Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011 - No. 1/2016

Overview

The National Health Reform Act 2011 was enacted by the Australian Parliament to overhaul and modernise the nation's health system, aiming to improve efficiency, quality, and sustainability of health services. The Act introduced the Independent Hospital Pricing Authority (IHPA) to determine national efficient prices for healthcare services provided by public hospitals. This legislative instrument, specifically the Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011, was introduced to provide the IHPA with guidance on developing models and strategies to enhance patient outcomes and reduce hospital readmissions. This direction aligns with the Council of Australian Governments (COAG) Heads of Agreement on Public Hospital Funding, aiming to integrate quality and safety into hospital pricing and funding. The policy objective is to improve service delivery across the health system, achieving better health outcomes and efficiencies.

Scope and Application

The National Health Reform Act 2011, as implemented through the Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the Act, applies specifically to the Independent Hospital Pricing Authority (IHPA) and its role in determining the national efficient price for healthcare services provided by public hospitals where such services are funded on an activity basis. This Act operates at the Commonwealth level and is intended to provide the Commonwealth, states, and territories with options for comprehensive and risk-adjusted models to enhance patient outcomes, reduce preventable hospital-acquired conditions, and decrease avoidable hospital readmissions. The IHPA is mandated to comply with the directions provided under this Act, which aim to improve service delivery and health system efficiencies. Notably, the Act does not direct the IHPA to change specific national efficient prices or efficient costs for health services between hospitals and sponsors but rather focuses on the implementation of broader models and strategies to achieve its objectives. The Act applies across Australia, with the IHPA working in conjunction with the Commonwealth, states, and territories to achieve the stated health reform goals.

Key Provisions

The main operative sections of this legislation, specifically subsection 226(1) of the National Health Reform Act 2011, empower the Minister to direct the Independent Hospital Pricing Authority (IHPA) in relation to the performance of its functions and exercise of its powers (subsection 226(1)). This direction is made under the authority of subsection 226(4) of the Act, which mandates that the IHPA must comply with any such direction. Section 131 of the Act outlines the functions of the IHPA, which include determining the national efficient price for health care services provided by public hospitals funded on an activity basis (subsection 131(1)(a)). This legislative instrument focuses on directing the IHPA to develop two models: a comprehensive and risk-adjusted model to determine how funding and pricing can be used to improve patient outcomes and reduce the amount the Commonwealth pays for sentinel events and a set of preventable hospital acquired conditions, defined by the Australian Commission on Safety and Quality in Health Care and agreed by the parties, that occur in public hospitals (subsection 131(1)(a)); and a comprehensive and risk-adjusted strategy and funding model to reduce avoidable readmissions to hospital that will adjust the funding to hospitals that exceed a predetermined avoidable readmission rate for an agreed set of conditions and the circumstances in which they occur. The Act imposes obligations on the IHPA to comply with the direction given by the Minister, which is to develop the aforementioned models and strategies in consultation with the Commonwealth, the States, and the Territories. The IHPA must have regard to the intention of the parties to implement a model for sentinel events from 1 July 2017, and a model for an agreed set of preventable hospital acquired conditions not before 1 July 2018, with a preceding shadow year. The Minister is also required to consult with the COAG Health Council before issuing any such direction, as stipulated in subsection 226(2) of the Act. This consultation process is intended to ensure that the direction aligns with the broader objectives of health reform and maintains collaborative efforts among the parties. The legislation does not explicitly state any offences, penalties, or civil/criminal consequences for non-compliance with the direction given to the IHPA. However, the statutory requirement for the IHPA to comply with the direction suggests that failure to do so could result in legal consequences, potentially including judicial review or other enforcement actions under the National Health Reform Act 2011 or other relevant legislation. The absence of specific penalties in this instrument may imply that the primary enforcement mechanism is the obligation of compliance with the direction, backed by the legal authority of the Act.