Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011 - No 1/2020

Overview

The National Health Reform Act 2011 was enacted by the Parliament of Australia to address the need for better coordination and efficiency in the health sector. This Act established the Independent Hospital Pricing Authority (IHPA) and outlines its functions and powers. The Act aims to ensure that funding arrangements for high-cost, highly-specialised clinical practices and technologies are efficient and effective. As per the explanatory statement, this legislation was introduced to address the need for a comprehensive understanding of the costing and pricing of services provided under the Nationally Funded Centres (NFC) Program. The NFC Program was endorsed in 1990 to facilitate the public sector provision of such services, and this Act aims to integrate it into the National Health Reform Agreement funding arrangements. The policy objective is to improve service delivery and achieve better health outcomes through efficient health system practices.

Scope and Application

The National Health Reform Act 2011, through the Direction to the Independent Hospital Pricing Authority on the performance of its functions, applies specifically to the Independent Hospital Pricing Authority (IHPA) and its role in determining the costs and pricing of the Nationally Funded Centres (NFC) Program. The NFC Program, established to manage high-cost, highly specialised clinical practices and technologies with limited demand, is overseen by the IHPA under this Act. The Act mandates that the IHPA must conduct a costing and pricing study into the NFC Program, exploring the direct and indirect costs of service provision, the aggregate costs, projected costs, and existing costs. Furthermore, the IHPA is directed to provide the Commonwealth and the States and Territories with options regarding funding mechanisms for the NFC Program, such as Activity Based Funding or block funding arrangements. This legislative instrument applies nationally, as it involves the coordination of health services across multiple jurisdictions within Australia. The Act does not extend to altering specific national efficient prices or efficient costs for health care services provided by public hospitals. This legislative instrument is of general nature and does not constitute a regulatory activity, hence it does not require a Regulation Impact Statement. The Minister for Health must consult with the Standing Council on Health before issuing any direction under this Act, ensuring that all relevant health ministers are informed and have input into the decision-making process.

Key Provisions

The National Health Reform Act 2011 (the Act) authorises the Minister to provide directions to the Independent Hospital Pricing Authority (IHPA) in relation to its functions and powers, as outlined in sections 226(1) and 131(1) of the Act. This particular instrument, made under section 226(1), directs the IHPA to undertake a costing and pricing study into the Nationally Funded Centres (NFC) Program. The study aims to examine the direct and indirect costs associated with providing each NFC service at specified sites, the aggregate costs across all sites, the projected costs for all NFC services, and the existing costs for each patient in each specified site. Furthermore, the IHPA is tasked with providing options to the Commonwealth and the States and Territories regarding the funding arrangements for NFC services, such as whether they should be funded through Activity Based Funding or block funding under the National Health Reform Agreement (NHRA). The instrument also requires the IHPA to develop and operate cost models and pricing models for the NFC Program, covering both existing and potential future services. This study is intended to aid in achieving better health outcomes and health system efficiencies for the public sector provision of high-cost, highly specialised clinical practices and technologies with limited demand. Under the Act, the IHPA is obliged to comply with the Minister's direction regarding the costing and pricing study and the provision of options to the Commonwealth and the States and Territories. The IHPA must conduct the study in accordance with the outlined objectives and submit its findings and recommendations to the relevant authorities. The Minister for Health has already consulted with State and Territory Health Ministers, as required by section 226(2) of the Act, by notifying them of the intention to issue the direction. This consultation is an essential part of the legislative process to ensure that the directions align with the views and needs of all stakeholders involved in the NFC Program. Breach of the Minister's direction to the IHPA under section 226(1) of the Act is not explicitly stated to incur specific penalties or consequences in the explanatory statement. However, the IHPA's failure to comply with the direction could potentially lead to civil or administrative consequences, as the Act and other related legislation may provide for enforcement mechanisms and sanctions in such cases. The Minister's direction is of a general nature only and does not direct the IHPA to change particular national efficient prices or efficient costs for health care services provided by public hospitals. This ensures that the direction remains within the scope of the IHPA's functions and powers and does not interfere with other aspects of the health care pricing and funding arrangements. The instrument is not subject to disallowance under section 44 of the Legislation Act 2003, which means that it cannot be overturned by a resolution of either House of Parliament.