Independent Hospital Pricing Authority Releases NEP and NEC

The  National Efficient Price (NEP) and National Efficient Cost (NEC) Determinations for Australian public hospital services for 2015-16 have been released by the Independent Hospital Pricing Authority.
In determining the NEP and NEC, the Independent Hospital Pricing Authority consulted with Commonwealth, state and territory government.
The NEP for 2015-16 is $4,971, per National Weighted Activity Unit (NWAU), which is an increase of three per cent from the  NEP for 2014-15.
Activity Based Funding (ABF) is used to determine the majority of Commonwealth funding  and the NEP underpins ABF to approximately 260 hospitals nationwide including all the large metropolitan hospitals.
Activity Based Funding (ABF) is payment for the actual hospital services that are provided. The price of each public hospital service is calculated by multiplying the NWAU allocated to that service by the NEP.
Examples provided include:

• A tonsillectomy has a weight of 0.7066 NWAU which equates to $3,513


• A coronary bypass (without complications) has a weight of 4.8491 NWAU which equates to $24,105


• A hip replacement (without complications) has a weight of 4.0591 NWAU which equates to $20,178.

“This year the Independent Hospital Pricing Authority has introduced a number of methodological improvements in calculating the NEP including opportunities for bundled payments rather than individual payments, such as dialysis treatments that take place in the home. This will assist in cutting bureaucracy and administration, is more patient centric and provides a focus on quality,” said Mr Shane Solomon, Chair of the Pricing Authority.
The NEC for 2015-16 is $4.784 million. The NEC is used when activity levels are not suitable for funding based on activity such as small rural hospitals. In these cases services are funded by a block allocation based on size and location instead. This type of funding applies to approximately 380 small rural hospitals.
“This year the eligibility limit for block funded hospitals has been reduced to encourage more Activity Based Funded hospitals. This provides an overall improvement to sustainability and predictability in funding outcomes for public hospitals from year-to-year,” said Mr Solomon.
For a full copy of the National Efficient Price and National Efficient Cost and a guide to understanding the Determinations for 2015-16, visit www.ihpa.gov.au