RAJ REPORT

Why Activity Based funding——The potential of activity based funding to improve hospital efficiency was one important reason behind the NHHRC recommendation. The NHHRC estimated that the implementation of ABF could result in recurrent savings of between $570 and $1,330 million annually (NHHRC 2009, p 260)

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2.2 The National Health and Hospitals Reform Commission reports  In 2009 the National Health and Hospitals Reform Commission (NHHRC) recommended that activity based

funding should be the principal mode of funding for public and private hospitals (NHHRC 2009). This  recommendation was made in the context of health expenditure estimates which showed that hospitals would be one of the fastest growing areas of health spending over the next few decades. Spending on hospital  services was projected to triple from $25.9 billion in 2002-03 to $81.4 billion in 2032-33 (Goss 2008). Many studies have indicated that there is considerable variation in hospital costs across Australia, with scope for

significant improvements in efficiency (Productivity Commission 2006, Gabbitas and Jeffs 2007, Erlandsen 2007, Novak and Judah 2011). The potential of activity based funding to improve hospital efficiency was one important reason behind the NHHRC recommendation. The NHHRC estimated that the implementation of ABF could result in recurrent

savings of between $570 and $1,330 million annually (NHHRC 2009, p 260). However, the NHHRC advocacy for ABF was not simply focused on improving technical efficiency, with the Commission citing other benefits as follows:

 

 

 

 

ihpa.gov.au/internet/ihpa/publishing.nsf/Content/draft-pricing-framework-html-toc/$File/IHPA Draft Pricing Framework_long version.pdf.

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