The National Health and Hospitals Network COAG Agreement

The Council of Australian Governments (COAG) Agreement 2010 outlines the agreement reached by all jurisdictions, except Western Australia, to establish a National Health and Hospitals Network (NHHN). The NHHN Agreement incorporates structural reforms as well as additional investments in hospital, primary and aged care services, and preventive care in mental health and diabetes health care.

Further initiatives announced in the Commonwealth Government’s Budget on 12 May 2010 include support for practice nurses, improved primary care infrastructure and the roll-out of electronic health records, bringing the total new health investment over the next five years to $7.3 billion. More information on this can be found in the AMA's media release.

The structural reforms include:

• the Commonwealth becoming the majority funder of public hospitals by funding 60% of the efficient price of public hospital services delivered to public patients and also funding 60% of capital, research and training in public hospitals;
• the Commonwealth taking funding and policy responsibility for GP and primary health care services, and aged care services (Victoria will retain responsibility for its HACC program);
• Local Hospital Networks (LHNs) responsible for hospital management and hospital performance;
• LHNs paid the efficient price of hospital services. Small regional and rural public hospitals will be block funded;
• State governments remaining system managers for public hospitals and responsible for negotiating and implementing service agreements with LHNs;
• new primary health care organisations (called Medicare Locals in the Budget) established to work with general practitioners and allied health and community care providers to improve access to care and drive integration of services. They will be based on existing divisions of general practice and work with LHNs on the integration of acute care, health promotion and prevention;
• a new independent hospital pricing authority established to set the efficient price for the Commonwealth’s contribution to public hospital services and for determining the Commonwealth’s payments for block funding, as well as being empowered to make binding determinations about cost shifting and cross border issues;
• new clinical safety and quality standards developed by a permanent Australian Commission on Safety and Quality in Health Care;
• a new national performance authority established to provide transparent information about national, state and local performance of the health system and report against the standards developed above, including transparent reporting of performance for every LHN, public hospital, private hospital and primary health care organisation; and
• Commonwealth contribution to activity based paid into a NHHN Fund which then makes payments to state-based Funding Authorities responsible for overseeing the distribution of funds to LHNs, as well as Commonwealth payments direct to States for research, training, major capital investment and block funding commitments for small regional and rural hospitals.

Additional investments include:

• health workforce funding of $644 million to deliver an additional 5500 new or training GPs; 680 medical specialists; and 5400 pre-vocational GP program training places over the next ten years;
• emergency department funding of $750 million from 1 July 2010 to help hospitals achieve 4 hour targets: all patients presenting at emergency departments either treated and discharged, admitted to hospital, or referred for follow-up treatment within 4 hours. Funding components include upfront payments, capital payments and reward payments to states meeting this target. The target will be phased in over 4 years starting from 1 July 2011;
• elective surgery funding of $800 million, including: upfront payments of $300 million from 1 July 2010 to help hospitals meet a waiting list target of 95% of patients treated within the clinically appropriate time, phased in to 2014; $350 million in reward payments for meeting this target; and $150 million in additional capital funding. Patients not treated on time will be referred to another public hospital or provided with free treatment in a private hospital;
• subacute hospital bed funding of $1,624 million from 1 July 2010 to increase the number of beds supporting rehabilitation, step down, mental health and/or palliative care;
• flexible hospital funding of $200 million from 1 July 2010 to assist hospitals in either emergency, elective or subacute services, depending on where most support is required;
• aged care funding of $739 million, including: funding for 2,500 new aged care places (through no interest loans) and for nursing home type patients in public hospitals equivalent to 2,000 aged care places; subacute and aged care in multiple purpose services equivalent to 286 beds; increased PIP payments for medical care in aged care; and a Productivity Commission inquiry on future aged care needs. Most of the funding will be provided over four years, starting variously from 1 July 2010, 1 July 2011 or 1 July 2012;
• diabetes management funding of $436 million to improve health outcomes of people with diabetes and reduce preventable hospital admissions beginning on 1 July 2010. The program provides payments of $1200 to practices for each patient enrolled and $10,800 each year to those practices providing better care and improving health outcomes;
• mental health funding of $174 million ($115 million new funding) in: early intervention and mental health support for young people; additional mental health nurses; and flexible care for people with severe mental illness;
• eHealth funding of $467 million to establish electronic health records for every person who wants one by July 2012; and
• general practice funding of $390 million for additional practice nurses; $355 million for improvements to general practice infrastructure; and $107 million in additional funding for the provision of GP-coordinated care for veterans who are at risk of hospitalisation. Funding of $417 million will also be provided to establish Medicare Locals and improve access to after hours primary care.

A workplan for implementing the reforms will be developed over the next few months for COAG agreement by 30 June 2010.

Comparison with AMA Priority Investment Plan

Key synergies

Single public hospital funding pool – greater transparency and more direct funding to hospitals. Funding allocation not made by state treasuries. National targets and standards, for example in emergency and elective surgery waiting times, strengthens accountability.

No Commonwealth takeover of public hospitals – States remain system managers and retain responsibility for negotiating and implementing service agreements with LHNs.

Stronger health care investment – additional funding invested into public hospitals and a stronger commitment and capacity for funding future growth.

Clinician engagement – potential for more clinician engagement in health care decision-making through LHN governing councils although will need to be monitored. Need to ensure clinicians are fully involved in the setting of targets, development of service agreements and monitoring of the system.

Local hospital governance – no Commonwealth takeover of hospitals. LHNs will have responsibility for the management of local hospitals and States will retain their service planning function. However, state control will need to be monitored to ensure the spirit and intent of the agreement is not compromised.

Teaching and research investment – separate funding maintained for teaching and research activity, although need to ensure funding is transparent and not diverted.

Capital investment – separate funding maintained for capital funding, although need to ensure funding is transparent and not diverted.

Hospital beds investment – more funding provided for additional subacute hospital beds and hospital capacity overall, but not enough. Need to ensure funding is implemented immediately. Implementation needs to be done in consultation with doctors and nurses.

Transparent national targets, standards and performance reporting – national targets and performance indicators will be developed, but process must be robust and consultative and involve the medical profession.

Clear accountability mechanisms – Commonwealth targets for elective surgery and emergency waiting times provide the opportunity to ensure that service agreements struck between states and LHNs include sufficient activity based funding to meet these targets.

General practice investment - additional funding provided for practice nurses and general practice infrastructure although falls short of what is needed.

Aged care investment – additional investment provided in aged care but insufficient to ensure existing places remain viable and new places are established.

Health workforce investment – additional investment in the health workforce is broadly consistent with AMA calls.

Mental health investment – additional investment in mental health provided but insufficient.

eHealth investment – funding to establish electronic health record system although additional support will be needed so that medical practices’ information technology capability is compatible with the new eHealth environment.

Key differences

Single public hospital funder – no single public funder of public hospitals but single funding pool achieved for activity based funding payments, therefore no sole responsibility at government level for public hospital funding.

Hospital bed investment – no commitment to ensure 85% hospital bed occupancy rate and no guarantee of new beds opening, although incentives through additional funding have been provided immediately to encourage opening of new subacute beds and possibly more aged care beds. No clear accountability mechanism to ensure new funding is used to improve hospital capacity within agreed timeframes, except for setting elective surgery and emergency waiting time targets.

Effective price for hospital services – COAG has agreed to the development of an ‘efficient’ price by an independent hospital pricing authority. An ongoing concern is how hospital-specific costs will be accommodated.

Realistic, transparent and achievable hospital-level targets and standards – yet to see how funding to LHNs will occur in practice: will States negotiate service agreements with LHNs that provide for realistic volumes; will the nationally efficient price be realistic and accommodate hospital-specific costs; and will sufficient contingency funding be available to allow sufficient capacity to meet unforeseen, short-term demand which is out of hospitals’ control?

Preventative health strategy – no comprehensive preventative health strategy – only diabetes and mental illness provided with additional funding.

Diabetes management – diabetes management plan requires enrolment with a practice, breaking the doctor-patient relationship and operates under a non fee-for-service model.

Indigenous health care investment – no additional funding for Indigenous health care, although health care announcements overall will provide some additional support.

In addition, no:

• dental health care plan;
• further MBS simplification of GP items;
• MBS eligibility for GP MRI referral or point of care testing;
• rural and remote rescue package; and
• long term care scheme.