{"id":"F2017L00179","name":"Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011 - No. 2/2016","slug":"f2017l00179","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":439126,"registerId":"F2017L00179-fast-fetch-1775955256144","compilationNumber":null,"startDate":"2026-04-12","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011 - No. 2/2016","content":"---\nmeta-content-style-type: text/css\nmeta-content-type: application/xhtml+xml; charset=utf-8\nmeta-generator: Aspose.Words for .NET 20.2\n---\n\n?xml version=\"1.0\" encoding=\"utf-8\" standalone=\"no\"?>\n\n![](image.001.png)\n\n \n\n \n\nDirection to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011 - No. 2/2016\n\n \n\n \n\nI, GREG HUNT, Minister for Health, acting under subsection 226(1) of the National Health Reform Act 2011 (the Act), having consulted with the Standing Council on Health, DIRECT that in relation to the performance of its functions and exercise of its powers the Independent Hospital Pricing Authority undertake the functions set out in Item 1 of the Schedule to this instrument and have regard to the matters set out in Item 2 of the Schedule to this instrument.\n\n \n\n \n\n \n\n \n\n \n\nDated:         16                     February 2017\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nGREG HUNT\n\nMinister for Health\n\n \n\n \n\n#### Contents\n\n \n\n \n\nPART 1 PRELIMINARY 3\n\n \n\n1 Name of Direction 3\n\n2. Commencement 3\n\n3. Authority 3\n\n4. Definition 3\n\n5. Schedule 3\n\n \n\n \n\n \n\nSchedule    4\n\n \n\nPart 1 Preliminary\n\n \n\n1.                    Name of Direction\n\n\n \n\nThis Instrument is the Direction to the Independent Hospital Pricing Authority on the performance of its functions under section 226 of the National Health Reform Act 2011 - No. 2/2016.\n\n \n\n## 2.                      Commencement\n\n \n\nThis Direction takes effect on the day after it is registered on the Federal Register of Legislation.\n\n \n\n## 3.                      Authority\n\n \n\nThis Direction is made under section 226 of the National Health Reform Act 2011.\n\n \n\n## 4.                      Definition\n\n \n\nIn this Direction:\n\n \n\nAct means the National Health Reform Act 2011.\n\n \n\navoidable hospital readmission means readmission to hospital for a condition or conditions arising from complications of the management of the condition for which the patient was originally admitted.\n\n \n\nhospital acquired complication means a hospital acquired patient complication, as defined by the national list developed, and amended from time to time, by the Australian Commission on Safety and Quality in Health Care[[1]](#_ftn1), for which clinical risk mitigation strategies may reduce (but not necessarily eliminate) the risk of that complication occurring.\n\n \n\nsentinel event means one of a subset of adverse events that result in death or serious harm to a patient.\n\n \n\n## 5.                      Schedule\n\n \n\nThe Schedule to this Instrument describes the direction given to the Independent Hospital Pricing Authority on the performance of its functions and exercise of its powers.  \n\n \n\nSchedule  \n\n \n\n1. Functions\n\n\n \n\n(i)                 The Independent Hospital Pricing Authority, in relation to its functions under s. 131(1)(a) and (h) of the Act, is to undertake implementation of agreed recommendations of COAG Health Council (on 20 January 2017) on pricing for safety and quality to give effect to:\n\n \n\n(a)     nil funding for a public hospital episode including a sentinel event which occurs on or after 1 July 2017, applying to all relevant episodes of care (being admitted and other episodes) in hospitals where the services are funded on an activity basis and hospitals where services are block funded; and\n\n \n\nNote: For hospitals where the services are funded on an activity basis and hospitals where services are block funded see Chapter 4 of the Act. \n\n \n\n(b)     an appropriate reduced funding level for all hospital acquired complications, in accordance with Option 3 of the draft Pricing Framework for Australian Public Hospital Services 2017-18, as existing on 30 November 2016, to reflect the additional cost of a hospital admission with a hospital acquired complication, to be applied across all public hospitals; and\n\n \n\n(c)     undertake further public consultation to inform a future pricing and funding approach in relation to avoidable hospital readmissions, based on a set of definitions to be developed by the Australian Commission on Safety and Quality in Health Care.\n\n \n\n2.      Matters the Independent Hospital Pricing Authority is to have regard to\n\n \n\n(i)                 In performing the activity referred to in Item 1(i)(a), the Independent Hospital Pricing Authority must have regard to the intention of COAG Health Council to:\n\n \n\n(a)   implement an adjusted funding model for sentinel events from 1 July 2017;\n\n \n\n(b)   have regard to the Australian Commission on Safety and Quality in Health Care’s review of sentinel events; and\n\n \n\n(c)   monitor and review the reporting of sentinel events by States and Territories to ensure those events are adequately reported for the purpose of funding adjustments.\n\n \n\n(ii)               In performing the activity referred to in Item 1(i)(b), the Independent Hospital Pricing Authority must have regard to the intention of COAG Health Council to:\n\n \n\n(a)     further refine the risk adjustment methodology for the COAG Health Council agreed hospital acquired complication model prior to 1 July 2017;\n\n \n\n(b)     shadow the implementation of the hospital acquired complication model to assess impact on funding, data reporting (e.g. condition onset flags), clinical information systems, and specific population and peer hospital groups; and\n\n \n\n(c)     public consultation on the findings of the shadow implementation with a final report submitted to COAG Health Council by 30 November 2017;\n\n \n\n(d)     provide direction and monitoring of State and Territory programs to audit medical records and coding to support continued improvement in reporting of hospital acquired complications; and\n\n \n\n(e)     implementation of reduced funding levels for all hospital acquired complications, subject to the results of the shadow period, from 1 July 2018.\n\n \n\n(iii)            In performing the activity referred to in Item 1(i)(c), the Independent Hospital Pricing Authority must have regard the intention of COAG Health Council for:\n\n(a)     the Australian Commission on Safety and Quality in Health Care to develop a list of clinical conditions that can be considered avoidable hospital readmissions, including identifying suitable condition-specific timeframes for each of the identified conditions;\n\n(b)     the Independent Hospital Pricing Authority to provide additional advice on feasibility and financial implications of  potential future pricing or funding adjustments for avoidable readmissions in accordance with the list of clinical conditions; and\n\n(c)     the development of pricing or funding adjustments to target avoidable hospital readmissions which arise from complications of the management of the original condition that was the reason for the patients original hospital stay.\n\n(iv)             The Independent Hospital Pricing Authority’s inclusion of the options referred to in Item 1 of this Direction in The Pricing Framework for Australian Public Hospital Services, in March 2017.\n\n(v)               In undertaking implementation, evaluation and provision of the advice described in Item 1 of this Schedule, the Independent Hospital Pricing Authority is to have regard to the following design principles:\n\n \n\n(a)   Reforms prioritise patient outcomes and are evidence based:\n\n \n\n1. Better patient health outcomes underpin the design and implementation of reform\n\n\n \n\nii.      The implementation and evaluation of pricing and funding models for safety and quality, and reducing avoidable readmissions, are based on robust evidence\n\n \n\niii.      Adjustments are based on evidence of a causal link to the condition or complication, and are commensurate with the additional care required as a result of the complication\n\n \n\niv.      Adjustments relate to conditions or complications which clinicians and other health professionals are reasonably able to take action to reduce their incidence or impact\n\n \n\nv.      Any models should add to the evidence base for strategies to address safety and quality, with robust monitoring of the effectiveness of implementation and ultimately, their impact on patient outcomes.\n\n \n\n(b)   Reforms are consistent with whole-of-system efforts to deliver improved patient health outcomes:\n\n \n\n1. Adjustments complement existing national and state measures to improve patient health outcomes and reduce avoidable hospital demand, including but not limited to the Australian Commission on Safety and Quality in Health Care’s goals, national benchmarking, data reporting, and accreditation\n\n\n \n\nii.      The implementation of pricing and funding models acknowledges that mechanisms other than pricing and funding have a role in achieving the reform intention and that complementarity of all mechanisms is desirable\n\n \n\niii.      The design and implementation of pricing and funding models should not compromise state system financial sustainability and quality and should therefore be focused on system level performance improvement.\n\n \n\n(c)   Reforms provide transparency and comparability:\n\n \n\n1. As far as practicable, implementation of financial levers provide transparency between the approach and the intended outcome\n\n\n \n\nii.      Pricing models use an appropriate risk adjustment methodology to consider different patient complexity levels or specialisation across jurisdictions and hospitals.\n\n \n\n(vi)             In addition, in relation to undertaking functions as described in Item 1 of this Schedule, the Independent Hospital Pricing Authority is to have regard to submissions from the Australian Commission on Safety and Quality in Health Care, the National Health Funding Body, the Commonwealth, States and Territories, and other parties deemed relevant by the Independent Hospital Pricing Authority.\n\n \n\n(vii)           The Australian Commission on Safety and Quality in Health Care will curate the Australian Sentinel Events List and the Hospital Acquired Complications List, develop rates of preventability for each hospital acquired complication to inform a risk adjustment methodology and lead development of a national consistent definition of avoidable hospital readmissions.\n\n \n\n---\n\n\n[[1]](#_ftnref1) Indicators of Safety and Quality <https://www.safetyandquality.gov.au/our-work/information-strategy/indicators/>\n","sortOrder":0}],"analysis":{"flash_summary_failed":{"failed":true,"reason":"Unauthenticated. Configure AI_GATEWAY_API_KEY or use a provider module. Learn more: https://ai-sdk.dev/unauthenticated-ai-gateway","source":"analysis-cron"},"kimi_summary":{"content_quality":"ok","complexity_score":4,"scope_assessment":{"changed":false,"description":"This direction remains tightly focused on its original purpose: using hospital pricing mechanisms to drive safety and quality improvements. It implements specific COAG Health Council decisions from January 2017 without expanding into unrelated policy areas. The scope is actually narrower than the enabling legislation (National Health Reform Act 2011) which gives broader powers over hospital pricing generally."},"complexity_factors":["Only 4 defined terms in section 4, but they reference external evolving documents (national lists maintained by the Australian Commission on Safety and Quality in Health Care)","Heavy cross-referencing to the National Health Reform Act 2011 (sections 131, 226) and external frameworks (Pricing Framework for Australian Public Hospital Services 2017-18)","Multiple implementation timelines with conditions (1 July 2017 for sentinel events, 1 July 2018 for complications subject to shadow period results)","Nested conditional logic: 'subject to the results of the shadow period' and 'as existing on 30 November 2016' creates temporal version-locking","Split responsibilities between IHPA, Australian Commission on Safety and Quality in Health Care, COAG Health Council, and States/Territories requiring coordination","Design principles in Item 2(v) use inconsistent numbering (mix of roman numerals, letters, and numbers) suggesting drafting by committee","References to 'shadow implementation' and 'condition onset flags' assume technical knowledge of health data systems"],"plain_english_summary":"This ministerial direction orders the Independent Hospital Pricing Authority to link public hospital funding to patient safety: from 1 July 2017 no payment for stays with sentinel events, from 1 July 2018 reduced payments for hospital‑acquired complications, and consultation on future penalties for avoidable readmissions. It affects public hospitals and state/territory budgets and aims to drive safety improvements by financial incentives—though critics warn it could prompt under‑reporting or coding games instead of real quality gains."},"flash_summary":{"complexity_score":7,"scope_assessment":{"changed":false,"description":"The Direction stays within IHPA’s statutory remit under s.226 and s.131 functions: it specifies particular pricing tasks and timelines (Schedule Items 1–2) to give effect to COAG Health Council decisions. It focuses IHPA’s work on safety‑and‑quality related pricing and consultation obligations but does not create new statutory powers or remove IHPA’s existing authority; it directs how IHPA must exercise its functions rather than altering the Act’s scope (see Authority s.3 and Schedule)."},"complexity_factors":["Cross‑jurisdictional implementation involving Commonwealth, States and Territories and multiple bodies (IHPA, Australian Commission on Safety and Quality in Health Care, National Health Funding Body) (Schedule Items 1, 2(vi), 2(vii)).","Technical development and application of risk‑adjustment methodology for hospital acquired complications (Schedule 2(ii)(a), 2(vii)).","Phased implementation and shadowing requirements with specified review dates and contingent rollouts (Schedule 1(i)(b); 2(ii)(b)–(c), 2(ii)(e)).","Data, coding and reporting dependencies (condition onset flags, auditing of medical records and coding) that impose compliance and IT/system change burdens on hospitals and jurisdictions (Schedule 2(ii)(b), 2(ii)(d)).","Requirement for new national definitions and lists (avoid able readmissions, sentinel events, hospital acquired complications) curated by an external agency, affecting measurement and eligibility (Schedule 4 Definition; 2(iii), 2(vii)).","Discretion for IHPA to consult and have regard to submissions from various parties, creating administrative judgment and potential stakeholder influence (Schedule 2(vi)).","Interaction with existing funding models (activity‑based and block funding) requiring mapping and transitional adjustments (Schedule 1(i)(a) note)."],"plain_english_summary":"This Direction (under s.226 of the National Health Reform Act) tells the Independent Hospital Pricing Authority (IHPA) to implement COAG Health Council decisions on pricing tied to safety and quality. Mechanically it requires: zero funding for episodes involving sentinel events, reduced funding for hospital-acquired complications, and further consultation on avoidable readmissions — applying to activity‑ and block‑funded public hospitals (Schedule, Items 1(i)–(iii)). It shifts financial incentives and imposes reporting, risk‑adjustment, shadowing and consultation duties on IHPA and state reporting systems."}},"importantCases":[],"_links":{"self":"/api/acts/f2017l00179","history":"/api/acts/f2017l00179/history","analysis":"/api/acts/f2017l00179/analysis","conflicts":"/api/acts/f2017l00179/conflicts","importantCases":"/api/acts/f2017l00179/important-cases","documents":"/api/acts/f2017l00179/documents"}}