Funding and recurrent expenditure

Information on funding and expenditure over time are expressed in both current and constant prices. Current prices reflect the amounts reported for each reference period. Constant prices adjusts current prices for the effects of inflation; that is, it aims to remove the effects of inflation. Hence, prices in different years can be compared on a dollar-for-dollar basis.

The constant prices presented in this chapter were derived from the current prices using the ABS’s Government Final Consumption Expenditure, State and Local—Hospitals and Nursing Homes deflator for both public and private hospitals, expressed in terms of prices in final reference year (that is, using 2016–17 as the base year for funding, and using 2017–18 as the base year for recurrent expenditure).

Funding

Public and private hospitals are funded from a range of different sources, reflecting the types of patients they treat and the services they provide (see Appendix A for more information).

Emergency department and outpatient services are mainly funded by governments, whereas admitted patient services are commonly funded by both private (non-government) and government sources.

Public hospitals

In 2016–17, the state and territory governments and the Australian Government provided most of the funds for public hospitals:

  • state and territory governments provided 51% ($27.3 billion)
  • the Australian Government provided 41% ($21.7 billion).

Between 2012–13 and 2016–17 (after adjusting for inflation):

  • total funding rose by an average of 1.8% each year, from $50 to $54 billion
  • funding from the Australian Government increased by an average of 3.8% each year, from $18.7 to $21.7 billion
  • funding from non-government sources decreased by an average of 0.2% each year
  • funding from state and territory governments increased by 0.5% each year.

Private hospitals

In 2016–17:

  • about 69% ($10.8 billion) of private hospital funding was non-government, including:
    • private health insurance funds ($7.8 billion)
    • individuals (or out-of-pocket expenses $1.8 billion)
    • other ($1.2 billion).
  • Australian Government and State/territory governments provided about 31% ($4.8 billion) of private hospital funding including:
    • private health rebates ($2.9 billion)
    • Department of Veterans’ Affairs ($817 million).

Between 2012–13 and 2016–17:

  • total funding rose by an average of 2.9% each year, from $13.9 to $15.6 billion
  • funding from non-government sources increased by an average of 4.2% each year, from $9.2 to $10.8 billion
  • funding from the state and territory governments increased by 16.6% each year
  • funding from the Australian Government decreased by an average of 2.3% each year.

Commonwealth funding arrangements

Public hospitals differ in how they are funded by the Australian Government:

  • activity-based funded (ABF) hospitals receive funding based on the amount and type of activity
  • block-funded hospitals are not considered suitable for activity-based funding due to the inability to meet the technical requirements of ABF reporting, a lack of economy of scale, or remoteness.

In consultation with jurisdictions, the Independent Hospital Pricing Authority (IHPA) develops block-funding criteria and identifies whether hospital services and functions are eligible for block-funding only, activity-based funding only or a mixture of activity-based and block funding.

In 2017–18, 285 public hospitals were designated as activity-based funded hospitals and 403 public hospitals as
block-funded. The funding designation was not assigned for 5 hospitals.

It should be noted that the funding designation information reported for the NPHED does not include a category for hospitals that are funded partly by activity-based funding and partly by block funding. See Appendix A for more information.

Where to go for more information

More information on:

  • comparability of revenue, recurrent expenditure and staffing information by administrative level is available in Table 1.1
  • funding sources for public and private hospitals is available in tables 2.1 and 2.2
  • Commonwealth funding arrangements is available in Table 2.3.

Available for download in the Data section of this report.

More information on funding of public hospitals is available in:

Recurrent expenditure

This section presents information on public and private hospital expenditure, including information on expenditure over time, in both current and constant prices.

Recurrent expenditure is the money spent by hospitals, local hospital networks and state/territory health authorities on the goods and services they use, such as salary payments, drugs, medical and surgical supplies.

Two expenditure totals for public hospitals are reported here. One that includes depreciation and another excluding depreciation.

Recurrent expenditure can be categorised into salary and non-salary expenditure:

Salary expenditure includes salaries and wages, payments to staff on paid leave, workers' compensation, leave, and salaries paid to contract staff where the contract was for the supply of labour and where full-time equivalent staffing data were available.

Non-salary expenditure includes payments to Visiting medical officers, superannuation payments, drug supplies, medical and surgical supplies (which includes consumable supplies only and not equipment purchases), food supplies, domestic services, repairs and maintenance, patient transport, administrative expenses, interest payments, depreciation and other recurrent expenditure.

Public hospitals expenditure

In 2017–18:

  • total recurrent expenditure on public hospital services was $71 billion (including depreciation).
  • $42.7 billion recurrent expenditure was reported at the public hospital level
  • $21.4 billion recurrent expenditure was reported at the LHN level
  • $3.1 billion recurrent expenditure was reported at the state/territory health authority level
  • salary payments accounted for 60% of the total $67 billion (excluding depreciation) spent on public hospital services.

The total recurrent expenditure information presented from 2014–15 to 2017–18 is not comparable with the total recurrent expenditure information presented for 2013–14. The data for 2014–15 to 2017–18 includes expenditure at the LHN level and at the state/territory health authority level (for 2014–15, excludes Queensland for both LHN level and at the state/territory health authority level). Therefore, percentage changes (increase or decrease) between 2013–14 and 2017–18 are not shown. See Appendix A for more information on limitations of the data related to recurrent expenditure.

Expenditure on different types of care in public hospitals

In 2017–18:

  • Admitted patient care accounted for 55% of recurrent expenditure on public hospital services, ranging from 43% for Western Australia to 78% for the Northern Territory.
  • Non-admitted patient care (including services both in and out of scope for the NHRA) accounted for about 20% of recurrent expenditure, ranging from 10% for Victoria to 30% for Queensland.
  • Direct teaching, training and research accounted for about 2% of recurrent expenditure, ranging from 0% in the Victoria and the Northern Territory to 4% in New South Wales.

Private hospitals expenditure

For private hospitals, the recurrent expenditure data reported for 2016–17 are considered comparable with the data reported for 2012–13 to 2015–16. Recurrent expenditure for private hospitals in 2016–17 was $13.8 billion. In constant price terms (adjusted for inflation), recurrent expenditure by private hospitals increased by an average of 4.5% each year between 2012–13 and 2016–17 (ABS 2018).

Where to go for more information

More information on:

  • recurrent expenditure over time, by state and territory and by peer group
  • private hospital recurrent expenditure
  • NHRA product streams.

Is available in tables 2.4 through 2.8 and S2.1, available to download in the Data section of this report.

Information on data limitations and methods is available in Appendix A and Appendix B.

References

IHPA (Independent Hospitals Pricing Authority) 2016. National efficient cost determination 2016–17, March 2016. Sydney: IHPA. View this report on the IHPA website.

Health expenditure Australia 2016–17. Health and welfare expenditure series no. 64. Cat. no. HWE 74. Canberra: AIHW. View this report on the AIHW website.

Private hospitals Australia 2016–17. ABS cat. no. 4390.0. Canberra: ABS. View this report on the ABS website