Key Recommendations from the Audit of the Commonwealth Funding of Public Hospital Services

Australian Government Funding of Public Hospital Services
– Risk Management, Data Monitoring and Reporting Arrangements

Auditor-General Report no.26 2018-2019

A performance audit assessing the effectiveness of risk management, data monitoring and public reporting arrangements under the National Health Reform Agreement (NHRA), in relation to the funding of public hospital services by the Australian Government.



Public hospital funding from the Australian Government, is based on service estimates for the local health network and bi-annual adjustments from actual service data. The Independent Hospital Pricing Authority (IHPA) and National Health Funding Body (Funding Body) are the respective bodies, which set the price of public hospital services and calculate the appropriate funding. The Commonwealth Government is concerned with an estimated increase in duplicate funding of public hospital services under the NHRA and other government programs.

Under NHRA, the Australian Government will not fund patient services where the service, or any part of, is funded through another Australian Government program including Medicare Benefits Scheme (MBS) or Pharmaceutical Benefits Scheme (PBS).¹  The Health Insurance Act 1973 (Cth) (HIA), prevents payment for a professional service under MBS where funded by another agreement of the Australian Government.²  The HIA additionally provides a mechanism for debt recovery of the actual benefit paid or excess paid³, however there is no such mechanism under NHRA.

In addition, there are limited data sharing agreements which allow the Funding Body to review both hospital service data and MBS/PBS data. Data linking mechanisms have been previously utilised by the Funding Body and subsequently applied to services under NHRA and MBS which are known to overlap. This data, however, only identified potential and not actual duplicate funding. Any debt recovery to date has occurred through MBS compliance activities, as opposed to changes to NHRA funding arrangements.

One of the key recommendations from the Performance Audit recognises the need to identify and prevent duplicate funding, and recover past duplicate funding, so far as the law permits. Continued reliance on MBS compliance activities is recommended, in addition to creating new data matching agreements to facilitate access of data by Department of Health. The current review of NHRA and recommended amendments may further facilitate MBS compliance activities, and the Department of Health’s ongoing access to public hospital service data. This will potentially allow the Department of Health to conduct more comprehensive compliance activities.

Amendments to the HIA⁴ will see a Shared Debt Recovery Scheme (SDRS) coming into effect on 1st July 2019. This will provide a mechanism for the Australian Government to recover debt related to incorrect payments under MBS, from either the individual practitioners or the employing/contracting medical organisations. Both parties, therefore, bearing responsibility to ensure MBS claims are accurate and correct.⁵

Rationale for Audit

The integrity of the processes by which the IHPA and Funding Body determine and allocate Australian Government funding for public hospital services relies upon accurate and complete state public hospital cost and service activity data.

Public hospital service data, however, is provided as an estimated value at the local network level and then an actual value at an aggregated national level. Data matching analysis suggests an increase in duplicate funding for hospital services.

Key Recommendations from the Performance Audit

The Department of Health is to:

  1. Work with the State Governments to form an agreement which allows the Funding Body and IHPA to monitor and the analyse service data, and determine the capacity of these bodies to provide strategic advice to the Government
  2. Identify, prevent and recover duplicate payments
  3. Work with the State Governments to implement reporting arrangements which require the States to be transparent on whether they are maintaining public hospital services funding levels as per NHRA obligations


Recommendation 1 and 3

Both these recommendations require further negotiation between the Department of Health and State Governments. There is no impact on current public hospital services.

Recommendation 2

The Funding Body currently has limited access to hospital service data which is required to identify duplicate funding. Furthermore, there is no mechanism under NHRA to then prevent or recover duplicate funding of hospital services.

The Department of Health recently completed a data matching report to identify where duplicate funding has occurred. The results are due to be published mid-2019. In the past duplicate funding matters have been resolved through MBS compliance activities, with recovery of debt occurring via MBS mechanisms rather than under NHRA funding agreements. The outcome of this report should highlight whether the Australian Government will begin to investigate duplicate funding matters or continue with the MBS debt recovery mechanisms currently in place.

Amendments to HIA, in the form of SRDS, are due to come into effect on 1st July 2019. The SRDS effectively provides the Australian Government with a mechanism to recover duplicate funding debt from either the individual practitioner and/or the employing/contracting medical organisation. The NHRA has not been amended to provide consistency with this change.

The practical effect of this recommendation, therefore, is that practitioners and health care organisations must ensure that they are compliant with MBS, paying attention to the 2012 Improved Billing Practices Policy. In addition, health care organisations need to be aware of the effect of the amendments to the HIA. Further clarity may be provided pending the Department of Health’s response and subsequent action to the data matching report.


For further information please contact the Law Compliance team:

Phone: 1300 862 667


[1] National Health Reform Agreement, Article A6.

[2] Health Insurance Act 1973 (Cth) s 19(2).

[3] Ibid s 129AC(1).

[4] Health Insurance Legislation Amendment (Improved Medicare Compliance and Other Measures) Act 2018 (Cth).

[5] The Department of Health, Changes to Legislation – Improved Medicare Compliance, 29 August 2018


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