What we do
The Independent Health and Aged Care Pricing Authority (IHACPA) assists the Australian Government to fund hospital and aged care services more efficiently by providing evidence‑based price determinations and pricing advice.
IHACPA was established in 2011 under the National Health Reform Act 2011 to promote improved efficiency in, and access to, public hospital services through the provision of independently determined pricing advice to all Australian governments.
In 2022, the scope of IHACPA's functions were expanded under various legislations to provide advice about aged care pricing and costing matters to the Minister for Health and Ageing and to approve higher maximum accommodation payment amounts for residential aged care.
Our program of work
We deliver an annual program of work through consultation and collaboration with the Australian Government, state and territory governments, advisory committees, key stakeholders and the public.
Our main activities include:
- developing national classifications for healthcare and other services delivered by public hospitals
- undertaking several major areas of work designed to inform the annual determination of the national efficient price (NEP) and national efficient cost (NEC), including ongoing consultation with all Australian health departments, expert advisory committees and key stakeholders.
- providing evidence-based residential aged care, residential respite care and in-home aged care pricing and costing advice to government
- refundable accommodation deposit approvals
- resolving cost-shifting and cross-border disputes upon request by a health minister.
IHACPA's role in health care is to determine the annual national efficient price (NEP) and national efficient cost (NEC) to enable activity based funding for public hospital services.
Activity based funding for hospital services
Activity based funding in the healthcare sector is a way of funding hospitals whereby they get paid for the number and mix of patients they treat. If a hospital treats more patients, it receives more funding. Because some patients are more complicated to treat than others, activity based funding also takes this into account.
National efficient price
The NEP is based on the average cost of a hospital admission across Australia. NEP is a factor, along with the volume of services delivered, of the government’s funding contribution to public hospitals.
National efficient cost
The NEC represents the average cost of government funding contributions for services that are not suitable for activity based funding, such as small rural and regional hospitals. The fixed-plus-variable structure enables changes in activity delivered in small rural hospitals to be reflected in funding and ensures there is no disincentive for states to provide services in rural areas.
Sustainable growth in hospital costs
The national weighted activity unit is a measure of health service activity expressed as a common unit, against which the NEP is determined.
Safety and quality
IHACPA works with the Australian Commission on Safety and Quality in Health Care to incorporate safety and quality measures into the determination of the NEP. Under the 2020-25 Addendum to the National Health Reform Agreement, IHACPA is required to integrate safety and quality into the pricing and funding approaches for public hospital services, to further improve the health outcomes of patients and decrease avoidable demand for public hospital services.
We provide government with expert residential aged care, residential respite care and in-home aged care pricing and costing advice that reflects the costs of delivering care. Our advice is independent, transparent, evidence-based and consultative. When developing our advice, we balance a range of objectives. This includes promoting the standard of high-quality care expected by the community and required by government policy and legislation.
The development of efficient pricing is a multi-year process that requires refinement over time. We develop our advice through consultation, policy development, data collection, and costing studies to inform government pricing decisions.
While our role is to provide pricing advice to the Minister for Health and Ageing, it is government who determines and announces the prices for aged care services. Following agreement from the minister, we publish our pricing advice on our website.
Our advice aims to support the government’s efforts to make aged care funding more transparent and efficient over time.
Australian National Aged Care Classification (AN-ACC)
The government provides subsidies to registered residential aged care providers through the AN-ACC funding model. Introduced on 1 October 2022, the funding model aims to provide equitable funding to providers that better matches residents’ needs and the costs of delivering care.
Since 1 July 2023, IHACPA has provided annual pricing advice to government to inform decisions on the AN-ACC price and price weights for each AN-ACC class and base care tariff category.
The Department of Health, Disability and Ageing is responsible for the other components of the AN-ACC funding model, such as refinement of AN-ACC classes and the AN-ACC branching structure.
Refundable accommodation deposit (RAD) approvals
A RAD is the lump-sum payment for a room (or part of a room) in an aged care home. The price is for residents who are not eligible for government assistance.
On 1 January 2025, the maximum accommodation payment amount that a registered provider can charge a resident as a RAD (or equivalent daily amount) increased to $750,000. This amount is indexed on 1 July each year in line with the consumer price index.
The current maximum accommodation payment amount is published in the Schedule of Fees and Charges for Residential and Home Care.
Providers seeking to charge a resident more than the current maximum accommodation payment amount as a RAD or equivalent daily amount must apply to IHACPA for approval.
