Activity Based Funding (ABF) is the system by which governments monitor, manage and administer the funding of healthcare provided by public hospitals.

Principles of Activity Based Funding

The key principles of ABF are the accurate and transparent allocation of funding to health services based on the activity they perform. This requires an ability to define, classify, count, cost and fund activity in a consistent manner.

Three key elements form the building blocks of ABF.

  • Classification - grouping activity that uses a similar amount of resources into clinical meaningful classes
  • Counting - applying the same rules and units to measure the amount of activity that occurs
  • Costing - measuring in dollars the amount of resources used to provide each output in the classified group

ABF implementation

The Council of Australian Governments (COAG) agreed to the introduction and phased implementation of ABF as part of the 2011 National Health Reform Agreement (NHRA).

The phased implementation of ABF builds on the Victorian system of casemix funding and continues to bring about reforms to the way health services are funded.