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The Funding Model

As of 1 June 2012, the Victorian Ambulatory Classification and Funding System (VACS) is no longer in use. VACS has been superseded by the Nationally Consistent Activity Based Funding system. The information contained on this website is historical. Please refer to Victoria’s Activity Based Funding website for information on current funding models.

The number and type of public patient encounters determine the variable funding received by VACS providers. The funding model also recognises ‘fixed’ elements and activities such as teaching and other services.

Annual throughput targets are set and health services are funded up to target. Significant variation, in terms of estimated activity levels and mix of services, are audited and payments adjusted accordingly where health services do not meet the targets specified.

To ensure a smooth transition, compensation grants were provided to the VACS-funded hospitals for the first three years from 1997–98 to 2000–01 but were removed in 2001/02.

Funding arrangements for non-admitted patients under the VACS funding model include the following components.

Non-admitted patient emergency services grant

The funding model, introduced on 1 July 2002, applies to hospitals with major 24-hour emergency services. It recognises hospital and emergency department availability and non-admitted workload. Hospital ‘availability’ relates to services provided by the hospital, but not necessarily by the Emergency Department (ED), that must be available to the ED on-call, regardless of the actual level of activity. At the ED level, availability relates to the minimum level of staff and resources required to be able to treat complex emergency cases, whether they arrive or not. While ensuring ‘availability’ serves both admitted and non-admitted patients, the activity associated with admitted patients is costed and recompensed through Weighted Inlier Equivalent Separations (WIES) payments.

The cost of having ED services available to non admitted patients has been allocated on the basis of each hospital’s share of the total number of multi-day emergency WIES. The model also explicitly recognises the actual workloads associated with non-admitted patients. Funding for non-admitted patients is allocated funding on the basis of weighted patient attendances, based on triage category.

VACS variable grant

The variable grant is calculated on the number of public weighted encounters. In 2010–11, the case payment for a non-admitted VACS patient throughput up to target is $179 per weighted public encounter.

VACS allied health services grant

This grant is determined on the basis of allied health occasions of service, up to target, as reported by hospitals to the Department. In 2010–11, the VACS Allied Health payment rate is $63 per allied health occasion of service.

VACS base grant

This grant provides for fixed or non-variable activities and services provided to patients outside defined clinical categories (for example, phone consultations and calls, administration of patients etc). In 2009–10, it represents approximately 12 per cent of the total non-admitted grant budget.

VACS teaching grant

This grant recognises the importance of non-admitted services for teaching and training. In 200–10 it represents 6 per cent of the total non-admitted grant for individual hospitals.

Specified grants

A number of services to non-admitted patients have either a relatively specialised function or are provided in a manner that cannot be readily funded in terms of patient encounters. Such services are however an important part of hospital services, and are funded through specified grants. Examples of specified grants are liver transplant services, cochlear implant clinics and genetics. In 2008–09 Specified grants represent 1.2 per cent of the total non-admitted grant for individual hospitals.

For more details on VACS targets, cost weights and modelled budgets refer to the Victorian health services policy & funding guidelines 2010-11.