The National Efficient Price: A Fair Future for Private Hospitals — But Still Years Away

The National Efficient Price: A Fair Future for Private Hospitals — But Still Years Away

By Empowered Health Analytics | November 2025

What the NEP is and why hospitals need it?

Australia’s private hospitals continue to operate within a funding system that is complex and opaque. Each year, hospitals and private health insurers negotiate hundreds of individual contracts—often with limited shared understanding of what constitutes an efficient cost of care.

By contrast, public hospitals are funded through the National Efficient Price (NEP), a transparent, data-driven mechanism set by the Independent Health and Aged Care Pricing Authority (IHACPA). The NEP defines the average efficient cost of delivering a unit of activity under activity-based funding. For 2025–26, that figure is $7,258 per National Weighted Activity Unit (NWAU25) (IHACPA 2025a).

Applying a similar framework to the private sector could make pricing more transparent and equitable, providing hospitals with an independently derived benchmark for the cost of efficient care. It would also enable government and industry to compare cost and performance consistently across public and private systems.

Why the NEP remains years away

Despite its potential benefits, a private-hospital NEP is not close to implementation. Evidence from government and industry sources points to a multi-year horizon before such a mechanism could credibly or legislatively exist.

Data foundations are not yet mandatory — and that matters

IHACPA’s Three-Year Data Plan 2025-26 to 2027-28 (IHACPA 2025b) outlines plans to strengthen hospital cost-data collections, including expansion of the National Hospital Cost Data Collection (NHCDC) to the private sector. However, participation remains voluntary.

The Department of Health and Aged Care’s Private Hospital Financial Data Collection Framework (January 2025) likewise notes that the program is voluntary and emphasises the need for “a robust evidence base” to understand private-hospital viability (DoHAC 2025b).

Without a mandatory, audited and comprehensive dataset, IHACPA cannot yet generate statistically reliable cost weights across the entire private-hospital market. Both insurers and regulators would require that assurance before accepting any formula-based benchmark or change to default benefits.

Industry submissions reinforce this reality. The Australian Medical Association (2025) stressed the importance of transparency to balance the negotiating power of insurers, while Private Healthcare Australia (2025) cautioned that new pricing frameworks could raise premiums unless grounded in validated cost evidence.

Collectively, these sources indicate that expanding and standardising cost reporting will take several years, consistent with IHACPA’s data-plan horizon to 2027-28.

Policy Consultation and Legislative Reform take time

Even after robust data collection is achieved, policy design and legislative processes introduce additional delay. The Private Health Reform Options paper (DoHAC 2025a) describes a “national private price” only as a potential reform option—signalling that no implementation pathway or schedule currently exists.

Historical precedents illustrate typical reform lead-times:

Reform	Consultation launch	Implementation	Duration
Activity-Based Funding for Public Hospitals	2009 (NHHRC Report)	2012–13	≈ 3–4 years
Prostheses List Reform	2016 discussion papers	Phase 1 2022	≈ 6 years
My Health Record opt-out expansion	2012 pilot	2018 roll-out	≈ 6 years

Reforms that alter funding flows or contractual structures consistently require several budget cycles.

This view is shared by sector leaders. In The Australian (August 2024), Ramsay Health Care CEO Craig McNally stated that introducing a national efficient-price model for private hospitals “would take five years” and “would do nothing to help operators which were suffering now.” (The Australian, 23 Aug 2024).

Similarly, Calvary Health Care observed that establishing such a mechanism “is not something that can happen overnight,” noting the decade-long journey required for the public-hospital NEP (Calvary Health Care 2025).

Realistically, a decade-long horizon

Taken together, the absence of mandated data collection, the complexity of cross-sector implementation, and the multi-year consultation and legislative cycle all point to an extended timeline.

While some stakeholders have suggested that a private-hospital NEP might emerge around 2028, this would require unusually rapid progress on data standardisation, policy design and industry agreement. A more realistic projection—based on comparable reforms and current IHACPA milestones—is that a credible, legislated NEP is unlikely before 2030, and that remains contingent on the reform proceeding at all.

In short, the National Efficient Price for private hospitals is conceptually close — but practically distant.

Acting now: Benchmarking tools like ROADS

While a National Efficient Price may still be years away, hospitals don’t need to wait to gain its benefits. The same principles that will underpin a future NEP—validated data, objective benchmarking, and evidence-based negotiation—are already available through modern analytics platforms.

Across Australia, private hospitals are using ROADS, Empowered Health Analytics’ benchmarking and performance-insight solution, to strengthen their negotiation position with private health funds and deliver measurable financial improvement.

ROADS transforms Hospital Casemix Protocol (HCP) annual-report data and financial performance information into actionable intelligence. By comparing peer-group performance across AR-DRGs, ROADS enables hospitals to:

• Quantify service-line efficiency and model “efficient-price equivalents,” mirroring the analytical foundation of a future NEP.

• Identify funding gaps where contracted benefits sit below national peers, supported by independent evidence.

• Demonstrate value and outcomes to health funds with transparent data, improving negotiation quality.

• Track efficiency gains year-on-year, supporting continuous improvement and reinvestment.

Hospitals using ROADS are already realising tangible results. As the Chief Executive of a Large Regional Private Hospital recently said:

“ROADS gave us the clarity we needed to understand where our pricing sat in the market. It’s helped us negotiate with confidence, supported by independent data.”— Empowered Health Analytics Client Testimonial, 2025

This kind of transparency and credibility is what a future NEP aims to achieve at a national level—but ROADS delivers it today.

The message for the sector is clear: waiting for the NEP is not the only path to fairer pricing. Hospitals can already build the evidence base to negotiate confidently, protect viability, and achieve sustainable, data-driven outcomes.

The Takeaway

A future National Efficient Price for Private Hospitals could transform pricing transparency and sustainability across the sector. However, pragmatically, even if consultation concluded tomorrow, a rollout by 2028 is very overly ambitious. Without mandated data collection and legislative change, a private-hospital NEP is unlikely before 2030—and even that depends on policy momentum.

In the meantime, hospitals can realise many of the same benefits through benchmarking platforms like ROADS, using existing HCP and financial data to negotiate from a position of evidence—today, not five years from now.

Want to know more about how ROADS can support your hospital? Book a discovery call.

References

• IHACPA (2025a) National Efficient Price Determination 2025–26, Commonwealth of Australia.

• IHACPA (2025b) Three-Year Data Plan 2025-26 to 2027-28, Commonwealth of Australia.

• DoHAC (2025a) Private Health Reform Options – Consultation Paper, January 2025.

• DoHAC (2025b) Private Hospital Financial Data Collection Framework – Consultation Paper, January 2025.

• Australian Medical Association (2025) Submission to the Private Health Reform Options Consultation Paper, February 2025.

• Private Healthcare Australia (2025) Submission to the Private Health Reform Options Paper, January 2025.

• Ramsay Health Care / The Australian (2024) “Cost-of-living pressures push patients from private to public hospitals,” The Australian, 23 August 2024.

• Calvary Health Care (2025) “National Private Pricing Mechanism: What Private Hospitals and Patients Deserve,” Calvary Care News, April 2025.

• Empowered Health Analytics (2025) Client Testimonial: Regional Private Hospital CEO, October 2025.