Second-tier default benefits

Page last updated: 02 August 2019

Annual Hospital Categorisation Review Consultation

On 1 January 2019, the Department of Health commenced administration of second-tier default benefits eligibility. Under these arrangements, private hospitals apply directly to the Department for recognition that they are eligible for second-tier default benefits. This has replaced the industry based Second Tier Advisory Committee (STAC).

The Department maintains and publishes the list of all private hospitals grouped by second-tier hospital category and their second-tier eligibility status.

The Department consults annually on this list. For this year the formal consultation round with private hospitals has now closed. Thank you to those who provided feedback. This review will be undertaken again in June 2020.

The list below is used by insurers to develop their second-tier rates.

Declared Private Hospitals Grouped by Second-Tier Hospital Category as at 1 August 2019 (Excel 68 KB)

Future changes to second-tier category and eligibility can be found on the Commonwealth declared hospital list.

What are second-tier default benefits?

Second-tier default benefits provide patients treated in an eligible hospital that does not have a negotiated agreement with the patient’s insurer, access to higher benefits than those that would otherwise be payable.

Second-tier default benefits are an amount no less than 85% of the average charge for the equivalent episode of hospital treatment. (Under an insurer’s negotiated agreements in force on 1 August of a given year with all comparable private hospitals in the same state as the hospital in which treatment occurs.) Comparable hospitals are those hospitals in the same second-tier hospital category with negotiated rates for equivalent episodes of care.

To facilitate calculation of second-tier default benefits by insurers, from 1 January 2019, the Department will categorise all declared private hospitals into the following categories:
  1. private hospitals that provide psychiatric care, including treatment of addictions, for at least 50% of the episodes of hospital treatment, and do not fall into category (g);
  2. private hospitals that provide rehabilitation care for at least 50% of the episodes of hospital treatment, and do not fall into categories (a) or (g);
  3. private hospitals that do not fall into categories (a), (b) or (g), with up to and including 50 licensed beds;
  4. private hospitals that do not fall into categories (a), (b) or (g), with more than 50 licensed beds and up to and including 100 licensed beds;
  5. private hospitals that do not fall into categories (a), (b) or (g), with more than 100 licensed beds, without an accident and emergency unit or a specialised cardiac care unit or an intensive care unit;
  6. private hospitals that do not fall into categories (a), (b) or (g), with more than 100 licensed beds, with either (or any combination of) an accident and emergency unit or a specialised cardiac care unit or an intensive care unit;
  7. private hospitals that provide episodes of hospital treatment only for periods of not more than 24 hours.
To determine a hospital’s current second-tier category and eligibility status, view the Department’s Hospital Declarations list on the Department's website.

How to apply for second-tier default benefits eligibility

The Department of Health commenced applications for second-tier default benefits eligibility from 1 January 2019.
    Applying for second-tier default benefits eligibility is optional for private hospitals. To be considered for second-tier default benefits eligibility, a hospital must:
    • complete the application form;
    • submit the completed form and all required attachments to PHIsecondtier@health.gov.au; and
    • pay an application fee of $850 (GST exempt) to the Department.
    Applications may be submitted at any time of year, but hospitals seeking to renew existing second-tier eligibility should submit an application at least 60 days prior to their second-tier expiry date. A separate application and fee is required for each hospital seeking eligibility.

    The Department will assess applications against the following assessment criteria:
    1. be a private hospital;
    2. be accredited;
    3. not bill patients directly for the minimum benefit payable by the patient’s insurer;
    4. make provision for informed financial consent; and
    5. submit Hospital Casemix Protocol Data to health insurers electronically with every claim for second-tier default benefits.
    Hospitals may apply for second-tier default benefits eligibility at the same time as seeking declaration as a private hospital.

    The Department will invoice applicants for second-tier eligibility upon receipt of a complete application.

    Hospitals will be notified of the outcomes of applications within 60 calendar days of the Department receiving a complete application, including payment of the associated application fee.

    Hospitals who meet the assessment criteria will be awarded second-tier default benefits eligibility, effective from the day of approval until 60 calendar days after the day that the hospital’s accreditation expires.

    Cost recovery

    The Department is fully cost recovering its assessment of applications for second-tier default benefits eligibility and publishing of a list of hospitals and their second-tier eligibility status. The Department maintains a Cost Recovery Implementation Statement for this activity, which provides information about how the Department implements cost recovery for administration of second-tier default benefits eligibility.

    Cost Recovery Implementation Statement

    Cost Recovery Implementation Statement 1 July 2019 – 30 June 2020 (PDF 692 KB)
    Cost Recovery Implementation Statement 1 July 2019 – 30 June 2020 (Word 53 KB)
    Cost Recovery Implementation Statement 1 January 2019 – 30 June 2019 (PDF 181 KB)
    Cost Recovery Implementation Statement 1 January 2019 – 30 June 2019 (Word 50 KB)

    Links and downloads

    Application form

    Application form (Word 134 KB)

    Second-tier Default Benefits Guidelines

    Second-tier Default Benefits Guidelines (PDF 218 KB)
    Second-tier Default Benefits Guidelines (Word 232 KB)

    Private Health Insurance

    Private Health Insurance (Health Insurance Business) Rules 2018
    Private Health Insurance (Benefit Requirements) Rules 2011

    Contact

    Questions about second-tier default benefits should be emailed to PHIsecondtier@health.gov.au.