Adopting surgical innovation within activity-based funding for public hospitals

To the Editor: Activity-based funding (ABF) is being gradually introduced across Australia’s public hospitals, which means that payments will be made according to cost-weights in about 670 diagnosis-related groups (DRGs).1 ABF is not new. It has been used in the United States since 1983 and in Victoria since 1993, and is the dominant funding model in several European countries. But not all public hospital activity can be funded through ABF: research and teaching are typically block funded and smaller hospitals often require block funding.2