Calculating Notional Funding from Activity Data

This tutorial walks through the calculation of notional equivalent funding (NEP) from admitted patient activity data using the nwau_py package. The result represents what a jurisdiction would have been paid under a given pricing year’s national efficient price (NEP).

Synthetic data only

All data used in this tutorial is synthetic and for illustration purposes only. Do not use these outputs for policy decisions, jurisdictional submissions, or financial reporting.

Prerequisites

• Python 3.10+
• nwau_py >= 0.6.0 installed
• Basic familiarity with activity-based funding (ABF) concepts

1. Load packages and prepare data

import pandas as pd
import numpy as np
from nwau_py.calculators import calculate_acute, AcuteParams
from nwau_py.pricing_constants import get_nep

np.random.seed(42)
n = 20
activity = pd.DataFrame({
    "DRG": np.random.choice(["E62A", "E62B", "F62A", "F62B", "G02A"], size=n),
    "LOS": np.random.randint(1, 15, size=n),
    "ICU_HOURS": np.random.choice([0, 0, 0, 0, 2, 4, 8], size=n),
    "ICU_OTHER": 0,
    "PAT_SAMEDAY_FLAG": np.random.choice([0, 1], size=n, p=[0.8, 0.2]),
    "PAT_PRIVATE_FLAG": np.random.choice([0, 1], size=n, p=[0.85, 0.15]),
})

The synthetic DataFrame contains episode-level DRG codes, length of stay, ICU hours, and patient demographic flags — the columns the acute calculator expects.

2. Calculate NWAU and notional funding

result = calculate_acute(activity, AcuteParams())
nep = get_nep("2025")

result["NotionalFunding"] = (result["NWAU25"] * nep).round(2)
result[["DRG", "LOS", "NWAU25", "NotionalFunding"]].head()

The calculate_acute function assigns an NWAU value per episode based on DRG and length of stay. Multiplying each episode’s NWAU by the national efficient price gives the notional equivalent funding.

3. Aggregate to stream summary

notional_funding = pd.DataFrame({
    "Episodes": len(result),
    "Total NWAU": result["NWAU25"].sum().round(4),
    "Mean NWAU": result["NWAU25"].mean().round(4),
    "Total Notional Funding": result["NotionalFunding"].sum().round(2),
    "Mean Notional Funding": result["NotionalFunding"].mean().round(2),
}, index=["Acute"])

notional_funding

This shows the aggregate NWAU and notional funding for the synthetic acute cohort.

Notional funding is not actual funding

Notional funding (NWAU × NEP) is a benchmark, not actual hospital funding. Real funding depends on jurisdiction activity-based pricing policies, block grants, cross-border arrangements, and other adjustments.

4. Export for downstream use

notional_funding.to_csv("notional_funding_summary.csv")

What to try next

• Comparing Observed Costs to Efficient Prices – bring in actual cost data alongside these NEP estimates.
• Stream-Level Cost Benchmarking – break the comparison down by care stream and benchmark against NHCDC.