Classifications aim to provide the health care sector with a nationally consistent method of classifying all types of patients, their treatment and associated costs in order to provide better management, measurement and funding of high quality and efficient health care services.

Classifications are comprised of codes that provide clinically meaningful ways of relating the types of patients treated by a hospital to the resources required. They enable hospital and health service provider performances to be measured by creating a link between the patients treated and the resources consumed for providing those treatments. This allows hospital and health service provider output to be measured, which forms the crucial data for policies on funding, budgeting and setting costs.

Classification systems enable clinical information that is written in medical charts to be converted into manageable data categories. Rules for collecting and coding clinical data need to be the same across Australia to ensure that all jurisdictions are obtaining and providing information the same way. Effective clinical classification systems ensure that hospital data is grouped into appropriate classes, which in turn contributes to the determination of a National Efficient Price for public hospital services.

IHPA undertakes reviews and updates of existing classifications and is also responsible for introducing new classifications for those service categories without an existing classification. This is an important role as having nationally adopted classifications for services provided in public hospitals will allow Australian governments to provide funding to public hospitals based on the activity based funding (ABF) mechanism.

There are six patient service categories in Australia currently which have classifications being used nationally or in development stage.