The basis used to determine NHR payments to LHNs in Queensland was advised by the Queensland Department of Health to be as follows:

Service agreements between the Department of Health and each Hospital and Health Service (HHS) are based on the Department’s funding and purchasing models. In broad terms, the funding model determines the price at which the department purchases services from HHSs, and the purchasing model determines the volume of services that are purchased.

In terms of the funding model:

35 of the largest public hospitals are funded through the Queensland Activity-Based Funding (ABF) model, which sets prices at a disaggregated level for each type of public hospital service. The Queensland ABF model is based largely on the national ABF model, but includes a number of modifications to reflect Queensland priorities.

Where an HHS achieves activity above the NWAU target set through the Service Agreement the NHR growth NWAU value at the State price is paid to HHSs.

The remaining public hospitals, predominantly small regional and rural hospitals, and specialist mental health facilities are funded through Block Funding arrangements which take account of hospital size and location. These are based on the National Efficient Cost Determination with some minor modifications for the actual expenditure for the service.

Most non-hospital services (e.g. preventive health, primary and community health) are funded based on historical funding levels. However, some services, such as oral health and breast screening, are funded based on a price per unit of output.