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:

39 of the largest public hospitals are funded through the Queensland Activity-Based Funding (ABF) model, which sets prices at a Diagnosis Related Group, clinic type and emergency department presentation triage level for public hospital services. The Queensland ABF model is based on the national ABF model, but includes a number of modifications to reflect Queensland priorities and service investments.

Other Queensland hospitals and facilities are funded through Block Funding arrangements, which take account hospital size and location. It is consisting of small rural hospitals, standalone hospitals providing specialist mental health services such as the Baillie Henderson Hospital, The Park-Centre for Mental Health, Kirwan Rehabilitation Unit, and Charter Towers Rehabilitation Unit, and mental health community care units.

Queensland Block Funding uses the National Efficient Cost (NEC) as a benchmark, and are based on 2017-18 reported expenditure (net of Depreciation and Other patient revenue and Department of Veterans’ Affairs revenue source) indexed by 2.5% per annual for two years to 2019-20 levels.

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.

The purchasing model determines the volume and value of services that the Department agrees to purchase from each HHS through the service agreement. The model reflects key priority areas for investment which is informed through a range of planning models, growth projections and performance objectives for each HHS.