Key messages

  • Small Rural Health Services (SRHS) are better funded through the block funding model.

The National Health Reform Agreement (NHRA) recognises that Activity Based Funding (ABF) is not practicable for all health services and that some hospital services are better funded through block grants, for example, some services in rural and regional communities.

The block funding model applies to Small Rural Health Services (SRHS) that meet the Independent Hospital Pricing Authority (IHPA) criteria for block funding.

Block funding criteria

The IHPA has developed criteria that can be used to determine which public hospital services are eligible for block funding. Block funding can apply:

  • when it is not technically possible to use ABF
  • when there is an absence of economies of scale that means some services would not be financially viable under ABF.


Eligible facilities in scope for block funding are Local Hospital Networks (LHNs) that meet the block funding criteria.

The Victorian Government is required to provide advice to the IHPA on which hospitals meet the block funding criteria on an annual basis. For SRHS, this advice can be provided once every six years, or more frequently at the discretion of the government.

Public and private patients are in scope for block funding, while compensable patients are out of scope.