Small and regional hospitals have so far not been subject to activity based funding (ABF) in Australia. These hospitals are deemed unable to meet the technical requirements for ABF. In most cases they also experience diseconomies of scale due to the need to provide a broad range of low volume services to geographically large but sparsely populated areas. Block allocation remains the main system of funding for these hospitals. The disadvantage of block funding is that it lacks transparency and accountability regarding volume and type of services being funded. Furthermore it does not provide tools to measure and improve efficiency.