In 1988 a countrywide study was conducted on the costs of rural health services in Papua New Guinea. 16% of all health centres and subcentres were surveyed. Information was collected on physical facilities, recurrent costs, staff time allocation, service outputs and quality of services. Wide variation was found in the costs of rural health facilities overall, and significant differences were found between the costs and outputs of health centres and subcentres. Average levels of service output were found to be similar at church and government facilities but average levels of utilization by the population were higher at church facilities. Despite government policy on extension of preventive health care, a strong emphasis was found on curative care. Many facilities were found to have significant excess bed capacity. Recurrent financing for transportation and maintenance was found to be inadequate.