JOHN DWYER. Restructuring the governance of health care in Australia. Part 1

Jun 3, 2016

Part One. Structural reforms for better health outcomes from a redesigned more cost-effective health care system.

The most important pre-election health care initiative has received very little publicity. Labor has committed to establishing a “Healthcare Reform Commission” if elected. While not likely to generate much discussion in one’s local pub it represents an acceptance by a major political party that we do need to explore structural changes to the way we deliver health to achieve better outcomes and fiscal sustainability. What follows is an evidence based scenario for the evolution of major structural reforms, many of which are currently being pursued internationally.

Australia is uniquely disadvantaged among OECD countries in that the responsibilities for health care are divided between States and the Territories on the one hand and the Commonwealth on the other, an arrangement that makes the integration of the various components of health care so difficult. Governments tend to focus on their area of responsibility to the detriment of whole of system integrated planning. For more than three decades it has been recognised that our health system would be much improved if provided by a single funder but the political leadership to create this reform has never materialised. With a significant review of the benefits and problems associated with our Federation currently being examined we have a rare chance to correct this chronic problem. We detail here a plan for the much needed restructuring of our health system that such an outcome would allow.

With restructuring much more health could be extracted from the currently available dollars. For example we have nine departments of health for 24 million people with duplication costs estimated to be at least a billion dollars a year.   Costs for State funded public hospitals are increasing more rapidly than are the costs for the Commonwealth’s Medicare scheme. Despite having more hospital beds available per capita than most OECD countries, today we need more. States have no levers to pull to improve community care and lessen the demands for hospital beds. The future provision of quality hospital care is dependent on a reduction in the demand for hospital services and that can only be provided from better health outcomes from a restructured primary medical care system.


What are the major structural reforms needed to improve our complex and fractured health delivery system?

The first and most important step, from which all other reforms can emerge, is also the most difficult politically. It requires the Federal government to broker an agreement with State and Territory governments for the creation of a new entity the —“Australian Healthcare Reform Commission”. Such a commission existed for a brief period in the Whitlam era and the recorded goals were almost identical to those challenging us today.

State, Territory and Federal governments would need to endorse the vision and through a COAG agreement pool their health related human and financial resources. The Commission will not be asked to explore options for changing our healthcare system. Its task is to facilitate the introduction of the model described herein. The commission would report to COAG and Australian Health Ministers. Its Board would be populated with clinical leaders from the health professions with enthusiasm for the model to be implemented as well as community leaders and individuals with appropriate economic and workforce skills. Appropriate bureaucratic expertise would be sought from existing members of State and Federal Departments of Health. The Federal government would fund the establishment costs.

The reform commission’s early activities would involve a series of consultations with the community and health professionals to detail the planned changes and respond to refinements this engagement might generate. It is more than likely that interactive consultation utilising “Town Hall” meetings or “Citizen Juries” will generate enthusiastic community support. Public enthusiasm for what are readily approachable concepts is essential if politicians are to feel comfortable with a long-term initiative.

The Commission would work to reassure clinicians that the changes sought are not being imposed. We are talking about “bottom up” government supported evolution not revolution and a decade long time timetable is to be anticipated.


The Reform Commission will be charged with ending the inefficiency associated with State and Territory borders creating illogical boundaries for the distribution of health care resources. It will develop a model for the creation of Regional Health Authorities describing the number needed and the geographically logical boundaries within which they will operate Within a defined region they will fund and organise the full spectrum of publically funded health care involving hospital, primary and community care. In the UK such authorities are referred to as “Commissioning Agents”.

Crucially the funds available to a region will be calculated using a Resource Distribution Formula based not just on population but also the special needs of a region. Recognising that different areas have special needs is crucial to cost effective and equitable care. It is a major reason why suggestions that Australians could be required to purchase private health insurance for all their health care from a competitive health insurance industry is short sighted as the concept is inimical to the imperative that is regionalisation. The creation of Regional Health Authorities in France has markedly improved equity and cost effectiveness.

These governance arrangements create the opportunity for funding using a classical “Funder/Provider split model”. A Regional Health Authority will be charged with delivering, in a region, a model of care embraced by Australians and their government. They will offer contracts for the delivery of local hospital services, integrated primary health care, community services, diagnostic testing etc.


Initially the commission would call for expressions of interest in the creation of a number of “proof of concept” Integrated Primary Care practices delivered from “Medical Homes” and supported by “Primary Health Care Organisations”. The initiatives will need to be planned with appropriate Local Hospital Networks.

Integrated primary care involves far more than better integrating chronic disease management. Fundamentally such a model involves the provision, in house, of a team of health professionals available to coordinate and integrate the full range of health care services required by those enrolled in the program offered. This is a significantly different approach to that of the “Super GP Clinic” where independent health professionals from various disciplines were working side-by-side in the one facility. We are talking about multidisciplinary teams in the one practice.

A key factor in the success of this model involves patients identifying with a specific practice and concomitantly, a practice assuming responsibility for the care of those patients. The way of affecting this is through voluntary enrolment in a practice of one’s choice. The psychology associated with enrolment in a medical home is important. A sense of belonging to a facility wherein all one’s health issues can be managed is reassuring and promotes adherence to advice given. Medical Homes foster a culture where those enrolled accept the obligation to address issues that might produce illness or compromise its management. The “team” acknowledges its responsibility to make every effort to help those enrolled avoid or manage health problems.

Doctors, nutritionists, a social worker, various nurse specialists, physiotherapists, occupational therapists and even a dental hygienist might staff a typical Medical Home. The exact nature of a given team is determined by the needs of the local community. We have described the model in greater detail elsewhere. What is described here is a properly resourced model of IPC that is evidence based and very different from the “Healthcare Home” model currently being proposed by the government.

Urged on by the World Health Organisation’s conviction that Integrated Primary Care with its emphasis on “Team Medicine” should be embraced globally, many universities responsible for educating the next generation of health professionals are already developing “Inter-professional Learning” modules; “team learning to prepare for team medicine”.

Our Government has recently announced plans to establish a trial of “Healthcare Homes” with the aim of “providing continuity of care, coordinated services and a team based approach according to the needs and wishes of the patient” . Few details are provided but the concept is far removed from the fully resourced Medical Home discussed herein, the effectiveness of which is supported by a strong evidence base.

The government’s tentative move to embrace a form of Medical Home is disappointing. The plan is only open to patients with chronic disease and more than one morbidity. It is doctor centric with no provision for allied health services. Capitation payments will be made quarterly with the dollar amounts yet to be decided and it relies on Primary Health Care Networks (PHN) providing many non-medical services. As constituted a PHN has little chance of providing such care as there are too few of them asked to cover large populations over large areas. There is one PHN for all of WA outside of Perth, olne PHN for Tasmania, population 555,000. The initiative does not supply any resources for prevention strategies and while GPs who embrace the plan will need to be accredited, how this is to be done is not clear. It is suggested that the plan will involve 200 practices caring for 65,000 patients, cost 21 million dollars over four years and be cost neutral to Medicare! The Hambleton report to Government recommending this trial emphasises that it may not be possible to implement without additional resources and provides encouragement to the Private Health Insurance sector for a future role in covering primary care services. Better-resourced Primary Care for those with private health insurance should remain unacceptable in Australia.

In part two of this paper, structural reforms to Primary Health Networks, the future organisation of hospital services and the affordability of the proposed changes are presented for discussion.

John Dwyer is Emeritus Professor of Medicine at UNSW.

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