JOHN DWYER. Restructuring the governance of health care in Australia. Part 2

Jun 3, 2016

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

There is broad agreement that in the near future our General Practitioners and their teams will earn the majority of their income from capitation payments that will require, for the first time in our Primary Care system, the documentation of health outcomes. Many doctors are concerned about this direction and argue that they may have neither the time nor the necessary kills to fulfil such requirements. International experience informs us that these doubts can be reversed with the creation of Primary Health Care Organisations to assist with these and many other issues. 


Over the next few years as many GP practices embrace and develop the Medical Home ‘Team Care” model the provision of much of the infrastructure they need to support their clinical activities should be provided by “Primary Health Care Organisations” (PHOs). These could evolve from the current poorly conceived “Primary Health Networks”.

“Medicare Locals” have become “Primary Health Networks”. For this huge country there are 31 such entities funded and charged with improving coordination of health care at a local level. Geographic challenges and resources that are inadequate for the tasks proposed will limit any improvement in health outcomes from this initiative. As constituted a PHN has little chance of providing such care as there are too few of them asked to provide individuals with care within large populations occupying large areas. There is one PHN for all of WA outside of Perth, One PHN for Tasmania, population 555,000.

It would be better to have the Primary Health Networks become “Primary Health Care Organisations” (a name that better describes their role) that will act as a Primary Care “hub” for an area sharing boundaries with one or more “Local Hospital Networks”. International experience shows us that this approach can be highly successful.

Imagine a healthcare landscape ten years hence wherein a series of “Medical Homes” in an area are affiliated with a Primary Health Care organisation. The Medical Home” practices can be autonomous units focused on delivering the best possible care but with many logistics that can interfere with their efficiency provided by a central Primary Care Organisation.

Primary care practices will, in the future, be required to document their health outcomes. Clinicians are concerned at the amount of time this may involve and many worry that they may not possess the skills required. Assistance with this requirement would be available from the central service as will such things as bulk purchasing, mandated “Continuous Professional Development “ opportunities, IT expertise, new drug expertise, and support for electronic health records. These hubs will also be resources for research and teaching.

Primary Health Care “Hubs” will offer direct and specialised care for enrolled patients of affiliated Medical Homes. In New Zealand Primary Health Organisations may offer secondary services currently only available in our country from hospitals. An acute attack of asthma, for example, could be treated in this community setting. International experience suggests that a majority of attacks would be treated successfully avoiding a trip to a hospital emergency department.

There would need to be many more than 31 Primary Healthcare Organisations around the country with every effort being made to logically cluster Local Hospital Networks, Medical Home practices and a Primary Health Care organisation. In New Zealand the number of PHOs grew from an initial 30 to 80 as the importance of local relevance became clearer.

We would expect interested health professionals in a given area to respond to an invitation to form the local Primary Healthcare Organisation as has happened in other countries.


It is likely that State and Territory government would negotiate for the funding needed to operate the hospitals they own and wish to support. Crucially however the Regional Authority will determine, in partnership with the Boards of Local Hospital Networks already existing in a region, what roles individual hospitals might play.

Fewer hospital beds will be required as demand for hospital services decreases but better-defined roles for supported hospitals will further improve efficiency. Hospitals will no longer be islands in an ocean of health care but part of an integrated network of hospitals offering appropriately specialised services. For many speciality services increased volume markedly improves outcomes. A Regional authority will facilitate initiatives that will see fewer hospitals offering fewer but better services. Flexibility will be essential of course as in rural areas; for example, such arrangements may not be possible.


When appropriate the Australian Healthcare Reform Commission will become the Australian Health Commission with responsibility for administering our health system. It will have assumed many of the responsibilities of the current nine Departments of Health, which will become much smaller, and less expensive bureaucracies. The Commission will provide a number of centralised functions e.g. administering the Pharmaceutical Benefits Scheme, promoting public health policy, initiating workforce initiatives, negotiating funding with government etc.


International experience suggests that the savings associated with this cost effective and equitable model of care will allow us to hold total health expenditure at no more than 9-10% of our GDP. In ten years time that dollar figure will be considerably larger than it is today, as our economy will have grown significantly. Part of this growth will be provided by the increased productivity of a healthier population.

Equally important will be the jettisoning of much inefficiency as our journey proceeds. It is estimated that currently we spend more than 10 billion dollars a year on “Low value/No value” tests and procedures. We can prioritise the ongoing work clinical scientists are already doing to standardise optimal regimens for disease management. Disseminating their recommendations will reduce variations in clinical care that are not cost effective.

While we continue to pursue a fruitful partnership with the private sector we can slowly remove taxpayer subsidies for Private Health Insurance without a major reduction in the number of Australians covered by insurers. There was only a 2% increase in the number of Australians with private health insurance that followed the provision of a taxpayer subsidy for that insurance. It was the introduction of the whole of life variable rating system and the tax pain for many who did not have private health insurance that resulted in a significant increase. While there has been a steady increase in the number of services provided by the private sector this has not resulted in any decrease in the demand for public hospital services, the anticipated benefit from the insurance subsidy.

The nine billion dollars now spent on this subsidy would be better spent on supporting the new model of Primary Care.

A majority of the patients flooding into our Emergency Departments, in need of urgent admission, have medical problems. All too often they must occupy a bed that the hospital hoped would have been available for a patient waiting for a planned surgical service. Better-resourced and targeted Primary Care will reduce the demand for public hospital beds especially for patients with medical rather than surgical problems, enabling public hospitals to perform more surgery. This in turn, will restore some competitiveness in the provision of surgical services, an essential development if we are to reduce the cost of surgery available to the public.

Very significant savings will result from the anticipated reduction in hospital admissions. Hospital expenditure is growing rapidly. Demand is forcing States and Territories to spend hundreds of millions of dollars refurbishing very old facilities and building new hospitals. International experience tells us that the suggested change, when fully implemented, can reduce the need for hospital beds by at least 20%. For us, that would provide an annual saving of more than ten billion dollars.


Perhaps the reason for the failure of successive governments to introduce needed reforms can be linked to a political reality, our short Federal election cycle encourages governments to give priority to shorter-term initiatives that might earn them a community “pat on the back” before the next election. We hear much about the transitions Australia must tackle to accommodate to a rapidly changing world, transitions that necessarily may take many years to implement. There is currently more than usual advocacy for significant structural reform and it is important that a comprehensive model for the changes needed and the methodology by which they could be implemented are available for debate. Many other countries have introduced major structural reforms to cope with contemporary health needs. Australia’s turn is well overdue.

John Dwyer is Emeritus Professor of Medicine at UNSW.

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