Briefing paper

Australian healthcare funding policy needs a rethink. Over the last decade, governments have sought to give primary health networks (PHNs) and local health networks (LHNs) greater local planning and commissioning roles. Policy direction suggests PHNs and LHNs will also be tasked with developing outcomes-based funding models, premised on the suggestion that local level planning will deliver better outcomes.

Developing a value-based payment model is complex. PHNs and LHNs require the necessary skills and experience, policy levers, supporting infrastructure and workforce to appropriately implement a value-based payment model. Such a decentralised approach is unlikely to be efficient. Implementing a value-based payment model in isolation will lead to duplication and missed opportunities to share learnings and iteratively improve value-based payment models.

The likelihood of developing a program of successful, value-based payment models will be substantially greater if state, territory and federal governments develop a structured and supportive policy and institutional framework around the intent to trial and evaluate ongoing value-based payment models nationally. Four recommendations are made to establish this framework.

Australian healthcare policy has focused mostly on reorganising models of care. State, territory and federal governments have neglected to harness financial incentives to improve value. This has been, in part, a response to the unease many providers feel towards having their revenue streams reorganised, taking on increased financial risk, and experiencing increased costs as business and care models realign.

It is natural for providers to pushback on value-based payments if the incentive structure fails to compensate for increased risk, fails to cover the marginal cost associated with meeting incentive targets, or fails to attribute health outcomes to care.

Value-based payments are a necessary step towards securing Australia’s healthcare system sustainability. Their purpose aligns with other important healthcare system policies to improve health outcomes and reduce waste. However, using financial incentives to change behaviour requires national leadership, substantial investment in better information technology, and improved data collection and sharing to inform and support measurable and attributable care outcomes agreed across patients, providers and funders.

The value-based payment reform journey will be long, and it will experience some failures. Resolute testing of innovative funding models within a strong learning ecosystem will help government build funding models that complement future healthcare needs and preferences of patients. Who bears the risk and who benefits must be transparent and factored into implementation to predict for uncertainties.

Publication Details
Access Rights Type:
Deeble Institute Issues Brief 49