The impact of government financial incentives upon the integration of health care services for people with chronic disease in Australia


Principal investigator


In Australia, there has been a noticeable shift in the burden of disease with a reduction in mortality and morbidity from infectious diseases and an increase in chronic (Western Lifestyle) conditions.  The nature of chronic diseases is that they generally require treatment by more than one practitioner due to the complex causality and potential for comorbid complications.

However the current structure of health systems in Australia, and in other western countries, does not support the patient centred style of care needed by people with chronic conditions.


Over the past decade, considerable effort has been directed at identifying the barriers to integration for groups managing chronic conditions and, as a result, various methods to improve outcomes including better collaboration, communication and education have been proposed.  One of the central influences on how the Australian health care system is structured and delivered is the funding model employed by governments, however this part of the incentive package for health care providers has received little examination with a notable lack of literature on the impacts of different payment models upon health outcomes.   Good incentive design requires an understanding of the nature of incentives, the environment in which actors operate and what motivates actors.  Poorly designed incentives are likely to fail to support program outcomes.


In this research I explored how the financing mechanisms embedded within government policies prevent or promote integration of care across the acute/primary interface for patients with chronic conditions. I evaluate the impact of the interactions between the current set of financial incentives provided by governments upon the integration of care to improve the understanding the phenomenon. The current purchasing mechanisms, principally those contained in Commonwealth policies or Commonwealth/State agreements, create barriers to integrated care for people with chronic conditions. The Commonwealth/State agreements, although purporting to improve coordination and integration through restructuring the organisation of care did not correctly target incentives to effect the desired changes.  As a result, vertical and horizontal fragmentation of the system remained, perpetuating the provision of episodic care rather than holistic care.  State level efforts to integrate care continue to be frustrated by the control exerted by the Commonwealth over the provision of primary health care services.  Since reforming the system to centre around the patient requires adjustment to both primary and acute care, programs that are organised at the state level are curtailed in their scope and influence. Overall, governments have not provided incentives to alter the organisation of health care services around the patient, thus preserving the dominant medical paradigm in which the organisation of services is centred on the service provider.


Finally, this paper proposes that changes are occurring to the organisation of health services, and that it is timely for governments to use a combination of market mechanisms and targeted incentives to encourage the organisation of health services around the patient.


Updated:  26 May 2017/Responsible Officer:  Director/Page Contact:  Coordinator