How Ready Are We For Value-Based Healthcare in Australia?

Australia’s health system is famed for universality and strong outcomes. But beneath the headlines, we all know it’s also under pressure: rising chronic disease, workforce constraints, rising costs and fragmented care across primary, hospital and social services. Value-based healthcare (VBHC) — paying for outcomes and organising services around what patients value — promises a way out of the trap of “more activity = more payment.”

The pragmatic question for leaders and clinicians isn’t whether VBHC is attractive in theory, it’s whether Australia is ready to adopt it at scale, and if not, what practical, realistic steps will get us there.

We unpack the current landscape, the real barriers, early wins we can scale, and a pragmatic roadmap you can use now — aimed at board members, executive teams and clinical leaders who need to move from aspiration to delivery.

What does “ready” actually mean?

Being ready for VBHC isn’t about having one new policy or launching one pilot program. Readiness means the system having several key pieces in place:

Policy alignment

Governments and funders allowing for payment models and agreements that allow new ways to pay for value (outcomes) rather than activity..

Data and measurement

Having consistent ways of routinely collecting and measuring health outcomes (both clinical and patient-reported), and then sharing that information across providers.

Digital capability

Electronic records and reporting systems being able to “talk” to each other so that information flows across hospitals, GPs, and community services and can be analysed in an integrated way.

Governance and skills

Boards, executives, and clinicians being upskilled with the knowledge and structures to manage risk, design contracts, and oversee outcomes-based models.

Consumer involvement

Patients having a genuine voice in defining what value means. Their perspectives, whether obtained through surveys or outcomes they report themselves, are just as important as clinical measures.

Many of these are partially present in Australia, but not yet joined up or mature enough for system-wide rollout.
Some progress has been made with pilots, policy documents, and discussion forums. But moving from good intentions to everyday practice is where the challenge lies.

Where Australia already has traction

• National reforms – Recent health agreements and policy discussions clearly talk about paying for outcomes. That’s important, because without a signal from the top, system change won’t stick.
• Pilots and trials – Several hospitals, peak bodies and research groups have run pilot programs testing bundled payments, new care pathways, and outcome dashboards. These efforts mean we’re beyond the “should we?” stage and squarely into “how fast and how well?” territory.
• Communities of practice – National conferences and forums are helping leaders and clinicians share their experiences of what worked and what didn’t.
• Practical guidance – Roadmaps, toolkits, and white papers have been produced to help health services take the first steps.

So the groundwork exists. The real issue now is scale. How do we move from isolated pilots and discussion papers to a system where value is embedded into routine care?

The stubborn, practical barriers

So why hasn’t VBHC taken over already then?

Because:

1. Funding still rewards volume

Most hospitals rely on activity-based funding. This means they are paid more for doing more, not necessarily for achieving better outcomes. While it’s a safe and predictable model, it discourages innovation. Payment reform that reallocates risk or rewards outcomes requires political courage and careful transitional design.

2. Data gaps

Outcome measurement is patchy, and patient-reported outcomes are not routinely collected consistently. Even when data exists, it’s often locked in silos that don’t connect across primary care, hospitals and community services.

3. Workforce skills

Clinicians and managers are experts at delivering care, but are less familiar with designing contracts, managing population health, or analysing outcome data. These are new skills that takes time to build.

4. Risk allocation

If a hospital or GP group takes on a contract that rewards outcomes, who pays if results don’t improve? Small providers may fear financial losses, while larger ones may prefer the security and predictable funding of activity-based funding.

5. Culture and governance

VBHC relies on different parts of the system working together. But our system is fragmented, with providers funded separately and accountable to different bodies. Siloed organisations and short political cycles makes long-term redesign difficult.

These aren’t impossible to fix, but they explain why VBHC is still more of a promise than a daily reality in most of Australia.

Where to start – practical, low-risk places prove value

It’s obviously unrealistic to transform an entire health system overnight. A pragmatic approach is to focus on areas where change is easier and the benefits are clearer:

Bundled payments for common high-volume procedures

Procedures like hip replacements or cataract surgery are relatively straightforward to measure and compare. These let teams test outcome measurement, care pathways and shared savings without flipping the whole hospital budget.

Chronic disease pathways

Conditions like diabetes and heart failure are costly and often managed across multiple providers. Coordinated care with shared savings would create incentives to prevent avoidable hospitalisations.

Outcomes dashboards

Starting small by measuring and sharing a handful of meaningful clinical outcomes and PROMs in high-impact services will allow clinicians to see how their outcomes compare and improve over time.

Value-based procurement

Instead of buying devices and implants purely based on upfront cost, consider long-term performance and the total cost of care.

These are manageable steps that build trust, demonstrate results, and can create momentum for broader reform.

A realistic roadmap for the next 3–5 years

Below is a pragmatic sequence of actions that balances ambition with political and operational reality. Each step has immediate activities leaders can start today.

Year 0–1: Build the foundations

• Agree nationally on a small set of standard outcome measures for a few priority conditions (e.g. hip/knee replacement, heart failure, diabetes).
• Fund 8-12 pilot programs across primary care, hospital, community services, that test bundled payments, shared savings and integrated pathways.
• Clarify the legal and policy frameworks for risk-sharing contracts.

Year 1–2: Prove and iterate

• Collect and share results from pilots quickly so others can learn. Publish interim results from pilots (clinical outcomes, patient experience, utilisation, cost).
• Invest in digital systems to capture patient-reported outcomes and link data across care settings. Prioritise interoperability, a minimum dataset standard, PROMs collection tools, and secure data exchange across primary and acute care.
• Provide training for leaders and clinicians on value-based contracts and outcome-driven care.

Year 2–4: Scale what works, adjust policy

• Expand successful bundled payments and pathway-based funding where pilots show benefits. Use regional rollouts with clear metrics and phased risk sharing
• Align state and federal funding agreements to allow more flexibility for outcome-based payments. Update National Health Reform Agreement levers to enable flexible payments and transparent accountability for outcomes.
• Strengthen patient involvement in co-designing what outcomes matter. Make patient-reported outcomes and experience measures central, not optional.

Year 4–5: Normalise value thinking

• Require boards and executives to monitor outcomes as a KPI of their core governance role.
• Make routine publication of outcomes and patient experience a data standard practice.
• Normalise a culture where teams continuously use data to improve care and base procurement decisions on long-term value.

What healthcare leaders must do now

1. Shift the conversation. Ask your team for three outcome measures that matter to patients for your top three services, and insist on a plan to collect them.
2. Pilot something small. Choose one service area and run a trial of bundled care or shared savings in the next 12 months. Keep contracts short (18–24 months) with clear evaluation requirements.
3. Invest in digital basics. Prioritise interoperability and PROMs capture; without these you cannot tell whether change is working.
4. Model risk and cashflow. Understand who will be paid differently, what happens if results don’t improve and how financial risk will be shared fairly.
5. Engage patients from day one. Outcomes without the patient voice miss the point of value-based care.

Risks to watch and how to mitigate them

No change is without risks. For VBHC, the main ones are:

Cherry-picking

Providers might prefer treating healthier patients who guarantee good results. Mitigate via strong risk adjustment, transparent patient lists and incentives for equitable access.

Short-term politics

Governments may change course quickly. Use legislated pilots with cross-party reporting to build continuity.

Data misuse or privacy concerns

Patients need confidence their information is safe and used for good reasons. Build transparent governance and consent models for PROMs and shared records.

Final thought: readiness is a journey, not an event

So is Australia “ready” for VBHC? The honest answer: partly. The concepts, policy intent and pilot activity are present, but we don’t yet have the full system maturity to scale it everywhere. That’s not a failure, it’s just reality for a reform of this size.

What matters is momentum. Leaders and clinicians need to move from philosophical endorsement to operational action, by choosing realistic pilots, measuring outcomes that matter, investing in the digital infrastructure, and developing the governance to share risk fairly. If we focus on practical steps over the next few years, VBHC can move from being a theory to becoming the routine way we measure and pay for care, delivering better outcomes for patients and better sustainability for the system.