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The economics of primary healthcare reform in Australia – towards single fundholding through development of primary care organisations


Correspondence to:
Ronald Donato, School of Commerce, University of South Australia, Adelaide, South Australia, 5000. Fax: + 618 8302 0992; e-mail:


Objective: A strong primary care sector is widely acknowledged as a fundamental component of a well functioning health system and thus has been the focus of strategic reforms in a number of countries. This paper provides an economic analysis of primary healthcare reform, with the aim of identifying the key structural elements that are necessary to support enhanced models of primary health in the Australian context.

Approach: This paper utilises economic theory, and draws upon empirical evidence and international experience to analyse primary healthcare reform to identify the structural elements necessary for an enhanced primary care sector. The aim of which is to improve health system performance. These structural elements are then critically examined in the Australian health system setting.

Conclusion: For enhanced models of primary healthcare to promote efficiency, they must incorporate a number of key structural elements; notably: governance and purchasing responsibilities for primary care devolved to a meso-level organisational structure through capitated single fundholding arrangements; blended payment methods for reimbursing providers; the establishment of a national quality and performance framework; and the development of primary care infrastructure.

Implications: As the Federal government attempts to address recommendations of the National Health and Hospital Reform Commission, a window of opportunity now exists to pursue long overdue structural reforms to deal with the challenges facing the Australian health system. The paper advances the important structural features to primary healthcare that need to be embraced as the government attempts to pursue its health reform agenda.

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