There is strong rationale for improving care for people with chronic conditions, including osteoarthritis (OA). Successful implementation of healthcare reform requires new concepts and directions that are strongly supported by policy, new models of care (service redesign) and changes in day-to-day practice (healthcare provider and patient practice). In this paper we discuss the extent to which policy about management of OA of the hip and knee has been translated into new service models in Australia. A structured search of government and other key health websites in Australia was performed to identify policy, funding initiatives and new services models for managing OA of the hip and knee. This search was supported by a literature review. Musculoskeletal conditions were designated a National Health Priority in Australia in 2002. Under the Better Arthritis and Osteoporosis Care initiative, Australia has developed a national policy for OA care and national evidence-based clinical practice guidelines for management of OA of the hip and knee. Only two well-described examples of new chronic disease management service models, the Osteoarthritis Clinical Pathway (OACP) model and the Osteoarthritis Hip and Knee Service (OAHKS) were identified. Primarily focused within acute care public hospital settings, these have been shown to be feasible and acceptable but have limited data on clinical impact and cost-effectiveness. While policy is extant, implementation has not been systematic and comprehensive. Clinicians have evidence-based recommendations for OA management but are poorly supported by service models to deliver these effectively and efficiently.