A Paradigm Shift in Healthcare – Valuing Patient Outcomes Over Profit

I. Introduction: A System That Rewards the Wrong Things

Australia’s healthcare system is widely regarded as one of the best in the world, ranking third globally in 2025. Yet beneath this glossy exterior lies a profound structural failure: a system that rewards sickness rather than health, volume rather than value, and profit rather than patient outcomes.

For decades, the financial scaffolding of Australian healthcare has been designed around volume. Hospitals are funded by number of admissions, length of stay, and activity levels – a structure that rewards throughput, not care. General practitioners are paid through fee-for-service, where Medicare pays for each patient consultation – a model with well-known consequences: it rewards short consultations and low-value care and does not reward keeping patients healthy.

This paper proposes a fundamental paradigm shift: a healthcare system that pays doctors to maintain health, not to treat sickness; that prioritises prevention over intervention; and that holds providers accountable for patient outcomes, not the number of procedures performed.

II. The Current System: Profiting from Sickness

A. The Cost of Healthcare

Total health expenditure in Australia has risen by an estimated 5.2% in 2025-26, reaching $295.3 billion. The health portfolio is projected to spend approximately 70.8 billion in 2025-26, and health expenses are expected to increase by 8.0% over the period 2025-26 to 2028-29. As a percentage of GDP, total expenses are expected to be 27.3 per cent in 2025-26.

Yet despite this massive expenditure, the system is failing to deliver value. As the Grattan Institute notes, Australia overwhelmingly funds GPs through fee-for-service, where “the consequences are well known. Fee for service funding rewards short consultations and low-value care, and doesn’t reward keeping patients healthy.”

B. The Insurance Industry: Profiting from Premiums

While patients struggle with rising costs, private health insurers are posting record profits. In 2024-25, insurers returned only 84.2 per cent of premiums to consumers as benefits – well below the 2019 level of 88 per cent. The Australian Medical Association is calling on the federal government to mandate insurers to return at least 90 per cent of premiums back to consumers.

Health insurance companies have pocketed an average $2.2 billion a year in unprecedented profits from people’s annual premiums, in addition to $3.5 billion a year in higher ‘management fees’. With 15 million Australians holding private cover and paying $29.9 billion in premiums annually, the scale of the extraction is staggering.

C. Pharmaceutical Profits

The Pharmaceutical Benefits Scheme (PBS) is projected to cost $19.9 billion in 2025-26. Pharmaceutical companies are posting significant profits – Telix reported revenue of $390.4 million, up by 63%, while other pharmaceutical companies report double-digit revenue growth.

These profits are built on a system where patients pay the price. The maximum patient co-payment for PBS medicines is $25.00 for general patients, and the PBS Safety Net threshold for general patients increased to $1,748.20. For many Australians, this is a significant burden.

D. Out-of-Control Specialist Fees

Specialist fees are rising far beyond Medicare support, leaving patients with heavy out-of-pocket costs. An initial consultation with a cardiologist or endocrinologist can cost up to $370, and up to $670 for a psychiatrist. On average, patients who pay a fee are charged $300 a year, and one in 10 low-income patients who are billed pay almost $500 a year. Patients pay out-of-pocket costs for two-thirds of appointments with a specialist doctor.

III. The Cost of Failure: Medical Errors and Preventable Harm

The current system is not just expensive – it is dangerous.

• 250,000 hospital admissions annually are due to medication-related errors, costing the healthcare system an estimated $1.4 billion.
• More than 50 per cent of medication errors occur at transitions of care.
• Diagnostic errors cost the health system an estimated $44.2 billion annually – 17.5% of total healthcare spending – and are fatal for 4,000 people each year.
• An estimated $1.5–$3 billion is ‘leaking’ from the Medicare system every year, predominantly due to honest billing errors from the complexity of the system.

These are not anomalies. They are features of a system designed around volume, not value. A system that rewards throughput rather than care.

IV. The Alternative: An Outcomes-Based, Prevention-Focused System

A. What We Are Proposing

Current System Our Vision.

Doctors paid for treating sickness. Doctors paid for maintaining health.

Profit-driven, fee-for-service model. Outcomes-based, wellness-focused model.

Status and expensive cars as markers of success. Quality of care and patient outcomes as markers of success.

Carelessness has few consequences. Carelessness has real ramifications.

Patients are revenue streams. Patients are people.

B. The Evidence for Prevention

Prevention is not just morally right – it is economically sound. The Australian Academy of Health & Medical Sciences reports that almost 40% of Australia’s burden of disease is preventable, and estimates show that every dollar invested in preventive health saves over $14 in healthcare and related costs.

Yet Australia has failed to invest in prevention. The Royal Australian College of General Practitioners (RACGP) is calling for a “strategic shift” in healthcare funding with a focus on preventive care, noting that had Australia placed more emphasis on prevention five years ago, it “could have saved at least $5 billion in health costs by now.”

Potentially preventable hospitalisations were 8.5 per cent of total admitted patient spending in 2023-24, totalling $7.7 billion. Every dollar spent on prevention saves over $14 in health care and related costs.

C. The Evidence for Outcomes-Based Funding

Outcome-based models (OBMs), which link payments to results rather than service volume, are gaining global traction as an innovative approach to healthcare financing. The EQuIP-GP trial is currently investigating whether a funding model based upon quality incentive payments for Australian general practices increases relational continuity of care.

Health impact bonds (HIBs), a type of outcome-based financing model, are increasingly applied in public health programs. These models represent a “quiet revolution” that could move Australian healthcare toward a system where funding, data and empathy can work together.

D. What This Would Look Like

1. Doctors are paid a good salary – not a fee for every service, but a salary that reflects their expertise and dedication

2. Their pay is tied to patient outcomes – not the number of procedures, but the health of their patients

3. Prevention is incentivised – catching problems early, educating patients, promoting healthy lifestyles

4. Carelessness is addressed – not with punitive measures, but with retraining, support, and accountability

5. Status is redefined – not by expensive cars, but by the quality of care and the trust of patients

V. The Case for a Blended Funding Model

The Grattan Institute has argued that Australia should move to a “blended funding model” for GPs. Such a model would combine fee-for-service with capitation and quality incentive payments, ensuring that GPs are rewarded for keeping patients healthy, not just for seeing them.

As the Grattan Institute notes, “Australia will need to keep increasing funding for general practice as the population grows and ages, but how government pays is important too.” The current system has “sent money to parts of Australia that didn’t need it, and left behind areas that need more funding the most.”

A blended model would address these inequities while shifting the focus from volume to value.

VI.A Deeper Understanding

All systems are interconnected. A healthcare system that treats symptoms rather than causes is like a garden that removes weeds but never tends the soil. The body, like the garden, is not a collection of separate parts – it is a whole. A system that rewards treating disease rather than maintaining health is a system that fundamentally misunderstands the nature of wellness.

Health is not the absence of disease – it is the presence of balance. A system that pays doctors to treat sickness rather than maintain health is a system that rewards imbalance. A system that values profit over patient outcomes is a system that has lost its way.

VII. Australia as the Ideal Trial Ground

Australia is uniquely positioned to trial this new model. With its universal Medicare system, strong private health insurance sector, and world-class research institutions, Australia has the infrastructure to implement and evaluate an outcomes-based, prevention-focused healthcare system.

Australia is already recognised as having one of the best healthcare systems in the world, ranking third globally. It spends $7,469 per capita on health, more than the OECD average of $5,967. It performs better than the OECD average on 7 out of 10 key health indicators.

But Australia also has significant challenges. About half of patients without private insurance face long waits for care. Specialist fees are rising far beyond Medicare support. The system is underfunded and under pressure.

These challenges make Australia the perfect laboratory for reform.

VIII. Conclusion: The Choice Before Us

The current healthcare system is not broken – it is working exactly as designed. It is designed to reward volume, not value. It is designed to treat sickness, not maintain health. It is designed to generate profit, not patient outcomes.

But we can choose differently.

We can choose a system that:

• Rewards doctors for keeping patients healthy
• Prioritises prevention over intervention
• Holds providers accountable for patient outcomes
• Values care over status
• Treats patients as people, not revenue streams

The evidence is clear: prevention saves lives and saves money. Every dollar invested in preventive health saves over $14 in healthcare and related costs. The cost of inaction is measured in lives lost, families broken, and a system that has lost its way.

We can do better. We must do better. And Australia can lead the way.

Dedicated to my darling wife – who taught me that true health is not the absence of disease, but the presence of care, and who ensures I eat good quality food.