Creating a better health system: lessons from England

In the UK, surgeries are awarded points and additional funding for keeping patients healthy. emanueletudisco photography/Flickr, CC BY-NC-ND

Australia has a relatively strong health system by international standards, but it needs a makeover. To generate fresh ideas, The Conversation is profiling five international health systems that have important lessons – good and bad – to pull Australia out of its health reform black hole.


While Australia and England share much of their cultural heritage, the countries have answered the challenge of funding health care in quite different ways.

The Australian Medicare system is predominantly based around private practice and fee-for-service. The English National Health System (NHS) is based on capitation, in which doctors are paid a fixed amount to manage a group of potential patients irrespective of the actual level of care.

Neither system is perfect, but each can learn from the other; after all, they both aim to achieve efficient, equitable, high-quality health services is the same.

Fee-for-service vs capitation

Australia’s emphasis on fee-for-service funding reflects both a strength and weakness. Paying for each consultation or service, mainly through the Medical Benefits Schedule, incentivises doctors to do more.

But it can also lead to over-provision of care. Most of us have anecdotes about returning to the doctor for procedural issues, such as renewing prescriptions, or receiving test results, which might be more efficiently done over the phone, or by a nurse or pharmacist.

The English system, with its focus on capitation, may be too far in the opposite direction. Under capitation, doctors are paid an amount to manage a set of patients, this amount usually determined by estimates of need.

If doctors are effectively paid no extra for providing additional care to a patient, then you can reasonably expect an average level of service below what is optimal.

Both the English and Australian systems have tried various ways of blending fee-for-service and capitation, but the two systems continue to sit some distance apart.

Pay for performance

One possible way out of this impasse is to move towards a system in which doctors are paid for results, rather than activity.

The English system has considerable experience in this area – good and bad – with its Quality and Outcomes Framework (QOF), which attempts to pay doctors directly for their patients’ health outcomes.

Under this system, surgeries are awarded points for a range of outcomes including chronic disease management, practice organisation, positive patient experience, and the provision of extra services such as child health and maternity services. These points are then translated into a financial payment for the surgery.

In England, there is mixed evidence about the appropriateness of this system. Design has proven a major challenge; in the first year, there was a cost blowout as surgeries achieved a much higher proportion of points than was expected.

So, could such an approach be taken in Australia?

The answer is that it would be difficult. Patients are registered to surgeries in England, meaning it’s easier to link clinical outcomes with the activity of particular doctors.

But Medicare data does show us which patients see which doctors, so linking to outcomes might be feasible in Australia.

However, as with much of the area of international transferability of health policy, the basic policy idea would need to be adapted to reflect the existing health system architecture.

Keeping people out of hospitals

Over the past decade, the English health system has pursued a policy of local commissioning of services. Led by local GPs, Clinical Commissioning Groups (CCGs) are responsible for allocating their local community’s health budget on emergency care, elective hospital care, maternity services and community mental health services.

CCGs place general practitioners at the heart of health care funding decisions, giving them a role previously undertaken by lay managers in primary care.

The aim is to strengthen primary care and keep people out of hospitals. If you make one body responsible for purchasing primary care (such as GPs) and secondary care (predominantly hospitals), you’re likely to make better use intensive GP interventions that would reduce the use of considerably more expensive hospital care.

In the 2012 Health and Social Care Act, the Conservative-led coalition placed £65 Billion into the hands of 211 newly-formed CCGs, 65% of a total NHS budget of £95 Billion.

CCGs account for two-thirds of England’s NHS budget. r.nagy/Shutterstock

The English experience of commissioning is still a developing story. It appears to offer benefit, but the design of the system is crucial. Those doing the local commissioning must be supported both logistically and financially, so they have the time to dedicate to this work and it isn’t just passed on to bureaucrats.

Australia’s fragmented system

Our health system is funded from a mixture of state/territory and federal money. Primary care is predominantly paid for by Medicare, while much of the financial cost of providing hospital care is met by the states and territories.

This poses a major problem for health-care reform. There is an incentive for both the states and the federal government to shift costs towards the other, which can be easily done by moving patients between primary and secondary care.

Further, the incentive to keep people out of hospital by providing more high-quality primary care is weak, because the government level responsible for primary care (federal) does not reap any savings from this extra investment.

Community-level organisations such as Medicare Locals are being given small pockets of funding to commission locally, and it is likely that this role will be included in the new Primary Health Networks (PHNs) when they replace Medicare Locals.

One option is to give local commissioners more power through the PHNs and redirect some state government funding directly to the community-based organisations.

But caution is required, as English history demonstrates high-quality commissioning requires substantial time and financial investment, as well as effective leadership and the willingness of clinicians to engage.

Designing a better health system

Like most other countries, Australia cannot continue to fund the increasing demand for health care, and we need to look for ways to strengthen the role of primary care and keep people out of hospital.

Australia needs new policies to keep people healthy and out of hospital. Image Point Fr/Shutterstock

In the endless debate around how to pay doctors in a way that doesn’t cause over- or under-servicing, adding payments for keeping people healthy is one possibility Australia should consider. But we need to keep in mind the possible negative consequences of such a policy.

Similarly, Australia should consider supporting local clinicians to make decisions that benefit their community. But because our health systems are so structurally different, the design of such a system for Australia would be a challenge requiring considerable thought.

This article is part six of The Conversation’s International Health Systems series. Click on the links below to read the other instalments.