The day before the Federal budget, Professor John Horvath’s Review of Medicare Locals was quietly published on the Department of Health’s website. The Review recommended the creation of Primary Health Organisations to replace 61 Medicare Locals and the Australian Medicare Local (AML) Alliance.

Unsurprisingly, the Federal budget broadly adopts the Review’s recommendations with a measure to replace the Medicare Locals with “fewer but larger” Primary Health Networks from 1 July 2015. 


For those who haven’t followed their development, the Medicare Locals were established under the 2011 COAG National Health Reform Agreement.  They replaced the GP dominated Divisions of General Practice Program which had operated for decades. 

Medicare Locals were established in three tranches from July 2011, mostly as amalgams of existing GP divisions or associations.  In some cases, the Medicare Locals were new companies created by primary health stakeholders from the region.

Like all new or merged organisations, it took some time for Medicare Locals to work through teething issues.  Relations with GPs had been soured by the Commonwealth requiring Medicare Locals to have a broad membership and skills based board not controlled by GPs. Flagship programs such as the After Hours Program were then required to be delivered under tight timelines without any legislative mandate.

In opposition, the Coalition made various promises to abolish Medicare Locals, then to reduce their administrative “waste”, and finally to “review” their operations.  The Review was commissioned in December 2013 and handed to the government in early March 2014.

Different name, same aim

The Primary Health Networks will be responsible for “improving patient outcomes in their geographical area by ensuring that services across the primary, community and specialist sectors align and work together in patients’ interests.”

This is ultimately the same as the Medicare Locals objective from 2011 of “supporting and enabling better integrated and responsive local GP and primary health care services to meet the needs and priorities of patients and communities”.

The aim is laudable but inherently difficult.  The health industry will know that there are numerous financial, legal, policy, political and personal barriers which thwart that aim.  Unless the Primary Health Networks have strong financial or other influence, the status quo will remain.

The aim will be even more difficult in an environment of significant hospital funding reductions and general practice, pathology and imaging co-payments.

The only other benefit in changing names is that consumers can no longer confuse a Medicare Local office with their local Medicare office.

Alignment to Local Hospital Networks

A key Review recommendation, which has been accepted, is that the Primary Health Networks must be aligned to the existing Local Hospital Networks.

There are currently 61 Medicare Locals and 123 geographical Local Hospital Networks.  The “fewer” number of Primary Health Networks will probably have to cover several Local Hospital Network regions.  That would require either large metropolitan or regionally stretched Primary Health Networks, particularly on Australia’s east coast.  The smaller state and territories regions probably cannot be further grouped.

Contestable selection of Primary Health Networks

A key Review recommendation is that Primary Health Networks will be selected through contestable processes.  The Department of Health will run an expressions of interest (tender) campaign like it did in 2010.

In practice, the entities most likely to contest becoming a Primary Health Network will be the existing Medicare Locals or a merger of them.  This will probably be similar to what occurred in 2011 when many GP divisions submitted proposals to merge and become Medicare Locals.

GP and consumer engagement

The Review recommended that the Primary Health Networks mandatorily establish Clinical Councils, with a significant GP presence, and local Consumer Advisory Committees.  This aspect has been adopted in the budget but it will remain to be seen whether they will take the form of a mandated “memorandum of understanding”.

Some Medicare Locals put forward similar ideas in the past but achieved varying success in implementing them in such a short time.  It will be interesting to see whether these Councils will bring GP engagement back to the levels achieved by the Divisions of General Practice Program.

Same funding

From 1 July 2015, the Primary Health Networks will receive the existing Medicare Locals funding allocation, which remains unchanged.  This is unexpected good news given the other cuts made to health funding.  As there will be fewer Primary Health Networks, the government hopes that the proportion of administrative costs will decrease.

The end of the AML Alliance?

The AML Alliance had the potential to provide common support, tools and policies to further reduce duplication and administrative costs.  However, it also became a program coordinator and fund holder for several programs (which it then passed to Medicare Locals).

The Review recommended that an alliance or peak body should not be funded by government.  It will be interesting to see whether the government restricts Primary Health Networks from paying for or pooling resources through a peak body which will inevitably form.


With fundamental aspects of our universal health system changing, it is somewhat reassuring that the Coalition government recognised the need for a Medicare Local style primary health network to be maintained.