Why Current Funding Models are Holding Back Digital Health

Why Current Funding Models are Holding Back Digital Health

… fee-for-service funding models have served our health system well.  But their time has gone.  We need a new approach to creating incentives for health providers to deal with our current health crisis in a more sustainable way.


When done well, Digital Health offers the components (mobile devices, the level of smartphone ownership, patient reported outcomes, gamification, consumer health devices, consumer genomics, etc.) to develop new models of care that do a better job of looking after patients.  We desperately need this to drive sustainability into our health systems, as our current models of care are failing under the weight of a chronic disease burden that they were never designed to support.

But there’s problem…  Our current health funding models.

The vast majority of health funding models today are fee-for-service.  Now there are downsides to any funding model, but let’s be clear about some of the risks of a fee-for-service model.



Most health providers don’t do this.  But some do, and it’s not okay.  Under a fee-for-service funding model a health provider can see a patient periodically for a check-up, regardless of need.  The schedule of appointments can be set by the health provider without justification.

Did you know that 8% of General Practitioner appointments in Australia are for Diabetes Management?  What proportion of these check-ups could be done in a different, non face-to-face way, costing less than the average $68 per appointment?


No paid focus on health outcomes

Fee-for-service is an input based funding model, by definition.  Now I truly believe that most health providers care about the health of their patients.  But they are not paid to care about the health of their patients.  And that’s an important distinction.  They’re not paid to get an outcome, just to provide service.


The ‘I’m not paid to do that” mentality

As I’ve said previously, under our current architecture of healthcare, the face-to-face appointment is currently the fundamental transactional unit of healthcare.  Unfortunately (but understandably), this has developed into a deep culture of health providers only doing work for which there is a billing code.  This often translates into little interest in patients outside of paid appointments.

Imagine for a moment if the rest of us worked in this way.  “I’ll only do the work activities on a price list that you give me“.  And how would you behave under this model?  I’d try to maximise my income.  It’s a normal way to behave.  But most of us are paid a salary, or in my case as the Managing Director a consulting company, a fee for an outcome – we maximise our work output in a limited funding envelope, not maximise our funding within based on our work input.

It’s also worth noting that health providers are not paid to utilise Digital Health solutions to drive efficiency in the way that they care for large cohorts of chronically ill patients.  There is currently no incentive (and no billing items) to harness digital efficiencies in the health system.


Now don’t get me wrong.  I believe that fee-for-service funding models have served our health system well.  But their time has gone.  We need a new approach to creating incentives for health providers to deal with our current health crisis in a more sustainable way.

Like it or not, and many won’t, we are on an inevitable path towards outcome-based funding models.  Only when we get these models, whether they be capitation, partial-capitation or outcome-based funding, will we see health providers have an incentive to harness the efficiencies enabled by new digitally-enabled models of care.

Under capitation, funding for a patient with a particular condition, let’s say Type 2 Diabetes, is capped at a specific amount per quarter or year.  The health provider receives a fixed amount for that period.  If they can keep the patient well and out of care then they might make a significant ‘profit’ on that patient.  If they over-service the patient then they risk losing money.  But either way, the health provider will need to look for ways to keep track of a patient’s health, without necessarily going to the expense of seeing them at a face-to-face appointment.

Enter Digital Health.  It is only under this new approach to funding that health providers will truly have an incentive to adopt the innovative models of care that organisations like Semantic Consulting are working on.

We’re not going to get to these new funding models without a fight, but I strongly believe it’s the right way to go, for the sake of a sustainable health system.  In fact, capitation is so anathema to many clinicians in Australia that I’ve started to call it the c-word!

The future, however, is coming.  Just a little too slowly for my liking…


3 thoughts on “Why Current Funding Models are Holding Back Digital Health

  1. Interesting discussion
    Accrual accounting of these new funding models will be interesting, including distributing income share to the practitioners involved.
    Industry is hard enough to account for under fee for service… poor financial controls everywhere, rampant internal fraud
    No one seems to think about the back end when they come up with these funding models
    Another set of “digital innovation” required at the back end

  2. I do agree . WE need more discussion amongdr health innovators to tell funding organisations in a more coherent n collective way.

  3. To do this it would help to support nobism.com because without knowing how the patient feels (symptoms) and what they do to feel better, we will never find the best treatments.

Leave a Reply to Rogier koning Cancel reply

Your email address will not be published.