One-off grants might spark innovation, but only sustainable funding will keep Australia’s digital health infrastructure alive.
Australia’s healthcare software sector walked out of the recent MSIA summit in Sydney with mixed feelings.
There was cautious optimism about the direction of national digital health, and a deep worry that the underlying funding arrangements still don’t match the scale of what government is asking the sector to deliver.
Vendors used phrases like “a car with no fuel” to describe the current environment. They were not talking about willingness. They were talking about capacity. Many left the session with ADHA leaders feeling that the gap between strategy and implementation has widened, not narrowed.
As someone who builds and runs a clinical software platform used by specialist practices across the country, I share that sentiment. The direction is right. The ambition is right. The engagement is improving. But the economic model underpinning all this work remains, in essence, unfunded.
And in a market where dozens of software vendors – large, medium and very small – must all align with national expectations, the lack of a sustainable, predictable funding framework risks stalling reforms that the sector otherwise supports.
The wrong kind of funding cycle
No one disputes that ADHA and the Department have made genuine attempts to support industry over the years. But the efforts have tended to be ad hoc: a one-off offer here, an isolated grant round there, typically tied to a narrowly defined deliverable. Some vendor groups have benefitted; others have been excluded through no lack of relevance to the broader goals.
The recent My Health Record support offers for aged care and certain specialist products were well intentioned. They helped some vendors move forward. But many others – including significant parts of the software ecosystem used by private specialists, allied health, hospitals, diagnostics, day surgeries and ancillary services – were left outside the tent.
The result is not dysfunction, but fragmentation. You end up with an ecosystem where:
- Some vendors have fully funded integrations.
- Some have partially funded integrations.
- Some have unfunded, incomplete, or stagnant integrations.
- And many are reluctant to begin new work because they see no path to sustainability beyond the initial build.
One-off grants solve early technical hurdles. They do not solve the far larger challenge of keeping integrations working as standards, security requirements and clinical workflows evolve year after year.
In fact, a grant model can unintentionally create “ghost integrations” – features that are technically present but rarely used, poorly supported, or quietly left to age because maintaining them brings no commercial return.
The real cost is in the maintenance
Many clinicians assume that digital health standards – My Health Record connections, secure messaging endpoints, pathology and imaging interfaces – “just work” once they appear in their software. But software vendors know that every one of these endpoints has an ongoing cost profile:
- Annual re-certification
- Security uplift
- New release cycles and breaking API changes
- Clinical safety updates
- Support overheads when providers use the functionality
- Risk and compliance obligations
These costs accumulate continuously. They do not stop when a grant runs out.
Clinicians also rarely accept price increases to cover these specific government-directed functions. It is not unreasonable: they see them as national infrastructure, and they are right. But because clinics will not pay for these integrations directly, vendors must absorb the costs indefinitely unless the government shares the load.
That creates the structural disincentive at the heart of the current debate. It is not about unwillingness. It is about the absence of a workable financial architecture for an industry that government depends on to execute its strategy.
What other countries have learned
International experience points toward a consistent message: if you want widespread adoption of national digital health capabilities across a diverse private vendor market, you need a stable incentive model that covers both integration and ongoing maintenance.
Almost every jurisdiction that has advanced interoperability at scale – whether in e-prescribing, secure document exchange, citizen-controlled records or regional health information networks – has used some variation of the following:
- A small, predictable annual payment recognising maintenance obligations.
- A usage-linked payment, modest in size, that only flows when an integration is actively used.
- A capped structure, to keep budgets contained.
- Clear, measurable eligibility requirements.
- No exclusivity – every accredited vendor can participate.
These mechanisms succeed not because they are generous, but because they are steady.
They de-risk participation for vendors. They reduce the likelihood of fall-off in usage. They give government tangible evidence of return on investment through real transaction data. And they motivate vendors to improve workflows and promote adoption among clinicians, because higher usage yields proportionally more support.
The closest analogue in Australia is our own electronic prescribing ecosystem, which has used a combination of a modest annual support payment and a tiny per-transaction incentive for integration. It has supported both large and small vendors without distorting the market, and it has driven one of the most successful modernisation efforts in Australian digital health.
It is not a perfect model, but it is a proven one.
Why this matters now
Australia is entering a period when large-scale digital health reforms are finally moving beyond strategy documents and into implementation schedules. The National Digital Health Strategy and the National Healthcare Interoperability Plan will require work from every corner of the software market, from the biggest EHR providers to the smallest niche systems.
But without a funding model that reflects the real economics of integration, the reforms risk slower uptake, uneven quality, and inconsistent provider experience across the country. Some vendors will sprint ahead. Others will lag because they simply cannot afford to participate.
This is not a criticism of ADHA or the Department. It is a recognition of the market reality of health technology in Australia. We operate in a highly fragmented, competitive environment. No single vendor can be expected to carry the weight of connection to national infrastructure indefinitely without support.
A proposed model: simple, equitable, sustainable
Based on what has worked internationally – and based on the lessons from e-prescribing here at home – a sustainable, generalisable model for vendor participation in national digital health initiatives could take the following form.
1. A small annual compliance payment for accredited vendors
This is not intended to be a revenue stream. It is simply recognition of the baseline work required to keep a connection compliant, secure and functional. It creates parity across vendors, irrespective of size.
2. A tiered usage-based incentive
Vendors receive a small payment only when clinicians or providers actually use the capability. This ensures:
- No payment for dormant or ghost integrations.
- Higher activity is rewarded.
- Government sees real uptake.
- The total exposure is predictable.
This does not need to be a per-transaction model. Tiers can be used to reduce reporting burden and eliminate administrative costs.
3. Caps and transparency
Government can set strict caps to prevent runaway spending. Vendors know the rules in advance. The public knows where the money is going.
4. No exclusivity
All accredited vendors can participate. No single vendor should hold privileged status or special access to funds.
5. Clean alignment to government objectives
Funding would be tied only to clearly defined deliverables – for example secure messaging transactions, document exchange events, validated clinical summaries – not to bespoke development or vendor-specific projects.
Why this helps government as much as vendors
A sustainable vendor funding model is not a subsidy. It is risk management.
It gives government:
- Predictable budgeting.
- Clear activity data.
- Faster adoption.
- Less fragmentation.
- Greater ability to forecast demand.
- Higher assurance that all vendors – not just a select few – can meet expectations.
It ensures that the systems clinicians rely on every day continue to function as government standards evolve.
And for vendors, it simply removes the current disincentive to doing the work. It gives them a reason to prioritise the integrations that matter most to the national agenda.
Where to from here?
The MSIA summit made one thing abundantly clear: the vendor community is not pushing back on digital health reforms. On the contrary, most vendors want to play a meaningful role in lifting the digital capability of Australian healthcare.
The concern is not the strategy. It is the sustainability of execution.
If Australia wants a genuinely interoperable health system – one where every clinical stakeholder, in every setting, can participate fully – the funding model must evolve. It must acknowledge the true ongoing cost of keeping national digital health infrastructure alive inside dozens of privately built systems.
A small, structured, sustainable vendor incentive program is not a silver bullet. But it is the missing layer that would allow government, vendors and clinicians to move forward together at pace.
And it is well within reach.
Dr Bert Pruim is an Australian dermatologist and CEO of Xestro, Australian cloud-only PMS and electronic medical record platform for private medical specialist practices.