A national first: Private hospital funding linked to patient-reported outcomes

The nation’s largest health insurance buying group has broken new ground in healthcare funding by linking private hospital payments directly to patient-reported experiences.

In a first for Australia, one major private hospital group has received a performance-based incentive from Australian Health Service Alliance (AHSA) after achieving measurable improvements in patient experience scores over a set period. The shift marks a pivotal move toward value-based care, where outcomes that matter to patients take priority over the volume of procedures performed.

The AHSA and its 21 member-owned health funds approved a performance-based rate increase following the hospital group’s success.

“For decades, private hospitals in Australia have been funded for activity, performing procedures or admitting patients. But from the patient’s perspective, the goal is not another operation; it is better health, safety, and a return to normal life,” said AHSA CEO, Andrew Sando. “Value-Based Healthcare changes this equation. Instead of rewarding activity, it rewards outcomes that matter to patients.”

Central to this transformation is AHSA’s Voice of the Patient (VoP) program, developed in partnership with Insight Actuaries. Over the past five years, the program has gathered feedback from more than 101,000 patients, the largest dataset of its kind in the country, capturing detailed insights into their experiences and outcomes in private hospitals.

The risk-adjusted, benchmarked data provides hospitals with an unprecedented view of their performance compared to peers, shining a light on both patient experience and care outcomes over time. According to AHSA, the value lies not only in collecting the data but also in how hospitals respond to it.

Armed with these insights, the hospital group implemented a series of targeted interventions. These included personalised pre-admission processes to help patients better understand their care journey, stronger communication during hospital stays and post-discharge, direct input from consumer advisory committees, and bringing allied health services in-house to strengthen care coordination.

“The hospital’s approach was both strategic and inspirational,” said Sando. “They took patient feedback seriously, acted on it, and delivered meaningful change. They noted that access to the VoP risk-adjusted comparisons and performance metrics was a key piece of their improvement journey and supported them in making meaningful changes that directly impacted patients. We can now see how hospitals will use this data to make outcomes better.”

The program is also drawing international attention. In 2025, it featured at the World Expo in Japan, was showcased at the International Consortium for Health Outcomes Measurement (ICHOM) conference, and highlighted at Harvard’s Value-Based Care program.

“Many have spoken about value-based care,” commented Sando. “We are proving it works – and showing that when providers focus on what matters to patients, the entire system improves. This initiative not only demonstrates that value-based care is achievable – it proves that when we listen to patients, the entire system improves.”

Building on this success, AHSA is now preparing to expand the model across more private hospital providers, offering what it calls a scalable blueprint for reform and innovation in healthcare funding.

“This is the way healthcare should work – hand in glove with the focus on the patient,” emphasised Sando.

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