Catholic Health Australia says operating losses, workforce pressures and outdated funding arrangements are pushing AI down private hospitals' priority lists, with smaller regional facilities at risk of falling further behind.
Australia’s private hospitals are struggling to keep their doors open, let alone invest in artificial intelligence, with the sector recording a $750 million operating loss last year, according to Catholic Health Australia.
Speaking at The Medical Republic and Health Services Daily AI and Hospitals Summit in Melbourne last week, Catholic Health Australia’s director of health policy Dr Katherine Bassett said financial pressures, workforce shortages and inadequate capital investment were limiting the sector’s ability to adopt new technologies.
“At the moment, the sector as a whole is trying to just keep the lights on. Last year, it made a $750 million operating loss,” she said.
“Capital has not been invested in properly since covid.”
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Dr Bassett said hospitals faced competing investment priorities, including maintaining existing services, attracting and retaining staff, and purchasing robotic surgical technology.
“And so, then that next layer in terms of AI and digital – that’s in the nice-to-have bucket,” she said.
Some private hospitals were starting from a particularly low technological base.
“Some private hospitals don’t even have an EMR,” she said.
Dr Bassett said the sector’s ability to invest in digital innovation was further constrained by government funding arrangements and private health insurance rules.
She singled out the Prescribed List, which determines insurer benefits for medical devices, arguing that its existing arrangements were not designed to accommodate emerging digital technologies.
“When we’re moving into this age where we’re now mixing medical devices and digital and AI, none of that’s really funded on said list,” she said.
“If you’re a hospital wanting to do stuff in that space, insurers aren’t really going to fund it.”
Dr Bassett warned that the financial and technological divide between larger metropolitan hospitals and smaller regional and not-for-profit facilities could widen over the next few years.
She said smaller hospitals risked losing the ability to attract and retain staff and keep pace with technological developments, potentially threatening access to care in regional communities.
“I am scared about the next few years,” she admitted.
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The challenge extended beyond the private hospital sector, with existing funding arrangements also creating obstacles for hospitals seeking to shift care away from traditional inpatient settings.
St Vincent’s Health Australia clinical innovation and medical engagement lead Dr Anthony Barberi said the organisation was pursuing an ambitious strategy to deliver more care outside hospitals.
“We want to bring care home, so that means moving 50% of what we do either at home or virtually by 2030,” he said.
Dr Barberi acknowledged that funding inflexibility was already affecting the organisation’s efforts but said it would not wait for government to resolve the barriers.
“We’re not going to wait for government,” he said.
Health economist Dr Luke Slawomirski said the new National Health Reform Agreement provided some scope to experiment with alternative care models through Service Model Reform Funding.
However, he said the funding would come from existing allocations rather than additional government expenditure.
Dr Bassett also questioned whether activity-based funding adequately rewarded hospitals for adopting technologies that reduced the cost of care.
She argued that calculating future hospital prices using historical cost data risked progressively removing the financial benefits of efficiency improvements.
“Our funding model isn’t really set up for this,” she said.
Dr Slawomirski warned that introducing new technology without addressing underlying problems in healthcare delivery could make those problems worse.
“If you just superimpose the technology on it, it will just magnify the problems,” he said.
The TMR and HSD summit was held in Melbourne on Thursday 29 October 2026.
