Australia’s health system is world-class with a thriving research sector in health and medical sciences. Yet, when it comes to supporting and scaling homegrown digital health innovations, our disconnected public hospital system presents a significant barrier.

The recent $32 million investment in Harrison.ai by the National Reconstruction Fund Corporation (NRFC) is a welcome recognition of the potential and capability of Australia’s digital health industry. But it also highlights a critical and unresolved challenge: Why must Australian digital health companies scale offshore before they are recognised at home?

A world-class health system failing to support local innovation

Australia consistently ranks among the top healthcare systems globally. We were ranked first in the Commonwealth Fund’s Annual Report on healthcare system performance, and our health science research ranks seventh globally.  Yet many of our most promising digital health innovators struggle to find a foothold in our own public healthcare sector.

Consider companies like Harrison.ai – a homegrown leader in artificial intelligence (AI) solutions for healthcare – has found it easier to scale their business internationally where innovation is readily embraced.

Public hospitals account for close to one third of Australia’s $270 billion annual health expenditure.  However, the health sector remains fragmented and poorly connected, underpinned by a lack of consistency and standardisation in the uptake of digital health solutions nationally.

While there have been efforts by the public sector in recent years to embed value-based procurement, procurement decisions and processes continue to focus on cost minimisation and large-scale purchasing agreements. Too often, public hospitals—the largest consumers of healthcare technology—continue to prioritise cost savings over long-term value.

Research by the Australian Medtech Manufacturing Centre last year found as little as 5% of total procurement spend by some Victorian public health services is manufactured locally.

This risk-adverse approach means governments, providers and consumers are missing out on the benefits of cutting-edge novel technologies and is limiting opportunities for local health technology start-ups to compete and grow.

For example, Harrison.ai has been overwhelmingly successful integrating with large local private health providers, with its technology accessible to one out of every two radiologists in Australia, but by comparison has only been adopted by three public hospitals in Australia.

The failure of governments to invest in such world leading local technology only entrenches health inequality, with best practice home grown technology only offered to those who can afford it.

And we know this is not an isolated case. Many of our digital health partners at DHCRC struggle to secure local contracts and often find greater success offshore. Not only does this stifle local innovation, but it also poses a sovereignty risk given the over-reliance on large multinational technology providers

The economic case for smarter procurement

Procurement is not just a cost – it is a strategic investment in both health outcomes and national economic growth. It’s time for a shift. To foster a digital health sector that competes on a global scale, government spending should be a strategic tool to drive not just healthcare quality and accessibility for all Australians but also industry development, innovation, jobs and economic resilience. 

In a recent report, Insight Economics said Australian tech procurement policies have fallen out of step with global best practice as governments around the world become more active in using their significant purchasing power to support local capability.

It’s time Federal and State Governments fully utilise their significant purchasing power across the healthcare sector to support home grown success stories like Harrison.ai. Such investment will not only drive local innovation but generate jobs and grow Australia’s digital health industry.

Despite some promising steps to support local, the national goal must be a procurement ecosystem that supports Australian SMEs to thrive locally and expand globally. We can do this by:

1. Align procurement with national health priorities. Establish a coordinated procurement landscape, ensuring strategic investment in digital health solutions that meet Australia’s future healthcare needs.
2. Prioritise value-based procurement.  Evaluate the long-term economic and clinical benefits of digital health solutions
3. Create clear pathways for local innovators.  Provide structured opportunities for SMEs to pitch their solutions, backed by procurement tools and incentives that enable their adoption.
4. Foster a more dynamic, innovation-friendly procurement environment.  Encourage early-stage investment in emerging technologies, rather than defaulting to established multinationals.
5. Align government funding with procurement decisions.  Ensure that public investment in digital health innovation translates into real market opportunities within our own healthcare system.
6. Mandatory reporting and tracking of local procurement targets for digital technology by  State health authorities and the commonwealth.

We are heading in the right direction. The National Digital Health Strategy already emphasises the need for a connected and digitally enabled healthcare system.

The new Commonwealth Procurement Rules commit to higher targets for government to source from SMEs and the NSW Procurement Board mandated in September that NSW Government agencies engage with local NSW suppliers before going to tender for projects worth more than $7.5 million.

These are just two examples of procurement reform that supports Australian innovation. The fact is, however, that it’s taken too long to get here and there’s still a long way to go.

The case of Harrison.ai should serve as a wake-up call: We have the talent, the technology, and the research excellence on our doorstep to see Australia as a world-leader in digital health.

No longer can we afford the missed opportunities to invest in local innovation and reap the economic and health benefits for all Australians.  

If Australia is serious about securing a world-class, innovative digital health industry, then our procurement policies must match our ambitions.

Government purchasing power is one of the most powerful tools at our disposal – let’s start using it.

Over to you: Share your view by going to our Poll

We asked –

Should public hospitals be supporting local innovation?

83% said YES