Australia’s health system functions remarkably well, despite operating under a complex set of institutions that make coordinating patient care difficult. Complications arising from a split in federal and state government funding and responsibilities are central to these challenges. This fragmented health care system can disrupt the continuity of patient care, lead to a duplication of services and leave gaps in care provision. Supervision of these health services by different levels of government can manifest in avoidable impediments such as the poor transfer of health information, and pose difficulties for patients navigating the health system. Adding to the Australian system’s complexity is a mix of services delivered through both the public and private sectors. To ease health system fragmentation and promote more integrated services, Australia should adopt a national approach to quality and performance through an enhanced federal government role in steering policy, funding and priority setting. The states, in turn, should take on a strengthened role as health service providers, with responsibility for primary care devolved to the states to better align it with hospital services and community care. A more strategic role for the centre should also leave room for the strategic development of health services at the regional level, encouraging innovation that is responsive to local population need, particularly in rural and remote areas.