As demand for hospital and emergency services grows there will be pressure to improve the integration of primary, acute and continuing care services. Research on ambulatory sensitive care conditions suggests that a significant proportion of hospital use is potentially preventable by primary health and community care services. The desire for better health outcomes and reduced use of acute care suggests a greater focus on primary health and community care. Reforms have generally emphasised planning, funding and regulatory mechanisms including brokered management of services for an enrolled population, capitation payments and pooled funding across primary,acute and continuing care, the development of coordinated service pathways and the consolidation of responsibility for costs and outcomes. Australia's division of funding, regulatory and planning responsibilities across jurisdictions introduces a unique set of challenges to address these issues. Nevertheless, there are a number of options better aligning Commonwealth and State initiatives through the Australian Health Agreements and funding for range of primary health and community care funding programs.