Objective: This article describes a project aimed at resolving inefficiencies associated with the use of the Pharmaceutical Benefits Scheme (PBS) in private hospitals. Method: Six alternative models were formulated and evaluated using quantitative and qualitative means. The preferred model was implemented for trial. Data sources: Drug utilisation records from medical and pharmacy histories of almost 2500 patients in 5 private hospitals, and focus groups and questionnaire surveys of medical, nursing and pharmacy personnel were used. Results: The model eliminated legal and operational problems associated with outstanding prescriptions, ensured patients received PBS subsidies to which they were entitled and was favoured by all stakeholder groups. Conclusion: The model should be available for implementation in all hospitals using the PBS.