THE overhaul of the health system will be backed by a $10 billion fund in the single biggest investment in health infrastructure made by a federal government.

The health and hospitals fund, to be financed from the surpluses of this year's and next year's budgets, will be directed to revamping strained hospitals and equipment, new medical technology and research.

The fund will also increase the Federal Government's ability to direct and influence big new health projects as part of its health reform agenda.

The money pot will be separate from the Federal Government's contribution to the running of state hospitals which is now being negotiated. The fund replaces the previous government's $2.5 billion health and medical investment fund and will be directed to a broader range of projects including the building and refurbishment of hospitals.

Money from both the earnings and the capital of the fund will be available for spending on projects. The Government has kept open the possibility of directing a proportion of future surpluses to the fund.

The Minister for Health, Nicola Roxon, said the $10 billion fund would "support strategic investments in health as part of the Government's reform agenda to equip Australia's health and hospital system for the future".

Among likely projects to benefit will be facilities to support better links between hospital clinical research and patient care.

The fund adds to the $3.2 billion for public health over the next five years that Labor has pledged before and since the election. The Government has committed an additional $1 billion for public hospitals and up to $600 million to clear elective surgery waiting lists.

Ms Roxon repeated the Government's mantra of ending the "blame game" between state and federal governments over divided health responsibilities and the Government's plan to broaden federal funding to cover care outside hospitals, including through primary care and preventative care, as well as aged care.

But the Government is also to significantly step up the policing of doctors suspected of rorting Medicare payments.

The government is estimating it will save $70 million over the next four years by stepping up audits of doctors to ensure they are actually doing what Medicare is paying them for.

Medicare Australia will get stronger powers to impose sanctions on doctors who are billing "inappropriately", but whose practice does not warrant referral to the Medicare watchdog, the Professional Services Review or criminal investigation.

The Government will increase the powers of Medicare to compel doctors to produce documents to substantiate their billing. At present they are not required to produce documents to substantiate their work if the evidence is contained in a patient record.

The Minister for Human Services, Joe Ludwig, said doctors billing inappropriately "will receive education on how to bill the relevant Medicare benefits schedule items correctly".

Under the measure Medicare will undertake an additional 2000 audits a year, greatly increasing the incidence of checks from audits on 0.7 per cent of doctors to 4 per cent.

The tougher approach on doctors comes at a time of tense relations between Ms Roxon and the Australian Medical Association, which has challenged the Government's policies, including the plan for 31 GP super clinics.