It is February 2005. A bus crawls down the hill into Teepokana (a small fictional town on the west coast of Tasmania) and grinds to a halt near the harbour. Arash stares out of the window. On one side, all he can see is the great Southern Ocean. On the other is a colourful row of shops, cafes and houses nestling under the steep hillside. As a final-year medical student, Arash is just starting his three-week rural general practice placement, at a rather unusual practice.

The old blue four-wheel-drive is waiting, just as Fiona, his preceptor, had told him it would be. Fiona is sitting on the tailgate tapping away on her laptop and intermittently sipping a cappuccino. After a friendly welcome, Arash is soon bouncing along the gravel road that leads out of town. He has never driven a "cruiser" before.

Meanwhile, Fiona is catching up on a few review consultations, juggling her laptop and mobile phone with admirable dexterity. "Here they are," she says, pointing at the screen, "Mrs Mansell's TFT results. She'll need to up her thyroxine a bit, I reckon". Arash looks puzzled. "All our pathology results come direct to the Multipurpose Centre's secure server. I can access new results remotely and then transfer them to her records. They're also web-based." A quick phone call to Mrs Mansell, and the plan is made. "See. I can do a script from my laptop that'll go direct to the pharmacy by email, and her medication will be dropped off by the postman first thing tomorrow. And here's the appointments page. I've got her booked in to recheck her TFTs."

Arash slows down as he pulls into a small settlement some 30 minutes' drive south of Teepokana. Fiona is just finishing her sixth review over the phone. "It's made a big difference now that rural doctors can claim through the MBS [Medical Benefits Schedule] for telephone consultations," she says. "Now, this is Spero Bay. Only 400 or so people live here permanently. It's mostly the copper mine and a bit of tourism that keeps this place alive. One of us comes down once a fortnight and we hold a surgery in the community hall."

Half an hour later and Arash is stuck. He has 40-year-old Bill Hodgson to see. Bill is worried about heart disease, because his workmate has just had a heart attack, and he thinks he should have his cholesterol checked and get some treatment. It is all very well knowing risk factors for heart disease, but Arash is struggling to answer some of Bill's questions. He turns to Fiona.

"Don't worry, you can't carry this stuff in your head. Now here's the practice home page," she says, turning the laptop's screen so that Bill can look as well. "Click on 'consultation tools' . . . there it is . . . 'New Zealand Risk Tables'.1" Arash is soon able to help Bill understand things more clearly. "So, your overall risk of having heart trouble in the next five years is between 2.5% and 5%. That's pretty low, isn't it? But if you could stop smoking then you'd halve your chances of getting heart disease." Guided by Fiona, Arash "clicks" a few more times and prints out some information for Bill from the Quit campaign2 and National Heart Foundation3 websites. Fiona suggests that Bill contact Aaron, the nurse practitioner, if he wants to give up smoking.

"Aaron's great", says Fiona as they drive back later that morning. "He does some sessions to relieve Linda, our regular community nurse, and also runs our respiratory and diabetes clinics. He's really good at the educational side of things. It makes a real difference to managing chronic disease. He works from sets of guidelines that we developed. In fact, our income through the Practice Incentive Program has meant we can pay for an endocrinologist and optometrist to visit annually."

Arash looks puzzled again. "But how can Aaron work in the surgery and in the community, and why would you use your own income to pay for visiting services?" Fiona smiles.

"We solved quite a few problems like that when we took the plunge 18 months ago. Our municipality became the first fundholding demonstration site. Essentially, we set up a service company that takes an annual lump sum from State Health and all our Medicare and PIP [Practice Incentive Program] income. In fact, every dollar we can grab from grants, university teaching appointments or whatever goes into one pot. The service company is overseen by a local board of directors, with both professional and consumer representation. So both Aaron and I are employed locally. We do quite nicely out of this arrangement, so we can just get on with planning and delivering services as best fits our skills without worrying about income or bureaucracy or traditional professional roles.

"It's certainly not an easy way to go. The local community has had a hard time deciding priorities out of the limited bucket of money. But the important thing is that it is their decisions and their priorities, not some bureaucrat's. They really own their health service."

Arash is feeling a bit numb as he walks into the Multi-purpose Centre. It seems he is going to need a heap of skills to be a doctor that he is not learning at medical school. Still pensive, he follows Fiona into the videoconferencing room next to the office. "This should be a good session for you to join", she says, as a group of eight students appears on the large screen in front of them. "These students are all in final year and come from Medicine, Nursing and Pharmacy. We have integrated skills teaching with all three schools early on in their courses and then a series of integrated sessions throughout the course. Today, we're doing some problem-based stuff on chronic disease. We'll focus on multidisciplinary team work. We're using the videoconferencing equipment much more for clinical applications as well, particularly for psychiatry. We've got so few psychiatrists in this State — most of our referrals go to Brisbane now. It works very well."

After lunch, Fiona flicks through her emails. There is one from Oliver, an exploration geologist who spends a good deal of time overseas. His asthma often worsens in hot humid climates and today, in Brazil, it is doing so again. Fiona opens his web-based record and finds the page with his asthma management plan to jog her memory. Oliver has entered a few peak flow readings over the past few days for Fiona to look at and informed her that he has doubled his inhaled steroids. He is really wanting some reassurance. Fiona enters a few comments in his notes and then emails him back.

She also has an email from Marjory. "Marjory's a poor soul really, but much better than she was a year or so ago. For the last few years, she's had a worsening combination of agoraphobia and panic disorder. She was taking up a lot of our time in house calls as she wouldn't leave home. And, worse, we weren't even helping her. Last summer, her grandchildren visited, got her hooked up to the Internet and bought her a small webcam for her computer. She had a few sessions of CBT [cognitive–behavioural therapy] with a psychologist using videoconferencing and has been using some Internet-based self-guided CBT. She's even had exposure therapy for her agoraphobia using virtual reality. Linda and I started taking turns to see her face-to-face once a month and would hook up with the videoconferencing in between. It was quite amazing — she actually started doing her hair and make-up for these sessions. She came to the surgery to see me last week for the first time in three years."

Fiona points to another email. "I'll sort this one out tonight", she says. "I do some charity work with some doctors in Nepal. I get one or two referrals a week for second opinions. They'll email me the history and any x-rays or things and any questions. If I don't know something, I can more easily find out than they can."

Arash has his thinking cap on by now. "How do you manage to keep up to date with everything?" Fiona smiles. "You can't, so I don't really try. Look, it's a question of redefining education and what it means and how we use it. And that's where all our fancy IT [information technology] really helps. I can't predict who is going to walk through the door tomorrow, so how do I know what to learn about? And what I learnt at the last evening meeting might be old hat by the time I need it anyway. We use 'just in time' education, and it's revolutionised the way I manage my patients. Our practice homepage links to websites like the BMJ's "Clinical Evidence" site4 and the National Electronic Library of Health in the UK.5 I usually get the answers I want quite quickly. Sometimes, we'll look for things during the consultation. If I can't get what I want in 30 seconds, I'll chase it up later. Sometimes, my patients will find the answers for me. It's sort of healthcare homework, I suppose. The practice provides an up-to-date list of reliable websites, and I just help patients work through it all. This way we get the answers to the questions we've got, as and when we need them."

Fiona clicks again on her laptop. "What's all that about?" asks Arash. "Up the top is the height of the ocean swell, and at the bottom are the local tide tables. Which means we've done enough work for one day. It's time to go surfing."