The church had secret files on priests accused of sexual misconduct, the Sydney Morning Herald reported.
Profiles were created as part of Encompass Australasia, run out of a Sydney hospital from 1997 to 2008.
A source told Fairfax Media priests in the Encompass program were given extensive help to allow them to make a new start outside the priesthood.
Police in both Sydney and Melbourne have said there were no reports from Encompass of criminal acts.
"There were some outrageous situations that would have been very embarrassing for the church had they become public," the source said. "Deals were cut. The whole operation was extremely confidential."
At least one Encompass patient did end up in prison after a detour to Rome.
Ross Murrin, who taught in Catholic schools as a Marist brother, was helped to find employment as a translator in Rome.
While he was away, police learned in 2007 he was a suspected of molesting boys in the 1970s.
He was arrested when he returned, pleaded guilty and received an 18-month sentence.