Why the Pathology rent debacle can dismantle General Practice

Why the Pathology rent debacle can dismantle General Practice

Dr Simon Torvaldsen
Wednesday 30 November 2016

General Practitioners across Australia are dealing with a number of issues that are impeding on the safe and financially viable delivery of General Practice.


Taking centre stage currently is the Pathology rent fight. The AMA has received more input on this issue in the last few weeks than anything else for a long time. There is genuine fear and concern over the future and viability of independent General Practice.


For those few who may not be across the issue, here are the basic facts:


• In 2007, the government introduced new rules designed to limit what it considered to be undue commercial influences relating to the ordering and delivery of pathology services. Co-location rules were clarified to make it explicit that benefits could not be made to induce the requesters of pathology services to make a request from pathology providers, including (but not limited to) rents paid by pathology companies which could not be substantially different from market value.


• Specifically, the amendments to the Health Insurance Regulations 1975 state that rents cannot be more than +/- 20 per cent of “market value”, and reference to market value being defined as a “willing purchaser” and “willing but not anxious vendor” (20CA and 20CB).


• In 2010, the (then) Australian Association of Pathology Practices (now Pathology Australia, comprising largely Sonic Healthcare) commenced lobbying government to artificially reduce the rent paid by pathology companies for co-locating with a general practice, citing that the rents paid were higher than the standard market value in the area. Following internal legal advice and from the Australian Valuation Office, the Department of Health and Ageing recognised that there was a niche market value for pathology collection centre rents. There have been two reviews since then.


• No changes were recommended and following the 2015 Review, Federal Health Minister Sussan Ley wrote to the AMA in March this year advising she had asked the DoH to develop a compliance strategy that would improve transparency and strengthen compliance and enforcement activities under the existing regulatory framework, i.e. no changes to the law.


• During the 2016 Federal Election, Pathology Australia launched a campaign against the announced cuts to pathology bulk-billing incentives. On 13 May 2016, the Prime Minister announced the rents for co-located collection centres would be artificially capped, and that in exchange Pathology Australia would drop their campaign.


The practical effect of the proposed change will be to transfer up to $150 million per year from cash-strapped General Practice to the pockets of corporate pathology providers and their shareholders (in 2016, Sonic Healthcare announced a 30 per cent increase in profit to $451 million).


Whilst there is no guarantee this will provide any benefit to pathology patients, it will certainly squeeze General Practice even harder, making it increasingly difficult to provide quality services and keep patients out of hospital. Bulk billing rates are likely to fall and out-of-pocket costs will rise. This is not likely to simply affect practice owners with co-located Pathology. Such a large cut in revenue will affect the very viability of some practices and force most to cut costs. This will inevitably flow on to staff, non-owner doctors and patient services. It will make General Practice overall less effective and a less attractive career option.


A very worrying aspect of the proposal is that it will see a government introduce regulation to a free market commercial business arrangement. It is a Marxist type proposal that is the complete antithesis of Liberal Party philosophy and tradition. And it specifically favours big business over small business.


What comes next? Fee capping? Rent control of other industries deemed ‘too expensive’ by government? So what is the AMA doing about this? Firstly, the AMA supports adequate funding of pathology services. It did not support cuts to bulk billing incentive payments. However ransferring the cuts to General Practice is NOT a solution. The AMA is strongly opposing this proposal and is in dialogue with the government and DoH at the highest levels.


We have also been briefing the Opposition on this matter, as it may require legislative change. Minister Ley has indicated she will pause and engage in meaningful consultation, which is a good start. The AMA is very involved in this process and will work hard to ensure a solution that maintains the current definition of market rent whilst at the same time preventing any improper practices (which we do not condone).


We also want to see adequate funding of pathology and the ability to maintain high quality services in Australia. What can you do? The government is responsive to grassroots pressure. Write to your local MP, to the Health Minister, the PM, and to the Shadow Health Minister.


Encourage your colleagues to write too. Former AMA President Mukesh Haikerwal has set up a website including an online petition – www.itswrong.com.au. Go there, sign the online petition and tell your patients and friends to do the same.


Also, encourage them to join the AMA! The Association sees General Practice at the centre of our healthcare system and is passionately committed to supporting it. Our strength lies in our membership – the stronger we are, the better we can represent you.


This is a fight that will be damaging to all parties if not resolved – government, General Practice and Pathology. It is not a good position for the government to be actively fighting with the profession and we know that worries about health can really bite at election time.


Hopefully by the time you read this, further progress will have been made to resolve this issue to the benefit of all concerned. I will then enjoy writing about all the other issues we are looking into on your behalf.

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