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02 Nov 2016

The AMA has warned that Federal Government proposals to cap pathology collection centre rents will likely drive up patient out-of-pocket costs and could force some medical practices out of business.

In a strongly worded letter, AMA President Dr Michael Gannon has appealed to the Small Business and Family Enterprise Ombudsman, Kate Carnell, to intervene and help try to convince the Government to drop its plan.

Dr Gannon said the proposal, announced during the Federal election, to change provisions in the Health Insurance Act would allow the two major pathology companies that dominate the market to unilaterally cut the rents they paid to medical practices for co-located collection centres (ACCs), delivering a big financial blow to small business already reeling under the effects of the Medicare rebate freeze.

“The proposed changes fundamentally alter the intent of the existing law…by imposing a blunt cap on the commercial rents that GPs and other specialists can receive for co-located ACCs,” the AMA President said. “It delivers two major listed companies with an unwarranted and unfair advantage…estimated to save [them] between $100 million and $150 million per annum.”

Under the deal, which was sprung on the medical profession without warning, the Government has promised to bring down rents in exchange for a promise from pathology companies that they will sustain bulk billing rates despite the loss of the bulk billing incentive.

Government Minister Senator Fiona Nash told the Estimates hearing the pathology industry had indicated “it is going to keep the bulk billing levels at its rates [and] we are taking it in good faith that that is exactly what they meant, and we expect they will do that”.

The terms of the agreement were laid out in a Senate Estimates hearing by Health Department Deputy Secretary Andrew Stuart, who said the “nature of the deal between the Government and Pathology Australia is to work to bring rents down to a more reasonable level and, at the same time or in some relationship to that, to continue with the Government’s proposal to remove the bulk billing incentive”.

ACC rents have risen strongly since their deregulation in 2010, and there have been fears of a nexus between leases and the number of pathology tests a practice orders.

But the Health Department has reported in several different forums that it has not detected any such link.

Dr Gannon said, instead, that the rapid increase in ACC rents had been driven by competition for market share between the two big pathology companies.

He warned that the Government’s proposed changes would have “a big impact” on medical practices.

“Medical practices are [already] feeling the impact of the current MBS indexation freeze, and policy changes like this will simply have a further negative impact on their cash flow and on practice viability,” he said. “For those practices that have used this source of rental income to help keep them viable during the current extended freeze, it may it may mean higher costs to patients or simply selling their business.”

Many, the AMA President said, had made decisions about hiring staff and purchasing equipment based on anticipated revenue streams from ACC rents, and the policy would put their finances under strain.

Dr Gannon said it was unlikely the Government comprehended the full impact of the “poorly targeted” policy when announcing it, including the massive windfall it would deliver to the big pathology providers and the hefty financial blow it would deliver to many medical practices.

Bearing out his concern, Mr Stuart admitted to the Senate committee that the Department had not modelled the likely effect of the pathology rents cap on general practices, particularly when combined with the Medicare rebate freeze.

The senior health official, who made pointed reference to the fact the deal was “a Government negotiation, not a departmental negotiation”, said details of the arrangement, especially regarding its implementation, were still being finalised.

First Assistant Secretary Maria Jolly told the committee that one of the major unresolved issues was the definition of market value - as it has been for the current ACC arrangement.

She said how the new arrangement would be introduced was also yet to be determined, including how existing leases would be treated, and how the new deal would relate to the current regime governing prohibited practices.

Adrian Rollins



Published: 02 Nov 2016