Dr Kerryn Phelps, AMA President, to the Medico-Legal Society of NSW, Sydney

We meet at a time when the medical and legal professions are colliding and intertwining like never before.

There is no better example than last week's record $13 million medical negligence payout to Calandre Simpson.

While nobody would deny that Ms Simpson's catastrophic injuries are deserving of compensation, this case has far broader consequences in the areas of social equity and universal health care.

But that is another speech for another occasion. I am here to talk about the corporatisation of medical practice - what it means for doctors, for patients, for the health system and for the community.

Before I embark on my riveting discourse on corporate medicine, I'd like to share with you a little-reported speech from last week.

It was delivered by the doctors' friend, a man who goes by the name of Alan Fels of the ACCC. He was addressing the Centre for Health Program Evaluation at the Monash University.

The speech was titled "Efficiency in delivering health care: The professions, competition and the ACCC". A curious title given that when it comes to health care, 'efficiency' and 'ACCC' are mutually exclusive terms.

In the speech, Fels made the highly amusing remark that "the preference of the Commission is to walk softly" followed immediately by a warning that "practitioners and firms need to understand that we also carry a big stick".

Our experience of Fels and the ACCC is that the only time they have ever been known to walk softly is so that they can sneak up on unsuspecting health providers from behind and wallop them with the big stick.

I make reference to Alan Fels of the ACCC because when it comes to corporate medical practice, the ACCC's 'big stick' is more like a toothpick - for some inexplicable reason, Fels has turned a blind eye.

While corporatisation of medical practice is going gangbusters, Fels responds lamely that corporatisation of medical services is largely beyond the scope of the Trade Practices Act.

As far as the medical profession is concerned, Alan Fels chooses his victims carefully - they must be vulnerable and lacking in resources.

For proof, you need look no further than the ACCC actions in relation to VMO contract negotiations in Western Australia and the attack on a small group of anaesthetists trying to arrange a round-the-clock roster for a suburban obstetric service.

I cannot see how the doctors, patients or the community have benefited in any way from these actions.

On the contrary, it can be argued that the ACCC's incursions have led to higher costs, reduced efficiencies, poor outcomes for at least one regional hospital still having difficulty attracting specialists, and an anaesthetic obstetric service that never happened.

The jury is still out on whether doctors, patients or the community have benefited from corporatised medical practice either.

More and more doctors are being 'touched' by corporate medicine in Australia.

Corporatisation of the medical profession has gained a level of momentum that none of us could have predicted just a few short years ago.

Yet the background to the trend was fertile ground for corporates hungry to sign up a demoralised GP workforce with an "unsellable asset" - their goodwill.

With the viability of private general practice under greater threat than ever before from higher costs, an outdated MBS, more red tape and the GST, many doctors saw the offer of cash up front…and lined up to join the corporates.

It is not the role of the AMA to take a position "for" or "against" corporate medicine.

We can closely monitor the trends, the impact on medical ethics and patient care, the nature of corporate behaviour and the impact on the health system generally.

For doctors in the process of making the decision, it is the job of the AMA to inform, educate and advise our members.

They need to be able to make informed decisions about their future. It is not just a career choice, it is a life choice.

The AMA has been in discussion at both ends of the corporate equation - with the corporates and with their doctors, including those doctors still making up their minds which way to jump.

We released a Doctors Information Kit to help the doctors make the right decision, and we were recently involved in the release of a code-of-conduct to ensure that corporates protect the rights and conditions of doctors and that patients' rights are enshrined.

If this can be achieved without legislation, it will be a small miracle given the reluctance of several of the major corporate players to agree to the code.

Corporate medical practice will continue to grow and spread in Australia.

It is the AMA's job to ensure that quality of care is ensured and clinical independence of doctors is maintained (to ensure that doctors don't become less the family doctor and more the corporate tool of profit!) - and look after our members and their patients.

Change is inevitable, and it is vital that all stakeholders are prepared to accept the challenge of this change.

Recent History

It is worthwhile pondering for a moment the recent history of corporatisation, which may help us see a little way into the future.

General practice in 1995 was largely a cottage industry with over 70% of general practices having only one or two doctors.

Deutsche Bank estimates that in 2001, even with the consolidation that has already occurred, 70% of general practices are still one or two doctor practices.

Corporatisation - the process of a public company buying up general practices, consolidating them in larger, sometimes purpose-built, ten to twenty doctors practices, and often with allied and diagnostic services on site - represents the most significant change to the business structure of general practice in its history.

The corporatisation process began in an environment of declining general practice incomes for practices that bulk-billed their patients.

At the same time, there are increased costs, a lack of capital and business structure for GP investment in their practices, community expectations of "free" GP services and a non-strategically distributed workforce.

There is a GP shortage, but that shortage is more acute in country areas and outer suburban areas - usually 'areas of need'.

Does corporatisation of medical practice address this emerging social problem? The answer is clearly "no".

Medicare Benefits by Broad Type of Service

GP consultations account for 35% of Medicare benefits paid - the largest single group - worth about $2.5 billion.

Diagnostic imaging and pathology have already been corporatised into large providers.

From a corporate perspective, GP services may appear ripe for consolidation - with $2.5 billion in government expenditure alone and the potential for payments over and above that through private billing.

Large GP Management Groups

All these factors are helping drive the corporatisation process as many GPs, often for the first time, are seeing their practices having some genuine financial value.

There is now a real prospect of receiving through goodwill payments the significant investment of time and energy they have put into their practices over many years.

They are still ending up with a job - often in the same practice treating the same patients - but with a nest egg in the bank and no ongoing responsibility to run the small business component of medical practice and the all the burdens this brings.

But there is a quid pro quo…the loss of the ability to choose your staff or your practice associates, limits on when you can take holidays, and of course the loss of 40% to 55% of your gross income for the next three to five years.

The major Australian players in corporate medicine are Foundation, Endeavour, Primary Medical Care Services/Gribbles and Mayne Health.

Each has a different level of penetration in the market in the various States.

Major Acquisitions over Last Two Years

A number of these companies are proceeding with an aggressive acquisitions strategy depending on their business model.

Some have an emphasis on market share, then consolidation and reaping of the economies of scale.

Others seek slow expansion with early consolidation.

Or they are choosing the path of vertical integration, some more aggressively than others.

These acquisitions have worked to create large monopolies in small areas, demolishing competition and the individual's right to choose a family doctor in any given local area.

General Practice Market

The move to corporatisation is most advanced in Western Australia - which represents only 9% of the GP market in Australia.

Gribbles, Endeavour and Foundation have been competing head to head in GP practice purchases in WA - but this has now slowed significantly.

Anecdotal information suggests that up to 30% of WA GPs are now working out of corporate practices, mostly in Perth.

The real scope for corporate expansion is in NSW, Victoria and Queensland.

Foundation has now stopped buying, and its share price dipped dramatically.

Endeavour has also slowed its buying and Gribbles is refocussing on pathology and diagnostics.

General Practice Market Share

Currently there are about 12% of GPs, probably slightly more, in corporate medical practice but the market is very dynamic with some companies pulling back significantly from buying.

It is likely that there will be some market consolidation among the existing Corporates in the future - with Mayne Health the most likely to raise the capital to acquire one or more of the other Corporates.

AMA Corporatisation Action Plan

The AMA wants to help doctors to retain their clinical independence if they work in a corporate.

We want to ensure that the ethical standards of the profession are embedded in the relationships between corporations and corporate medical practitioners.

To this end, we developed a decision support kit for doctors because information is vital when the corporates come knocking.

The kit covers things like:

corporate governance

obligations to shareholders

Contracts - terms of contracts, heads of agreement

legal issues.

staff - both medical and non-medical

termination of existing commercial arrangements

and share equity.

It also covers issues relating to the new work environment:

remuneration

control over provision of medical services, support staff and administration

and working conditions.

Then, if the doctor wants to leave the corporate, things like:

termination of contracts

and restrictive covenants.

Corporate Code of Conduct

As I mentioned earlier, the AMA initiated negotiations with some of the major corporates for a Code of Conduct.

The Code deals with fairness, equity, mutuality, and good practice in contractual arrangements.

It deals with vocational training, continuing learning and career development.

It calls for a prompt, fair and accessible complaints handling scheme.

The Code is voluntary. As far as possible, we would prefer to avoid new restrictive legislation.

The Code was launched last month with a couple of the major players opting out of committing to the Code, and one company withdrawing just days out from the launch. Not a good start.

Nevertheless, the Code will be useful in distinguishing those Corporates prepared to meet minimum benchmarks in contractual relationships with doctors from those corporates that are not.

The success of the Code can only be assessed over time and it is a useful framework for the future.

The AMA will play a monitoring compliance role and will actively encourage more Corporates to sign up.

Benefits

What are the possible benefits for doctors in joining a corporate medical practice?

The ability to convert the intangible asset of goodwill into a tangible financial nest egg.

A capital injection into consolidated medical practice for equipment, computers and treatment rooms.

Reduced stress associated with running a small business.

Being involved in a larger group practice may offer greater flexibility in work hours and being on call.

More 'freedom' to focus on clinical work.

Negatives

On the other hand, there are problems to contend with.

Potential loss of clinical independence.

Loss of control over staffing and practice support.

Potential for an "all care, no responsibility" culture to develop in practice.

Less bargaining power at the time of contract renewal.

Contractual restrictions on future practice rights.

Limited access to medical records and patient base. I have seen first hand the unacceptable behaviour of some corporates who have refused patients' new doctors any access to their records, even at a price.

Start up costs of a new independent practice should the corporate relationship turn sour.

And the spectre of patients' interests versus shareholder interests.

The great corporate debate in the Australian community has only begun.

People like their family doctors. They want to keep them in their communities.

But unless something is done to help doctors stay in practice, the family doctor will become a thing of the past - just like local banking services, community post offices and the corner store.

Fixing an outdated and inadequate Medicare Benefits Schedule (MBS) would be a good start. But both major parties are not prepared to tackle this problem…yet.

In the meantime, doctors are queuing up to join a corporate or leaving medicine altogether.

The losers will be our patients and our local communities.

Corporate medical practice is here for some time at least. The medical profession must work together to ensure their incursion does not negatively affect doctors or their patients.

In closing, I cannot resist one further mention of Alan Fels and his speech.

In his opening remarks, he chose to quote author and fishing enthusiast, Izaak Walton, on health:

"If you have it, praise God, and value it next to a good conscience; for health is the second blessing that we mortals are capable of; a blessing that money cannot buy."

Fels went on to say: "In this I have to say, he was wrong. Because he was not an economist he couldn't comprehend the simple proposition that money is a blessing that can buy good health."

Perhaps this explains why Fels and the ACCC have failed to have a close look at corporatised medicine in this country.

This attitude will only confirm the view held by many Australians that, in many areas, competition policy and the application of the Trade Practices Act has been misguided and misdirected.

As Alan Fels sets out on his mission to investigate the medical profession, unless the ACCC can actually provide some evidence of public benefit for their activities - which is remarkably wanting at this present time - I think doctors and the broader community would be happier if he were to take the advice of Izaak Walton and put up the 'Gone Fishing' sign…permanently.

Thank you.