Interview - Dr Andrew Pesce, AMA Federal Councillor, Radio 2SM - Obstetricians have rejected reports they are making hundreds of thousands a year and are whinging about medical indemnity

GOLDMAN:     Obstetricians have rejected reports they are making hundreds of thousands of dollars per year and whingeing about medical indemnity.  The Herald says specialists earn up to about $550,000 annually, and at the same time are threatening to pass increased indemnity costs to patients.

We have the AMA's Andrew Pesce on the line.  Good morning, Andrew.

PESCE:           Good morning.

GOLDMAN:       Andrew, you say that's not the case?

PESCE:           The case is that that article that's quoted in the Sydney Morning Herald today proves the point that we've been making.  The only income that obstetricians make is from the gap payments that patients pay to them.  The rebates that the health fund and that the medical benefit schedule provides barely covers practice costs.

Every time there's an increase in practice costs nowadays, it has to be directly passed on to patients, so that the whole problem is that as indemnity costs keep going up, then we have to pass these costs on to the patient.  And this is what we've been pointing out to the government for a long time.

GOLDMAN:     There's nothing awful about that.  That's normal business practice, isn't it - and, after all, an obstetrician is a business?

PESCE:           I guess when it comes down to the nuts and bolts, that's right.  We've always tried to provide services with minimal gaps to patients because we understand that people who have already paid private health insurance would expect that they'd have very little in the way of further out-of-pocket expenses.

                          But unfortunately the benefits provided by the funds and the government have been devalued over the years, so that it's just impossible to carry on a business using those benefits as your only income source.

GOLDMAN:     Does an obstetrician earn up to $550,000 a year?

PESCE:           Well, I'll talk about my own case.  That's correct.  Practice costs are about $250,000, and then I've got another $150,000 in indemnity costs- -

GOLDMAN:     So the $550,000 - that's- -

PESCE:           Gross- -

GOLDMAN:     That's gross income, yes- -

PESCE:           That's not what we pay ourselves out of the practice - that's gross billings from which we've got to meet all our costs.

GOLDMAN:     And they are considerable, there's no doubt about it - and of course not the least, the indemnity cost.  And just on that - because I'm aware of the amount of money that you pay out - it's a wonder there are any obstetricians left.

PESCE:           Well, that's the bottom line I suppose.  If obstetricians are making so much money, why is it that we've lost about 25% of our number in the last three years?

GOLDMAN:     Yes, that's really puts the kybosh on the argument that obstetricians are earning all this money and still doing OK, and trying to pass costs on.  If they were able to do that, they probably would.  And so at the end of the day, they've said this is not viable, have to get out.  And you've got GPs all over the place that happen to be obstetricians as well - they are no longer obstetricians.  They simply can't afford it.

PESCE:           No, the general practitioners have essentially left the obstetric work force, except possibly in country areas where they're able to do it within the system provided by the public hospital system.  But in private practice, essentially it's not viable any more.  You have to have such large numbers of deliveries to generate the earnings to pay the costs that it's just not viable.

GOLDMAN:     So at the end of the day, the Herald story is probably a little unfair.

PESCE:           I think it is.  I must say, I spent a lot of time talking to that journalist, pointing out all the things that I've pointed to you.  And I guess, look, everyone writes a story because they want to make a point.  I think the point is that they're trying to present the counter argument that there's always two sides to every story- -

GOLDMAN:     Yes, but it's a pretty base point, it's a pretty base point - they simply wanted to push the headline, "This job delivers a tidy income", without trying to tell the real story.

PESCE:           I think that's true.  And I think it's a bit mischievous because it doesn't point out that the gross billings are not the income that doctors derive from the practice - that's what they have to pay all their practice costs out of.

GOLDMAN:     Yes, it's certainly not helping in the current climate at all, when you've got a situation where so many obstetricians are leaving the practice.  All right, so is there any forward thinking with regard to the amazing amount of money that you're paying out in indemnity cost?

PESCE:           I think there has to be a balance between what people pay for the services they provide and what we can provide them with services.  In terms of indemnity costs, I think that there are still many ways forward to decrease the load.  One of the problems with obstetricians' indemnity costs is that the very, very rare, but seriously injured baby which costs millions and millions and millions of dollars to look after has to be paid for now by - there's only 300 private obstetricians left in Australia- -

GOLDMAN:     Three hundred?

PESCE:           That's right, there's only 300 obstetricians in private practice left.  Now, they're the ones who have to find the billings to pay for a Calandra Simpson case where you pay up to sort of $10 million for the long-term case of a catastrophically injured baby.   Now, it makes much, much more sense for that cost if it has to be borne, to be spread much more equitably across the whole community.  If 300 obstetricians have to somehow raise the money to pay for the care of these babies, it's going to inevitably drive the cost of their premiums through the roof- -

GOLDMAN:     And not only that, insurance companies will go missing because 300 people is not enough to pay for it.

PESCE:           That's right.  It's becomes not commercially viable.  It would be the same as having a green slip scheme paid for by just, I don't know, one pub section of the driving public- -

GOLDMAN:     Very good - I've never heard it explained that way.  That certainly makes sense.  Maybe a few people might sit up and take notice a bit more.  All right, thank you very much for your time this morning, Andrew, bye.

PESCE:           Thanks a lot, bye bye.

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