You are on page 1of 2





Chartered accountant David Dahm,

CEO and founder of the Health and Life

How to
survive the
big squeeze
Owners are being forced to change the way they
operate, but many appear to be putting off tough
decisions until it is too late, writes Zilla Efrat

O-PAY OR doctors pay? Something has to give in the business

of running a GP practice as
successive governments unleash
an ever-increasing number of challenges.
Its so tough for smaller practices
that some are selling up. The smart ones
are innovating. Those that are too fearful
or tardy to act are heading for a
rude awakening.
With bulk billing at record levels, the
biggest pain is coming from the four-year
freeze on Medicare rebate indexation,
says Dr Malcolm Parmenter, CEO of Sonic
Clinical Services.
He describes it as a slow death by
a thousand cuts. Sooner or later (and
probably later), GPs will be forced to
charge a co-payment. Currently there is
no sign of an increase in private billing.
Practices just cant keep up with inflation. The statistics show that GPs continue to bulk bill while pedalling faster,
says Dr Parmenter, whose company owns
Independent Practitioner Network (IPN)
and has partnerships with 1700 doctors
at 200 clinics.
These are uncertain times. Practice
owners must run their businesses with
one eye distracted by the uncertainty of


the MBS review, in which medical experts

are scouring the schedule looking for items
and rebates to cut.
Then theres last months announcement of the Health Care Home reforms,
the governments plan to radically change
the funding mechanism for seven million
patients with chronic conditions.
Details are still patchy. But the idea is
that fee-for-service payments to doctors for
chronic disease care will be replaced by an
as yet unknown quarterly payment.
The scheme might offer welcome relief,
but doctors bemoan the lack of detail so far.
Without any information on the quantum and break-up of its funding, one can
only speculate about how it might work,
says Dr Parmenter.

The statistics show that

GPs continue to bulk bill
while pedalling faster


consultancy, says: There are many

unanswered questions on policy
reform and these are creating a
lot of uncertainty. Obviously
the bigger practices are better
resourced to deal with
them. The smaller ones are
being overwhelmed by the
tsunami of change.
Mr Dahm reports an
increase in practice distress
in the form of wage cutbacks and practice sales.
The problem is that many
practices are not very financially literate. They dont understand what their numbers mean
and react when its too late.
Professor Anthony Scott, who jointly
co-ordinates the University of Melbourne
Health Economics Group, believes that
instead of altering their bulk billing formulas, many practices are just taking the
hit. Others are changing their cost structures, delegating more to practice nurses
or operating more effectively.
There is evidence that GP s charge
higher prices for richer patients than
poorer patients. Therefore, they may
decide not to change prices for poorer
patients because they will just go somewhere else. But for richer patients, they
might be able to charge higher prices
and keep them, says Professor Scott.
Dr Rodney Beckwith, who
operates two NSW practices,
has adopted a wait and see
approach before implementing more private billing.
He estimates his practices
bulk billing rate to be over
98% and says they essentially
break-even. So small changes
to the system can have big
impacts on their viability.
If my wait and see
approach fails, then clearly the
rebate will become unsustainable
and all general practices will need
to charge privately above the rebate.
This will create social problems as many
of our patients are genuinely unable to
afford private fees.

Dr Beckwith is also looking at other

income opportunities. We have long recognised that the arbitrary and politically
driven agenda of the government creates
a high level of risk for GP practice owners.
The government can scrap certain item
numbers on a whim, deeply affecting our
business viability, he says.
The biggest direct cost reduction
is in the percentage we are able to
pay to contractor doctors. We simply
made a decision, regardless of what our
competitors are doing, not to pay above
a certain percentage, no matter what.
Otherwise, we will go broke.
Dr David Tillett, the founding member
of Central Medical Group in the AlburyWodonga region, says his practice has
tightened up its billing structures and is
bulk billing fewer people.
We have introduced a new process for
assessing people for bulk billing, Previously
it was pretty much up to the doctors to
decide. Now we have an application process
for people who feel that they need bulk billing. We used to bulk bill over 65s routinely,

We have introduced
a new process for
assessing people for
bulk billing DAVID TILLETT
but no longer do that. On the whole
patients have responded really well to
this. I think thats because weve communicated the issues effectively to them.
Weve also been more diligent in
following up on people who dont attend
The prac ztice is trying to improve
the quality and depth of its services.
Weve been talking to orthopaedic
surgeons, gastroenterologists around
Hep C treatments, and to plastic
surgeons and dermatologists on how
to enhance skin care, he says. PAGE 18

A welcome concept in a hostile environment


Adjunct A/Professor, Menzies Centre

for Health Policy, University of Sydney

HEALTH MINISTERS have consistently

stated their commitment to primary care,
but delivery on this has fallen well short
of what is needed for the realities of 21st
century Australia.
There is a plethora of evidence to show
that an accessible, affordable, quality
primary care system delivers better health
outcomes, addresses health disparities
and provides the best value. However,
successive governments have been
hobbled by a priority focus on hospitals, an
unwillingness to broker turf battles between
professional groups, kowtowing to the
medical profession over fee-for-service, and
an inability to move beyond data collection
to analyses and evaluation and beyond pilot
programs to national implementation.
The political philosophy and budget
cuts of the Abbott / Turnbull government
have led to a rejection of a federal role in
prevention, an undermining of Medicare

and a push for increasing reliance on private

health insurance, with the result that both
health disparities and patients out-ofpocket costs have grown.
There are also structural problems
inherent within the healthcare system/s
that hinder the transition from
the current general practice model to a
primary care model (and then hopefully
on to a primary health care model). There
are reasons to hope that the work of
the Primary Health Networks will drive
some of the required changes in policy
and organisation such as local planning,
management and collaboration. But efforts
are also needed to subvert the federal / state
silos and ensure strategic planning across
departmental barriers to address the
social determinants of health.
It is interesting that the recommendations from the Primary Health Care
Advisory Group (PHCAG) on reforms for
primary care focused solely on the development and implementation of Health Care
Homes to provide better co-ordination
of care for those with chronic




A welcome concept in a hostile environment CONTINUED


consequences for non-enrolled patients?

Other issues that have yet to be addressed
are the appropriate inclusion of Aboriginal
Controlled Community Health Services
and Indigenous patients, the integration of
mental health services, and ensuring better
co-ordination with specialist services.
The government has said that the Health
Care Homes trial will start in 2017. Theres
a lot of work to be done to ensure that clear
guidance and information is provided to all
the stakeholders.
The most important of these are the
people with chronic and complex illnesses
who must be empowered as participants if
they are to benefit from this new approach.
But healthcare providers who will be
involved will need reassurances that this is
not just another short-term trial condemned
to be sidelined by limited resources,
inflexible guidelines, failure to instantly
achieve results or changes in government.

Health Care Homes are

essentially ambulances
at the bottom of the cliff.
What is also needed are
fences at the top
If done diligently, this work will expose
a raft of issues and gaps that need to
be addressed in the current disjointed
healthcare system/s, especially at the
interfaces. It will also highlight the impact
current government policies are having on
the ability of patients and their healthcare
providers to manage chronic and complex
conditions effectively. These are poor
foundations on which to build a new
approach to care and cannot be ignored.
We should hope that this election
year will bring out more than just one
proposal to reform primary care. Health
Care Homes are essentially ambulances at
the bottom of the cliff. What is also needed
are fences at the top of the cliff that will
prevent the onset of chronic conditions. We
have the data to show where the best buys
are in prevention and early intervention
for both physical and mental health.
What we need is the vision and long-term
commitment to implement them.


In addition to boosting
consolidation among practices, Mr Dahm
expects the changes to change the way
practices are run in the future.
He says owners need to develop
a sustainable strategy for the future,
define this with actual numbers and
get practice-wide buy-in.
They should also decide what changes
they will tackle and which they wont.
You cant do everything at once. If you put
too many changes on to your staff members and doctors at once, they could hit
their breaking points, says Mr Dahm.
He supports weaning practices
off bulk billing.
As soon as you put a fee on your
service the patient becomes discerning.
So there is a fear among doctors that they
have to justify their services because
patients will demand more or go next
door to the bulk billing practice. But
thats a myth.
If they go to the practice next door,
it means you are probably not that good
at what you do. You need to focus on
patient surveys and what patients think
about your services.
You may come up with some great
ways to retain patients. For example,
some practices are introducing
membership fees to encourage patient
continuity. Others may charge $10 a
consult for the first 10 consults and bulk
bill for the rest of the year.

and complex conditions. This
proposal has been well received, in large
part because the case for the adoption of
the Patient Centred Medical Home (PCMH)
model has been well made and supported
over the past few years. That the Turnbull
government announced its adoption of the
PHAG recommendations, through what it is
calling Health Care Homes, in the context
of increased funding for hospitals, highlights that the focus of federal policy makers
remains on illness care rather than on
prevention and early interventions to,
for example, tackle the rise in diabetes
or the impact of depression.
With the recent COAG agreement, the
devil is in the detail, and there are few
details, especially given the short time
frames. Are there realistic expectations that
the Commonwealthstate efforts to reduce
pressures on public hospitals will be fully
developed, implemented and delivering
evaluated results by July 2020 when the
agreement ends, let alone by 2018 when it is
proposed the next agreement is developed?
For Health Care Homes this will
require agreements about the appropriate
model or models, where the pilots will
be implemented, and how the target
populations will be selected. How will
the trial be funded (there are intimations
of contributions from the states and
territories and private health insurers) and
will this affect the modelling, locations and
The Health Care Homes proposal is
welcomed but it will struggle to deliver
hoped-for changes in care in an environment
where clinicians Medicare fees are frozen,
bulk billing incentives for pathology and
diagnostic procedures are threatened,
thresholds to access to both Medicare and
PBS safety nets are increasing and patients
out-of-pocket costs are growing.
There has been no mention of workforce
requirements, so it is not clear how busy
practices will deliver on issues such as
patient transport, house cleaning and
home modification needs, as highlighted in
examples provided in the ministers media
release. It is proposed that participating
practices will each have some 350 patients
enrolled this seems like a sizeable burden
given the increased levels of care expected.
Is it manageable and what will be the