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Government pathology changes could cost practices up to $150m

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Federal Government plans to change the rules regarding rents for pathology collection centres could be a disaster for medical practices, ripping up to $150 million a year from their income, the AMA has warned.

AMA President Dr Michael Gannon has told Health Minister Sussan Ley that a significant number of general practices will become “collateral damage” if the Government persists with plans to change the definition of ‘market value’ that applies to rents for pathology collection centres, with serious consequences for the provision of health care.

Dr Gannon said the Minister needed to re-think the proposed changes and adopt a more nuanced approach “consistent with the original intent of the…laws”.

“If you do not get this right, a significant proportion of general practices will become collateral damage, which would be a disastrous policy outcome and contrary to your stated support for the specialty,” he told Ms Ley.

Last month it was revealed that the Government had put off plans to axe bulk billing incentives for pathology services and abandoned its threat to impose a moratorium on the development of new collection centres.

In a climb-down, the Government pulled back from its threat to scrap the incentives on 1 October and advised it would not be proceeding with the moratorium, which was announced during the Federal election in order to head off a protest campaign by the pathology industry against the axing of a bulk billing incentive.

Instead of a ban, the Government has directed that collection centre leases be put up for renewal every six months, down from the usual 12 months, until a new regulatory framework is put in place. Existing leases will be grandfathered for up to 12 months, after which the new rules will come into effect.

The bulk billing incentive cut, meanwhile, which was originally due to come into effect from 1 July and save $332 million, will now not be implemented until 1 January 2017.

“Bulk billing incentives for the pathology sector will continue until new regulatory arrangements are put in place and the Government will continue to consult with affected stakeholders,” a spokesman for Ms Ley told the Herald Sun.

But the Minister is persisting with plans to change the regulations governing rents for approved collection centres, particularly regarding the definition of market value as applied under the prohibited practices provisions of the Health Insurance Act.

Dr Gannon said that in talks earlier this year, the AMA had agreed with moves to strengthen compliance with existing regulations and “weed out examples of rents that are clearly inappropriate”.

But he said the Government at that stage had given no hint it was considering changes to the regulations, and its election announcement had taken all stakeholders, except Pathology Australia and Sonic Healthcare, by surprise.

Dr Gannon said the Government’s clear intent was to control collection centre rents, and the AMA opposed the proposed changes.

There are more than 5000 collection centres across the country, many co-located with medical practices.

“These practices are small businesses and have negotiated leases in good faith,” Dr Gannon said, and had made business decisions based on projected rental revenue streams, including staffing and investment.

He warned that ripping this source of revenue away could be disastrous for many.

“For many practices feeling the impact of the current MBS indexation freeze, this source of rental income has helped keep them viable,” he said, adding that AMA estimates were that the Government’s changes would cost practices between $100 million and $150 million a year in lost rent revenue.

“The magnitude of this cut goes well beyond an attempt to tackle inappropriate rental arrangements. It is causing significant distress, particularly for general practice,” Dr Gannon said. “I doubt the Government truly contemplated the extent of the impact of its election commitment when it was announced.”

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