Issue 24 / 25 June 2018

This article is reproduced with permission. It first appeared in the University of Melbourne’s multimedia news platform, Pursuit, on 14 June 2018.

A NEW report has revealed substantial variation in the hourly earnings of Australian medical specialists and it isn’t entirely clear what’s justifying it.

The ANZ Melbourne Institute’s Health Trends – Specialists report says greater fee transparency is needed as part of the wider policy challenge of ensuring that we are realising full value from the country’s growing health expenditure, says study leader Professor Anthony Scott.

And, he says, insurers and professional member bodies are likely best placed to drive greater transparency in the sector.

“In the current market, patients have little or no information at the point of referral and, therefore, cannot make informed choices regarding the value proposition of different providers and treatments,” says Professor Scott, Program Director Health Economics at the University of Melbourne’s Melbourne Institute of Applied Economic and Social Research.

“Whether fee transparency will lead to a reduction in fee variation and eradicate some of the very high fees causing understandable public concern, will really depend on how GPs and patients access the information at the time of referral and how specialists themselves react.”

The report cites Professor Scott’s Medicine in Australia: Balancing Employment and Life survey of doctors that found significant within-specialty and between-specialty variation in earnings, particularly between surgical and non-procedural specialty groups.

The highest earning group is orthopaedic surgeons, where median hourly earnings are 2.4 times higher than those of endocrinologists at the lowest end of the scale. But among orthopaedic surgeons themselves, hourly earnings at the top are 2.3 times those at the bottom.

Medicare data also shows significant fee variation within-specialty. For example, in 2016 within neurology there was a 125 percent difference between consultation fees at the lowest and highest ends of the scale.

But on the positive side, the report found that rising spending in health is being driven by volume, not fees. Average prices per service, including both the government’s Medicare fee and the provider fee, actually fell in real terms by 0.15 per cent in the ten years to 2015–16.

Research suggests some of the fee disparity reflects private practice costs, location, equipment, the time required and the complexity of procedures. But Professor Scott says these cost inputs aren’t the full story.

While a provider’s reputation and expertise could also be expected to drive fees, he says the problem is that customers (both patients and general practitioners) generally lack the information to make these judgements.

“The fact that GPs and patients have little information on quality and costs suggests that other factors are likely playing a role,” says Professor Scott.

Indeed, he points out that other research has demonstrated that some specialists simply price-discriminate by charging higher fees to higher income earners.

Professor Scott says, in the UK, government-funded surgeons now have their performance listed on the NHS Choices website, including risk adjusted mortality rates; additionally, British GPs are legally required to offer patients a choice of specialists.

But he cautions that simply publishing market information on a website may not work because patients could find the information difficult to interpret.

In addition, he says, publishing mortality rates could simply encourage practitioners to treat more healthy patients. There’s also the risk that providers will look at each other’s fees and increase them to the highest charge. He says that research in the US suggests better published information hasn’t led to patients making better choices.

“What we need is more targeted interventions on providers, like health insurers, professional bodies and perhaps government, directly asking providers to justify their prices where there is wide variation,” says Professor Scott. “Doctors are very competitive and would respond to this sort of pressure.”

The report says that a key challenge is to reduce the amount of low-value or unnecessary care – it notes that the OECD estimates that about one-fifth of world health spending makes minimal or no contribution to good health outcomes.

“We need to address low-value care, over-treatment and over-diagnosis at the same time as we call for transparency and accountability from Australia’s specialists,” says Professor Scott.

The report also highlights that the growth in the number of medical specialist is outstripping growth in the number of general practitioners. But it warns that limited access to expensive training places in hospitals and other settings is creating “bottlenecks” meaning that would-be specialists are facing increased competition and delays for training.

“Some of these doctors could end up under-employed and working part-time when they would prefer to work full-time; or in jobs that don’t fully utilise their training; or leave clinical practice altogether,” the report says.

While an increase in the number of specialists could normally be expected to drive down fees, the report cautions that it isn’t clear that would happen.

“The increase in the number of specialists has been occurring for some time and there is no sign that the sector overall is losing steam in terms of earnings and revenue growth,” says the report.

“Though the need for healthcare services sometimes seems limitless, governments, insurers and patients need to make choices about how to best use the ten per cent of gross domestic product currently spent on healthcare.”

Niamh Cremins is Media and Content Manager at the Faculty of Business and Economics, the University of Melbourne specialising in public relations and strategic communications.

Andrew Trounson is senior journalist on Pursuit at the University of Melbourne. An award winning journalist, he has reported for Dow Jones Newswires, the Wall Street Journal and The Australian newspaper, specialising in research, economics, business and education policy.

 

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Poll

Surgeons should provide patients with the MBS schedule of fees for their procedure, as well as their quote before surgery is agreed to.
  • Strongly agree (79%, 326 Votes)
  • Agree (13%, 55 Votes)
  • Strongly disagree (4%, 15 Votes)
  • Neutral (3%, 11 Votes)
  • Disagree (2%, 8 Votes)

Total Voters: 415

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8 thoughts on “Why do medical specialist fees vary so much?

  1. Anonymous says:

    This overcharging is going to destroy an excellent medical system. It is unprofessional. Perhaps specialists wishing to charge “what the market will bear ‘ could in fact leave the medicare system and the funds and declare themselves Businesses and face all of the problems businesspeople face. They would not call themselves professional with the cudos which arises from being a professional when in fact they are business people.

  2. Anonymous says:

    I am deeply concerned regarding this issue, please seemy comments

  3. Anonymous says:

    Fascinating that your poll asks specialists to provide a quote of their fees (appropriately) but does not insist on health insurers providing their rebates. Health insurers deliberately obfuscate about what is MBS, what their offered rebate is, and how much the doctors’ fee is in excess of that rebate if there is a gap. The patient is simply told how much they will be out of pocket, so that the insurer does not have to reveal that they are pocketing all of their own rebate in excess of the schedule fee if the doctor fee exceeds the PHI rebate. So much for transparency!
    Groups like iSelect have made a very successful business model from shopping around to find the cheapest insurance for consumers. There is no plausible reason why they could not do the same for doctors’ fees.

  4. Anonymous says:

    Doctors who overcharge are just slimey crooks. It is a free country and there is already too much regulation so this should be allowed but frowned upon by decent doctors. There will always be ratbags and schisters in any occupation. Everyone knows who they are. Most of us have a low opinion of them.

  5. Leviathan says:

    The poll is badly worded. There are two questions being asked: (1) should a surgeon provide a quote or estimate as well as the relevant MBS item number (of course they should), and should they provide the “MBS schedule of fees” – why the schedule? The patient isn’t picking an operation from a catalogue. One of the Anonymouses above correctly identifies that the policies of the individual insurance companies make a big difference to out of pocket costs, but it’s the elephant in the room and their recent cutting of coverage including newly hiked “excesses”, which are premium increases by stealth, tend to be forgotten about. The surgeon is not responsible for the MBS and its shortcomings, and it is not in anyway an indication of what is fair and reasonable, only what the Government is willing to contribute.
    As it happens, we provide the procedure charge, the expected rebate (from what we understand of the insurer, who pockets the Medicare rebate) and the anticipated gap – and then direct the patient to check with their insurer to ensure any excesses and other traps are revealed beforehand.

  6. Kim Bulwinkel says:

    The CMBS listings are a government contrived & manipulated list of public insurer rebates and bear no relationship now with the long – standing AMA derived [since 1986] Schedule of Fees & Services.
    It is hugely disingenuous to misrepresent the the “MBS” as the reference standard. ……. Talk about false news!!

  7. Anonymous says:

    It is totally Immoral unethical and unprofessional to overcharge suffering patients beyond the recommended fee
    I am surprised that there is NO regulations against the greedy minority who overcharge for their services

  8. Ian Hargreaves says:

    This article could equally be titled: “Why do car prices vary so much?”

    Having commented on a recent InSight article on fees, I was musing on this as I overtook a Ferrari on the weekend. He was stuck in traffic, and I was on foot. I could not see the point of buying a low-slung uncomfortable car which could only average 30 km/h in Sydney. However, there are people who are willing to spend hundreds of thousands of dollars to get a particular car, whether it is an electric Tesla or a vintage model T Ford.

    Just as people have factors other than price in their decision to pick a particular car, there are factors such as reputation and the location/convenience of a particular specialist which may influence a patient’s decision. Having 2 hospitals which are 30 km apart in Sydney, very few of my patients will choose the one further from their home. My Friday afternoon operating list is much more popular with the self-employed than my Monday morning, as they can work until lunchtime and take a few flexi hours with effectively no time off work.

    But the assertion: “What we need is more targeted interventions on providers, like health insurers, professional bodies and perhaps government, directly asking providers to justify their prices where there is wide variation,” completely misses the point. The price variations are not being paid by the health insurers, professional bodies or governments, but directly by the consumers. I justify every price I charge, straight to the person who pays it.

    There is a safety net provided by the public health system where people are treated for free, but with the corollaries that they have no choice of doctor, so their surgery/treatment may be done by a junior trainee, and they have no choice of the timing of this. This is less relevant if you have a gunshot wound or a heart attack, than if you are self-employed builder with an arthritic wrist, for whom getting surgery at a convenient time between jobs is of prime importance. When you are working on a contract for a half million dollar house, a ‘free’ operation that causes you to default and face penalties is not as cheap as an ‘expensive’ one where you can choose the date.

    Economists often struggle with the idea that people buy a car rather than taking cheap bus trips – it’s not economically rational, just more comfy and convenient. The answer to the question which heads this article, is because unlike a North Korean barbershop, medical specialists offer their patients a wide variety of options with a correspondingly wide variety of costs. And for the cynical, given that the original report was funded by the ANZ bank, one could ask why the interest rates on credit cards vary so much from the interest rates on deposits.

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