AGPA newsletter 14 June 2018
Dear Practice Owners,
Pathology Rent Update
This is hot off the press.
I attended a meeting at the Department of Health (DoH) chaired by the First Assistant Secretary (FAS) in the Provider Benefits Integrity Division this week. The meeting was in regard to pathology rent and collection.
The Department has commissioned a review of Collection Centres and rent and presented their data yesterday. Unfortunately they didn’t want to release the data and wouldn’t allow pictures to be taken of the slides/handout. There were some fascinating graphs.
As you are all aware the only reason the Government has got involved in this space is due to the furore at the last election around pathology rent. As a result they are now following through on the letter regarding the Red Book that almost everyone received last month. The Department wants to ensure greater compliance going forward.
When I asked directly about the Department apparently attempting to curtail rent received by lessees in the market, it was very clearly stated that they are in no way trying to control the market or trying to control prices within that market. “Willing buyer, willing seller” was what the FAS said.
Some of the data that I found interesting.
There were more than 1500 collection centres whose pathology revenue was less than the rent they were paying. The Department seemed perplexed that a pathology company would continue a relationship like this and were looking for explanations.
The strongest correlations to the amount of rent being paid were:
- It being a new pathology collection centre.
- The number of referring doctors and MBS claims.
As you would expect.
The next three cases are particular behaviours that the DOH is concerned about.
- There were 50 cases of collection centres that had never collected any pathology specimens since opening. After the collection centre had been opened the referring doctor had changed his/her referral pattern to send specimens to the company now paying them rent.
This is probably specialists doing a lot of biopsies in theatre, and the pathology company is securing their histology source. This looks like inducement and the DOH is very keen to stamp this out. - There were 100 cases of practices having a collection centre open from path company A but they were still sending all of their pathology to path company A but at the previous collection centre. ie rent is being paid for a collection centre within a practice but no collection is occurring at that centre.
- There were 300 cases of a collection centre opening within a practice and the pathology referral pattern showed a doubling of the amount of pathology ordered by practitioners within that practice after the collection centre opened.
Next steps from DoH
From here the DoH will send letters asking the pathology companies to volunteer information about what is happening. They will also ask the pathology companies for the lessee’s details so that they may write to them as well. They are going to be asking about the behaviours stated above. This will probably occur over the next 4-8 weeks.
However, the Department will also be writing to practice owners who are making high rents independent of behaviour. They will be looking at the rent paid by collection centres within a postcode and if you are 20% higher than the average for that suburb you will probably receive a letter. This will be based on the rent per square metre.
They will be sending out a letter asking for information in regard to this. The FAS was asked about what information they will be seeking. He didn’t have any clear indication at that time.
If you receive a letter in the next 2-3 months I think a very reasonable reply will be to explain the process of how your rent was determined. e.g. by taking it out to tender and inviting a response from the various pathology companies. Then you have clear evidence of ‘willing buyer, willing seller’ and as per the FAS statement, they are not interested in intervening within the marketplace.
If you are a practice with behaviour similar to the cases mentioned above, you are going to be having some very difficult discussions with the DoH.
What is “market rent” for co-located pathology collection centres?
Central to pathology rental debate is the definition of “market rents”.
Currently this is defined by the price agreed to by a willing buyer and willing seller. However, we are engaged in an ongoing battle to ensure that this definition doesn’t change to a strict definition based on the rent paid per square metre by the practice itself.
To achieve this, we need your help to compile a national database of rents being paid for co-located pathology collections centres.
This will allow AGPA to proactively highlight the wide range of pathology rents that may be considered normal in the free market, and how this may or may not correlate with the square metreage formulas presented in the Red Book.
As practice owners it will allow you to determine whether you are an outlier in terms of absolute rent, rent per FTE GP, rent per square metre or rent per square metre when compared to other practices. It will also provide a basis for rebuttal if you become the target of any future compliance action.
As Board members we have begun to enter our own pathology rental data into this database and the results are already both surprising and illuminating. Please join us by anonymously entering your own data via this link https://bit.ly/2KRf4M7
To optimise the accuracy of the database, please pass this link onto other practice owners who are not AGPA members and encourage them to also contribute. Please do not post this link to online forums other than RACGP/ACRRM/GPDU where it may be able to be viewed by non-GPs.
We look forward to reporting the database data back to you in the coming weeks.
AGPA Pathology Rents Webinar
The AGPA will hold a webinar Pathology Rents – the current state of playon 20 June at 8:30 pm Eastern Australia Time via Zoom Video link (You will need a computer with good internet access, speakers and a microphone).
The Webinar format will be based around three 10 minute information sessions
- The Red Book
- Recent experience with renegotiating Pathology Rents
- Legal aspects of rental agreements.
The information sessions will be followed by a Q&A session.
Places will be limited and preference is being given to AGPA members. If you would like to attend please register with the AGPA Secretariat (contact details below).
Yours sincerely
Dr John Deery
Chair
Australian General Practice Alliance
Australian GP Alliance Secretariat
PO Box 241 I Deakin West ACT 2600 I Australia
Tel + 61 (0) 2 6290 1505 I Fax + 61 (0) 2 6290 1580 I M +61 (0) 439 947 190
AGPA@commercemgt.com.au