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Big pathology lobbies for lower GP rents | Medical Observer

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Big pathology lobbies for lower GP rents Julie Lambert (/author/julie-lambert) 22 February 2016

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http://www.medicalobserver.com.au/professional-news/big-pathology-lobbies-for-low... 22/02/2016

Big pathology lobbies for lower GP rents | Medical Observer

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BIG pathology labs under threat from funding cuts are once more lobbying for rent control of collection centres as they dump less-profitable contracts with general practices. Cost-cutting moves by market leaders Primary Health Care and Sonic Healthcare have led to some winnowing of their collection desk arrangements, even before the government announced plans to scrap pathology bulk-billing incentives. Primary, which has claimed the largest number of collection centres with a list of some 2114, says it has shed more than 100 sites in the past six months and will continue “aggressive“ rationalisation in the second half of FY2016. The company blamed “unsustainable growth” in collection centre rents and labour, citing compound annual growth of 12% in these costs. In a pitch to investors last week, Primary said it would have a strong platform to reset its cost base for collection centres with 60% of leases up for renegotiation in the next 18 months. Both Primary and Sonic say they will introduce some form of pathology copayments to stay viable, while mainstream media is warning the public may be hit with co-payments of $30 for blood tests and PAP smears. In this scenario, Medical Observer understands mid-sized practices are being asked to accept discounts of the order of $30,000 on annual rent. But it’s far from certain how wide the ripple effects will go. Pathology Australia says the government should abandon its plans to scrap the bulk-billing incentives for pathology which will cost the industry $332 million over four years.

http://www.medicalobserver.com.au/professional-news/big-pathology-lobbies-for-low... 22/02/2016

Big pathology lobbies for lower GP rents | Medical Observer

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But if the government seeks other savings, it “must provide relief on the cost side through a move to market rents” for collection centres, the industry body says in its 2016 budget submission. It says the sector is already in critical straits, with providers large and small suffering financial distress and many struggling to remain viable after successive funding cuts. “One way the pathology sector will remain viable in the long term is if the government implements policies that support the reduction of the costs of providing pathology services in the community,” the submission says. “The most striking example of this would be the implementation and enforcement of effective regulations that address the current high rents for pathology collection centres, particularly those co-located within medical centres.” In many cases rents are 20 times “market rates”, the submission says. Pathology Australia President Dr Nick Musgraves says the body simply wants clarification of a vague regulation that calls for collection centre rents to be within 20% of a market benchmark. "We aren't seeking to apportion blame. We are just thinking of a solution that's best for patients." Practice consultant David Dahm says if pathology providers are hurting, it’s because they struck deals to chase market share during a period that saw rapid consolidation of the industry. “No one has ever forced a billion-dollar listed (pathology) company to sign an unfair lease,” he tells MO. When the conversation on lease arrangements comes around, practices should have their business case ready, he says. “Smaller practices and owners that have depended on high rents to pay for their you-beaut business expansion will be vulnerable as the market contracts."

http://www.medicalobserver.com.au/professional-news/big-pathology-lobbies-for-low... 22/02/2016

Big pathology lobbies for lower GP rents | Medical Observer

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Mr Dahm says practices that have signed contracts with pathology labs containing an â&#x20AC;&#x153;economic viabilityâ&#x20AC;? clause may need to seek advice, but he believes rent control of the type sought by the industry is unconstitutional.

Tags: Pathology in Practice (/tags/pathology-in-practice)

Author: Julie Lambert Political Reporter Julie Lambert covers politics for Medical Observer, with special interests in public health, rural medicine, business, medico-legal matters and the environment. She was formerly chief sub-editor at Australian Associated Press and a business reporter and editor in Japan.

More articles by this author > (http://twitter.com/PedanticLamb) (http://www.medicalobserver.com.au/author/julielambert)