GPs and patients Australia-wide breathed a collective sigh of relief in January when the Federal Government scrapped plans to cut the Medicare rebate on short visits by $20, followed by the scrapping of the unpopular GP co-payment.
While it has given ground on the rebate cuts for short visits, the Government has not withdrawn the freeze on the level of Medicare rebates paid until 2018.
These changes, in particular the freeze to the level of Medicare rebates paid until 2018, have the potential to cause significant pain for many general practices, particularly those with a high percentage of bulk-billed patients.
Flatlining revenue, rising costs
The major issue is that the proposed freeze on Medicare rebates will, in effect, halt the revenues of practices that bulk-bill a large percentage of patients.
At the same time, costs including wages and rents will continue to increase over the same period, ultimately leading to decline in profits. In fact, a number of practices I’ve been working with have estimated the proposed rebate freeze could essentially halve their profits if it is introduced.
The ironic part of this situation is that a number of key costs for a general practice, such as wages, are governed by awards set by the Federal Government. So effectively, the Government is dictating that costs must increase, but at the same time putting a limit on revenue.
For practices, the message is simple. If these changes are introduced and if you continue to bulk-bill a large proportion of patients over the next three years, you are going to suffer. That means there needs to be a mindset shift, as practices can no longer afford to bulk-bill patients that do not need it.
With the heart of the profession being all about service, this is going to be a difficult transition for many businesses.
Change the conversation
The question of whether to bulk-bill or private bill patients is a major dilemma for every practice I’ve ever worked with. Part of the reluctance to shift someone to private billing is a fear of losing the patient, or even worse, that they will not seek medical advice when they need it.
While this is an understandable position, the simple fact is that with that if the Government introduces its proposed changes, a business that bulk-bills a large percentage of patients is unlikely to be sustainable in the long term. Quality medicine is too costly and a practice will not be viable unless some of those costs are shared with patients that can afford to contribute.
We are encouraging GPs to start having a different conversation with their patients and explain the reasons for a shift towards private billing for patients who can afford to pay.
Our experience has highlighted that with careful planning and analysis, a practice is able to make the transition to a higher percentage of private billed patients with relative ease.
There will always be patients who cannot afford the cost of healthcare, and we would never propose taking away bulk-billing in these circumstances. But there are ways of finding a balance that will ensure your revenues continue to increase in order to meet the cost demands of the business over the coming years.
How to begin?
The reprieve from the immediate crisis has provided an opportunity for practices to get ready for the changes that are coming.
Not only is it time to have a different conversation with patients, but also a different conversation with your practice advisors. Getting specific information about how your practice is placed to weather the next few years will be critical to answer the “what if” questions.
William Buck has developed a model that is able to provide structure, guidelines and certainty around these important decisions and help you work through the issues at hand. The process includes:
- A review of your business structures to ensure that they continue to be appropriate for the new business conditions
- Benchmark the financial performance of your practice to highlight where there are hotspots, costs overruns and examine where your income is going.
- Consulting and analysis with your practice to review your current billing practices and help make important decisions about private billing versus bulk-billing with the goal of being able to transition to private billing a greater portion of your patients.
We are assisting many practices with this transition and if you are seeking advice to help your practice navigate the uncertainty that the proposed Medicare changes may bring, please contact your William Buck Advisor.