By TOM LAUNDY

DIRECTOR, BUSINESS ADVISORY

The Australian Government’s Health Care Home trial for patients with chronic illness could mark the beginning of a new reform for Australia’s health care system that has implications on revenue for the nation’s GP practices, which raises the question – are GPs ‘business ready’ for the change? 

The ‘revolutionary’ reform

On 31 March 2016, the Australian Government announced its intentions to roll out the first stage of its Health Care Home trial in selected regions across the country as part of its Healthier Medicare reform. From 1 July 2017, around 200 medical practices or Aboriginal Medical Services will become Health Care Homes, enrolling up to 65,000 patients with chronic and complex health conditions who have been assessed as Medicare-eligible. They will provide a ‘home base’ in coordination with other specialists to provide the comprehensive ongoing care that patients with chronic and complex conditions need.

Funding challenges

While the Australian Government has allocated $21.3 million from the health budget to fund the Health Care Home rollout until 30 June 2019, a number of industry bodies (who are in support of the model following its success overseas) are questioning if it will be enough to help make the trial sustainable financially. 

Currently, statistics show that 1 in 2 Australians suffer from a chronic condition, while 1 in 5 have at least two conditions. Given the large percentage of the population suffering from chronic illness, this only intensifies the Government’s need to be more strategic in finding a way to provide sufficient, ongoing funding to support GPs under the new model. 

In recent years, GP practices have felt the pinch of financial pressures and contracted margins as a result of the freeze on Medicare and other cuts to funding. We all know at the heart of their profession, GPs want to improve the quality of life for patients, but the reality is they also need to run a practice that is profitable. 

Under the new model, instead of claiming a Medicare rebate for each patient visit, GPs will be paid a single monthly payment for the treatment of a chronically ill patient. The value of this single payment is yet to be determined but it could be as low as $39. If we look at a move away from the current ‘service based’ model of care for chronic illness patients to a ‘subscription based’ reform, a cap on the cost per month will be cost-effective for the Government if a patient already sees their GP frequently or if the number of visits increases over time. GPs on the other hand, may be left substantially out of pocket.  

The changes may also reduce the quality of care and amount of time GPs can offer, not just these individuals but to other patients on their books. It’s imperative the Government avoids creating a system that discourages GP’s from treating patients on a chronic care plan. 

Who will it affect?

The new reform may work in favour of larger practices who have the capacity, infrastructure and financial advantage to absorb higher costs but what about smaller family owned practices? It could prove much less feasible for their business when you take into consideration all of the overheads the general ‘bread and butter’ service fee needs to cover such as rent, staffing costs and medical equipment.    

While it is still very early days and there is no need to rush into putting the cart before the horse so to speak, it’s important for GPs to be thinking now about how it could potentially impact their business in the future. If the trial goes well, we will see an eventual nation-wide roll out and practitioners may be faced with no choice but to adopt the new reform. 

So what should practices do?

If there was ever a more compelling time to look into the crystal ball and undertake some future forecasting on your business, this would be it. New reforms can often mean significant changes to an industry and forward planning is the key to assessing the future viability and profitability of your business to cope in the new environment. 

At William Buck, we would advise GPs to proactively conduct a strategic review of their business early with a few tips: 

Conduct a high level assessment. 

A high level review of your current business model will help to identify any efficiencies and mitigate potential impacts to your longer term revenue if the reform is adopted. The spread of your patient client base will be the most important aspect to your practice’s profitability and GPs with older patients are more likely to be impacted. 

What’s the alternative? 

Look at what other alternatives might be available to help find the right balance in treating chronic illness patients without compromising on quality of care. Some solutions you could consider include:

  • Are there any benefits in setting up a co-location model with other specialists? 
  • Could you monitor a patient externally using technology such as Skype in combination with their face to face visits?
  • Is it possible to outsource the bulk of the care to other providers such as nurses and in doing so, what is the right mix and skills required to achieve the optimal outcome? 


Conduct a case study. 

If you’re considering applying for the trial, prior to signing up we would recommend conducting an in-house case study based on one or two of your practitioners and their current patient mix.

For example, one GP may be responsible for around 300 patients with 120 of those suffering a chronic illness.  The impact on this practitioner would differ significantly to a GP who looks after 250 patients, 25 of whom have a chronic illness.

A case study will help to provide some insight into the potential implications the trial may have on key factors such as billing, profit and time spent on patient care. By crunching the numbers, you will be able to anticipate what costs you might incur, where your business will ‘break even’ in the payment scheme (e.g. do payments need to be $39 or $60 a month?) and how your practice may need to change to accommodate this.   

There are many variables that we just don’t know at this stage, including how often a patient will access their GP during the trial, if the payment set by the Government will remain fixed or change with each budget or if these will vary for patients with different illnesses. It will certainly be interesting to see what findings come out of the trial period. 

We all want a healthcare system that works for the future but not by looking to put in place a counter-intuitive one that penalises a doctor for regularly seeing chronically ill patients. The priority here for the Government remains to be effective consultation and engagement with GPs as key stakeholders in the reform and other major health services initiatives such as the revised implementation of the personal electronic health records which initially saw poor take-up rates by GPs. 

In an effort to produce a cost-effective health care model for the longer term we need to ensure we avoid putting further strain on the additional resources that will be needed to service it. 

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