Senator CHRIS EVANS —I want to ask about the `GP involvement in coordinate care planning'. Could someone explain that to me?

Mr McRae —The intention with `General practitioner involvement in coordinated care planning' is that we will create a new item on the Medicare benefits schedule that patients can claim against so that doctors can be paid for the time they spend undertaking and developing what we are calling multidisciplinary care plans. These will be plans for the care of patients which are developed in collaboration with other players, be they other doctors, allied health professionals or community carers, so that when doctors have patients who require longer term care they can be given a decent long[hyphen]term plan that they are all party to.

As things stand at the moment, if doctors want to do that kind of work they can do some of it under conventional consultations, but generally it takes too long and it is not well remunerated, or they do it in their own time. This will give them a paid incentive to develop these plans and be remunerated for it.

Senator CHRIS EVANS —My starting point in asking about this is: why wouldn't they be doing it already?

Mr McRae —The answer is in the last bit of what I was saying. They may do it in a consultation, but it takes an hour to do a decent process and relative to shorter consultations longer consultations are not well remunerated.

Dr Morauta —The other thing is that, at the moment in a very large number of the circumstances, the patient has to be present for a Medicare rebate to be paid. In a sense this eases that restriction by allowing a group of care givers to get together and plan the care of a patient. That is different from the current arrangement.

Senator CHRIS EVANS —An element of this is that you think there is a financial disincentive for them to do those longer consultations?

Mr McRae —At the moment there is a disincentive for the longer consultations and there is certainly no incentive for activity which is undertaken when the patient is not there.

Senator CHRIS EVANS —This is cost, though. Is this a balanced item? What do you think you will save on normal consultations, or is this the total cost of the measure?

Mr McRae —This is the net cost of the measure. We think that the growth costs will be higher and there will be offsets against normal consultations.

Senator CHRIS EVANS —What is the basis for the modelling, then? What is the take[hyphen]up rate?

Mr McRae —I do not have those figures with me.

Dr Morauta —They are very much estimates at this stage. It is a new arrangement and we will have to see how it pans out.

Senator CHRIS EVANS —I accept that, but you budgeted items there increasing to $22.9 million in the fourth year so you obviously envisage quite a take[hyphen]up. I am interested in the basis on which have you given that financial advice.

Mr McRae —You are right; we did do some substantial costing and modelling to generate these figures. The actual figuring behind that was done strictly for the ERC activity and is probably cabinet[hyphen]in[hyphen]confidence, Senator.

Senator CHRIS EVANS —Are you telling me that we have to approve $22 million a year expenditure and you cannot tell me why? I do not want to be difficult, but there must be a basis upon which this is erected.

Mr McRae —I am not suggesting there is not a basis.

Dr Morauta —There is a basis, but there is a bit of a convention that these costings prior to cabinet approval are not made available in this kind of forum.

Senator CHRIS EVANS —It is a new convention to me. I did not know that we did not explain the basis on which the funds were calculated.

Mr Podger —There is a degree of detail that we would not normally provide, particularly if there is some uncertainty in terms of the relationship between the figures and the behaviour patterns of the GPs, which we are also talking about. There may be some basis of these estimates that we would be able to provide you with—indications of the numbers of episodes, if you like. It may be unwise to provide the full details of some aspects of it.

Senator CHRIS EVANS —Why would it be unwise, Mr Podger? This seems to be a common response from this department now and I am beginning to wonder what it is that is so confidential. Is it because of the sensitivities of doctors? Is this what we are running into again?

Mr Podger —There are two principles which are used. Certain things that are based in cabinet considerations are not normally provided. Secondly, where the information and assumptions may have some relationship to negotiations we have with the profession or whatever, there are occasions when the full details are not provided because they may prejudice those discussions. What I have said is that we would be willing to have a look at whether some general assumptions behind this could be provided to the committee on notice. I was not trying to be difficult.

Senator CHRIS EVANS —I am much more interested now than I ever was. This is not about cabinet[hyphen]in[hyphen]confidence; this is about a budget measure. You have publicly announced this. You say that you are going to spend $3.6 million next year and you are going to spend $22.9 million in 2002[hyphen]03. I do not think it is unreasonable for the Senate to ask on what basis you are spending that money.

Mr Podger —As I have said, I do not have that detail here. I am happy to provide as much as I can on notice. I said that there are some principles for not providing all details about the assumptions behind things.

Senator CHRIS EVANS —Are you telling me that you are seeking to use that excuse or justification on this occasion? I had this with the MRI. It was going to be taken on notice, and by the time we came back we had a new set of explanations as to why I could not have the information.

Mr Podger —I am not trying to be difficult at all, Senator. My officers here do not have that information with them at the moment. I am happy for us to go away and have a look at what can be provided. There may well be some assumptions that we can provide around the numbers of episodes. I just mentioned that there were two principles that I use from time to time about not giving all the details about assumptions involved in some estimates.

Senator CHRIS EVANS —I do not want to delay any. There may well be those principles, but I want to know if they are being applied in this case and, if so, why.

Senator Herron —As I understand the second part, it is a policy statement that has been made, and the outcome is dependent on negotiations that are occurring. It is not a matter for the public record at the present time.

Mr Podger —The officers have mentioned that the estimates also are net. Working out what that entails raises some assumptions about what is going to happen about other consultation items. We are in negotiations with the GPs. I just want to check that out. I am not trying to be difficult. I will see what we can provide as the basis for the estimates.

Senator CHRIS EVANS —I hope it is not secret GP business, because it seems to me that the you have asked for the Senate to pass the appropriation bills and these are items contained in them. There must be a basis upon which you are accountable for seeking that money. I will leave it there, but it seems to me that it is not unreasonable to ask on what basis you are seeking that money. What quality control process is there for the content of a coordinated care plan? Who decides what is a coordinated care plan?

Mr McRae —At the moment, we are still in the process of developing the items to go into the Medicare schedule. That is not yet complete. When those items are defined, the items in the Medicare schedule book and the notes that go with them will define fairly closely the minimum content of those plans. The quality assessment will be part of the ongoing Health Insurance Commission audit processes.

Senator CHRIS EVANS —On what basis are you taking this initiative? It sounds like you have not done the work yet in terms of that.

Dr Morauta —I think the broad answer to the question is that in the coordinated care trials—whereas the final evaluation of those is not in—we have learnt that, if we can get together teams of people who provide services for these people with high care needs, there is a much better product from the point of view of the patient. That lesson is being picked up and dropped down into the series of measures to support integration between general practitioners and other providers. That is the sort of lesson that is being spelt out. DVA has some experience in this area, and we are drawing on that as well.

Senator CHRIS EVANS —So where is the information on this evaluation of coordinated care trials? Where is that information contained that you are using for the basis of that decision?

Dr Morauta —There has not been a final evaluation of the trials, but the experience so far has suggested that work between providers is a very valuable way of improving care for patients.

Senator WEST —Whose experience?

Dr Morauta —I think it would be the general view from the trials.

Senator CHRIS EVANS —But how do I quantify that? You have made this decision—and I presume that is better outcomes or lower costs. Where is this quantified? Where is the evidence for this?

Dr Morauta —We will have to take that on notice. I am not positive about what has been published from the trials.

Senator CHRIS EVANS —I understand that the trials are going on. I see that there is more money for more trials, and this seems to be accepting the result. Do I assume that we do not consider the trials to be trials any longer?

Dr Morauta —No, I think there are different aspects of the trials. Some of them are about how you design care; others are about how you fund it. The evaluation is continuing into a number of those areas, but this was an area that we picked on as having had some success so far. But we need to take on notice the evidence on that.

Mr Podger —The trials are still very much in the early stages. I hesitate to use the words `conclusion' or `results', but there are some lessons that are coming through. I think it is pretty clear that we are certainly getting better and more appropriate care in a number of the services, and we are learning a lot about our management of that.

With respect to the financial side, I think there is still a lot to learn. You remember that the hypothesis was that we were going to get better and more appropriate care within the existing budgets. I think we are still finding that some of the finance control mechanisms need to be looked at further. That is a particular area where I see the new trials focusing—seeing whether there are new tests that we can do in that area. We are also going to be looking at the private sector in the new trials. We do not have a great deal of private sector involvement in the current round of trials. There is a little bit, for example, in the Hornsby trial, but we would wish to look at private sector involvement in the new trials.

Senator CHRIS EVANS —Are you suggesting to me, Mr Podger, that there is some element of capping in this proposal?

Mr Podger —Not in this particular proposal here.

Senator CHRIS EVANS —So how do you assure yourself that there is not a huge number of general practitioners doing coordinated care planning and that that budget item is not exceeded?

Dr Morauta —There is no assurance built into this measure.

Senator CHRIS EVANS —So this is not part of the sensitivities about negotiations with GPs about a potential cap on the use of this measure?

Dr Morauta —In the offer that the government has made to general practitioners, these funds are included under the amount in the agreement. If an agreement were not signed—and we do not have an agreement signed at the moment—this item would run as shown in the budget and there would be no limit on it.

Senator CHRIS EVANS —I was going to come to that agreement later, but you are telling me that this measure as part of that agreement is subject to agreement of the GPs.

Mr Podger —No, this one is not subject to the agreement, but if there is an agreement this set of money would be within the bounds of the agreement and therefore come within the aggregate cap that is being negotiated in that agreement. So, to that extent, this is relevant—

Senator CHRIS EVANS —And if there is no agreement?

Mr Podger —If there is no agreement, this will proceed as set out here—without the aggregate cap across the GPs.

Senator CHRIS EVANS —So there is potentially no control on the potential expenditure?

Dr Morauta —Except the design of the item, which is the way the whole of the MBS has been run to date.

Senator CHRIS EVANS —So you would then design—

Dr Morauta —The way you design an item in the MBS has an effect on how it is picked up and how it is used, so you could define it narrowly or broadly, depending on your policy intent and also the behavioural response you thought you might get—and often items are adjusted as a result of that. But basically there is no limit implied in this measure as it stands on the paper.

Senator WEST —It has just been raised with me that on the coordinated care trials there have been no consumer satisfaction surveys—that is, for the care recipients. How are you coming to the conclusion that it is popular?

Mr Podger —I am sorry, Senator; I was looking around to see whether I had the officer who has been handling the coordinated care. The trials come under outcome 4, and that officer is not here at the moment. We can do what we can at the moment.

Senator WEST —What is the difference between coordinated care planning and coordinated care trials?

Mr Podger —This item is not restricted to those who are within the trials.

Senator WEST —Okay, I will leave it.

Mr Podger —If you like, I can try to answer some of the questions on coordinated care, but the officer will be here later.

Senator WEST —I can certainly ask it under 4. Who is expected to have the lead if you are coordinating care? Who is expecting to be doing the lead on this care coordination?

Mr McRae —I think there will be a number of different situations there. There will certainly be many where the general practitioner will have the lead, where the general practitioner will have someone who comes through their practice and the GP forms a view that a plan is appropriate for the person. The GP will take the lead and do the dealings with other people. We are also allowing, particularly under the next item, the multidisciplinary case conferencing, those situations where other people are developing care plans and draw in the medical expertise of the general practitioner. We have not actually listed them there, but the sorts of examples around are bodies like ACATs which are in the community now and developing plans—generally for elderly people in that case. ACATs are the aged care assessment teams which are in the community now using a number of different professionals to help develop care plans. The general practitioner who is looking after the individual doctor can make a useful contribution to that care plan. At the moment sometimes the general practitioners go along to those conferences and sometimes they do not. One of the reasons they do not go at the moment is that they are not remunerated for it. By developing this case conferencing item we
will be allowing payment to be made for the doctors to attend those conferences and provide the clinical input that is often needed.

Senator WEST —What assistance is going to be given to the other health professionals that are part of a multidisciplinary health team? I have worked in one, so I do know what they do. What additional resources are going to be given to the other professions in those teams and groups? You are giving the doctors some additional finance—presumably so they can employ someone if they have to to be away. What are you going to do to ensure that you are not stretching the resources of the other health professionals without giving them sufficient financial benefits to make sure they have replacements?

Mr McRae —The items we are dealing with here are all Medicare benefit schedule items, so they are only items that relate to the payment of doctors, basically. So it does not provide us any opportunity to pay other people. In terms of what you are asking, to a large degree what we are trying to do is to get the doctors involved in those areas where they are not involved but other people are. So in the ACATs kind of examples those things happen now but the doctors are not as involved as they should be. In the case of the care planning we were talking about earlier, we are looking at the doctors developing the plans, dealing with the other players who are providing services in the community and organising with them a decent sequence of care.

Senator CHRIS EVANS —So this is the total budget for this measure? There are no other allocations for other disciplines or professionals to be paid?

Dr Morauta —No, and the issue you raise is an important one. We have had two meetings with the states now about this measure, because they fund some of the other participants and we have had quite a good robust discussion with them about how the item could only relate to services that were available—you cannot get a situation in which somebody is writing a care plan for services that are not funded, for example. And we need to ensure that that occurs by having the full involvement of the other providers. So HACC providers or anybody else need to be able to say, `Yes, this service is available.' And it cannot go into the care plan unless that has happened. So we are alert to the issue and, in the work we are doing with the states and the other providers as well as the doctors, we will try to ensure that that kind of problem does not occur. But it is an important issue in the design of the item.

Senator CHRIS EVANS —So what is the doctor getting paid for?

Dr Morauta —For time spent developing the plan.

Senator WEST —Why is it considered that only a doctor can organise a coordinated care plan?

Mr Podger —That is not an assumption at all. The problem has been that many doctors have felt that because they did not get any remuneration for this activity they were not involved in things, and ACATs and HACC have felt in many places that it is unfortunate that doctors are not drawn into the process. This will provide the incentive to do so. But it remains to be seen whether the doctor would be the one who writes the plans in detail or whether they would have others write them, in cooperation with others. It is interesting in the coordinated care trials that there are a number of places where the GPs have taken the lead role in being a sponsor for a trial but the actual care planning activity is frequently done by other than the GP.

Senator WEST —Given the GP might see people once a month and the domiciliary nurse could be in there once or twice a day, I know who would be the appropriate person to be making the care plan.

Mr Podger — With respect, it would be nice if the doctor was involved as well, if we are to get it right.

Senator WEST —Yes, but there are some issues, with all the professions, for which nobody else but that profession can make the care plan. Nobody else but that profession has the expertise to do so.

Senator Herron —I do not think that is disputed, Senator West. It is just that, under the Medicare system, it is based on the remuneration of a GP.

Senator WEST —And it follows on from what has been done to ensure that there are adequate numbers and adequate remuneration of the other health professionals that they have the time and the availability of resources in terms of personnel to attend and participate.

Senator Herron —That is what the trial is about.

Senator CHRIS EVANS —There are multidisciplinary case conferencing allocations. As I understand it, it is just payment for the doctor. Is that on an hourly rate for the doctor?

Mr McRae — Again, the items are yet to be finalised, but we would expect them to be time based.

Senator CHRIS EVANS —What sort of basis are you looking at?

Mr McRae — The development of these things is done through negotiation with the medical profession, which we have not yet got into.

Senator CHRIS EVANS —So the $11.7 million is a complete guess, is it?

Mr McRae — Obviously we had to use figures in doing the arithmetic, Senator.

Mr Podger — This is a standard practice where we put in a best estimate but the item does not take effect for some time, during which time we will negotiate with the profession and expect to get an outcome very close to our estimates. But we have done this in many budgets before.

Senator CHRIS EVANS —This item is subject to the GPs agreement too, is it?

Dr Morauta — It is the same as the previous one, Senator. If a GP agreement were signed, because this is like an attendance item, it would be moved under it for more general financial management purposes. But if there is no GP agreement, this item stands as it is now.

Senator CHRIS EVANS —So I take it I am going to have the same problem finding out what it is based on. Because you have not struck a deal with the GPs yet, we cannot work out what the basis of these allegations is.

Mr Podger — Again we will do our best to provide you with some material, Senator. I do not want to be difficult on this.

Senator CHRIS EVANS —It is becoming clear to me what is happening. You want to claim `commercial[hyphen]in[hyphen]confidence' to negotiate with the GPs, it seems.

Mr Podger — We do end up negotiating with the GPs. You can understand that you do not want to reveal your full hand when you are going to enter into negotiations, but within that there ought to be some material we can provide you.

Senator CROWLEY —Who are you negotiating with—the College of General Practitioners or the AMA?

Dr Morauta — A group of four organisations—the AMA, the College of General Practitioners, the Rural Doctors Association and the Australian divisions of general practice.

Senator CHRIS EVANS —What about the practice incentives? Is that in the same boat? Is that another `subject to consultation' measure?

Mr McRae — That is not a Medicare benefit item. We have a program called the Practice Incentive Program within which there are a range of components, one of which is the current immunisation incentives program. We are looking to set up a new item, if you like, within that program which provides incentives for general practitioners to look at preparing care plans for a significant proportion of those people within their patient base who may need those plans.

Dr Morauta — The funds here are not the funds for the payments to general practitioners. They are just the departmental expenses. The funds are coming from within the existing Practice Incentive Program.

Senator CHRIS EVANS —What does that mean—that other payments will be reduced in order to accommodate payments under this heading?

Mr McRae — No. Within the forward estimates for the Practice Incentive Program is an allowance for growth. We are able to fit this in within that allowance.

Senator CHRIS EVANS —What is allocated to be spent on new care plan targets as part of that overall budget?

Mr McRae — When we get to a full year we expect it to be about $10 million. There will be virtually nothing this year.

Senator CHRIS EVANS —But in a full year you would expect the new care plans to be costing about $10 million?

Mr McRae — Of that order, yes. As I said, we are still in the process of designing it. That is the target we are working towards.

Senator CHRIS EVANS —What is the threshold for being involved in this? What are they required to do?

Mr McRae — Again, we have some distance to go in designing it in detail. The expectation is that we will be setting a proportion of the estimated population of people aged over 65 with chronic and complex needs in their patient base and saying, `If you have care plans for more than this proportion of the people in that group you get an incentive payment and, if you do not, you do not receive one.' It is the same notional structure as we have with the general practice immunisation incentives program.

Senator CHRIS EVANS —So if they meet the target they get a one[hyphen]off cash payment; is that the sort of thing?

Mr McRae — Yes. It can be quarterly and all sorts of things in practice. But that is the notion, yes.

Senator CHRIS EVANS —How would you measure the target?

Mr McRae — We would be able to measure the actual number of care plans from the item we talked about on the earlier page. We can assess automatically from the claims coming through from the practice how many care plans they have prepared.

Senator CHRIS EVANS —They will get a double payment, in a sense, will they?

Mr McRae — In a sense, if they meet the target. The point is that the MBS payments, which we were talking about earlier, are basically payments for doing a task. As they see somebody
coming through and choose to provide them with a plan they will be paid for their time and effort for doing that, which is quite appropriate. But we are saying to them, `Doctor, look at your group of people and think about how many of them really need care plans. When you start to make an effort to ensure that all the people who should have those plans indeed have them, we will provide you with another payment which is an incentive for that focus.'

Senator CHRIS EVANS —Will that be a percentage of their client base, or a percentage of their client base that meets the target?

Mr McRae —As best as we can measure, it will be a percentage of their client base aged over 65 with chronic and complex care needs.

Senator CHRIS EVANS —Obviously certain doctors in certain practices would have almost exclusively older clients and others don't at all.

Mr McRae —Indeed. Again, from the HIC data, we can get the age basis and so forth quite directly.

Senator CHRIS EVANS —Is this $10 million a year payment subject to negotiation in the GPs agreement as well?

Mr McRae —No, because it is within a separate item. It is not part of the medical benefits payments. It is not part of the Medicare Benefits Schedule; it is part of the Practice Incentive Program, which is an annual program.

Senator CHRIS EVANS —Is the incentive program subject to the agreement of the GPs?

Mr McRae —We will obviously want to negotiate and talk with the GPs to make sure that we produce an incentive program which makes sense to them. With most of these things, we want to work with them rather than sit in our ivory towers. In terms of what you are asking about whether it is subject to their agreement, at the end of the day it is subject to our consultation with them—I think that is the way to put it.

Senator CHRIS EVANS —I guess the other way of saying it is: is it going ahead if they do not agree?

Mr McRae —Yes.

Dr Morauta —Yes. It goes ahead outside the agreement.

Senator CROWLEY —When you said `they' in answer to a question from Senator Evans, who is `they'? Do you mean a practice or an individual doctor, or the number of people who are taken under a care program?

Mr McRae —I am not exactly sure which `they' it is. The payment arrangement will be a practice payment, as is the Practice Incentive Program and the immunisation program. The payments will be made based on the numbers of plans and the patient base of a practice.

Senator CROWLEY —So it is not per doctor? Does it vary depending on the size of the practice?

Mr McRae —Obviously, the size of the patient base will vary depending on the size of the practice. The larger practices will have more patients.

Senator CROWLEY —Is there any opportunity for such funding to be provided to doctors who work in 24[hyphen]hour clinics?

Mr McRae —Yes, it makes no difference. The nature of their practice in that sense will not affect their eligibility.

Senator CROWLEY —The nature of 24[hyphen]hour medicine has changed a whole lot in recent times. They tend to be accused of not being the people with chronic or long[hyphen]term care programs for people.

Mr McRae —If they do not provide the plans, then they will not reach the target levels and will not get the incentive payment.

Mr Podger —They are not excluded from the process, but their success rate might be different from the success rate of other practices.

Senator CROWLEY —Would you be allowed to negotiate a different package of care if, for example, you worked in a 24[hyphen]hour clinic? Would you allow that kind of variation?

Mr McRae —We certainly have not in anything else in the Practice Incentive Program, and I would not imagine we would do so here. You would try to set the same standards.

Senator CHRIS EVANS —So voluntary annual health assessments for those aged 75 years and over is again going to be on the MBS, is it?

Mr McRae —That is correct, yes.

Senator CHRIS EVANS —I gather you have not struck a rate for this new item either.

Mr McRae —No. The three MBS items—the care planning, the case conferencing and the health assessments—are all in the process of development at this stage.

Senator CHRIS EVANS —So we are not sure either what work would have to be completed to qualify for the payment?

Mr McRae —No. We will obviously have to build into the item quite specific elements. There is substantive debate going on at the moment about that within government and with the profession.

Senator CHRIS EVANS —I suppose it is the same with quality control process. How are we going to manage that?

Mr McRae —It will be, in effect, the same sort of an answer as I gave before.

Senator CHRIS EVANS —Does the same answer apply to this being subject to agreement with the GPs?

Mr McRae —Inasmuch as it is also money which is included within the general practice agreement, should an agreement be struck. If no agreement is struck, then it will still be an item which we develop and which is used.

Senator CROWLEY —Is there room for a locum service at night to contribute to such a care agreement?

Mr McRae —I guess if they are formally attached to the practice.

Senator CROWLEY —The rotating ones are not? I am speaking hypothetically; I am not suggesting a particular case. Many people will tell you that if they ring a practice at night they will get a roving locum.

Mr McRae —Indeed. I guess part of the reason I have not thought that through is that I would not have expected the roving locums to be the people who are developing care plans. They would tend to be the people who are providing the needed services for people with rather more short[hyphen]term need.

Senator CROWLEY —It is an important point though, is it not, that one of the complaints from the community has been that people may go to their practice and they may see their doctor during the day, but they may not guarantee seeing that doctor at night or even one of
the other doctors in the practice who might be able to have access to the ongoing care program. Is this something that you will look at?

Mr McRae —It is certainly something which we can look at. I guess I should say that within the Practice Incentive Program itself, which is currently being redeveloped, there are fairly direct incentives for the after[hyphen]hours care to be structured in ways which provide the sort of access you are talking about.

Senator CROWLEY —Is that an extra incentive?

Mr McRae —The Practice Incentive Program is being redeveloped in a way which makes this one of the explicit incentives rather than—

Senator CROWLEY —To do their own after[hyphen]hours work?

Mr McRae —That is correct.

Senator CROWLEY —If that is the case, that effectively means that no locums would not be part of the program.

Mr McRae —No.

Senator Herron —It is my understanding that there is an incentive for a group of doctors to link together to provide an after[hyphen]hours service rather than have a contracted after[hyphen]hours service provider. Is that right?

Mr McRae —It is also in the nature of an incentive or a reward for those practices which manage more of their own after[hyphen]hours care.

Senator Herron —That is what I was getting at.

Mr McRae —I guess I am having difficulty in linking the questions about locums to the care planning and health assessment.

Dr Morauta —Are you worried that the care plan will not be accessible to the people after hours, Senator? It is somewhere in the regular doctors' information base but, if the person turns up after hours, they will not get to the care plan—is that part of your concern?

Senator CROWLEY —Many people who fit into this category of 65 and over or 75 and over are just not going to be sick between nine and five. They are going to need care at various times if they have asthma or chronic heart conditions, are diabetic or have a fall. Any of those programs mean that they may very well need assistance outside of nine to five. And who is going to provide it? I am concerned that a practice might come to an agreement, accept the money for the incentive but then ask a locum to do their work after hours. I am trying to be clear with this. Does a practice agreeing to this kind of incentive and the Practice Incentive Program and all that goes with it mean that they are also signing on to do their own after[hyphen]care work in the practice?

Mr McRae —No, they are not.

Dr Morauta —Normal MBS services are delivered to patients who have these care plans just like they are to everybody else, business as usual. The difference is that the care plans provide a framework for ensuring that some services are provided which might otherwise be overlooked. But if somebody is sick after hours, they need care in the middle of the night or anything else, normal MBS services current arrangements apply.

Senator CROWLEY —As I recollect many GPs talking about it, this would be a very big concern for many of them. There was a concern that good practice meant that you had an ongoing commitment to care. I certainly agree with Senator Herron that, for lots of practices—particular if it is more than a one[hyphen]person practice—you may rotate your nights off, but at least
the other people in the practice have an ongoing commitment to the delivery of care for those people. I had not understood that a practice incentive of this sort would allow you to buy in a locum. It seems contrary to what you are aiming to do when you are trying to involve doctors in ongoing care or people in this way.

Mr Podger —The Practice Incentive Program is trying to achieve a number of improvements in the quality of the services. One dimension of that is to try to encourage the practices to provide out[hyphen]of[hyphen]hours care other than through a locum arrangement that is right outside the practice. Another part of it is to improve their information base so that they can provide better continuity of care. We are trying to encourage them to have clinical information systems which might assist. I can see both of those enhancing the quality of a care plan, but the care plan is not being done on condition of those things. But we would hope that the Practice Incentive Program over a period of time and with different dimensions will improve the quality of the GP system by a considerable amount and in many dimensions. I hope that helps.

Senator CHRIS EVANS —Perhaps we could go back. I started with the GP agreement in the first place, rather than the budget measures, but they seem to be pendent.

Senator CROWLEY —I have a few questions on this practice incentive stuff.

Senator CHRIS EVANS —Yes, I have a few as well. I thought the starting point, though, might be to ask for an update on where we are with the general practice memorandum of understanding. That seems to be the contextual framework for the rest of the budget measures. This new agreement is due to apply from July this year, isn't it?

Dr Morauta —Yes.

Mr McRae —Yes.

Senator CHRIS EVANS —I gather that, after the result of the AMA election, there is more chance of it going ahead than otherwise might have been the case. So by what time do the negotiations have to be finished?

Mr McRae —The AMA at their federal council meeting last week agreed that the current draft memorandum of understanding should go out for consultation with the AMA membership, and that has now been sent out. It is also going out through the divisions and the other networks. We have asked that the whole thing be wound up by 30 June so that, if they do agree to sign it, it is signed up, as I say, before 1 July.

Senator CHRIS EVANS —Is the without prejudice draft that I have recommended by the peak bodies? You say that it is going out to their membership.

Dr Morauta —We do not know which draft you have.

Mr McRae —Yes. But, as Dr Morauta says, I am not sure which draft you have. The draft that has gone out from the AMA has a cover note on it which basically says, `This is for consultation.' It does not say loudly in either direction whether it is recommended or not.

Senator CHRIS EVANS —I guess I phrased that badly. I was not seeking for you to comment on their internal workings so much. Do you think you have a deal that they are now trying to discuss with their membership, or do you expect to have further negotiations about the detail?

Mr McRae —I guess it will depend very much on what comes back. I do not know. I would personally hope that we do not have any more discussions on detail because we have done a large amount of that with the leadership to get to the point that we are at now. But if the
membership comes back having noted things that worry them, we may well have more. I do not know.

Senator CHRIS EVANS —You are starting to get short of time for that sort of process.

Mr McRae —Indeed.

Senator CHRIS EVANS —Could someone explain to me the capping arrangement? I think it is set out in the draft that I have as the MBS funding guarantee. Will someone explain to me how that works and take me through it?

Mr McRae —The broad notion is very much—as per other agreements—that the amount of money which is specified will be, if you like, a target amount which we will work towards over the three years. Each year, we know what sort of volume growth and price growth assumptions are behind those figures. So as each year progresses, we can see whether we are overspending or underspending with respect to that target. Should we be overspending—or underspending, for that matter—then, as we come to the price[hyphen]setting each year, which is done each November, we can adjust the prices of the relevant items up or down to bring us back within line. Also, if we see things happening with items being overused, one can also change the structure of the items. So we have room to move in both defining what the items are that can be claimed against and in the fees on those.

Senator CHRIS EVANS —So the figure of $7.670 million is the three[hyphen]year target figure, is it?

Mr McRae —That is correct, yes.

Senator CHRIS EVANS —It is for non-referred attendance items. What does that mean?

Mr McRae —Fundamentally, it means the sort of items that general practitioners use. General practitioners take the non-referred items. Non-referred attendances are where you and I walk off the street into a GP's surgery and have a consultation. The referred ones are, by and large, those the general practitioners send off to specialists. There is no referral for those services.

Senator CHRIS EVANS —Effectively, we are talking about the vast majority of GPs' work?

Mr McRae —Yes. That is correct.

Senator CHRIS EVANS —I am a layman. I am trying to get a feel for what it actually means.

Dr Morauta —It excludes any procedural items that they undertake. It is just the consultations.

Senator CHRIS EVANS —Part A says $6.982 million for GP attendance items over the three years, equivalent to a uniform annual growth rate of 4.1 per cent on a basis of $2.48 million. So you are factoring in a 4.1 per cent growth rate each year?

Mr McRae —On average, yes.

Senator CHRIS EVANS —Is that on the number of items or on the cost?

Mr McRae —That is the total cost for the vocationally registered GPs. So it is a mixture of item numbers and price increase.

Senator CHRIS EVANS —That is where you get the ability to adjust?

Mr McRae —Yes. The price increases that are built in are standard indexation and inflation allowances. That is what we have allowed for.

Senator CHRIS EVANS —The 4.1 per cent seems a trifle high.

Mr McRae —There is volume growth coming from the underlying growth in volumes. You will see that part A is for the vocationally registered doctors and part B is for, depending on which version you have, other unreferred services.

Senator CHRIS EVANS —That is my version.

Mr McRae —The other unreferred services are in fact shrinking as more doctors are becoming vocationally registered. So the growth is a mixture, if you like, of underlying growth in the total number of services and the movement from the other category into the vocationally registered category.

Senator CHRIS EVANS —So how much of the 4.1 per cent is cost inflation and how much is growth?

Mr McRae —I am not sure whether I am allowed to talk about the forward estimates. The inflation figures are between 1.5 and two per cent in terms of the forward estimates that we have.

Senator CHRIS EVANS —So the rest of that is made up of this growth in services?

Mr McRae —That is correct.

Senator CHRIS EVANS —That is based on population growth and the other shifts you are talking about?

Mr McRae —Population growth and ageing and recent experience.

Senator CHRIS EVANS —What are A2 consultations?

Mr McRae —A2 consultations are consultations undertaken by other medical practitioners. They are the general practitioners who are not currently vocationally registered.

Senator CHRIS EVANS —I gather that this is referred to as a soft cap. What is the purpose of the soft cap?

Mr McRae —We have built into the agreement several triggers where the Commonwealth will be prepared to put in further money if things happen. It is not reasonable for the medical profession to carry that. Again, depending on your version—

Senator CHRIS EVANS —You can cover all versions, if you like.

Mr McRae —There are basically three things that the Commonwealth is suggesting it is reasonable to carry the risk for. One of them is obviously if there are government decisions which add to the number of doctors or in some way add to the expenses. It is not reasonable for the doctors currently there to wear the cost of government decisions which might add to this. The second one is if inflation actually increases substantially above the levels predicted. In fact, if you have the right version, you can read off the predicted levels of inflation; I should not be too precious about that. The third is other factors that are completely beyond the control of both the government and the profession which lead to growth. The most obvious sorts of things are growth in doctor numbers. For example, the number of doctors coming through the Australian Medical Council was way different in one year from what it had been in other years, and it put costs up. It would not be reasonable for the doctors currently out there to wear the costs of that increase.

Senator CHRIS EVANS —What ultimate guarantee is there that total expenditure will be kept under control?

Mr McRae —Apart from those three areas, it will be kept to $7.670 million. In those three areas, there is movement for decisions; that is clearly something which is absolutely manageable. In the other areas you cannot completely manage it. But in those other areas the
government would have had to carry the costs anyway. If inflation had gone up significantly, we always had an indexation arrangement. If external factors had come through, we would always, again, have had to wear that cost. There is nothing new and different in there. The other thing is that, in conjunction with the profession, we will be doing continuous monitoring to ensure that there are not other movements that need to be managed.

Senator CHRIS EVANS —So the pathology partnership and the pharmaceutical incentives come in as part of that agreement?

Mr McRae —No. The pathology agreement is a completely separate agreement. You are talking about the quality incentives in pharmaceuticals item?

Senator CHRIS EVANS —Yes. The budget measure.

Mr McRae —That is really a separate thing. Within the general practice agreement, there is a clause which says that we will work together on quality initiatives. It does not go through the detail of any of those initiatives.

Senator CHRIS EVANS —So both those measures are separate from the proposed agreement with the GPs?

Mr McRae —Yes, except inasmuch as the broad measure of it.

Senator CHRIS EVANS —Perhaps you could take me through each of them. Is the pathology agreement not subject to agreement with the GPs as well?

Mr McRae —No. The pathology agreement is subject to agreement with the pathologists. It is quite a separate entity.

Dr Morauta —The pathology agreement is the second agreement we have had with the pathologists. It follows much the same pattern. There are two main changes in it. The first change is that the question of the licence collection scheme has been addressed. We have reached agreement with pathologists to move away from that arrangement by the end of the agreement to an accreditation guesstimate, which is a sort of deregulation arrangement.

The second change is in the way growth in volume is managed. Above a certain level there will be a sharing of risk with the pathologists on growth in volume. The actual capping arrangement is lower than last time; they are given a lower overall growth rate than they had last time.

Senator CHRIS EVANS —Can you then explain to me the savings figures; what are they measured against?

Dr Morauta —They are savings on the previous forward estimates. We did provide a table which showed there was also some netting in that measure, and we provided it to Mr Griffin. But if you want a copy of that, we can give you one. It just shows the netting of the measure.

Senator CHRIS EVANS —Yes, I would appreciate that. So these estimates of $8.4 million, $19.8 million, $32 million and $49.7 million worth of savings are savings against the forward estimates, the projected cost of pathology; is that right?

Dr Morauta —That is right, yes.

Senator CHRIS EVANS —What then is in this for pathologists?

Dr Morauta —I think what there has always been in these agreements for any member who is part of the medical profession—certainty about what government is going to do to them over a series of years, and from time to time—

Senator CHRIS EVANS —Rip $50 million off them a year, according to this.

Dr Morauta —Yes, but sometimes governments have been very draconian with the medical profession in terms of fee freezes and other things, and this gives them some certainty in that area. It also gives them the opportunity to work with government to manage their own part of the table in a sort of joint way rather than government coming in and imposing certain arrangements upon them. So that is what they get out of it.

Senator CHRIS EVANS —There must be a very persuasive negotiator.

Dr Morauta —I think they might be very frightened of the central agencies and what can happen to them in their various budgets.

Senator CHRIS EVANS —Is that agreement signed?

Dr Morauta —Yes.

Senator CHRIS EVANS —When does that take effect from?

Dr Morauta —1 July.

Senator CHRIS EVANS —So was that just signed recently?

Dr Morauta —Head of the budget, do we have a date for when it was signed? 11 May.

Senator CHRIS EVANS —Incentives for prescribing pharmaceuticals: is that again measured against budget out years?

Dr Morauta —Yes.

Senator CHRIS EVANS —I will have to tell Senator Newman you are doing this. Whenever I do that, she gets very cross; she says I am not allowed to do that.

Senator WEST —What?

Senator CHRIS EVANS —Compare against forward estimates. When I say that they cut $850 million from the child-care budget, she says, `No, no, Senator, they're only forward estimates; they're not real savings at all.'

Senator WEST —That is what they said about the dental health program too.

Senator Herron —It seems to me that you are both correct.

Senator CHRIS EVANS —Yes. It is just interesting that there seems to be a different approach by the government on this occasion. So, again, this is savings of $64 million in the fourth year against what you say would have been the cost of pharmaceuticals. Just how does this work?

Dr Morauta —In this case, the costings are built on an agreement that has been reached with the department of finance—that, in so far as savings are made on the PBS as a result of general practice initiatives, 50 per cent of the savings will accrue to general practice and 50 per cent to the budget. The amount in the budget here is our current estimate of what could be saved in this measure and flow to the budget.

Senator CHRIS EVANS —So this is 50 per cent of the total savings outcome?

Dr Morauta —Yes.

Senator CHRIS EVANS —They go back to GPs?

Dr Morauta —Yes, as the program is developed, that would be the plan.

Senator CHRIS EVANS —So how is that money to be given back to GPs?

Dr Morauta —The discussions with the profession are continuing as to how this program would work. The expectation at the moment is that it would be paid something along the
Practice Incentive Program line. But it has not been agreed or settled yet how it will work. It will not go into MBS rebates.

Senator CHRIS EVANS —It will not go into MBS rebates. This is what, again, over and above the GP agreement?

Dr Morauta —Yes.

Senator CHRIS EVANS —What is the timetable for this measure, when you have savings already this year?

Dr Morauta —I think the development would be finished some time in the first half of this financial year. Brett, do you want to add anything here?

Mr Lennon —The measure is due to take effect from 1 July 1999. But it is recognised that, in the first year, there will be a gradual build[hyphen]up as the medical profession gets used to the measure. So the savings reflect that gradual build[hyphen]up.

Senator CHRIS EVANS —You are working on $56.6 million savings in the first year?

Dr Morauta —No, I think it is only the $28 million in the first year—

Mr Podger —Yes, times two.

Dr Morauta —No.

Mr Lennon —Savings are $28 million in the first year for the Commonwealth government; that is correct.

Senator CHRIS EVANS —Does that mean that the GPs do not get their cut the first year?

Dr Morauta —No, they get it a year later. Because we cannot pay them until it has happened, if you like, there is a one[hyphen]year slip.

Senator CHRIS EVANS —I am not sure that necessarily applies in that program from what I have heard, Dr Morauta, there being $3,000 for computers for doctors who do not have computers. But we will come to that. So, basically they do not get the savings this year because you do not have the system in place?

Dr Morauta —That is right, it is all slipped by a year for them.

Senator CHRIS EVANS —It will all be a year behind.

Dr Morauta —The year after, yes.

Senator CHRIS EVANS —So they have to make the savings first?

Dr Morauta —Yes.

Senator CROWLEY —Does everyone get it or only those who are good?

Senator CHRIS EVANS —I presume you will tell me that you do not know how you are going to pay it yet.

Dr Morauta —We have had some discussions with the profession, but the matter is not by any means resolved. Obviously, as an incentive to improve, it is necessary to avoid giving it to the doctors who were prescribing worst. We have to design something around a model of best practice, if you like, then everybody who achieves that would be rewarded. Perhaps Brett would like to add something here just in terms of the general design issues.

Mr Lennon —No, the detail of it has not been finally sorted out yet. There are various options that we need to discuss further with the medical profession. It could be paid through divisions of general practice, for example. We are open-minded in relation to the details of the measure and need to discuss this measure further with the medical profession.

Senator CHRIS EVANS —How would you pay it through divisions of general practice?

Mr Lennon —We would seek to measure how much the growth in the particular drug groups that are being targeted have fallen over the year compared with the estimates that were in the budget. We would then look to measure that on a division-by-division level and make the payments to individual divisions of general practice. That would basically be the way it would go.

Senator CHRIS EVANS —What is a division of general practice?

Senator CROWLEY —This means bad doctors could get the benefit as well as good doctors?

Dr Morauta —No, obviously the system has to be designed not to let that happen.

Senator CHRIS EVANS —What is a division?

Dr Morauta —It is a group of doctors who are working together in a locality. They have a number of other activities that they do related to quality of service and so on.

Senator CHRIS EVANS —What is the normal size of a division?

Dr Morauta —It is very variable.

Senator Herron —It depends on its geographic location.

Senator CHRIS EVANS —That is what I thought. I thought they were quite large units.

Dr MacIsaac —Divisions have on average about 120 doctors, although they vary in size. Some have as few as 15 and others going up to several hundred.

Senator CHRIS EVANS —But it would not be performance related at all inside that sort of division, would it? That is, if you make it to the division. Is the division a legal entity?

Dr MacIsaac —Yes, divisions are legal entities. They are either incorporated bodies or companies limited by guarantee.

Senator CHRIS EVANS —And they could then distribute funds to their shareholders?

Dr MacIsaac —The model that we have been considering actually does not involve paying the money to the division to be distributed. There are several options which we have been considering and which we need to put to the profession and get their advice on which they would find most acceptable.

Mr Lennon —We really need to discuss this further with the profession before we can come down into specifics.

Senator CHRIS EVANS —But this coming year's budget is erected on this. This is saving us money now.

Mr Lennon —We anticipate being able to get into some detailed discussions with the profession very shortly.

Senator WEST —What drug groups are you looking at applying—

Mr Lennon —There are three drug groups that are being looked at: cardiovascular drugs, drugs for the treatment of gastric ulcer and upper gastrointestinal tract disorders, and antibiotics. Between them they account for about $1.4 billion of Pharmaceutical Benefits Scheme expenditure.

Senator WEST —Can you just refresh my memory: what drug groupings did therapeutic groupings contain? I have a recollection about peptic ulcers and I have a recollection about cardiovascular—

Mr Stevens —When the therapeutic group premium arrangements were introduced they covered four groups: one was the ACE inhibitor group; another was the calcium channel blocker group—

Senator WEST —How about putting those into what you have down here simply as `cardiovascular drugs'—

Mr Stevens —Both of those are covered in the cardiovascular group.

Senator WEST —Yes, thank you.

Mr Stevens —Another was the H2 antagonists, which are part of the group for the treatment of ulcers. The fourth was the statin group for the lowering of cholesterol.

Mr Podger —The two measures are quite different measures. The therapeutic group premium was to do effectively with the price, whereas this is to do with utilisation.

Senator WEST —But in the long run the utilisation is going to cut the price because you have savings all the way through. Is this an indication—

Mr Podger —No, the cost is utilisation times price. The first measure was essentially around the price; this measure is about utilisation.

Mr Lennon —But the savings here are being obtained as a result of a reduction in the rate of growth in the three drug groups concerned.

Senator WEST —That is some of the arguments you used with the introduction of therapeutic groupings.

Senator CROWLEY —Do you mean that you are literally going to be encouraging doctors to prescribe less?

Senator WEST —The cheaper drugs—

Mr Lennon —No. In relation to the particular drug groups concerned, we will only be looking at best practice prescribing protocols as have been accepted by independent groups such as the National Prescribing Service, which is a group that was set up by the government to discuss with doctors best practice prescribing protocols and educate doctors on best practice prescribing protocols. All of the actual areas concerned will be looking at good practice prescribing protocols. It just so happens that, in relation to what is good practice prescribing protocols in these particular areas, we can also achieve savings.

I will give you a couple of examples. There is an opportunity for doctors to more widely adopt well[hyphen]accepted guidelines, which in many cases will lead to improved health outcomes. For instance, specific problems are known to exist in the overuse of antibiotics in conditions where they are not appropriate. Similarly, in many cases a gastric ulcer can be treated using a relatively short course of treatment against heliobacter pylori infection rather than long-term treatment with drugs such as proton pump inhibitors. So in relation to good practice prescribing protocols in the area of antibiotics and in the area of gastric ulcer problems, you can achieve good and often better practice and achieve savings at the same time. That is the essence of this measure.

Senator WEST —I do not have a problem with the changes in peptic ulcers nor in trying to improve the use of antibiotics. But if you look at geographic areas, divisional areas, you are not going to be able to compare areas with one another to any degree just with a raw figure. In an area such as `Nappy Valley', the use of antibiotics in winter time with kids with throat infections and ear infections is going to be a lot different from the use in areas that
have, say, young adolescents or young adults who will be fitter and will not go through the same naught to five years otitis media problems that you get.

Dr Morauta —Those are certainly some of the design issues that need to be worked through. There is no sense in which we should be disadvantaging different groups or encouraging people to prescribe inappropriately. You are right: those issues need to be addressed in the design of the scheme.

Senator WEST —With the cardiovascular ones, what sort of issues are you wanting to address? We had the argument that we went through on a number of occasions about some of the more expensive ones. Are the therapeutic group premiums going to continue in conjunction with this program?

Mr Lennon —Yes, it is because they are two quite separate measures. One is impacting on price and one on prescribing. I might ask Dr MacIsaac to talk about the issue of prescribing protocols in relation to cardiovascular drugs.

Dr MacIsaac —Cardiovascular drugs are one of the major drug groups that we look at as anti-hypertensives.

Senator WEST —Yes.

Dr MacIsaac —There are essentially four main classes of anti-hypertensives used in Australia. In recent years doctors have tended to move towards using the newer classes of agents, despite the fact that well[hyphen]accepted evidence based guidelines suggest that the newer agencies in many cases do not really have any significant advantage to your patients. So what we are suggesting is that doctors may be able, by looking at an individual patient, to carefully tailor their treatment and in many cases choose a drug which will be equally effective but less expensive.

Senator WEST —That is the therapeutic groupings.

Mr Stevens —The therapeutic grouping arrangement was to compare drugs that served exactly the same purpose such as ACE inhibitors.

Senator WEST —That is a matter for a bit of debate too, because some of them were not exactly the same. We are not talking generic drugs here.

Mr Stevens —No, they are not generic; they are a different chemical entity but basically they serve the same purpose.

Senator WEST —That is right. Therefore, there are different idiosyncratic reactions with individuals.

Mr Stevens —The difference between this measure and the therapeutic group premium is that the therapeutic group premium looks at drugs in a narrow therapeutic class whereas the prescribing measure here is a wider class—it looks at beta[hyphen]blockers, diuretics, calcium channel blockers, ACE inhibitors, and the new A2 inhibitors. They are the latest group in the class. They are looking at angiotension 2 inhibitors such as irbesarten for treatment of hypertension. But therapeutic group premiums look at a very narrow group whereas this measure is looking at a much wider group. How can you compare in some instances a beta[hyphen]blocker with an ACE inhibitor? They are not compared on price. They can be compared on effects.

Mr Lennon —This measure is looking at the prescribing practises of doctors. That is what this measure is focused on.

Senator CROWLEY —Dr MacIsaac, did you use the words `evidence based'?

Dr MacIsaac —Yes, I did.

Senator CROWLEY —So in some ways what you are doing is building in in[hyphen]service best practice through an incentives scheme. Is that a fair way of assessing it? If these gals and guys have not all gone back to school for the last six weeks and seen what is the latest research, the latest data, the best way to evaluate these things, you are going to help them get focused.

Dr MacIsaac —It is true. Evidence based medicine is about encouraging the dissemination of new knowledge and research into clinical practices as quickly as possible.

Senator CROWLEY —Some of the research you seem to be telling us is that the latest and greatest pharmaceuticals are not necessarily better in terms of good ongoing care for a patient.

Dr MacIsaac —That would not be a reasonable generalisation to make. It is certainly true that newer classes of anti-hypertensives have shown to have benefits in selected patient groups. I can give you some examples if you wish. But they do not necessarily achieve those benefits if used across the board for all grades and levels of hypertension.

Senator CROWLEY —Is it a fair comment to say that a lot of the times the best material that is provided to doctors is provided by the pharmaceutical companies who really have a vested interest in flogging their own product and that really quite often what is an evaluation of the new against the ongoing old is not necessarily provided? It is not of benefit to the pharmaceutical companies to tell you that, is it?

Dr MacIsaac —I think you are quite correct in saying that the majority of information in the past that has been provided to doctors has generally been provided by pharmaceutical companies. However, in recent years we have recognised that we need to use similar measures to promote evidence of good practice to doctors and provide encouragement in that direction. That is the reason why the National Prescribing Service was established as an independent body to provide advice to general practitioners about trends and best practice.

Senator CROWLEY —What research can you lay claim to to justify these things? Are you actually ordering any research or are you just depending on what you can look up through MEDLARS or the Cochrane Institute or whomever?

Dr MacIsaac —The Pharmaceutical Benefits Advisory Committee, which is the major committee advising the minister on pharmaceuticals, actually conducted a comprehensive review of anti-hypertensives two to three years ago. Since then the department has been advised by specialists in that area and, as you say, organisations with access to resources such as the Cochrane collaboration to see whether there have been any new significant developments.

Senator CROWLEY —Is any Australian research being targeted to this stuff?

Dr MacIsaac —Yes, there is a major study of anti-hypertensives going on in Australia at the moment called the Australian national blood pressure 2 study. That is being conducted in general practice involving about 2,000 general practitioners around Australia. It has been running for the last two or three years.

Senator CROWLEY —Who is funding that?

Dr MacIsaac —That study is being funded by one pharmaceutical company, but it is also being supported by doctors being able to claim rebates from Medicare for patients who are involved in the study.

Senator CROWLEY —Which pharmaceutical company?

Dr MacIsaac —I am sorry, I do not know that. We can take that on notice.

Mr Lennon —Senator, all of the prescribing protocols which we are working to develop and implement as part of the quality prescribing initiative are protocols which have been or are being developed by the National Prescribing Service, which is an independent body with a large representation from the general practice community as well as from the various pharmacist groups. We are working closely with the National Prescribing Service in developing those protocols. We are very confident that the protocols that we will be rolling out will be objective, evidence based protocols.

Senator CROWLEY —I do not really dispute that. What you are effectively doing is in[hyphen]service training. You are getting access to the research and almost effectively saying to the doctors, `You'll take note of this later stuff.'

Mr Podger —We are trying to facilitate in[hyphen]service activity within the profession. We are being a little bit cautious about whether it is us or whether we are trying to help the profession through it. On that question about that study, I wonder whether Professor Whitworth has got a bit more information on it.

Prof. Whitworth —Yes, I can comment on that. Senator, I am on the Independent Data Monitoring Committee. The Australian national blood pressure 2 study follows on from the very seminal first A&BP study. It was the first study anywhere in the world to show the benefits of treatment of mild hypertension. The current study, which as you have heard is largely being run through general practices around the country, is funded by Merck. It is supported by this department through access to MBS and PBS. There is also a component of funding from the National Health and Medical Research Council for independent assessment.

Another major blood pressure study is being conducted out of Australasia called Progress, which is a study looking at the prevention of secondary stroke in both hypertensive and normotensive patients using blood pressure lowering. That study involves the recruitment of patients all around the world. About 6,000 patients have been recruited. In that case, the funding involves the Health Research Council of New Zealand and the NHMRC, but the bulk of the money is coming from Servia, a pharmaceutical company. I think they are both examples of partnership arrangements between government and the private sector.

Senator CROWLEY —I have a couple of questions about the Practice Incentive Program. How many doctors have applied for new computers?

Mr McRae —There is no program under which doctors can apply for new computers, Senator. We made available a transition payment recently which was put forward on the basis that we would like doctors to use it to assist them to move towards the new program of the Practice Incentives Program. Obviously, one of the things they could have done with that money was to buy computers, but they were not obliged to spend the money in that way.

Senator CROWLEY —How much was that?

Mr McRae —The easiest way to describe it is to say that an average full-time general practitioner would have got $3,000.

Senator CROWLEY —An average of $3,000 per general practitioner?

Mr McRae —For a full-time doctor, yes. It varies by practice size.

Senator CROWLEY —What was the doctor supposed to do with this $3,000?

Mr McRae —The Practice Incentive Program funds are available for the doctors to use as they see fit within their practice or any in any other way. Some of them use them to purchase things in the practice. Some of them use them for other purposes.

Senator CHRIS EVANS —What are they required to do to qualify for the $3,000?

Mr McRae —To qualify for that payment, they have to qualify to get onto the Practice Incentive Program. To get onto the Practice Incentive Program, you have to be either working towards getting accreditation or meeting a number of requirements which would have enabled you to work towards accreditation if you so chose. So it depends on having doctors in the practice with vocational registration. It depends on the availability of 24[hyphen]hour care from the practice and a string of conditions.

Senator CROWLEY —One of the interesting things about being a doctor is, every now and again, I get a letter as a doctor. I got a beauty the other day saying, `Dear doctor, don't risk losing $3,000. Practice Incentive Program—PIP—for GPs. Have you completed your new entrant application form from the Health Insurance Commission? All qualifying practices receive a one-off payment of approximately $3,000 for full-time equivalent GPs to support "moves to electronic information management and better quality care to patients".' That does not have a footnote, so I am not sure whose quote it is. Is it the department's? Is it the Health Insurance Commission's?

Mr McRae —I do not know where that letter came from. Certainly letters went out from the department when this payment was first agreed which included words of that nature. We were looking to provide assistance to practices in moving towards the new PIP system. One of the major incentive payments under the new PIP system is for data management and information management. The payments will be based upon access to things like electronic prescribing and electronic communications. The transition payment was thought to provide an opportunity to assist practices to prepare for those structures.

Senator CROWLEY —It sounds to me that, if I was going to apply for that $3,000 for GP support to move to electronic information management, I would be in the area of computers or something close to it, would I not?

Mr McRae —Indeed.

Senator CROWLEY —New applications must be lodged by 24 May 1999. How many applications were lodged?

Mr McRae —In the last month we have got a very large number of applications.

Senator CROWLEY —You kid me! How many GPs are there and how many have applied?

Mr McRae —We have had a very large number of applications to join the program as a whole. So people are not just applying for this bit of money, they are applying to join the Practice Incentive Program as a whole and they will remain within that program from now on.

Senator CROWLEY —We are trying not to smile.

Mr McRae —I am sorry, but that is what they are applying for.

Senator CROWLEY —Absolutely.

Mr McRae —These payments are of the order of the payments within the Practice Incentive Program, as quarterly payments which were going on in any case. At the last count, 3,700 practices had been approved for the PIP and approximately another 700 were waiting for approval or about to go through those processes, which takes us to 4,400 practices altogether out of 6,000 practices.

Senator WEST —That is $11 million so far.

Senator CROWLEY —That is probably one of the best returns you have ever had.

Mr McRae —That is the total number that are there; that is not the new ones. I do not have the numbers in front of me, but over 3,000 practices signed up as part of the PIP before this program began. At what point the new ones were driven by this change as against the ongoing growth in the package I am not sure. I could take that question on notice and look it up.

Senator CROWLEY —Please do. This is for full[hyphen]time equivalent GPs, so if you had five doctors in the practice, as I read this, you would be eligible for $15,000?

Mr McRae —That is correct.

Senator CROWLEY —Whoopy[hyphen]do!

Mr Podger —Can I comment on your reaction to this and remind you a bit about the history of this program?

Senator CROWLEY —Yes please.

Mr Podger —The program came out of the Better Practice Program of some years ago, which of course was paid for out of half[hyphen]indexation of GP rebates, so there is a strong view amongst the GPs that this program was paid for by themselves. They are therefore uneasy about us being too tough in the way we manage it. It is now a Practice Incentive Program because we have turned the program more substantially into an incentive program for better practice and higher quality. You seem to have the impression that this is somehow an unreasonable rip[hyphen]off for the GPs, but this does not in fact reflect the nature of the history of the program and, indeed, I think the program is providing reasonable incentives for better quality.

Senator CHRIS EVANS —I think that point is well made and that is why, to be fair to us, I started by asking you what they did for the money and you have said it is for better practice. I have given you the opportunity to tell me what better practices result from the payment. Quite frankly, you have not made the case. In fact, all you have said is that they sign on for the PIP. But my starting point—the concern raised with me—was that, far from now becoming experts in electronics or management, a lot of the practices that have received the money do not have a computer, have not purchased one and are under no obligation to purchase one. If that is not right, please correct me.

Dr Morauta —I think there is a link in the chain that is missing. Under the new Practice Incentive Program formula for next year, there are to be payments for IT activity in the practice. There was a feeling among general practitioners that a lot of people would not be ready for that unless there was some opportunity for them to catch up and be ready. Next year—Ian will describe the detail—there will be a series of payments that are tagged to what they can do with IT.

Mr McRae —Fundamentally, the payments are for making use of electronic prescribing within the practice with the majority of doctors doing the majority of their prescribing using the electronic systems. The second part of that incentive arrangement is to have capacity for electronic communications to allow them to do things like downloading pathology reports and undertaking those sorts of activities.

Senator CHRIS EVANS —I accept that and I will be happy to come to that because it is about next year's payment, but the question I asked—and I would appreciate a response—is whether or not anything was required of them other than registering in return for this $3,000 payment and, in particular, was there anything required of them in the way of electronic management in order for them to receive that payment?

Mr McRae —In order to receive the payment they had to apply to and be approved to join the PIP.

Senator WEST —But not to supply proof that they had actually expended the money on anything that had improved their practice?

Mr McRae —That is correct.

Dr Morauta —The proof is a kind of delayed proof in the sense that next year, when these IT components come in, they will forfeit access to them if they have not got their IT arrangements in place.

Senator CHRIS EVANS —What were the other payments made under the system this year?

Mr McRae —This year or next year?

Senator CHRIS EVANS —I am dealing with the retrospective.

Mr McRae —Retrospectively, the PIP, which followed on from the Better Practice Program, was based on a formula which depended upon the practice size. It depended on a thing called a continuity index, which attempted to measure how well the practice provided continuity of care for its patients; whether the majority of patients who came to that practice mainly came to that practice rather than going elsewhere, and included an additional payment for rurality. The practices in more remote areas received higher payments.

Senator WEST —Have we actually got a definition for `rurality' yet?

Mr McRae —The definition we have been using for this program—

Senator WEST —It has been thrown around—rurality and rurality index—but do you have something to define it?

Mr McRae —For the whole life of this program a measure called the RMA index has been used. There is work being done now to try to develop a better system, but this system has been in place now for some years now.

Senator WEST —The RMA?

Mr McRae —RMA.

Senator WEST —That is not the rurality index, though. Didn't the rurality index come out of the work of—

Dr Morauta —What we are dealing with here is the method by which the Practice Incentives Program—formerly BPP—payments were made in relation to rural doctors. That is a separate measure that might be used in other programs.

Senator WEST —I know.

Senator CROWLEY —Could I just continue with a couple more questions about this very interesting letter? They go on to say: `We have prepared a quality personal computer package for $3,000 that will enable you to electronically generate, track and print for patients appointments and notes, accounts, receipts, etc., referral letters and correspondence, Medicare claim forms, prescriptions using MIM or Medical Director drug database, and income tax return data for your accountant and summary of practice results. Plus bulk[hyphen]billing electronic lodgment and med claim facilities can be included for only an extra $500. On first transmission the Health Insurance Commissioner will pay you $500, which covers your establishment cost.'

I do not think I should keep reading it all. Perhaps I should. It is terribly interesting: `Our personal computer package comes complete, ready to run, and includes a PC, printer, all programs, installation, configuration for your practice, staff training and complete ongoing
warranty and support for one year. We are a one[hyphen]stop shop that looks at all your needs, whether software or hardware related. No more hassles or arguments between suppliers. We arrange all warranty and service for you.' This is a letter that comes from an organisation called In Depth Business Systems in Clarence Park, South Australia. How did they get involved in this, do you know? Have they been contracted by anyone to do this?

Mr McRae —No, not at all.

Dr Morauta —It sounds like they are being entrepreneurial.

Senator CROWLEY —Do you know if there is a similar entrepreneurial thing happening in other states?

Mr McRae —I am not aware of it. I really do not know.

Mr Podger —I am not aware of any other particular one like that, but there may be. I am aware of a number of companies who are offering software packages for GPs.

Senator CROWLEY —Let me make it clear. I think the move to computers and so on has distinct advantages, and I am not opposed to that. The reason I have a sort of sour smile about all of this is that I have spent many years contributing lamingtons and raising raffles to try to help schools buy a computer. So that is why I am interested to know how many of these have gone out. I have not multiplied 4,400 by

$3,000 yet, but it is nice. A lot of schools would like this kind of assistance, too. Further to what my colleagues have asked, what sort of sense do you have of the practices that are taking up the $3,000 per full[hyphen]time equivalent GP and actually buying into these services?

Dr Morauta —I think we will know the answer to that question next year when we run the PIP payment on the basis of these IT outcomes. And if, as a result of this payment and other incentives provided to general practice, we do have a much bigger IT uptake in general practice, I think we will probably all think we are ahead. But we cannot judge that now, because the proof is in next year's figures on the take[hyphen]up on the IT outcome in the PIP. We are hoping for a good result, but we do not know if we will get one or not.

Mr Podger —Certainly, our view is that if the GPs—many of them are more of a cottage industry—if we are able to encourage them to not only take up IT but use it for clinical purposes, not just for administrative purposes, there are very substantial gains in quality of care that can be made out of it, particularly in things like prescribing and so on.

Senator CROWLEY —I understand that, and I appreciated some of that. But there are also considerable administrative gains, are there not, if they have their payment systems and you press the buttons and it is all there?

Mr Podger —That could well be.

Senator CROWLEY —It could well be? Surely there is?

Mr Podger —Yes, there is, but there are some tricky issues to work through around some of the points about bulk[hyphen]billing and so on. We would have to be working our way through them.

Dr Morauta —In the PIP program, we are focusing on two particular sets of outcomes. One is electronic prescribing, which in itself does not immediately—and of itself—change the arrangements with the HIC. What it does is produce a much better form of record of the prescription, which can avoid a lot of these adverse consequences from untidy writing and other kinds of things that occur. So we are basically looking for clinical outcomes there. But
there are other measures that you are referring to, when there could be better claiming systems, and they are part of other parts of this budget and another set of initiatives.

Mr Podger —There is also software on the prescribing arrangements that you can get which can automatically allow a doctor to check whether or not they have made other prescriptions in recent times which might have adverse impacts on new prescriptions. Things like that can be within the software—all sorts of things which would improve safety and appropriateness.

Senator CROWLEY —Can I ask whether you are interested in, through the PIP program, the administrative savings for practices if they become electronic?

Mr McRae —It is not one of the things that we will be making incentive payments for, no. We will not be collecting that information.

Mr Podger —That is not a directly relevant thing for PIP. But yes, we are interested. Indeed, on one of the measures elsewhere we are looking for some savings down the track for the HIC from improved electronic commerce arrangements, but we are interested in moving in that direction.

Senator CROWLEY —Your department not too long ago did some very interesting research on the administrative benefits for child[hyphen]care centres to collect their data electronically and to remit for payment electronically. They were more than significant savings. I would be surprised if the same were not true for general practices.

Mr Podger —I am not disagreeing with that. I am saying that in each of these areas there is more to it than the administrative issues. For example, in the child[hyphen]care issue there are quite sensitive policy issues to do with parents and centres, as I recall, as to whether the payment went to the individual or went to the centre. There were quite sensitive policy issues worked through. In this area there are sensitive issues, to do with things like what it means for bulk[hyphen]billing incentives and so on, that we would have to work through very carefully.

Senator CROWLEY —Has any work started on that?

Dr Morauta —I think the Health Insurance Commission officers might like to assist on this one, because they do a lot of work on the claiming.

Mr Mynott —Before I go into any explanation, would you like to just give me your question so that I can focus on the issue you are trying to inquire about? Was it basically about how we are going with electronic commerce generally?

Senator CROWLEY —I certainly remember that before Medicare was introduced one of the really interesting arguments was what percentage each practice would put as a figure for their administrative costs that bulk[hyphen]billing, for example, might significantly reduce. All good practices were trying to be efficient in the way they did what was required of them, either on behalf of clinical needs or in terms of meeting government requirements and so on. I am sure that is still the case. If the government is so supportive of PIP, what part of PIP is administrative efficiency as apart from clinical better practice? Can you give us any data on what benefit there is to have everything coming in and out electronically?

Dr Morauta —I think this question is separate from PIP. I think the separate issue is about administrative efficiency. PIP is not necessarily focused on that aspect of it. Mr Mynott could talk about the general business of electronic transactions between the HIC and providers.

Mr Mynott —The Health Insurance Commission has been fostering electronic transmission for quite some time. In about late 1980, I think, we started getting some form of claiming in electronically. That picked up a little bit about 1993 when we put together our med claims package. Since that time we have been gradually increasing the take[hyphen]up of direct bill claims
from general practices and pathology practices to the extent that we now have about 56 per cent of our direct bill claims coming to us electronically through what we refer to as med claims. Basically, that is an electronic data transmission facility. As I said, that has been building up over that time. We are still putting effort into that because certainly we are always looking to improve our processes. That has a lot of benefits for us, obviously, and also for the practices. We do support the practices with some up[hyphen]front payments. Of course, there are processing benefits for us and also efficiencies in the data coming to us.

Senator CROWLEY —Can you give us any figures on the efficiencies? What savings are there?

Mr Mynott —There is cost, obviously. I have not got those figures with me, but the cost of a manual processing claim is probably something of the order of 2 to 1, I think, as compared with electronic claiming. But of course there are costs that we incur in setting up these providers. Depending on the volumes that they transmit to us at the time, the recovery cost varies.

Senator CROWLEY —Does electronic transfer also enable you to return whatever benefits are owing to the doctor in a shorter time?

Mr Mynott —No, there has been no talk of that at this stage because we are looking to reduce our costs. They are strategies that the commission has adopted to try to contain its own processing costs.

Senator CROWLEY —I have a claim here that `bulk[hyphen]billing electronic lodgment and med claims facilities can be included for only an extra $500' and that `on first transmission the Health Insurance Commission will pay you $500, which covers your establishment costs'. Is that accurate?

Mr Mynott —It is a business approach, as was said a while ago. The commission has offered the $500 up[hyphen]front incentive from about 1993, I think. That was basically a cost to support the practices in transferring to electronic commerce and it was meant to help defray some of the costs of establishing themselves with computer systems. We do that now with every practice—with every site that transmits. We pay a one[hyphen]off $500 payment to that site. We also provide the software that provides the encryption of the data and the compression of the data.

Senator CROWLEY —If you are providing software, that is just for payments, is it?

Mr Mynott —That is for the transmission of the direct bill claims and the receipt back.

Senator CROWLEY —Do you or Mr Podger know how these people got into running this program? You are just saying that somebody was sitting out there looking for an opportunity and decided to get into this?

Mr Podger —I do not know the basis of the particular one you have got. I just do not know. But the HIC program has been around for some years and there are a lot of companies who are aware of it.

Mr Mynott —It is open market out there for software suppliers. They are all aware of what we are providing and offering, and it is up to them to market their own software packages. So they would have access to that incentive payment, the same as any other software company.

Senator CROWLEY —I would be very interested to know where they get their cut, wouldn't you? If you read this letter it sounds like they get $3,000 from you, Mr Podger, so that they can walk around to this organisation, which is going to give them a PC, a printer, all programs, installation, configuration, staff training and an ongoing warranty and support for one year. That is not a bad package for $3,000, is it?

Senator Herron —I get that every week in the surgical group. There are groups out there that have been advertising that for the last 15 years, I think—and you can get cheaper deals than that. That is just another flyer for a group that has locked on to this particular program. This particular one—I haven't seen that one; I am not aware of it—has presumably gone to general practitioners. There are a whole lot of marketing programs out there in relation to software provision and computers, printers, et cetera. That one sounds as if they have locked on to the $3,000 package.

Senator CROWLEY —It certainly does, but those of us who have been in and around buying computers and the bits and pieces that go with them know that either they are playing the rest of us for suckers or they have got a special deal going. I have to say that, relatively, to get all of that for $3,000 is not a bad buy, unless it includes something like just renting or—

Mr Podger —You do not quite know how much capacity comes with that and how much room there is for growth in software capacity and so on. I just do not know.

Senator CROWLEY —I tell you what: by tomorrow morning I might. One phone call should fix this, don't you think? I will be back to ask you, Mr Podger.

Senator Herron —Have they specified the hardware in that and the capacity of the computer? I am just interested.

Senator CROWLEY —No, but they do say that it does all of that.

Senator Herron —What I am getting at is that they sound as if they have locked into the $3,000 package without specifying what the hardware is and what they are going to give you for it.

Senator CROWLEY —I do not think it would be baby bytes, do you?

Senator Herron —No, but computer experts will tell you that price halves and capacity doubles every two years. So you would be wanting to be very careful if you were a purchaser as to what was being provided in that.

Senator CROWLEY —Just a last question on this point. I do not want to keep on it forever, but—

Mr Podger —Senator, it might be helpful if you gave me a copy of that. There is nothing that you have read which has made me particularly alarmed. Maybe it would be worth while my reading it just to see whether there are any concerns.

Senator CROWLEY —They offer a drug database and so on. But I presume that practices would be advised to speak to you and get your software for sending data to the HIC rather than letting anybody out there have a go at it?

Mr Mynott —That is right. They normally still require a software supplier to install the package on their computer system. Most practices have to engage some software supplier, anyway.

Senator CROWLEY —Thank you.

Senator CHRIS EVANS —Earlier I asked what other incentive payments were paid this financial year. I am not sure whether you answered that question or answered something else. I just want to be clear about it. I want to know what other incentives were paid this financial year ending 30 June to GPs under the scheme. There was a $10,000 payment for something as well, wasn't there?

Mr McRae —The basic Practice Incentives Program payment is on average around $10,000 for a full[hyphen]time doctor. But that is the standard program, which has been rolling along for some years now.

Senator CHRIS EVANS —What did they have to do for that this year?

Mr McRae —This year they had to be signed up to the Practice Incentives Program, which is the same process that we were talking about before. They are signing up now. They had to meet the entry[hyphen]level standards.

Senator CHRIS EVANS —This year they got both a $10,000 payment and a $3,000 payment?

Mr McRae —Yes, that is correct.

Senator CHRIS EVANS —So you are talking about two payments made to a full[hyphen]time GP this year—one of $10,000 and one of $3,000—for signing up to participate in the PIP?

Mr McRae —Yes, for participating in the program and for continuing to meet the standards of that program. There are not two payments; there are quarterly payments. That is the mechanics of it.

Senator CHRIS EVANS —But just in terms of totals, two total payments were made, one of $10,000 and one of $3,000, for signing up to be part of the scheme?

Mr McRae —The people who are part of that scheme were getting those payments, yes. They are obliged then to continue to meet the quality standards.

Senator CHRIS EVANS —Earlier you described the numbers for the take[hyphen]up rate. Was that for the totality of the scheme, or was that just for the $3,000 payment?

Mr McRae —You can only sign up for the totality of the scheme. You cannot just sign up for the payment.

Senator CHRIS EVANS —Yes, I am just trying to get it clear in my mind. All of those who signed up would have received the $10,000 and the $3,000 payments?

Mr McRae —They would have received however much came in quarterly payments for the time that they were members.

Senator CHRIS EVANS —That was on a pro rata basis for the year?

Mr McRae —Yes.

Senator CHRIS EVANS —Was that $10,000 payment also paid to each full[hyphen]time equivalent in the practice?

Mr McRae —These are all practice[hyphen]level payments. They are paid to the practice as a lump sum based on the actual size of the practice.

Senator CHRIS EVANS —If I were in a practice with four full[hyphen]time GPs, we would have received $40,000, not $10,000; is that right?

Mr McRae —That is the case on average. As I tried to say earlier, the actual payments are based on the continuity index, and continuity can be quite varied. Some practices would have got a lot less than the average and some substantially more. Again, those in the more remote areas get more. There is quite some differentiation. To get onto the scheme and to get the payments you have to meet the base standards. But the actual payment that you get depends on the continuity index, which provides quite a good measure of the continuity of care which a practice is giving. This is giving us some opportunity to reward those practices that are providing better quality care.

Senator CHRIS EVANS —I want to get this clear. I do not want to put words in your mouth. If I verbal you, I am happy to be corrected. Effectively, that $10,000 average payment is linked to that continuity of care index?

Mr McRae —Yes.

Senator CHRIS EVANS —The average payment is $10,000?

Mr McRae —Yes.

Senator CHRIS EVANS —Is the $3,000 payment linked to the continuity of care program?

Mr McRae —No, that was not linked to the continuity.

Senator CHRIS EVANS —Thank you for that.

Dr Morauta —Can you clarify whether there is a difference between rural doctors and non[hyphen]rural doctors in the payment, too?

Mr McRae —Yes, this is the rurality index that Senator West was referring to earlier.

Senator CHRIS EVANS —I can't pronounce that so I didn't ask you about it.

Mr McRae —Yes, the payment is based on continuity and on whether or not you are in rural and remote areas, with those in the more rural and remote areas getting a higher payment. There is an additional payment there.

Senator GIBBS —Getting back to PIP and the $3,000 payment, is that particular item anywhere in the budget papers? Is that described anywhere?

Mr McRae —No, it is not in the budget papers, because it is a payment from within 1998[hyphen]99. It is money that was appropriated last year under the alternative payments for general practice program and was paid from within that money appropriated last year.

Senator GIBBS —So this $3,000 payment started last year?

Mr McRae —The alternative payments for general practice has included the PIP program, or the Better Practice Program before it, for many years. This year, we made the additional transition payment from within the funds appropriated for that program.

Senator GIBBS —What I am trying to say is: how would these people know that there was $3,000 available to doctors?

Mr McRae —We wrote to all doctors—this is where that letter came from—and the minister made an announcement to say that this transition payment was available. The reason that we got the big shake[hyphen]up that people were talking about earlier was that it was advertised within the medical community. But there was no secret about it. One of the aims of this was to get more people into the program.

Senator CROWLEY —These people are better than you because I never got a letter from you.

Senator GIBBS —We didn't know about it; the doctors did.

Senator CROWLEY —They are probably mailing every doctor, because I am certainly not registered to practise. A lot of this is really another way of funding general practice to try to encourage general practice to do something else besides fee[hyphen]for[hyphen]service practice—the so[hyphen]called sausage machine practice. Have you seen any change in the payment of rebates in any of the practices on PIP?

Mr McRae —I am not aware of what research has been done on that.

Senator CROWLEY —Is anyone trying to monitor that?

Mr McRae —I know it has been looked at over time. I really don't know. I am happy to take that on notice; I cannot answer that directly. I can find out what has been done and I am happy to get back to you.

Senator CROWLEY —My memory serves me rightly, does it not, that PIP was to try to address the needs of general practices for funding that encouraged something besides straight fee[hyphen]for[hyphen]service medicine?

Dr Morauta —Yes, that is correct. It was funded in part from other places and in part from only 50 per cent indexation for general practice and fee for service, and the other 50 per cent went to build up this program.

Senator CROWLEY —What data have you been collecting about the change of payments of rebates and fee for service in general practice?

Dr Morauta —We are taking that question on notice. We don't have that information with us.

Mr Podger —The shift from being the Better Practice Program into being the PIP program was, in part, out of the reviews done in 1997[hyphen]98 on general practice. But we will take that on notice to see whether there is particular data in that area that might be helpful.

Senator WEST —In relation to Medicare easy claim facilities, my information was that that scheme commenced as a series of pilots. Have they ever been reviewed, assessed or evaluated?

Mr Mynott —Are you talking about the fax machines?

Senator WEST —Yes.

Mr Mynott —They were a pilot initially. There were about 600—

Senator WEST —Announced in the budget.

Mr Mynott —They were included in the budget before last. They have all been installed now. The latest budget included a further 600 easy claim facilities.

Senator WEST —What I am asking is: has any evaluation been done of the original pilots further down the track?

Mr Mynott —Yes, there has been. I will get a colleague to join me.

Mr Robbins —The original pilot was in Queensland and there was an evaluation done. It showed in fact that it was well accepted by the community and then there was another 104 machines put in after that.

Senator WEST —Yes, and of the first group, I think they were doing something like 10 a week or so, weren't they? They were doing a very small number of claims. Now that you have got 700 or whatever it is out—

Mr Robbins —There are about 600 out.

Senator WEST —I know that you have moved to larger communities—communities like Tumut and Forbes. Whilst it was well accepted and there were very few problems in the small communities, what reviews and evaluations have been done of the larger numbers that have gone in and of the communities that have larger populations and a greater workload for those faxes?

Mr Robbins —The volumes vary quite a bit. You are correct, in fact, that the volumes in some of those early sites were fairly small. Some of the higher volume sites, on the most recent figures—this is just looking at the month of April—are having a daily average of about the mid[hyphen]20s in terms of the number of claims per day. But there are other sites which in fact
are quite variable in volumes, by which I mean that they may actually be performing very well one week but quite low the next week. We have some sites that are consistently low volumes. We have actually been doing some work to try to find out just what factors make up the difference in that.

Senator WEST —When will that work be completed? When will you have the results of that work?

Mr Robbins —We have some initial work from that. I suspect, in fact, the rest will be finished probably within the next couple of months. The initial results show that the impact of the doctors' and the pharmacists' feelings about the device and promotion of the device are fairly important. One of the things that we found out from some research quite recently is that the customers are fairly keen on some sort of human interaction. So those pharmacists who are helpful in terms of people putting in their claims generally have higher claim volumes than where they are not so concerned.

Senator WEST —I wonder why I am not so surprised. What has the reliability of the machinery been like? Where you have got 20 or so a day being sent, what is the cost factor in terms of the reliability of machinery and the need to replace breakdowns?

Mr Robbins —Except in a very few sites, at the present time the only maintenance we have had to do is the regular preventive maintenance. We have had a couple of machines where we have changed the design recently in terms of the cover panel. It would appear that some customers may have been a bit heavy[hyphen]handed with them. The cover panel covers all the normal fax buttons and they push them a bit hard. But other than at a couple of sites we have haven't had any problems with maintenance that way.

Senator WEST —Some of those machines must be about three years old. What is the life span of them?

Mr Robbins —The machines actually should go for a while yet. They were originally bought on the premise that they could go for at least four years. We bought at the same time some extra machines to cover those few that might in fact have got through quality control and not be good. So at the moment I do not see any reason to believe they wouldn't go that distance.

Senator WEST —What is the cost to date to install? What has been the cost of the faxes?

Mr Robbins —The cost is a bit variable, because we actually have an arrangement with the people who put them in as to the locations. So clearly it is more expensive to go a bit further out than closer in. The other thing is that there are some parts of the installation costs which are a bit variable in terms of putting in lines and electrical connections. So we pay for those and in some places that are more difficult the installation can be rather more expensive than others.

Senator CHRIS EVANS —I thought it was going to cost us $30 million to put in 600 more. Now it is down to $19.2 million. What has happened there?

Mr Robbins —Senator Evans, you will notice that there is an amount of $1.6 million in this next year and then it goes up. Part of that was that when we looked at how it was best to roll out another 600 devices, it was obvious that there were a couple of other government initiatives that we should consider. One was rural transaction centres. There are other ways of providing access to Medicare. So it was not intended to put 600 devices out next year. That is partly why it has come down because, originally, the $30 million would have allowed for 600 devices to go out right at the beginning and have full running costs for the whole program.

Senator CHRIS EVANS —So the unit cost hasn't come down, you are actually not putting out 600 new sites?

Mr Robbins —Not up[hyphen]front.

Senator CHRIS EVANS —How many new sites are you putting out?

Mr Robbins —What is allowed for in that first year is 100 sites.

Senator CHRIS EVANS —And in subsequent years?

Mr Robbins —Two hundred and 300, to add up to 600.

Senator WEST —Why are you spending $4.7 million in 2002[hyphen]03?

Mr Robbins —There will be running costs for those 600 devices and the original program covered up to 2002 for the original devices but not for an extra year. So that actually covers the running cost for the whole lot of them.

Senator WEST —The whole lot?

Mr Robbins —Yes.

Mr Mynott —It is still 600. They are still putting out the 600, which was the initial—

Senator WEST —Yes, but by 2002[hyphen]03, where you have got $4.7 million, that includes not just the running costs of this 600 but the running costs of the whole 1,200.

Mr Robbins —Yes.

Senator WEST —But where—

Mr Robbins —I mention that it actually says up to 600 additional Medicare easy claim facilities. While we would imagine that that was the number, there are a couple of factors in that. One is that it would clearly be not sensible if we were going to, in fact, put something in a rural transaction centre to put something where we already had an easy claim device. So there is an estimate there in terms of the number of sites that are viable sites for Medicare access.

Senator CHRIS EVANS —I still don't understand how the cost went from $30 million down to $19 million, if you tell me that you are putting out the same number of sites in the end. I can understand how it would be different, it might be rear[hyphen]end loaded.

Mr Robbins —Right.

Senator CHRIS EVANS —But as I understand it, you are saying to me that the total costs are no longer $30 million; the total cost is now $19 million but we have the same number of sites. Is that because you are not putting them in rural areas as much because of the rural transaction centres and therefore you do not have the distance component costs?

Mr Robbins —Sorry, Senator, I missed some of that question.

Senator CHRIS EVANS —Basically, the $30 million to the $19.2 million—I do not understand how you have saved $11 million. You say to me, `The roll[hyphen]out is slower than anticipated' and you do not get the 600 for three years. I can understand that might mean your costs were rear[hyphen]end loaded towards the end of the program but, as I understand it, what you are saying to me is that the total cost over four years is now $19 million compared to $30 million. I don't understand how you have saved yourself $11 million.

Mr Podger —First of all, as was mentioned, there is a phasing[hyphen]in implicit in this. That means that the first year's figure is not a full year figure effectively for the 600. So that explains about half the difference, and I suspect the rest of it is just simply the fact that we redid the
estimations. Those original estimates were in the election context. There has been a revision and I suspect that is the other reason for the change. But half the difference is simply that you have a ramping up here, rather than a full setting up from day one.

Senator CHRIS EVANS —That makes sense if the maintenance cost is a big component. It does not make sense if the establishment cost is the major component. So are you still saying that that is the reason?

Mr Podger —I understand that there was a re[hyphen]estimation after the election, but I cannot give you the full detail here. My understanding was that there was a re[hyphen]estimation after the election.

Senator CHRIS EVANS —That is what I am trying to understand. We had the trials, as I understand it, then you had a feel for the costs. I am just trying to get to the bottom of what has happened here.

Mr Robbins —The trials in fact gave us costs that were less than the cost proposed in that election promise. One of the main differences is that the machine we currently use in fact almost certainly will not be available to us in the future. It is currently still in production in Japan but is about to come off production. The chances are that we will not be able to replace it with a machine of exactly equivalent cost, so there is a slightly higher installation cost. As the secretary said, there is a considerable reduction in cost in the amount of running costs for those machines.

Mr Podger —I suggest that we can look at this a little bit more and give you a reconciliation, if you like, as to the basis for the changes.

Senator CHRIS EVANS —That might be helpful, rather than delaying us now.

Mr Podger —Rather than going through all the detail, that is probably an easier way to do it for us.

Senator WEST —The $4.7 million in 2002[hyphen]03 includes the maintenance and servicing and provisions for the whole 1,200 centres. Where is the maintenance and servicing for the original 600 in the previous years, prior to 2002[hyphen]03? Is that in that 6.2 and 6.7?

Mr Mynott —The ongoing costs will be absorbed in our normal ongoing running costs. We are funded now under an output pricing agreement with the department, and that includes our running costs. That would be absorbed in that for those regimes.

Mr Podger —There was provision last time for moneys. Going back to a past PBS, it got about $2.1 million a year provided.

Mr Wooding —Page 284 of the 1998[hyphen]99 PBS.

Senator WEST —I just do not happen to have that with me.

Senator Herron —We were expecting you to remember it.

Senator WEST —Absolutely right, Minister, at this hour of the day. But I want to know—

Senator CHRIS EVANS —Senator West is an accrual accounting person. She would not understand the old system.

Senator CROWLEY —Does that running cost include salaries?

Mr Wooding —Yes.

Senator CHRIS EVANS —And have you decided where these are going?

Mr Mynott —No, that has not been decided yet.

Senator CHRIS EVANS —How is that process transacted, then?

Mr Mynott —We had criteria established for the initial 600. We will be revisiting that criteria to see whether it is still effective or whether we need to consider other criteria.

Senator WEST —Will they be located in any places where there are currently Medicare offices?

Mr Mynott —No. They will be under basically the same criteria—certainly not where there is a Medicare office.

Senator CHRIS EVANS —Could you give us a copy of that criteria?

Mr Mynott —The previous criteria?

Senator CHRIS EVANS —Yes.

Mr Mynott —Yes.

Senator CHRIS EVANS —You do not anticipate much change in terms of the criteria to be applied for the allocation of these 600?

Mr Mynott —I would not like to make that commitment here. We will have to revisit that.

Senator WEST —You are not in a position to tell us where they are going to be set up yet?

Mr Mynott —That is correct.

Senator CROWLEY —Are there any in shire headquarters already?

Mr Mynott —I am sorry?

Senator CROWLEY —It is listed here that some may be in shire headquarters. I wondered if any are already established in shire headquarters.

Mr Robbins —No, at the moment there are not.

Senator CHRIS EVANS —I am sure that in places like Aboriginal communities that might make a lot of sense.

Senator CROWLEY —I am just interested in your comments, though, Mr Robbins, that if the people find that there is someone there to talk to, someone to help them sort things out, someone to help them to generally deal with it, it goes much better than if there is not.

Senator WEST —I think there was an argument we had about this about three years ago, but anyway that is all I have on that. Could I just ask the HIC how long they have been advertising in the National Facsimile Directory? Are you aware that you are listed in the National Facsimile Directory? Are you aware of what the National Facsimile Directory is? I would draw your attention to an adjournment speech I made last week. This is a subsidiary or a part of the Telecommunications Group of Australia that goes around soliciting, in a rather unusual manner, by just ringing up and asking for confirmation about entry details and charging $640. When I went and had a look at the site on the Net, I found that the HIC was there—134 Reid Street, Tuggeranong, fax 02 6282 5025. Were you aware of it? This group is known to New South Wales Department of Fair Trading.

Mr Mynott —No, I was not aware of that.

Senator WEST —You may not have even paid anything. It may be that they just stuck it there anyway.

Mr Mynott —The address is right, so we will check that out.

Senator WEST —I am fascinated, because I think they are a bit shonky. Their business practices leave a lot to be desired. I will say that in here under privilege.

Senator Herron —I in fact heard your speech. I agreed with what you were saying, in fact, because it is a common practice, or I have seen them in those bills for unsolicited listing.

Senator WEST —This group just ring up and say, `We are checking that this entry is correct,' wanting a verbal approval over the phone. They really do attempt to high pressure sell. If you tell them to send it to you in writing, they send you a fax of one page and if you do not answer that the next day they send you one that reduces the price from $640 to about $90[hyphen]odd and offers you a free holiday as well.

Senator CHRIS EVANS —Sounds like the Securities and Investments Commission.

Senator WEST —Some of the companies related to this are actually deregistered and are struck off, action pending or in progress. I just thought I would advise the HIC that they get a guernsey.

Senator CROWLEY —Hold out for another day and you can raffle the holiday. I have a couple of questions about the obstetrics initiative mentioned before the last election. The government announced a new Medicare rebate for complex births at a cost of $18 million. As I understand it, the purpose of that money was to try to eliminate high gap payments for complex births.

Mr McRae —Yes.

Senator CROWLEY —And because the obstetricians in particular argued that they got insufficient remuneration. Have you done any evaluation of that obstetric initiative?

Mr McRae —There has been some work done, yes.

Senator CROWLEY —Can you tell us what work and can you tell us what impact it had on the schedule fee charging?

Mr McRae —The complex item was set up with a new fee of $950. It was anticipated that the new item would cover about 20 per cent of the items for confinement. That is about what has happened. The number of confinements are still rolling along at similar levels to before—slightly declined. There is no apparent decline in the out[hyphen]of[hyphen]pocket expenses, which is where we had thought things might have changed.

Senator CROWLEY —Am I right with the following information: the latest data is that something like 56.3 per cent of the claims made against the new fee are for above the schedule fee?

Mr McRae —I am sorry, I do not have that piece of data. I can tell you how much is being charged on average above the schedule fee for the new item.

Senator CROWLEY —Please.

Mr McRae —It is $218. What percentage are above the fee and what are below is not something I have here, but I obviously can find that information for you.

Senator CROWLEY —What is the $218?

Mr McRae —It is the average above schedule fee charge for the new item.

Senator CROWLEY —The whole point of increasing the rebate was to try to reduce the amount. First of all, it was to make sure that doctors who dealt with complex obstetrics problems were reasonably remunerated and, at the same time, hopefully reduce the gap payment or the cost to the families. So what you are saying is that, in fact, the evidence is that there is no apparent decline in out[hyphen]of[hyphen]pocket expenses?

Mr McRae —No, the new item has a smaller gap payment than the old item had. The old item had gap payments towards $300, and now they are down to $218.

Senator CROWLEY —I wrote down that you said: `There is no apparent decline in out[hyphen]of[hyphen]pocket expenses.'

Mr McRae —I am sorry; I did say that. That relates to the old item. So the continuing standard confinement item has a similar gap payment now to that which it had before, which is of the order of $300.

Dr Morauta —But the new item has a smaller gap.

Senator CROWLEY —Say that again, please.

Dr Morauta —The new item has a smaller gap than the old item.

Senator CROWLEY —So the suggestion that I want to question you about is that 56.3 per cent of the claims made against the new fee are for above the schedule fee. Can you take that on notice?

Mr McRae —Yes, certainly.

Senator CROWLEY —That is higher than average, as I understand it, for obstetrics. Is it true, too—can you check for me and provide any data, for or against—that the frequency of charging above the schedule fee has, if anything, increased with this new payment, and new mothers are still faced with a gap payment?

Mr McRae —I will take that on notice, yes.

Senator CROWLEY —But essentially what you have said is that they do have a gap payment, although it is smaller than the gap they used to pay?

Mr McRae —That is correct.

Senator CROWLEY —If you could provide anything further on that it would be very useful, thank you.

Senator CHRIS EVANS —On the next matter, could we perhaps start with the general radiology area? Where are the agreements signed after last year's budget reflected in the budget papers?

Dr Morauta —They were reflected in last year's budget papers.

Senator CHRIS EVANS —What about this year?

Dr Morauta —The expenditure on diagnostic imaging is just within the general total of the Medicare benefits item, which at page 88 is a very large number at the top of the page.

Senator CHRIS EVANS —So I really do need to, therefore, go to this table you provided to me last time, do I, to understand what is happening? That was the summary table: the modalities and number of services 1998[hyphen]99?

Dr Morauta —Yes, and there is a target number for each year of the agreement for expenditure.

Senator CHRIS EVANS —Yes, but how is that reflected in the budget?

Dr Morauta —It was reflected in the last budget as a savings on estimates, and in this budget it is lost in the mists of the MBS there, but we can provide you with the information separately.

Senator CHRIS EVANS —Perhaps we could start with how we might distinguish that now if, as you say, it is not in the budget. I think last time I interrupted you. You gave me the
number of services but you did not give me the costs. I looked at that in Hansard , and you were about to give me both, and in the end I got only the number of services. So I have been reminded to ask for both on this occasion, if you have them.

Dr Morauta —Senator, I did not intend not to give you services.

Senator CHRIS EVANS —It was not your fault. I got off the services issue and then never actually came back to the costs. At that stage, you had up until the end of March 1999. Do you have an equivalent updated table?

Dr Morauta —Yes. It is coming out as the number of services up to April and benefits paid up to April.

Senator CHRIS EVANS —Great. So we only have one month's more figures than we had last time?

Dr Morauta —Yes.

Senator CHRIS EVANS —This is the modalities paid.

Dr Morauta —Benefits paid is the dollars one. Have you got benefits paid, 1.2?

Senator CHRIS EVANS —Yes.

Dr Morauta —That is it.

Senator CHRIS EVANS —There are about 400 different sets of figures all in a blur on a piece of paper.

Dr Morauta —Yes. The total amount paid this year so far is $873 million—that is shown in the bottom right[hyphen]hand corner.

Senator CHRIS EVANS —Perhaps you could start by describing for me what you think is happening. Last time you were cautiously optimistic that you were within the range on MRI, but you were not getting the savings on CT that had been anticipated. Would you like to perhaps give me your overview first?

Dr Morauta —I think the overview is that we are trending above where we should be across the table as a whole, and our current estimates are that, by the end of this year, we will be $35 million over what was allowed for in the target.

Senator CHRIS EVANS —That is across all services?

Dr Morauta —Across all the modalities.

Senator CHRIS EVANS —What is driving that?

Dr Morauta —It looks, from the table, as if the growth in CT and ultrasound is continuing to be quite high, and also in nuclear medicine. So those are running above where it would be comfortable to have them. And together they add up to that kind of a thing. It is not a massive over, but it is over.

Senator CHRIS EVANS —Because, as I recall the Hansard from last time, you were expecting to get some savings on the CT figures, weren't you, or expecting a sort of replacement thing with MRI; is that right?

Dr Morauta —When MRI was put in, both the profession and the government thought that there would be some relationship to CT and that we would get some apparent reduction in CT. That has not fed through yet, and we are in discussion with the profession as to what in fact is driving these figures in order to see whether there is any action needed and where action would be appropriate to bring these down.

Senator CHRIS EVANS —But you say that there are problems with things like ultrasound as well?

Dr Morauta —It looks as if they are both growing quite rapidly. I think it is more of a clinical judgment for the profession as to which area is growing in a way that is inappropriate, in a sense, in the current environment and whether there is inappropriate use of services going on in those areas, and we look to them for advice on that.

Senator CHRIS EVANS —So what do you say about the MRI figures?

Dr Morauta —MRIs are likely to come in around what we expected of this year—100,000 to 105,000 services. I think, as we discussed last time, it would appear that on the number of machines we have in the second and third year we are likely to be somewhat over the target figures in the agreement. The third year has 145,000 services. A sort of a back of the envelope calculation suggests we might be 30,000 or 40,000 above that on current trends in the final year.

Senator CHRIS EVANS —Do you think that is largely driven by the larger number of machines being available than anticipated?

Dr Morauta —I think that would be the main driver. There is a review as part of the agreement after 18 months on the MRI side. I think when the dust has settled, so to speak, on the MRI and machines issue, the government will come back and have a look at that. But at the moment that seems to be where we are trending.

Senator CHRIS EVANS —When do you take it that that 18 months is due?

Dr Morauta —December this year.

Senator CHRIS EVANS —So the MRI monthly figure seem to jump around a bit. Was your estimate for this year based on a full year or was it based on that September start[hyphen]up?

Dr Morauta —I think the original number in the agreement was 120,000, but people thought that, because it was a late start[hyphen]up, 100,000 would be about the right number. I think we are probably heading towards—where is my latest back of the envelope number?—105,000 or 106,000 this year. That is what I think it is.

Senator CHRIS EVANS —So what action have you initiated to discuss with the sector the concern over the $35 million over what was expected?

Dr Morauta —We have a consultative committee on diagnostic imaging and at the meeting in April, I think it was, we provided them with an account of these trends. Sometimes it is a bit difficult to see in January and February what is going on in MBS because it is a bit of a low season. So March came out really high and we then presented them with those figures and initiated discussions with them about the causes and how we might jointly handle the issues. Then there was a conference, as you are aware, of radiologists last weekend or the weekend before and again we raised it more broadly with the college members who were there, and they continued their discussions on the different options for handling it.

Senator CHRIS EVANS —From the government's point of view, where are you at?

Dr Morauta —I think we are discussing it this week again with the profession. It is an ongoing process to establish what is the best way to handle this matter.

Senator CHRIS EVANS —Do you expect any remedial action to be in place to stop you going over the agreed cap this financial year?

Dr Morauta —You will not get it this financial year, at this sort of late stage. It will be something that will be adjusted over the three[hyphen]year life of the agreement. These agreements
work over three years to allow time to take not drastic action, but action which happens over the life of the agreement.

Senator CHRIS EVANS —So you expect you will exceed it this year?

Dr Morauta —Yes.

Senator CHRIS EVANS —Whatever you put in place, it will not be able to affect this year. Do you expect to be able to recover, if you like, the overrun from this year in the later two years?

Dr Morauta —That would be the implication of having the agreement, yes.

Senator CHRIS EVANS —So that the caps should apply across the totality of the three years, rather than each individual year within it?

Dr Morauta —That is right, yes. That is how it works.

Senator CHRIS EVANS —So what measures are you proposing to the industry to restrict the growth?

Dr Morauta —We suggested some options, but we are really looking to them to pick the most appropriate in a clinical sense and in a sense from their knowledge of the industry. For example, you might have an algorithm for providing one test first and another test second, but that is something that they can make a clinical judgment on. We, as bureaucrats, are not too hot in that area, so we are waiting for them to come forward with proposals in that area. The agreement provides for a number of different things that could be done, such as redesign of items, the changing of the pattern of referrals and so on. We are just waiting to see what comes. Obviously no indexation, the equivalent to a fee freeze and some targeted reductions in some areas of the schedule are a possibility.

Senator CHRIS EVANS —At the end of the day that is your bottom line option, isn't it—to reduce the fee you pay for the service?

Dr Morauta —The bottom line option is like that. It is not necessarily where you prefer to be.

Senator CHRIS EVANS —But I gather there is some expectation that that is where you might end up among the radiologists. I gather there is talk now of a co[hyphen]payment or something?

Dr Morauta —I am not aware of the discussion of a co[hyphen]payment, except from a press release that came from Ms Macklin.

Senator CHRIS EVANS —You seem to be of the view that really the onus is on the industry to come up with a solution.

Dr Morauta —No, we do it together. But I am saying that to get the most clinically appropriate or medically appropriate one, it has to be something that they really do feel would be a fair approach to the issue. There are some very simple costing things you can do, but then they are often, as I discussed at this conference with them, quite unfair. You might say take it across[hyphen]the[hyphen]board, but across[hyphen]the[hyphen]board might be quite the wrong thing in terms of what is best for patients.

Senator CHRIS EVANS —Is the solution likely to target the particular procedures that are causing the problem, or is it more likely to be across[hyphen]the[hyphen]board of all procedures? Are you likely to target CT or an ultrasound?

Dr Morauta —It is really difficult to say at this stage. I think there will probably be a little bit of across[hyphen]the[hyphen]board in some way, perhaps around indexation and some other measures too,
but it is a bit early days to anticipate how it is going to be put together. I imagine it will be a mixed package of things.

Senator CHRIS EVANS —What sort of reception did you get from the radiologists?

Dr Morauta —As you can imagine, they were absolutely thrilled to discover they were over budget.

Senator CHRIS EVANS —But did you get a sense that they are accepting the government's argument?

Dr Morauta —Their own speakers at the conference drew attention to the same issue and talked it through. At the conference it was a question of the broader membership appreciating the issues.

Senator CHRIS EVANS —That is always difficult. Perhaps, Mr Watzlaff, we might start by asking where you are at at the moment. An update report might be a useful beginning.

Mr Watzlaff —I have updated the table that was presented last time of the number of MR units in operation, claiming and approved. Perhaps I can present that document to you.

Senator CHRIS EVANS —That would be helpful, thank you. Perhaps you could describe what is happening.

Mr Watzlaff —Perhaps I could just point out that, in terms of the number of units approved for eligibility, the number has grown from 83, which was the figure last time, to 89. The number of units claiming has grown from 72 to 75 and the number of units not yet claiming has grown from 11 to 14. That is in accordance with what I mentioned last time, that there were still units that were coming forward and seeking approval. So that is the current state of the number of units.

Senator CHRIS EVANS —So since the last time we spoke on 31 March—in the previous two months—you have had another six units seek to be registered?

Mr Watzlaff —No. There are six units that have been approved. There could well be other applications that have not been approved at this point where they are subject to requisition or some aspect like that that have not been resolved. They are the number that are actually approved at this point.

Senator CHRIS EVANS —So there could be others—I always get into trouble with the terminology of this, so correct me if I am wrong—already lodged with you which have not yet been approved?

Mr Watzlaff —That is right.

Senator CHRIS EVANS —So we have got three subsets. We have got the 89 that have been approved.

Mr Watzlaff —Yes.

Senator CHRIS EVANS —We have got others. Are you able to give me the number which are currently with you but not yet approved?

Mr Watzlaff —There is a small number. I think it is about three or four that haven't been approved.

Senator CHRIS EVANS —So there are three or four on top of the 89.

Mr Watzlaff —Yes.

Senator CHRIS EVANS —And there is the third subset, which is those that may yet come in.

Mr Watzlaff —Yes.

Senator CHRIS EVANS —But there is no deadline.

Mr Watzlaff —There could be additional ones, yes.

Senator CHRIS EVANS —Do you have any information as to whether there are still others out there?

Mr Watzlaff —We do believe there are other applications that will come in, but the number that we have on that is rather rubbery. I could speculate on the number but perhaps it wouldn't be very helpful.

Senator CHRIS EVANS —No. Is it Professor Sage who is head of the radiologists?

Mr Watzlaff —Yes, there is a Professor Sage.

Senator CHRIS EVANS —I just came across a document the other day written in July 1998 and he said there would be about 100 at the end of the process. We should have spoken to him, shouldn't we? He looks like he is going to get it pretty well close to right. Interesting: the industry seemed to know. All right. So where are we up to then with the investigation?

Mr Watzlaff —Our investigators are continuing their work. They are interviewing various parties, the medical supply companies, providers, entrepreneurs and others. They are taking statements where necessary and they are working through the investigation.

Senator CHRIS EVANS —First of all, I want to establish how many units have now been investigated.

Mr Watzlaff —All of the applications that came in under what we call part 3D of the application form, that is, those that were the subject of orders but were not actually installed as at budget night.

Senator CHRIS EVANS —Is that 30 now?

Mr Watzlaff —It is around about 30, yes.

Senator CHRIS EVANS —It was 24 the last time, so I guess with six months, it is 30.

Mr Watzlaff —Yes.

Senator CHRIS EVANS —So there are 30 that were not in operation but pre[hyphen]ordered and have sought to be registered. Where are you at with the investigations?

Mr Watzlaff —As I say, we are taking statements, we are conducting interviews and we are working towards completion of the investigation as at the end of July, which I mentioned the last time as being the expected date of completion.

Senator CHRIS EVANS —Have you been able to clear any of the applications? The last time you indicated to me that you hadn't sort of actually finished any of them.

Mr Watzlaff —No, we haven't actually cleared any of them as yet, because we are still taking statements. We haven't actually come to any particular findings on any of the matters at the present time, and that will be the subject of review when all the material is in.

Senator CHRIS EVANS —So are you still hopeful of making the July reporting deadline?

Mr Watzlaff —Yes, I am.

Senator CHRIS EVANS —But, of course, that means that in July, once you have completed your inquiries, if you have concerns that you think are worth pursuing, you then refer off the ones that you are concerned about to the DPP; is that right?

Mr Watzlaff —That would be so, yes.

Senator CHRIS EVANS —So we won't have any better information in July if that is the case than we have now; is that right?

Mr Watzlaff —I would accept that by the end of July we would certainly be able to say that we had concerns about a particular number and we had referred that number to the DPP with a view to prosecution action taking place.

Senator CHRIS EVANS —Would you be free to share that with me at the time or would you feel—

Mr Watzlaff —In terms of the identified information, I wouldn't have any difficulty then because there would be no prejudice to the investigations. The investigations would be complete, the briefs would be done, the matters would be referred.

Senator CHRIS EVANS —I am just trying to get a feel for what we can expect to get out of you—I am not trying to be rude—about what you will feel you are able to release publicly at that point. You know that there is some concern about the length of time that this is taking. I guess I am raising the concern that if you have one or more matters that you think require the involvement of the DPP, we won't have a situation where at Senate estimates or other forums we get the answer, `Of course, because there are prosecutions afoot, it would be improper for us to release any information.' I am just trying in advance to get a feel for what you are likely to say to us then.

Mr Watzlaff —With respect to any matters that might be referred, of course, it would be prejudicial to go into the detail of those cases. But insofar as those where there are no advance findings, that would not be an issue at that time. There would be no question of prejudice arising.

Senator CHRIS EVANS —So would you feel free to let me know the dates on which they had signed their contracts?

Mr Watzlaff —We would provide a full report at that time, yes.

Senator CHRIS EVANS —Let me just follow that through. I have gone back over the earlier Hansards and I just want to be clear on the scope of your investigation. As I understand it, you are investigating allegations that the dates for the signing of contracts might have been misrepresented, that people may have made fraudulent claims about the dates on which they entered into agreements. Is that the extent of your investigations?

Mr Watzlaff —That is right. Under our act, we are empowered to investigate for breaches of the Health Insurance Act. So the lodgment of a false document with us would be an offence and we would be able to investigate and we do investigate those sorts of things. So we would be looking at obtaining evidence as to whether or not any documents lodged with us in the course of these applications for recognition as eligible MRI sites contain any false information. We would also be looking at the question of whether or not the statutory declarations were false and that would be a separate offence as well.

Senator CHRIS EVANS —But the other concern that has been raised has been the question of whether or not certain parties had access to information as to the budget decision earlier than the announcement in the budget. That, of course, is not within the scope of your investigation.

Mr Watzlaff —No.

Senator CHRIS EVANS —So those concerns will not be addressed by your investigation; you will merely report on whether there has been, if you like, strictly criminal activity in terms of the dates of the contracts.

Mr Watzlaff —That is our role—to investigate fraud against the program.

Senator CHRIS EVANS —Perhaps, Mr Podger, I could ask you a question which I raised at a previous estimates round. We got a bit off the track and I did not nail you down on it. I just want to be clear whether the department has conducted any other investigations, made other inquiries into matters other than those that Mr Watzlaff is conducting in particular in relation to questions about whether the secrecy of the process leading up to the budget announcement was maintained, whether anybody gained undue commercial advantage by having access to that decision prior to its announcement—those sorts of issues.

Mr Podger —The department has not got access to the detailed material that the HIC has got and has not been, therefore, in a position to undertake any other examinations. As has been mentioned before, the issue of general understanding that the possibility of MRI coming on to the MBS was known. That was widely known ever since there had been a report by the ARTEC about the matter and there had been discussions quite openly with the profession before the more detailed discussions with a small group during the budget process.

Senator CHRIS EVANS —I understand that. I am not asking you whether you have got access to the information that Mr Watzlaff's section is dealing with. I am asking you whether you have conducted any investigation or made any inquiries in relation to that budget process, the negotiation process, and whether or not any undue commercial advantage might have accrued to parties who were party to that process.

Dr Morauta —I think, Senator, if you are asking has there been any investigation into the possibility of a leak from the department, I think, no, there hasn't. I think we are confident that there was no such leak about the supply measure.

Mr Podger —If there was to be any further investigation of that, it would depend upon the information that might come out of the HIC study. We are not going to be able to do it without that sort of information.

Senator CHRIS EVANS —Why is that, Mr Podger? Sorry to interrupt, but I do not understand that. That is why I was very keen to get it clear that there is a very limited nature of the inquiry being undertaken, which goes to the question, as I understand it—correct me if I am wrong—of whether effectively people have falsely claimed that contracts were entered into prior to the budget announcement. That is a very specific allegation about falsifying documents. That did or did not occur. Mr Watzlaff is investigating that. The answer to that will be forthcoming. There is a separate issue of whether or not certain parties had advance knowledge of a budget decision and were in a position to take commercial advantage of that. It seems to me quite separate.

Mr Podger —There have been some suggestions, as you say, of the latter. But in the HIC's case, there has been some material put to the HIC anonymously. That material has not been put to the department, and the department has not had any basis for any investigation of the issue that has been speculated.

Senator CROWLEY —Senator Evans asked, Mr Podger: have you made any inquiries or have you asked questions about this matter? I am not sure that you actually answered that.

Dr Morauta —If you are talking about the supply side measure and the decision within Government on that, we reviewed the process and we are satisfied that there was no leak.

Senator CROWLEY —You reviewed the process?

Dr Morauta —We went through the sequence of events and looked at what had happened when, and we were quite clear in our mind that—

Senator CROWLEY —So the answer is, yes, you did make some inquiries?

Dr Morauta —We looked at it internally. There was no formal—

Senator CROWLEY —So the answer is, yes, you did make some inquiries?

Mr Podger —There was not an external or major review undertaken.

Senator CROWLEY —Senator Evans's question was fairly specific: did you make any inquiries about this matter?

Dr Morauta —Not external to the department, no, Senator.

Senator CROWLEY —Did you make any inquiries?

Mr Podger —We had an examination internally of the process.

Senator CROWLEY —The answer has to be yes because I think, Dr Morauta, you said, `We could find no evidence that there had been any information leaked', which presumably meant you had to do some—

Mr Podger —I think if I had answered the question and simply said, `Yes, there had been inquiries', the immediate assumption would be that we have been involved in a process of asking external people questions. We have not done that.

Senator CHRIS EVANS —That is the point, isn't it? Within the department you made some inquiries about whether or not you had leaked. So the department had a look at its own processes and whether it was responsible, and it found that it wasn't. But that still leaves another subset. We have the question of falsified contracts. We have the question of whether the department leaked and a question about whether other people with commercial interests had access to the information.

Dr Morauta —We don't believe they did, Senator.

Senator CHRIS EVANS —On what basis do you form that opinion?

Dr Morauta —Because the supply side matter was a matter held very closely within a small circle within the department.

Senator CHRIS EVANS —With respect, Dr Morauta, you are also the person who told me that at most there were going to be 10 to 15 machines that were not in operation on budget night. We are up to 30 and climbing. Something is going on here.

Dr Morauta —I don't think that we have got a clear picture of the causal connection there.

Senator CHRIS EVANS —I concede that. I think it is fair to say that I have been trying to find it—very unsuccessfully. But when you reassure me about all of this stuff, I go back to the first time we had the discussion. Quite frankly, it seems to me that the department has not had as good a feel on this as Professor Sage has, who looks like coming in spot on in July 1998 in predicting how many applications were around. You were way out. That has had an enormous impact on the costs of the measure. You told me at that first round, too, that the department's advice was that there were enough machines currently in operation. Now we have another 30 and growing. It seems to me that we have to get to the bottom of this. The department seems to have been unwilling to make inquiries, but now you tell me you are confident that there is not a problem. I am happy for you to assure me of that. I would be happier if you told me that you have got somebody in, you have had an investigation from somebody who was not involved and here is the report. On what is your confidence based?

Dr Morauta —That it was held very close, that it was done in a very tight time frame and that there was no opportunity for any external people to know of the supply side position.
Senator, I have to say that I think the ordering of machines over the period from when it was known that it was going on the MBS might be a response to the possibility of it going on the MBS as much as it might be a response to knowledge of the particular supply side measure eventually put in right at the end of the process.

Senator CHRIS EVANS —I guess that is a reasonable hypothesis. But they are machines that cost $2.5 million to $3 million[hyphen]plus. Now we have found that, although we had 60 over the last 15 years in Australia, we have suddenly got 30 ordered within a matter of months.

Dr Morauta —The government made a commitment to increase access to MRI. That was the response of the ARTEC report.

Senator CHRIS EVANS —I am told that some of the providers got four or five machines each. That is big money—four or five times $3 million plus all of the other costs involved. I do not know many businesspeople who invest that sort of money on a hope that something might occur. As I say, if I had the dates for the applications I would be a lot clearer as to whether I should be suspicious or not.

Senator WEST —Are these machines being leased or being purchased outright?

Mr Watzlaff —I think most of them are leased, or at least the ones that I have seen tend to be leased. I could not really give a total picture, though; that is not really an issue that we have looked at in detail.

Senator WEST —A couple of weeks ago there was an interesting ad in the Weekend Australian . On the bottom corner of the front page there is a reference to the National Australia Bank and the statement `You need new radiology equipment in a hurry but you haven't got the cash? We can arrange lease arrangements within a week'. That struck me as interesting. Do you know whether there are any—

Mr Watzlaff —I could not really comment on that.

Senator CROWLEY —Have you seen the ads?

Mr Watzlaff —No.

Senator CROWLEY —You do not read the Weekend Australian then?

Senator EGGLESTON —I have a question about multiple ownership of MRIs. Is there any information about location in terms of practices having multiple or several MRIs? They might be located in different parts of a city servicing different populations and, therefore, quite rationally servicing a different need?

Mr Watzlaff —We do have all of that data. I have not really analysed it from the point of view of the mix from individual practices, but that certainly could be done quite readily.

Senator EGGLESTON —It would be interesting to see that information.

Senator CHRIS EVANS —Taking up Senator Eggleston's point, as I understand it there was supposed to be some relocation money available for grants? One of the criticisms of the old system was not that we actually had too few machines but that they were not necessarily located in the best possible locals. Apart from this issue of the explosion in the numbers, we have this issue of the minister announcing relocation money?

Dr Morauta —That is right. The minister has written to the states. Not all of the states have been particularly quick in coming back. We have now put the money over to the beginning of next year for a general consideration of these relocation and adjustment grants to assist machines to get in a better position geographically to assist the population.

Senator CHRIS EVANS —Does that mean none of that money was spent in the last financial year?

Dr Morauta —That is right.

Senator CHRIS EVANS —Do we have any program in place for relocation, or are we just waiting on information back from the states?

Dr Morauta —We have written to all of the states and we are also going to put out a general advertisement for expenditure to flow in the first half of this coming year on the scheme.

Senator CHRIS EVANS —What does that allow you to do? What will you fund, how much will you fund and for what purposes?

Dr Morauta —It is not to buy a machine, but it is to assist in moving a machine or for a financial analysis of a machine. It is about assisting people to reposition machines, not to pay for them. There is quite a lot of money involved in moving it from one place to another and building a structure in which it can go.

Senator CHRIS EVANS —So how much are you prepared to fund anybody to the tune of?

Dr Morauta —Some $300,000 or $400,000.

Senator CHRIS EVANS —Have you had any grants for such funds?

Dr Morauta —No, we have not made any grants yet. We have had expressions of interest from a couple of states and we are waiting to be sure that we have got everything in from them before we proceed to allocate the money. So we do it in one go.

Senator CHRIS EVANS —I thought the minister announced a relocation late last year?

Dr Morauta —I think it was subject to a formal application from the state government, the details of which are still in process.

Senator CHRIS EVANS —So he announced it, but it has not happened?

Dr Morauta —He announced that it would be eligible for the scheme when it emerged, but I think this application has not completely emerged yet.

Senator CHRIS EVANS —So this is the Liverpool unit, is it?

Dr Morauta —Yes.

Senator CHRIS EVANS —Was it to be relocated to Liverpool or from Liverpool?

Dr Morauta —To Liverpool.

Senator CHRIS EVANS —And you say that has not happened because the state government has not complied?

Dr Morauta —We needed detailed applications, Senator. That has not been received.

Senator WEST —Do we know where these 89 are located across the country, or are they just out there?

Mr Watzlaff —Yes, we have the postcode locations.

Senator WEST —Could we have those, please?

Dr Morauta —Yes.

Senator CHRIS EVANS —Would we be able to get a more detailed location than just the postcode—the actual hospital or site?

Mr Watzlaff —Yes, I do not see any difficulty with that.

Senator CHRIS EVANS —Thanks.

Senator WEST —And also the ones that are pending, please.

Senator CHRIS EVANS —Some of those would not be located as yet, I suspect.

Dr Morauta —The ones that are not claiming now, but we hope that if they are claiming they are located somewhere.

Senator CHRIS EVANS —Yes.

Senator WEST —We would like to know where they are going to be located. Surely they have not just ordered the machine and left the location up in the air, have they?

Senator CHRIS EVANS —Not if they have an MRI.

Mr Watzlaff —There have been allocations made, but some MRI units are looking for a home.

Senator CROWLEY —Is there any substance to that claim?

Mr Watzlaff —It is just general industry scuttlebutt.

Senator CROWLEY —No evidence that you have discovered yet?

Mr Watzlaff —Well, in the sense that the things we are looking at have found a home, we have not really been looking at that as a specific issue. I am going back a little in time.

Senator CHRIS EVANS —Is that the 14 subset? The eligible units not yet accessing Medicare, are they actually the subset who have not found a home?

Mr Watzlaff —No, they all nominate a location, but there have been occasions when people have wanted to move a location from one place to another.

Senator EGGLESTON —Do you have an accessibility factor that you take into account in locations?

Mr Watzlaff —No, that is not an issue for us.

Dr Morauta —But it is an issue for the adjustment and relocation scheme. Somebody might have planned to put one in one place, but then the population and public need might suggest it would be better elsewhere, and they might come to us for assistance in relocation.

Senator EGGLESTON —Do you have a population criteria or something like that—one MRI per half a million people or something like that?

Dr Morauta —I think it is more generally expressed than that in the criteria for the scheme as public access.

Senator EGGLESTON —But that must be on the basis of something.

Dr Morauta —Can I take that one on notice? I do not have the criteria with me for the relocation scheme. But in the efforts of the states, it has been set out. I just need to bring that forward.

Senator CHRIS EVANS —But it is a good point, isn't it? Your evidence, the first time we discussed this, was that you thought the 68 machines you were going to get was about right to meet your needs. Now you have 89, and you have to pay people to relocate them. So you have 21 more machines than you thought you needed, and you are going to pay people to put them in a place where they can make a better profit. That is very generous.

Dr Morauta —Or provide that service.

Senator EGGLESTON —But is it a question of service more than profit—better service to the public?

Senator CHRIS EVANS —The relocation program was based on the argument that we had enough machines but we did not have them in the right places. Now we have 30 more machines. I suspect we have the coverage we need, haven't we?

Mr Podger —We may or may not. It depends on where they are located.

Senator CHRIS EVANS —If they are located where they are not needed, then we have a problem with overservicing, I gather.

Dr Morauta —The arrangements in the scheme are quite tight in terms of referrals and the reasons and grounds for referrals and a number of other things. So it is not clear to us whether there is any overservicing occurring at the moment, and that is something that will be taken up in the review.

Senator WEST —But weren't you talking to the college last week about the fact that the increased rate of servicing—if it kept on going—would hit the ceiling and beyond?

Dr Morauta —That was more generally for the radiology item. The MRI issue is slightly separate from that. The $35 million target is merely a result of the growth in the rest of the DI table.

Senator CHRIS EVANS —But you conceded that the MRI was likely to be over target at the end of the period as well, didn't you?

Dr Morauta —Yes, but it is not part of the $35 million at the moment.

Mr Podger —We are predicting that the MRI looks like being over in years two and three. And that is an issue we will have to look at in the review at the end of this year. There may be a number of different ways of addressing that which we will have to look at with the profession.

Senator CHRIS EVANS —A large part of that is why you got 50 per cent more capacity.

Mr Podger —One of the reasons will be because there are more machines than we had expected, yes.

Senator CHRIS EVANS —Can I take Dr Morauta back to the question of the process by which we arrived at the budget decision. Dr Morauta, I think on a previous occasion you told me that there was a working group of the college set up to negotiate the arrangements in relation to MRI; is that right?

Dr Morauta —Yes.

Senator CHRIS EVANS —They were all members of the college, appointed by the college?

Dr Morauta —Yes. I think we have provided—

Senator CHRIS EVANS —When I asked a question on notice you gave me a list of the names. Thanks for that. I just wanted to check that they are, in fact, the college's representatives, selected by them, with whom you negotiated.

Dr Morauta —Yes.

Senator CHRIS EVANS —Were they the only people you negotiated with?

Dr Morauta —Yes, I think that is right.

Senator CHRIS EVANS —So there was no other group you were negotiating with at the same time?

Dr Morauta —No.

Senator CHRIS EVANS —A rival organisation?

Dr Morauta —No.

Senator CHRIS EVANS —Whom did the college's negotiating team meet with? I know they had a couple of meetings with the minister later on.

Dr Morauta —The thing was negotiated with the department.

Senator CHRIS EVANS —So departmental officers were the other side of the equation?

Dr Morauta —Yes. I will just check, but I think they had a consultant who worked for the college. Yes, there was a consultant for the college.

Senator CHRIS EVANS —Do you know who that person was?

Dr Morauta —Peter Geary.

Senator CHRIS EVANS —And he was part of their negotiating team?

Dr Morauta —I think he was assisting them.

Senator CHRIS EVANS —Who acts for the department?

Dr Morauta —Ms Rogers, who was assistant secretary at the diagnostics and technology branch, and her staff.

Senator CHRIS EVANS —Is Ms Rogers still with us?

Dr Morauta —She has moved to another job.

Mr Podger —She is looking after the blood inquiry.

Senator CHRIS EVANS —I notice that she was with us at the first round of estimates and has not come back. I did not know whether we had said something wrong. So she was the senior officer on the department side?

Dr Morauta —Yes.

Senator CHRIS EVANS —How often did they meet?

Dr Morauta —It sounds like about four or five times. Is this the one where we provided dates of the meetings, or not?

Senator CHRIS EVANS —No, the dates of the last couple of meetings. I think that was when we were discussing the issue of the timing of the budget announcement and the last couple of meetings. I gather this process started well before the previous year. I think that was the point Mr Podger was trying to make to me earlier.

Dr Morauta —I think there were seven meetings held with the college and one meeting with the minister. I am sorry, I will have to take on notice the question about the dates of those meetings.

Senator CHRIS EVANS —If you would not mind, because I think the only two dates I have are the last couple of dates when we were discussing when they met and the process up to the budget decision. I think the fifth was the last meeting where I think you said they finalised the position, and then subsequent to that the minister—

Dr Morauta —Let me take that on notice. I do not have the dates of all the meetings we held in relation to the agreement. I need to go back on the records and provide you with that. But it certainly goes back to Christmas or so—not before.

Mr Podger —When I mentioned matters before that, it was not in terms of formal negotiations. It was more in general discussion following the ARTEC report. For example, there was a meeting of the college in Adelaide at one stage at which I was asked to speak.
I was asked questions on MRI and was the government looking at it, and the answer was: yes, the government was looking at it.

Senator CHRIS EVANS —I finally found the answer on notice that you gave me about who represented the College of Radiologists. Mr Geary was not on that list you gave me. Was he at the meetings?

Dr Morauta —I think that would be because he was not representing. I think he was assisting.

Senator CHRIS EVANS —I ask that question again then: were there other people at the meetings? We have now established that Mr Geary was one. Were there other people at those meetings who were not on the grants list of their negotiating group and were not represented in the department? Were there other people at any of those meetings involved in this process?

Dr Morauta —Let me take that on notice, Senator. The only possibility is something like the CEO of the college, but I need to check it. We should have a record of each meeting that lists the persons present.

Senator CHRIS EVANS —I appreciate that. Can you just take me through the process then. You are going to let me know about the numbers and I won't not hold you to the numbers and dates. But there was a series of meetings between the radiologists and the department at which you thrashed out the bones of this proposal; is that right?

Dr Morauta —That is right, yes.

Senator CHRIS EVANS —At some stage, then, the minister was involved. Was he involved to sort out the final detail or was he just involved in the sense of coming in to ratify the deal sort of thing? Put the supply side issue to one side; I accept what you said about that.

Dr Morauta —I think the minister would have come in, as he does in these things, towards the end to confirm his support for the arrangements that were emerging and to let the college know that he was alongside the arrangements and knew what was going on. I think it would be more of that kind of ratification.

Senator CHRIS EVANS —That is what I was trying to get at. So he was not involved in the detail all the way along?

Dr Morauta —No.

Senator CHRIS EVANS —He was at the last couple of meetings and ticked off on it. You said to me that the college put propositions about the supply side solution. Did they put one solution or a number of solutions to that problem?

Dr Morauta —I think I provided an answer to a question on notice on that, Senator. I'm not sure whether you've got it. I think I have provided it, but I do not know quite where it has finished up. We indicated that they suggested things like quota systems for MRI scans, perhaps health program grants, limiting supply to currently operating machines—things like that. They did not actually suggest the thing that actually happened.

Senator CHRIS EVANS —So was it one of the issues canvassed at the meetings with them?

Dr Morauta —No. I think they knew something had to happen, but they left it to us to decide. In the agreement it makes it clear that the supply side matter is a responsibility of the government.

Senator CHRIS EVANS —That's right. I am just trying to ascertain whether there was a discussion about the final option considered at those meetings?

Dr Morauta —No.

Senator CHRIS EVANS —So it would have come as a surprise to them on budget night?

Dr Morauta —Yes.

Senator CHRIS EVANS —Which was their preferred model to the supply side problem?

Dr Morauta —I think I cannot answer that. I will just take on notice whether they did express a preference among these arrangements.

Senator WEST —If they didn't put up the supply side model, who did?

Dr Morauta —The government decided on the supply side measure that was put in place.

Senator CHRIS EVANS —And we are quite clear that the department did not put that proposition or float that as an alternative in those meetings?

Dr Morauta —I'm quite certain about that. They did not want to be engaged in that. They thought it was commercially difficult and so on, and they wanted the government to take all the weight of that decision.

Senator CHRIS EVANS —Why would it be commercially difficult for them?

Dr Morauta —Well, they did not want to engage in judgments around those kinds of issues. They thought that it was more appropriate for government to make those decisions.

Senator CHRIS EVANS —Is that because they thought they had conflicts of interest?

Dr Morauta —Yes.

Senator CHRIS EVANS —So did the members—

Dr Morauta —Well, not just conflicts of interest, but also the fact that even if the people on the thing were not involved, other people outside would be affected by the decision and that might create all kinds of difficulties—those sorts of things. They wanted the government to take the decision. It was very clear.

Senator CHRIS EVANS —Did the members of that working group declare their personal interests in the issues? Was there a declaration of interest process?

Dr Morauta —I do not know the answer to that question.

Mr Podger —We can check that out, but by definition they all had an interest. I think it would have been hard to have a specific declaration when they all had an interest.

Senator CHRIS EVANS —I guess I am suggesting that if you had five machines on order you had a fairly big interest. I would have thought it was something you might raise. I guess I am asking: did members of the committee raise the issue of whether or not they had already ordered the machines or had entered into contracts to purchase machines?

Dr Morauta —We can take the question on notice and see if we have any evidence on that point. I think that they would largely know each other's interests in the business, as Andrew has said. I'm not sure that we will get anything by looking, but let me look at the record and see if there was a discussion of that in the meeting. I am just not sure whether the record will show it.

Senator CHRIS EVANS —Whether they know each other's interests or not is not the point. I'm asking what you knew. You were negotiating with these people and so I'm interested to know what the department knew about the personal commercial interests in the decisions being made of the people who they were negotiating with. Was there a process whereby their commercial interests were declared, was that recognised as part of the process and did it affect the way you handled the issue?

People have been at pains to stress to me that the supply side issue was put to one side. I have never quite understood why. So I am interested to know. You say to me that the radiologists were keen to leave that to government. Maybe they had their own reasons for not wanting to be involved in that decision. Given that the government negotiated this issue with these people, I just wondered whether or not there was a process for them declaring their interests, whether the department was aware and whether the minister was aware of the interests they had in this issue and, if you like, what process surrounded that?

Dr Morauta —I think that the department would have known which of the members of the committee had MRI machines and what general business interests they had in the field, but I think it would be unlikely that they would know who had things on order. I'll have to check that, but I think it would be unlikely that they would know that.

Senator WEST —How many of the committee who did not have MRI machines at the beginning of the consultation process now have them?

Dr Morauta —I could not answer that question, Senator.

Senator WEST —Would you like to look at it? Have you looked at it?

Dr Morauta —Yes, we will take that one on notice, Senator.

Senator CHRIS EVANS —Obviously that is a pertinent issue. Quite frankly, with all due respect to Mr Watzlaff, that is where maybe his inquiry is too limited, not through any fault of his own. I am not casting aspersions, but it seems to me that we are not getting any investigation of these more general issues that I raise and the inquiry that has been conducted goes to a very narrow set of questions. Some of the concern that has been expressed in the industry and raised with me goes to broader issues. We are interested in how many of these 30 machines might have been purchased by people closely connected with representatives of the negotiating group. I am not making any allegations, but it seems to me a reasonable question to ask. It has also been put to me that one of those members did declare an interest and he made his position quite clear. That has been put to me in defence. I have no reason to disbelieve that, but I would have thought that if that is the case it would have been put to the department.

Dr Morauta —I'm sorry, Senator, but because we have had this change of hands I need to go back and look at the question of this declaration of interest. We said that we will take that on notice. As a general comment, I would say that in both pathology and this area, although this area has higher capital investment, we are in negotiating these agreements dealing with businesspeople—people who are in business and who obviously have an interest in the outcome.

It is a much more attenuated process, for example, than general practitioners, where there are a very large group of people. These are much more concentrated industries and I think that it is an inevitable feature of the work that we are doing here that we are dealing with people with business interests. I think that there are a number of issues you have raised which are important about how they handle those interests in the process, but I do not think that there is any avoiding doing this in this way.

Senator CHRIS EVANS —No, I think that is right, Dr Morauta. That is why I have been very careful about what I have said about it, and I do not wish to cast aspersions on anybody. It is a small group, they all have interests and it is a growth field, et cetera. As I say, I have been informed that one member of the committee at least claims to have declared their interest with the department so there would not be an allegation of conflict of interest.

Senator EGGLESTON —In setting a criteria where you are providing this diagnostic imaging service, because it is a better service and helps elucidate problems more clearly and you are seeking to provide greater ability to it from the public point of view, that must be, surely, your guiding principle, as it would be with the committee concerned. Inevitably, you have got business people and radiologists who, you might say, have a vested interest, but basically it is about providing a diagnostic service to the community, surely?

Mr Podger —Clearly, the purpose of the whole deal was, firstly, to put a cap on growth; and, secondly, to introduce access to MRI, which has been very much more limited than previously. That was the aim of the exercise. In negotiating with the industry, we were inevitably going to be dealing with people who had personal interests at stake. I guess we have said that we will take on notice the particular processes in those discussions about declarations of interest, but what we have made clear is that the discussions of the particular supply site measure was left to the department and the government to settle. It was not settled in that particular forum with those people. There are also a range of reasons why most of the profession would have been aware that there was consideration of the MRI being put onto the MBS scheme in one way or another.

Dr Morauta —The ARTEC report really set the scene for that by saying that there was an undersupply, and it would appear almost from then on that the government would have to respond to that in some way by increasing access.

Senator CHRIS EVANS —Is that clear, though, Dr Morauta? I thought that it was quite the opposite. I thought the implication of the report, in fact, was that the government would have to respond only by making some provision for relocation and better usage of the machines that were currently located and working.

Dr Morauta —No, I do not think that is right. I am ready to take advice, but the ARTEC report said that there was an undersupply in Australia compared to other countries and that there was room for expansion of services. Is that right?

Senator CHRIS EVANS —I am not sure that that sits quite comfortably with what I have been told by others, and I thought by you earlier.

Dr Morauta —Let me revisit that and take it on notice.

Senator CHRIS EVANS —I am not accusing you of misleading at all. Certainly, the conclusion I drew was that that was true in terms of the publicly funded facilities, the 18 machines. But I thought your evidence was that that report and your own department's view was that the 60[hyphen]odd machines that were currently available were sufficient to meet the needs; that, yes, we have slightly less usage than some other comparable countries but that that was not a concern in that you thought that was still a reasonable number of machines to meet the demand and you were looking at ways of better using those machines to provide better access for those communities that could not access them, et cetera. So maybe it is just a difference of emphasis.

Dr Morauta —I am not really sorting myself through this very well, Senator. My briefing says that while the ARTEC report recognised the need for an expansion of publicly funded MRI services, ARTEC also concluded that there is currently an excess capacity in Australia, albeit with some geographic maldistribution of units. So the issue appears to be about the funding of MRI services, you are right, rather than the actual number of machines available.

Senator CHRIS EVANS —And that is why it seems to me it would have been reasonable to think that there might have been a relocation scheme or a change in the status of those in operation but not something—

Dr Morauta —Bringing other machines under this umbrella, yes.

Senator CHRIS EVANS —Which is where we have ended up.

CHAIR —Are there any more questions in outcome 2?

Senator WEST —Yes. Can I just ask, following on this DI stuff, we have got the table of numbers of services and they are still chuffing along at a pretty great rate. I note ultrasound is still growing at 12 per cent a year, CTs are still at nine to 10, new commencements at about eight. Where would you expect to see the drop? If MRIs are actually going to affect this DI modality and cause a change in servicing and request practices, where would you expect to see the drop? Where is the change going to occur?

Dr Morauta —I will ask Dr Primrose, who is an expert in this area, to talk a little about the relationship between CT and MRI.

Dr Primrose —We mainly expect MRI to have an impact on imaging of the central nervous system and of joints.

Senator WEST —Sorry, the central nervous system?

Dr Primrose —And joints. In terms of the central nervous system, the trade[hyphen]off would be in terms of the CT scan and angiography and pneumoencephalography, although that was largely replaced by CT when that came along.

Senator WEST —Where is angiography—and diagnostic radiology, is it?

Dr Primrose —Yes, that is right.

Senator WEST —We got a drop with CTs in July, August and September, but after that it seems to have plateaued out and we were only doing 2,800 MRIs according to this sheet in September. So it would appear not to—

Dr Primrose —I think it is a bit hard to know what the final patterns of utilisation are going to be, because when you introduce improved access to a newish modality like this, you have got a prevalent pool of patients who have been waiting to have the scan, and then after that period of time you go on to incident cases, or new cases. So I think probably at this stage it is a bit early to know.

Senator WEST —Have you looked at the MRI prescribing patterns?

Dr Primrose —Yes, we look at that.

Senator WEST —What are you seeing at this stage? With the MRIs that are being done now what has been the waiting time for patients?

Dr Primrose —That they have to wait?

Senator WEST —Yes, to get into the MRI. You said there was a backlog.

Dr Primrose —I don't think that we have recorded that but we know that there was a pool of patients who, because of the access problems that we talked about earlier on, were waiting for a scan, particularly when it was known that it was going to come on the schedule. So once those patients have been scanned, you would be going more towards the pattern that would be driven by the incidence of new disease.

Senator WEST —Are you beginning to see that now?

Dr Primrose —I think by the end of the year, when we do the review, we will have a much clearer idea. We would certainly expect a reduction in CT scanning of the central nervous system and limbs over time if there was the appropriate use of MRI vis[hyphen]a[hyphen]vis CT.

Senator WEST —Right. Why is the growth in ultrasound occurring?

Dr Primrose —I think that is a very complex issue. I think some of it is the availability of new technologies like echocardiography. Admittedly, that is not totally new but there are new applications for it. I think that there has been the new use of abdominal ultrasound in people who have got blunt or penetrating abdominal trauma to look for haemoperitoneum. So that has tended to be used on presentation in the emergency department. So I think that there are new indications for it, but there is no doubt that there is an underlying strong increase in the use of ultrasound at a general practice level in terms of ultrasound examinations per 100 consultations.

Senator WEST —Where are we seeing ultrasound units? Are only radiologists permitted to operate them or read them? Is there some restriction in relation to ultrasound?

Dr Primrose —In terms of Medicare benefits, they have to be rendered under the supervision of a medical practitioner, but it is not only radiologists. Radiologists provide about 70 per cent of ultrasounds. We can give you the exact breakdown of this. But physicians of various sorts do as well—such as obviously cardiologists for echocardiology and physicians for nuclear medicine. Then you have obstetricians and gynaecologists for the obstetric and gynaecological scans and then you have urologists, of course, for the ultrasound scanning of the prostate. We can give you a complete breakdown of the specialities of the providers.

Senator WEST —With all due respect to general practitioners in some areas, it is not the sort of thing I would want to have undertaken and read by somebody who was not well qualified and proficient.

Dr Primrose —That is true. But the provision of ultrasound by GPs only accounts for a small minority of it. I cannot give you the details at the moment. I do not have those in front of me, but we can certainly provide them.

Senator EGGLESTON —Wouldn't it mostly be in obstetrics—basic obstetric ultrasounds done by GPs?

Dr Primrose —Yes, of the minority of services that were done by GPs, I imagine that obstetrics would account for most of it.

Senator WEST —I am sure I read research recently that looked at the frequency of ultrasounding of foetuses and at birth weights and failure to thrive. Is there some adequate research on that to indicate the impact of excessive ultrasonography?

Dr Primrose —I do not think there is evidence of a deleterious effect of ultrasound on foetal birth weight. Obviously, the higher risk pregnancies are going to have more ultrasounds, anyway, so that would be a major confounding effect. The evidence in this area was recently reviewed in the paper that was done by the Australian Health Technology Advisory Committee for the ultrasound forum that was held last year. We could give you a copy of that. That has a section that looks at obstetric ultrasound and the impact it has on outcomes.

CHAIR —We have reached the stage at which we need to decide whether to close. I need the committee to tell me if they wish to go on for another 10 minutes and round up Outcome 2. Otherwise I propose that we adjourn the meeting.

Senator CROWLEY —I think the questions I have would not take very long to deal with.

Senator CHRIS EVANS —I have some more, anyway.

CHAIR —If we have to bring the officers back for Outcome 2, there is not much point taking it any further. I thank officers for their attendance. The meeting stands adjourned till 9 a.m. tomorrow.

Committee adjourned at 11.01 p.m.