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Wednesday, 13 November 2002
Page: 6205

Senator EGGLESTON (12:50 PM) —I would like to talk about changes which have occurred in GP medicine in recent times, particularly the corporatisation of medical practices. Many people may have noticed a difference in their local medical practice in recent times and found that their small, local surgery may have been replaced by a mulitidoctor, multiservice corporate practice.

Over the past 20 years, there has been a trend towards corporatisation of general practice, and in the past few years it has rapidly increased. What, you may ask, is meant by corporatisation of general practice medicine? Corporatisation of general practice medicine basically involves doctors entering into agreements with companies whereby they have use of their consulting rooms and practice management services in exchange for a percentage of their incomes, usually 50 to 60 per cent. In some cases, corporatisation of general practice has gone hand in hand with vertical integration of medical services, so that the corporations also have interests in specialist and diagnostic services, including radiology, pathology and, sometimes, physiotherapy and pharmacy. All of these services are generally located in the same large medical centre.

Western Australia has been very much at the vanguard of the corporatisation of medicine, with many independent general practices being purchased by corporations. Nearly 50 per cent of general practitioners in Western Australia are involved in corporate medicine. Other states have not experienced such a rapid rate of corporatisation. GP medical practices have been aggressively targeted by these corporations, and doctors have been offered large sums of money to sell their practices to them. I have heard of offers of more than $1 million being made to some general practitioners, and in other cases combinations of cash and equity have been offered.

Major companies involved in corporate medicine include Foundation Healthcare, Endeavour Healthcare, Primary Healthcare, Gribbles, and Mayne Health. An April 2001 article in Australian Doctor cited estimates that around 2,500 GPs—about 10 per cent of the total number of general practitioners in Australia—have been contracted to one of the five large medical companies. Also, a newspaper article in March of that same year referred to a prediction that up to 50 per cent of GPs will work in a corporate medical practice within the next three to five years. However, this prediction now looks unlikely to be fulfilled, for several reasons. Medical company earnings have generally not met expectations, share prices have fallen and amendments to the Privacy Act now require a patient's consent for the transfer of medical records—all putting a break on further acquisition of general practices by corporations. Some writers, such as Paul Fitzgerald, writing in the Medical Journal of Australia in July 2002, believe:

Although corporations have a large share of the Perth market ... it is unlikely they will achieve more than 20% of other metropolitan markets, such as Sydney or Melbourne.

Corporate medical practices have been lauded as having benefits for consumers and doctors alike. For doctors, it is said that they can concentrate on what they do best—that is, practising medicine. For patients, corporate practices are being promoted as being customer friendly, offering good customer service. Because they employ a large number of doctors, corporate practices, unlike the traditional family doctor or sole general practitioner, are able to operate seven days a week and for extended hours. Corporations are building new large medical centres which offer the most up-to-date facilities. Patients are thus saved the inconvenience of having to travel elsewhere for specialist and diagnostic services, because they are all offered under the same roof.

For all of this, the advent of corporate medicine has been greeted with suspicion and even outright hostility in some quarters. The Australian Medical Association has expressed reservations about corporate medicine, in its scoping paper on general practice corporatisation. The most prominent concern is the vertically integrated nature of corporate medical practices. Corporations impose a third party on the doctor-patient relationship and there is a fear that GPs will be pressured by the management of these corporations to refer patients to the corporations' own in-house services, thereby eroding patient choice and the doctor's own clinical autonomy.

General practice in and of itself is not overly profitable. In 1999-2000, the average Medicare payment to general practitioners, including those working part-time, was approximately $110,000, out of which gross income the GP has to meet the expenses of running his practice. A bulk-billing general practitioner wanting to generate an after-expense but pre-tax income of $130,000 needs, it has been estimated, to conduct 37 standard consultations a day, five days a week, 48 weeks of the year. By way of contrast, the average Medicare payment to radiologists was $650,000 per annum, and the average to pathologists was more than $600,000.

This raises the question of why corporations have been willing to pay relatively large sums of money for general practices. The answer perhaps lies in the general practitioners' role as gatekeepers to the health care system, in that it is they who prescribe the medications, order diagnostic tests and refer patients to specialists. As Dr Paul Fitzgerald, who contributed to the AMA's position paper on the corporatisation of general practice, said on Radio National:

You don't buy general practices because general practices are good business, you buy general practices because you want to buy their referrals.

Beth Quinlivan, in an article on corporate medicine, cites the KPMG report entitled `Corporatisation of general practice' when she says:

... for every dollar of Medicare income paid to a general practitioner, $1.60 is paid by Medicare for a specialist service. If a doctor's referrals can be controlled—or directed—a large slice of that specialist market can be tied in. If a medical centre has, for example, 10 full-time general practitioners, each generating $200,000 of Medicare income a year, they are also generating on average $3.2 million a year in downstream specialist billings. If a substantial part of that is picked up by businesses or specialists who work in the same corporate group, it is a good income stream.

Obviously this may raise concerns about the independence of GPs in corporate medical centres. In its scoping paper, the AMA has said that GPs in some corporate medical centres have complained of pressure to turn patients over rapidly, loss of personal relationships with patients, and professional compromises to meet the requirements of the owners. Associated with this are concerns that doctors in corporate practices will come under pressure from management to overservice. However, on Radio National in August last year the then Minister for Health and Aged Care, Dr Michael Wooldridge, said that there was no evidence that corporatisation of general practice had resulted in overservicing and that, if the government did get information that this was leading to a blow-out of costs in medicine, it would act very quickly.

As is well known, all medical practitioners are under constant computer surveillance of their practice modus operandi, referral and prescribing patterns, so any variation is quickly noted. However, the other side of the coin is that many GPs working in corporate practices report that consultation times are often longer—15 minutes instead of 10 minutes or less—so that they practice better medicine and also enjoy being free of the responsibilities for the business management and administration of medical practices.

Mr Ed Bateman of Primary Healthcare has said that most of the general practitioners there run their own practice and the people who come to see them come to see their family doctor. He said that doctors have accepted corporatisation because of economic forces, stating that for more than 20 years there has been a `cost squeeze on general practitioners'. Initially, he said, they worked harder, but they get to the point where they have to look at alternatives. The alternative many have chosen is to be involved in a corporate medical practice. Doctors also report enjoying access to the more technologically sophisticated equipment which the big medical practices usually provide, and they enjoy having ancillary staff available such as treatment room nurses, which a solo GP usually cannot afford. A further matter of longer term concern over the corporatisation of medicine is that it will provide an impetus towards managed care as per the American model, whereby referral and treatment decisions are made by protocol and the management choices of doctors are thereby circumscribed.

Corporate medicine appears now to be well established. But there is a series of questions I think which we as a community need to ask ourselves about corporate medicine and about whether it is in the best interests of the community as a whole. Firstly, is it in the public interest that general practices be vertically integrated with specialist and diagnostic services? If it is, should there be a requirement that GPs must disclose the company's interests as well as any personal interest that they may have in the service when seeking to refer a patient so that the patient can make an informed choice? Has vertical integration resulted in higher use of specialist and diagnostic services or will it in the future? Other questions are whether professional bodies and universities should pay a greater role in educating doctors about their ethical duties and whether uniform legislation should be introduced in all states and territories to seek to guarantee clinical autonomy of medical practitioners. These are just some of the issues which might eventually have to be addressed and resolved.

In conclusion, overall the format of general practice medicine appears to have changed and, just as 30 years ago corner stores and small owner-operated stores gave way to supermarkets and shopping malls, so now the same has happened in general practice medicine. There is a large well-appointed multi-doctor corporate medical centre to be found in many a suburb around this country where a small local independent solo practitioner's rooms have been replaced.