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Wednesday, 11 September 1985
Page: 422


Senator GEORGES —by leave-I present the 236th report of the Joint Parliamentary Committee of Public Accounts on the Committee's medical fraud and overservicing inquiry into pathology.

Ordered that the report be printed.


Senator GEORGES —by leave-This is the third report tabled by the Joint Committee of Public Accounts from its medical fraud and overservicing reference. Since the commencement of this inquiry in early 1982 evidence had come before the Committee indicating that this particular area of medicine-pathology-has been and is growing rapidly in terms of services rendered, Commonwealth Medicare benefits paid, and the number of pathology providers. Many serious concerns about pathology have been expressed to the Committee by the major medical associations, senior Commonwealth administrators, the Royal College of Pathologists of Australasia, pathology corporations, specialist pathologists and their technicians, other practitioners and, perhaps most importantly, the patients themselves. The Committee's report reflects, analyses and discusses these concerns.

The report's findings relate to two broad areas-the changing nature of the pathology industry in Australia, and the difficulties and deficiencies in the Commonwealth's administration of the approved pathology practitioner scheme, the Medicare benefits schedule and other associated responsibilities related to the Health Insurance Act. This report is a prime example of the Committee discharging its traditional duty of scrutinising public moneys. In this case we are talking about an analysis of Medicare pathology benefits, currently worth some $300m a year. The report is also an example of how useful parliamentary committee reports are as a reliable information source. This pathology report provides an insight into an industry which the Parliament and the public appear to know very little about. This is despite the somewhat ironic fact that most Australians are users of pathology services.

The four chapters of this report reveal, firstly, how concentrated the private pathology industry is, an idea of the general cash flows involved, and the location and number of practitioners who may render pathology. For example, the top 25 pathology groups received just over 50 per cent, or $44m, of Medicare pathology benefits during the March quarter of 1985. The top seven pathology groups received 26 per cent of Medicare pathology benefits during the same three-month period. Secondly, they reveal severe problems with the administration of the approved pathology practitioner scheme and the urgent need to review all pathology practitioners, and their laboratories, for accreditation. Thirdly, the report deals with the overwhelming and questionable dominance of pathology services rendered at high specialist pathology benefit rates as opposed to the very few services rendered at the ordinary rate. Fourthly, it deals with the way in which the infiltration of entrepreneurs into the industry has the potential to jeopardise the provision of universal health care in Australia.

This last point, the development of medical entrepreneurs, is undoubtedly the most difficult and serious problem confronting the profession and the Government at present. These entrepreneurs work just within the bounds of the law, pay lip service to professional ethics, and vigorously scrutinise regulatory measures, both professional and governmental, for loopholes and areas of imprecise specification. Put bluntly, they rank the pursuit of profit and market control over and above patient care. All 41 of the Committee's recommendations are geared to combat the operations of these medical entrepreneurs as far as pathology is concerned.

It is clear from the report that further improvements need to be made to systems in the Department of Health and the Health Insurance Commission. Undoubtedly the most disappointing aspect of this inquiry concerns a continued lack of suitable effective structures to handle cases of overservicing. Current remedies to combat pathology overservicing based on the medical services committee of inquiry system are completely unsatisfactory, inefficient and need urgent reform. Three years ago the Committee recommended that this system be scrapped and replaced. Yet to date, despite what appear to be the best intentions of government, in consultation with the profession, there has been no change. This situation needs to be remedied immediately. The provision of quality health care in Australia needs to be both publicly accountable and cost effective.

In commending this Public Accounts Committee report to the Senate I place on record the work of the sectional committee under the chairmanship of Mrs Ros Kelly, a member of the House of Representatives, and the project team which drew together the information necessary for the preparation of the report. In particular, I wish to give credit to Mr Peter Mason for his work in this connection.

I wish to add one or two remarks of my own in regard to this report. This morning I sent a letter, together with a copy of the report, to Dr Repin, the Secretary-General of the Australian Medical Association. That letter reads:

My Committee is most concerned about the variety of serious problems-in both the Commonwealth's administration and in the private pathology `industry'-that are yet to be overcome.

While the recommendations of this Report will improve matters, the Committee believes that continued co-operation and consultation between the profession and the Government and its administration is essential.

I appeal to the Australian Medical Association to read this report carefully and to do whatever it can to cover the malpractices which the report reveals, because it is very much in its interests to do so. An inquiry is being conducted into the medical benefits schedule. I believe the schedule is one of the factors leading to this abuse and these malpractices. I suggest that the AMA should do everything possible to construct the schedule. I do not doubt that the inquiry will bring down recommendations which will lead to these reforms.

I need to refer to one of the chapters in the report in order to outline the extent of the malpractice which occurs in the industry and which needs to be corrected. In the preparation of this report we received a great deal of information and we analysed much of it. Various charts are available which will explain clearly to honourable senators what the problem happens to be. The Committee received that information by requesting it from the Department and the Health Insurance Commission. We endeavoured not to identify the people concerned and the report does not identify any person in particular. I inform the Senate that there is one instance in which the identity of the person concerned ought to be made known to the Parliament. In fact, there may be more than one, but there is one person in particular who needs to be named because the malpractices which are, I believe, the responsibility of this person are malpractices that ought to cease and the person ought to be brought to account. The Parliament will have to determine whether one of its committees investigating fraud and overservicing and the discovery of malpractices should report fully to the Senate on the extent of that activity.

We have a problem in that the sectional committee, having asked for information from the Health Insurance Commission, saw areas where the Medicare system was misused. It may have been in a position to identify people but it hesitated to do so and did not do so in this report because it felt that someone else-perhaps the Parliament-ought to make the decision whether people who have been identified as misusing the system but who have stayed barely within the law, ought to be named in the Parliament. If information gathered by the Health Insurance Commission and information as to incomes received by medical practitioners is made known publicly I do not doubt that there will be an outcry. I do not believe that doctors' incomes should be made known publicly but the amount of moneys paid to doctors from the public purse should be known. That view is reinforced by an example given on page 90 of the report. I will read it quickly because I do not want to take up too much time of the Senate. I do not doubt that Senator Watson, who is a member of the Committee, would like to make one or two comments. I am attracted to a remark by Dr Thompson, the then President of the Australian Medical Association, who stated:

Unless one was very careful--

he was talking about entrepreneurial developments in medicine-

One could end up with a `depersonalised' sort of situation in medical practice. But provided that such activities were conducted legally, the people employed had a proper contract which protected their interests; there were no kickbacks, the referral process did not abuse the national health scheme; and people behaved ethically, it was very difficult to object. The area is one which must, and will, be examined.

4.9 The Committee believes that many of the entrepreneurial medical schemes currently in operation violate these last two conditions outlined by Dr Thompson, i.e. they abuse the national health scheme and involve unethical behaviour.

4.10 An example of a `medical entrepreneur', whose corporate medical marketing operations, general practice style and professional ethics are currently of serious concern to both the profession and the Government, follows. This particular general practitioner (referenced as Dr X in the examples below) operates a large complex commercial practice which, among other things, includes several suburban clinics. Each of these clinics refer almost all of their pathology tests to Y Pty Ltd-a pathology company owned and operated by Dr X.

4.11 Investigations of this `entrepreneurial' doctor have found that, among other things:

Dr X has a high incidence of collecting blood for pathology (MBS Item 955, fee $3.40), in May 1984 there were 232 cases where the collection of blood by Dr X had been itemised but no pathology had been subsequently requested or performed;

virtually all Dr X's pathology tests were performed by Y Pty Ltd;

Medicare benefit payments to Y Pty Ltd in May 1984 totalled $144,667 for 9,904 pathology services, this represents an average cost of $114.91 per patient and 7.87 services per patient . . .

Medicare benefit payments to Y Pty Ltd during May 1984 resulting from Dr X's requests totalled $86,363.87 for 5,723 services, this averages $130.26 per patient and 8.63 services per patient;

the balance of pathology services performed by Y Pty Ltd for which Medicare claims were processed in May 1984 were requested by 16 other medical practitioners, of which 13 were practice partners of Dr X;

perhaps because of tax reasons Medicare benefits paid to pathology laboratories in June 1984 as a result of tests requested by Dr X fell dramatically to $605.70, of which $122.80 was paid to companies other than Y Pty Ltd;

in July 1984 Medicare benefits paid to Y Pty Ltd as a result of pathology tests requested by Dr X totalled $284,020.35 for 22,553 services, this represented a cost of $125.67 per patient and 7.98 services per patient . . .

Dr Z, a practice partner of Dr X's also requests all his pathology tests from Y Pty Ltd, for the two month period May-June 1984 Medicare benefits totalling $20,314.10 were paid as a result of Dr Z's requests for 1,370 services, this represents an average cost of $75.24 per patient and 5.67 services per patient . . .

I give these details because I wish to arrive at this point. The report continues:

a review of pathology services ordered by Dr X and Dr Z has revealed abnormally high instances of certain services, these included the apparent routine ordering of Item 1401 (SP MBS fee $23.00), this test is restricted to one per annum for proven cases of an unusual medical condition known as hyperlipidaemia and was one of an apparent routine series of tests ordered by both Drs X and Z;

similarly Item 1313 estimation of glycosylated haemoglobin (SP MBS fee $20.50) appears to be routinely ordered, this test is restricted to 3 services per annum for patients who require management of established diabetes; and

generally the review revealed numerous instances of pathology tests attracting benefits in excess of $500.00 being ordered by Dr X for each patient on the same day.

4.12 This doctor, his various practices, partners and associated companies are under detailed investigation at present as part of an intensive joint effort by the HIC, DoH, AFP and DPP.

4.13 Perhaps the most disturbing thing about such a case as the one above is that, instead of being a lone example, it is symptomatic of a relatively new breed of `medical entrepreneurs'.

There are numerous examples in this report of such practices. The report gives numerous examples of the splitting of fees and numerous examples of doctors seeking out and offering all their pathology work to particular laboratories. This report is an exposure of massive problems within the pathology area. It needs to be examined and the decision needs to be made that identification is necessary of one doctor in particular and perhaps one or two others. That decision needs to be made especially since the doctor concerned is in the process of spreading that sort of operation from New South Wales to other States and the Australian Capital Territory.


Senator Peter Baume —And he is using standover tactics too.


Senator GEORGES —Obviously the honourable senator knows the doctor to whom I refer. This doctor has sought to use the freedom of information facility to probe into departments, and even indirectly into the Public Accounts Committee, to discover what action is likely to be taken against him. Although this report does not name the doctor it can clearly identify him.

One matter needs to be cleared up. The Committee received information which identifies a whole number of doctors. It must be appreciated that the doctor about whom I am talking is not one of the top 25 providers of pathology. He is one of the lesser providers.


Senator Walters —Why do you allow bulk billing? You would overcome it if you did not.


Senator GEORGES —I do not want to get into a debate on that matter. Possibly bulk billing is used as a means to manipulate the system. However, that is not an argument against a proper use of bulk billing. What we are seeing is a manipulation of the system and the schedule. This manipulation is an affront to the medical profession, and the medical profession accepts it as such. This doctor can be identified by a clear and careful reading of the report and the appendices. If I were asked a question about this matter at any later stage I would find it very difficult not to name the person concerned. I really believe that it is in the public interest to name the person. However, the Committee has placed constraints upon itself in that it would not identify any particular person in this report. The real problem with that is that unless the person concerned is identified the activities of some other doctors who are engaged in this profession may be brought into question in some way.

I commend the report to the Senate. I remind honourable senators that the example I have given is only one of a number of examples that could be given. Although this example is a massive exaggeration of the problem, there are others who seek to follow this doctor's example. The sooner that these abuses and malpractices are brought to an end the better. The Committee has made some 41 recommendations which will go some way to solving the problems. However, they will not go the whole way.