Pathology Rent Police

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2017-12-18As an accountant specialising in assisting medical practitioners, I am concerned about the unfair playing field and potential intimidating and questionable legality of the Government’s new initiative to protect big pathology business against small practices with a new data kick back monitoring system, when the there are no clear rules for enforcement or ethical brakes in the system.

Uneconomic Clauses are dangerous!

A key concern is the systemic risk from an event e.g. a pandemic. We are aware many practices have ignored good advice to have commercially sustainable legally binding leases to be prepared. Clients of Health and Life who have used our updated templates have less to be concerned.

Some practice owners over a nice dinner may have naively decided at the recommendation of a provider to exercise less scrutinity (keep their advisers at bay and save time and costs) and use their ‘template’ lease arrangements.

Our key concern are the risky “úneconomic” clauses that are embedded in these lease agreements. What this means for many is a 3 month termination notice may be served because of insufficient referrals are being made to the pathology labs collection centre. We do not recommend such clauses as they may also imply a kick back arrangement.

Such clauses are a concern with the Health Insurance Act. They made be viewed as an economic inducement and not a permitted benefit. This may attract significant penalties and prosection. This is why we recomend well prepared templated commerical terms and conditions to protect the practice.

The real problem is for some uncontrollable reason referrals drop. This significant source of income that ususally covers the rent an overheads for many practices could force the practice into severe financial distress.

Many have borrowed heavily and for the long term for a new building and infrastructure. This may push the practices business model over the edge to insolvency. Typically we see this where doctors are paid 70% of their bulk billed gross fees in an expensive new fit out.

Should this happen expect patients to leave with their doctors if the practice is suddenly forced to reduce bulk billing.

What is market value?

The definition of market value is clear and has been tested: that it requires a willing buyer and willing seller. So how do you prove you are being paid 20% above market value and have committed a crime, when both parties are independent and the victim is a billion dollar corporate claiming that they been excessive overcharged for rent by a three-person general practice?

It sounds ludicrous but taxpayers’ money is being wasted, despite this issue having been heavily debated and resolved in 2009. The corporate pathology companies keep trying to legislate profits for themselves.

They already enjoy special protection from kickback laws by being listed companies. This cynical attempt to earn lazy profits at taxpayer’s expense is very disappointing to see.

For an analysis of the issue, see

GP practices in govt crosshairs over pathology rents

choice_paradox1Increasingly corporate medicine, where legally profits are placed before patients, has become the norm. Smaller practices are facing ever-increasing challenges as Big Government and Big Business do deals, as it is more convenient to deal with a few players than many.

As a result, patients are losing their freedom to choose the type of services they want. Less competition means fewer services and the patient becomes less empowered. It is always better to be a big fish in a small pond.

This unhealthy cocktail, of pathology laboratories, also owning general practices that are also listed on the stock exchange, gives them unprecedented special privileges.

For example, they can never be prosecuted in engaging in a kickback arrangement because they vertically own the supply chain from GP to specialist.


This can breed unprecedented overservicing that the taxpayer ultimately pays for because they can afford to bulk bill, providing no out-of-pocket services to patients. The greater concern is they are not subject to any clinical scrutiny or penalty, unlike your local doctor, who you trust to act in your best interests. Currently only 25% of practice in Australia are practitioner owned. There will be reduced incomes for doctors as the corporate environment dominates.

patients before profitThe effect of this, combined with the Healthcare Homes program in which payments are now made to doctors and practices, is that doctors may suffer significant job security and remuneration loss if they do not comply with those corporates’ financial goals which are in conflict with doctors’ professional responsibility to their patients.

To make matters worse, they will not be held responsible for any clinical adverse events and malpractice issues (legal action against them would be intimidating). The safest protection for doctors is to work for practices that are practitioner-owned and well run where doctors have an economic and professional influence on the practice. As a doctor, you are better off working in a practice where you are a big fish in a smaller pond that is ethical and you can at least have a debate on patient care and not just on Key Performance Indicator’s.

I am concerned the Government at the last election, was pressured and in effect ‘blackmailed in the consulting room’ to change the pathology rent laws by the corporates without a proper public debate.

In any case, the corporates’ efforts to try to regulate rents is legally not enforceable. The Labour Government in 2007 failed to achieve this, after conducting a thorough assessment. This current Government also needs to ‘do their homework’. See the following article:

Pathology Deal Blackfire

It annoys me personally that we continue to waste taxpayers’ money on this issue as the corporates publicly cry poor on one hand and on the other, boast significant pathology profits (for example, see 2017 Primary Healthcare’s latest annual report). I believe the Federal Government, taxpayers and patients are being played as fools.


Primary Healthcare 2017 Annual Report

  1. ACCC – in the scope of reviewing path providers

Is the conduct of the pathology labs exposing medical practices to serious penalties? The pathology rent data will also show if there exists price fixing amongst pathology providers and whether there is unconscionable conduct. A Freedom of Information request for the data, after the data is in, would help to determine this.

GP practices in govt crosshairs over pathology rents

See Unfair contract terms and Price fixing

  1. Should corporates decouple their general practices from their specialty practices since they are conflicted?

This would reduce unnecessary red tape, and the need to monitor for over-servicing and the need for more policing laws. The free market that is open and transparent needs to prevail and we do not want a ‘too big to fail’ corporate-dominated healthcare system like the banking industry. There is safety in competition.

Currently, Government policy is engendering an oligopoly ‘whipping board’ for corporates to beat the Government for more taxpayers’ money without any scrutiny. As the saying goes, once you let them in you cannot get them out. Patients too will suffer from our apathy in not raising this concern with our local Member of Parliament.

  1. Practices should consider running an education campaign aimed at their patients to educate them on the issues.
  2. Contact us if you require any further information at or 1800 077 222.

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