Billing to stay financially viable
- On 05/10/2016
With the challenges facing general practice, practices need to take an honest look at how they are currently operating.
How much will I lose under the Medicare rebate freeze?
The Medicare rebate freeze is one of the greatest challenges general practice has ever faced – and there have been many in recent years.
The Government is freezing indexation of Medicare rebates for four years from 1 July 2014 until 1 July 2018.
This means the rebate amount paid to general practices will not be increased for inflation, as has previously been the norm.
The table shows how the real value of the Medicare rebate to practices will fall over a four-year period.
The Item 36 Medicare rebate amount (after taking into account indexation of 2.75% per annum) will only be worth $64.33 compared to its original value of $71.70.
This is a reduction in real income to the practice of $7.37 per consult.
The potential loss of income to a doctor performing 5,156 consults a year on average could be as high as $36,092 per doctor.
How do I fix the gap?
Many practices will find that their operational structures and systems are fairly efficient so improvements to assist with the finances may only be marginal.
Discussion then turns to price and the often misunderstood issue of bulk billing versus private billing.
Aside from the financial considerations, the issue challenges practices from a cultural acceptance perspective, perceptions of value and even emotional issues of guilt.For many practices a key step in making the transition is to address “feelings of guilt” experienced by some doctors and staff.
The guilt issue requires a cultural change in the practice and a better appreciation of the value of the medical services provided.
Communicating the change
Practices that make the transition from bulk billing to private billing should have a policy for dealing with patients who may not be in a financial position to pay a higher amount.
Practice staff will need to be educated about this policy and provided with instructions on what to say and how to deal with these patients. Many practices clarify the price at the time of booking, so as to address the issue at the outset.
Will I lose patients?
The fear of losing patients is another stumbling block which prevents practices from taking the step.
Feedback from the practices that have moved from bulk billing to private billing was that some reduction in patients occurred but patient numbers soon returned.
From a financial perspective, a practice could maintain its operating position from a lower base of patients, with those patients paying a higher rate.
This also has the potential to free up time for doctors and practice staff to improve medical services or offer new services.
Making the transition
The two key elements to the successful transition from bulk billing to private billing are education and communication. Doctors, staff and patients need to be educated about the transition, and effective communication of the change needs to be planned.
This was very evident in the discussion between doctors at the general practice workshops run by the AMA (NSW) late 2015.
The road ahead
There are many challenges and uncertainties facing general practices.
What is certain though is that practices need to take an honest look at how they are currently operating. Practices need to appreciate that they are in the business of medicine.
The business of medicine involves the provision of high quality healthcare and a financially viable practice can only help with this objective. In order to remain financially viable, practices may need to consider transitioning from bulk billing to private billing.
Stuart Chan is the Director for Specialist Medical for Cutcher&Neale.
See how your practice is dealing with the challenges
The billing model that you choose will depend on a range of factors. Future Practice and the AMA NSW have developed a web tool to quickly and easily test the long-term financial sustainability of your practice. Check your practice now: