For many individuals, the term “bulk billed” refers to a GP visit they don’t should pay for out-of-pocket. But one other type of bulk billing is within the news ahead of May’s federal budget – bulk billing of pathology testing, reminiscent of blood tests.
This pertains to the fees pathology firms receive from Medicare to perform out-of-hospital laboratory tests, the kind your GP might order to assist diagnose or monitor disease.
These pathology fees have been frozen for almost 1 / 4 of a century. Is that fair? Obviously not, argues Australian Pathologywhich represents private pathology laboratories.
It has recently launched its “Keep Pathology Bulk Billed” campaign. At the core is a request for about an additional A$160 million a 12 months for pathology firms. It argues this is required to maintain most out-of-hospital pathology tests free for the general public.
But easy solutions recommend by vested interests involving more public funds are rarely in the general public interest. Here’s how we’d design a fairer pathology system, fit for the twenty first century, that keeps tests free for the general public.
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Pathology is big business
Collecting specimens and analysing them is big business. Pathology providers received almost $3.25 billion for out-of-hospital tests in 2022-23 from Medicare rebates. Pathology testing can also be conducted in private and non-private hospitals, but these are funded under a mixture of various arrangements.
Almost all (greater than 99%) of out-of-hospital pathology services are bulk billed. That’s a rate much higher than that for GP visits, which stood at about 80% in the identical period.
Pathology use is increasing faster than the population is growing. That’s partly due to more chronic disease within the population, and partly because recent tests have gotten available.
Pathology provision is concentrated in a number of hands, with a lot of providers listed on the Australian Stock Exchange. Increases in pathology rebates, as Australian Pathology is asking for, would go straight to firms’ bottom lines, increasing shareholder value.
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So why are pathology firms calling for more funding now? Pathology firms’ profits burgeoned in the course of the first years of the COVID pandemic, with the introduction of widespread PCR testing and the federal government funding that went with it.
But the industry was accused of making the most of “COVID-19 misery”, and the gravy train eventually ended. So pathology firms are actually looking to switch that revenue, using the newest campaign to try to extend rebates.
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Does the pathology industry have some extent?
On the face of it, a 24-year freeze on pathology government rebates might sound unfair. But a glance into the pathology world reveals an industry where there was significant productivity growth.
An increased volume of normal tests, as we’ve seen lately, can result in improved productivity. For instance, firms can work their testing equipment harder – running them for longer, loading them with more samples – lowering the fee per test. Improvements in equipment also allow tests to be done quicker, allowing increased economies of scale.
But a fee freeze is a lazy policy, an example of “set and forget”. While it does achieve some advantages for the taxpayer, it’s not optimal. That’s since it assumes all of the productivity savings (from automation, digitisation and increased economies of scale) exactly offset any increased costs from inflation. This isn’t prone to be true. Given the present extent of automation and consolidation, this might be leaving excess profits within the pockets of providers, and costing governments greater than they should pay.
More changes in pathology provision are yet to come back. Advances in artificial intelligence are accelerating and automatic reading of some pathology tests may reduce pathology costs further, yielding more profits for providers.
Future policies must reflect changes in how much it costs to supply pathology services, details of that are thin on the bottom.
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What must occur?
Government should step back and ask whether a fees-for-pathology-service payment system, designed a century ago when pathology provision was literally a cottage industry, continues to be right in an era of intensive automation and ownership concentration. The answer is clearly no.
Reform should first dump the prevailing uncapped, fee-for-service payment system. Pathology is an enormous business and ought to be paid as such using tenders and contracts.
fizkes/Shutterstock
Pathology firms ought to be invited to tender to supply out-of-hospital pathology services in designated geographic areas. Two or more tenders may very well be approved to take care of competition between providers and keep options open for the tip of the tender period. Pathology contracts should involve no out-of-pocket payments by consumers.
In-hospital pathology shouldn’t be covered by the identical arrangements. Instead, private hospitals should make their very own contractual arrangements for pathology provision, as they do now.
Public pathology services – run by state governments or their agencies reminiscent of Pathology Queensland – are also changing.
Consolidation of public pathology services in New South Wales yielded significant improvements in productivity. Victoria has began a less ambitious reform process, consolidating into three public providers slightly than the one public provider model seen in NSW, Queensland and South Australia. This may even probably yield savings.
Public providers ought to be invited with private providers into the tender process to boost competition.
What’s the take-home message?
The world of pathology provision is in flux, with more changes on the horizon, whether that’s related to technology or consolidation. In this environment, paying more to non-public providers under a payment system that has passed its use-by date will not be good policy. That’s despite its simplistic attraction and advocacy from vested interests.
So the subsequent time you go to a pathology collection centre and see posters encouraging you to email your MP to “keep pathology bulk billed”, beware. The campaign is more about company profits than saving you money.