Pathology Australia Budget Submission

Transcription

1 Pathology Australia 2015 Budget Submission FEBRUARY 2015

2 Contents Executive Summary...i Pathology Australia Federal budget submission... 1 Background... 1 Pathology Australia... 1 What is Pathology?... 1 How is it provided?... 1 How is it funded by Government?... 2 Increased productivity... 2 Current issues Flat demand MSAC changes High rents Effects of coning... 5 What does the sector want?... 6

3 Executive Summary Pathology Australia is the national peak body for private pathology in Australia. Our members include both small specialised laboratories as well as large organisations with laboratories and collection centres nationwide. Pathology is an essential specialist medical service which enables accurate diagnosis, management and prevention of disease. Seventy per cent of all medical diagnoses and 100% of all cancer diagnoses rely on a pathology report for diagnosis and care management. Pathology is a referred specialist medical service. The need for a pathology referral is determined by General Practitioners and other Specialist medical practitioners in response to signs and symptoms from patients. Pathology Services are itemised on the Medicare Benefits Schedule (MBS) as are other medical services and fees and rebates are determined by Government as for other medical specialties. At present, there are approximately 126 million pathology services provided by the sector per annum resulting in funding of approximately $2.5 billion (average of $20 per item). Although Pathology represents 35% of all the services provided under Medicare, it is only 13% of the benefits paid, down from 16.5% 10 years ago. There are a number of policy initiatives that are impacting on the long term stability of the sector. These are key issues for the sector, and consist of the following: Key Issues: 1. Flat Demand there has been a drop in demand for pathology tests since May 2014 resulting in lower than forecast volumes and related funding. Uncertainty concerning the GP co-payment is contributing to this. 2. Medical Services Advisory Committee (MSAC) changes to clinical practice, and as a result revenue received from some pathology tests, were implemented in November 2014 without notice or consultation. 3. Inappropriately high rents relating to Approved Collection Centres Pathology Australia is working with government to implement the changes required in regulation to abolish this inappropriate development between requesters and providers of pathology services. 4. Effects of coning the sector, as a result of existing pathology funding arrangements, provides a significant number of pathology tests at no cost to government. The result is a contribution by pathology providers to reduced outlays by Government. Previously, Pathology Australia on behalf of the sector had a cooperative arrangement with Government in the form of a series of funding agreements. The most recent agreement is currently in abeyance. Pathology Australia is interested in ensuring that there is a formal process for discussion and negotiation around the impacts of government policy changes on funding for the sector. In this way, changes to clinical practice, technology advances and the impacts of funding reviews by government can be discussed collaboratively to ensure the impacts of changes in policy are reviewed at a macro-economic level. Pathology Australia is seeking to: a) enter into negotiations with the Government in the near future over a new Pathology Agreement which would provide certainty for Government and for the sector and enable 2015 Budget Submission I Pathology Australia Page I i

4 providers to continue to deliver world class pathology services to all Australians more cost effectively. Pathology Australia has the expertise to ensure this occurs effectively. b) Ensure there are no unexpected changes to the MBS affecting pathology. Proposals arising from MSAC and other sources should be the subject of consultation with the sector prior to implementation particularly if such proposals have significant revenue implications. c) Continue to work with the Government to achieve the earliest possible resolution of the very high rents paid for co-located pathology collection centres and other inappropriate commercial arrangements. There has been significant progress and continuing cooperation with the Government regarding this issue but it is essential we maintain our resolve and effort to achieve this change quickly Budget Submission I Pathology Australia Page I ii

5 Pathology Australia 2015 Federal budget submission Background Pathology Australia Pathology Australia is the national peak body for private pathology in Australia. Our members include both small specialised laboratories as well as large organisations with laboratories nationwide. Our members are committed to the provision of high quality, affordable, safe and accessible pathology services to all Australians. Pathology Australia members provide the majority of private pathology services in Australia. What is Pathology? Pathology is an essential specialist medical service which enables accurate diagnosis, management and prevention of disease. Seventy per cent of all medical diagnoses and 100% of all cancer diagnoses rely on a pathology report for diagnosis and care management. It is essential in the management of most diseases especially chronic diseases such as diabetes, cardiovascular disease, cancer, arthritis, hepatitis and HIV. Pathology testing is also required for the majority of preventive health programs designed to avoid the development of chronic disease. As such, it is critical that all Australians have access to high quality affordable pathology services. Australia has accessible, affordable, high quality, low cost, and efficient pathology services achieved through co-operative arrangements between the Government and the private pathology sector over the last 18 years. The partnership between the Government and the private Pathology sector has resulted in major reductions in cost and an efficiency dividend for Government whilst simultaneously maintaining the high quality of services. This is unlike the experience in New Zealand and Canada where significant systemic failings have resulted in significant adverse events. How is it provided? Pathology is a referred specialist medical service. The need for a pathology referral is determined by General Practitioners (GP) and other Specialist medical practitioners in response to signs and symptoms from patients. General Practitioners order 70% of pathology services and through their critical gatekeeper role in the Australian healthcare system, control referral to specialists and hospital admissions which are responsible for the remaining 30% of Medicare pathology referrals. Three large private pathology providers (Sonic, Healthscope and Primary) deliver more than 80% of pathology services through the Medicare Benefits Schedule (MBS) with public providers and a range of not for profit and smaller general and specialist pathology providers delivering the remaining services. Although the sector has gained the benefits of more productive, lower cost and higher quality services, we have retained the advantages of diversity and specialization through small providers contributing to these quality outcomes Budget Submission I Pathology Australia Page I 1

6 Australia has one of the best pathology services in the world. Patients have easy access to affordable pathology testing, the results are of very high quality and there have been none of the safety breakdowns that have been seen in other countries such as Canada and New Zealand. The service is very efficient. This has been achieved through consolidation, automation and centralisation in the private sector necessitated by the combination of recurrent funding cuts and Government regulations designed to control demand. The productivity gains achieved have ensured the ongoing viability of the sector. This process is now largely complete with limited scope for ongoing productivity/efficiency gains on a large scale. How is it funded by Government? Pathology Services are itemised on the MBS as are other medical services and fees and rebates are determined by Government as for other specialties. At present, there are approximately 126 million pathology services (39 million episodes and 88 million test items) provided by the sector per annum resulting in funding of approximately $2.5 billion (average of $20 per item). Annual Government expenditure on Pathology prior to 1996 was subject to wild and unpredictable fluctuations which presented clear budgeting issues for Government. Expenditure would rise sharply due to a range of new tests becoming available accompanied by sharp volume increases in the use of these tests. The following year, expenditure would fall equally sharply as Government slashed rebates to keep expenditure under control. In response to this, Government and the pathology sector signed a Memorandum of Understanding in 1996 to stabilize pathology funding through adjustments to volume and price to achieve yearly targets over the three years of the Agreement. Two subsequent Agreements were signed covering the period from with a two year gap between when the most recent Pathology Funding Agreement was signed. The funding agreements have provided both the Government and the sector with a degree of certainty and have led to the efficiency gains described below. Quality and access were not compromised for patients - rather they have increased. The gains in productivity are evidenced by MBS data. Although Pathology represents 35% of all the services provided under Medicare it is only 13% of the benefits paid, down from 16.5% 10 years ago. Real pathology fees have declined by greater than 50% over the life of Medicare whereas real fees for other medical services have increased. Increased productivity Although Pathology represents 35% of all the services provided under Medicare, it is only 13% of the benefits paid, down from 16.5% 10 years ago. Pathology expenditure is reducing as a share of total MBS expenditure as a result of substantial productivity gains achieved by the sector, with co-operation from Government. Pathology tests alone represent 24.5% of all services provided under Medicare. This does not include tests provided for the benefit of patients but not paid due to coning under the Schedule. These impressive outcomes have not been achieved in other specialties. They have been achieved in Pathology because real pathology fees have declined by >60% over the life of Medicare whereas real fees for other medical services paid under the MBS have increased Budget Submission I Pathology Australia Page I 2

7 Private pathology in Australia is very efficient compared to similar services delivered in the public sector. As an example, a recent Ernst & Young review 1 into the publicly managed SA Pathology service found that, whereas private pathology services were delivered at a cost of 81% of Medicare Benefit Schedule fees, SA Pathology delivered the same services at 126% of MBS fees, a 55% higher cost. Governments have benefited substantially from the shift in the provision of pathology services to the private pathology sector and further benefits are available. Figure 1: Medicare Benefits per health service Benefits per Service Corrected for Average Weekly Earnings (60%) and CPI (40%) 80% JANUARY 2000 to MAY % 40% Medicare without Pathology has increased by 15.2% 20% 0% -20% Pathology has decreased by 66.2% -40% -60% -80% Graham Collins, Manager, Data Analysis, Pathology Australia Ernst & Young Australia Review to assess the efficiency, effectiveness and financial performance of pathology services. Executive Briefing book - 17 December Budget Submission I Pathology Australia Page I 3

8 Figure 2: Medicare Benefits Pathology services Medicare Benefits - Pathology 3,000 17% Pathology Medicare Benefits ($000,000) 2,500 2,000 1,500 1,000 16% 15% 14% 13% Pathology Share of Medicare Benefits (%) % 1999/ / / / / / / / / / / / / / /2014 Financial Year Total Medicare Pathology Benefits Pathology Share of Medicare Benefits Current issues The impressive achievements in improved productivity are the result of industry/government collaboration over a long period of time. The sector has been able to amalgamate and corporatise and deploy new technologies to meet the competing demands of higher referrals from requesters for high quality pathology services and the requirement of governments to reduce budget outlays. Patients have benefited enormously from having easy access to high quality pathology tests at affordable prices. These impressive achievements cannot be assumed to be available as readily into the future. The benefits of amalgamations and corporatisation have largely run their course and further benefit from improved technology is harder to achieve at reasonable cost. There are no easy productivity improvement measures available to us and Government cannot expect the same rate of return it has achieved in past years. Additionally there are a number of factors having a negative impact on the sector meaning it is less able to respond to budget austerity measures. These are outlined below. 1. Flat demand The Pathology Sector is highly supportive of the Government s revised co-payment policy announced on 9 December The announcement included the Government s decision to exclude Pathology and Diagnostic Imaging from the co-payment policy and Pathology Australia congratulated the Government for listening to the advice of the Sector on this issue. The Pathology Sector will still be significantly impacted by the optional GP co-payment as announced on the 9 th December The anticipated decrease in demand for GP services will result in reduced Pathology referrals. In fact, the sector has already experienced a period of reduced demand for Pathology services starting from the time of the original 2014 Federal Budget announcement. In the five months to November 2014, there has been negligible growth in demand - considerably less than the corresponding period in This appears to be secondary 2015 Budget Submission I Pathology Australia Page I 4

9 to the impact of media coverage of the Budget. If the current trend in demand continues, it will result in a reduction of greater than $100 million in the full year or approximately a 4% funding reduction. Policy certainty is required by the sector as soon as possible. 2. MSAC changes In response to recent MSAC reviews, on 1 st November 2014 the Government reduced fees and restricted the use of Vitamin D testing, Vitamin B12 testing and Folate testing. The sector estimates the full year effect of these changes to be in the order of $125 million per annum. The sector has had to respond to these changes with minimal forewarning despite the significant budgetary impact. Pathology Australia believes there is a need for a formalised period of consultation with industry groups regarding the macro-economic impact of MBS changes that arise from an MSAC review or any other review, prior to implementation. 3. High rents The Government has long recognized the need for legislation and regulation to ensure benefits paid between providers of pathology services and requesters of pathology services were broadly consistent with market rates and that without such regulation, market failure and unethical practices would develop. In 2008 and 2009, the legislation was strengthened, however the regulation of rents in co-located collection centres and other commercial arrangements, has failed. Very high rents are being paid for co-located collection centre space across the board. In many cases, per square meter rental rates are twenty (20) times market rates. It is estimated that the current above market rents paid for co-located Approved Collection Centres has added an additional cost burden on the sector of $200 million per annum. The Sector has proposed new regulations which would more effectively remove these above market rate rents and regularise the arrangements between providers and requesters and we are in consultation with the Minister for Health and the Department over this issue. The Government is making good progress and is working closely with the sector and a continuation of this action is necessary from the Sector s point of view given the matters raised earlier. Revenue reductions along with strongly rising costs is a difficult scenario to manage in any business including private pathology. We look forward to working with the new Minister for Health on this issue in the coming months. 4. Effects of coning In the case of GP referrals for pathology services, only the three highest value test items in an episode of testing are paid benefits under the MBS. The remaining tests must be completed and reported but no benefit is payable to the provider. This practice is known as episode coning. Other coning arrangements operate at the individual item level and restrict the number of times an item can be billed per annum but the GP episode cone has by far the biggest impact. It is estimated that 20% of tests items are not billed and this figure is rising as the number of tests per referral is rising Budget Submission I Pathology Australia Page I 5

10 The Government is not aware of the number of tests provided but not billed because no reference is made to coned services on itemization submitted to the government (Department of Human Services DHS) for payment. The actual productivity improvement in the sector is underestimated as the services supplied but coned out are not included in the calculation. Presently, the sector is experiencing an increase in the level of coning (i.e.; the number of tests requested per episode and thus coned out). The sector believes that there should be an attempt to collect information on the number and value of coned services so that it can be properly assessed and acknowledged in the relevant discussions over funding. This is estimated to be a saving contribution from the sector of approximately 10-15%. A notional fee for coned items sufficient to encourage the providers to itemise the items to DHS may be appropriate. What does the sector want? It is Pathology Australia s preference to renegotiate a new Pathology Funding Agreement with the Government in The new Agreement would not need to follow the previous formulas and could give greater flexibility in funding than the most recent Agreement which required strict yearly reconciliations for each year of the Agreement. In addition, there were many Committees established under the Agreement and each Committee and the interactions between committees, was unwieldy. An agreement gives certainty to Government and the Sector and this has a value which extends to patients. Pathology Australia, on behalf of the Sector, is seeking a commitment from government to reinstate a formal process for a positive and collaborative working relationship. Key to this will be mechanisms for consultation and negotiation on the impacts of government policy changes to the sector. In this way, changes to clinical practice, technology advances and the impacts of funding reviews by government can be discussed collaboratively to ensure the impacts of changes in policy are reviewed at a macro-economic level. Pathology Australia is seeking to: a) enter into negotiations with the Government in the near future over a new Pathology Agreement which would provide certainty for Government and the sector and enable providers to continue to deliver world class pathology services to all Australians more cost effectively. Pathology Australia has the expertise to ensure this occurs effectively. b) Ensure there are no surprise changes to the MBS affecting pathology. Proposals arising from MSAC and other sources should be the subject of consultation with the sector prior to implementation particularly if such proposals have significant revenue implications. c) Continue to work with the sector to achieve the earliest possible resolution of the very high rents paid for co-located pathology collection centres and other inappropriate commercial arrangements. There has been significant progress on this issue but it is essential we maintain our resolve and effort to achieve this change quickly Budget Submission I Pathology Australia Page I 6

11 Pathology Australia Level 1, 16 Napier Close Deakin, ACT 2600 P: F: E: