Pathology Australia Budget Submission

Transcription

1 Pathology Australia 2016 Budget Submission FEBRUARY 2016

2 Pathology Australia 2016 Federal budget submission 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 corporations with laboratories and collection centres nationwide. Pathology is an essential specialist medical service which enables accurate diagnosis 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. Private pathology services play a key role in the delivery of high quality health care to all Australians. The Government needs to acknowledge this. We currently provide a large number of high quality pathology services to the Australian public at affordable prices and with negligible out of pocket payments. Australians regard pathology services as efficient, accessible and important in their care. The pathology sector has delivered health budget savings to the Government by rapidly increasing productivity in the sector. Despite this, the Government has repeatedly sought further savings. The sector has now reached a tipping point and the Mid-Year Economic and Fiscal Outlook (MYEFO) decision to cut a further $332 million over 4 years is not sustainable. It will result in the widespread use of significant copayments for pathology testing which will lead to patients deferring critical tests, delays in diagnosis and worse health outcomes for Australians. The Sector calls on Government as follows: 1) The proposal to remove the BBI should be abandoned 2) The Government should allow the MBS Review to proceed. There should be no further cuts to the Pathology MBS in the budget these cuts will lead to significant patient copayments. Instead any proposed changes to the Pathology Services Table should be referred to the MBS Review process. 3) If the Government seeks other savings, they must provide relief on the cost side through a move to market rents for co-located collection centres. The Government should immediately introduce the minor clarifying changes to the permitted benefits regulations and should proceed to enact effective compliance measures that will ensure rents for colocated collection centres are not in excess of market values and do not relate to the value of referrals arising at any site Budget Submission I Pathology Australia Page I i

3 Pathology Australia 2016 Federal budget submission Background Pathology Australia is the national peak body for private pathology in Australia. Our members include both small specialised laboratories as well as large corporations with laboratories and collection centres nationwide. Pathology is an essential specialist medical service which enables the accurate diagnosis 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. Referrals are made by GPs and other Specialist practitioners on the basis of clinical need and clinical judgement. There is no capacity for pathology providers to provide services on their own initiative or to influence others to request services. It is a popular service because it is good quality, accessible, with rapid turnaround and rapid reporting to the referrer through electronic communications and it is low cost with few patient co-payments. It is essential to a good health service. Our service is increasingly supplied through corporatized publicly listed companies along the same lines as Diagnostic Imaging and General Practice and increasingly, Assisted Reproduction Services, Ophthalmology, Orthopaedics etc. The private pathology service in Australia is very efficient. This efficiency is partly attributable to the growth of large centralized laboratories. This process has been facilitated by the establishment of large businesses some of which have been listed publicly in order to access the capital required to operate a highly capital intensive pathology service. This financial model has been the basis of the highly efficient pathology services that exist today it should not be criticised or demonised it should be supported. Governments must work collaboratively with all sector participants not in opposition to them. The sector has previously worked collaboratively with Government over several successive pathology funding agreements. We have a track record of quiet co-operation with Government and of negotiating funding agreements and sticking to them. This has provided massive benefits to government. In the last 20 years, real pathology fees have declined by 55% while all other Medicare Benefits Schedule (MBS) real fees have increased by approximately 10%. If pathology fees had moved in line with other MBS fees, Government would be spending $1.8 billion (69%) more per annum for pathology and if other MBS services had achieved the productivity improvements we have, Government would be spending $6.9 billion (41%) less per annum today. These achievements are very significant and commendable but it would be a serious mistake for Government to believe the sector can continue to deliver savings at the same high level indefinitely into the future. The Current State of the Sector The current state of the pathology sector can only be described as critical. All providers large and small are in severe financial distress with many providers struggling to remain viable. This 2016 Budget Submission I Pathology Australia Page I 1

4 comes off the back of repeated cuts to funding in recent years including a cut of 4.5% in November Pathology fees and rebates have not been indexed routinely for the last 20 years. In fact, nominal rebates have been cut and today stand at 12.3% less than they were in Since that time, the cost of providing services as measured by Average Weekly Earnings (AWE) has increased by 93.5% and as measured by Consumer Price Index (CPI) has increased by 54.8%. Real pathology fees today are only 45% of the pathology fees in Total outlays growth for the 12 months to December 2015 for Pathology was only 0.8% - significantly lower than the growth for any other medical or health discipline. These factors when combined with the rapidly rising costs arising from excessive rents for Approved Collection Centres have meant many providers are facing the threat of closure. There have already been several market failures with the closure of several medium sized laboratories. This includes the closure of Healthscope Pathology in Queensland, Border Pathology in Albury Wodonga and Adelaide Pathology Partners. Equally the larger providers are under extreme financial pressure and there is a real risk of cutbacks in services and more laboratory closures. A further cut to funding in the short term could have dire consequences for the provision of pathology services in Australia. Government Proposal to Remove the Bulk Billing Incentive In May 2014 the Federal government attempted to introduce mandatory co-payments in the Federal Budget. This policy was later abandoned following widespread criticism. The Government subsequently implemented $450 million in cuts to Pathology funding over 4 years in Nov 2014 with no forewarning to the pathology sector. It has now announced a further $332 million in cuts over 4 years from July 2016 through the removal of the Bulk Billing Incentive. The inevitable result of this sustained attack on the funding for Pathology will be the introduction of copayments for pathology services. All pathology providers have indicated that if the proposal to remove the BBI is implemented, they will be forced to introduce patient co-payments. In effect the Government s recent MYEFO announcement in pathology will be seen as the introduction of the earlier disastrous co-payments policy through another means. We believe this would seem to be an accurate representation of the situation. Government is aware of the history of the introduction of the Bulk Billing Incentive items. In the and budget, there were significant fee cuts in pathology with a combined effect of a reduction in funding for Pathology of approximately 10%. To address concerns that these savage cuts would cause the bulk billing rate to fall, and also to partly offset the massive cut to funding, the Government introduced Bulk Billing Incentives. These incentives have been entirely effective in preventing bulk billing rates from falling and there has in fact been a small increase since then. The bulk billing rates for outpatient pathology services are now >98% - easily the highest of any medical discipline. This is now threatened. The bulk billing incentive payments constitute a critical component of the funding for every pathology episode. As the BBI is applied to every episode, in total, it constitutes 4% of the funding for pathology services. In the case of some tests, the BBI is an even more critical component of the funding. For example, the BBI makes up 12% of the funding for analysis of cervical cancer screening tests, 15% for monitoring of diabetes and 21% of funding for bowel cancer screening tests Budget Submission I Pathology Australia Page I 2

5 If the proposal to remove the BBI is implemented on 1 July 2016 and the sector is forced to introduce patient co-payments, they will have to be significantly higher than the actual cut to funding. This is because the co-payment will need to offset, not just the impact of the fee cut, but also the administrative costs involved in the process of private billing and the collection of a very large number of relatively small co-payments. This partly relates to the rules associated with the billing of pathology which require accounts to be issued after testing is completed. In addition, whereas the Government was indiscriminate in removing the BBI from all patients regardless of socioeconomic or health status, it is likely the private pathology sector will implement a copayment policy with some consideration of socioeconomic and health status. The proposal to remove the BBI therefore threatens the quality of pathology services and patient access to these services. It will result in co-payments and these will undoubtedly result in patients deferring having critical pathology tests resulting in worse health outcomes and ultimately greater cost to government in the longer term. The BBI cut must be abandoned. In addition, due to the immediate threat to pathology services that currently exists, the Government should work with the sector in an effort to find possible savings through greater efficiencies. An obvious example of this would be for Government to make the necessary regulatory changes relating to permitted benefits and enforce these regulations as outlined below. A Sector Solution Control of Rents One way the Pathology sector will remain viable in the long term is if the Government implements policies that support the reduction of the costs of providing pathology services in the community. The most striking example of this would be the implementation and enforcement of effective regulations that address the current high rents for pathology collection centres, particularly those co-located within medical centres. 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. The sector has provided evidence to Government that the Government s own Prohibited Practices legislation was not being adhered to with rental payments well in excess of the market rates (+ or -20%) objective in the Legislation. The practice has exploded since the ill-conceived decision to allow an unlimited number of co-located collection centres to exist. The numbers of collection centres is now well beyond that required based on patient need or demand. Very high rents are being paid for co-located collection centre space across the board. In many cases, per square metre rental rates are twenty (20) times market rates. It is clear that the current above market rents paid for co-located Approved Collection Centres (ACC) has added an additional cost burden on the sector. The Sector has proposed a small clarifying amendment to the current regulations to make them less ambiguous and has also proposed a simple workable mechanism that would ensure arrangements between referrers and providers were compliant with the regulations. The minimal input this would require from government would over time provide some reduction in cost pressures and ensure the sustainability of the sector. At the same time this would ensure arrangements between referrers and providers were transparent and appropriate Budget Submission I Pathology Australia Page I 3

6 For several years the sector has worked with different Governments and Ministers in an attempt to implement the changes necessary to address the problem of excessive rents for collection rooms changes which are in fact designed to do no more than enforce the principles and objectives of existing legislation passed by Parliament in 2007, with bipartisan support. The Sector has advised the Government that it is unable to address this problem by itself because of entrenched landlord expectations and the competition dynamics in the sector. The existing Prohibited Practices Legislation is itself an acknowledgement of this dynamic. To date, the Government has stated a preference for increased compliance measures. However the sector has serious concerns that these will not be effective. To date there has still been no evidence of additional compliance activity or correspondence from the Department of Health to referrers to indicate an intention to conduct increased compliance activity. As a result these payments continue without the knowledge of patients or the public who are unaware the referrers choice of pathology provider may be based on what could be considered a commission. The Sector will of course co-operate with the Government s efforts to increase compliance. However it is important to note that the current situation with ACC rents has taken some time to evolve. Equally it will take a substantial amount of time (more than 12 months and more likely years) for it to unwind. Given the proposal to cut the BBI announced in December to take effect from 1 July 2016, there is now an urgent need for action to reduce above market rents for colocated collection centres. As outlined above the proposed abolition of the BBI is an attack on the funding to the pathology sector. This will lead to the introduction of patient co-payments. At the same time the Government has failed to address an obvious source of waste within pathology relating to excessive rents for collection rooms which would be rectified by enforcing the existing Prohibited Practices regulations. Revenue reductions along with strongly rising costs is a difficult scenario to manage in any business and private pathology is no different. If the Government seeks to manage the growth in the health budget, it cannot rely on more and more productivity improvement on top of what has already been achieved. There is now minimal scope for further market concentration within the sector something that would be contrary to the Governments stated aim of maintaining diversity in the sector. Ensuring the viability of the providers - both small and large - can only come from a reduction in the costs of doing business and Government leadership is key to unlocking these costs. Increased productivity Although Pathology represents 35% of all the services provided under Medicare, it is only 12.5% of the benefits paid, down from 17% twelve years ago (see Chart 1). Pathology expenditure is reducing as a share of total MBS expenditure as a result of substantial productivity gains achieved by the sector. All data provided in Charts 1 to 3 has been taken from publicly available and published data (Data source: Medicare Data, Department of Human Services; AWE & CPI, Australian Bureau of Statistics) Budget Submission I Pathology Australia Page I 4

7 Chart 1 Medicare Benefits - Pathology The real fees for pathology tests today are 45% of the pathology fee as of 2000 (see Chart 2). The gap between the real fee benchmark and the pathology fee in the chart below represents productivity improvement the sector has provided to Government.. Chart 2 Last 20 Years Real Value of Pathology Medicare Schedule Fees since FY These impressive outcomes have not been achieved in other areas of Health or medical care. They have been achieved in Pathology because real pathology fees have declined by 55% over the last 20 years whereas real fees for other medical services paid under the MBS have increased Budget Submission I Pathology Australia Page I 5

8 The Government recently announced that it would freeze indexation of MBS fees and rebates for General Practice items for the next 4 years. This was met with widespread criticism from the medical profession and rightly so. The policy does not acknowledge the costs of running a modern medical practice and is again seemingly designed to force healthcare providers to introduce patient co-payments for their services. What is not widely known is that pathology fees and rebates have not been indexed routinely for the last 20 years. In fact, nominal rebates have been cut and today stand at 12.3% less than they were in 2000 (see Chart 3). Since that time, the cost of providing services as measured by AWE has increased by 93.5% and as measured by CPI has increased by 54.8%. Chart 3 CPI, Average Weekly Earnings and Pathology Rebates January 2000 to May 2015 The total Government outlays on Pathology also shows the sector has provided Government with huge savings over the last 2 decades. The rolling 12 month benefit growth for Pathology to December 2015 is only 0.8% - again significantly lower than the growth for any other discipline. This fact alone highlights the recklessness and ill-considered nature of the Government s recent proposal to remove the bulk billing incentive for Pathology. Private pathology in Australia is among the most efficient services in the world. This is why Australian Pathology providers now operate throughout the world and have been actively pursued to provide services in overseas jurisdictions. MBS Review The Government said it would pursue savings in the MBS through the MBS Review and the various committees and processes established to implement that Review. The Government has placed considerable importance on the MBS Review for this reason. The Government committed to a process of consultation before implementation. Various committees have been formed to advise the Minister on potential changes to the Pathology Services Table. However the Government has fallen at the first hurdle. In the case of Pathology, consultations are yet to occur Budget Submission I Pathology Australia Page I 6

9 Even before those committees were able to meet and even before the Government was able to receive advice on the options available and the impact of the various options, it has announced its decision to abolish the BBI within the MYEFO under the cover of budget in confidence. This makes a mockery of the MBS Review. If the Government wishes to re-establish trust in the MBS Review, it needs to abandon the proposal to remove the BBI from all pathology testing and work with the profession to find the most suitable changes to the MBS consistent with good patient care and access. There should be no MBS cuts to Pathology in the budget the sector simply cannot absorb any further reductions in funding. Any changes that are considered or proposed by Government should instead be assessed fully by the processes of the MBS Review. Pathology Australia has supported the Minister s review of the MBS based on the premise of reviews of evidence, data and constructive consultation with the sector. This is required to enable clinician led reviews of the Pathology MBS to ensure sustainability in the long term. It is this review that has the Pathology sector s support. What does the sector want? 1) The proposal to remove the BBI should be abandoned 2) The Government should allow the MBS Review to proceed. There should be no further cuts in the Pathology MBS budget these cuts will lead to significant patient copayments. Instead any proposed changes to the Pathology Services Table should be referred to the MBS Review process. 3) If the Government seeks other savings, they must provide relief on the cost side through a move to market rents for co-located collection centres. The Government should immediately introduce the minor clarifying changes to the permitted benefits regulations and should proceed to enact effective compliance measures that will ensure rents for colocated collection centres are not in excess of market values and do not relate to the value of referrals arising at any site Budget Submission I Pathology Australia Page I 7

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