New front in Malcolm Turnbull's health war as doctors unite on pathology deal

Doctors say patients will be charged an average of $15 to $20 more to visit a GP if the government proceeds with plans to regulate the rents they can charge pathology companies that co-locate in their practices.

But pathologists say they are being charged obscene rents that are jeopardising their ability to keep bulk billing for their services.

The issue is heating up as Health Minister Sussan Ley prepares to unveil her final plans in the coming weeks, with GP practice owners uniting under a new group – the Australian GP Alliance – to force a government rethink.

"This issue has galvanised us," says the new group's chairman, Canberra GP and practice owner John Deery.

"The medicare rebate freeze is like the death of a thousands cuts but this is a guillotine to cut off our heads.

"A lot of practices are going to struggle to keep their doors open."

The government announced its rent control deal with Pathology Australia during the election campaign in May.

In exchange for the regulations that pathologists have been clamouring for for a decade, the sector agreed to drop its damaging advertising campaign against the Coalition's plan to remove bulk-billing incentives for pathology and imaging services.

Critics saw the deal as a quick election fix to stem the government's bleeding over health policy.

But Liesel Wett, CEO of Pathology Australia – which is dominated by Sonic Healthcare, one of the big two providers in the country – says she's confident the government will follow through on the election pledge.

"It's good practice and it's good for patients. If this is resolved pathologists will be able to more readily bulk-bill the people who need it. That would be a win for patients," she said.

Pathology Australia says the loose definition of "fair market value" is enabling GPs to charge well above real estate rates – and in some cases as much as 100 times more than the market medical suite rent.

Royal College of Pathologists of Australasia chair Michael Harrison says the government should follow through on the deal that would force GPs to charge normal commercial rents rather than "grossly-inflated" rates.

"You could rent an apartment overlooking Central Park in New York for a year for what people are paying for a small collection centre in a regional area of Australia – it's just nonsensical," he said.

"Our concern is this is not ethical behaviour because a lot of the current rents bear no relationship to real estate value. They're not paying for the space, they're paying for the referrals – and that is actually illegal."

Dr Deery says the deal will simply help the two big pathology companies – Sonic and Primary Health Care – further consolidate their grip on GPs.

He doesn't deny there are high rents but says that it's a result of fierce competition between the pathology providers for market share.

"They sign these contracts willingly, no one holds a gun to their head. It's a free market, there's no undue influence," he said.

"It seems very disingenuous to me that these established and powerful multinational companies are crying unfair, saying that they can't negotiate deals with small business-owners."

He says GPs are using the revenue from pathology to cross-subsidise the reduction in Medicare fees over time. If they lose that income stream they will inevitably have to start charging patients more.

The Australian Medical Association is also siding with the GPs, even though it also has pathology members. While it has been treading carefully on the issue as it seeks to balance its competing interests, it's now ramping up its fight against the changes after realising just how deep the anger among GPs is.

AMA president Michael Gannon has written to Ms Ley outlining his concerns and calling for a change of course.

"These practices are small businesses and have negotiated leases in good faith with the much larger pathology providers," he said.

"They have made business decisions based on projected rental streams, including investment in infrastructure and staffing. For many practices feeling the impact of the current Medicare indexation freeze, this source of rental income has helped keep them viable."

The AMA estimates the government's policy would rip up to $150 million from general practice each year.

A spokeswoman for Ms Ley – who is still consulting with groups like the AMA on the policy – said the government remained committed to taking steps to reduce regulatory cost pressures for pathology providers.

"This is to ensure that every taxpayer dollar spent on pathology lands as close to the patient as possible. It will allow pathology providers to compete for locations based on the quality of the service they provide," she said.

Labor health spokeswoman Catherine King has called the deal a "short-term political stunt" to keep the pathology sector quiet that will end up costing patients more.