Are practices with 10-20% service fees viable?

5 minute read

Short-term incentives to get GPs on board are not new, but the ‘desperate’ market is pushing some practices to ‘sell their soul’.

Practices offering GPs services fees as low as 20% are not as uncommon as one might imagine, but how are – or are – they sustainable?

A quick search of employment marketplaces for GP vacancies by The Medical Republic turned up several practices offering remarkably low service fees.

While most such vacancies boasted short-term offers, say for the initial three months at a practice, some offered long-term fees of 10-20%.

Speaking to TMR, practice manager Riwka Hagen, the founder of practice advisory firm Medical Business Services and admin of the 12,000-member Practice Managers Network Facebook group, said the desperate shortage of GPs may have pushed some practices to offer the extremely low fees.

“[In some cases], it could be a crisis situation of having to fill a short-term need and a practice is prepare to fund it, not dissimilar to the sorts of rates that GPs would attract for filling in locum work, which would be sitting at about that percentage, if not even higher,” she said.

But while some practices may have additional avenues for funding or managers willing to cop higher service fees to make the model somewhat viable, for most private practices service fees of 10-20% aren’t sustainable, Ms Hagen said.

“If we had a more competitive GP market space, then you would definitely see a moderation of how far practices are prepared to sell their souls in order to get a GP to just be there,” she said.

“It is really very desperate out there.”

A spokesperson for Australian National University Medical Centre, which offers 90% billings to its GPs, said theirs was not a model that would be sustainable for most.

“We have 88% of our patients bulk billed on 15-minute appointments with no after hours,” they said.

“So we offer 90% in an attempt to attract GPs, knowing that even with a lower percentage in most practices, they will be able to earn more.

“It’s not something most practices would be able to do, and we manage it because we are part of the university, which offsets the financial challenge.”

GP recruiter and consultant Martina Stanley told TMR that she generally opted not to work with practices offering such low service fees longer term.

“As a general rule, it’s difficult for practices to make a profit, even if they’re receiving 50% [of GPs’ billings].

“I believe there are some practices that are trying to attract doctors by offering a very high percentage.

“Particularly if the practice is new, it might be a way of getting started.

“We don’t work with practices like that, usually, because we know that’s not sustainable.”

While practices may be able to generate revenue through other means, say through sub-leasing to a pharmacy, “it’s pretty hard to generate revenue outside of the money brought in by GPs,” she said.

But offering low services fees as short-term incentives to attract GPs is not a new practice, she said.

It allows practices to help GPs as they build their patient base, while avoiding any payroll tax-related confusion that an hourly pay rate-type incentive might bring.

“It’s an attempt to support the doctor through that initial phase when they’re building up, without confusing the [employment] status of the doctor,” said Ms Stanley.

Ms Hagen warned practices against offering hourly rates, in the wake of recent payroll tax developments.

“Anything that looks like an hourly retainer, or a time-based fee for providing service, looks very much like an employee arrangement,” she said.

“I would think practices would want to be very careful around how they structure that incentivisation.”

Co-chair of the RACGP poverty and health specific interests group Dr Tim Senior said practice owners were making judgement calls about how to best attract GPs to their practices and keep their doors open.

But at a systems level, this may disadvantage deprived communities.

“One of my main worries about [services fees] is that there’s clearly going to be more ability to pay GPs higher percentages of billings and higher take-home pay in services in well-off areas where patients can pay copayments.

“[A practice owner’s] obligation is to keep the doors open, running their practice and employing their staff.

“But I think the way that the health system is organised and funded will need to take account of this because already the recruitment is to well-off city areas, and it’ll become increasingly difficult to get GPs into areas which aren’t.”

Ms Stanley said practices had to shoulder a substantial risk with little support and must be highly business-savvy to stay afloat.

“The funding model is such that it puts quite a lot of pressure on the practices.

“Practices really have to use their own business acumen to try and create a sustainable service.

“That’s why we’ve seen such a decline, and I think we’re going to see even more decline, in bulk billing rates, because it’s not sustainable for practices or doctors.”

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