Culture change key to Primary’s future

4 minute read

Primary Health Care has backed away from its practice of offering long-term GP contracts


One of the biggest operators of medical centres is diversifying its business model

Primary Health Care will rely on more attractive terms for GPs, new investment in large bulk-billing medical centres and a swing to non-MBS business to lift its fortunes after a flat performance in the latest year.

The major operator of medical centres is diversifying into private billing through acquisitions, new developments and conversions of existing businesses, saying it will have an undefined number of private-billing clinics on board by the end of this year.

Managing director Peter Gregg told The Medical Republic a shift to more flexible hiring conditions to attract and keep GPs was already showing “pleasing results”, with the retention of doctors jumping 35% in the year to June 30.

“Our overall doctor numbers are up by 36, which is not as much as we would like, but the new offers we are making to doctors are starting to gain traction,” he said.

Revenue from the network’s 71 medical centres in the year was stagnant at $323.7 million, as Primary started the year with a shortfall of GPs and failed to meet its recruitment target, despite a pick-up in the second half of the year.

However, the cost of GPs in the year plunged by 35% as Primary backed away from its long-standing practice of offering doctors large upfront payments in exchange for long-term full-time contracts.

More than 50% of newly contracted GPs in the second half of the year joined without any upfront fee, helping to reduce total clinicians’ costs at medical centres by 43%.

The old contract formula, developed by Primary founder Dr Ed Bateman, locked GPs into long-term deals by offering upfront payments of as much as $800,000 for what it termed practice “acquisitions”.

But the model backfired when the tax office ruled in 2015 that GPs who had accepted such payments owed a total of $110 million in unanticipated liabilities. To avoid a mutiny, Primary pledged to cover the cost, coughing up the last $13.5 million of that tax debt in the year just ended.

Mr Gregg said he was intent on refocusing on core businesses – medical centres, pathology and diagnostic imaging – and creating a desirable workplace with flexibility in remuneration models and hours.

“The cultural transformation we are trying to enact here, and the refocusing of the business back to its three core streams, will take some time,” he said.

“We need to engage with our healthcare practitioners and make this a place where they want to work. If they want to work here, patients will want to visit us here. So we are spending a lot of money on these things.”

He added: “We are rolling out five new, large-scale, bulk-billing clinics and investing in the private-billing sector. We will have some clinics there by the end of the calendar year.”

The new private-billing business would add a “differentiated value proposition” for patients and GPs, the company said. The move would also help reduce reliance on the MBS, as would the adoption of “medical home” models, including dental and chronic care.

Nearly two years after Mr Gregg took over from the late Dr Bateman in 2014, the culture shift comes on the heels of the departure of the founder’s two sons.

Henry Bateman had been general manager of Primary’s medical centres division until he quit earlier this year. Reportedly, he has been considering rolling out a rival network that could compete with Primary’s clinics.

Speculation has intensified about a possible family regrouping after Henry’s brother, James Bateman, resigned as head of the pathology division less than a fortnight before last Wednesday’s earnings announcement.

Primary remains the subject of rumours as a possible takeover target, a prime factor in buoying the company’s share price despite its weakened state and lingering uncertainty about government policy affecting its pathology and imaging businesses.

The company booked an annual net profit of $74.9 million, down 41% from the previous year, on revenue of $1.514 billion.

However, the results reflected one-off items such as the sales of Medical Director and land on Sydney Harbour, the legacy of the failed GP contract model, and a substantial paydown of debt.

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