Over‑reliance on bulk‑billing incentives creates a 'Mars Bar medicine' model in which patients survive but practices struggle or die.
In a profession where many GPs have traditionally wanted to work independently and shape their own style of care, “Mars Bar medicine” inflationary sugar‑hit measures like the tripled bulk‑billing incentives may succeed in nudging up the headline bulk‑billing rate.
However, the BBPIP model, PSI rules and employment reclassification risks are instead likely to erode practice sustainability, dampen competition, constrain innovation, narrow patient choice, reduce practitioners’ freedom to practise and to offer patients what they genuinely need, increase workforce burnout and, ultimately, drive out‑of‑pocket costs higher.
Government‑backed, high‑volume bulk‑billing corporate models that rely on “contractor” doctors rather than genuinely independent tenant doctors structures now face the highest regulatory and financial risk under this new mix of policies.
Short-term spike in bulk billing
New data presented to Senate estimates show that after the tripled bulk‑billing incentives were extended, the national GP bulk‑billing rate rose from about 77.7% to roughly 81–81.2% in a single month.
Health officials reported that bulk‑billing incentives were claimed about 10.8 million times in November, compared with around seven million in October, with roughly 1100 practices switching from mixed billing to universal bulk‑billing and a total of about 3000 clinics signed up to the Bulk Billing Practice Incentive Program (BBPIP), many of which were already bulk billing.
The language used by the government officials in describing the program’s “reconciliation” process and the need to “check in arrears” that practices had universally bulk billed before releasing the full 12.5% loading reads less like routine program assurance and more like a warning that any practice signing up could expect close fiscal and compliance scrutiny, almost as if they were being quietly put on notice for potential tax and regulatory audit.
BBPIP: rigid model with cliff-edge risk
Under BBPIP, practices that agree to bulk bill every Medicare‑eligible patient for all eligible services receive an additional 12.5% incentive payment on top of standard MBS benefits and existing bulk‑billing incentives.
This payment is calculated on eligible services over a quarter.
It is subject to reconciliation in arrears, meaning that if a participating practice fails to universally bulk bill the relevant item, even for a relatively small number of services, it can lose the entire 12.5% loading for that period, effectively locking clinics into one high‑stakes billing model.
PSI/PSB rules: central control and lost deductions
The BBPIP structure also feeds into the ATO’s personal services income (PSI) framework, which focuses on who really runs the business and who earns the income.
When a practice registers for BBPIP, controls MBS billing and receives the additional incentives, it appears to be the true operating entity rather than a mere landlord, which weakens the case that individual GPs each run a separate personal services business (PSB) and strengthens the view that they simply earn PSI.
If income is PSI and the GP does not qualify as a PSB, the ATO can deny or heavily limit many business‑style deductions, such as payments to associated entities, service‑fee arrangements designed to split income, portions of rent, and marketing or management charges, leaving only tightly defined PSI‑related expenses (for example, professional indemnity, directly work‑related costs and some CPD) deductible.
Commentators warn that this can strip away significant tax deductions that currently help make running or joining a private practice financially worthwhile for doctors, especially high‑income GPs targeted in recent ATO guidance and media coverage on income‑splitting.
Related
Contractor to employee: tax and payroll squeeze
The same features BBPIP reinforces centralised billing through the practice, practice‑level control over fees and policies, and incentive payments flowing via the clinic are exactly what ATO contractor rulings, Fair Work “employee‑like” assessments, and state payroll‑tax authorities examine when deciding whether GPs are really independent contractors or, in substance, employees.
State rulings and amnesty schemes across jurisdictions such as Queensland, Victoria, South Australia and others set out when medical centre contracts are treated as “relevant contracts” for payroll tax and highlight that where practices collect patient fees and then pay doctors a share, those amounts are often treated as taxable wages unless a specific exemption applies.
If GPs are reclassified as employees or employee‑like workers, practices can face extra PAYG withholding, superannuation and payroll‑tax liabilities, on top of the BBPIP compliance obligations and the PSI deduction limits affecting individual doctors.
This combination raises fixed costs for clinics, reduces the appeal of contractor‑style and clinician‑owned models, and makes it harder for small or innovative practices to compete with larger, more corporatised centres.
Workforce shortage, practice decline and reduced patient choice
All of this lands in a system where national modelling already projects substantial GP shortfalls: the federal GP Supply and Demand Study estimates a current unmet demand of more than 2400 FTE GPs in 2024, rising to around 3900 FTE by 2028 and over 8900 FTE by 2048, with significant gaps in states such as New South Wales, Victoria and South Australia.
As regulatory and tax settings push GP work into more rigid, centrally controlled, employer‑style environments, fewer doctors are likely to choose practice ownership, and some existing practices may close or consolidate, reducing the number of independent clinics and the diversity of care models.
A 40‑year analysis in When Patients Survive, but Practices Die: The Unhealthy Business Model of Bulk Billing I argue that over‑reliance on bulk‑billing incentives and PIPs creates a “Mars Bar Medicine” model in which patients survive but practices struggle or die, with practice numbers stagnating or falling despite strong population growth.
That work shows that Australia’s population has grown markedly since the early 1990s.
At the same time, the number of accredited practices has barely increased, leaving each FTE GP responsible for nearly 900 patients and limiting patients’ ability to choose and access high‑quality, independent care.
International and Australian evidence suggests that when provider competition and model diversity fall, prices and out‑of‑pocket costs tend to rise, and patients’ ability to switch providers or billing models is constrained.
Recent analysis of Australian out‑of‑pocket costs projects that without reform, visible out‑of‑pocket medical costs in the private system alone could rise from about $1.1 billion in FY23 to an extra $1.6 billion by 2030, driven in part by limited competition and weak consumer protections.
Conclusion
In a profession where many doctors have traditionally aspired to work independently and shape their own services, policies such as BBPIP, tighter PSI rules, payroll‑tax crackdowns and an unhealthy bulk‑billing business model risk accelerating a shift towards large, centralised organisations, exposing high‑volume bulk‑billing corporate practices to particularly acute practice and practitioner tax and compliance risks while, over time, leaving fewer viable clinics, less innovation, reduced patient choice and higher long‑run gaps once the current incentive‑driven surge in bulk‑billing washes out.
Forty‑year historical analysis arguing that over‑reliance on bulk‑billing incentives creates structural dependency, contributes to a decline in practice numbers per capita and limits patients’ ability to choose and access high‑quality care.
David Dahm is a chartered accountant, chartered tax adviser, registered tax agent, and a former AGPAL surveyor with 10 years of service. He is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life.
This article was first published on the Health and Life website. Read the original here.
