If you’re trying to figure out if the government’s new bulk billing incentive will work for you or your practice, there are now a few groups out there trying to help, all with pretty different approaches.
Within two weeks of prime minister Anthony Albanese announcing $8.5 billion of new Medicare money, largely to entice everyone to shift back to doing more bulk billing, we have so far counted four separate models (one not publicly available unfortunately) competing for your attention if and when you sit down to try to do the maths on whether the government’s pitch is really worthwhile or not.
You might want to look at each model, because they all have been created by groups with very different backgrounds in finance and modelling: the Department of Health and Aged Care (which unfortunately isn’t being made available to anyone); a technically and potentially financially adept interested GP (Dr David Fong); a business analytics platform subscribed to by the majority of GP practices in the country (Cubiko); and a long-time (and sometimes controversial) practice advisory principal and accountant, David Dahm.
All the models have the same premise: use this to work out to what extent, if any, you shift the profile of your practice, or your sole trader business if you are an independently operating tenant doctor, to more or full bulk billing.
DOHAC’s model
The DoHAC model is the easiest to dispense with in your consideration because for reasons so far not explained, and which certainly put some sort of cloud over the whole policy, the department will not make their model or methodology available publicly.
All that DoHAC has so far released is some very high level examples for three sizes of practice, with no real input variables for anyone to get a sense of what they are doing to arrive at the conclusion that everyone is going to love this new incentive and switch over like crazy over time to the point where nine out of 10 consults are bulk billed by the year 2030.
There’s a very obvious question here of why not be transparent and release the model if you think it’s so great, which, so far, hasn’t been answered.
On this basis, the DoHAC model can’t and shouldn’t be used. It’s not a model that anyone can trust or assess until they let everyone know what they are actually doing.
If you trust this model, you will essentially need to rely on the word of a politician – “trust us, this works, we modelled it…”
The only reason the government might be able to get away with this is that before Mr Albanese even finished his grand announcement press conference in Launceston, the opposition had come out and said they’d match the policy.
It’s not exactly the blind leading the blind, but it’s certainly the opaque and cunning leading the blind, none of which helps a practice owner or tenant GP work out sensibly what to do about the offer.
A GP’s model
Dr David Fong is a smart and engaged GP who took an immediate interest in the new policy and developed and published his own model providing a lot of detail on inputs and methodology and a chance for a GP or practice owner to use their own inputs to come up with some actual insight into what they might do.
You can find his model here.
Dr Fong says that his model “demonstrates the effect of pre-existing gap-fees, the proportion of patients which would normally be privately billed and the inclusion of different non-referred general practice service items into the estimated profitability of adopting the proposed bulk-bill incentive program”.
He provides some pretty good examples for everyone to get a sense of what he is doing and how – generationally better and more informative than DoHAC’s go at providing us with examples.
Dr Fong goes into quite a bit of detail on how his model works and has published his model code for anyone to take and try their inputs for themselves.
We make a couple of observations here, and we did not get time to reach out to Dr Fong for clarification today, but we will:
- The model seems to only focus on the revenue side of a switch equation. It doesn’t take into account costs, which other models do. We are not saying this is bad or good.
- The model only appears to be for those making a decision on whether to go back to full bulk billing or not, nothing in between. This is useful but some practices tweaking their mix between private and bulk billing (not going all out back to bulk billing) will almost certainly be a consideration they will be thinking about.
- You need to understand how to run and execute software code (not a lot but some, which might be an issue) to test the model using your own inputs.
Dr Fong’s model feels like a useful one to look at and try, especially if you can run the code yourself or have an IT friend who can do it for you. He is at least giving you the basics of his methodology and inputs, and with that he’s miles ahead of anything DoHAC has put out so far.
Practice advisory and accountant
Long time practice advisory principal, accountant, and chief payroll tax stirrer, David Dahm, has taken the view that you can’t model the real-world impact unless you take into account costs along with revenue, and then more.
In particular he takes into account the tax implications for a practice or tenant doctor in changing the profile of how much they mix bill, but he also goes into some interesting detail on other key metrics such as volume of bulk billing to FTE ratio.
The other reason an owner or tenant doctor might want to try Mr Dahm’s model is that he isn’t asking anyone to run stuff through software. He is publishing a series of benchmarks on costs and revenues per FTE that someone can simply take and do their own maths on, pretty easily.
The only question someone might have of Mr Dahm’s modelling is “where did all these benchmarks come from, and can we trust them?”.
Mr Dahm told TMR the data comes from 30 years of working with literally hundreds of practices and thousands of doctors – all de-identified of course. In other words, he seems to be making public a lot of his accounting IP over the years, which is something he couldn’t have done on a whim, and which, looks like it is the polar opposite to DoHAC’s secret squirrel approach to modelling the new incentive.
Mr Dahm’s view of DoHAC’s decision to not to release their modelling is pretty dim.
“What possible reason could they have to cloak their methodology and inputs?” he asked.
“Surely on something so systemic and important to the future of Medicare everything should be on the table so owners and GPs can make the best decision for the future of their businesses.
“That’s one reason I’ve been happy to make a lot of hard-earned IP public in my modelling.
“Decisions around what you do as a result of this policy will make or break a lot of practices into the future is my feeling.”
You can see Mr Dahm’s model and workings on HERE
Spoiler alert: Mr Dahm has run the model on a lot of practice and tenant doctor scenarios, and he doesn’t like what he sees.
Some David Dahm detractors might point to his obsession with the effect of changes to your bulk-billing profile that this policy is clearly incentivising and tax.
But any owner or tenant doctor who thinks that potentially serious tax cost implications might arise from this new policy probably should have a good read through the commentary Mr Dahm provides with his model and then decide what they think.
A business analytics platform model
Cubiko, which is a subscription-based business analytics platform integrated into most major PMS systems, announced yesterday that they too were going to partake in the new bulk-billing Medicare modelling game.
The product isn’t quite ready yet, but there’s a few reasons why owners and tenant doctors might want to check it out when it does come out.
The key advantage that Cubiko is going to have over any other models out there is that it’s going to reach into your own historical practice data to model stuff, and, likely, it’s going to be easy to use and punch in numbers.
An interesting aspect of Cubiko’s modelling product is that the group has told everyone that they are working closely with DoHAC on developing their model.
Is this a good thing or bad thing, though?
If DoHAC won’t release their modelling to anyone, and so far every interested GP, expert and analyst in town who has done the numbers can’t come up with what DoHAC has come up with – that masses of practices will change their mixed billing profile and bulk billing will make a huge comeback – what are they telling Cubiko to model?
Will Cubiko be independent enough in developing their model, in other words?
The other question for everyone when the Cubiko product hits your PMS in the next few weeks would be, is Cubiko going to model costs comprehensively as well as revenue, as Mr Dahm claims he is.
Cubiko is capable of reaching into Xero to look at stuff like this, but that feels like a pretty tricky thing to try.
A final question might be, would Cubiko go anywhere near trying to model potential tax impacts? Cubiko aren’t an accounting firm after all.
It’s unlikely, but that will not necessarily make the Cubiko model flawed in any way.
It feels like it will be another interesting and useful point of input for owners and tenant GPs out there who are starting to worry that the government pitch of “relax, change your profile and let the good times flow….” might be a tad simplistic.
Non-modelling considerations
As we suggested in our Saturday First Draft piece on this topic, there are some things here that are very hard to model, but which are vital to consider anyway.
Top of that list is: does anyone think that given the track record of both the government and the opposition on indexing Medicare rebates properly, that this new splash of bulk-billing money will be indexed properly as we move forward?
History says no it won’t. You could look at the last 20 years, do a quick sum on what has been indexed against the total CPI in that time, and inject that into your own model to get a sense of how long it might be until whatever financial advantage you gain from changing your profile as a result of the new policy, is eroded away by this problem.
Happy calculating everyone.
