The price is right

Annabel McGilvray
Med J Aust
Published online: 20 May 2013

What to look out for when setting your fees

It must be an election year. The cost of health care is in the headlines again with questions about increasing gap fees and Medicare’s effectiveness.

Most recently, advocacy by the Consumer Health Forum’s (CHF’s) aggressive Hip Pocket Pain campaign pointed out that Australians have the fifth-highest out-of-pocket medical expenses in the OECD (Organisation for Economic Co-operation and Development), at $1075 per year.

“What we know with health is that the burden is not shared equally, so people with chronic or serious illness are paying thousands of dollars a year, and they’re the ones that can least afford it”, says CHF Chair Karen Carey.

The vast majority of general practice consultations are bulk-billed — 82 per cent in the last quarter of 2012 — and recent Australian Institute of Health and Welfare figures show that just $125 of the $1075 worth of out-of-pocket expenses goes towards medical services including general practitioner visits.

But the disparity between the Medicare Benefits Schedule (MBS) lists and the consumer price index is growing and, more critically, there’s a large and increasing disparity between the MBS lists and the costs of employing staff and paying electricity, insurance and rent among other expenses. So how do GPs continue to maintain quality practice and set fair fees? What role, if any, does competition play? And what are the trade practices legal requirements?

There is a vast range of different models for setting fees within a practice. Many practices have agreed prices for all GPs, while in others the partners, associates and/or employees set individual fees. Beyond this, Money and Practice has been told of GPs who bump up fees to deter new patients, and many others offering discounted or reduced pricing for clients in need.

Fee options

“The MBS lists are constantly below the cost of the increase in the cost of providing a quality service year after year after year”, says Australian Medical Association (AMA) President Steve Hambleton. “GPs need to look at their individual circumstances. There are some who are above the AMA rate and there are some who are below. The priority here is a longitudinal relationship with your patients and a quality service.”

According to Dr Hambleton, GPs have three options when setting fees: they can charge a fair fee and provide a quality service; they can charge less or bulk bill, changing the quality of the service to, presumably, go faster; or they can shut their doors.

A fourth option now widespread within the profession is the “reduced fee”, which often sits alongside the standard fee and the bulk-billing rate.

It’s always been around, but Melbourne GP Dr Pat Crowe says the reduced fee has become much more commonly used over the past decade.

“The reduced fee is when you’re trying to look after disadvantaged people but you don’t particularly want to bulk bill them.”

“It’s charging a couple of dollars over of the Medicare rebate level, but still sending the message that this is a private valued service that you need to pay for that is not adequately covered by Medicare.”

Dr Crowe says the message for the client is “we know you’re doing it tough so we don’t want to sting you very much” and it’s frequently used for families or individuals with acute medical issues.

But reduced fees don’t make economic sense for a GP to use too often as they, by definition, don’t cover the cost of the service and full-fee paying patients effectively subsidise those on reduced fees or bulk-billing rates.

“But I’m astounded at the number of patients who you do that for that come back to you at a later date and say ‘things are great now, you can start charging me normally’”, says Dr Crowe.

Collective bargaining

In the realm of trade practices, the Australian Competition and Consumer Commission (ACCC) recently issued an authorisation (A91334) enabling general practice partners and associates to work together to set prices within the practice and for practices to collectively bargain with Medicare Locals and public hospitals about the fees for medical services they provide, such as after-hours consultations.

This type of authorisation has been made before, in 2002 and 2007, but it was the first time the application was made by the AMA rather than the Royal Australian College of General Practitioners (RACGP) and it was the first time the Medicare Locals were included.

“The RACGP has quite rightly said ‘this is your turf, and you should look after it’”, said Dr Hambleton.

The initial application requested that it apply to AMA members alone, but after discussion and submissions from others including the RACGP, the Rural Doctors Association of Australia and the CHF expressing disquiet about the distinction — not to mention the practical difficulties of excluding non-AMA members from negotiations and price-setting — this was changed to include all GPs.

Partner and competition law expert at King & Wood Mallesons Lisa Huett says the authorisation provides immunity for doctors to be able to set prices and collectively bargain as a practice rather than individually. Normally these actions would be in contravention of the Competition and Consumer Act.

“Cartel conduct is not reserved for big businesses meeting in swanky rooms. It applies at every level and, on some levels, doctors do compete and the ACCC has enforced that law.”

She says the ACCC authorisation arises from part of the Competition and Consumer Act which recognises that in some circumstances, when there is demonstrable public benefit, immunity can be granted for conduct which would otherwise breach the Act.

“It doesn’t change the law — GPs are still in the eyes of the Act competitors —however, this recognises that the public benefits in enabling the price-setting and collective bargaining outweigh any price-fixing concerns that the ACCC would otherwise have.”

In particular, the ACCC determination recognised the public benefits of intrapractice price-setting when it comes to administrative efficiencies within practices and continuity of service for patients.

Allowing GPs within a single practice to collectively bargain when negotiating prices for services provided to Medicare Locals and public hospitals was also done in recognition of what Dr Hambleton calls the common sense benefit of eliminating the bureaucratic inefficiencies of having to negotiate separately with each GP for the same result.

The AMA’s new dealings with the ACCC may have broader implications for the profession, with the organisation already considering making a similar application for other medical specialist groups.

“There may be other areas of the profession where it may have some relevance”, says Dr Hambleton. “We may need to be in that space to support all of our colleagues, whether they are specialising in general practice or otherwise.”

Anaesthetists, who increasingly work within group models and have previously been subject to ACCC action, could be the first to benefit.



Dr Pat Crowe has seen price-setting from the perspective of a practice owner, now as an employee, and also as a member of the Inner East Melbourne Medicare Local.

He welcomes the ACCC authorisation for collective bargaining between general practitioner colleagues to enable single practices to negotiate as one body with their Medicare Locals, but isn’t anticipating a huge change.

“Because of legal requirements, Medicare Locals and, before them, the Divisions needed to negotiate individually with all practitioners, but usually the same agreement was reached with every doctor.

“That was a messy procedure and now it’s a very outlined and legal procedure.

“This will save a lot of time and bureaucracy.”

He says that because of the authorisation, there is likely to be more open communication about the decisions being made about fees.

“I think now there’ll be a bit more discussion between the doctors within a practice and certainly within the after-hours clinic about what is an appropriate fee.”

When it comes to fee-setting within a practice, he says it’s a huge benefit for both patients and the practice if everyone is charging roughly the same fee. “It gives people the security that everything is much the same between doctors at a practice and it doesn’t allow people to play one doctor off another purely on price.”

Ultimately, he says, the authorisations are legitimising how doctors have been practising for 30 or 40 years. “This current legal ruling is probably just tidying up the loose ends of what people have been doing for a long time.”

  • Annabel McGilvray



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