Why the mass pathology clearance campaign is more about increasing industry profits than saving money

For many individuals, the term “bulk payment” refers to a GP visit that you just haven’t got to pay for out of pocket. However, one other type of bulk billing is emerging in the news leading as much as the May federal budget – bulk billing for pathology tests akin to blood tests.

This refers to fees that pathology corporations receive from Medicare for performing out-of-hospital laboratory tests that a family doctor may order to diagnose or monitor a disease.

Pathology fees have been frozen almost 1 / 4 of a century. Is it OK? Of course not, he argues Australian pathologywhich represents private pathology laboratories.

It recently launched itsKeep a cumulative pathology fee“campaign. At its core, it’s asking for something extra 160 million Australian dollars yr for pathological corporations. He argues that this is needed to make most out-of-hospital pathology tests freed from charge to the public.

However, easy solutions proposed by particular interests, involving more public funds, are rarely in the public interest. Here’s how we could design a more equitable twenty first century pathology system that gives free testing to society.

Pathology is big business

Collecting samples and analyzing them is a giant deal. Pathology providers received almost $3.25 billion for out-of-hospital testing in 2022-23 from Medicare rebates. Pathological tests are also carried out in private and non-private hospitals, but they’re financed through different mechanisms.

Almost all (over 99%) out-of-hospital pathology services are billed collectively. This is a much higher percentage than for visits to a GP, which was around 80% in the same period.

The use of pathology is increasing faster than the population grows. This is partly because there are more chronic diseases in the population and partly because recent tests have gotten available.

The provision of pathology services is concentrated in a number of hands, with many providers listed Australian Stock Exchange. Increasing rebates for pathologists, as demanded by Australian Pathology, would translate directly into corporations’ financial results, increasing shareholder value.

Do you remember road tests? In the early days of the pandemic, private pathology corporations conducted tens of millions of COVID PCR tests.
Christie Cooper/Shutterstock

So why are pathology corporations now calling for more funding? Profits for pathology corporations soared in the early years of the Covid-19 pandemic with the introduction of widespread PCR testing and associated government funding.

But the industry has been accused of benefiting from “COVID-19 misfortune” and eventually the sauce train ended. So pathology corporations at the moment are looking to switch that revenue, using the latest campaign to try to extend discounts.

Is the pathology industry right?

At first glance, the freezing of presidency rebates for pathologies for twenty-four years could seem unfair. However, a glance into the world of pathology reveals an industry that has seen significant change productivity increase.

As we’ve got seen in recent times, increased standardized testing can result in improved productivity. For example, corporations can put more stress on test equipment – running it longer, loading more samples – lowering the cost of the test. Hardware improvements also enable faster testing, allowing for greater economies of scale.

But freezing fees is lazy policy, an example of “set it and forget it.” Although it brings some advantages for the taxpayer, it is not an optimal solution. This is because all productivity savings (from automation, digitalization and increased economies of scale) are assumed to precisely offset any increased costs resulting from inflation. This is never true. Given the current level of automation and consolidation, this is prone to leave excess profits in the pockets of providers and price governments more than they should pay.

More changes when it comes to pathology, it is yet to come back. Progress in artificial intelligence are accelerating, and automatic reading of certain pathology tests can further reduce pathology costs, providing greater profits for providers.

Future policy must reflect changes in the costs of providing pathology services, the details of that are tenuous in practice.

What must occur?

The government should step back and ask itself whether the fee system for pathology services, designed a century ago when the provision of pathology services was literally a cottage industry, is still appropriate in an era of in depth automation and concentration of ownership. The answer is clearly no.

Reform should first abandon the existing unlimited fee-for-service payment system. Pathology is big business and ought to be paid as such through tenders and contracts.

To keep costs low, pathology providers ought to be invited to tender.
fizkes/Shutterstock

Pathology corporations ought to be invited to tender to supply out-of-hospital pathology services in designated geographic areas. Two or more bids could also be approved to keep up competition between suppliers and keep options available until the end of the bidding period. Pathological contracts mustn’t include any out-of-pocket payments by consumers.

In-hospital pathology mustn’t be covered by the same findings. Instead, private hospitals should enter into their very own contractual arrangements for the provision of pathology services, as is currently the case.

Public pathology services – run by state governments or their agencies akin to Queensland Pathology – they’re changing too.

The consolidation of public pathology services in New South Wales has brought about this significant improvements in productivity. Victoria has launched into a less ambitious reform means of consolidation three public suppliers fairly than the single public provider model seen in New South Wales, Queensland and South Australia. This will likely end in savings as well.

To increase competition, public suppliers ought to be invited to take part in the tendering process along with private suppliers.

What is the message you possibly can take home?

The world of pathology care is consistently changing, and there are more changes on the horizon, whether related to technology or consolidation. In this example, paying more to personal providers on a payment system that has passed its expiration date is not good policy. This is despite its simplistic appeal and support of vested interests.

So next time you go to a pathology collection center and see posters encouraging you to email your MP to “keep your pathology bills together”, beware. The campaign is more about the company’s profit than saving money.