Ep58: Billing Part 2—Compliance and the Free Market

Ep58: Billing Part 2—Compliance and the Free Market
11 May 2020

Fellows of the RACP can claim CPD credits via MyCPD for listening to this episode and reading the resources below.

In this episode we continue the discussion from Episode 56 about medical billing in Australia. Almost 500  million Medicare rebates are processed every year and for the most part these are claimed appropriately. But non-compliant billing could be costing the health system over 2 billion dollars annually. The vast majority of this comes down to misunderstanding of the conditions around MBS items, according to our guest Loryn Einstein of Medical Billing Experts.

Every year the Department of Health shifts its attention onto a different specialty area to look at the statistical spread of claiming behaviour. Practitioners at the top end of the curve receive warning letters and flagged practitioners who persist with unaccountable billing behaviour will have their practice audited more thoroughly. Finally, they may be referred to the Professional Services Review, a sort of judicial panel made up of clinical peers.

Questions have been raised by professional bodies and lawyers about the sensitivity of these processes to clinical nuance or procedural fairness, and the lack of education available to practitioners. We hear responses to such concerns from the Department of Health.

Finally, we take a look at the huge range of private medical fees in Australia. Loryn Einstein considers how factors like regulation and supply and demand shape this market.


Loryn Einstein (managing director, Medical Billing Experts)

Written and produced by Mic Cavazzini. Tracks courtesy of Free Music Archive include ‘Shadow Lines’ and ‘Le Hustle’ – Polyrhythmiques, ‘Mr S’—Tortue Super Sonic, ‘Un desert’- Komiku, ‘Undercover Vampire Policeman’- Chris Zabriskie, ‘Friends and Apples’- Alpha Hydrae. Image licenced from Getty Images

Editorial feedback for this episode was kindly provided by members of the RACP’s Podcast Editorial Group; Sern Wei Yeo, Rhiannon Mellor and Seema Radhakrishnan


AskMBS email advice
Shared Debt Recovery [Department of Health]
Out of pocket costs [Department of Health] 
Professional Medical Practice podcast
Informed Financial Consent [AMA]
MBS Review Taskforce consultations
MBS Online Factsheets
I stand accused of rorting Medicare. This is what it's like [Medical Observer]
Variation in outpatient consultant physician fees in Australia by specialty and state and territory [MJA]
Variation in the fees of medical specialists: problems, causes, solutions [MJA]
Variation in the costs of surgery: seeking value [MJA]
Mind the gap: How do medical specialist fees work [SMH] 
New fee website shows NSW pays up to 40 times more in out-of-pocket costs [SMH]


MIC CAVAZZINI:               Welcome to Pomegranate Health, a podcast about the culture of medicine. I’m Mic Cavazzini for the Royal Australasian College of Physicians. This is a continuation of the discussion from Ep56 about medical billing in Australia. We’ve already heard about the confusing legislation that regulates the interface between Medicare and private health insurers, and we highlighted some of the pitfalls that consultant physicians should be aware of. Today we’re going to look at how the rules are made and enforced, and what the outcome is for the marketplace of specialist services. Our guide on this journey is Loryn Einstein.

LORYN EINSTEIN:             So I'm Loryn Einstein, I'm the Managing Director of Medical Billing Experts. We perform outsource billing for all specialties across the country and we focus on keeping our clients safe from unnecessary Department of Health audits and keeping them out of the hands of the PSR.

MIC CAVAZZINI:               I'm sure you get this question all the time but I have to ask, any relation to the Einstein?

LORYN EINSTEIN:             Yes. Yes. If you could see me when I haven’t straightened my hair you'd know that. I have the Einstein hair.

MIC CAVAZZINI:               So really? There's a family connection?

LORYN EINSTEIN:             Yes. Yes

MIC CAVAZZINI:               The PSR Loryn Einstein is referring to is the Professional Services Review, the top cop when it comes to Medicare compliance. We’ll get into the details about how the PSR works a bit later, but I want to start today’s story with a nod to its director between the years 2005 and 2011, General Practitioner Dr Tony Webber. After stepping down from that role, he published an article in the MJA that, to mix metaphors, let the cat out of the bag among the pigeons. Dr Webber wrote that Medicare was quite efficient at distributing benefits but, and I quote;

“From the beginning, there were inadequate safeguards in a scheme based on the honour system. In no other area of public expenditure where recipients have significant control has so little attention been paid to audit…..Extrapolating modestly from the misuse of the MBS, PBS and the Medicare Safety Net…  that I am directly aware of, I estimate that 2–3 billion dollars are spent inappropriately each year.” End quote

The lay media, of course, ran riot with headlines about ‘Medicare rorts’, while doctors responded angrily to Dr Webber in the medical press. They said that he was tarnishing the integrity of a largely honest profession and making back-of-the envelope generalisations from incomplete data. Indeed, Dr Webber’s figures would put Medicare ‘leakage’ at 10 to 15 percent of total expenditure, which is much higher than estimates from comparable health systems abroad that average around 7 percent.

But Tony Webber was close to the bone when he blamed an outdated Medicare Benefits Schedule that left a lot of grey areas for unwary or unscrupulous providers. Since Dr Webber’s bombshell, the Department of Health has redesigned the way it detects and manages non-compliance, and how it closes some of those loopholes.

In the 2016-2017 financial year, $29 million dollars of debts were raised against non-compliant providers for a cost of about $5 million. Then a Health Portfolio statement from the 2017-18 budget [Portfolio Budget Statements 2017-18. Budget Related Paper No. 1.10] suggested that something over $100 million could be recouped, though enforcement operations would need to ramp up. While that figure is still a long way from $2 billion, Loryn Einstein does believe that non-compliance is steadily being corrected through the program.  

LORYN EINSTEIN:             Because doctors billed from the beginning of Medicare until about 2016, 2017 without much pushback, habits became ingrained in clinical practice where all things just continued to happen. You know, business as usual. So it used to be, if I lectured five years ago and it was just a group of physicians, there was no other specialty, they'd turn to me and say, look, I've got four or five item numbers, how can I go wrong? And now when I lecture I can't get out of the room for a couple of hours afterwards answering compliance questions or addressing concerns about letters they’ve received from Department of Health or they’ve got an upcoming PSR hearing. It’s a totally different world. What we’ve been saying for the last 10 years at Medical Billing Experts, finally the doctors have a reason to listen.

So picture a triangle. So at the bottom of the triangle you’ve got about 95% of the medical community that are are actively trying to stay compliant and do a good job at that. And then the next layer is the occasional or inadvertent noncompliance by either lack of education or bad advice from a colleague or misinterpretation of an item, they're billing the wrong item. Or some of their behaviours aren’t correct as far as how they're completing the clinical work to comply with the item number.

And Department of Health reports that’s about 2 to 4 percent. So in that 2 to 4 percent realm the Department of Health will do a computer audit of certain behaviours that they think are happening in the community. They’ll send out a series of letters to doctors of that specialty about those item numbers and ask the doctors to respond.

If that doesn’t change the doctor’s behaviour, they then are categorised as sustained noncompliance at which point they're given a one-on-one audit. That’s the second warning shot the doctor should receive. After that, they still haven’t changed their behaviour, then a referral is made to the PSR. The Director of the PSR makes a determination of whether further investigation should be done and if it does it goes through the whole PSR process.

MIC CAVAZZINI:               In the Private Practice magazine you wrote that one of the most common billing errors identified is overbilling for initial consultations which are, of course, reimbursed more generously than subsequent attendances. So that means using an item number like 110 more than once for a single referral or a single cause of treatment.

LORYN EINSTEIN:             That is one of the most easily detected errors, there doesn’t even have to be human interventions from the Department of Health. All they need to do is go back in the computer system and match 110s for a patient under any of the doctor’s provider numbers back to one referral. You have to have a referral to transmit through Eclipse, you have to have a referral to even manually submit those claims so they're all in the computer system. But we’re still seeing those behaviours.

Our compliance team, day after day after day, we are stopping billing from going through and contacting the doctors to ask them to either do a please explain or change the item number. So the standard the Department of Health has, and that PSR enforces as well, is that the clinical notes need to be contemporaneous but they need to be a full set of clinical notes. And they need to reflect all of the basic standards of a consultation and that’s history, examination, management, preventative health advice. And if those aren’t in the clinical notes a 110 and a 116 should not be billed for a physician.

MIC CAVAZZINI:               Now, some other billing items that the auditors pay particular attention to are care plans and urgent care items. Why are those particular triggers for them?

LORYN EINSTEIN:             One of the issues is when the determination is made that care is urgent the standard that needs to be met is that the patient is treated and then the determination is made retrospectively about whether the care was urgent care or not before billing an urgent care item number. And they, through some of the clinical note taking, were picking up the fact that both GPs and specialists were charging urgent care item numbers on the determination made sometimes even before the patient was seen.

The other thing that we've seen come through is so, for example, a patient comes through an Emergency Room, a physician on the ward would accept the patient on the ward, charge urgent care item but then come back to review the patient every day. And, because it was a complex patient, felt that it was appropriate to charge urgent care four or five days in a row. Which, even for a layperson like myself, doesn’t make sense. But once a patient’s stabilised it’s no longer urgent care. Now, it’s the billing that happens that’s not with a procedure that there's the same level of confusion and the same level of enforcement activity if not more.***

MIC CAVAZZINI:               Let’s go over the tiers of ‘enforcement activity’ in more detail. Few people realise that Medicare doesn’t sit within Department of Health but another arm of government called Services Australia. When you enter a claim into the Eclipse computer system, there’s an automated process that determines whether it has met the first criteria to be paid. Simple conditions like, “does it clash with any other item numbers being claimed”, or “is there a limit to how many times that item can be claimed per patient?”.

Human evaluation occurs at a surface level only given that close to 500 million individual services are billed to Medicare each year. It could never be cost effective to monitor compliance one claim at a time, so a statistical approach is used to observe trends in behaviour over the whole specialty workforce being targeted. This is done by the Department of Health’s Behavioural Economics and Research Team.

They might already be familiar to you as the unit that in 2018 sent out ‘nudge’ letters to the most prolific prescribers of opioids. You’ll remember that this number-crunching approach was accused of lacking the nuance to consider a prescriber’s particular area of work— say you had a high proportion of patients in palliative, oncological, or post-surgical care who needed strong analgesia.

More recently, the DoH’s “nudge unit” again raised the heckles of GPs, when it focused on claims for mental health treatment plans. You’re only supposed to co-claim them alongside a regular attendance item if the mental health issue come up during that consult. If mental health is the first issue raised, however, then the treatment plan must be claimed on its own.

341 General Practitioners across Australia were identified as having co-claimed half their mental health treatment plans compared to an average rate nationally of 23%. When the warning letters went out there was an immediate backlash. Take this comment by Dr Elizabeth Oliver writing for the Sydney Morning Herald “A good GP is often booked up three weeks in advance. Should the firefighter who attends for PTSD come back another time for the shoulder injury? A woman’s relationship is becoming increasingly violent. Should we address her suicidal thoughts today, or her contraceptive needs?”

The Australian Medical Association released a statement saying that the compliance program’s “blunt use of metrics…will overlook the nature of a practitioner's practice”. They also questioned the arbitrariness of the thresholds that would cause a practitioner to be flagged, and the fact that enforcement letters are often the first time a provider even learns that they’ve interpreted the MBS wrongly. The AMA stated that this program is “a poor, and punitive, substitute” for proper education.

I contacted the Department of Health to ask how appropriate their statistical approach was for reading the intentions of practitioners. A spokesperson in the Provider Benefits Integrity Division told me that the thresholds chosen only singled out practitioners with billing rates that are “extremely high” or “very different” compared to their peers.

Here’s more of the official response dubbed in: “The metrics to identify practitioners are developed in consultation with the Department’s medical advisers to account for, and where possible exclude, practitioners with unusual patterns of billing that may be clinically appropriate.” … “The Department acknowledges that individual practitioners may have a particular type of practice or patient cohort that generates unusual claiming patterns. In these instances, practitioners are advised in the letter that if they are satisfied their practice is appropriate, no further action is required.”

The spokesperson added that the letters should not be seen as punitive nor do they suggest a practitioner’s claiming has been fraudulent in intent.  On the lack of education available to practitioners about compliance rules, the DoH response was: “Targeted campaign letters are an educative approach that was developed in consultation with, and supported by, medical stakeholder groups. They are used to support early intervention and reduce the likelihood of practitioners who may be inadvertently billing incorrectly from being identified for an audit or referred for a Professional Services Review.” Loryn Einstein doesn’t think this is a great approach, but says that providers do get plenty of warning before thing get serious.

LORYN EINSTEIN:             The targeted campaigns and the audit activities, when the Department of Health presents why they do these activities, they say it’s to give the practitioners an opportunity to change their billing practices from inappropriate to appropriate. So what they're, in fact, saying is our method of education is enforcement. So I think that doesn’t sit well with me.

So, yes, it is difficult in an arena where there isn't education presented by the compliance body. Or, yes, they say that there's things online but it doesn’t tell you what not to do. These are the behaviours that are going to get you into trouble. What the Department of Health states their process is, is, you know, the letters first, the audit second, you have some warning shots across your bow. And it’s only if you don’t change your billing methodology, at that point you end up in the hands of the PSR.

Let me separate GP from the rest of the world, because there are some people who are out there as consultants who used to work in GP practices who sell billing optimisation. And one of the things that they’ve said in writing on their Facebook page is, “If you're not getting audited you're not pushing it far enough”. This is the most outrageous statement that I've heard in the 20 years I've been doing medical billing, and there's a lot of players out in the marketplace who are selling bad advice. And this is leading to behaviours that are going to lead the – you might as well just call the PSR and say, “I'm going to right now bill a whole bunch of item numbers to raise a whole lot of money. Would you like the money back now because it’s all inappropriate or should we wait for the whole formal process to go through?”

MIC CAVAZZINI:               OK, so to tie all that together, the people that are crying foul and saying, “it wasn’t me, Guv, I didn’t know that it was a crime,” they're ignoring all of those shots over the bow as you describe them, that there aren’t that many excuses for ignorance anymore.

LORYN EINSTEIN:             Not anymore. There might have been a lack of awareness and when you look at the cases that are in front of the PSR, it isn't very difficult to figure out who the inadvertent billers were and who the fraudsters are. Because PSR does publish the case outcomes every month and on the more detailed write ups you can tell very easily what the problem has been with the practitioner. There are fraudsters in every profession and that’s never going to change and it is a very, very small contingent. And, for me, my new definition of billing optimisation, because often I'll get a call saying could you please present a lecture in billing optimisation, I'll say yes. And the first thing I say in the lecture is, “the definition of billing optimisation is when the doctor bills appropriately and gets to keep every penny of what they’ve just received.”***

MIC CAVAZZINI:               The Department of Health spokesperson I emailed similarly recognised that most non-compliant Medicare billing is inadvertent. He said that when providers are audited they are given individualised feedback and are able to make voluntary repayments without further penalty.

While the compliance process we’ve described does provide opportunities for course correction the AMA, and other critics, say it does more to provoke distress for honest practitioners than it does to stamp out cynical misuse of the MBS. Dr Anchita Karmakar, is a Gold Coast GP who says she’s suffered reputational damage and profound health repercussions from being scrutinised by the Professional Services Review.

In 2015 Dr Karmakar received a letter warning about her frequent use of MBS items for after-hours visits and urgent consults. This was followed by inquiries from the DoH she describes as “innocent and friendly” in which she explained that given the cohort of migrant patients she was seeing, her use of the home visit items was consistent with the conditions described in the Benefits Schedule.

But the tone of the inquiry changed instantly when her case was referred for an audit by the PSR, which has the authority to subpoena your patient records to try and determine whether the billing was clinically warranted.
Dr Karmakar has written that the experience was “like getting pulled over for speeding, without actually knowing what the speed limit is.” While she was given the opportunity to admit error, Anchita Karmakar felt she had had not abused the rules and had looked after her patients properly.

Towards October this year she will take on Department of Health in the High Court, with representation from Queen’s Councillor Julian Burnside AO. One of the QC’s chief criticisms of the PSR process, is that a doctor’s legal representatives aren’t permitted to intervene during a review as they would in a normal court process—essentially to “cross-examine the complainants”. Dr Karmakar’s defenders have called the PSR “a Kangaroo Court” and former AMA president Dr Mukesh Haikerwal even compared it to the Stasi.

I put these concerns about due process to the Department of Health, and PSR executive officer Bruce Topperwien gave me this response by email; “While the Act limits the role of a lawyer in a PSR Committee hearing to attend the hearing and provide advice during the course of the hearing to the person under review, addressing the Committee on questions of law, and making submissions at the end of the hearing, it is quite an active and useful role within that hearing process.”

Another criticism of the Professional Services Review is that its Committees of the are made up of medical professionals who don’t have the legal expertise to apply procedural fairness. Anchita Karmakar’s solicitor, David Gardner, told the Medical Republic paper that without proper legal training, committees are likely to ask what you’ve done wrong rather than whether you’ve done wrong. Of 101 reviews performed over the 2018-2019 financial year, not a single one had exonerated the practitioner being investigated

Julian Burnside QC also worries about the “
legislative chilling of criticism” about the review process. In section 106ZR of the Health Insurance Act it’s written that “A person must not disclose to another person…any information or evidence given to the Committee in the course of its deliberations. Penalty: Imprisonment for 12 months.” Conversely, the Department of Health does have the right to publish an individual’s name, address, and misconduct once a “final determination” is made. [Section 106ZPR].

I asked Bruce Topperwien of the PSR whether practitioners under review need be fearful of discussing their case more widely; “Most of the evidence given at the hearing is medical information relating to the practitioner’s patients... Section 106ZR operates to ensure that anyone who has access to that information, including PSR staff [members of the PSR Committee the person under review, and their lawyer] do not disclose such information unless the law otherwise allows them to do so….The section does not prevent a person under review from [naming themselves publicly as a person under review or] discussing publicly, in general terms, the nature of the proceedings” This means you would, therefore, be allowed to share the information with an expert witness who was giving evidence on your behalf.

While Anchita Karmakar’s case has been described as a David and Goliath scenario, the introduction of the Shared Debt Recovery Scheme may have unwittingly set the PSR up for a heavyweight titlefight. Under this Scheme, the Department of Health can hold the practice that manages a provider’s billing responsible for some share of the debt repayments.

But some of these private practices and hospitals are corporate giants with ample war chests. Take, for example, the National Home Doctor Service, which according to the ABC has a revenue of over $54 million a year and at least 800 GPs on its books. 15 of these doctors were being investigated for alleged over-servicing of urgent after-hours items, but midway through the process the Professional Services Review broadened its net to include another 56 not flagged when the case was first referred. The corporation took the PSR to the Federal Court of Australia on the grounds that procedural fairness had been denied. On May 25th a judge ruled that the review of the NHDS should cease, stating that “The Director effectively shifted the goal posts.”

Don’t get me wrong, the National Home Doctor Service already had a record of questionable behaviour even before it started aggressively marketing a convenient and cost-free 24 hours service enabled by the telehealth items created during the COVID crisis. The RACGP has more than once queried the quality and safety provided by such ‘deputising services.

But the Federal Court had been convened to judge not the NHDS’s behaviour but the natural justice afforded by the Professional Services Review. For lawyers, this quandry goes right to the core the PSR’s purpose. Is it to evaluate bureaucratic behaviour or clinical practice, and can these two tasks be performed by the same people?

On the clinical aspect, the PSR Panel is a group of around 100 health professionals recruited from different disciplines to help to focus its auditing work. It’s from this Panel that a smaller Committee is chosen to Peer Review a referred practitioner. Loryn Einstein explains further how these people are brought together.

LORYN EINSTEIN:             So the whole concept of the PSR panel is that a panel of your peers determines what appropriate behaviour is and what not appropriate behaviour is. So in the past you could be faced with a panel of GPs, a physiotherapist, a dentist, it could be any number of panel members trying to tell you whether or not your behaviour had been appropriate. Because there was a lot of pushback about that, now the PSR has done a lot of recruitment and it’s almost giving us a vision of what's coming next or what’s already in the pipeline to look at their recruiting patterns at this point. And physicians are very much in the limelight as far as the PSR. They’ve recruited in haematology, rheumatology, rehab medicine, oncology, respiratory and sleep and endocrinology were already seeing the first wave of letters go out. Oncology had, about six months ago, a wave of enforcement letters so that’s the first stage. Remember that 2 to 4 percent where it’s occasional and inadvertent noncompliance.

MIC CAVAZZINI:               So in another one of your articles you highlighted a couple of extreme examples of overbilling in the millions of dollars. What are the consequences when a provider is caught?

LORYN EINSTEIN:             So if a provider owes money they can have their current Medicare benefits withheld to pay down the debt. If they're a staff specialist in a hospital their wages can be garnished. They have the ability now to seize assets, to seize bank accounts and these are only really exercised in cases where the doctors aren’t voluntarily paying back the funds once the debt’s raised. If they comply with the payment process none of those things happen. If it’s inpatient billing that will also lead to the health fund asking for the money back as well.

But, hand in hand with that go to disqualifications from particular item numbers. Not only is the doctor paying back massive amounts of money but they're precluded from making a living for the next 12 to 24 months in some cases and sometimes permanent disqualification. And that would only be in the case where there was no chance of the doctor changing their behaviour in the future.

MIC CAVAZZINI:               Right. And, as an additional deterrent, the PSR can refer the most serious cases to AHPRA. Does this happen very often?

LORYN EINSTEIN:             So, for example, from July 2019 to December, let’s see, eight practitioners were referred to AHRPA of a total of 61 cases. So whilst the numbers aren’t high the penalty is severe.

MIC CAVAZZINI:               So you’ve mentioned Medicare, the Department of Health and the Professional Services Review. There's also the MBS Review Taskforce which looks at the overall picture and where the trends are going.

LORYN EINSTEIN:             So the Taskforce has a very distinct task and there's over 5,700 item numbers in the MBS. And as of 2015 a majority of those item numbers hadn’t been touched since the MBS started. So we’re talking some 47 years of the item numbers being unchanged. And that’s despite changes in technology, changes in what’s best practice, clinical practice. So it changes a lot in 40, 50 years. So their whole task is to review the item numbers and bring them up-to-date with current clinical practice. Also to make it clearer to doctors, hopefully, what was expected before billing an item number.

The MBS Review Taskforce has clarified a lot of the item numbers or changed them to be more clinically relevant. So the grey area is where item numbers were being billed because they historically had been billed for certain treatments or procedures or surgeries. There were now more appropriate item numbers so it solved some of the inappropriate billing that happened due to lack of appropriate item numbers.

MIC CAVAZZINI:               You said in one of your interviews that these three offices, the PSR, the DoH and the MBS Review Taskforce aren’t always singing from the same song sheet but that’s improving all the time.

LORYN EINSTEIN:             Medicare and Department of Health, they're not singing in harmony at all. I don’t think they’ve even seen each other’s hymn sheets. And the Review Taskforce is a totally separate process and it’s not about compliance, it’s about relevance. The process itself is a very robust process, the outcome, because then there has to be several layers of government approvals before those changes can be made, the outcome isn't always what was proposed by the medical community itself or it causes more confusion. So the communication of what the changes mean and some of the underlying standards is very muddy.

For example, they published amendments to the entire sleep and respiratory section of the MBS. And within a few months amendments had to come out because the new item numbers or the amended item numbers caused more confusion than the old item numbers. So it’s a work in progress but I take my hat off to that process. Because they actually acactually are willing to go back and say, you know, that wasn’t working, let’s try this.***

MIC CAVAZZINI:               I want to finish the story from a slightly different perspective. Given Loryn Einstein’s role in consulting to specialists on their billing, I asked her how she saw the medical marketplace in Australia and the various forces driving it. What is an appropriate price to set for your service and why are the media always on about “fee gouging” doctors in regards to out-of-pocket costs?

The first factor is the value of Medicare Benefit Schedule fee for any item. I’m not sure if the Medicare documentation [Note GN.10.26] is being optimistic when it’s stated that “The fee for any item listed in the MBS is that which is regarded as being reasonable on average for that service, having regard to… reasonable ranges of complexity and technical difficulty encountered.” My guests from episodes 55 and 56 already explained that the Medicare rebate is understood to be a subsidy only and it’s hardly enough to cover the real costs of running a practice if you only bulk bill. Remember, only 85% of the listed MBS schedule fee is reimbursed to you for outpatient consults, or 75% for inpatient services.

The picture is even grimmer when you look at political decisions over the last decade. Medicare rebates would normally get bumped up annually keep pace with inflation. But in 2013 there was an indexation freeze introduced temporarily by the then Labor government as a budget balancing measure. The Coalition which took over at the next election persisted with the freeze, meaning that year by year it became more costly for a medical practice to operate

After some horse trading with professional bodies, the government began a staged thaw of the scheme. In July 2017, GP bulk-billing incentive payments were indexed once again to inflation. In 2018, the rebate for all regular GP and specialist attendances was unfrozen. Last year it was specialist procedures and other GP services, and from July this year, it’s the turn of items numbers for diagnostic imaging .

But the indexation of rebates simply took up where it left off in 2013, meaning that the Medicare rebate for consults is still five years behind the relative inflation in costs of staffing, rent, insurance and other medical supplies. Here's what Loryn Einstein makes of it.

LORYN EINSTEIN:             So stepping back to your question about the indexation of the MBS; 1.5% in many years doesn’t even keep up with the cost of living. And, for doctors, it’s not about the published CPI stats. For most medical practitioners it was a 2.9% increase for the medical award this year. I don’t know any specialist staff that is paid at the award rate. To get skilled staff you have to pay very high wages and that’s why you find so few bulk-billing practices as time goes on.

The MBS, it will never catch up even if that were meant in 2012 to be an appropriate benefit. And the AMA says, “no, that never met the standard of what the doctor should be earning”. The MBS is more of a budgetary line item. And I would imagine that when it first came in that the MBS was set based on, “there's a total budget of x, we have these number of items we’re going to be reimbursing” and somehow scaling that into a budget. It may or not have been in line with what the appropriate benefit would have been for a doctor at that point in time. But certainly, with the passage of time, it has come farther and farther out of line with what the expectation would be from a medical practitioner for those consultations and treatments.

MIC CAVAZZINI:               The Australian Medical Association has lobbied government to have the MBS more accurately reflect the real costs of running a practice and it publishes a parallel list of fees that it thinks is appropriate for practitioners to charge. We’ve already said how an initial attendance with a consultant has an MBS rebate of $155.60. According to the AMA’s list, this would merit a fee of $345.00 which is more than double and for many other items the ratio is even greater. Now, private funds can't contribute to outpatient consults but for inpatient care other helping practitioners and patients meet at the AMA rate?

LORYN EINSTEIN:             No, it’s actually going the opposite direction. So the AHSA group of funds, so funds such as Peoplecare and Navy Health and Teachers Fed, they had their own gapping scheme which was much more generous. And it really did approach AMA level because it was a calculated amount. But now, as of the 1st of July, they have joined the rest of the health funds in that known gap of 500 being the maximum. So it’s stepping backwards. But it’s a free market, patients are free to—if the specialist or surgeon that they have been referred to by their doctor is more expensive than they can afford there is nothing constraining them from going and finding a specialist or surgeon who doing known gap or a gap that actually they're able to afford.

MIC CAVAZZINI:               There's been a lot of attention lately on the variation in specialist fees. A three year old Medicare report  shows that there are systematic differences by specialty. At the lower end, the average gap or an initial attendance with a rehab physician was $72. For a gastroenterology consult it was $88, respiratory medicine, $98, rheumatology, $120 and at the top of the scale neurology was pipped for top place by clinical genetics which had an average out-of-pocket cost of $161 for the first consult. What do you think explains these trends by specialty?

LORYN EINSTEIN:             It’s Economics 101. So if you remember your first course in economics where your supply curve meets the demand –

MIC CAVAZZINI:               Supply and demand –

LORYN EINSTEIN:             Supply and demand. So it’s not just about supply and demand but it’s supply of particular products. So, for example, in Queensland, there are a large number of cardiologists in Queensland, it’s a highly competitive environment. For the most part, you don’t see large gaps being charged because all the patient has to do is go next door in the suites and start a bidding war up that hallway. So it’s free market just doing what it does.

MIC CAVAZZINI:               Well, in fact, those figures were the average rates for each specialty but within a specialty the variation is much greater. So the fees for consults range by a factor of five and for procedures the overall variation can be up to 40-fold. One pattern that you can see in these fee variations is geographic. So it was reported recently that, for cataract surgery, a patient in New South Wales pays an average gap of $650 as compared to $30 in Tasmania. And there was a comment by Associate Professor Lesley Russell from the Menzies Centre for Health Policy that some specialists charge what they think the market will bear. Do you think that –

LORYN EINSTEIN:             It’s what they know the market will bear. It’s not what they think the market can bear. So it absolutely is geographically driven. And, in our client base, a good example is doctors that work both at the San and at Westmead. So the fees they charge at the San are very different from what they charge at Westmead. But it’s not that they're gouging the people at the San but they practice at Westmead and out of compassionate grounds to the socioeconomic circumstances of that area. They reduce their expected fee.

And, yes, that causes variances in pricing but we see a lot of compassionate behaviour as well. What does cause concern, some of the areas of medicine that are becoming more popular and where patients can draw funds out of their superannuation funds are those that I find concerning. So, for example, for bariatric surgeons and it’s the same for IVF, they're highly competitive, highly sought after, both of those types of treatments can be paid for out of superannuation funds. It drives the price, in my opinion, and it drives patient behaviour. The patient is so desperate for treatment in some of these cases that they don’t look at the long-term implications of emptying out their super.

MIC CAVAZZINI:               Do you think that consumers assume that higher fees relate to better quality and safety?

LORYN EINSTEIN:             Unfortunately, in some circumstances, yes. In some instances there actually are some surgeons who specialise in certain types of complex surgeries. And a good example is in some of the orthopaedic revisions or some of the trauma cases where there's doctors who do just that, that’s all they do. And they do, some of them, charge a higher fee for doing those but the fee is warranted by the outcome. But as far as most normal treatments, there are published statistics that show that higher dollars don’t equate to better outcomes.

MIC CAVAZZINI:               But what about this Medical Costs Finder website that the government has launched which allows consumers to search for the average out-of-pocket costs of common services by area? Do you think that will redistribute some traffic and the market will lie even less?

LORYN EINSTEIN:             The challenge faced by this website is the fact that it’s all based on what the practitioner and the practitioner’s rooms are reporting through either the manual system or through Eclipse. A voluntary reporting system is going to only end up with those who are more moderately costed to report in because they are an advantage to them. So it will show what the low end of the market is, you're not going to get a true feel for the market. I would have pushed for it to be a mandatory reporting system.

MIC CAVAZZINI:               So a lot of what we’ve talked about is based on the premise that, in Australia, providers have the constitutional right to run their own business without government fee regulation. And according to Kate Aubusson, from the SMH, this sets Australia apart from other countries with fee for service systems like Canada and France. So do those marketplaces look very different in terms of specialist fees?

LORYN EINSTEIN:             Absolutely. Where there's a constraint such as those systems you don’t see those gapping dollars around it, there is a set fee structure. It all works at a very legislated way. If you were in the UK and you have the flu, you want to go see a GP, you have to be registered with a particular GP and you have to wait for an appointment. Here, you could walk into any GPs office and, in most of those offices, get in the same day if you really need to be seen. There is a very good public health system. Yes, there's wait lists but unless you’ve lived in America, for example, you don’t have the perspective of what zero healthcare really looks like.

I think Australia, as a country and as a culture, the free market environment suits our culture. It is really a fantastic medical system in the whole. Nothing’s ever going to be perfect, but we have a good strong underlying system where, if you actually need healthcare, it is available in the public system. If you want to fast track that or you want to have a specific doctor or you want to go to a specific hospital, you can have private health insurance and you can either choose a doctor that charges a gap or doesn’t charge a gap. It is absolutely free choice for the patient which I think is an extraordinary system.***

MIC CAVAZZINI:               That’s all we have time for today, but it raises some questions we’ll have to come back to. Does Australia’s blended public-private system occupy a Goldilocks zone, between the overstretched NHS in the UK, and the extreme inequity of US healthcare?

And how long can Australia’s good times last, given that the health insurance industry is in a “death spiral” according to researchers from the Grattan Institute. Meanwhile in New Zealand, the largely public system is ranked almost as highly on measures of efficacy – is this down to a smarter design or a more concentrated population?

For now, I want to thank Loryn Einstein of Medical Billing Experts for contributing to this episode of Pomegranate Health. You can hear more interviews with her at the Professional Medical Practice podcast. I’ve linked to this and other useful resources at our website—for example a page from MBS Review Taskforce listing all the reports currently open for consultation. Embedded in a transcript of this episode are heaps of citations, many of them from the great journalists at Australian Doctor and the Sydney Morning Herald. Many thanks also to the physicians on the editorial group who found time to review drafts of this podcast. Please share it with colleagues if you’ve found it helpful. I’ll be back with a new episode in about a month. I’m Mic Cavazzini. Bye for now.


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21 May 2024
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