Eric Abetz (Tasmania, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

I move:

That the Health Insurance (Eligible Collection Centres) Approval Principles 2010, made under subsection 23DNBA(4) of the Health Insurance Act 1973 , be disallowed.

Quality health care is a vital public policy goal for the coalition and it should be such for this parliament. We want quality care delivered in a manner that does not waste money or lead to overservicing. In fact, it was those considerations that motivated the Labor government some two decades ago, in 1992, to introduce a regulatory framework in relation to pathology collection centres. It was this Labor framework in 1992, which was updated by the coalition about a decade later, that has now been junked by the government without any consultation with the sector.

The regulatory framework introduced by Labor was designed what was then the exponential growth in approval pathology collection centres. The regulations served their purpose well. But Labor’s recent decision, without any consultation, to remove the regulations has seen a growth of 46 per cent in the number of such centres in just the last eight months. The numbers have grown from 2,426 collection centres to 3,536. That is an extra 1,110 collection centres, a 46 per cent increase, in just eight months.

Everyone must acknowledge this as wasteful and also unsustainable. This growth has been driven not by customer or patient demand or good health care but by the commercial considerations of—if I might say so—certain general practitioners. All the new collection centres—and I stress this: all 1,110 of them—are in GP surgeries, adding a cost of about $100 million to the service. This impacts on research and on quality of service. It has seen the closure of laboratories in regional and rural areas and staff redundancies. What is more, the smaller providers are now being muscled out by the bigger players.

The position the coalition is proposing will overcome those bad outcomes and save the taxpayer money. It is in fact a savings measure. The Royal College of Pathologists of Australasia supports the coalition position. The Australian Association of Pathology Practices supports the coalition position. Indeed, if Labor were to support our position, they could reduce their flood tax by at least $100 million, if not more.

Labor claim that these regulations offend the National Competition Policy. It seems that they pick and choose. If they were so serious, so concerned, about the National Competition Policy, one could ask: why are they not removing the regulations surrounding pharmacies and the whole host of other medical services? Indeed, it is very interesting, given the Labor Party’s backflips on a whole host of issues in recent times, that they seem to have adopted in relation to pathology services the view that the market—to coin a phrase—should rip.

But this is a situation in which we are dealing with government funded services. It stands to reason that it will cost more the more that you drive the availability of it, especially the unviable ones, which will cost so much to provide. I am talking about those new service centres that previously did not exist that have not been demanded by patients or indeed by good health care. The 46 per cent increase has simply been commercially driven, and that of itself may not be a bad thing, other than that we are in fact talking about the expenditure of a lot of taxpayer money.

In relation to this disallowance, which comes quite late in the piece given that these changes were introduced on 1 July last year, but given that these changes have been made, we can see the disaster the policy has been with this 46 per cent increase in the collection centres. We can also see the blow-out in the costs. I would have thought, given the bitter experience the government has suffered by this failed policy as a result of its lack of consultation, it may now be minded to say, ‘Look, yes, let’s disallow this particular regulation and go back to the drawing board.’

Some concern has been expressed as to what will happen to those 1,110 that have been licensed since this regrettable decision. We cannot do anything about that; they are licensed, they are in the marketplace and they will be able to continue for the 12 months for which they have been licensed. A suggestion has been made that somehow they would no longer be licensed. That is not the case; their licences, as agreed, would continue.

I will make a few other observations and also refer to the Australian Financial Review article of 21 September 2010 which, on page 47, reported that ‘costs for all providers have soared’ since the restrictions were removed on 1 July 2010. That was the experience already in September, some two or three months after the change was made. Now, with the experience of another five months on top of that under our belt, we can say that the costs for all providers have absolutely soared and the cost to the Australian taxpayer will simply be so much greater.

The coalition does not support the sort of piecemeal approach that was adopted by the government. There was no appropriate consultation in relation to this. There will be increased patient costs, and that is going to undermine a very important sector of our health service providers and run the risk of cost blow-outs for the health budget. We have now been told that the minister will make cuts and changes to pathology funding in this year’s budget. That was just reported today. The minister said that this would have to happen if appropriate savings are not identified by the sector. Well, if she wanted appropriate savings, she could have identified those herself by not disallowing this regulation.

There is a risk that, if more collection centres continue to open, it will be difficult to wind back the costs of providing services if an alternative arrangement is agreed. The coalition is not opposed to a change in regulation, but it needs to be subject to proper consideration and review to avoid unintended consequences for patients. Put simply, if the cost of providing these services is going to blow out, as it already has, as has been reported in the media, then who cops it? The taxpayer and the individual patients.

Pathology services have had the benefit of being one of the few services that are substantially bulk-billed. I am not sure if I can put my finger on the figure, but, if my memory serves me correctly, about 85 per cent of services in pathology are currently bulk-billed. I think I am getting a nod of agreement in relation to that. Make no mistake. With an impost of over $100 million being imposed by this unfortunate decision, there will be more services, there will be more bulk-billing, but also there will be the temptation for these service providers to have a gap which individual patients will have to pay.

There has not been a suggestion that doctors are not seeking pathology services because of a lack of collection centres. There has been no demand that there should be more pathology services or suggestion that pathology services have not been sought by general practitioners. Indeed, they have been and we have seen a growth rate in them above the growth rate in the population. But they have been contained in a way that does not lead to overservicing. Once there are these extra 1,000-plus collection centres, there are the overheads that the pathology companies have to pay for. And who is going to pay? Either the taxpayer or the patient. And there was no demand for that to occur.

I simply say to Labor: if you do not want to listen to me on this, that is fine; I accept that. Listen to your predecessors in 1992. The rationale they provided in 1992 remains valid and proper today.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

I would like to speak on behalf of the government and the Minister for Health and Ageing, Ms Roxon, and oppose the motion from the opposition to disallow the government’s pathology reforms in the Health Insurance (Eligible Collection Centres) Approval Principles 2010. This motion again highlights the sort of negativity and destructive attitude to health reform—and all reform, in fact—that we have seen from the opposition in recent times. It is really an issue of whether people are going to side with the interests of big business or with the interests of patients. We would argue that the interests of patients ought to be given priority, and the opposition approach in this matter does not reflect a commitment to putting the interests of patients first.

It also seems to highlight that a commitment to competition and choice is all rhetoric from the opposition, not something that they give any serious attention to when we get to these sorts of debates. Discussions on National Competition Policy between the Commonwealth and states identified the regulation of pathology collection centres as an area where impediments to competition may exist. An independent review by KPMG in 2006 found that these restrictions protected the market share of the three major pathology providers which dominate the sector. That is a very important point: KPMG’s independent review found that three major pathology providers dominate the sector. It also found that the restrictions were a major barrier to new entrants to the market.

The government’s reforms lifted, from July 2010, restrictions on the number of collection centres for pathology tests which can be operated by a provider. The government’s decision to lift these restrictions has improved competition in the pathology sector, leading to greater choice for patients and better access to services. And pathology providers have voted with their feet, opening more than 1,000 new collection centres around Australia, providing much greater access for Australians. About 20 per cent of these collection centres are operated by smaller pathology companies. This means that the smaller providers are increasing their market share, as previously they only operated about 16.8 per cent of all collection centres.

Medicare data shows that, as of November 2010, 21 per cent of new collection centres were in rural and remote areas. So we are seeing greater access for Australians to pathology centres and much better access and coverage in rural and remote areas. We have got new collection centres in regional New South Wales, including Kiama, Molong and Orange; regional Queensland, including Toowoomba, Bundaberg and Rockhampton; regional South Australia, including Port Augusta, Bordertown and Whyalla; and regional Victoria, including Mildura, Benalla, Ballarat and Bendigo.

While some existing major companies have publicly criticised the government’s reforms, I think it is worth noting that there may be issues for them in terms of market share and the threat of competition. They may not be the best source of advice on these matters. From the opposition’s point of view, it has been publicly revealed recently that the pathology tycoon Ed Bateman has been a big donor to the Liberal Party. We know he funded political ads attacking the government recently, claiming the sky would fall in if Labor’s pathology reforms were not reversed. But, of course, that has proven to be incorrect and he can be judged on the outcomes. This is perhaps more about his commercial interests than the interests of good health policy in this country. The sky has not fallen in, as was claimed.

The government’s $329 million pathology bulk-billing incentives have helped ensure that the bulk-billing rates for pathology continue to rise. The bulk-billing figure for pathology in the December 2010 quarter—the latest figure available—is 87.1 per cent, an increase of 1.4 per cent on the September 2010 figure. Pathology volumes rose 2.9 per cent in December 2010. The chief executive of Sonic, the biggest pathology provider, told shareholders last November that growth in its pathology business would return to long-term trends in 2011. Even Mr Ed Bateman agrees with this assessment. Primary Health Care advised shareholders on 15 February that earnings would improve in 2011 as revenue growth in pathology resumed.

This motion should be defeated by the Senate. It is much more about supporting the interests of some big companies with large market share than about focusing on the needs of patients and their access to pathology services. This motion would clog the arteries of competition, and it does not reflect well on the opposition in terms of their negative approach to good public policy in this country.

I will conclude with those remarks and make it clear that the government opposes the motion in Senator Fierravanti-Wells’s name. Can I say, though, in closing that I understand there was some discussion between Senator Xenophon and the office of the Minister for Health and Ageing on the issue of overservicing in the pathology sector and related compliance matters. I draw colleagues’ attention to the Health Insurance Amendment (Compliance) Bill, which was debated in the other place this morning. That bill will strengthen oversight of issues such as inappropriate servicing and obviously will come to us in due course. But I am able to table a brief summary of the very comprehensive arrangements the government has in place already. It is a document titled ‘Overservicing in the pathology sector: compliance and monitoring’. I table that to help inform the debate in the chamber.

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

In July 2010 the government lifted restrictions on the number of pathology collection centres a pathology provider could operate. Collection centres collect patient samples from pathology tests, the issue we are talking about. Prior to July 2010, as we know, the number of collection centres allocated to providers was based on a formula connected to the volume of Medicare services. Under the old system the biggest providers were allocated the most collection centres. A 2006 independent review by KPMG found that these restrictions protected the market share of the major existing pathology providers. The market for pathology tests had been dominated by three major companies: Primary Health Care, Healthscope and Sonic. The KPMG review also found that restrictions were a major barrier to new entrants to the market.

Many more new collection centres have opened since 1 July 2010, which we welcome. Approximately 20 per cent of these new collection centres are operated by small providers. This means that smaller providers are increasing their market share as previously they only operated 16.8 per cent of all collection centres, as has been articulated. Medicare data shows that, as of November 2010, 21 per cent of the new collection centres were in rural and remote areas.

Some existing major pathology providers have criticised the government’s reform. You have to wonder whether their concern is about protecting their market share from competition as obviously they were protected before. The major pathology providers have claimed that the reforms could increase costs for patients and reduce bulk-billing. We understand the government is providing $329 million over four years for bulk-billing incentives in pathology. We also understand that the government is in discussion with the pathology sector, including not-for-profit pathology providers, to provide and develop funding arrangements for the future. Smaller pathology operators have been able to expand their operations. I have in fact received letters from companies that have had legal leases with tenancy agreements, have employed many staff and have purchased equipment and furniture in many locations. Any going back to the pre-reform situation would destroy these companies and see a return to a closed-shop approach to the pathology market being highly dominated by corporate pathology providers. Patient freedom of choice would stop and out-of-pocket patient gaps would enter the market.

The Greens believe that the smaller, independent laboratories are keeping the larger, previously dominant providers honest. Although corporate pathology providers have seen a reduction in their profits, they are still able to make a profit. If the legislation were to revert back to the previous legislation, where would it place the practices that have already expanded? Would they retain the site they have opened since the beginning of July last year? These sites have legal commitments to lease payments for the term of the lease, but if they are no longer an approved collection centre or they do not have their licence, what would many of them do? Many staff have been recruited in these new facilities. There is an issue of ongoing employment in these already approved locations.

Despite claims that the government’s reforms are damaging their business, the major pathology providers remain comfortably profitable companies and in fact some of them have predicted growth in their business in 2011. The Greens believe the disallowance motion would reverse the opportunity to provide greater choice to consumers and we would in fact then go back to protecting some of the dominant companies in the market. We believe this is not good overall for patients. Having said that, I have to say that we agree with Senator Xenophon that it would be a good idea at some stage not too far into the future to have a further independent review to look at how those arrangements are performing.

There has been an awful lot of lobbying going on around this issue. I will admit I have had lots of letters both for and against the new arrangements. I will note, however, that lobbying us with bits of paper cut off from pamphlets that have obviously been put in pathologists’ outlets and have the association logo on does not work very well when all people have done is sign them, and I suspect some people do not actually know what the issue is and what they are signing. The emails I have received from independent operators outlining their concerns if these arrangements were reversed explain the situation, explain where they are coming from and explain what impact going back on the new arrangements would have. They have provided an eloquent story on what impact it would have because they have in good faith taken up the new arrangements. That is not to say that we do not and have not heard the other providers’ arguments, but we think on balance the new arrangements are better. But they could do with a review, so we support Senator Xenophon’s position that there should be some review into the future.

We do not support this disallowance because we do not think going back to the old way of doing business is the appropriate way to handle this. We think it would have an adverse impact on those new centres that have opened and the ones that have opened in rural and regional areas, which we think has been a good thing for those particular areas. We will not be supporting this disallowance motion.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I will not be supporting the motion by Senator Abetz to disallow the Health Insurance (Eligible Collection Centres) Approval Principles 2010. However, I have had discussions with a number of stakeholders about this and I had what I thought was a productive meeting with the shadow minister for health about it. So I know and understand the concerns about overservicing and I will address those shortly.

It would be remiss of me, however, not to mention another matter. The Leader of the Government in the Senate referred to the issue of competition. I think it is a good thing to have competition in the marketplace, to open up the market. If only the government had a similar approach to Coles and Woolworths!

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Senator Chris Evans interjecting—

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I do not know whether that is a promise from the Leader of the Government in the Senate—whether opening up pathology services is a harbinger of things to come for the grocery market, over which Coles and Woolworths have a stranglehold.

Concetta Fierravanti-Wells (NSW, Liberal Party, Shadow Minister for Ageing) Share this | Link to this | Hansard source

You can only keep trying.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I will keep trying, Senator Fierravanti-Wells. My office has been contacted in the lead-up to this motion by many stakeholders on this issue—large-scale pathology providers, small providers who have set up centres since the deregulation last year and industry representatives. Since the deregulation last July, the number of collection centres has increased by over 1,000 throughout the country. I note the comments by the government and by Senator Siewert that there has been an increase in access to pathology services in regional communities and country towns which did not previously have such centres. That is unambiguously a good thing.

I believe that this move has improved competition in the pathology sector, which I believe is a good thing. I am also aware that legislation was recently passed giving patients greater choice about which pathology provider they wished to visit—you are not restricted to the pathology provider on the form. That introduction of greater choice is also a good thing. However, I am concerned that overservicing may occur and that issue has troubled me most in considering this matter.

Before I refer to that, however, I also have a concern about the consequences of these regulations being disallowed. Those who have entered into commercial arrangements with longer term leases of, say, two, three or five years, would, I believe, suffer significant detriment. There ought to be mechanisms in place to deal with those people who have acted in good faith in setting up businesses. However, I have had discussions with Mr Dutton, the shadow minister for health, at which he raised his concerns and I do think overservicing is an issue on which we always need to be vigilant.

I am advised by the Minister for Health and Ageing and by the Leader of the Government in the Senate, who set out a number of compliance mechanisms that already exist, that where the government discovers evidence of overservicing strong action can be taken. The 2009-10 annual report of the Professional Services Review contains full details of cases referred to the PSR by Medicare Australia, including some in the pathology sector. I have been assured by the government that there is strong, ongoing monitoring of service usage across the MBS, that Medicare Australia aims to audit approximately four per cent of providers each year and that the preparation of compliance reports identifying trends in the use of Medicare services and the continuous monitoring of data enable compliance teams to act quickly when problems emerge.

Having said that, the Senate has an opportunity, when the Health Insurance Amendment (Compliance) Bill 2010 is brought before this chamber, to have a serious look at strengthening the overservicing provisions, particularly in relation to the pathology sector. I think that it is important that we do so to ensure that there are sufficient mechanisms in place to prevent overservicing, to look at trends in overservicing, to ensure that consumers have a choice of pathology providers and to ensure that communities, particularly regional communities, have fair access to pathology providers. We need to ensure that there is no rorting of the system occurring, that there is no overservicing and that the system is equitable in its operation. I think there is an opportunity, when the Health Insurance Amendment (Compliance) Bill is brought before this place in the not too distant future, to strengthen the legislation and allay some of the concerns of those who have proposed this disallowance motion. I think that will deal with the concerns about the potential for overservicing.

For those reasons, I cannot support this disallowance motion. But I look forward to working constructively with the opposition, my colleagues in the Greens and Senator Fielding from Family First to ensure that the overservicing provisions of the Health Insurance Amendment (Compliance) Bill 2010 are strengthened significantly and that there is a monitoring regime in place to prevent the system from being rorted.

Eric Abetz (Tasmania, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

I make this appeal to the Greens and Senator Xenophon. They are aware that there are problems with the current situation—

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

We are aware that there are potential problems.

Eric Abetz (Tasmania, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

Senator Xenophon refers to it as a ‘potential’ problem. There are over 1,000 new collection centres starting in eight months, a 46 per cent increase—if you don’t think that that is going to lead to overservicing and pressures on GPs to refer more! Clearly GPs and others will be making money from having collection centres within premises they own or rent. As a result, if they are to receive funds from that, there will be pressure for extra referrals. It will be very interesting to see the increase in referrals since July last year. If we do disallow this situation, all we do is go back to that which existed in July—and there was no huge public outcry to deregulate this sector before then. In fact, there was no consultation whatsoever with the providers about this change.

So if we go back to that which existed in July 2010, we will get a position which will allow the government to engage in proper and genuine negotiations about these issues. As soon as this disallowance motion is defeated, as I suspect it will be, the government will say, ‘You beauty! We’ve achieved what we wanted,’ and there will be nothing you can hold over the government to get them to properly negotiate. Senator Xenophon, you continually live in hope that the government will abide by its promises and its undertakings. I would remind this place of the rock-solid guarantee given on 16 August 2010 by the Prime Minister that there will be no carbon tax. If you are willing to take her on her promise, and her minister on her promise, so be it.

In relation to competition, of course the coalition is committed to competition. I thought I had entered this debate from the coalition point of view trying to tease out the issues, not casting across the chamber the slurs and aspersions which the Leader of the Government in the Senate unfortunately descended to yet again when talking about donations and matters of that sort. Quite frankly, I think it demeans the leader and highlights the paucity of argument on the government side that they have to fill their time with that sort of demeaning nonsense. It does nothing for them or for their argument.

The simple fact is that, while some small providers are trying to get into the marketplace, they are being squeezed out as we speak. The failure of this disallowance motion will see the big providers get an even bigger market share and a greater monopolistic situation occurring at the expense of the small providers. While I do not think we will be able to change the minds of the Greens and Senator Xenophon on this, which is a matter of regret and the motion of disallowance will go down, the government will undoubtedly face a bigger bill and patients will face a bigger bill. Will health services and quality be improved? The answer to that is an unequivocal no.

Question put:

That the motion (Senator Abetz’s) be agreed to.