Pathology merger would make sub-leasing untenable: GP Alliance

Practice owners have joined the chorus of concern over a potential merger that would create an Australian pathology provider giant with more than 50% of the market share across the country.
 
Concerns over the takeover, which would see Australian Clinical Labs (ACL) acquire Healius, largely centre on how it would impact the healthcare sector more broadly, with a sharp focus on the downstream implications for patients and more recently, what it could mean for GP practice owners.
 
Dr John Deery, Australian GP Alliance (AGPA) Chair and practice owner, told newsGP that the takeover could leave ‘quite a large hole in the bottom line of most general practices’ that co-locate with collection centres and lease their space to pathology providers.
 
Should the merger proceed, he predicts the value of these leases will decline alongside competition within the industry, as it would make it difficult – if not impossible – to use tenders to maintain rental market value.
 
‘In a lot of places on the Eastern Seaboard now if ACL and Healius combined, that’s it,’ he said. ‘There’s going to be only one, possibly two providers in town. So it’s very difficult to run a tender process’.
 
The AGPA expects that the problem would impact a large proportion of general practices as many collection centres are run out of clinics that may rely on this rental income.
 
‘If the practice owner can’t run their practice profitably, they’ve got to do one of [three] things,’ Dr Deery said.
 
‘They’ve got to increase their service fees to their GPs, or they have to increase their fees to patients.
 
‘Or there is option number three, and we’ve seen a lot of this recently – close the practice.’
 
Dr Deery also outlined the direct impact the merger would have on patients, who may no longer be able to access pathology collection centres through their local GP, which will be less convenient and may result in delayed or missed testing.
 
In a statement issued on August 11, the AGPA outlined other issues with the merger, including patients having a lack of choice when it comes to pathology providers and having to wear the cost if practices have to increase their fees to recover lost rental income.
 
Earlier this year, RACGP President Dr Nicole Higgins also wrote to the Australian Competition and Consumer Commission (ACCC), to raise concerns regarding lease arrangements if the merger were to go ahead.
 
‘Many general practices rely on pathology sub-leases to ensure they can continue to afford to provide care and remain financially sustainable,’ she said.
 
‘A decrease in market diversity and competition in this area could sway these arrangements to the detriment of general practices, impacting their financial viability and their ability to continue to provide patient care.
 
‘This is of great concern to the RACGP given the importance of patient access to high-quality general practice care across Australia.’
 
The ACCC has outlined preliminary competition concerns in a Statement of Issues and is currently reviewing submissions on the proposed merger.
 
It has said that a ‘significant reduction in competition’ could lead to adverse consequences, such as reduced pathology bulk billing rates, higher co-payments, collection centre closures, reduced frequency of pathology collection and longer turnaround times.
                              
The ACCC is expected to announce the review’s findings on 12 October.
 
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ACCC Australian Clinical Labs Australian Competition and Consumer Commission Healius lease agreements pathology practice owners