Pathology reforms: Frozen fees, windfall gains, and the fight for bulk-billing

Diagnostics & MedTech News: For nearly a quarter-century, pathology fees have remained stagnant, a situation deemed patently unfair by Australian Pathology, the voice of private pathology laboratories nationwide.

In response, the organisation has initiated the ‘Keep Pathology Bulk Billed’ campaign, advocating for an additional annual allocation of approximately $160 million to sustain the provision of free out-of-hospital pathology tests for the public.

Amidst a backdrop where Medicare rebates allocated nearly $3.25 billion for out-of-hospital tests during the 2022-23 fiscal year, it’s crucial to note that pathology services within public and private hospitals operate under distinct funding frameworks. Over 99% of out-of-hospital pathology services are bulk billed, a substantially higher rate compared to GP visits, which hover around 80% within the same timeframe.

The demand for pathology services is on an upward trajectory, outpacing population growth, attributable in part to an increase in chronic illnesses and the availability of novel diagnostics tests.

Stephen Duckett, Honorary Enterprise Professor, School of Population and Global Health, and Department of General Practice and Primary Care, University of Melbourne, underscores the concentration of pathology provision among a handful of players, some of whom are publicly listed entities. While Australian Pathology seeks higher rebates to boost their financial standing, Professor Duckett points out that the industry reaped significant profits during the initial phases of the COVID-19 pandemic, buoyed by widespread PCR testing and accompanying government subsidies.

Despite initial appearances, a 24-year freeze on government rebates for pathology services warrants scrutiny. Although advancements in automation and digitisation have bolstered productivity, the current fee freeze fails to accurately account for inflationary pressures, potentially resulting in windfall profits for providers at the expense of government expenditure. Moreover, the advent of artificial intelligence (AI) promises further disruptions, likely enhancing efficiency and profitability in pathology services.

To optimise the payment structure, Professor Duckett advocates for a departure from the existing fee-for-service model towards a system of tenders and contracts. Under this paradigm, pathology companies would competitively bid to deliver services within designated geographic regions, ensuring equitable access for consumers without additional out-of-pocket expenses.

Concurrently, reforms within public pathology services, such as those witnessed in New South Wales and Victoria, underscore the need for consolidation and enhanced competition to drive efficiencies and cost savings.

While the current landscape of pathology provision presents opportunities for improved efficiency and cost-effectiveness, proactive reforms are imperative to ensure equitable access and fiscal sustainability in the provision of essential healthcare services.

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