Senator SIEWERT (Western Australia) (5.23 pm)—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-ofpocket 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 re-versed 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.