Border Pathology, based in Albury-Wodonga, has been sold to the region’s main provider, Dorevitch Pathology. Photo: Nicole Emanuel Health Minister Sussan Ley announced as part of the government’s mid-year budget update plans to scrap bulk-billing incentive payments for pathology services. Photo: Andrew Meares
A major pathology business in Health Minister Sussan Ley’s electorate will close on Christmas Eve, buckling under funding pressures to the sector in recent years.
Border Pathology, which is based in Albury-Wodonga, in Ms Ley’s electorate of Farrer, has been sold to the region’s main provider, Dorevitch Pathology, creating a “monopoly” of pathology services in the region, a Border Pathology source familiar with the sale said.
It is understood the business never received enough referrals to reach market share since it opened in 2010, and struggled with increasing costs, with the Medicare rebate for pathology tests frozen for the last 20 years.
Between 50 and 60 per cent of the business’ 55 staff are expected to lose their jobs, the source said.
Most of its collection centres will remain open after the sale, but staff numbers had still not been finalised on Tuesday. No pathologists and very few scientists had been offered jobs at Dorevitch, which meant that many would likely leave the region, the source said.
The sale comes a week after Ms Ley announced, as part of the Mid-Year Economic and Fiscal Outlook statement, that the government plans to scrap bulk-billing incentive payments for pathology services, and reduce such payments for diagnostic imaging services, saving $650 million over four years.
The Border Pathology source said that the recent planned cuts did not factor in the decision to sell the business, but was rather a product of “all the pressures on the industry for a number of years now”.
“Everything that’s impacting on all of the pathology industry has pressured us.”
Beyond frozen Medicare rebates, these included cuts to Medicare for pathology tests on vitamin D and folate last year, and the deregulation of collection centres in 2009, which led to fiercer competition.
Industry groups say that the pathology sector is starting to consolidate for the same reasons.
Pathology Australia says the latest planned cuts make small and medium-sized businesses particularly vulnerable to closure, with fears of a Coles and Woolworths-like duopoly of listed healthcare companies Sonic and Primary Health Care. Both businesses have indicated they will charge patients co-payments to make up any losses.
Ms Ley said that the sale was a “local business decision made in a highly-competitive” pathology industry, with about 140 providers running more than 5000 collection centres.
She rejected the notion that the sector was consolidating: “It’s a bit rich for the sector to now try and portray the aggressive acquisition strategies of big, listed corporations as ‘consolidation’ in the sector.
“The constant complaints from pathology corporations about lost revenue from a clinical reduction in unnecessary vitamin D and folate tests … exposes exactly what this is about – profits, not patients.”
Liesel Wett, chief executive officer of Pathology Australia, said that Border Pathology was the third medium-sized pathology business to be sold to larger players in the last six months, following Sonic’s purchase of Adelaide Pathology Partners and Crescent Capital’s takeover of Healthscope’s pathology practice.
“We support healthy competition, diversity and quality services so that communities can judge and make a choice. This reduces competition and choice,” she said.
Dr Debra Graves, chief executive officer of the Royal College of Pathologists of Australasia, said the planned cuts could “tip the balance” for a number of services in financial difficulty.
“If they haven’t got enough revenue to keep operating the business, they’ll have to raise it through co-payments or look at selling or closing down.”
Dorevitch Pathology’s chief executive officer, Neville Moller, has told the Border Mail: “The only way a quality, affordable, regional pathology service will survive locally into the future, with continuing government cutbacks, is for a major provider to have the size and scale to operate successfully.”
Ms Ley has blamed planned cuts on pathology providers for only increasing their bulk-billing rate 1 per cent since the incentive payment was introduced in 2009.
Labor introduced the incentive payments for pathology services to offset about $763.4 million in cuts to the sector and to encourage businesses to maintain or increase bulk-billing levels. About 88 per cent of pathology services currently bulk-bill.
Opposition health spokeswoman Catherine King said the bulk-billing rate had risen 1.5 per cent and called on the Turnbull government to “withdraw its threat to scrap bulk-billing incentives, which the minister herself admitted last week would leave some patients worse off”.
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