The Grattan Institute’s report on the cost of pathology testing highlights the need for the Commonwealth to modernise Australia’s pathology payment system, Australian Healthcare and Hospitals Association (AHHA) Acting Chief Executive Dr Linc Thurecht said.
The report, Blood Money: paying for pathology services, found that the government could save at least $175 million a year by changing the way it pays for pathology testing and negotiating a fairer share of efficiency savings with industry.
New technology, industry consolidation and volume growth have transformed the economics of pathology testing since Medicare was introduced. But the government’s payment methods for testing have not changed in 40 years, the report claimed, costing taxpayers $2.5 billion in 2014-15.
The report recommended a number of reform options to improve the efficiency of the government’s pathology test purchasing, including abolishing patient co-payments for tests and introducing price competition into the market.
“The current fee-for-service payment system in pathology is outdated and does not take into account industry efficiencies realised through technological, market and regulatory changes,” said Dr Thurecht. “Nor does the current fee-for-service system pass on efficiency savings to health-consumers and taxpayers.”
The report further indicated that market based pricing of pathology services rather than government based pricing could lead to additional savings of up to $160 million.
“The AHHA would support a pilot being conducted in Victoria to open the provision of pathology services to a competitive tendering process where the government would share some the benefits of improved economies of scale, with Primary Health Networks being closely involved to ensure care coordination at the local level,” said Dr Thurecht.
“Any changes to modernise Australia’s pathology payment system must be carefully considered and evidence-informed. With ongoing reform processes underway throughout the health sector, any change must come as part of a coordinated response.”
“The priority must always be to ensure that Australians have access to an accessible, equitable and sustainable health system that delivers quality outcomes.”
Communications Officer, The Australian Healthcare and Hospitals Association
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