General practice still making healthy profits: report

The financial health of general practice spans a broad spectrum, says Professor Anthony Scott
Sarah Simpkins
Professor Anthony Scott
Professor Anthony Scott.

General practice is generating larger profits and margins than legal practice, construction or accounting, a new report claims.

Researchers looked at all ABN holders registered for GST and found the median profit among those in general practice was $144,000, while their median gross profit margin was 36%.

This compared with a median profit of around $130,000 and a median margin of 35% for those in legal practice.

But the big winners were non-GP specialists, with their median gross profit of $216,000 and median gross profit margin of 49%.

Despite stagnant Medicare rebates and the continued cost pressures of the COVID-19 pandemic, the results suggested that not all practices were struggling, said lead author and health economist Professor Anthony Scott.

“Our data are not inconsistent with reports that GPs in some areas and in some circumstances are not doing very well at all,” he added.

“We’ve looked at averages, but there are extremes — some practices are struggling, particularly if they are bulk-billing and they are in a low socioeconomic area.

“Maybe they don’t feel they can switch to private because their patients would not be able to afford it.

“But others are managing to be profitable.”

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The report from ANZ and the Melbourne Institute found that the median profit in non-GP specialties was 14% greater than the median profit in general practice back in 2005/06.

But by 2020/21, the gap had blown out to 50%.

The report added that doctors across specialties were reducing their hours, in line with a recent Australian Doctor survey that highlighted widespread GP plans to move to part-time work.

With an existing workforce crisis, the Federal Government needed to take the part-time shift into account as it tried to increase GP numbers, said Professor Scott, the program co-ordinator for health and healthcare’ at Melbourne Institute of Applied Economic and Social Research at the University of Melbourne.

“Obviously, you need more doctors to replace every doctor coming out,” he said.

“Now we need even more of them to maintain the status quo in terms of the total hours that are worked clinically.”

The report also showed more GPs were coalescing in group practices, which he said demonstrated the lack of desire for practice ownership.

“Doctors come out of medical school, and they don’t know how to set up a private practice.

“They might decide to start a business with their friends, but they haven’t been taught how to manage a business in their training, so they don’t know what to do.”

More information: Trends in the structure and financial health of private medical practices in Australia, October 2022