Price of a blood test pushed up by rent increases. Picture: istock
Price of a blood test pushed up by rent increases. Picture: istock

The scam pushing up the cost of blood tests

EXCLUSIVE: A national rent rort means it now costs Australian pathology companies more to rent a broom cupboard in a GP clinic than a penthouse on Fifth Avenue in New York.

And adding sting to the gouge is that patients are being slugged an additional $6 for every blood test.

The controversial rent agreements - that breach Medicare guidelines - are driving up the cost of blood tests and expose doctors to a serious conflict of interest.

News Corp has seen evidence that medical practice owners are actually blackmailing pathology companies, warning they will send test referrals to another provider unless pathology companies pay rent increases of $40-60,000 a year.

It can now cost more to rent a tiny room in a GP clinic than it costs to rent a penthouse in Manhattan.
It can now cost more to rent a tiny room in a GP clinic than it costs to rent a penthouse in Manhattan.

Taxpayers, through Medicare, are footing the exorbitant rent bills that are lining the pockets of medical centre owners who are often private equity firms.

The federal government deregulated pathology collection centres in 2009 and the number of collection centres has ballooned from 2600 to 5900.

Before deregulation, rents for collection centres in GP clinics were around $30,000 a year - now they are up to $300,000 or more.

Controversial rent agreements are driving up the cost of blood tests.
Controversial rent agreements are driving up the cost of blood tests.

It can now cost more to rent a tiny room in a GP clinic than it costs to rent a penthouse in Manhattan where rents are between $168,000 and $204,000 a year.

Medicare rules state that rents should not exceed 20 per cent of the market value of the GP clinic but they have never been enforced.

There is a major conflict of interest issue at the heart of the rip off because doctors decide which pathology companies they refer patients to.

Pathology companies can earn $200,000 to $900,000 a year from referrals from a typical GP practice and lose enormous income if the refuse to pay the rent increases and the GPs switch pathology companies.

If rents for these centres were controlled there would be another $200 million or more Medicare dollars a year available to fund 8000 extra hip replacements or extend Medicare rebates to cover dental services.

In the last two years the rising rents have pushed smaller pathology players like Healthscope Pathology, Adelaide Pathology Partners, St John of God Pathology and Perth Pathology out of business.

Some of the collection centres subsidised by Medicare are so tiny (4 square metres) they can't even fit in the bed needed for patients who faint and are converted broom cupboards.

Worse still, despite the massive rental bills some collection centres are only open a few hours a day a few days per week.

More than half the patients referred for a blood test don't even use the collection centre in their doctor's clinic because it is not convenient.

They use collection centres run by the same pathology companies in other locations.

 

Many GP collection centres open only a few hours a day. Picture: iStock
Many GP collection centres open only a few hours a day. Picture: iStock

The soaring rents are a major problem for Medicare because taxpayers subsidise pathology tests through Medicare with over $2.9 billion spent in 2017 on 144, 728,370 services.

Industry insiders have calculated that rental costs have grown from $6 per standard blood test in 2010 to $12 per test in 2016-17.

The government pledged to crack down on the rent rorts during the 2016 election campaign but abandoned the promise after winning office.

However, last year it wrote to 400 of the nation's 7000 GP practices asking them to provide information on their pathology rental agreements.

Royal Australian College of General Practitioners president Dr Harry Nespolon agrees there are some rental agreements "at odds with normal commercial activity" but said there is an open market.

"Pathology providers are multi-billion dollar ASX listed businesses, they are big enough and ugly enough to negotiate," he said.

And he warns after the government froze Medicare rebates for GP services for four years the rent earned from pathology providers is the only profit some practices are making, if it was removed "then general practices will close down," he said.

Switching referrals to providers who pay higher rent is not blackmail, he said.

"Woolworths does those sorts of deals with suppliers every day," he said.

Pathology Australia which represents the pathology companies refused to comment on the size of the rents.