We have been receiving reports from some practices that GP’s in private medical practices have been targeted by a recent mass Pathology Rent Red Book mail out from the Department of Health. The Department is informing referring GPs of the current prohibited kickback rules e.g. excessive rents being offered to practices and to be wary of such arrangements. Specifically, if you own a practice or use a practice manager that has a pathology collection centre or other diagnostic services, make sure you can answer any questions accurately and truthfully in order to avoid unnecessary suspicion and unwanted inquiries.

(Indeed, this may have been the intended effect of the mass mail out. We are not sure why landlords were not contacted as well.)

The mail out clearly is implying there should be a concern regarding some practices but this should not be a concern for those who complying to the letter, which most practices are. You may need to reassess your situation however.

It is commendable that the Federal Government is attempting to provide some clarity on this issue, which was so heavily politicised in the last election. We are familiar with this issue, having been involved with an amendment to the 2009 law that continues to remain upheld – see article Pathology Deal May Backfire.  The bottom line is the Government cannot price-fix pathology rents. Practices must ensure they use the ‘market value’ approach to ensure their position is legally sound.

For those practice owners who have leases; if you offer exclusive dealing arrangements referred to in the Red Book, which historically most pathology laboratories have requested, then this may reduce the rental value of your lease if this clause is removed. This needs to be budgeted for and/or seek appropriate advice on how to address this issue. This may be a key issue in your rental negotiations.

Note that you are not required to seek a formal valuation; however you must ensure ‘market value’ is paid. Market value means an open market with a willing buyer and seller involved in the transaction.

One difficulty is that your local valuer may be unaware of what a multibillion dollar national pathology lab will pay for your consulting room. The valuer should also include signage rights, car parks and common areas like the waiting room which are often overlooked.

The ideal situation is an open tender based on the same set of terms and conditions. In our experience, this will get the right outcomes for all parties. However, the correct documentation and processes must be in place. Contact David Dahm at pa@healthandlife.com.au for further information.

Please note we are not lawyers, we are accountants and practice advisers. Please seek specific legal advice in relation to your own circumstances. We cannot be held responsible for any errors or omissions in this article. This article is for discussion purposes only.

For more insights visit our blog.

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Chartered Accountant, Chartered Tax Adviser, Registered Tax Agent, Former AGPAL Surveyor 10 years of service

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)

After a serious work related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal. I continue to provide accounting tax and practice management advice to many practices all over Australia.

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

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