Medical businesses increasing profits while consolidating to fight increasing costs
Australian medical businesses are growing faster than businesses in other industries with profits bouncing back despite rising costs during the pandemic, especially for non-GP specialists, a new report by ANZ and the Melbourne Institute: Applied Economic & Social Research at the University of Melbourne shows.
The latest ANZ–Melbourne Institute Health Sector Report (2020-21) led by Professor Anthony Scott shows GP and non-GP specialist medical businesses saw profits rise by an average of 2.4 per cent per year for GPs and 5.4 per cent per year for non-GP specialists before the COVID-19 pandemic.
“The amount of profit for non-GP specialists is much higher than for GPs and other businesses such as law, accountancy and finance businesses. Non-GP specialists saw profits of almost 49 per cent of turnover and for GPs this was 36 per cent,” Professor Scott said.
Profits are increasing, but so are expenses, which could be leading more medical entities to consolidate. The total number of doctors in a solo private practice has fallen by 0.5 per cent between 2013 and 2020, while the number in group private practices has increased by 28.9 per cent.
“There’s a large increase in the number of oncologists, dermatologists, obstetricians and gynaecologists, surgeons and physicians, each coming together under one entity to seek the benefits of being in a larger organisation. These benefits can include lower overhead costs through sharing of resources such as buildings and administrative support,” Professor Scott said.
“We’ve seen this trend occur in other countries including the USA and it can mean fewer businesses are operating and reducing competition. This could lead to price increases for consumers in an industry where out of pocket costs are already growing fast,” he said.
The report includes data from the peak of the pandemic when medical businesses had a sudden increase in costs as they adapted to COVID settings. Though profits initially fell during COVID, they have since increased again because of the pent-up demand during the pandemic, especially for non-GP specialists.
“Despite the challenges and extra costs, turnover was maintained for GPs because of government support and adoption of telehealth. Medical businesses have shown they are flexible and can adapt and recover to maintain the provision of medical care,” Professor Scott said.
It is expected demand will remain high for private medical care provided by GPs and other specialists as people who delayed care and treatment during the pandemic return to seek care.
“The demand could possibly be dampened by current inflationary pressures for those with lower incomes that use specialist care and GP care,” Professor Scott said.
ANZ’s Head of Health Cindy Arthur said it was great to see medical customers continuing to adapt with the changing circumstances in the industry.
“The past couple of years have been particularly tough for the health industry and we are pleased to support our customers through the ups and downs of business,” Ms Arthur said
This is the fifth in a series of health sector-specific reports commissioned by ANZ and researched and written by the University of Melbourne. The views in the report are those of the author and not the ANZ Banking Group Limited.
The report will be launched and discussed at an online event at 12pm AEDT on Wednesday 12 October.
The full report will be available here on Wednesday morning.