Labour mobility has slowed as concerns around job security rise.
There are good reasons to join forces with like-minded medical practitioners – but there are challenges to consider, too. NAB Health’s Tim Daha and Stephen Power take a look at the pros and cons of corporate medicine.
It used to be illegal for anyone other than a general practitioner (GP) to own a surgery. When the law changed in 1996, GPs were finally free to join private hospitals, pathologists and radiologists as part of a large health corporation.
For many, this has proved an attractive option. According to the 2018 Gratton Institute report Mapping Primary Care in Australia, Australia’s three largest corporate chains currently manage about five per cent of practices and employ about 15 per cent of GPs.
“Becoming part of a larger organisation can bring a range of benefits,” says Tim Daha, Managing Partner of NAB Corporate Health in Melbourne. “At a very core level, economies of scale reduce operating costs such as employee wages, equipment costs and rent. The premises are generally modern and well-equipped and often bring a range of providers such as radiologists, pathologists, specialists and even pharmacists together under one roof.
“Patients appreciate the convenience and it also creates opportunities for practitioners to cross-refer to their own business partners.”
Many busy GPs are more than happy to ditch time-consuming administrative and management tasks.
“This is very attractive to practitioners who aren’t interested in running a business or being entrepreneurial,” says Stephen Power, Managing Partner, Health – NAB Partners Southern. “They see this as a way to focus on patient care and not be distracted by things like hiring staff, computer records, company tax returns and accounts.”
Daha says that a large organisation with multiple locations will often provide more flexibility and opportunities for both GPs and their support staff.
“There can be financial benefits, too,” he says. “Most practitioners receive equity in the larger corporation as part of the transaction, which means you can become part of a scalable business.
“For example, one of our clients gradually built up a successful corporation by buying individual businesses across general practice, physiotherapy, radiology, home care and aged care. They achieved enough scale to list on the ASX and, just recently, they were bought out by a private equity group. That’s good news for everyone with a stake in the company.”
Corporatisation can be a great move – but it isn’t right for everyone.
“It’s important to consider possible challenges before making a commitment,” Power says. “The first thing to check for is an alignment of values. When you work in your own practice for some time you’re bound to build up a loyal patient base and develop strong professional relationships. A very different environment could be quite confronting for both you and your patients. For example, if you’re used to taking your time with each patient and billing accordingly, it could be hard to adjust to a practice that focuses on bulk billing and fast turnaround.”
Individual GPs and specialists who are entrepreneurial by nature might prefer to build up a business of their own, too.
“Some people aren’t comfortable with the idea of becoming what is effectively an employee when they’re used to being boss of their own practice,” Daha says. “One option is to acquire or join forces with one or more complementary businesses, again with similar values to your own. In this case, you’d be a business owner as well as a practitioner, so you’d need to be sure you’re comfortable wearing both hats.”
A pharmacy can be a practical addition to any group, Power adds, but this is subject to different legislation.
“Only pharmacists can own a pharmacy and there’s regulation around how many anyone can own,” he explains. “That’s a state-by-state consideration so you need a really good line of sight around what that would mean for you in terms of meeting your business goals. For example, medical practitioners looking to corporatise may need a partnership with a pharmacy that takes the form of a tenant relationship.”
Both Daha and Power stress the need for good business advice.
“It’s important not to wait till you have the lightbulb moment that it’s time to sell or expand,” Power says. “Regular input from the right accountants, bankers and financial advisers will help keep your business in good shape and ensure you’re ready to take advantage of any opportunities that arise.”
NAB Health can provide support through every stage of business development.
“We work with everyone from practitioners at the very beginning of their career right through to institutions,” Daha says. “Our NAB Health team, which includes our specialist partners Medfin and HICAPS, can help medical professionals run their business efficiently whatever its size.”
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.