health

General
Practitioner
Industry Benchmark
Report 2019
Prosperity Health GP Industry Benchmark Report 2019 - Page 1
Prosperity Health GP Industry Benchmark Report 2019 - Page 2
Foreword
General Practice remains under financial
General Practice
pressure across the country. In this current
benchmarks are
landscape it is vitally important to know
a crucial tool in
how to improve profitability and where to understanding
look for assistance. the drivers in
your business.
We know that general practices are the backbone of the Australian medical
industry and they are the backbone of Prosperity’s health practice. Prosperity
Health specialises in providing medical and allied health professionals
with the financial services they need. Our team of specialists provide
comprehensive planning, accounting, audit, taxation, salary packaging and
personal financial advice to a wide range of health sector members.

At Prosperity Health, we want to make sure we are doing everything possible

to support our general practice clients to grow, improve and eventually sell
their practices for the highest price, so they can live and retire financially
secure. We continually invest in developing our own professional skills, so
we can make sure our clients receive best of breed advice from us and our
trusted team of experts.

With 11 partners and over 130 staff throughout the firm, Prosperity has the
necessary expertise, experience and resources to service our clients’ needs
throughout NSW, ACT and QLD. We are very proud of our leading reputation
and we follow best practice processes and procedures to ensure our clients
receive consistently high-quality services and solutions.

To provide our practice owning GP’s with accurate, real time industry
performance benchmarking information, we are proud to release our
fifth Prosperity Health Benchmark Study as a tool to assist practices in
understanding their key performance metrics and to help them keep ahead
of their competition.

Stephen Guthrie
Director
Prosperity Health

Prosperity Health GP Industry Benchmark Report 2019 - Page 3

 Recent industry analysis
General Practice revenue is growing but only slowly - is this the impact of the
There is a Medicare cuts or are there other factors at play?

growing trend The April 2019 IBISWorld Industry Report into General Practice Medical
in better Services provides some interesting high-level industry statistics:
utilisation of • The General Practice Medical Services industry has grown over the last 5
the MBS and years at an average rate of 3.5% per annum and at 3.0% for the 2018/19
improved year. Some of this growth has been as a result of small increases to MBS
efficiencies in rates but the primary driver has been the increase in the number of
consultations and the impact of our ageing population.
the bulk billing
• Over the next five years, the industry is still expected to increase by an
system
average of 3.8% per annum, driven by both population growth and the
ageing population.
• A consequence of the ageing population has been the increase in bulk-
billing rates, which covered up to 85% of all GP consultations over the
past five years.
• Total visits to GP’s have been steadily rising for a number of years and the
report from IBISWorld expects this trend to continue.

While the number of patient visits is increasing, it appears that bulk billing
is driving this increase. As a result, total industry growth is being driven by
volume increase and not by price increases. This will continue to place further
pressure on GPs to improve their efficiency and could lead to GPs pushing
the boundaries of good medicine vs consultation time. This pressure could
be the reason we are seeing a growing trend in Practitioners trying to better
utilise the MBS and extract more value from the billing codes available under
the bulk billing system.

The IBISWorld Industry Report shows the growing trend in patient visits.

Prosperity Health GP Industry Benchmark Report 2019 - Page 4

About the Prosperity Health GP Benchmarking Study
Our practice benchmarking study is in its fifth year and covers a broad cross
section of our GP clients from NSW and QLD. Respondent practices cover a Five years of
diverse cross section of the general practice industry.
benchmarking
The benchmarking and key performance indicator (KPI) results have been data is
divided into four broad categories: starting to
• Trading KPI’s - including patient fees, bulk billing rates, and billing reflect some
consultations split between consultation levels; consistent
• Growth and Performance KPI’s - including consulting room utilisation trends
levels, patients per GP, and net profit;
• Staff KPI’s - including the percentage of GP’s that are full time, and staff
salaries; and
• Operating Cost KPI’s - including rent, electricity and other costs as a
percentage of patient fees.

In each category we have provided two measures:

Industry average T his represents the average benchmark / KPI result across
the whole database of contributing practices

Highest 20% 
This shows the benchmark / KPI result for the upper 20%
of each category, calculated separately for each individual
benchmark.

Also included are a number of non-financial questions for Practice Managers

and Owners. These questions provide insight into the owner doctors’
thoughts on the industry and their practice and track trends for long term
participants on issues such as:

• The owners’ level of concern over sustainable patient numbers

• Whether it feels harder to run a GP practice in the current market
compared to last year
• Concerns about the future of general practice

Over the next few pages we have listed some of what we see as the key
highlights from the study.

Prosperity Health GP Industry Benchmark Report 2019 - Page 5

 Understanding the Benchmark Numbers
Not all benchmarks are created equally. Whilst the process of data collection
Focus on the can itself provide useful insights, it is in the interpretation and analysis of the
results where most knowledge is gained. Over the last five years we have
important
found some benchmark results to be interesting but probably self-evident,
numbers whilst others results provide data of much greater relevance to the end users
of the reports.

Some of the key findings which contribute to running a financially sound

practice are highlighted below.

A large proportion of practice income is usually derived from the Service fees
charged to consulting Doctors. Consequently, the individual performance of
each Doctor in a clinic is crucial to the overall financial success of the practice
itself. Once practice expenses are paid and the practice profit is determined,
we can measure the contribution to this profit from each Doctor on a Full
Time Equivalent (FTE) basis.

The four major variables in driving practice profitability are:

• The patient fees of the collective GP team

• The Service fee percentage charged
• Wages paid to nurses and admin staff
• Operating costs

The Patient Fees of the GP

The first piece of the puzzle is the level of billings by each Doctor. The
practice receives a service fee calculated as a percentage of the billings of
the Doctors and this generally makes up a majority of the income of the
practice. Some Doctors will bulk bill and others will have a majority of private
billings. Even when bulk billing, the amount billed is also then dependent on
the consultation level undertaken and billed.

Our benchmarking data show that the average billings per FTE GP is around
$411,000, with the top 20% of GPs billing an average of $567,000 per year.
Noticeably, the more successful practices tend to have a higher proportion of
Level B and Level D consultations.

Study Average Top 20%

Fees charged per GP $411,650 $567,771
Bulk Billing Percentage 57% 89.9%
Level B Consultation % 59.6% 75.4%
Level D Consultation % 5.3% 13.2%

Prosperity Health GP Industry Benchmark Report 2019 - Page 6

Understanding the Benchmark Numbers (continued)

The Service fee percentage charged

While Service fees charged are dependent on many factors, including the
patient mix and supply of and demand for GPs in a particular region, as a rule
a higher percentage is charged by those practices where greater assistance is
provided by nursing and administration staff.

Wages paid to Nurses and Administration staff

As billings are typically considered to be income of the Doctors, the practice

then charges the Doctors a service fee, with this service fee treated as
income of the practice. Therefore, it is usually the wage expense of the
practice nursing and administration staff which forms the largest expense of
the practice. Control of this area of expenditure is a significant factor in the
overall financial success of the practice.

Where practice nurses are more involved in patient care and hence allow a
GP to effectively increase the overall patient fee base, scope exists to reduce
the Service fee percentage slightly and still see a financial benefit for both
the Doctor and the practice. However, the Practice needs to constantly
monitor the use of nurses (paid by the practice) to make sure that the Doctor
/Nurse mix is managed and remains financially viable.

On average practices spend 20.6% of total billings on Nurses and

Administration Staff Wages and Salaries (including on-costs). However, larger
practices with efficient staff management routines have been able to drive
this cost down to an average of 12.5% of billings. This margin can make a
significant difference to the financial outcomes for the practice.

Study Average Top 20%

Nurse and Administration Salaries 20.6% 12.5%

Operating costs

Some of the less crucial benchmarking numbers from the study include other
operating expenses. While it is important not to pay too much for medical
supplies or outgoings, we have found that variances in these costs do not
make major contributions to the overall success of the practice.

Prosperity Health GP Industry Benchmark Report 2019 - Page 7

 Understanding the Benchmark Numbers (continued)

The largest area of cost (excluding staffing costs) is rent, at around 6%

of billings – most other expenses are relatively insignificant and generally
represent less than 1% of billings.

Study Average Top 20%

Rent Expense 6.0% 3.8%
Electricity Expenses 0.5% 0.1%
Telephone Expenses 0.8% 0.5%

Net Contribution per GP

All of the above factors form part of a bigger picture and drive the overall
profitability of the practice. One way to measure this profitability is the Net
Contribution per FTE GP. This is the actual profit of the practice expressed in
terms of the dollar value generated per full time equivalent GP.

This measure will vary from practice to practice and largely depends on the
patient demographic, the billing practices and the Doctors. To illustrate the
variability of factors, consider the following two scenarios:

Doctor A – privately bills above the MBS, has a high percentage of schedule
B consultations, averages four patients per hour, performs the majority of
consultations without nursing involvement and who pays 35% as a Service
fee to the practice.

Doctor B – bulk bills all patients, sees an average of six patients per hour,
utilises a variety of billing codes, uses the services of a nurse regularly and
pays 40% as a service fee to the practice.

Without a correct benchmarking process, it is simply not possible to second

guess which scenario produces a better financial result - both for the
individual Doctor and also for the practice.

Our study has found that the average practice generates a net profit of
approximately $37,000 per full time equivalent GP, whilst high-profit practices
achieve a 230% better outcome.

Study Average Top 20%

Net Contribution per FTE GP $37,689 $85,742

Given the risks involved in running a medical practice and the extra time
typically invested by owner Doctors into the practice, is this return on
investment enough to warrant the additional stress and time involved?
We have seen a growing trend amongst younger GPs to reject practice
ownership in favour of longer-term associate doctor agreements, in order to
benefit from greater flexibility and improved lifestyle outcomes.

Prosperity Health GP Industry Benchmark Report 2019 - Page 8

Prosperity Health GP Industry Benchmark Report 2019 - Page 9
 The need for supplementary income
Most practices understand billings and the importance of the income
generated by the Doctors. However, in many cases the net Contribution of
the FTE GP’s is not achieved solely through patient billings.

To be a financially successful practice, income needs to be generated from

sources other than patient billings. For example, a typical practice might have
the following costs as a percentage of patient billings:

• Contracting Doctors 65%

• Nurses and Admin costs 20%
• Rent 6%
• Other costs 5%

This leaves a 4% profit for the practice - not a large margin for error. If
some Doctors demand a lower Service fee percentage or the staff mix isn’t
quite right, it is very easy to slip into a loss situation very quickly, where the
owners need to subsidise the underperforming practice. It is typically the
Owner Doctors who end up covering this shortfall and taking home a lower
percentage of their own billings.

Most practices now realise that to succeed in the current environment,

they need other sources of income. This income will not just supplement
the practice profits, but in most cases it will prove essential to the practice
turning a profit and achieving a net contribution per GP.

This additional income can come from a number of sources, with the main
source being Government incentives such as PIP and PNIP. This income can
vary from 0% to 13% of patient billings, depending on a range of factors and
the accreditation of the practice.

Prosperity Health GP Industry Benchmark Report 2019 - Page 10

The need for supplementary income (continued)
As well as Government incentives, practices are supplementing their income
by renting under-utilised rooms to third parties. Historically, the most
lucrative tenants have been pathology or other medical service suppliers
but changes from 1 July 2018 (as set out in the Department of Health (DOH)
Redbook) have mandated changes in this area. From that date new lease
contracts entered into will be required to ensure that:

• the rent charged is not substantially different from the market value of
rental rates for the rest for the premises;
• the rent is not related to the number, kind or value of requests for
pathology or diagnostic imaging services made by the relevant
requester; and
• if the provider is a pathology provider, the provider either establishes
an approved collection centre or an accredited pathology laboratory
in the premises within 60 days of entering the arrangement, or renders
professional services in the premises, and does not use or occupy the
premises for any other purpose.

These changes are already having a significant impact on the level of

supplementary income generated by medical practices. With the pathology
and diagnostic imaging incomes potentially reducing when contracts are
renewed, combined with the reduction in pharmacy rental arrangements a
few years ago, many practices will face a much tougher future.

Prosperity Health GP Industry Benchmark Report 2019 - Page 11

 Technology and AI as drivers of change

With third party sources of income under pressure, many practices are
turning to technology to drive efficiency and process improvements.
Practices are increasingly investing in systems and technology to assist
in collecting richer financial data on a timelier basis, improving billing
automation between practice management systems and accounting
systems, automating patient booking systems and streamlining online payroll
and rostering systems.

The cost of investment in better technology and reporting processes can

often be offset by savings in administration wages.

We see this area as a major driver in the management of Medical Practices

in the future, as well as a means of driving a reduction in expenses and
hence contributing to the maintenance and even growth of Medical Practice
profitability into the future.

Conclusion
At Prosperity Health we offer tailored benchmarking and practice consulting
services to help you monitor and improve the performance, growth,
profitability and value of your practice. For further details and to review your
own practice planning matters, contact your local Prosperity Health office to
arrange for an initial consultation.

Prosperity Health GP Industry Benchmark Report 2019 - Page 12

Want to get involved?
Health practitioners understand the importance of diagnosing the correct
cause of a health issue. By correctly identifying the symptoms, the right Is your practice
treatment can be provided and the benefit to the patient will be invaluable.
meeting or
The Prosperity Health team has applied the same philosophy to our exceeding the
benchmarking program. A tailored individual diagnostic report will assist benchmarks?
your practice by correctly identifying potential issues and the follow up
consideration will address and prioritise key focus areas to support the
achievement of your practice goals.

The Prosperity Health team is offering medical practices an exclusive tailored

diagnostic report and follow up consultation. The necessary information can
be gathered by you or your practice manager within an hour, and our report
will be received within 10 business days. Please call your local Prosperity
Health office or email us at mail@prosperity.com.au for more details.

Prosperity Health GP Industry Benchmark Report 2019 - Page 13

 A dedicated team

Stephen Guthrie Megan Smith Ashley Quinton

Director, Business Services & Tax Director, Business Services & Tax Director, Business Services & Tax
T 02 8262 8702 T 02 4907 7207 T 07 3007 1915
E sguthrie@prosperity.com.au E msmith@prosperity.com.au E aquinton@prosperity.com.au
Location: Sydney Location: Newcastle Location: Brisbane

Brendan Campbell Gary Dean John Manuel

Director, Business Services & Tax Director, Financial Services Director, Financial Services
T 07 3007 1909 T 02 8262 8712 T 02 4907 7252
E bcampbell@prosperity.com.au E gdean@prosperity.com.au E jmanuel@prosperity.com.au
Location: Brisbane Location: Sydney Location: Newcastle

Hamish Landreth Sam Gadani

Associate Director, Financial Services Associate Director, Business Services & Tax
T 07 3007 1922 T 02 8262 8747
E hlandreth@prosperity.com.au E sgadani@prosperity.com.au
Location: Brisbane Location: Sydney

Prosperity Health GP Industry Benchmark Report 2019 - Page 14

About Prosperity Health

Prosperity is an independently owned, award-winning chartered accounting

and financial advisory firm with offices in Sydney, Brisbane and Newcastle. Your Prosperity
Our Health team specialises in providing medical and allied health is our business
professionals with the financial services they need. Our team of specialists
provide comprehensive accounting, audit, taxation, salary packaging
and financial advisory services to practices of all sizes as well as individual
practitioners and their families.

With 11 partners and over 130 staff throughout the firm Prosperity has the
necessary expertise, experience and resources to service our clients’ needs
throughout NSW, the ACT and QLD. We are very proud of our reputation
among our clients and we follow best practice processes and procedures to
ensure our clients receive consistently high-quality service and solutions.

You may be interested in viewing our video series on GPs at our website
www.prosperity.com.au

Our experienced Prosperity Health team can work closely with you to assess
your individual circumstances and work with you to develop strategies to
reach financial goals and objectives.

Prosperity Health GP Industry Benchmark Report 2019 - Page 15

 Sydney Newcastle Brisbane
Level 11, 2nd Floor, Level 22,
309 Kent Street 175 Scott Street 333 Ann Street
Sydney NSW 2000 Newcastle NSW 2300 Brisbane QLD 4000
health T 02 8262 8700 T 02 4907 7222 T 07 3839 1755
prosperity.com.au