23 June 2021

ACT’s subscription clinics in voluntary administration

Finance KnowCents Medicare Practice Management

Expressions of interest are open for anyone wanting to buy into the ACT’s general practice market with the National Health Co-operative going into voluntary administration.

The pending insolvency of the NHC was announced on Monday afternoon, with the admission that it had incurred a significant deficit since the conclusion of the government’s JobKeeper payments.

The not-for-profit operates eight GP clinics across the ACT, employing about 90 medical and administrative staff.

For a monthly fee of $10, patients are able to access unlimited bulk-billed doctors at any NHC practice as well as a range of allied health professionals and psychology services.

The model has been criticised as breaching Section 20A of the Health Insurance Act 1973, which says that when a Medicare benefit is payable, “the practitioner accepts the assignment in full payment of the medical expenses incurred”, i.e. without extra private fees.

But the organisation has maintained that due to their fees not being co-payments, they remain legal.

Michael Slaven and Aaron Torline of Slaven Torline have been appointed as the joint and several administrators of the NHC since Monday.

Mr Slaven told TMR that while the NHC was not currently insolvent, it was likely to become so at a future point.

“It’s business as usual and we’re operating in the usual way while we run through this administration process,” he said.

“We hope to advertise nationally seeking expressions of interest for the acquisition of the clinics, either the entire line, or individual clinics, and we hope to start that process within the next week.”

Mr Slaven said the overarching objective for any negotiations with interested parties would be in the interest of maintaining the current offerings of the NHC.

The organisation was first formed in 2010 as an answer to Canberra’s general practice shortage. It’s unique model was touted as a way to retain essential healthcare workers in general practice, while offering affordable care to patients.

The NHC’s 2019-20 financial report revealed that the organisation had bagged about $15 million in revenue last financial year, up $1.5 million from the previous year.

This sum included $10 million in patient fees, an additional $1 million in patient membership fees and $1.5 million in service fees.

But over the same period, the director’s fees of the NHC increased by 60%.

The NHC also managed to pull more than half a million dollars in JobKeeper during the first half of 2020 alone.

Add that to the tax concession the NHC gets as a not-for-profit organisation, and it starts to paint a more puzzling picture about where it all went wrong.

David Dahm, a chartered accountant and CEO of Health and Life, said the publicly available financial reports of the NHC in fact suggested it was growing.

“The revenue was increasing during 2019-2020, when the pandemic started, but the reports also reveal that it has a large amount of director fees which is eating that money,” he told TMR.

“The NHC appears to be very top-heavy and, looking at the numbers, you would wonder if they didn’t pay out those director fees if they would be in administration.”

The financial report from the current financial year is yet to reveal where everything went wrong for the organisation.

But Dahm, who advises a number of medical practices, said this example was not a reflection of bulk billing being a bad business model.

“People may run the narrative that bulk billing isn’t solvent, but it actually seems to be unique to the organisation, because I’ve got practices of similar size, operating with bulk billing, and they’re doing far better than how the NHC appears to be doing,” he said.

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