To survive payroll and ATO tax changes, they will need to reinvent their business models and value proposition for GPs who keep ‘leasing space’ at their centres.
It’s a sign of the times that the heading and intro of this article had to change to fall into line with state payroll tax office rulings (and federal tax laws).
The original heading said “Working for a corporate”, but if you’re a corporate and an SRO reads that heading, it says straight up that a GP is working for you, and in this new payroll tax world, you can’t have that.
Unless you want to pay payroll tax.
In this seemingly simple heading change, many GPs might envisage changes to the terms and conditions they currently work under at a corporate and imagine the changes will be mostly good if you’re the sort that doesn’t like having a boss.
According to HealthAndLife practice advisory principal David Dahm, the key issue the corporates have to address to avoid paying payroll tax (and they have to avoid that or go broke pretty quickly) is that in the past there has been a lot of “command and control” over services delivered by doctors, operational procedure and even billing.
Dahm says that moving forward, corporates will have to walk the talk on being only landlords and providers of specifically contracted admin services for tenants.
They cannot be providers of medical services directly to the public or even suggest that in their advertising or signage, says Dahm.
This is a big change, and comes on top of having to adjust their doctor service contracts and payment flows to align with various SRO rulings.
What are the significant changes to the relationship between a doctor working at one of these centres and the businesses running the centres?
- Contracts with each doctor will need to recognise specifically a relationship that is strictly tenant-landlord – like Coles and Westfield, where Westfield doesn’t tell Coles what it should charge for milk. Such a contract can include all sorts of services to be provided by the landlord to the tenant in the form of fees, or percentages of revenue, but there will need to be a very clear line where the tenant has significant independence in how they run their business, and specifically in how they manage their patients.
- There can be no “command and control” anywhere in the relationship or the contracts for services. A tenant doctor can’t be held to delivering a certain number or type of services, as most doctors working at corporates have in the past. They can’t be monitored for number of consults and type of consults, or be seen to be. A tenant doctor should have the freedom to bill who they want when they want and how they want.
- There can be no direct, indirect or implicit control by the administration provider over the tenant doctor. The service provider must in every respect just be only provider of services and space to a tenant doctor, and nothing else.
There’s obviously a lot more freedom in a model like this for a GP, but it’s likely to end up being a two-edged sword for some doctors who have been working at centres and have become accustomed to having only limited control of how they deliver patient services, and what they charge.
Some GPs love the “no care, not that much responsibility” relationship that a corporate has offered in the past, although of course most GPs are going to care about their patients. These doctors never wanted the added hassle of running their own business with all the admin, effort and worry that goes with that and that’s why many signed up to a corporate.
In this new model, while a good service provider centre will attempt to keep as much of that in place as they can for continuity of existing doctors, there is no escaping that there will be more responsibility on the tenant doctor as the true business owner of the patient services side of the business.
Just how this relationship is likely to bed down over time will be fascinating to see, given the spread of personalities that work at corporate setups, the demographic of existing doctors at such centres and the need for centres to keep recruiting tenants who are likely to suit their centres and be good revenue generators for themselves and through that the centre.
How in this new relationship can a corporate, with far less day-to-day control over how a GP working at their centre delivers, make the same or more money?
That might be the easiest question to answer according to Dahm.
He told Medical Republic that a good corporate will set up its services contracts on a very detailed and tightly run “pay for what you use as you use it” model.
A simple 30% fee model probably won’t cut it in this new world.
If tenant doctors still want the old corporate offering of “I’ll just turn up for the patients, you do the rest”, that’s still largely deliverable, strangely enough.
One tenant doctor may not want centralised booking services or the services of a practice secretary at front of shop. They may make less as a result of not employing optimal services, but they are going to cost a lot less to service because of the pay for exactly what you use model.
It may take some time for a service centre corporate to get these settings right, but they will in the end. They will have to.
As far as tenant doctors go, the upside of this arrangement, other than a feeling of greater autonomy and freedom, is that in order to optimise your “rent” a centre manager will need to be competitive in the provision of space and services.
Within this new world, a centre manager can have some form of set leasing time frame but the idea of non-competes are not on the table at all any more. When a lease is up, if a tenant doctor doesn’t like the space or the services, they can walk, and walk next door to a centre offering better rates and services if they want.
That sort of dynamic should be good for doctors using these centres, as it will encourage competition on attractiveness of space and services.
From an admin provider perspective, corporates will likely embrace the idea that they aren’t a “practice” with “our doctors” providing great team care any more – a lot more than small to mid-sized traditional practices will. It’s a big cultural change for traditional practice owners who are GPs, but corporates are there first and foremost as businesses, not care providers, so optimising processes and procedures in this new world to make their money in a new model will be first base. It’s just how hard it might end up being in a newly competitive landscape where you can’t simply lock your doctors in like you used to via lump sum contracts.
You need something? Take it off the rack of services we offer. Here’s our rate card to use that service, whether it be a booking system, helping manage your direct banking, an analytics service like Cubico if you would like to optimise your patient mix, a patient management system, virtual services like telehealth, the creation of your personal website (which you’ll need in this new world and we as a centre might stipulate you have to protect ourselves), or a practice secretary.
All part of the service.
A good corporate will make this all very easy for a tenant doctor.
They will want it to say: you’re in total control, they’re your patients to bill and work with as you see fit, and we want that to be as seamless as you need, but you will need to pick and choose what services you require to make it work for you from a money perspective.
What about the idea of team care and camaraderie within a practice environment?
There is nothing to say a smart corporate can’t set up an environment where something akin to this culture evolves within a medical centre space. Doctors working in the same space are free to exchange ideas, back each other up, help each other with things like after hours, and even do things like go to education events together. But likely, there’ll be some mechanism of charge for curating these connections and community, as bizarre as that might sound. A centre might not choose to charge for stuff like this as a service, but they’d be wise to charge, given the optics of what the SROs are looking at in terms of payroll tax.
Overall, a smart corporate is going to make their centre experience as seamless as they can for existing doctors, and attractive as they can for potential new tenant doctors, in terms of how much a doctor really has to worry about in running what will now truly be their own business.
In the end the key attraction of working for a corporate should largely remain: through service provision it takes care of nearly everything other than running the patient. There will be a lot more freedom for a doctor working at a centre in terms of mobility, ability to choose when and how to work, what to charge etc.
But there will be some trade-offs for a tenant doctor, for sure.
One thing that has changed substantively says Dahm is that corporates won’t be able to offer up-front lump sums for GPs to work in their centres. These have been categorised by the courts now as prepaid contracts of employment: you get $500k to work but you’re essentially indentured to use for a set period of time to pay off what effectively was a loan.
This might be seen by some GPs as a disappointing development, but these up-front payments weren’t actually ever contracts of sale. It wasn’t like you could sell your patient set and swan off to Fiji for the next few years and sit on a beach. You had to be there and service those patients.
In some ways, getting this dynamic out of the mix is making the relationship with a corporate more honest.
One aspect of this new world is that smart entrepreneurial doctors who don’t think the services on offer at these centres are value for money, and who are no longer constrained by non-competes in contracts, could organise, walk out when a lease agreement expires and set up their own version of a corporate. Next door if they want.
This apparently has already occurred at one of our major corporates.
In the end, responsibility for the business of each GP will be with the GP, not the service centre.
In a weird sense there’s some freedom in not having to worry about what you charge a patient, and in some cases, even what services you offer them (do you do a care plan or not bother any more?)
That, if it was ever a freedom, is gone for a tenant GP now.
They are going to need to spend some mental effort and time working out what combination of services works best for them in terms of their lifestyle and the money they want to make.
That’s a big step away from how things used to work for a GP who works at a corporate.
