Planfarm Bankwest Benchmarks2016 - 2017

Bankwest Future of Business:Focus on Medical Services

2018

ContentsKey insights

Industry overview What’s driving industry growth?

Spotlight on Australia

Spotlight on Western Australia

What does the future hold?

What challenges does the industry face?

Where do the opportunities lie?

Forecasted industry growth

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Key insightsForeword

Understanding factors impacting your industry, and how other businesses in your industry are performing, can be a great gauge for how your business is tracking.

The Bankwest Future of Business: Focus on Medical Services Report is designed to give you a snapshot of the current and expected future state of your industry, which could help you plan and spark ideas. The report covers Australia’s medical services sector, summarising trends based on statistics from IBIS World, the Australian Bureau of Statistics and other reputable sources.

Visits to doctors and specialists are rising. The number of Australians who visited a general practitioner (GP) rose 1.5% to 20.8 million in the year to June 2017, while the number of Australians seeing a specialist rose by 2.1%1 people to 7.82 million. Growth in Western Australia’s general and specialist medical services sector was the largest nationwide, with a 7.3% increase in specialist attendances and a 5.8% increase in GP attendances during the same period.

The delivery of Australian medical services is changing, with key stakeholders advocating greater access and calibrating their service to best achieve patient outcomes. The introduction of Health Care Homes, which

is designed to improve healthcare for patients with chronic and complex conditions, keeping them in their home and out of the hospital system, will provide greater convenience for patients as they can access a diverse range of services beyond GPs3. While less efficient services will be reformed, the latest review to urgent after-hours doctor’s services will seek to contain the 154.7% growth this part of the industry experienced in the five years to June 2016.

The rising costs of Medicare, pressure on the public purse and Australia’s goal to be a medical service exporter will provide vast opportunity for technology and innovation within the industry to drive down industry costs4. Recent innovation has included double-sided online marketplaces connecting practitioners with patients, sensory technology and biomarking to facilitate services and adopt a more preventative approach to healthcare and chronic disease.

The government’s commitment to Medicare and Australia’s ageing population will see anticipated revenue growth of 15.7% in the five years to June 20225. However, earnings for GPs will remain sluggish during this period, with wages declining by 0.6% compared to a 11.4% rise for specialists6.

1 Department of Health 20172 Does not include obstetrics & anaesthetics3 Department of Health 2017

4 Australian Trade and Investment Commission 20175 IBIS 20176 IBIS 2017

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Industry overview Breakdown

Employment growth strong

General practice and specialist medical services, 2016-2017, Revenue ($b)

Australia’s general and specialist medical services industry delivered 166.4 million services in the year to June 2017, up 2.4% on the previous year.

Employment in the sector grew by just 0.1% in the year to August 2017, however over a five-year horizon employment growth has been strong at 23.7%. The significant rise in employment is largely in line with the 24.7% increase in Medicare benefits paid during the same period, which totalled $22.0 billion in the year to June 2017.

Revenue

$23.4 bn

Number of businesses

22,009

Number of employees

Employment in general & specialist medical services, seasonally adjusted, 2007-2017

163,705

The general and specialist medical services division refers to GP medical services and specialist medical services. Revenue for general medical services was $11.8 billion in the year to June 2017 and accounted for 50.4% of industry revenue, marginally higher than specialist services, which accounted for $11.6 billion.

General practice medical services

Specialist medical services

Source: IBIS 2017

2013 2014 2015 2016 2017201220112010200920082007

100,000

90,000

110,000

120,000

130,000

140,000

150,000

160,000

170,000

Source: ABS 6291.0.55.003

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What’s driving industry growth?Older Australians have a much higher likelihood of seeing a GP or medical specialist. The population aged 65 and over increased by 18.2% in the five years to June 2017 to 3.8 million, playing a large role in the industry’s growth. The private health insurance industry

benefits strongly from take up of private health cover extras and general treatment cover.

Around half of Australians have private health insurance extras cover, however, the number of Australians taking out extras cover has risen by 10.2% in the five years to June 2017.

Proportion of Australians visiting GP or medical specialist by age, 2016-2017

Other factors driving industry growth7

Private health cover

More people seeing after- hours GP

Fewer people waiting longer than they feel acceptable to see a GP

Fewer people waiting longer than they feel acceptable to see a specialist

Source: ABS 4839

7 ABS 48398 APRA 2017

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Spotlight on Australia Rising employmentAustralians are seeing doctors more regularly, with GP attendances rising by 2.2% to 130 million

in the year to June 2017. On average, Australians are seeing their GP 0.5 times more a year than they were 10 years ago (6.2 vs 5.7). Specialist services demonstrate a similar trend, with specialist attendances rising by 3.5% to 31.1 million in the year to June 2017, while services per patient rose to 4.0, up from 3.6 a decade ago.

Increased use of after-hours GPs has been driving growth in the general medical services sector, with the number of services more than doubling in the last five years.

Number of services and benefits paid ($m) for after-hours medical services, 2011-2016

Source: Department of Health 2017

Strong growth in the industry has led to rising employment in the sector and the highest proportion of full time workers since the turn of the century. Full time employment rose by 3.0% in the 12 months to June 2017, compared to a 3.7% decline in part time employment during this period.

working full time

increase in employment in five years to August 2017

GPs per 100,000 Australians

increase in female GPs compared to 19.0% increase in male GPs in the five years to June 2017

Source: ABS 6291.0.55.003, Department of Health 2017

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Spotlight on Western AustraliaWestern Australians are the most likely to have private health ‘extras’ cover, with 67.5% of the WA population holding the cover in the year to June 20179. Bulk billing rates increased across specialist and GP attendances, however average patient fees also increased, highlighting greater use of public services and modest price rises in the private sector.

Western Australians enjoyed the smallest increase in average patient fees in the year to June 2017, while experiencing the largest increase in services10.

A recent study completed by the WA Department of Health found that by 2025, there will be a 1,450 shortfall in medical practitioners in the state. This includes a 974 shortfall in GPs as well as severe shortages in the following specialist areas:

Obstetrics and gynaecology

Ophthalmology

Psychiatry

Largest increase in benefits, smallest increase in contribution

GPs

Increase in attendances

Bulk billing rate

5.8%

80.6%(2017)

78.3% (2016)

Specialists

7.3%

19.1%(2017)

17.4% (2016)

Specialist shortfalls predicted

increase in services (2.7% national average) (4.2% national average)

increase in patient fees (4.2% national average)

9 APRA 201710 Department of Health 2017

Source: Department of Health 2017

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Australian residential population projections by age cohort, 2017-2037

Source: ABS 3220

What does the future hold? The removal of the Medicare rebate freeze will give some relief to medical practitioners who have had to cover rising costs since its introduction in 2013. Australia’s ageing population will ensure that demand for medical services, particularly specialist services, continues to grow. In the five years to June 202211:

After-hours care shake-upSignificant growth in after-hours care has raised concerns about the effectiveness of these services in delivering the best health outcomes for Australians.

A recent review by the Medicare Benefits Schedule (MBS) Review Taskforce into urgent after-hours care across Australia has brought changes to the industry effective 1 March, 2018.

These changes will not affect rural and remote after-hours services due to the difficulty in supplying these services in those areas.

population will rise by 12.3%

population will rise by 17.1% 85+65+

Removal of top Medicare rebate to trainee doctors for after-hours home visits

Limitations on advertising for after-hours care

Restrictions on pre-booking urgent after-hours home visits

11 ABS 3220 8

What challenges does the industry face?

Despite a growing number of Australians taking out private health insurance extras cover, the overall proportion is declining which will inhibit revenue growth, particularly among specialist care providers. Estimates from the Australian Prudential Regulation Authority for the September 2017 quarter reveal less than half (49.8%) of Australians have extras cover, the lowest proportion in five years.

Young Australians are also electing not to take out private health cover, with 50,000 fewer extras cover policies held among the 20-29 cohort in the three years to September 2017.

Proportion of Australians with private health cover declining

Australians with private health insurance extras cover, 2015-2017

Declining fertility rates

Collaboration with other professionals as patients demand greater breadth of services and continuity of service

Integrating and embracing technology advancements to drive productivity

Number of graduating students exceeds number of trainee opportunitiesSource: APRA 2017

Otherchallenges

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Greater focus on chronic disease prevention

Increased collaboration with supporting services to give greater coverage of health care

Traditional business models under pressureRecent reviews into after-hours care and concerns over medical practitioner models that bulk bill for shorter consultation times will see a re-focus on genuine patient needs and less fragmented business models12.

Recommendations to reform the medical services sector include:

Fees partially indexed to health outcomes

1012 Department of Health 2017

Where do the opportunities lie?

Technology driving innovation

Healthcare costs are growing at twice the rate of GDP and pressure on the government to increase federal funding has led to a review of the MBS. The Federal Government highlighted the following in the 2017 Budget13:

Vast opportunity exists for medical services operators who can identify ways to improve efficiencies and the delivery of care. A number of recent Australian innovations are anticipated to reshape the industry and lead to positive outcomes for end users.

The use of technology to collect data will provide further information for medical practitioners, as well as providing more rich data for future research.

$194.5 million additional mental health funding from 2016-2020

$65.9 million allocated 2016-2019 for preventative health research

$104 million estimated total cost of collaborating with other services

$9.1 million to improve access to telehealth psychological services

Digitising healthcare records to better connect practitioners with patient information

Sensor technology that can predict hazards and urgent health problems

An online marketplace connecting practitioners and patients

Applications that can track personal biomarkers to predict potential health problems

13 Department of Health 201711

Forecasted industry growthAustralia’s ageing population and improving access to medical services will see industry revenue grow by 15.7% in the five years to June 2022.

Access and delivery of medical services across Australia will continue to improve via a larger number of medical centres in the next five years to June 2022, aimed at providing ease of access and convenience.

Projected shortages across some specialist areas will see wages for medical specialists grow at a much faster rate than general medical practitioners in the five years to June 202214.

increase in medical specialists’ wages

decline in general practitioners’ wages

General and specialist medical services revenue ($b), 2007-2022

Source: IBIS 2017

Access and delivery

GP establishments 15.8%

Medical specialist establishments 17.9%

14 IBIS 2017

Source: IBIS 2017

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At Bankwest, we know that Business Banking is about more than just financial solutions.

Speak to one of our Business Banking Specialists today. Call us on 13 7000.

We provide banking solutions to many of Australia’s leading businesses, including those in medical services. Whether you require straightforward banking or a more customised solution, our team of experienced banking specialists can help.

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Australian Government Department of Human Services, Medicare Item Reports, Canberra, 2017

Australian Bureau of Statistics 6291.0.55.003 (December 2017), Labour Force Australia Detailed Quarterly, Nov 2017, available at: http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6291.0.55.003Nov%202017

Australian Bureau of Statistics 3222.0 (November 2013), Population Projections Australia 2012 (base) to 2101, Population Projections Fact Sheet, available at:http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/3222.02012%20(base)%20to%202101

Australian Bureau of Statistics 4839.0 (November 2017) , Patient Experiences in Australia: Summary of Findings, 2016-17, Tables 1-3, available at:http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4839.02016-17

Australian Prudential Regulation Authority, 16/17 Annual Report, Canberra, 2017

Australian Government Department of Health, General Practice Statistics, Canberra, 2017 Australian Government Department of Health, Health Budget 2017-18, Canberra, 2017

Australian Government Department of Health, Health Care Homes, 2018 Online, available at:http://www.health.gov.au/internet/main/publishing.nsf/content/health-care-homes-professional

Australian Government Trade and Investment Commission, Annual Report 2016-17, Canberra, 2017 Mullaly, J. General Practice Medical Services in Australia, IBISWorld, February 2017

Mullaly, J. Specialist Medical Services in Australia, IBISWorld, November 2017

Richardson, A. Other Health Services in Australia, IBISWorld, October 2017

Sources

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The information contained in this report is of a general nature and is not intended to be nor should be considered as professional advice. You should not act on the basis of anything contained in this report without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this report.