Bankwest Future of Business:Focus on General & Specialist Medical Services2019 release

ContentsKey insights

Industry overview

What’s drivingindustry growth?

Spotlight on Australia

Spotlight on Western Australia

What does the future hold?

What challenges does the industry face?

Where do theopportunities 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 General & Specialist 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 general and specialist medical services sector, summarising trends based on statistics from IBIS World, the Australian Bureau of Statistics and other reputable sources.

With age comes a higher prevalence of chronic disease and greater healthcare costs. As Australians age, they are increasingly making use of medical and Medicare services. The number of Medicare services used by Australians rose by 5.1% in the year to June 2018.1 This was driven by growth in the number of doctor visits, as well as the number of services provided per visit. An ageing population provides a long-term stable source of revenue for the medical services industry.

The specialist medical services industry is particularly well positioned. As people age, they demand a greater number of specialist services. Specialist medical services attendance rose by 2.0% in the year to June 2018, with average patient contributions increasing by 6.3%2, fuelling revenue growth. General medical service use is also increasing. In 2018, the proportion of Australians visiting a general practitioner more than four times a year rose to more than half of all Australians at 50.1%, an increase of 3.9 percentage points compared to 2017.3

The outlook for the medical services industry is promising as numerous growth opportunities have arisen. This growth includes products like sensory devices and monitoring technology, as well as new software that helps improve information management and patient communication. From this, businesses can expand services and revenue. Medical service providers should focus on value-adding investment and data driven solutions. In doing so, they are able to meet customer expectations for flexible and comprehensive medical services and remain competitive.

1MBS 2018 2MBS 2018 3ABS 4839 4

Industry overview

Percentage increase by service type, 2017 - 2018

Source: MBS 2018

General medicalSpecialist medicalObstetricsAnaestheticsPathologyDiagnostic imagingOptometryAllied health

Australia’s medical services industry performed well in 2018, as revenue across specialist and general medical services grew by 2.1% to $25.2 billion.4 Employment was particularly strong, growing by 3.9% during the year, however wage growth for specialist medical services continue to outpace those in general medical services (4.2% vs -1.8%).5

General and specialist medical services overview

General Medical Services

Specialist Medical Services

Total

Source: IBIS 2018

$12.7

$12.4

$25.2

Revenue($billion)

43,763

20,014

63,777

90,594

40,601

131,195

Establishments Employment

Growth in the sector has been driven by increasing demand and expenditure on healthcare services. In the year to June 2018, the number of patients increased by 1.9%, with the number of services provided per patient rising 2.8%. Increasing patient numbers and greater service demand is inflating the amount of Medicare benefits paid. During the same period, benefits paid totalled $23.2 billion, an increase of 5.4% on the previous year.7

7MBS 2018

Total Medicare service attendances across Australia increased by 5.1% in the year to June 2018. The largest growth came from allied health (8.7%) and pathology testing (6.6%).6

4IBIS 2018 5IBIS 2018 6MBS 2018

4.0%2.0%

-0.2%3.9%

6.6%5.1%

5.9%8.7%

5

100%

What’s driving industry growth?Growth in the proportion and number of Australians aged 65 and over will drive growth throughout the industry. The majority of healthcare expenses occur in the latter half of life, with healthcare expenses rising as people age. Since 2001, the proportion of people aged 65 and over has increased by 24.8%.9

Proportion of people using medical services in the 12 months to June 2018 by age

Australians are visiting the GP more frequently. The proportion of Australians who visited a GP four or more times per year rose to 50.1% in 2018, up from 46.2% in the previous year.8 Growth in GP visitation fuels growth in specialist medical services as patients are referred.

15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+

Source: ABS 4839

80%

60%

40%

20%

23.7%

79.8%

32.2%

83.3%

35.0%

85.7%

41.6%

88.8%

48.2%

94.7%

57.6%

97.5%

61.6%

97.6%

56.6%

75.4%

0%

Who used GP medical services Who used specialist medical services

8ABS 4839

Other factors driving growth in the industry in the five years to June 2018 include:

3.1%increase in bulk

billing rate10average visits to a GP (non

referred attendances)11health insurance (number

of insured people)12

6.9%17.0%

9ABS 310110MBS 2018

11MBS 201812APRA 2018 6

Spotlight on AustraliaThe cost of healthcare services has been rising across Australia. In the last 10 years to 2018, the average patient contribution towards the cost of medical services has doubled.13

Insurance trendsThe number of Australians insured has been steadily rising over the past 10 years. In September 2018, the number of insured Australians was just shy of 13.6 million, an increase of 24.0% from September 2008.14

Despite the total number of people insured increasing, the proportion of Australians insured has been decreasing. Between September 2015 and September 2018, the proportion of Australians with insurance cover fell 3.0%.15

Number ofservices

Source: MBS 2018

13MBS 2018

Medicarebenefits paid

PatientContribution

Bulk billingrates

ACT

87.9% 9.1%

22.9% 47.1%

NSW

97.0% 4.3%

22.8% 46.2%

TAS

96.1% 7.2%

31.7% 59.7%

VIC

109.9% 9.7%

23.9% 46.3%

SA

104.6% 7.5%

25.9% 53.1%

WA

101.3% 11.1%

29.6% 58.9%

NT

111.6% 16.3%

57.3% 91.1%QLD

91.7% 9.4%

30.3% 61.3%

Insurance trends Australia, 2008 - 2018

2008 2010 2012 2014 2016 2018

8

14

13

12

11

10

948%

60%

58%

56%

54%

52%

50%

46%

44%

Proportion insured (RHS)Insured persons (LHS)

Mill

ions

Source: APRA 2018

Western Australians are the most insured people in Australia, with an average insurance rate of 69.2%, 15.1 percentage points greater than the national average.16

14APRA 2018 15APRA 2018 16APRA 2018

7

Number of Medicare services per capita, 1985 - 2018

Source: MBS 2018

Australia WA

18

12

1985 2015

10

8

6

4

2

0

Spotlight on Western AustraliaWestern Australia experienced the strongest rise in the use of Medicare services of 7.2% in the year to June 2018, compared to the national average of 5.1%.18

As of September 2018, some 54.6% of Western Australians have private hospital cover, which is substantially higher than the national average of 44.9%.17

17APRA 2018

7.2%Services

7.6%Benefits paid

2.1%Bulk billingrate

4.5%Patientcontributions

Growth in the industry outpaced growth in the population and performed well relative to national trends. The number of GPs per capita rose by more than three times the national average in the year to June 2018 (3.6% vs 1.1%). The per capita use of services by Western Australians has increased by 52.0% over the last 20 years.19

14

16

1988 1991 1994 1997 2000 2003 2006 2009 2012 2018

18MBS 2018 19MBS 2018 8

What does the future hold?As Australia’s population ages, higher demand will be placed on medical services, in particular specialist services. At current estimates, the population aged 75 and above will increase by 93.1% over the next 20 years.20

20ABS 3220

100%

Australian population growth by age bracket, 2018 - 2038

Source: ABS 3220

80%

60%

40%

20%

7.1%

0%

5 year forecast

After-hours careA disproportionate number of working age Australians are using after-hours medical services. Typically, consumption of medical services increases with age, however, 25-34 year olds are more than twice as likely as 65-74 year olds to make use of after-hours medical services.21 This is likely due to the higher opportunity cost associated with missing work, and indicates a demand for more flexible hours and medical services to accommodate the needs of younger Australians.

10 year forecast 20 year forecast

The Medicare rebate freeze is to be lifted in 2019 and will allow for indexation of the Medicare rebate for specialist services. This means medical service providers will be able to adjust their prices and will no longer need to absorb rising input costs.

0-24 25-49 50-74 75+

7.8%14.1%

26.2%

16.2%

29.4%

7.6%12.4%

24.9% 22.4%

46.8%

93.1%

Use of after-hours medical services in the past 12 months, 2018

Source: ABS 4839

21ABS 4839

15 - 24 years

11.4%25 - 34 years

13.3%

35 - 44 years

11.7%45 - 54 years

10.9%

55 - 64 years

8.7%65 - 74 years

6.3%

75 - 84 years

6.9%85+ years

7.8%

9

Specialist Medical Services

30,000

25,000

20,000

15,000

10,000

5,000

0

Medical services business counts, 2013 - 2018

12,920

General Practice Medical Services

42,772

34,821

2013

2018

Source: IBIS 2018

What challenges does the industry face?The number of general and specialist medical services operating nationally rose to 59,266 in 2018, an increase of 1.3%.22 A rising number of GP services builds competition in the sector and will likely encourage more clinics to bulk bill to compete for patients.

45,000

40,000

35,000

16,494

The number of GP services per capita is increasing. Between 2013 and 2018, GP services per capita rose 7.8%. During the same period, the number of GPs per 100,000 people rose to 150.2, an increase of 13.2%.23 An ageing population demands a greater number of services, however, supply is outpacing demand. As GP numbers increase, the market could become saturated and see downward pressure placed on wages.

Increased competition is seeing growth in bulk billing, with bulk billing rates across the country rising by 3.1% over the past five years. Western Australia saw the largest increase in bulk billing rates in the country, almost triple the national average at 9.2%.24

The availability of general and specialist medical services inregional and remote areas continues to challenge the sector. Regional businesses face unique challenges, such as the inability to retain high quality staff who are drawn into urban centres.

22IBIS 2018 23MBS 2018 24MBS 2018

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Where do the opportunities lie?Developments in technology and data management will continue to lay foundations for significant growth in general and specialist medical services. As technology advances, cheaper and more sophisticated medical equipment will be made available. In order to provide greater value to customers, businesses will need to keep up-to-date with the latest monitoring and sensory equipment.

Third party services have allowed medical service providers to boost procurement and improve convenience across the sector. Businesses can employ such services and increase the value provided to patients through:

Value through technology

An ageing population will place pressures on the medical services system as demand increases. The majority of healthcare costs are borne in the later years of life. As people age and become chronically ill, conventional systems of treatment will no longer be viable. Greater flexibility, preventative care, and chronic disease management will be needed to curtail healthcare expenditure.

Developments in chronic illness management include:

25ABS 4364

Automated text messages with service updates. e.g. rising wait times

Email direct marketing and text messages notifying patients of programs and initiatives. e.g. free immunisations

Automated reminders for follow up or regular visits

Specialist medical services will expand as the population ages and chronic disease becomes more prevalent. Growth in services treating cognitive decline is expected to be particularly strong. Recent estimates show mental and behavioural conditions are the fastest growing chronic illnesses in Australia, rising by 20.5% in the three years to June 2018.25

Medical services are often hampered by administrative inefficiencies. Businesses should leverage document and client management systems to improve productivity and reduce administration and time costs.

Implanted sensor hardware

Cloud-based data management

Remote monitoring

Automated alert systems to and between doctors and patients

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Forecasted industry growthAn ageing population combined with a demand for chronic condition management and specialist medical services will underpin future revenue growth in the medical services industry. Medical services revenue is expected to grow by 24.7% over the next five years.26

Medical services revenue, 2010 - 2024

Source: IBIS 2018

$35

2010 20242012 2014 2016 2018 2020 2022

Actual Forecast

26IBIS 2018

Billi

ons

($)

$33$31$29$27$25$23$21$19$17$15

General medical services

Specialist medical services

8.2%

12.5%

WagesRevenue per establishment

6.7%

13.5%

Source: IBIS 2018

Increasing demand and a limited supply of specialist medical services is expected to place upwards pressure on medical specialists’ wages. Wages are forecast to grow by more in specialist medical services than general medical services over the next five years.

Specialist vs General

12

Australian Bureau of Statistics (2018), 3101.0 - Australian Demographic Statistics, Jun 2018.Available at http://www.abs.gov.au/ausstats/abs@.nsf/mf/3101.0

Australian Bureau of Statistics (2018), 3222.0 - Population Projections, Australia, 2017 (base) - 2066. Available at http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/5A9C0859C5F50C30CA25718C0015182F?opendocument

Australian Bureau of Statistics (2018), 4364.0.55.001- National Health Survey: First Results, 2017-18.Available at http://www.abs.gov.au/ausstats/abs@.nsf/PrimaryMainFeatures/4364.0.55.001?OpenDocument

Australian Bureau of Statistics (2018), 4839.0 - Patient Experiences in Australia: Summary of Findings, 2017-18. Available at http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4839.02017-18?OpenDocument

Australian Bureau of Statistics (2018), 8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun 2013 to Jun 2017. Available at http://www.abs.gov.au/ausstats/abs@.nsf/mf/8165.0

Australian Prudential Regulation Authority (2018), “Private health insurance statistical trends”. Available at https://www.apra.gov.au/publications/private-health-insurance-statistical-trends

Department of Health (2018), “Annual Medicare Statistics”. Available at http://www.health.gov.au/internet/main/publishing.nsf/Content/Annual-Medicare-Statistics

Department of Health (2018), “General Practice Statistics”. Available at http://www.health.gov.au/internet/main/publishing.nsf/Content/General+Practice+Statistics-1

Harrison, L. “General Practice Medical Services in Australia”, IBISWorld, November 2018.

Harrison, L. “Specialist Medical Services in Australia”, IBISWorld, October 2018.

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.