(First published in Australian Doctor Magazine - November 2019)
If you are a practice owner, then it's likely you have heard someone at a practice management seminar discuss how the highest and best use of any available consulting room is to fill it with a busy and productive clinician.
I have delivered that advice myself in numerous forums, often drawing the analogy between medical practices and hotels - in both cases, profitability is largely driven by occupancy levels. Unfilled sessions and underutilised consulting rooms are the leading area of under-performance in many general practices.
If only it were that simple.
As is well understood, despite their best efforts, many practices are simply unable to attract independent associates to fill their needs. The slew of GP vacancies (at least 1000 across Australia) sees many practices, especially in rural areas, increasingly desperate.
Recent years have seen a growing trend in part-time roles, as contracting doctors choose to work reduced sessions to balance other commitments and interests. Practice owners find themselves with unfilled or split sessions, leaving the practice under serviced at times that are generally considered less attractive to work.
The competition for doctors has driven down service fee levels, often to unsustainable levels. Earlier this decade, benchmark service fees were about 45% depending on the region. Today, service fee rates of 25%-35% are becoming increasingly common and are no longer that critical point of difference which will attract a new doctor.
Keeping in mind that the service fee income needs to cover the costs of support and nursing staff, rent, consumables, overheads and myriad other items, it is little wonder that most practices are heavily reliant on incentive payments and sub-rental income to break even.
Alternative pricing strategies
In a bid to attract doctors into these 'less desirable' sessions or to change room utilisation behaviours, some practices are trialling dynamic pricing strategies. This model works by adjusting the service fee levels payable by doctors, based on the time of day, and is aimed at filling all available sessions by making them more price-attractive to the doctor.
Popular 9am - 3pm time slots attract a higher service fee (say 35%-40%); whereas the 4pm - 7pm weekday slot might be priced at a lower service fee (say 25%-30%).True dynamic pricing models require constant adjustment to reflect changing market conditions and the use of recording systems, which automate much of the administrative burden associated with differential pricing.It's the same strategy employed by airlines in seat pricing and hotels in room pricing. Other variations can include differential service fees for new versus existing patients, or for higher-billing versus lower-billing GPs.
Whether this strategy works to help a practice attract new GPs in a competitive market is yet to be proven. True dynamic pricing models require constant adjustment to reflect changing market conditions and the use of recording systems, which automate much of the administrative burden associated with differential pricing.
While these systems exist, many practices have yet to implement the technology necessary and so are not readily placed to consider more innovative strategies.
Non-financial strategies
Income levels and service fees are not the only factors that will help you attract new GPs to your practice. Clarity around your practice's value proposition, the ability to clearly articulate your values and behaviours, a well-thought-out patient service model and profile, and team culture are all of fundamental importance.
Many of these factors are also equally relevant in your retention strategies, as are engagement processes such as regular clinical meetings, offering teaching opportunities, investing in your premises and equipment, and providing the right levels of support staff.
None of these strategies will address the immediate industry-wide shortfall in GPs but they may help your practice find the extra one or two doctors who will make a noticeable difference to your practice's service capacity.
A willingness to try different approaches and invest in systems that support these initiatives are essential steps in the journey.
If you have any questions regarding the above, contact Director of Business Services and Taxation, Stephen Guthrie at sguthrie@prosperity.com.au. Alternatively, we have Specialist Health Sector Advisers in each of our offices. If you would like to speak to one in your location, call 1300 795 515.
