Australia Government Reviews Pathology Service to Cut Costs

Australian health professionals will get cheaper pathology services if companies like Primary Health care Ltd. and Sonic Health Care Ltd. have to compete for about A$2 billion ($2.03 billion) in medical testing contracts, a review said.

The government-commissioned review said tendering for pathology services as opposed to a fee-setting system could deliver a “significant price reduction.” The government will include any pathology changes for the public health system, known as Medicare, in its May 10 budget, the review said.

Analysis of pathology tendering elsewhere shows it “has provided significant price reduction,” the review said. “Many pathology fees, historically set through Medicare arrangements, are not in line with contemporary practices.”

Ramsay Health Care Ltd., Australia’s biggest private hospital operator, rose 3.3 percent to A$18.32 at the 4:10 p.m. close of trading in Sydney, the highest since the company went public in 1997. Primary, which provides medical tests, fell 4.9 percent to A$3.08, the most in more than a year. Sonic dropped 2.9 percent to A$10.95, the lowest in more than three months..

Government spending on pathology has grown an average of 7.3 percent a year since 1984, the Department of Health and Ageing review said. Growth slowed to 2.1 percent last year after the government imposed a 5 percent fee cut in November 2009. Funding for pathology may increase less than 2 percent this year, it said.

The review said tenders would be for a defined geographic area, with multiple suppliers, to provide “a comprehensive range of pathology tests.” It has called for submissions before March 25.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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