Frequently asked questions and answers

Questions and answers frequently asked by consumers regarding legislative amendments

Page last updated: 24 December 2007

What is the purpose of the changes to the legislation?

What prompted the amendments?

What consultation has been undertaken on the changes to the legislation?

When will the changes take effect?

Who do the prohibitions apply to?

What benefits are permitted?

What benefits are prohibited?

What are some examples of permitted and prohibited benefits between requesters and providers?

What practices does the legislation prohibit?

Are there any circumstances in which a transaction at market value would not be a permitted benefit?

I currently receive assistance from my pathology provider with equipment needed for the collection of pathology specimens. Can this continue?

I am currently party to a lease between a requester and a provider. What should I do to ensure that I am complying with the new provisions?

Will the legislation prohibit requesters of pathology or diagnostic imaging services and providers of those services from sharing the profits of a group practice?

Can requesters employed by a practice receive incentives (e.g. salary bonuses) for directing patients to pathology or diagnostic imaging service providers employed by the practice or to a particular provider?

Can providers offer incentives that benefit patients?

Can employers insist that requesters employed by the practice request services from a particular pathology or diagnostic imaging provider?

What protections are in place to ensure fair treatment of anyone accused of breaching the legislation?

Why has the delegated legislation that is required not been made available?

What are the penalties?

Why doesn’t the legislation address circumstances where certain providers are allowed to self-refer services?

Will there be a change to the qualifications and experience required to become an Approved Pathology Practitioner (APP)?

Will Medicare Australia have adequate powers to enforce the changed legislation?

In some circumstances, salaried medical practitioners in public hospitals receive a portion of the income the hospital receives from services provided to private patients, including pathology and diagnostic imaging services. Will this be permitted under the new provisions?

Where can those who might be affected obtain additional information?

Does the prohibition on stationing staff at a requester's premises mean that a pathology provider cannot rent premises from requesters for use as Approved Collections Centres?

Frequently asked Questions



What is the purpose of the changes to the legislation?
The amendments clarify and strengthen the provisions in the Health Insurance Act 1973 which aim to:
  • prohibit practices that induce, or have the potential to induce, practitioners to request pathology or diagnostic imaging services; and
  • encourage fair competition between pathology and diagnostic imaging providers on the basis of quality of service provided, and cost to patients.
  • The legislation also makes other more minor, technical amendments relating to the delivery of pathology services to address changes which have occurred within the pathology industry since the existing provisions were drafted.
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What prompted the amendments?
In 2002, a review of Commonwealth legislation for pathology arrangements noted that the legislative arrangements for regulating pathology services needed updating and streamlining. The offences and enforcement provisions were highlighted as areas of concern, particularly in relation to bribery and prohibited practices.

In 2005, the Department of Health and Ageing commissioned a further review, undertaken by Phillips Fox Lawyers, specifically to examine the pathology enforcement and offence provisions of the Health Insurance Act. The Phillips Fox review included 52 recommendations. Combined, these recommended that the enforcement and offence provisions be redrafted to express more clearly the Government’s intent to prevent bribes and inappropriate benefits between pathology providers and requesters of services, and to extend the application of provisions to create an enforcement framework that can be more effectively applied.

The Government accepted the majority of recommendations of the Phillips Fox review and also agreed that the framework for preventing inappropriate practices between pathology requesters and providers should apply equally to requesters and providers of diagnostic imaging services.


What consultation has been undertaken on the changes to the legislation?
The review that gave rise to the proposed amendments was informed by significant consultation with pathology providers, professional and industry peak organisations, State and Territory Governments, medical registration authorities and peak consumer groups.

Following release of the final report of the review in September 2005 and the Government’s response in May 2006, the Department of Health and Ageing consulted further with stakeholders, including briefing sessions for requesters and providers of diagnostic imaging services.
    The Department consulted with key Government agencies and major pathology and diagnostic imaging stakeholders in June 2006 to inform stakeholders of the proposed framework and timing of the legislation, as well as gathering all relevant information to enable the amendments to be drafted.

    Stakeholders expressed a desire to work collaboratively with the Government during the drafting process to ensure that inappropriate practices are prohibited and that the legislation does not produce any unintended consequences for appropriate commercial arrangements.

    In December 2006, the Department of Health and Ageing disseminated an Exposure Draft of the legislation to peak industry bodies and relevant Commonwealth and State Government agencies.

    A number of submissions were received in response to the draft, most of which supported the intent of the provisions. Many stakeholders also provided very valuable advice regarding possible areas for improvement in order to ensure that the legislation achieved its intended purpose.

    The Department of Health and Ageing will engage in further consultation on the legislative instruments that will support the Act.
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    When will the changes take effect?
    The changes will take effect on 1 March 2008. This will provide time for requesters and providers of pathology and diagnostic imaging services to familiarise themselves with the legislation and to make any necessary adjustments to their business practices.


    Who do the prohibitions apply to?
    The legislation applies to:
      • anyone who is able to request pathology or diagnostic imaging services that would be eligible for Medicare benefits (requesters);
      • anyone who renders pathology or diagnostic imaging services of a kind that are eligible for Medicare benefits (providers); and
      • people or companies who employ either requesters or providers, and their executives.
      • Any person who offers or provides a benefit, or makes a threat, with the intention of inducing a requester to request pathology or diagnostic imaging services from a particular provider.


    What benefits are permitted?
    In summary, the following transactions are permitted benefits:
      • the distribution of profits or shares from a pathology or diagnostic imaging business, provided that the benefit is proportionate to the person’s interest in the body corporate, trust or partnership;
      • remuneration (whether salary, wages, commission, allowances or bonuses) that is not substantially different from the usual remuneration paid to people engaged in similar employment or under similar contracts for services; and
      • a payment for property, goods or services where the amount of the benefit is proportionate to the person’s share of the cost of the property, goods or services (in the case of shared property, goods or services) or is not substantially different from the market value of the property, goods or services (in cases where the property, goods or services are not shared). Regulations made under the Act will prescribe a method of working out the market value and whether a payment is substantially different from market value. Additional requirements apply to payment of benefits in connection with the use or occupation by a pathology service provider of premises.

    Please note that this list is a summary list only and the Act should be consulted for full details.

    In addition to the kinds of permitted benefit described in the Act, the legislation includes a power for the Minister to determine, by legislative instrument, that a certain type of benefit is a permitted benefit. The determination, which is currently being developed, will be available for those who might be affected by the amendments before they take effect.

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    What benefits are prohibited?
    A prohibited benefit is any benefit that does not fall within the definition of “permitted benefit” contained in the Act and is not within a class of benefits included in a determination of permitted benefits made by the Minister. A prohibited benefit can take any form including money, property, goods, or services.

    In addition, even if a benefit would otherwise fall within the definition of permitted benefit, it will not be permitted if the benefit is related to the number, kind or value of requests for pathology or diagnostic imaging services made by the requester. In other words, any benefit that is linked to the making of requests is prohibited.

    The Act also contains a general prohibition on the stationing of staff and equipment at a requester’s premises for the purpose of providing pathology or diagnostic imaging services.


    What are some examples of permitted and prohibited benefits between requesters and providers?

    Shares
    If a requester owns (or owns shares in) a pathology or a diagnostic imaging service, then they can share in the legitimate profits of that business (in proportion to their share of ownership). The payments cannot be greater than the value of the provider’s proportionate share of the business and cannot be linked to the requesting of services. Requesters may not receive dividends based directly on the number of requests that they make to the business.

    Leases
    A provider may lease premises from a requester, provided that the amount of rent paid aligns with the market value of those premises. It would not be permitted for the amount of rent paid to be linked to the number, type or value of the services requested. If the lessee is a pathology service provider additional requirements also apply.

    Sharing rented premises and staff
    Requesters and providers may share rented premises provided that they each pay the appropriate rent based on the space used by them. Again, additional requirements apply to the use which a pathology service provider must make of such shared premises. Requesters and providers may share staff and equipment provided each party pays their proportionate share of the costs. However, a provider may not station staff or equipment at a requester’s premises for the purpose of providing pathology or diagnostic imaging services.

    Salaries and wages
    If the spouse of a requester (or a person with a connection to the requester) works for a provider then the provider may pay the person a salary, provided that:
      • the salary is reasonable, that is, similar to that paid to others carrying out similar work; and
      • no element of the salary is linked to the number of pathology or diagnostic imaging requests made by the requester.
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    What practices does the legislation prohibit?

    The legislation prohibits:
      • a requester or someone connected to the requester asking for, or accepting, a non-permitted benefit;
      • a provider or someone connected to the provider offering or providing a non-permitted benefit;
      • the making of certain threats in connection with pathology or diagnostic imaging requests or services.

    People who are connected to a requester or a provider are defined in the legislation and include, for example, family members, business associates and related corporate entities.

    The legislation also requires requesters and providers to report cases where any person (regardless of whether they are a requester, a provider or a person connected to one of these) asks for, accepts, offers or provides a non-permitted benefit, or makes threats, if there is an intention that in doing so the requester will request (or be induced to request) services from a particular provider. This would capture the situation where, for example, a friend of a provider makes a payment to a requester intending that the payment would induce the requester to request services from a provider;

      Are there any circumstances in which a transaction at market value would not be a permitted benefit?
      A transaction will not be a permitted benefit if it is related to the number, kind or value of pathology or diagnostic imaging requests made by a requester, even if it otherwise appears to meet the requirements to be a permitted benefit.

      For example, any arrangement where a requester received a payment every time they made a request would not be permitted.

      Any transaction would not be a permitted benefit if it was dependent upon requests for pathology or diagnostic imaging services being made to a particular provider.

      The payment of rent by a pathology service provider to a requester will not be a permitted benefit, even if the rent is at market value, if the provider does not comply with the requirements of the new legislation regarding the use of those premises.

      A benefit is also not permitted if it consists of the stationing of staff or equipment at the requester’s premises for the purposes of providing pathology or diagnostic imaging services. For example, it would not be a permitted benefit for a diagnostic imaging provider to provide an ultrasound machine at a GP practice. Exceptions to this may be made through a Ministerial Determination—for example, in rural and regional areas.

      Similarly, it would not be a permitted benefit for a pathology provider to pay part or all of the salary of a practice nurse or phlebotomist who was stationed at a GP practice to collect pathology specimens.

      A transaction will also not be a permitted benefit if it is not a genuine transaction. For example, if a pathology provider took out an option to buy a GP practice, at market value, then this might appear to be a permitted benefit. However, if both parties know that there is no intention to ever exercise the option, then this could be considered a sham transaction as the option has no true value.
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      I currently receive assistance from my pathology provider with equipment needed for the collection of pathology specimens. Can this continue?
      There is provision in the Act for the Minister to determine, by legislative instrument, a list of permitted benefits. Such an arrangement will not be permitted under the legislation unless the arrangement is a permitted benefit under the Ministerial determination. The Department of Health and Ageing will be consulting with stakeholders on the detail of benefits to be included in the list of permitted benefits. If you have suggestions about benefits that should or should not be permitted, please contact the Department at legislativeamendments@health.gov.au.


      I am currently party to a lease between a requester and a provider. What should I do to ensure that I am complying with the new provisions?
      Any payment under a lease that is substantially different from the market value of the property would not be permitted. The provision will apply to payments made or sought on or after 1 March 2008, even if the lease arrangements were entered into before that date.

      The Department of Health and Ageing is currently developing Regulations that will provide greater clarity and detail about how to calculate whether a lease is substantially different from the market value of the property.

      Before 1 March 2008, leases between providers and requesters continue to be subject to the current provisions of the Health Insurance Act.

      If you have any comments to make or require further information on the detail of the legislative instruments in relation to valuing property, please contact the Department at legislativeamendments@health.gov.au.

      It is advisable that anyone who is unsure how the changes will affect them seek legal advice.
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      Will the legislation prohibit requesters of pathology or diagnostic imaging services and providers of those services from sharing the profits of a group practice?

      Where requesters and providers are partners in a practice, they can share in the profits of the practice provided that each person’s share of the profits is in proportion to the financial interest that they hold in the partnership. However, it would be unlawful if the distribution of profits is based on the number, type or value of requests a requester directs to the practice.

      In circumstances where requesters and providers own shares in a company that operates a pathology or diagnostic imaging business, the dividend that each receives must be in proportion to the shares they hold in the company and not related to the number, type or value of requests a requester makes.

      It is advisable that any requester considering purchasing a stake in a pathology or diagnostic imaging practice obtains legal advice.


      Can requesters employed by a practice receive incentives (e.g. salary bonuses) for directing patients to pathology or diagnostic imaging service providers employed by the practice or to a particular provider?
      These types of arrangements are prohibited. Under the provisions, requesters are prohibited from receiving benefits (including salary bonuses) that are related to the number, kind or value of requests made to a provider.


      Can providers offer incentives that benefit patients?
      It is not intended to make competition on the basis of quality or on the basis of cost to patients unlawful. Nor is it intended that the provisions make it unlawful for any person to publicise the availability of pathology or diagnostic imaging services, or to offer quality of service and/or cost advantages for patients in return for direction of referrals. For example a provider may offer to bulk bill patients.
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      Can employers insist that requesters employed by the practice request services from a particular pathology or diagnostic imaging provider?

      Under the provisions, it is unlawful for an employer to threaten to penalise employees for not requesting services from a particular provider.


      What protections are in place to ensure fair treatment of anyone accused of breaching the legislation?

      The criminal offences in the legislation are subject to the provisions of the Criminal Code Act 1995 (the Criminal Code) and therefore all protections included in the Criminal Code.

      To prevent easy evasion of the provisions by channelling inappropriate benefits through third parties, the new provisions hold requesters and providers responsible for the actions of third parties who engage in inappropriate practices. There are two key provisions to protect requesters and providers from being held liable for actions they are not aware of, or cannot control:
          • Requesters and providers can only be held liable if it can be demonstrated that they knew that a connected person had offered, provided, sought or accepted a non-permitted benefit or made a proscribed threat.
          • If a requester or a provider becomes aware of a connected person engaging in proscribed conduct, they can avoid liability by reporting this to Medicare Australia within 30 days of becoming aware of the transaction.
      This ensures that no-one can be held liable for the actions of another person unless they were aware of and condoned those actions.

      The provisions allow executives to be held liable when a company commits a breach, but only where they:
          • knew a breach would occur;
          • could have influenced whether the breach would occur; and
          • failed to take all reasonable steps to prevent the breach.

      The provisions relating to liability by executive officers have been based on section 54B of the Therapeutic Goods Act 1989.
        Specific protections in relation to civil penalties include:
            • a time limit of 6 years to seek a penalty for a contravention;
            • a person cannot incur both a civil penalty and a criminal conviction for the same conduct; and
            • evidence from civil penalty proceedings is not admissible in criminal proceedings.
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          Why has the delegated legislation that is required not been made available?
          The provisions allow for the creation of a number of legislative instruments including:
            • Ministerial Determination of permitted benefits—this is likely to involve two instruments to allow them to be tailored for pathology and diagnostic imaging;
            • Regulations specifying a method of determining market value and for working out whether the amount of a payment is substantially different from the market value; and
            • Ministerial Determination specifying the qualifications and experience a person needs to become an Approved Pathology Practitioner.

          The relevant provisions take effect on 1 March 2008, allowing time for the details of the legislative instruments to be developed in consultation with stakeholders.


          What are the penalties?
          The legislation contains both criminal offences and civil penalty provisions.

          The penalty for each criminal offence is up to five years imprisonment and/or a fine of up to $33,000 ($165,000 for corporations).

          The penalty under each civil penalty provision is up to $66,000 for individual requesters or providers, and $660,000 for corporations.

          Breaches of the provisions will also be referred to a Medicare Participation Review Committee, potentially resulting in loss of access to Medicare.

          In general, the criminal offences apply where a person has asked for, accepted, offered or provided a benefit or made threats and it can be established that there is intent to request pathology or diagnostic imaging services from a particular provider as a result of being provided the benefit, or to induce a requester to request pathology or diagnostic imaging services from a particular provider.

          Civil penalties apply where a person has engaged in prohibited conduct even where there is no intent to induce the requesting of a pathology or a diagnostic imaging service.


          Why doesn’t the legislation address circumstances where certain providers are allowed to self-refer services?
          The Health Insurance Act allows for the payment of a medicare benefit for a pathology or diagnostic imaging service that was not referred by another practitioner in certain limited circumstances. This is commonly called ‘self-referral’. The amendments specifically relate to requests for pathology and diagnostic imaging services from one practitioner to another.
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          Will there be a change to the qualifications and experience required to become an Approved Pathology Practitioner (APP)?
          The amendments to the Health Insurance Act will give the Minister for Health and Ageing the power to determine, by legislative instrument, the formal qualifications and experience that are needed to become an Approved Pathology Practitioner (APP).

          Under the current provisions, a Medicare benefit is payable for a pathology service only if it is performed in an Accredited Pathology Laboratory (APL) by or on behalf of an APP. When deciding whether or not to accept an undertaking from a prospective APP the Act currently requires the Minister to consider a person’s formal qualifications and experience, but there is no strict requirement to have particular qualifications or experience. When the legislative instrument is put in place under the new provisions, a prospective APP will need to satisfy the Minister (or delegate) that they have the formal qualifications and experience specified in the legislative instrument before the Minister (or delegate) will accept the undertaking.

          A legislative instrument specifying the qualifications and experience that are needed to become an APP will be developed before the changes take effect in March 2008. The Department of Health and Ageing will work closely with key professional bodies during the development of the legislative instrument to ensure that no unintended consequences arise from the legislation.


          Will Medicare Australia have adequate powers to enforce the changed legislation?
          The legislation includes provisions to allow Medicare Australia to extend its existing powers of investigation in respect of suspected criminal offences to include possible breaches of the new civil penalty provisions. The Department of Health and Ageing is working closely with Medicare Australia to develop effective mechanisms for monitoring compliance with the new provisions.


          In some circumstances, salaried medical practitioners in public hospitals receive a portion of the income the hospital receives from services provided to private patients, including pathology and diagnostic imaging services. Will this be permitted under the new provisions?

          These payments would be permitted, provided that the amount paid to the medical practitioner is not substantially different to the usual remuneration paid to persons engaged in similar employment and is not related to the number, type or value of services that the medical practitioner requests.


          Does the prohibition on stationing staff at a requester's premises mean that a pathology provider cannot rent premises from requesters for use as Approved Collections Centres?

          It is permitted for a provider of a pathology or diagnostic imaging service to rent premises from a requester of those services, provided that the rent paid is not substantially different from the market value. Providers may station staff and/or equipment at those premises, provided that the staff and/or equipment are stationed within the area of the premises that the provider leases. For example, a pathologist may lease part of a medical centre from a requester for the purpose of operating a collection centre. This arrangement is permitted, provided that staff collecting the specimens are not stationed outside of the approved collection centre. Similarly, a radiologist may lease part of a medical centre. However, equipment used to provide diagnostic imaging services must not be stationed outside of the area that is leased by the radiologist.

          Please note that this is a simplified discussion of some of the provisions of the new legislation. It is advisable that anyone who might be affected by the provisions consult the legislation and, if in doubt, obtain independent legal advice regarding the application of the new legislation to their own circumstances.
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          Where can those who might be affected obtain additional information?
          Further information and updates about the changes can be found at www.health.gov.au/legislativeamendments. A copy of the Health Insurance Amendment (Inappropriate and Prohibited Practices and Other Measures) Act 2007 is available at www.legislation.gov.au.

          It is advisable that anyone who is unsure how the changes will affect them seek legal advice.