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charging a gap

Doctors: Should You Charge a Gap?


Oct 14, 2018


Medical specialists and private practice doctors who charge a gap for their services are being blamed by some for the downturn in Australians seeking basic medical care. But as a medical professional with a business to run, you’ve got increasing expenses to cover.

Should you charge a gap to make ends meet and keep your practice successful?

Here’s some key considerations.

What It Means for Doctors to Charge a Gap

“Charging a gap” is when a medical professional increases the cost to a patient for a particular procedure by charging more than what Medicare covers.

The Medicare Benefits Schedule pays a fixed rate to medical care providers for basic hospital treatment and some specialist consultations. This is a government service to the citizens of Australia. But like other doctors, you do have the freedom to charge more than that if you feel your services are worth more than what Medicare will reimburse you for.

As a result of charging a gap, your patients will have to pay the difference between what Medicare will pay and the rate you set.

What About Bulk Billing?

Bulk billing is an incentive to doctors to discourage them from charging their patients unnecessarily. For each patient you don’t charge beyond the fixed Medicare schedule, you’ll be rewarded a few extra bucks from the government.

Bulk billing is at its highest rate in history. So some doctors and economists are convinced this means the incentive scheme is working. But another angle shows that Australians are still paying some $3 billion every year in out-of-pocket gap payments. And those who are benefitting from bulk billing are fewer in number than you’d think; they often happen to be repeat patients.

The bottom line is that bulk billing may not be the safety net for the medical economy that many think it is. Doctors can’t afford to fool themselves into thinking that charging a gap won’t have any repercussions in the future.

Should You Charge a Gap?

No one, including the medical industry, is asking the economy to sustain an unlimited, unrestrained rise in doctors’ fees.

But the reality is, you still have your practice to think about. And the freeze on Medicare reimbursements certainly doesn’t help when the cost of everything else is going up.

So what choice do you have?

Before you go arbitrarily setting a rate for your services, ask yourself a few questions:

What is the demand is there for my services?

Take a good look at your market and your target patients – this dictates your business model. Get to know your competition. Understand that there is a marked difference between serving as a general practitioner in a low-socioeconomic area and working as a specialist surgeon in the heart of Sydney, and cost expectations will differ accordingly.

Do you understand your costs? Can you be more efficient?

Are you operating as efficiently as possible? If so, you won’t be relying so much on the increased margins. If you aren’t working with an experienced medical accountant and managing your cash flow effectively, charging a gap WILL NOT solve any of your problems long term.

There are many ways the modern medical professional can streamline his or her treatment process to save time and generate more income. With a little application to your business, you can earn more money without directly charging your patients more.

What is your responsibility to your community?

Only you in good faith can weigh up your model in the context of your community, based upon your own personal values.

Get advice

Nitschke Nancarrow are experts in the business of medical professionals – whether it is running a medical practice, or a personal tax or investment matter – contact us to get the right advice.

Contact Nitschke Nancarrow managing partner Kym Nitschke for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.

– Kym Nitschke

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s  interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.

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