General

Practitioners

INDUSTRY BENCHMARKING
REPORT 2015

health
Foreword

We know that general practices are the backbone of the Australian medical industry, because they
are also the backbone of our Health practice. Prosperity Health provides specialised financial,
advisory, taxation and wealth management services to over 500 medical practitioners throughout
NSW, ACT and Queensland.

At Prosperity Health, we want to make sure we are doing everything possible to support our
general practice clients to grow, improve and eventually sell their practices for the highest price, so
they can live and retire financially secure.

We have invested in developing our own professional skills, so we can make sure our clients
receive best of breed advice from us and our trusted team of experts.

To provide our practice owning GP’s with accurate, real time industry performance benchmarking
Information, we conducted a benchmarking study during 2014-15 into the key practice performance
metrics for our general practice clients.

This report provides the feedback from that study, set in the context of an analysis of recent
broader industry data released by respected commentators and industry analysts.

We encourage you to contact us to discuss how our knowledge and processes can be applied to
grow and improve YOUR practice.

Stephen Guthrie
Director
Prosperity Health 

General Practitioners Industry Benchmarking Report 2015 | Page 1

Contents

Foreword 1 

Contents 2 

Recent Industry Analysis 3 

Practice Benchmarking Study 6 

Trading Benchmarks 7 

Growth & Performance Benchmarks 8 

Staffing Benchmarks 10 

Operating Costs 11 

Assets, Cash Flow, Finance & Value 11 

Conclusion 12 

About Prosperity Health 13 

Our Prosperity Health Key Contacts 15 

Contact Us 16 

General Practitioners Industry Benchmarking Report 2015 | Page 2

Recent Industry Analysis

The July 2015 IBISWorld Industry Report into General Practice Medical Services provides some
interesting high level industry statistics:

 Strong demand for GP services has resulted in industry revenue rising by an estimated
compound annual rate of 3.8% over the five years to 2015-16, reaching $11.4 billion pa.
 Revenue growth during this period has been driven largely by growth in consultation
volumes, primarily on the back of Australia’s rapidly ageing baby boomer generation. This
ageing population drives industry growth as older generations are more susceptible to
disease, chronic illness and minor ailments. Older people also require more prescription
medications and regular health check-ups.
 Despite older people typically being offered bulk-billing, which reduces per-patient revenue
through the absence of co-payments, patient volume growth is expected to result in
compound annual revenue growth of 2.7% for the five year period 2016-21.
 Bulk-billing has climbed to cover over 80.0% of all GP consultations over the past five
years.

Patients using GP services can be segmented into the following age groups:

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The IBISWorld report notes a number of macro-level factors influencing the General Practice
industry, including:

 A continuing consolidation of practices, meeting consumer demands for more convenience,

multi-disciplinary services and longer operating hours.
 The use of GP services by larger practices as a “loss leader” for their other in-house
specialist services. GPs operating their own private practices could be forced to bulk-bill to
stay competitive, putting pressure on their profit margins.
 Increasing pressure on the Federal Government to reduce the growth in Medicare funding,
which has seen the freezing of schedule fees numerous times over the past five years,
resulting in increases to schedule fees not meeting inflation.

General Practitioners Industry Benchmarking Report 2015 | Page 4

Industry wide revenue of $11.4b is split into the following broad categories:

In November 2014 the University of Sydney released their latest edition of the Bettering the
Evaluation and Care of Health (BEACH) study into general practice clinical activities, covering the
10 year period to 2014.

This study highlighted many areas in which GPs and general practice have changed between 2004
and 2014:

 Bigger practices: the proportion of GPs working in larger practices (more than 10 GPs)
increased from 14% to 26%, while solo general practices declined from 12% to 9% of total
practices.
 Ageing: almost half the GP workforce is aged over 55, compared with one-third just a decade
ago.
 Feminisation: the proportion of female GPs has increased from 32% to 43%.
 Shorter week: average hours in direct patient care decreased from 40 hours to 37 hours per
week.
 Using practice nurses: the number of consults involving practice nurses and allied health
workers has doubled to around 8% over the past 10 years.

General Practitioners Industry Benchmarking Report 2015 | Page 5

Practice Benchmarking Study

Our practice benchmarking study covered a broad cross section of our general practice clients from
NSW, ACT and Queensland. Respondent practices covered the following cross section of the
general practice industry:

 Solo GP practices (with 1-2 contracting doctors) through to practices with 15 full time
equivalent (FTE) GPs.
 Gross patient fees of $0.7m - $7.3m
 Salary and on-costs for admin and support staff from $0.12m to $1.9m

Our benchmarking and key performance indicator (KPI) results have been divided into 5 broad
categories and in each category we have provided two measures:

Industry Average This represents the average benchmark / KPI result across the whole
database of contributing practices.

Highest 20% This shows the benchmark / KPI result for the highest 20% of the
contributing practices, for each individual benchmark.

To help understand these measures, look at the following example:

Industry
Highest 20%
Average

Bulk Billed Patient Fees (%) 63% 91%

So in this example case:

 The average level of bulk billed patient fees (by $ value) of all survey respondents was 63%
 Of the spread of responses, the average level of bulk billed patient fees (by $ value) of the top
20% of respondents was 91%.

This measure does not imply any linkage with

practice profitability. It is not a measure of “what
are the most profitable practices doing”.

All results are based on reported financial data for the 2013-14 financial year.

General Practitioners Industry Benchmarking Report 2015 | Page 6

Trading Benchmarks

Industry Average Highest 20%

Bulk Billed Patient Fees (%) 63% 91%

Unsurprisingly, the data from this survey is in broad alignment with the IBISWorld report findings
noted earlier. In the 20% of surveyed practices which do not bulk bill to any significant extent, the
average bulk billed patient fees were less than 10% of total fees. In other words, there are a small
number of almost completely private billing practices which tends to skew the overall industry
averages. If these practices are excluded from the data set, the industry average increases to 76%.

Is there a discernible correlation between bulk billing levels and practice profitability? In short – no!
Our data shows that it is possible to run a profitable practice under either private or bulk billing – by
far the bigger determinant of profitability is consulting room utilisation and management fee levels.

Industry Average
Standard Consultations (%) 46%
Long Consultations (%) 18%
Other Consultations (%) 36%

For the purpose of this survey:

 Short Consultations were defined as Medicare items 23 & 3
 Long Consultations were defined as Medicare items 36 & 44
 All other items fell into the Other Consultations category

Industry Average Highest 20%

Gross Patient Fees per square metre ($) $6,931 $11,717
Patient Fee Growth (%) (see note below) 13% 36%

How well a practice utilises their available floor space is a critical factor in driving profitability. The
practice floor space of our surveyed practices ranged from 100 m2 (with 3 consulting rooms) to
over 900 m2 (with 22 consulting rooms). The top 20% of practices who generated the most patient
fees from their floor space, averaging $11,717 of fees per m2, ranged in size from 220-718 m2.

Patient fee growth results warrant particular mention, as we have intentionally excluded the growth
data from two practices which were skewing the results.

 Our surveyed practices reported average patient fee growth rates from 2013 to 2014 of 13%,
with the top 20% of practices reporting average growth of 36%.
 Two practices however effectively started from a zero base in 2013 to build practices with
turnovers of $1.1m and $4.4m respectively. The resulting percentage growth data has been
excluded from the above results.

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 Industry Average Highest 20%
Practice Incentive Payments (%) 7.4% 11.6%

Practice incentive payments (including PIPs, NIPs and GPIIs) varied widely across the surveyed
practices, from 0-12% of total patient fees.

Growth & Performance Benchmarks

Industry Average Highest 20%

Patients per GP 2,862 5,953
Consultations per GP (per annum) 5,220 7,764
Average Patient attendance rate pa 2.6 4.8

Patients per GP is a measure of the number of “active” patients recorded by each practice in their
patient database divided by the number of full time equivalent GPs at that practice. As a
consequence, the reported results are clearly heavily influenced by how regularly each practice
cleanses their patient data and how they define an “active patient”.

Our surveyed GPs are a busy crew, averaging 5,220 consultations pa, with the busiest 20% of
practices averaging 7,764 consultations pa. Unsurprisingly, there is a clear correlation between
high consultation rates and low levels of Long Consultations (Medicare items 36 & 44). The
busiest practice was a 2 GP practice averaging nearly 10,000 consultations each per annum.

A comparison of total active patients vs number of consultations pa revealed that the average
patient attended their GP practice 2.6 times pa, with a small number seeing their patients almost 5
times pa.

Industry Average Highest 20%

Consulting Room Utilisation (%) 59% 84%

Improving the utilisation of consulting rooms is generally an area where practices need to focus
attention in improving overall profitability. A consulting room without a GP or allied health
professional in it seeing patients is simply wasted space.

We measured room utilisation by calculating the actual number of patient consulting hours per
practice as a percentage of the theoretical number of available hours (being the number of
consulting rooms multiplied by the opening hours for the practice).

Clearly newly established practices move through a period of under-utilisation as they build their
patient base. But amongst the mature practices we were surprised that only 25% of surveyed
practices achieved utilisation rates in excess of 75%.

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The factors contributing to the low utilisation rates are considered to be threefold:

 Lack of available contracting GPs to fill those rooms;

 Part time GPs who are allocated a fixed room on a full time basis (so that the room is not used
by other GPs in free sessions)
 Over capitalisation (interestingly the surveyed practices with the largest number of available
rooms often displayed mediocre utilisation rates).

Industry Average Highest 20%

Patient Fees per GP ($) $406,297 $590,725
Average Patient Spend per annum ($) $193 $319
Fees Charged per Consultation ($) $68 $83

Gross patient fees per GP per annum showed a broad range, from $265,000-$740,000. The
majority of higher billing practices fell in the $550,000-$600,000 range.

The average patient spend per annum is a function of gross patient fees divided by the number of
active patients in each practice’s database. As noted earlier, the reported results are heavily
influenced by how regularly each practice cleanses their patient data and how they define an
“active patient”.

Fees charged per consultation was calculated by dividing total patient fees by the number of
consultations and reflects the large number of bulk billing within the surveyed client base.

Industry Average Highest 20%

Gross Profit Margin (%) 37.2% 44.1%
Gross Profit per GP ($) $150,443 $225,215
Net Profit (%) 9.8% 23.0%
EBIT (Earnings Before Interest & Taxes) 10.8% 23.2%

For the purposes of this survey, Gross Profit has been calculated as follows:

Gross patient fees generated by owner GPs

Less: Arms-length component payable to owner GPs (55-60% of gross fees)
Plus: Net contribution received from contracting/employed GPs
Less: Medical supplies cost

This approach serves to treat owner GPs in an equivalent manner to contracting GPs and calculate
the practice profitability on the basis that all GPs (whether owners, contractors or salaried) receive
a market-based share of the patient revenue generated.

Gross Profit margins averaged 37.2% for the surveyed practices, with higher performing practices
averaging 44%. In absolute dollar terms, Gross Profit per GP (taking into account owners,
contractors and employed GPs) averaged around $150,000, with higher performing practices
averaging more than $225,000 per GP. This measure shows how much extra gross profit should be
expected to be added to the practice (after the GP takes their fee cut) for every additional GP
working in the practice.

General Practitioners Industry Benchmarking Report 2015 | Page 9

Average net profit rates across the industry were a more modest 9.8%. In this survey, Net Profit
represents the profit available to the owner GPs after all operating costs and after allowing for an
arms-length split of their direct patient fees (calculated at 55-60% of gross fees, depending on the
region).

Interestingly:

 The bottom 20% of surveyed practices reported a net loss under this methodology. In other
words, the owner doctors were earning less as a result of operating the practice than if they
had worked as contractors in their own practice!
 The top 20% of surveyed practices generated average net profit percentages of 23%. In all
cases, these practices were 2-4 GP practices.
 In absolute dollar terms, 15% of the practices were made up of 1 owner practices netting in
excess of $400,000 profit pa (in addition to 55-60% of their own billings). These practices
typically had a large number of contractor GPs providing patient care.

EBIT (Earnings Before Interest and Taxes) rates are very much in line with Net Profit rates in this
industry, reflecting the low overall use of debt to finance practice operations.

Staffing Benchmarks

Industry Average Highest 20%

FTE Admin Staff per GP 0.9 0.5
FTE Nurses per GP 0.4 1.0
Staff Salaries, Wages & On Costs % 19.8% 10.2%

Administrative and nursing staff have been measured on a per GP basis, in order to provide a
comparison point between smaller and larger practices. All figures are on a “full time equivalent”
(FTE) basis. The Staff Salaries, Wages & On Costs have been measured as a percentage of total
patient fees.

The Highest 20% of practices:

 Use over 40% less administrative staff per GP than the industry average
 Employ one nurse for each GP.

Effective use of administrative staff is another key area where practices can significantly improve
their bottom line. The practice data reflected quite divergent practices in relation to admin staffing
levels for equivalent practices:

 Two practices with 13 GPs – one running with 8 admin staff and the other with 15
 Two practices with 8 GPs – one running with 6 admin staff and the other with 11

Total staff costs averaged 20% for the surveyed practices but the most profitable practices in net
profit % terms managed their average total staff costs to nearly 10% of patient fees.

General Practitioners Industry Benchmarking Report 2015 | Page 10

Operating Costs

Industry Average Best 20%

Advertising & Promotion (%) 0.3% 0.0%
Cleaning (%) 0.6% 0.1%
Electricity (%) 0.5% 0.3%
Rent Expense (%) 4.0% 1.5%
Telephone (%) 0.9% 0.5%

Whilst it is important to monitor and manage the wide range of other costs incurred in running a
practice, these costs are overall reasonably minor in percentage terms in comparison to staff costs.
Most practices do not appear to overspend on these items.

Assets, Cash Flow, Finance & Value

Industry Average
Total Debt as a % of Medical Practice Value (%) 28%
Total Debt to EBIT (%) 1.3%

Many of the typical business ratios do not translate well to general medical practices, due to the
welcome absence of debtors, inventory and trade creditor issues.

Debt levels are reasonably modest and generally represent finance for asset acquisition or
voluntary debt undertaken by practice owners for debt management reasons.

General Practitioners Industry Benchmarking Report 2015 | Page 11

Conclusion

At Prosperity Health we offer tailored benchmarking and practice consulting services to help you
monitor and improve the performance, growth, profitability and value of your practice. For further
details and to review your own practice planning matters, contact your local Prosperity Health office
to arrange for an initial consultation.

As outlined above, the key planning, growth and performance measures include:
- Industry trends
o Revenue growth driven largely by growth in consultation volumes
o Increasing pressure on the Federal Government to reduce the growth in Medicare
funding.
- Benchmarking study results
o It is possible to run a profitable practice under either private or bulk billing - by far
the bigger determinant of profitability are consulting room utilisation and
management fee levels. How well a practice utilises their available floor space is a
critical factor in driving profitability.
o The top 20% of practices who generated the most patient fees from their floor
space, averaging $11,717 of fees per m2, ranged in size from 220-718 m2.
Improving the utilisation of consulting rooms is generally an area where practices
need to focus attention in improving overall profitability.
o The factors contributing to low utilisation rates include lack of available contracting
GPs, inefficient use of rooms for part time doctors and over capitalisation.
o The top 20% of surveyed practices generated average net profit percentages of
23%. In all cases, these practices were 2-4 GP practices.
o Effective use of administrative staff is another key area where practices can
significantly improve their bottom line.

Interested in being part of our next survey?

If you are a practice owner and would like to be involved in our next benchmarking report, please
contact your local Prosperity Health office for further details.

REFERENCES

Whytcross, D (July 2015) IBISWorld Industry Report Q8511. General Practice Medical services in Australia

Britt H, Miller GC, Henderson J, Bayram C, Valenti L, Harrison C et. al. A decade of Australian general practice activity 2004–
05 to 2013–14. General practice series no. 37. Sydney: Sydney University Press, 2014.

General Practitioners Industry Benchmarking Report 2015 | Page 12

Exclusive Offer

Health practitioners understand the importance of diagnosing the correct cause of a health issue.
By correctly identifying the symptoms, the right treatment can be provided and the benefit to the
patient will be invaluable.

The Prosperity Health team has applied the same philosophy to our benchmarking program. A
tailored individual diagnostic report will assist your practice by correctly identifying potential issues
and the follow up consultation will address and prioritise key focus areas to ensure achievement of
your practice goals.

The Prosperity Health team is offering medical practices an exclusive tailored diagnostic report and
follow up consultation. The necessary information can be gathered by you or your Practice
Manager within an hour, and our report will be received within 10 business days. Until the end of
2015, this will be at the reduced rate of $595. Please call your local Prosperity Health office or
email us at [email protected] for more details.

General Practitioners Industry Benchmarking Report 2015 | Page 13

About Prosperity Health

Prosperity is an independently owned, award-winning chartered accounting and financial advisory

firm, with offices in Sydney, Brisbane and Newcastle.

Our Health team specialises in providing medical and allied health professionals with the financial
services they need. Our team of specialists provide comprehensive accounting, audit, taxation,
salary packaging and financial advisory services to a growing base of small to medium enterprise
(SME) clients, mid sized corporates and high net worth individuals.

With 13 partners and over 120 staff throughout our three offices, Prosperity has the necessary
expertise, experience and resources to service our clients' needs throughout New South Wales, the
ACT and Queensland. We are very proud of our reputation amongst our clients and we follow best
practice processes and procedures to ensure our clients receive consistently high quality service
and solutions.

Our experienced Prosperity Health team will work closely with you to assess your individual
circumstances and continue strategies to reach your financial goals and objectives.

General Practitioners Industry Benchmarking Report 2015 | Page 14

Our Prosperity Health Key Contacts

Stephen Guthrie Megan Faraday-Bensley Ashley Quinton Brendan Campbell

Director Director Director Assoc. Director
Sydney Newcastle Brisbane Brisbane

MORE ABOUT: Stephen MORE ABOUT: Megan MORE ABOUT: Ashley MORE ABOUT: Brendan

John Manual Gavin Fernando Lilian Luu Moien Khan

Director, Director, Manager Manager
Financial Services Financial Services Sydney Sydney
Newcastle Newcastle

MORE ABOUT: John MORE ABOUT: Gavin MORE ABOUT: Lilian MORE ABOUT: Moien

Sabrina Findlay Kelly Chard

Manager Manager
Newcastle Brisbane

MORE ABOUT: Sabrina MORE ABOUT: Kelly

General Practitioners Industry Benchmarking Report 2015 | Page 15

Contact Us

For further information or to make an appointment with a specialist adviser please contact us at –

Sydney Newcastle Brisbane

Level 1 Level 2 Suite 1, Level 3

130 Elizabeth Street 175 Scott Street 200 Creek Street
Sydney NSW 2000 Newcastle NSW 2300 Brisbane QLD 4000

T 02 8262 8700 T 02 4907 7222 T 07 3839 1755

[email protected] www.prosperityhealth.com.au

General Practitioners Industry Benchmarking Report 2015 | Page 16

 One Team, One Plan,
Smarter Advice.

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