I have a very smart uncle. But in his early years he was not what I would call successful.
In his later years? Let’s just say he built a multimillion turnover business which allowed him to retire comfortably. He happens to be one of my mentors. When I started my business, he was a wealth of knowledge.
I will never forget what he once told me.
‘Business has been in existence since humans had the ability to think. Businesses do not fail. There will always be business and the need for business. Businesses fail because they do not adapt to change.’
Many failed business owners will come up with excuses. ‘The timing was not right. Employees did not do what they were supposed to do. The bank did not support us. I had a bad business partner. Taxes were too high. There was too much red tape.’
These and more are just some of the excuses I hear from failed business owners.
And recently I feel the same thing when it came to payroll taxes. I look at what the AMA Queensland have on payroll tax, and I just ask what my uncle would say. It would probably be along the lines of ‘Yes, it is a problem and yes its crap but how do we change our business and adapt so we survive?.
In the medical Associations case, it should be ‘Yes this is crap and not good news but rather than complain, cry and come up with excuses how do we help our members adapt and change so not do they survive but thrive?’
Do not get me wrong. I totally understand burn out by GP’s. I get that GP’s are the first line of defence and I certainly know the margins made by GP practices.
The AMA gives 9 reasons why payroll taxes is a ‘patient tax’ and why GP practices should not pay Payroll Tax. 6 of these reasons have nothing to do with patients but the effect on GP’s and the income a practice makes. Only 3 have to do with the effect on the wider community. And the list is also in that order. The practice excuses come first, and patient matters last.
And this is why I do not think the strategy of the AMA & RACGP will work. But I hope with crossed fingers (and toes) that I am wrong.
When you talk about saving yourself, the public nor the States care. The States only see the money they may get from practices and think GP’s are self-serving in their excuses.
And as the recent NSW & Victoria States have shown they really do not care. There is not even an amnesty in those States although there is now 12 months grace in NSW.
Having spoken to someone quite high in the ranks who knows someone else even higher in the ranks of Qld Government this is what they have told me.
- Yes, they expect some practices to close. They may be more than some – there may be quite a lot. They are OK with that.
- Yes, there will be more strain elsewhere such as emergency rooms. They are not OK with that but will accept it.
- Yes, there will be more GPs on the market as practices close.
Yes, some GP’s will re-educate themselves and move to other disciplines.
But the nature of economics is this. When a business has money pressures, they will do a few things.
- Raise prices or
- Reduce costs. Or
- Diversify and change
If a practice raises prices, patients will blame the practice not the States and that is why the States do not care about it. And all that means is more to pay in payroll taxes which means the states will be rubbing their hands with glee.
How to reduce costs? Well, if the AMA really believe ‘thousands of GPs will be unemployed without practices to work in’ economics also dictate that more supply than demand will result in contractors being paid less.
If contractors are paid less, practice become profitable again which means practices start to reopen as margins increase taking pressure off the State system.
In their view this is all an economic cycle.
And the states know that the largest cost of a practice is contractor GP payments which is as high as 75% when 10 years ago it was about 60%. In the States view the reason practices are not making money is not because of payroll taxes but because the AMA and RACGP helped the Government restrict the number of doctors in the system to boost income for doctors. They see it as a Federal and Association issue, not a state tax issue.
There’s more. GP Practices are not the only ones that work on low margins. There are multiple businesses, from Security to retail that operate on low margins and they pay payroll taxes. If they want an exemption GPs need to make a real case which does not include any benefits to them.
I am not saying that view is right. It is what the States are thinking and if that is how they are thinking then the public may think that too. And that is why overall, the public do not have sympathy with the argument. They know it is a problem – just not how big a problem it is.
And that is maybe why the States view is that there will be short term loss for everybody but in the long term they will win major dollars without the blame.
But going back to how this article started. Healthcare, especially General Practice, has been in existence for thousands of years. It has had many ups and downs. The introduction of Payroll Taxes will not jeopardise that. What will determine the number of practices that will close is their ability to adapt and change. And also if contractors are willing to accept that they too might have to come to the table.
