Why are there so many corporate owned clinics?

25 October 2018 | Australian GPs, Clinic Owners and Practice Managers | 3 minutes read

Why are there so many corporate owned clinics?

GPs are sometimes uncertain about job options for corporate groups, but the reality is that job options with smaller clinics becoming more and more rare.  In fact many smaller clinics have made the decision to sell to larger groups or corporates.

So why are all these clinics selling? The simple answer is that the current climate makes it difficult for small clinics to thrive.

The General Practice sector is changing and over the last 2 years, we have increasingly seen small clinics sell to corporate organisations. The market is being increasingly being flooded with clinics owned by a select few such as Primary Health Care, IPN, Fullerton Healthcare, and others.

We have put together a list of the main reasons why we think this has happened:

Overheads

Clinics struggle to make revenue due to increasing overheads and competition to attract GPs. Clinics retain on average 30% of the service fee, however,  much of this goes to paying overheads such as wages for receptionists, nurses and managers and rent and equipment.  For a breakdown of typical costs for overheads check our blog here.

In some cases, corporates have additional arms of their organization such as pathology and radiology which can help to cover the overheads for the GP practice.

Cashflow

Like all businesses, clinics have slow and busy periods which means that cash flow can become an issue when not managed correctly. Corporate practices have access to larger pools of funding which makes it more likely that GPs and staff will get paid on time and other costs can be covered more easily.

Administrative Burdens

The administrative burden of running a practice has increased over time.  Managing Medicare payments,  complying with accreditation standards etc, contribute to a large administrative workload.   Sometimes smaller, privately owned practices make the decision to sell because they no longer have the capacity to manage the complex administrative tasks.  At the same time, corporate groups who take on these tasks on a larger scale, can manage this more easily.

GP Shortages

Good GPs are hard to find and sometimes GPs need to move for a variety of reasons.  As a rule of thumb, larger practices might expect to lose a GP every 9 months.  In a market that is so short of good doctors, practices are increasingly required to provide better percentages, higher guarantees, and even upfront payments.  It is easier for larger organisations to pick up these costs because of the economies of scale.

At the end of it all, there are good and bad sides to the sector moving towards corporates but there is a practical side that makes it difficult to go back to the days when most practices were privately owned.

Need Assistance?

GPs – Want to discuss your options? At Alecto we create a relationship with our clients whether big or small and can help find the best place for you. Please contact us at info@alecto.com.au for assistance

Practice Owners – Being a practice owner is not easy, but if you need help with financial strategies, practice management or are thinking of selling, please contact us at info@alecto.com.au for assistance

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