In 2023, we witnessed an increase in both interest rates and the cost of living, which has added significant pressure to many businesses, not to mention the cost of running a practice. On top of that, finding the right people to support and sustain a successful practice hasn’t been an easy feat. Let’s look at the latest recommendations about professional fee indexation to keep up with inflation over the next twelve months.
The Australian Medical Association (AMA) publish their annual Medical Fees Index (MFI) to provide guidance to doctors on professional fee setting. The MFI takes into consideration the following components:
- salaries and wages of staff employed – based on the ABS Wage Price Index
- other practice Costs (including medical indemnity insurance) – based on ABS consumer price index (CPI)
- motor vehicle costs – based on Private Motoring Component of CPI
The AMA MFI is a weighted average of the cost and wages indices impacting the cost of practice for Australian doctors.
Setting fees and considering inflation
Generally, staff are better prepared to have conversations with patients regarding doctor’s professional fee adjustment if it’s done annually on the same date. This is to ensure that patients are accustomed to the annual changes of fees.
Ensuring value of services
Inflation decreases the value of money, so if fees are not indexed in line with inflation, the value of the service provided reduces year on year. To support you in providing the best possible care and treatment for your patients, you need to ensure that your time is compensated accordingly so it can help to ease the pressure and financial cost of running a successful practice.
Practices find it helpful to have a thorough review of fees at the beginning of the calendar year (1st January) or the start of the financial year (1st July), depending on the practice’s financial cycle. It’s important to communicate this to your patients by sending notifications and consent forms to keep patients informed and maintain transparency.
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What is a reasonable increment for professional fees?
The AMA medical fees index has been reporting since 1973 and recommended price increases have fluctuated over that time.
The incremental increase of professional fees can be aligned to factors in the market impacting medical practices:
- a very tight market for medical practice administration staff (increasing wage costs)
- the increased workload required with managing telehealth (increasing per session staff costs)
- the recent 0.5% increase in the superannuation guarantee
For 2024 fees, the AMA recommends an increase of 4.57%. This increase is considered a lower limit of what is reasonable seeing the consumer price inflation was reported at 5.4% for September 2023, according to Reserve Bank of Australia. Inflation does not seem to be slowing down anytime soon.
Practitioners may use this guidance as a measure against which all professional fees could be indexed. It is a requirement that doctors consider the reasonableness of their fees in relation to the cost of practice and the services provided. There isn’t an upper or lower limit of what is reasonable or unfair, however the AMA MFI provides a good starting point from which to start when considering fee increments.
Scheduling fee increases is just one of the strategies that could make life easier for doctors who are concerned about the operational costs of their practices. Start 2024 with personalised consultation from Avant Practice Solutions. Get in touch with us today to find out how we can help your practice starting 2024.
Persons implementing any recommendations contained in this publication must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular practice. Compliance with any recommendations will not in any way guarantee discharge of the duty of care owed to patients and others coming into contact with the health professional or practice. Avant and Avant Practice Solutions are not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published. © Avant Mutual Group Limited 2024.