‘Incentivised price gouging’: The private companies making millions off doctor shortages

Sydney Morning Herald, 10 July 2023

Private recruitment companies responsible for finding temporary doctors and nurses to plug gaps in critically understaffed NSW hospitals have been accused of deliberately driving up staff costs while also discouraging medical workers from taking full-time jobs in the public health system.

The increased use of temporary doctors and nurses to cover shortages in the NSW health system has been the subject of criticism across the medical industry due to concern about the enormous cost to taxpayers and its impact on patient care.

In the 2021-22 financial year, NSW spent $1 billion on visiting medical officers, a 54 per cent increase on a decade ago, as the health system becomes more reliant on temporary staff thanks to an exodus of permanent workers.

The cost of temporary doctors has forced some medical charities to stop funding visits in remote areas and will be examined in a special commission of inquiry into health spending due to begin next month.

Much less is known about the third-party companies that act as middlemen between an overstretched health system and the growing pool of doctors who prefer to work as “hired guns”, as one long-time locum GP described himself, in the lucrative temporary doctor market.

In NSW, dozens of private companies are registered with NSW Health to act as go-betweens. They advertise roles for which doctors can often earn between $3000 and $4000 per day, and come with accommodation, travel and car hire.

“Only two hours from the coast, it enjoys a warm summer, tones of amber during the autumn, a crisp winter and an exhilarating spring,” one job listing paying $3000 per day at a public hospital in NSW read this month.

The cost of those agencies is secret but, according to Greens MP Amanda Cohn – who worked as a locum or temporary doctor in regional towns across the state for years before entering parliament at the last election – a lack of oversight has led to mismanagement and left the health department at the whim of companies often “incentivised” to drive up costs.

Because local health districts manage their locum workforce through different agencies, she said, “no doctor can see every vacancy and no hospital can see every available doctor”.

“That means that doctor A who lives in region A can be flown to region B, while doctor B who lives in region B is flown to region A,” she said.

“I have worked at hospitals where two doctors have accidentally been booked to work the same role for the same week and there is no doctor on the following week.”

Cohn said because some recruitment agents were paid via commission, they were “incentivised to price gouge our hospitals”.

In a speech in the NSW parliament, Cohn said agents had “discouraged me from accepting placements before the hospital was offering crisis rates”.

This masthead has seen evidence to suggest third-party firms sometimes seek to avoid filling vacant positions within the health system until a higher rate is available.

In one exchange between a doctor and a recruitment agent, who this masthead has kept anonymous to protect sources, the company’s representative appears to suggest delaying a placement until more lucrative “crisis rates” are offered.

Documents also reveal that in some cases the contracts between doctors and third-party agencies discourage health workers from permanently filling roles in the public hospital system by including breakage fees.

A copy of a contract between a medical worker and one third-party provider states that a doctor who accepts a role with a “client” – which can include NSW Health – within 12 months of accepting a locum placement must pay “damages” to the private company.

The contract states the damages would be equal to what the company would have been paid by the department if it had arranged the position.

While NSW Health said it spent about $148.8 million on junior locum doctors who worked in public hospitals, those costs do not capture what is paid to the 59 private agencies registered to operate in the state.

NSW Health did not answer questions about the cost of third-party agencies, but a spokesperson said they typically received 15 per cent of the doctor’s fee per placement. However, those fees can be as high as 20 per cent. It means that based on one 13-week placement of $3000 per day on a five-day roster the placement agency would be paid $29,250.

There were more than 3800 temporary doctors contracted to local health districts in regional NSW alone in the 2020-21 financial year.

Treasurer Daniel Mookhey said recently he was “surprised to learn” how much the state spends on visiting medical officers.

“We spend more per capita on VMOs than Queensland and WA, which has a more dispersed health system,” he told a meeting of Health Services Union delegates last week.

Cohn believes NSW could potentially save hundreds of millions of dollars by cutting out the agencies and managing the health workforce through a central database.

The idea is not novel: in 2008 a special commission of inquiry into health services run by current Supreme Court judge Peter Garling made the same recommendation after he found local health districts were inadvertently driving up their own costs.

“Sometimes area health services bid against each other to hire locums for a weekend and everyone ends up paying more than they should,” he found.

A spokesperson for NSW Health said attracting medical workers, particularly GPs, to remote parts of the state was “a long-standing challenge for every state and territory across Australia”. NSW Health “employs locums in rural and regional areas where there are challenges attracting permanent staff”, the spokesperson said.

While agencies are audited every three years, “fees and commissions are not set in the policy but are
determined between districts and agencies under these contracts”.