Healius Pathology Pty Ltd, a pathology provider in New South Wales, has been ordered by the Commonwealth to pay a pecuniary penalty of $1.65 million for violating the Health Insurance Act 1973.
The Chief Executive Medicare – on behalf of the Commonwealth – commenced civil proceedings in the Federal Court of Australia against Healius, trading at the time as Specialist Diagnostic Services Pty Ltd.
The court recently ordered Healius to pay a pecuniary penalty of $1.65 million and legal costs of $200,000.
The case revolved around Healius's six-year lease arrangements for pathology collection centres co-located at two dermatology practices in Castle Hill and Kingswood in NSW.
According to the Australian Government Department of Health and Aged Care, expert valuation reports relied on by the Commonwealth revealed that the agreed amounts for the leases arrangements were “between 100% and 470% greater than the market values.”
The court deemed the lease arrangements significantly different from market value, making them “serious contraventions that are deserving of significant penalties,” particularly regarding general deterrence to the pathology industry.
The court decided that a significant penalty was warranted due to Healius's position in the pathology market, its large size, and financial position. Healius was cooperative in the litigation, including accepting the contraventions and penalties.
The Department of Health and Aged Care welcomed the court's decision and vowed to continue enforcing compliance with the prohibited practices provisions in the Health Insurance Act 1973 and engage with lessors and lessees where concerns are identified.
“The department suggests that rent paid per square metre for a medical centre premises may be used as a guide to determine a proportionate rent for space occupied by a pathology collection centre within the medical centre. The department also encourages regular review of lease arrangements and recommends seeking independent valuations of premises to ensure compliance with the act,” it said.
