Bateman, Edmund v Health Insurance Comm

[1998] FCA 774

FEDERAL COURT OF AUSTRALIA

ADMINISTRATIVE LAW - appeal from decision of Administrative Appeals Tribunal - construction of Reg 3P Health Insurance Commission Regulations - formula for calculating payments to medical practitioners under a “Better Practice Program” attached to the Ministerial minute initially approving the creation of the program - applicants applied for payment under the Program - whether regulation implementing the Program authorised use of formula by Health Insurance Commission - regulation incorporated criteria for payment contained in a particular document - extent to which formula could stand with those criteria - whether “executive power” of Minister could bind Commission - whether Commission free to regard formula as having been intended to be applied despite terms of regulation.

Health Commission Act 1973 (Cth)
Health Insurance Commission Regulations, reg 3P

EDMUND BATEMAN AND ANOR v HEALTH INSURANCE COMMISSION
NG 485 of 1997

MADGWICK J
3 JULY 1998
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG485  of   1997

BETWEEN:

EDMUND BATEMAN
FIRST APPLICANT

MICHAEL CHRISTIE
SECOND APPLICANT

AND:

HEALTH INSURANCE COMMISSION
RESPONDENT

JUDGE(S):

MADGWICK

DATE OF ORDER:

3 JULY 1998

WHERE MADE:

SYDNEY

SHORT MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The matter be remitted to the Administrative Appeals Tribunal to be further dealt with according to law.

2. The respondent pay the applicant’s costs.

3. Liberty to apply within seven (7) days.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 485 of 1997

BETWEEN:

EDMUND BATEMAN
FIRST APPLICANT

MICHAEL CHRISTIE
SECOND APPLICANT

AND:

HEALTH INSURANCE COMMISSION
RESPONDENT

JUDGE(S):	MADGWICK
DATE:	3 JULY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

HIS HONOUR:  This is an appeal on matters of law from a decision of the Administrative Appeals Tribunal (“the Tribunal”) regarding the applicants’ entitlement to payments under a Commonwealth government scheme known as the “Better Practice Payments Program” (“the Program”), which was administered by the Health Insurance Commission (“the Commission”).  The Program was aimed at providing a financial incentive to general medical practices to improve the quality of service and to encourage greater continuity of care for patients within the one medical practice, among other things by encouraging doctors to build up patient loyalty to their practice. 

To become eligible for a payment under the Program, a medical practice was required to meet certain criteria.  The indicators of eligibility were, broadly speaking, that (1) the doctors in the medical practice were suitably qualified and in good professional standing; (2) the medical practice provided a comprehensive range of general practice services; and (3) there was to be a focus on patients, whereby the medical practice was required to provide general health care information to patients and to establish a system for feedback from patients concerning the quality of care provided by the practice.

On 18 April 1995 Dr Bateman lodged an application for payment under the Program on behalf of the Warringah Mall 24 Hour Medical Centre.  Dr Christie lodged his application on behalf of the Chatswood 24 Hour Medical Centre on 11 May 1995.  Both are large medical practices, open 24 hours a day, with extensive specialist and paramedical facilities and other services, such as on-site pharmacies and the provision of a courtesy car for patients unable to make their own way to the medical centre.  At the relevant time, there were 16 full-time practitioners employed at the Warringah medical centre and 14 practitioners at the Chatswood medical centre.  As it happens, both practices have a comparatively high proportion of patients who do not seek medical attention more than once in each year.  There was material, not rejected by the Tribunal, that appeared to show that, in relation to significant numbers of single-visit patients, they might have “loyalty” to an applicant’s practice but not attend more than once a year for unrelated reasons:  they might be healthy, and attending for a precautionary check-up; they might have medical needs for which a single efficient attendance might provide adequate treatment; as well, in the case of the applicants’ practices (in contradistinction from some others), their extensive range of in-house para-medical services might cause a single medical attendance to suffice where otherwise it would not; or patients might, because of the applicants’ bona fide 24 hour service, attend their practices for emergency treatment because of the unavailability of other practices.

The applications were originally rejected by the Commission on the basis that the medical centres did not satisfy the eligibility criteria relating to out-of-surgery services.  After the applicants sought a review by the Tribunal of that original decision, the Commission reconsidered its decision in the light of additional data collected from Medicare records, and decided that the applicants were eligible for payment.  The medical centres were paid certain sums for each quarter from August 1995 to February 1996.  The applicants then sought a review by the Tribunal of the decision as to the quantum of those payments, claiming that considerably more ought have been paid to them.  The Tribunal affirmed the Commission’s decisions, for the reasons given on 27 May 1997.  This is a review of that decision.

The applicable legislation
The Health Commission Act 1973 (Cth) established the Commission (s 4).  Its principal functions include those of conducting the “Medibank Private” health benefits fund.

Part IIB provides for the Commission to perform “additional functions”.  Under s 8E the Commission is required to perform “such functions in relation to ... matters relating to health as are prescribed” by regulations; the regulations may prescribe “the manner in which the Commission is to carry out” such a function.  It is the Governor General who makes the regulations:  s 44. 

Part IIC - “Powers of the Commission” - provides in s 8G that, subject to the Act, the Commission has power to do all things necessary or convenient in connection with the performance of its functions.  Section 8J provides that the Commission, “in performing its functions or exercising its powers, is subject to any written directions given by the Minister”.  Any such direction is to be set out in the Commission’s annual report.  The requirements of the Acts Interpretation Act 1901 as to publication and disallowance by Parliament of, and incorporation of other instruments in, regulations are applied to such Ministerial directions.

Under Part V - “Finance”, the Commonwealth is to pay to the Commission, from time to time, such amounts as the Minister for Finance thinks necessary for the purpose of enabling the Commission to make payments required of it in the course of carrying out its function:  s 33.  Section 37 requires that the moneys of the Commission shall be applied “only” towards legal obligations of the Commission “in or in connection with the performance of its functions” and (so far as is material here) “in making any other payments that the Commission is authorised or required to make under this Act”.

An annual report and audit are required:  s 42.  The Governor-General’s regulation-making power, as usual, extends to the prescription of matters convenient as well as necessary for the operation of the Act:  s 44.

On 8 December 1994 the Health Insurance Commission Regulations were amended to include reg 3P, which so far as material, provided:

“3P.(1)       For the purposes of subsection 8E(1) of the Act, the following functions are prescribed:

(a)to receive and process applications ... from the nominated persons in respect of a general medical practice for the participation of the general medical practice in the Department’s Better Practice Program (“the Program”);

(b)to make decisions:

(i)on the eligibility of general medical practices, in relation to which applications of that kind that are lodged with the Commission, to participate in the Program; and

(ii)to make decisions concerning the amount payable from time to time to each general medical practice participating in the Program;

...

(2)In performing its function of making decisions under paragraph (1)(b), the Commission must:

(a)make the decisions:

(i)in relation to applications lodged with the Commission on or before 30 November 1995 - in accordance with criteria stated in the document known as ‘Eligibility Criteria and Payment Arrangements for the Better Practice Program, 1994-5’ published by the Department in November 1994.”

The document referred to in para (2)(a) of Reg 3P provided:

“Eligibility Criteria and Payment Arrangements for the Better Practice Program, 1994-5

Eligibility Criteria

The eligibility criteria for 1994-95 have been derived from the Royal Australian College of General Practitioner’s (RACGP) draft Entry Standards for General Practice Accreditation.  A basic prerequisite is that practices are bona fide general practices providing care in a way that is consistent with the RACGP definition of general practice:

‘General Practice is defined as the provision of primary, continuing, comprehensive whole patient care to individuals, families and their communities.’

It is expected that the eligibility criteria will be refined over time within the broad context of the Better Practice Program.  Any changes will reflect the experience gained from the Program and would be developed in consultation with the medical profession and consumer representatives.  The current eligibility criteria are intended to remain effective until at least 30 June 1995.  Practices will be advised of any changes to the criteria after this date.
As well as providing care consistent with the RACGP definition of general practice, practices must have been in operation for at least six months and must demonstrate that they satisfy all three of the following basic eligibility criteria:

1         ...

2The practice provides a comprehensive range of general practice services

a.The practice provides adequate after hours care.

Patients must have access to a full after hours service which provides cover 24 hours a day.  Practice doctors need to be involved in and responsible for the after hours care provided.  This does NOT require that the practice provides all its own after hours care.  It is permissible, for example, to use deputising services or to co-operate with other practices but to meet this criterion practice staff should be actively involved in providing this service.

b.This practice provides adequate out of surgery visits when justified on social or medical grounds.

Out of surgery visits include home visits, nursing homes, hospital and other institutional visits.

c.The practice has an average consultation time of at least ten minutes.

3.The practice demonstrates a patient focus

a.Practice information sheets should always be available to patients.

At a minimum, these sheets should include the names and qualifications of all practice staff; the practice’s consulting hours; arrangements for after hours services; information on the availability of out of surgery visits; a schedule of fees and arrangements for payments; and arrangements for complaints about the practice.

b.The practice obtains regular and structured feedback from patients through an approved patient survey.

Payment Arrangements

Available funds will be allocated to each eligible practice in proportion to the relative size of the practice, in terms of patients attending the practice, and the extent to which those patients received their general practice services from that practice in the previous twelve months.

Each eligible [rural] practice ... will receive an additional amount directly proportional to its practice size as described above.

Eligible practices will be provided with full details of the basis for payment each quarter.

Note:  Applicants should note that supplementary information about these payment arrangements and criteria, the process for assessing these criteria and the operation of the Better Practice Program is also included in the Better Program Information Kit published by the Department of Health Services and Health.

The “Kit” referred to is another document.  So far as material, its terms are:

“Better Practice Program Information Kit
...
This package contains important information on how the Better Practice Program operates, the eligibility criteria and the assessment process.  Applicants should read all documents carefully.

1             Why Better Practice Payments?

Some Background

Since 1989 the Government has made substantial efforts to support and strengthen the role of general practitioners, to improve their status and remuneration and improve outcomes for the community.

Under the Government’s General Practice Strategy, funding has been provided for a wide range of initiatives ...

The Better Practice Program is the latest addition to the strategy.

Limitations of Fee for Service

GPs in Australia currently get their remuneration almost exclusively from fee-for-service (FFS) and many GPs value the FFS arrangements very highly.  At the same time the profession has had concerns for some years over several issues which compromise the overall quality of care and general practitioner satisfaction.

A common concern is the growth in “six minute medicine” where many short consultations are provided to maximise the number of patients and income.  Another problem is that there is no remuneration for many GP activities.  Unfortunately a wholly FFS system can do little to change these problems.  While it would be technically possible to extend Medicare to cover non patient contact services there would be enormous problems with verification, accountability and cost.

Another option would be to increase the consultation fee to take into account these unpaid services.  Apart from the issue of cost the uncomfortable fact is that the GPs who didn’t actually perform any of these extras would end up earning more than those GPs who did.

This is an inherent problem in any FFS system.  No matter what the level of fee the financial incentives always reward those who do the least possible amount of defined work for the fee.

The other inherent problem with FFS is that it can encourage more rapid throughput - to collect more fees you perform more services.
...
In short, GPs who do best out of the current FFS arrangements are those who see patients more quickly and more frequently, who prescribe more and perform unpaid extras the least.  The ones likely to do worst financially are those who spend more time with their patients, prescribe less and provide more unpaid services.

It is not surprising that more and more GPs are opting for the more financially rewarding type of practice.  Unfortunately this is not the type of practice the RACGP and your patients believe delivers the highest quality of care and greatest GP satisfaction.

What will Better Practice Payments do?

The Government is not looking to remove or replace FFS as the main method of remuneration for GPs; it has many strengths.  No one remuneration system is perfect and the Government is introducing something often called ‘a blended payment’ system.  This is simply a mix of different types of remuneration methods to get different incentives working.

The Better Practice Program aims to put some incentives for quality care into the remuneration system.
...
The Payment Process

Payments will be made directly to the practice.  It is often the practice which decides important quality of care issues such as continuity of care, record systems, and policies on after hours care and home visits.
...
How the payments can be spent

The Better Practice Payment will be additional income for practices to use as they wish.  Practices will not have to specifically account for the payment, but the usual taxation rules apply.
...
Review and consultation

As the Better Practice Program gets underway, a committee will be established to provide input into the implementation, ongoing management and future development of the program.  This committee will include representatives from general practices, consumers and the Government.

[the text of the “Eligibility Criteria” document referred to above is here set out]

4             How the Better Practice Payments are calculated

On average payments will be about $10,000 a year for each full time GP in the practice.  The amount of the payment will depend upon:

·   whether the practice is in a designated rural area;

·   practice size; and

·   the level of continuity of care provided by the practice.

Payments will be calculated using Medicare and Department of Veteran Affairs claims data held by the Health Insurance Commission.  The calculation will be made by distributing the available funds to eligible practices in proportion to:

·   practice size multiplied by the continuity index, plus practice size multiplied by rural loading.

Practice Size

Practice size is a measure of the workload of the practice - larger practices will tend to get larger payments.

A patient is counted as one patient regardless of the number of attendances.  A patient who attends several practices is apportioned to each practice according to the proportion of services they receive from each practice.  A patient thus appears as a fraction of a whole patient equivalent for each practice attended.

Whole patient equivalents are standardised to adjust for the fact that different age/sex categories on average use a different number of medical services.

Practice size is the sum for each practice of the standardised whole patient equivalents seen by that practice in one year.

Continuity Index

The continuity index calculates the extent to which patients attending a particular practice receive their general practice services from that practice versus all other practices.  Practices with high numbers of patients predominantly attending their practices will receive higher payments than practices which mainly provide only episodic care to patients attending a range of practices.

The continuity index is a measure of the practice’s market share of the patients attending it during one year.”
...

5             Applicants’ Guide

...

Part C     Functional Details of the Practice

...

2.     Defining the Practice

GPs organise themselves into practices in many ways.  Practices will receive the maximum payment where they define themselves functionally, i.e. when they define themselves around the arrangements they have for patients.  This is because the patient continuity index records how often patients return to the same practice.”

The bureaucratic background
On 24 October 1994, the Minister approved a recommendation prepared by the Department of Community Services and Health that the Program be introduced from November 1994.  An integral part of that process was the Minister’s approval of the eligibility criteria for payment under the Program broadly as set out above.  In addition, a “Better Practice Payments Formula” (“the formula”) attached to the ministerial minute, was also approved.  This formula was devised to calculate the amount of payment to which an eligible medical practice was entitled.

Under the formula, the amount of the payment to an eligible practice would depend upon three factors.  The first related to the size of the medical practice.  The recommendation to the Minister stated:

“Practice size is a measure of the workload of the practice and larger practices will tend to get larger payments.  Practice size is measured in Standardised Full-time Equivalent Patients.  This is related to Patient Count ie. the number of individual patients seen during a recent 12 month period and the age and gender of those patients.

A patient who attends only one practice is counted as one Full-time Equivalent Patient for that practice regardless of the number of attendances.  A patient who attends several practices is apportioned to each practice according to the Medicare benefit value of consultations (not other services) provided to the patient.  The patient thus appears as a fraction of a Full-time Equivalent for each practice attended.

Practice size is Standardised (adjusted) to compensate for any differences in the age/sex profile on an individual practice’s patients compared with the Australian average.  Without this adjustment, workload would be understated where there is a higher than average proportion of patients in age/sex categories known to require more doctor effort, such as the elderly and women in maternal years.  Similarly, an overstatement is likely if patients tend to be young adult males.  Standardisation deals with this by adjusting the Full-time Equivalent value of each patient by reference to Australian averages of service utilisation under Medicare for each age/sex group.”

There was no substantial difference between these concepts and those referred to above as having been adverted to in the relevant regulation.

The third element was a rural loading, the purpose and function of which is not relevant to this review.

However, the second factor, called the Patient Continuity Index, gives rise to difficulty.  It was said to be intended to reflect the degree of patient loyalty to one particular medical practice.  It will be recalled that a purpose of the scheme is to encourage general medical practitioners to conduct their practices in such a way that they would attract such loyalty.  Payments were to be based on the proportion of care that each medical practice provided to its patients, relative to the proportion of care provided by all other medical practices to their patients.  But, crucially for the real issues in this appeal, the Index excluded patients who had visited a medical practice only once in the previous twelve months.  Such single encounters were to be excluded, according to the Ministerial minute, on the basis that those patients “have not had an opportunity to exercise choice and demonstrate continuity”.

The formula was then represented as follows:

(adjusted practice size x adjusted patient continuity index x [a pre-determined] amount per patient) +
  0.5

(adjusted practice size x rural loading per patient)

The nature of the appeal
One basis of this appeal is whether the Tribunal erred by regarding the use of the formula attached to the Ministerial minute as authorised by the regulation.  In its reasons for decision, the Tribunal held:

“[The Regulation] first prescribes a function for the Commission, the present respondent, namely to receive and process applications in the Department’s Better Practice Program and to make decisions not only on eligibility but also as to the amount payable from time to time.  Decisions of this nature must be made in accordance with the relevant criteria stated in a document identified in Regulation 3P(2) as ‘Eligibility Criteria and Payment Arrangements for the Better Practice Program 1994-1995’.  It has to be said that some confusion has arisen as a result of this drafting technique.  If criteria and payment arrangements were to be fully identified, they should have been published as a schedule to the regulations.  As it is, one is left with the argument raised by the applicants that the Formula is not part of the statutory package but is something devised to give definition to the general concepts of the eligibility criteria.  Although the matter is not free from doubt, we have come to the conclusion that the eligibility criteria and payment arrangements referred to in the sub-regulation are the two documents attached to the Ministerial minute.  This minute was the source from which the regulation flowed.  The Formula therefore has been in existence in general terms as long as the general conditions of eligibility have existed.  The Formula is not something that came into effect after the program was promulgated.  This being so, the conditions of eligibility in attachment A and the Formula in attachment B become, by way of incorporation by reference, a part of the regulation.  The regulation itself, of course, is a disallowable instrument.  One has to assume that is has withstood the scrutiny of Parliament through its appropriate committees.  As such, it has the force of law and must be administered in that way.  As a legal instrument laying down positive law the only flexibility or discretion to be found in its application will be in the terms of the regulation itself.

...

This being so, and there being no dispute that the payments to the applicants were calculated in accordance with the Formula which, as we believe, is incorporated into the regulation, then there is no basis upon which the applicants can query the quantum of those payments.

If we are wrong and the Formula is in fact no more than a Ministerial guideline, or statement of policy, then the same result, in our view, would ensue.

...

This policy (if it be merely a policy) deliberately adopted criteria which, as it happens, disadvantaged the applicants.  Having regard to the weight which must be accorded such a policy, we can only conclude that such criteria were deliberately adopted.  If the applicants’ practices receive lower payments because (for example) they deal with more singles than other practices, then one is driven to conclude that this result was intended.  The exclusion of singles has been a feature and a central part of the policy since its adoption.  Similarly if the applicants are disadvantaged in relation to other practices by reason of the fact that most of their patients are young, then one has to assume that the policy was framed with this in mind.  In other words, the practices with which both applicants are associated are not the types of practices which were in contemplation of the policy makers in setting out to achieve their stated objective.  If the program was not designed to encourage practices of this nature, then practices of this nature can not be heard to complain that they are disadvantaged by the implementation of that policy.”  (emphasis added)

The applicants contend that the application of the formula was not authorised by the regulation, and that at least it should not be applied to the exclusion of all other considerations, where (as in their case) the medical practice, although striving to meet the aims of the Program, would be disadvantaged by the operation of that formula. The applicants’ position was succinctly summarised by the Tribunal:

“The principal cause of complaint was the way in which the patient continuity component was calculated without reference to singles. Patients who may be categorised in this way form a large number of the users of the two medical centres.  In excluding singles, the applicants alleged that the program had failed to consider the usefulness in promoting better practice, which the applicants provided to people who were injured, to people who were seriously ill, to people who attended for annual tests and to people who were generally healthy but fell ill once a year.

The applicants were also aggrieved by the way in which the Formula determined ‘practice size’ (SWPE).  The weighting factor in the Formula, according to age and sex, resulted in larger payments to practices with older patients.  The applicants’ evidence was that older patients do not tend to use 24-hour medical centres.  They contended that the provision of medical services to an age group or sex which needs less care does constitute ‘better practice’ and that the age and sex ratios of the patient base were unrelated to the quality of the practice.

In general they complained that the application of the Formula to all practices regardless of the nature and type of practice resulted in a comparison of practices that were not comparable.  For example, a 24 hour service provided by eight principal general practitioners could not reasonably be compared with a one to three person practice which provides ten hours service.  The applicants contended that many of the features of their practice should have been taken into account because they result in ‘better practice’ and failure to take them into account gives an unintended rigidity to the scheme.”

The applicants bring this appeal upon two grounds.  The first is that, on a proper construction of the regulation, the Commission’s powers ought to be regarded as discretionary; the regulation would thus require or authorise a flexible approach such that the Commission would be able to take into consideration the special circumstances of the medical practices represented by the applicants.  It was contended that the Commission erred, by substituting for such a flexible approach, a rigid application of a mathematical formula which excludes consideration of the merits of each particular case. 

Alternatively, it was submitted that, if there is no discretion available to the Commission under the regulation, then the formula is not authorised to be considered, as the elements therein contained were not included in the document specifically referred to in the regulation; in particular, it is irrelevant to take into account patients’ gender or age and to exclude single-visit patients.

A threshold error
It was agreed before me that the Tribunal had erred in holding that the “document” referred to in the regulation comprised the material attached to the Ministerial minute and that such document is that set out above and headed “Eligibility Criteria and Payment Arrangements for the Better Practice Program, 1994-5 and, probably also, the “Kit” document.  That was an error of law because it affected the decision as to the meaning of the regulation.  However, it was contended for the respondent that, on a true appreciation of events and circumstances and a proper understanding of the correct document(s), there was no reason the Commission might not, nevertheless, apply the formula.

Is the formula authorised by the regulation?

The regulation requires the Commission to “make ... decisions in accordance with criteria stated in the document” (emphasis added) therein referred to.  It will be convenient to call such document the “regulation document”.  However, as indicated above, applicants are asked to note that “supplementary information about these payment arrangements and criteria, the process for assessing these criteria and the operation of the Better Practice Program is also included in the Better Practice Program Information Kit published by the
Department of Human Services and Health”.  It will be recalled that the relevant “supplementary information” in the “Kit” provides:

“The amount of the payment will depend upon:

·   whether the practice is in a designated rural area;

·   practice size; and

·   the level of continuity of care provided by the practice.

....
Practice Size
Practice size is a measure of the workload of the practice - larger practices will tend to get larger payments.

A patient is counted as one patient regardless of the number of attendances.  A patient who attends several practices is apportioned to each practice according to the proportion of services they receive from each practice.  A patient thus appears as a fraction of a whole patient equivalent for each practice attended.

Whole patient equivalents are standardised to adjust for the fact that different age/sex categories on average use a different number of medical services.

Practice size is the sum for each practice of the standardised whole patient equivalents seen by that practice in one year.

Continuity Index
The continuity index calculates the extent to which patients attending a particular practice receive their general practice services from that practice versus all other practices.  Practices with high numbers of patients predominantly attending their practices will receive higher payments than practices which mainly provide only episodic care to patients attending a range of practices.

The continuity index is a measure of the practice’s market share of the patients attending it during one year.”

In the submission of counsel for the Commission, the reference to “episodic care” should be understood to have been meant to distinguish “whole patient care” from that involved in simply treating a presenting, urgent problem of a patient who arrives on some particular day.  So much may be conceded.

However, nothing in the document makes it clear that patients requiring “only episodic care” as so understood were to be regarded as including, say, regular patients fortunate enough only to require medical attention once in a given year or that a practice’s partial dependency upon such patients would be totally excluded from the calculation for payment.  Indeed, every indication in the two documents is to the contrary.  Practitioners were told that medical practices which treated patients more regularly would receive a higher payment.  The supplementary information in the Kit document is thus far from making it clear that the formula was consistent with considerations that are within the scope of the regulation.

The question then arises: is the attachment to the Ministerial minute, which sets out the formula, nevertheless consistent with or otherwise relevant to the intended operation of the regulation?

Counsel for the Commission pointed to the fact that the Program was, apparently, originally created in the exercise of the Minister’s executive power, and that pursuant to s 8J of the Act the Commission is subject to written directions of the Minister.  The Ministerial minute needed, therefore, to be taken into account by the Commission or, at least, the Commission was entitled to have regard to it for the purpose of understanding the aims and intent of the Program, there being no legislative structure to support it.  Once regard could be had to the formula, it could be applied.

There is a number of difficulties about such an approach.  In the first place, the Minister’s approval of her Department’s proposal was not, nor could it have been, a s 8J direction to the Commission.  It was not so in form and it was not laid before Parliament, nor publicised as such a direction must be.  More fundamentally, the approval occurred before the relevant function was conferred on the Commission in the manner required by the Act.

It may have been possible to establish and operate the scheme without any specific legislative warrant, depending upon whatever general discretions were available to the Minister under some other statute or statutes, or even perhaps without statutory authority, in reliance on the constitutional power to spend money “for the purposes of the Commonwealth” (Constitution ss 81 and 83) and the power of the executive (ss 61 and 57 (xxxix)) - as to which see Pharmaceutical Benefits Case (1945) 71 CLR 237 and Australian Assistance Plan Case (1975) 134 CLR 338 - and/or a “nationhood” power c.f. Davis v Commonwealth (1988) 166 CLR 79). But that was not the course followed. The view that commended itself to the Governor-General was that the administration of the scheme should be committed to the Commission by delegated legislation, and that the Commission should be required to apply certain criteria set out in a specified document. When such a legislative intent has been effectuated to delineate a scheme, there is no reason to think that an earlier outline by an officer of the executive can be preferred to the legislative expression. Even treating the Ministerial minute as a guideline of government policy, such a guideline or policy might at best be relevant to how a regulation should be applied.  It cannot authorise the doing of something different from that which the regulation authorises. 

Further, where ordinary and clear language has been used in such a document, so that the limits of the criteria contained therein are clear, absent a result which is clearly unjust or ridiculous, there is no warrant for seeking to depart from such plain language to give effect to what had been the (legally) informally stated plan of the responsible Minister. An appeal to the need for a “purposive” interpretation of the regulation (cf s 15AA of the Acts Interpretation Act 1901) is in vain:  there is no warrant to assume that the Governor-General - advised by the Executive Council (Constitution ss 62 and 63) and, no doubt, according to convention, the Cabinet - accepted every element or detail of the Minister’s plan.  It is not hard to envisage health policy, or mere “political” reasons why some departure from the Minister’s plan may have been thought prudent.  Certainly any other Minister who relied on the terms of the regulation (and the actual document incorporated thereby) which he or she was advising be adopted would have had no inkling that the Commission might act on a formula which, in one respect, is antithetical to that document.

The regulation document, it will be recalled, told doctors:

“practices ... must demonstrate that they satisfy all three of the following basic eligibility criteria:

1         ...

2The practice provides a comprehensive range of general practice services

a.The practice provides adequate after hours care.

...

3.The practice demonstrates a patient focus

...
Payment Arrangements

Available funds will be allocated to each eligible practice in proportion to the relative size of the practice, in terms of patients attending the practice, and the extent to which those patients received their general practice services from that practice in the previous twelve months.”

The regulation did not limit “criteria stated in the document” to what the document calls “eligibility criteria”. The material just quoted, under the subheading “Payment Arrangements”, amounts to criteria for making decisions under Reg 3P(1)(b)(ii). On the plain meaning of that material, there is no justification for excluding all “singles” from being accorded any weight in relation to practice size, “patients attending the practice” or “the extent to which ... patients received their ... services from [the particular] practice ...”

The position is no better if one goes to the “Kit” document.  It explained:

“... GPs who do best out of the current FFS arrangements are those who see patients more quickly and more frequently, who prescribe more and perform unpaid extras the least.  The ones likely to do worst financially are those who spend more time with their patients, prescribe less and provide more unpaid services.

It is not surprising that more and more GPs are opting for the more financially rewarding type of practice.  Unfortunately this is not the type of practice the RACGP and your patients believe delivers the highest quality of care and greatest GP satisfaction.
...
The Better Practice Program aims to put some incentives for quality care into the remuneration system.
...
The amount of the payment will depend upon:

·   ...

·   practice size; and

·   the level of continuity of care provided by the practice.

...
Practice size is a measure of the workload of the practice ...

A patient is counted as one patient regardless of the number of attendances.  A patient who attends several practices is apportioned to each practice according to the proportion of services they receive from each practice.  A patient thus appears as a fraction of a whole patient equivalent for each practice attended.
...
Practices with high numbers of patients predominantly attending their practices will receive higher payments than practices which mainly provide only episodic care to patients attending a range of practices.

The continuity index is a measure of the practice’s market share of the patients attending it during one year.”

Reading those explanations along with the criteria set out in the regulation document, what is said to be important is encouraging patients to attend one practice only, whether a patient attends the same practice once or 50 times in a year.  But the concepts incorporated into the formula negate that principle.  An important distinction can fairly be made, for the legally applicable purposes of the Program, between a patient who chooses to attend a particular practice but only once in a given year, and a patient who attends more than one practice in that year but only once at each practice.  Such distinction is however taken into account by the “standardised practice size ratio”.  If a medical practice otherwise meets the criteria set out in the regulation document, then the number of single-visit patients of itself would appear to be no, or at least no necessary, indicator that the medical practice has not achieved the high standard of quality care at which the Program is said to aim, or a high level of patient “loyalty”.  Indeed, in this case, the applicants’ medical practices appear to have offered an impressive and extensive range of medical and other services for patients’ care and convenience.

It may or may not have been the case, as the Tribunal suggested, that it was actually intended by the framers of the regulation that the formula attached to the Ministerial minute be incorporated in the regulation by reference; the wording of the regulation simply failed to give effect to any such intention.  In any event, if that formula is not specifically authorised by the regulation, it cannot be applied if so to do would conflict with the terms of the regulation itself.  If the formula is, in any respect, inconsistent with the stated objectives of the Program as described by the regulation document, then that element or elements of the formula cannot be said to have been authorised by the regulation.  As I have indicated, there is such an inconsistency in relation to the question of “single-visit” patients. 

It was argued also that, as in the case of single-visit patients, nothing in the legal criteria authorised an approach, evident from the weighted factors incorporated into the formula, which would cause large payments to practices with older and/or female patients.  That is not, it seems to me, correct.  In the regulation document, under the heading “Payment Arrangements”, there is a reference to the allocation of funds proportionately, among other things, to “the relative size of the practice”.  Later, that is explained, under the heading “Practice Size”.  The explanation includes this: 

“Whole patient equivalents are standardised to adjust for the fact that different age/sex categories on average use a different number of medical services.”

Whether it be the true position that such categories do differ in their frequency of use of medical services is likely to be a matter of experience, judgment and definition.  Such matters often involve, with or without any necessity for express acknowledgment of it, questions of opinion.  It would require an overwhelming case to suggest that it was Wednesbury unreasonable of the Governor-General, as delegated legislator, to have taken the view of the facts evident in the quoted statement.  No such case was made out.  If other than a pernickety view of matters is taken, the formula, insofar as it adverts to such matters, does not go outside the criteria to be gleaned from the regulation document.  I see no error of law in a formula (or other fixed kind of approach) having regard to such factors as those taken into account in the formula in question.

The applicants’ other argument, in effect, was that it would be so unreasonable that the Commission should have no discretion as to how the scheme is to be administered that the regulation should be construed so as to give the Commission a broad overriding discretion for hard cases.  I disagree.  A scheme such as that propounded need not, in principle, have an overriding discretionary element.  Tens of millions of dollars were to be disbursed annually to tens of thousands of doctors, via their practices.  To decide upon some formula, or other fixed method of approach, would, in my view, be quite permissible so long as one could see that (a) such approach was not in conflict with the legislative source of the Commission’s powers and (b) such approach dealt reasonably (in the Wednesbury sense) with the question of each applicant’s claim to fall within the legislatively sanctioned criteria.  Within the limits of constitutional power, the legislature (or delegate) can of course choose such criterion it wishes, and make them mandatory.

In my opinion, the Tribunal erred in finding that the formula had the force of law and that the scheme was to be administered by the Commission in the manner prescribed by the formula.  The Tribunal also erred in holding that, if the formula was no more than a Ministerial guideline, the same result would or could follow.  Accordingly, I remit the matter to the Tribunal to be decided according to law, and having regard to the reasons given herein.

I will order that the respondent pay the applicant’s costs but give liberty to apply within 7 days if there is said to be some relevant and unusual matter of which I am unaware.

I certify that this and the preceding nineteen (19) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Madgwick

Associate:

Dated:             3 July 1998

Counsel for the Applicant:	G Flick & N Abadee
Solicitor for the Applicant:	Jim Main & Associates
Counsel for the Respondent:	R Henderson
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	20 March 1998
Date of Judgment:	3 July 1998