An independent report shows there is healthy competition in the optometric market, which may help quell concerns about the risk of monopoly-like behaviour following the removal of the Medicare fee cap.
The findings are presented in Optometry Market Analysis: Final Services Report. The Australian Government Department of Health had commissioned ACIL Allen Consulting to undertake an analysis of optometry practices in Australia.
ACIL Allen handed its report to the department on 22 April. The department shared the report with Optometry Australia (formerly OAA) at a meeting on 30 April.
Optometry Australia CEO Genevieve Quilty said the fact that the report was commissioned showed the government had been seriously considering Optometry Australia’s request to remove the fee cap.
‘This report shows what members have long been telling us, that there is strong competition in the optometry market across the country. While this isn’t news to many in the sector, this report’s particular model of analysis provided the government with a solid foundation for considering the impact on patients of removing the fee cap,’ she said.
Ms Quilty said the report clearly showed that speculation that an increased level of competition across the sector would result in dramatic increases in fees if the cap were removed, would not eventuate. ‘However, optometrists will be able to charge a rate that is fair for the services they provide,’ she said.
The findings give the department an understanding of the number and location of optometry practices, highlighting whether they are stand-alone independent practices or part of a corporation, franchise or buying group, and the regional distribution of optometry practices.
ACIL Allen concluded that there are 2,978 optometry practices. These include all practice locations and visiting sites in Australia, of which:
- 1,044 are stand-alone (independent) (35%)
- 870 are in buying groups (29%)
- 588 are franchises (20%)
- 476 are corporates (16%).
The report also identified that 2,048 of the practices are located in capital cities.
ACIL Allen said this data was a ‘powerful resource’ for the department.
The report acknowledged that rising input costs, deflating product prices and overseas competition had forced many independents either to join a buying group or to enter into a franchise agreement to remain competitive.
Market analysis helps determine the likely implications that a policy change, such as removing the fee cap, can have for competition within the market.
The independent consultants had pointed out that in rural areas where there were ‘thin markets’, there was potential for monopolistic behaviour if the fee cap were to be removed. The report stated that it was therefore essential to understand the rural and regional optometry market, in particular the number of optometry practices and their services.
For this purpose, ACIL Allen developed supply density benchmarks and applied them to maps showing the physical location of optometry practices in each state to provide a spatial market analysis.
The resulting analysis shows that concerns that removing the fee cap could lead to monopolistic behaviour and pricing in parts of the country where there are relatively few practices were unfounded.