Australia: Prohibited Pathology & Diagnostic Imaging Arrangements

Last Updated: 4 September 2008
Article by Alison Choy Flannigan and Tim Smyth

Have you reviewed your practice and agreements with pathology and radiology services? This article provides an update on prohibited pathology and diagnostic imaging arrangements under the Health Insurance Act.

Major amendments to clarify, streamline and strengthen provisions prohibiting inducements to request pathology and diagnostic imaging services have now been in force for just over four months.

Due to the breadth of the amending legislation, all doctors and health services (both private and public) need to review their current arrangements to ensure that their practices and contractual arrangements comply with the new law.

As liability for an offence extends beyond requestors and providers of pathology and diagnostic imaging services to not only persons 'connected' to them, but also to directors and officers of corporations and persons who 'aid, abet, counsel or procure' a contravention, all health services should ensure that as part of their corporate governance they have:

  • Reviewed their current arrangements.
  • Ensured that key managers are aware of the new framework and penalties.
  • Revised any arrangements or practices that do not comply.
  • Implemented an ongoing monitoring system to prevent breaches.

It is likely that many service contracts, leases and other agreements or 'understandings' will need review and legal advice on compliance with the new regulatory framework.

The New Legislation And Regulator Frame Work

The Health Insurance Act 1973 (Act) was amended in June 2007 by the Health Insurance Amendment (Inappropriate and Prohibited Practices and Other Measures) Act 2007 (Commonwealth). The main amendments of the amending Act commenced on 1 March 2008.

Accompanying the commencement of the amendments, the Minister for Health and Ageing, the Hon Nicola Roxon MP, made two Determinations in February 2008 (Permitted Benefits Determinations) - one for pathology and one for diagnostic imaging. The Department of Health and Ageing also published a useful Explanatory Guide to the Health Insurance Amendment (Inappropriate and Prohibited Practices and Other Measures) Act 2007 in August 2007 and Medicare Australia has distributed information sheets to practitioners.

A regulation is yet to be made setting out methods for determining market value for rent and other payments made under agreements with pathology and diagnostic service providers.

As the legislation applies to arrangements for requesting or providing pathology and diagnostic radiology services eligible for a Medicare benefit under the Health Insurance Act, the new framework is applicable to both the private and public sectors.

What Is Prohibited?

In a nutshell, any benefit other than a permitted benefit as set out in the Act or a Permitted Benefits Determination is now prohibited. A prohibited benefit can take any form, including money, property, goods or services. In addition, even if a benefit would otherwise fall within the definition of permitted benefit, it will not be permitted if the benefit is related to the number, kind or value of requests for pathology or diagnostic imaging services made by the requester.

The Act also contains a general prohibition on the stationing of staff and equipment at a requester's premises for the purpose of providing pathology or diagnostic imaging services, except under a commercial lease of separate space.

Key Concepts - 'Requestor ', 'Provider ' And 'Persons Conected '

A key concept to understand is the very broad defining of 'requester' and 'provider'. A requester must not ask for or accept a benefit (other than a permitted benefit) and a provider must not offer or provide such a benefit.

It will be a criminal offence to ask for, accept, offer, or provide a benefit, or make a threat that is intended to induce requests to a particular provider.


A 'requester' of a pathology service means:

  • A practitioner.
  • A person who employs or engages under a contract for services, a practitioner.
  • A person who exercises control or direction over a practitioner (in his or her capacity as a practitioner).

A 'requester', in relation to diagnostic imaging services means:

  • A medical practitioner.
  • A dental practitioner, chiropractor, physiotherapist, podiatrist or osteopath - where that person referred patients to diagnostic imaging services for which Medicare benefits are payable.
  • A person who employs or engages under a contract for services a person specified above.
  • A person who exercises control or direction over a person specified above in his/her professional capacity.

Therefore, if you employ or engage under a contract for services or exercise control or direction over a medical practitioner, you will be a requester under the Act.

Whether or not you exercise control or direction over a person will be a question of fact. Providers

A 'provider' of a pathology or diagnostic imaging services means:

  • A person who renders that kind of service.
  • A person who carries on a business of rendering that kind of service.
  • A person who employs or engages under a contract for services, a person specified above.
  • A person who exercises control or direction over a person specified above in the second person's capacity as specified.
  • A person who is a provider of any kind of pathology service or diagnostic imaging service.
  • An approved pathology practitioner (APP).
  • An approved pathology authority (APA).

Persons Conected

The obligations extend not only to the provider and requester but also to persons who are 'connected' to a provider or requester.

Section 23DZZIJ states that a person is connected to another person if (amongst other matters):

  • The first person is a relative of the other person.
  • Both of the following apply:
  • The first person is a body corporate.
  • The other person is a director, secretary, chief executive officer or any other executive officer of that body corporate.
  • Both of the following apply:
  • The other person is a body corporate.
  • The first person is a director, secretary, chief executive office or any other executive officer of that body corporate.
  • Both of the following apply:
  • The first person is a body corporate.
  • The other person is a body corporate that is related to that body corporate.

There are similar arrangements in relation to trusts/ beneficiaries and partnerships or employment/ engagement.

Whether or not a body corporate is related to another body corporate is to be determined in the same manner as under the Corporations Act 2001.

Permitted Benefits

Section 23DZZIF defines 'permitted benefits'. These include:

  • Sharing profits of a pathology or diagnostic imaging business if the dividend is proportionate to the beneficiary's interest in the business.
  • Remuneration (whether salary, wages, commission, allowance or bonuses) provided that the amount of remuneration is not substantially different from the usual remuneration paid to persons engaged in similar employment or under similar contract.
  • A payment for property, goods or services that are shared, where the amount of the benefit is proportionate to the person's share of the cost of the property, goods or services.
  • Making or accepting payment for property, goods or services that are not shared between the requester and the provider at market value.
  • The provision of pathology or diagnostic imaging consumables approved by Ministerial Determination.

Even if a benefit is included in the list of permitted benefits, it will not be permitted if the benefit is related to the number, kind or value of the requests for pathology services or diagnostic imaging services made by the requester.

The Amendment Act also prohibits the provision of staff and equipment at the requester's premises for the purposes of providing pathology or diagnostic imaging services, except under a commercial lease of separate space.

The Pathology Determination includes the following permitted benefits:

  • For premises that are a hospital - the provision of equipment stationed at the hospital for use in relation to the rendering of services relating to pathology to a person who is in attendance at the hospital for the purpose of receiving hospital treatment.
  • Educational material about pathology, including material that may be given to patients. The Diagnostic Imaging Determination includes the following permitted benefits:
  • The provision of staff or diagnostic imaging equipment at premises of the beneficiary if the premises are a hospital or the staff or equipment are stationed at premises for the sole purpose of enabling services relating to diagnostic imaging to be rendered during a surgical procedure performed at the premises (including a procedure performed by fine needle aspiration).
  • Educational material about diagnostic imaging, including material that may be given to patients.
  • Education sessions on diagnostic imaging that meets specified requirements.

Lease Arrangements

Health care practices, hospitals and other facilities who have leases with pathology or diagnostic imaging providers will need to review the terms of the leases to ensure that the rental is market rental.

It is anticipated that a further Ministerial Determination will be made on circumstances in which lease payments would be permitted benefits. The Act provides for regulations to be made prescribing a method of working out what the market value is, and whether the amount of a payment is substantially different from the market value. No regulation has yet been made.

It has been suggested that there will be a requirement that the parties obtain at least two sworn valuations of the market value of lease arrangements and that payments under the lease must not be substantially different from the market value (that is, are within 10% above or below the average of all valuations which are obtained).

Commercial arrangements such as a lease or contract entered into before 1 March 2008 may still be in breach of the legislation if they do not meet the new requirements. For leases entered into before 1 March 2008, the Department of Health and Ageing has indicated that there will be a period for the parties to obtain valuations as to market value.

Civil Penalties

The civil penalties are 600 penalty units (currently $66,000) for an individual and 6,000 penalty units (currently $660,000) for a corporation.

Further, a breach of this legislation can result in referral of the provider to a Medicare Participation Review Committee and possible loss of access to Medicare.

Criminal Prosecution

It will be a criminal offence to ask for, accept, offer, or to provide a benefit, or make a threat that is intended to induce requests to a particular provider.

The penalty for a criminal offence can be imprisonment of up to five years.

Personal Liability And Responsibilities Of Executive Officers

An executive officer of a body corporate might contravene a civil penalty provision under the legislation if the body corporate contravenes a civil penalty provision.

An executive officer of a corporation contravenes the legislation if:

  • The body corporate contravenes the legislation.
  • The executive officer knew that the contravention would occur.
  • The executive officer was in a position to influence the conduct of the body in relation to the contravention.
  • The executive officer failed to take all reasonable steps to prevent the contravention.

Executive officers of a body corporate should take reasonable steps to prevent the commission of an offence under the Act (this will be taken into consideration in connection with any prosecution of an offence).
Aiding And Abetting

The Amending Act also prohibits persons from aiding, abetting, counselling or procuring the contravention of the Amending Act.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.