Referral of inquiry
On 6 July 2011, the Senate referred the following matter to the
Community Affairs References Committee for inquiry and report:
A review of the
Professional Services Review (PSR) Scheme provided for under the Health
Insurance Act 1973 (the Act) which is responsible for reviewing and
investigating the provision of Medicare or Pharmaceutical Benefits Scheme
services by health professionals, with particular reference to:
(a) the structure and composition of the PSR, including:
(i) criteria for selection of the executive and constituent members
encompassing their experience in administrative review proceedings,
(ii) the role of specialist health professionals in assisting in cases
where members lack relevant specialist expertise, and
(iii) accountability of all parties under the Act;
(b) current operating procedures and processes used to guide
committees in reviewing cases;
(c) procedures for investigating alleged breaches under the Act;
(d) pathways available to practitioners or health professionals under
review to respond to any alleged breach;
(e) the appropriateness of the appeals process; and
(f) any other related matter.
The reporting date for the inquiry was originally set as 22 September
2011; this date was subsequently extended to 12 October 2011.
Conduct of inquiry
The inquiry was advertised in The Australian and on the internet.
The committee also wrote directly to a number of organisations and individuals
inviting submissions to the inquiry. The committee received submissions from 52
individuals and organisations. The committee held two public hearings, the
first in Canberra on 22 September 2011 and the second in Canberra on 23
The committee thanks all those who contributed to the inquiry by making
submissions, providing additional information or appearing before it to give
The committee also wishes to mention the contribution of those health
and medical practitioners who, through sharing their experiences with the PSR
Scheme, brought many of the issues discussed in this report to the fore.
Context for the PSR Scheme
The PSR Scheme:
...was introduced in 1994 to replace the previous Medical
Services Committees of Inquiry (MSCI) scheme. A report by the Australian
National Audit Office (ANAO) in 1992-93, entitled Medifraud and excessive
servicing: Health Insurance Commission found that MSCIs were not operating
satisfactorily and needed to be strengthened.
The primary purpose of the PSR scheme is to:
...protect the integrity
of the Commonwealth Medicare benefits and pharmaceutical benefits programs and,
in doing so:
(a) protect patients and the community in general from the risks associated
with inappropriate practice; and
(b) protect the Commonwealth from having to meet the cost of services provided
as a result of inappropriate practice.
...provides for the examination of an individual health
practitioner’s conduct by a committee of peers to ascertain whether
inappropriate practice under Medicare is involved and, if so, to provide for
action to be taken.
The current PSR Scheme
The PSR is made up of 3 separate elements: the Director, the committee
of peers, and the Determining Authority. The Director's main role is to decide
whether or not the case should proceed, and if so whether it is appropriate to
enter into an agreement with the practitioner which may include repaying some
or all of the Medicare benefits received. This agreement has to be ratified, or
rejected by the Determining Authority. If the Director does not consider an
agreement to be appropriate, or one cannot be reached, the Director will then
refer the case to the committee of peers. This panel will then examine the case
in detail with the practitioner and report to the Determining Authority. If
inappropriate practice has been found the Determining Authority will decide on
The three stages in detail are as follows:
Review by the Director
Medicare Australia requests the Director of the PSR to undertake
a review of the provision of services by a practitioner over a specified
The Director considers the Medicare Australia request and, if
the Director forms the opinion that the person may have engaged in
inappropriate practice, they undertake a review.
The Director examines the data received from Medicare
Australia and may also direct the practitioner to produce complete and original
patient records. The records are examined, the Director may meet with the
practitioner, a report on the findings is made and any submission received from
the practitioner is considered. After this, the Director must decide to:
- take no further action;
- offer the practitioner the opportunity to negotiate an Agreement
under section 92 of the Act where the practitioner acknowledges inappropriate
practice and agrees specific actions which may include repaying a part or all
of the Medicare benefit that has been received; or
- refer the practitioner to a peer review Committee.
If the Director considers that the conduct of the
practitioner needs further investigation, or the practitioner chooses not to
enter a section 92 Agreement, a Committee of the practitioner’s peers is
Review by a Committee
Members are drawn from the Panel appointed by the Minister.
The Committee will consider whether the practitioner's clinical
decisions were inappropriate for the patient, whether the services provided did
not meet the requirements of the Medicare item descriptor and / or any PBS
restrictions as well as assessing the adequacy of clinical records. The
Committee will use clinical records and any other material provided by the
practitioner. The Committee determines whether the practitioner’s conduct in
connection with the rendering or initiation of services would be acceptable to
the general body of their peers.
If, after considering the information provided, the Committee
forms a preliminary view that the practitioner may have engaged in
inappropriate practice, a hearing will be held.
The hearing will provide the practitioner with the
opportunity to present both oral and written evidence to support their case.
After considering all the evidence, the Committee produces a Draft Report
containing its findings. The practitioner is given a copy of this Report.
If the Committee finds that no inappropriate practice has
occurred, the matter is closed.
If the Committee finds that inappropriate practice has
occurred, the practitioner will be given time to make submissions on the Draft
Report. The Committee will then consider the Practitioner’s submissions and may
or may not change their findings. The Committee will then issue a Final Report
to the practitioner, and the Determining Authority.
The Determining Authority
The Determining Authority is an independent body within the
Professional Services Review which has two main functions:
decide whether to ratify section 92 Negotiated Agreements
reached between the Director of PSR and a practitioner; and
determine what sanctions to apply whenever practitioners have
been found to have engaged in inappropriate practice by a Committee.
When a Committee makes a finding of inappropriate practice
against a practitioner, the Determining Authority will invite submissions from
the practitioner on the sanctions it should impose. The Determining Authority will
then draft a determination, including the sanctions it intends to impose.
The Determining Authority must impose one or more of the
- a reprimand;
- partial disqualification from claiming a Medicare benefit for no
more than 3 years;
- full disqualification from claiming a Medicare benefit for no
more than 3 years;
- an order for repayment of any Medicare benefits for services
provided in the review period which have been found as being provided
- a full disqualification from the PBS for no more than 3 years.
Practitioners are given an opportunity to make written
submissions on the Draft Determination. The Determining Authority will consider
this submission and then make a Final Determination. This Final Determination
contains the final decision of PSR and is the end of the PSR process unless the
practitioner appeals to the Federal Court or Federal Magistrates Court.
Major changes to the PSR Scheme
1999 Review of the PSR Scheme
The PSR Scheme was reviewed in 1999 following the 1998 Federal Court
decision in the case of Anthony Adams v Steven Yung & Anor  FCA
506 (15 May 1998). According to the review report the case:
...highlighted deficiencies in the legislation and in the
operation of the Professional Services Review Scheme, and necessitated a
comprehensive review of the Scheme. In the Yung case, the PSRC relied
on the legislative definition of inappropriate practice being conduct
unacceptable to the general body of the profession. Consequently, the PSRC
inquiry focussed on the general pattern of conduct, not on the provision of
excessive services to individual patients as required by the previous Medical
Services Committees of Inquiry (MSCI) process. 
A review committee was consequently established which comprised the AMA,
the Health Insurance Commission, DoHA and the Director of the PSR. The remit
of the review was to:
...address the deficiencies identified by the Court and to
clarify the legislative intention of the Scheme to focus on professional conduct.
The Review Committee concluded that the PSR Scheme ethos of peer review
be maintained and made 45 recommendations in its report that were:
...necessary to improve the administration of the PSR process
to meet the needs for legal effectiveness, transparency and natural justice,
and to ensure the peer review process is maintained.
The recommendations covered the following areas:
- the definition of inappropriate practice;
- processes to arrive at findings;
- expanding the agency;
- the Health Insurance Commission (HIC) and referral processes;
- the role and responsibilities of the Director of PSR;
- enhanced legal assistance and processes;
- referral of professional issues;
- the determining panel;
- revised time periods; and
- review rights.
Recommendations of note included the publication of the names of practitioners who had
been found to have practiced inappropriately, and the introduction of the 'deeming
provision' that applies where a general practitioner provided 80 or more
consultation services on 20 or more days in a 12 month period.
In ensuring these recommendations were considered and actioned, the
Review Committee recommended that the government review the new PSR
arrangements within three years after coming into effect.
2006 Review of the PSR Scheme
The 1999 review had prompted a number of legislative changes to the PSR
enabling legislation. The recommendation to review these changes within 3
years was not implemented because the government felt that not enough case law
had developed to properly assess whether the changes had had the desired
effect. The 2006 report explains the government's decision:
...the proposed review was delayed because there was
insufficient case law to
effectively evaluate the 1999 legislative amendments. When further refinements
to the PSR Scheme were made in 2002 in response to the decision in the Pradhan case, the decision was made to
postpone the review until such time as an adequate case law history could be
developed to inform the process.
The 2002 amendments were intended to clarify the object and operation of
the Scheme and the amendments included:
- the inclusion of a new objects
clause (s.79A of the HIA), emphasising the public protective aim of the Scheme;
- the replacement of the
investigative referral process with a request from Medicare Australia that the
DPSR examine Medicare services rendered or initiated by a practitioner for whom
a Medicare benefit had been claimed during a period (s.86). This amendment
meant that the DPSR or a PSR committee was able to examine patient records
relating to any or all specified services rendered or initiated by the
practitioner during a specified period, and was not restricted by Medicare
Australia’s reasons for the request; and
- enhanced procedural fairness
opportunities at various stages of the Scheme’s review process.
When established the 2006 review committee comprised the AMA, Medicare
Australia, DoHA and a representative from the PSR. The committee's remit was
...the impact of the recommendations of the 1999 Review and
the impact of the 1999 and 2002 legislative changes on the operation of the PSR
The report on the review broadly confirmed the continued support for the PSR Scheme and the concept
of peer review and found that:
All of the 1999 Review recommendations have been implemented,
except for recommendations 6, 10, 16, 40 and 44...(of which) recommendation 6
has been partially implemented...recommendation 44 ... has been implemented (through
the 2006) Review.
The report described the 1999 and 2002 amendments to the scheme had
...the protective nature of the scheme in protecting both
Commonwealth revenue and patients from inappropriate practice. The amendments
also reinforced the ‘procedural fairness’ requirements necessary in the
process, based on a strong system of peer review. The Steering Committee
considers that these were important changes to ensure procedural fairness and
protect the rights of the person under review (PUR).
The PSR recently lost two cases in the Federal Courts. The first
was the decision on 7 June 2011 to quash the decision of the PSR against Dr
Peter Tisdall in 2009
with costs being awarded to Dr Tisdall. The court cited a lack of
evidentiary support for the PSR Committee's conclusion in that case, though the
PSR Director at the time, Dr Webber, noted that the finding ' does not go to
the clinical behaviour' of the doctor in question.
The second case, Kutlu v the Director of PSR,  concerned the appointment
of a number of PSR Deputy Director and Panel members going back to 2005.
The Court decided on 28 July 2011 that the appointments were made in
contravention of the Minister’s obligation under sections 84(3), and 85(3) to
consult with the Australian Medical Association (AMA) prior to the
appointments. The court deemed invalid the committees to which one or
more of those named were members, as well as the reports of those committees.
The committee understands that this has led to the dropping of a large number
of reviews of medical professionals that were on foot at the time of the
The committee wrote to the minister on 30 August 2011 asking how the government
intended to respond to both cases. A reply was received on 12 September 2011 saying
that the Commonwealth had applied for special leave to appeal the decision of Kutlu
v Director of PSR but did not outline the grounds on which it will do so. The
Commonwealth has advised that it will not be appealing the decision of Tisdall
The PSR submission states that on 27 October 2010 it requested that all
current Panel Members and Deputy Directors of the PSR resign in response to 'potential
issues with the 2009 appointment of Panel members and Deputy Directors'.
In March 2011 new guidelines were agreed by the PSR and AMA for the
appointment of Panel Members and Deputy Directors, however the recruitment
process has not yet commenced. This means that currently the PSR does not have
any Panel Members and Deputy Directors.
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