How the Clinical Workforce Affects Healthcare Business Value

Why the workforce sits on both sides of a valuation

A healthcare business is usually valued on its future maintainable earnings: the profit a purchaser could reasonably expect it to sustain, drawn from normalised results. Normalisation removes owner-specific, one-off and non-commercial items so the result reflects ordinary trading. Those earnings are commonly expressed as EBITDA (earnings before interest, tax, depreciation and amortisation) and capitalised by applying a multiple, a factor reflecting the risk attached to them. That is the capitalisation of future maintainable earnings method, applied as at a valuation date, the day the conclusion speaks to.

The clinical workforce acts on both halves of that calculation. On the earnings side, clinical labour is usually the largest cost, so paying below the local market rate, trading with vacancies unfilled, or having the owner absorb clinical, supervisory or management hours without charge all overstate what a purchaser could sustain. See what is maintainable earnings.

On the risk side, the question is whether each role the earnings depend on can be replaced, in that location, at the cost assumed in the accounts. That is not key-person risk, the exposure created when the result rests on one individual, usually the owner: a practice can have little owner dependence and still carry serious workforce risk. See practitioner dependence.

Scarcity runs the other way too. Where the constraint on building a competing practice is a practitioner who cannot be recruited, an assembled and contracted team is part of what makes goodwill saleable. That is a price effect rather than a value effect: a purchaser with no recruitment alternative may pay more than the value concluded on a general basis.

Which clinical roles are actually hard to fill in Australia?

Jobs and Skills Australia publishes an annual Occupation Shortage List and treats a shortage as arising where employers are unable to fill, or have considerable difficulty filling, vacancies for an occupation at current levels of remuneration and conditions of employment and in reasonably accessible locations. A shortage is therefore partly a statement about price, not only supply. Selected national ratings from the 2025 list, the most recent at the time of writing, follow.

Scarcity sits with the registered practitioner rather than the front desk: dentists are in shortage while dental assistants and medical receptionists are not, and community aged care support workers are in shortage while residential aged care workers are not. Replacement cost and recruitment lead time concentrate in the roles that generate billings.

The rating is a national average at a point in time. State and territory ratings are published as well, and an occupation can be a regional shortage nationally and a full shortage in one jurisdiction, as enrolled nurses and hospital pharmacists are in the Australian Capital Territory. Ratings move between annual lists: chiropractors and osteopaths were newly in shortage in 2025, while the nursing support and personal care workers, and optometrists and orthoptists, unit groups dropped out. A valuation concerns the labour market the business actually recruits from at the valuation date, so a national rating is a starting point, not an answer.

Why the cause of a shortage matters more than the label

Jobs and Skills Australia also classifies the unit groups in shortage by the likeliest driver: a long training gap, a short training gap, a suitability gap or a retention gap, with some uncertain. The analysis sits at unit group level, but it does real work in a valuation.

Pharmacists, psychologists, physiotherapists, occupational therapists, dental practitioners, dental hygienists and therapists, audiologists and speech pathologists, medical imaging professionals, specialist physicians, midwives, veterinarians and veterinary nurses are long training gap groups: few qualified applicants per vacancy behind a long qualification pathway. No employer closes that gap quickly, so for a practice that needs one of them it is a structural limit on growth, not a hiring problem.

Aged and disabled carers are a retention gap group, and the largest employing group in that category. Jobs and Skills Australia describes a retention gap as below average retention, driven by pay and working conditions, workplace culture and access to services such as childcare, health care and transport. The fix costs money, and that money lands in maintainable earnings. Chiropractors and osteopaths, and surgeons, are suitability gap groups: enough qualified applicants, but employers do not regard them as suitable, which shows up as long recruitment cycles rather than an empty market.

For an NDIS provider or an aged care and community care business, a retention-driven shortage means wage pressure, agency use and turnover cost. For an allied health practice, a dental practice or a veterinary practice, a training-driven shortage caps billable capacity in a way money will not lift.

Employee or contractor: how the engagement model affects value

General practices, dental practices and many allied health practices engage principal practitioners under service or facility arrangements while employing nurses, hygienists and administrative staff. Aged care, community care and disability providers are far more heavily employment based, so their exposure is to award cost and retention rather than service-agreement terms.

Neither model is inherently preferable. What matters is whether the arrangement is documented, whether it matches how the business operates, and whether the earnings have been struck on the right cost base. Service arrangements shift some clinical risk and cost to the practitioner but weaken control over hours, patient handover and restraint on departure, while employment carries leave, superannuation, workers compensation and award obligations as a comparatively fixed cost.

The model also bears on goodwill, the value of a business above its identifiable net assets. Personal goodwill attaches to an individual practitioner and their own patient following, and generally leaves with them; transferable, or commercial, goodwill attaches to the business itself, to its location, systems, brand, referral relationships and assembled workforce. Current written agreements with practitioners, including notice, handover and restraint terms, are one of the mechanisms that moves value from the first category into the second. See what drives the value of a healthcare business.

Which award applies, and what it sets

Award coverage sets the floor on labour cost, and a multidisciplinary healthcare business commonly operates under several awards at once. The Fair Work Ombudsman summary of the Health Services Award, formally the Health Professionals and Support Services Award (MA000027), records that it covers employers in the health industry and their employees in a classification in the award. The health professionals named include chiropractors and physiotherapists, occupational therapists, counsellors and psychologists, dental hygienists and therapists, radiographers and sonographers, pharmacists and podiatrists, alongside support employees such as medical receptionists, dental assistants and pathology collectors. It does not cover nurses, paramedics, or doctors, general practitioners and surgeons.

The Nurses Award (MA000034) covers nursing assistants, enrolled nurses, registered nurses and nurse practitioners in the health industry, but not medical practitioners, registrars, clerical and administrative employees, health professionals such as physiotherapists, or nursing assistants working in aged care.

Community pharmacy sits outside both. The Pharmacy Award (MA000012) covers employers in the community pharmacy industry, a business registered as a pharmacy under state or territory legislation that dispenses prescriptions or sells medicines to the public, together with its pharmacists, students and interns, dispensary assistants and shop assistants. See pharmacy valuations.

The Social, Community, Home Care and Disability Services Award (MA000100), often called SCHADS, covers the crisis assistance and supported housing, social and community services, home care and family day care sectors. Home care coverage reaches personal care, domestic assistance or home maintenance for an older person or a person with a disability in a private residence; social and community services coverage reaches personal care, including therapeutic care, and lifestyle support for a person with a disability in community residential settings, respite centres and day services. It does not apply where the Aged Care Award, Health Services Award or Nurses Award applies instead.

That boundary is live in home and residential care valuations: the same worker doing similar duties can fall under a different award depending on where the care is delivered, which changes the rates, penalties and allowances behind the roster. Coverage sets minimum rates rather than market rates, so it shows whether a historical wage cost reflects an understated classification, and misclassification is an inherited liability. Coverage should be confirmed with your workplace relations adviser.

Payroll tax: the workforce cost that may not appear in the accounts

Payroll tax is a state and territory tax on wages, and in healthcare it reaches beyond the payroll ledger. Revenue NSW states that where practitioners are engaged as common law employees their wages are liable, and that where they are not, payments to them may still be liable under the relevant contract provisions in Division 7 of Part 3 of the Payroll Tax Act 2007 (NSW). It records that audits in this industry find employers failing to declare contractor payments and failing to identify that they are grouped, through common control or common employees.

Revenue NSW also notes that the twelve month pause on audits of medical practices engaging general practitioners, begun on 4 September 2023, was lifted with the introduction of the Bulk Billing Support Initiative and that audits recommenced on 4 September 2024, with a rebate available to medical centres paying contractor general practitioners that meet certain bulk billing thresholds. Exemptions may apply to particular contracts, including where a general practitioner provides the same or similar services for 90 days or less in a financial year.

Where an arrangement carries an unquantified exposure, a purchaser prices it, and that affects both the earnings figure and the risk assessment. Positions differ between states and change over time, so the treatment of your own arrangements should be confirmed with your accountant. See payroll tax, contractor arrangements and medical practice value and medical practice valuations.

Accrued entitlements, enterprise value and equity value

Accrued annual leave and long service leave sit as provisions, and they are usually largest in exactly the businesses whose workforce is most attractive. Enterprise value is the value of the business operations, before borrowings and surplus assets. Equity value is what remains for shareholders once net debt and similar items are taken into account. Employee provisions, long service leave in particular, are often treated as a debt-like item deducted from enterprise value rather than as part of working capital, the operating assets and liabilities the business needs to trade. Practice varies, and what matters is that the treatment is consistent with the earnings measure, so the same cost is neither counted twice nor missed.

Structure matters too. Where shares in the practice entity are sold, the purchaser inherits the entitlements with the employment history; where the business and assets are sold, the parties typically negotiate whether the vendor pays them out or the purchaser assumes them with a corresponding adjustment. See valuing a healthcare business for a shareholder exit.

Supervision pipelines and the practitioners you cannot simply hire

Some professions cannot be staffed by recruiting people who already hold general registration, because entry to it runs through supervised practice the employing business hosts.

The Psychology Board of Australia's 5+1 pathway involves a five-year sequence of accredited study followed by a one-year internship, carried out in an approved work role under a Board-approved principal supervisor and one or more secondary supervisors, and concluding with the National Psychology Exam. Provisional registration must be held and renewed for the whole period. A psychology practice that grows by developing provisional psychologists commits senior clinician time to supervision, which reduces the supervisor's own billable hours.

That trade is a real earnings item and frequently invisible in the accounts, because the supervising practitioner is often the owner: a valuation that normalises the owner's remuneration to a market rate has to price supervision hours as well as clinical ones. It cuts the other way too, because an established pipeline is one of the few workforce assets that genuinely transfers with the business.

Overseas recruitment: the levers a practice does not control

Where the domestic pipeline is constrained, healthcare businesses look overseas, and the constraints sit outside the business entirely. For medical practices, the Department of Health, Disability and Ageing applies the Distribution Priority Area classification to general practice catchments, using 824 non-overlapping GP catchment areas built from Medicare patient and provider data, population demographics, workforce and infrastructure location, accessibility and topography, and classifying a catchment where its actual billing level falls below the relevant benchmark. Under section 19AB of the Health Insurance Act 1973, international medical graduates and foreign graduates of accredited medical schools can only access Medicare in areas with general practitioner shortages.

Some rules apply automatically. Areas classified MM 2 to MM 7 under the Modified Monash Model, which measures remoteness and population size, are classified as a Distribution Priority Area; MM 1 inner metropolitan areas are not; the Northern Territory and Tasmania are. Classifications are assessed each year, removal indicates that access has improved, and a practice may request an exceptional circumstances review.

For an inner metropolitan practice that recruitment channel is generally closed rather than merely narrow. None of this is a reason to discount a practice; it is a reason to test recruitment assumptions. A forecast that a vacant clinical room will be filled next quarter depends on classifications, registration pathways and supervision capacity the owner does not control, and a valuation says so rather than absorbing the assumption into the earnings.

How a valuer prices workforce risk

The analysis usually runs in four steps.

First, rebuild the cost base. Every clinical, supervisory and management hour the business actually needs is costed at a market rate for that location, including hours the owner performs without charge and hours currently unfilled.

Second, test replaceability. For each role the earnings depend on, the question is whether a replacement exists in that labour market, how long recruitment has taken, and what the business had to offer to fill its last vacancy. Shortage ratings inform this; the practice's own recruitment history settles it.

Third, test durability. Long average tenure with low unplanned turnover suggests the business holds people in its own labour market, and turnover concentrated in one discipline or site tells a different story from turnover spread across a large support workforce. Turnover carries costs the accounts rarely isolate: recruitment, onboarding, agency or locum cover, and lost billings while a caseload is rebuilt. Current agreements, notice and restraint terms and award coverage bear on whether the team survives a change of owner.

Fourth, reflect the result. Where the workforce is thin, undocumented or unreplaceable, it appears in the risk assessment behind the multiple and, where relevant, as a stated sensitivity. Where it is deep, documented and stable, it supports the conclusion rather than adding a separate amount.

Where earnings are expected to change materially while a workforce is rebuilt, capitalising a single maintainable figure can misstate the position. A discounted cash flow, which projects cash flows and discounts them to a present value at a rate reflecting their risk, may then serve as a cross-check or the primary method, though it is only as good as the recruitment assumptions behind the forecast. A net assets approach and genuinely comparable market transactions can provide further reference points. See healthcare business valuation methods.

What a valuer will ask you for

Expect a focused request covering the workforce: a staff list by role, discipline, engagement type, full-time equivalent, start date and remuneration; employment and service agreements, including notice, restraint and handover terms; the awards and classifications applied; the roster and any agency or locum use; billings by practitioner; vacancy and turnover history; leave and long service leave provisions; supervision arrangements and practitioners in training; and payroll tax registrations, returns and any assessments.

See preparing a healthcare business for sale, sale and exit valuations, or request a valuation to discuss scope.