Independent valuations of Australian medical practices

Medical practices are valued on maintainable earnings: the profit the practice can sustain once non-recurring, non-commercial and owner-specific items are adjusted out, a process called normalisation. Those earnings are capitalised, or projected cash flows discounted, at a rate reflecting the practice's risks. The sector work is deciding what maintainable means when most fees are set by the Commonwealth and earned by individuals who can leave.

The entity being valued

Two structures dominate. In a doctor-owned practice the entity bills Medicare and patients, pays the doctors and keeps the balance. In the medical centre model a service entity holds the lease, equipment, systems and non-clinical staff and charges each doctor a service fee calculated on billings; its earnings are those fees less its costs. It does not own the doctors' billings, and confusing the two is the most common error in pricing a practice.

Unlike pharmacy, general practice ownership is not limited to registered practitioners, so corporate and group operators both own and buy practices. The Medical Journal of Australia reported that survey data from 2020 indicate approximately 16 per cent of GPs work in corporate-owned practices, and that 25 per cent were practice owners that year, down from 35 per cent in 2008. The RACGP reports in General Practice: Health of the Nation 2025 that close to one in four practising GPs (24 per cent) are practice owners, and that 82 per cent of non-owner GPs are not interested in owning one. That thin owner-buyer pool widens the market for a systemised medical centre and narrows it for a practice only another local doctor could run.

The Medicare billing profile

The Medicare Benefits Schedule (MBS) sets a schedule fee and a benefit for each service, and indexes most of them on 1 July. The Department of Health, Disability and Ageing raised most general medical services items by 2.6 per cent from 1 July 2026, when item 23, a general practitioner attendance at consulting rooms of at least 6 and less than 20 minutes, carried a schedule fee of $45.05. Bulk billing means the patient assigns the Medicare benefit to the practitioner, who accepts it as full payment. Private billing means the practice sets its own fee, and the gap the patient pays does not move with the schedule.

Since 1 November 2025 the Bulk Billing Practice Incentive Program has changed that arithmetic. Services Australia states that participating practices meeting the criteria receive an additional 12.5 per cent incentive payment on every dollar of MBS benefit from eligible services, distributed equally between practice and provider and assessed quarterly. A practice must bulk bill all eligible services, be registered for MyMedicare (the voluntary patient registration model) and add the program in the Organisation Register. Participation is voluntary and can be stopped, so the income is a policy choice rather than a fixed attribute of the business.

The valuation states which billing model the earnings assume, and how much of those earnings depend on settings the Commonwealth can change. Telehealth extends the existing patient relationship rather than forming a separately saleable business: the Department of Health, Disability and Ageing advises that a rebated GP telehealth service requires either an eligible telehealth practitioner, meaning a face-to-face service billed to Medicare in the last 12 months by that practitioner or arranged by that practice, or patient registration in MyMedicare with the service performed by the registered practice. A previous video or phone consultation does not satisfy it.

Contractor doctors and payroll tax

Most private practice doctors are engaged as independent contractors, or as tenant doctors paying a service fee, rather than as employees. We read each agreement for fee terms, restraints and notice periods, and compare fees actually collected against billings. Where an owner-doctor pays no service fee, or a concessional one, earnings are restated as if the owner paid the terms the other doctors pay. That single adjustment often moves value more than any other.

Thomas and Naaz Pty Ltd operated three medical centres, engaged doctors under service agreements, collected the Medicare benefits their patients had assigned and paid each doctor a proportion, keeping the balance as its service fee. The Tribunal confirmed payroll tax assessments on those payments, holding that the agreements were relevant contracts under the Payroll Tax Act 2007 (NSW) and the payments deemed wages, and in Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 the Court of Appeal dismissed the summons seeking leave to appeal. Leeming JA observed that other practices may have adopted similar collection arrangements and so risk engaging the deeming provisions, and that the three doctors who processed their own Medicare claims showed a ready mechanism to avoid that result. How a practice collects and distributes assigned benefits is a valuation fact, not an administrative detail.

States have since legislated relief on differing terms. The Queensland Revenue Office exempts wages paid by a medical practice, other than a hospital, to a contracted or employee general practitioner, with no bulk billing condition. Revenue NSW instead gives a rebate on contractor GP wages from 4 September 2024 where the medical centre bulk bills at least 80 per cent of its GP services in metropolitan Sydney or at least 70 per cent elsewhere, and states it does not extend to GP employees, non-GP specialists or allied health providers. The State Revenue Office Victoria exempts the fully-funded share of GP wages from 1 July 2025, apportioned by the value of fully-funded work. RevenueSA exempts GP wages in the proportion that bulk billed GP services bear to all GP services, from 1 July 2024. The ACT Revenue Office exempts wages paid to GPs at designated medical practices for bulk billed, veterans' and workers compensation services from 1 July 2025, with no bulk billing threshold, unlike its earlier amnesty. The position for your state, entity and period should be confirmed with your accountant or the relevant state revenue office. Ongoing payroll tax belongs in maintainable earnings; unresolved historical exposure is a liability deducted from value. See payroll tax and medical practice value.

Personal and transferable goodwill

Commissioner of Taxation v Murry [1998] HCA 42 is the principal Australian authority on goodwill, and the Australian Taxation Office applies it in Taxation Ruling TR 1999/16. Goodwill is the attractive force which brings in custom. It is inseparable from the conduct of the business and legally distinct from the sources from which it emanates: it may be site, personality, service, price or habit that obtains custom. TR 1999/16 describes personal goodwill as the source of goodwill made up of the skills, reputation, character and personality of the people working in a business, so intimately identified with them that its value diminishes if they withdraw, and not capable of transfer. It adds that a purchaser may still pay for goodwill, because other sources, including the habit or inertia of customers, keep drawing custom.

Which sources of custom belong to the practice is therefore the question. A provider number follows the practitioner's registration with the Australian Health Practitioner Regulation Agency (Ahpra), cannot be used by another health professional, and a doctor needs a further number for each location, so none of it transfers. What can transfer is the site, the patient records and recall systems, the nursing and reception team, the doctors' agreements and restraints, MyMedicare registrations, accreditation history and, for specialists, referral patterns. We test whether patients attend the practice or a named doctor, how evenly billings are spread, and what happened when a doctor last left. See What is goodwill in a medical practice?.

Accreditation, incentives and location

Commonwealth practice incentives pay the practice rather than the doctor, and both main programs run through accreditation. The Practice Incentives Program (PIP) requires a practice to be accredited, or registered for accreditation, against the Royal Australian College of General Practitioners (RACGP) Standards for general practices. The Workforce Incentive Program Practice Stream requires accreditation under the National General Practice Accreditation Scheme, administered by the Australian Commission on Safety and Quality in Health Care, with the RACGP Standards referenced on the certificate, and subsidises engaging nurses, nurse practitioners, midwives, Aboriginal and Torres Strait Islander Health Workers and Practitioners, pharmacists and allied health professionals.

Those payments are calculated on the practice's Standardised Whole Patient Equivalent (SWPE) value, a measure of practice size built from the fractions of care provided to each patient, weighted for age and gender, for which the guidelines state an average full-time general practitioner is around 1,000 annually. The guidelines set the maximum payment at $35,236.84 a year per SWPE value of 1,000 where a nurse practitioner, registered nurse, midwife or allied health professional works a combined 12 hours and 40 minutes a week. The SWPE value uses a rolling 12-month reference period starting 16 months before the payment quarter, so incentive income lags trading, and it is capped at 4,000 each quarter. The guidelines also state that where a practice is sold, accreditation must be part of the sale for the accreditation and the historical practice data, including the SWPE value, to transfer; otherwise the buyer applies as a new practice. Incentive income transfers only where the transaction carries it.

Location drives recruitment, and recruitment is tight: the Department of Health, Disability and Ageing's Supply and Demand Study: General Practitioners in Australia (August 2024) projects a shortfall of over 800 GPs in 2024, rising to over 2,600 by 2028 and 8,600 by 2048. The Distribution Priority Area (DPA) classification identifies GP catchments with lower access to GP services than a benchmark, and is used under section 19AB of the Health Insurance Act 1973, under which international medical graduates and foreign graduates of accredited medical schools can access Medicare only in areas with GP shortages. Under the Modified Monash Model, MM 1 is a major city and MM 7 is very remote; areas classified MM 2 to MM 7 are automatically DPA, MM 1 inner metropolitan areas are not, and the Northern Territory and Tasmania are DPA. If an annual reassessment removes DPA status, doctors holding an existing exception may continue while they meet its conditions, but replacing a restricted doctor becomes harder.

Specialist practices

Specialist practices use the same framework with different sources of custom. Patients generally reach a specialist by referral, most often from a general practitioner, and that relationship usually attaches to the individual rather than to the rooms. Consulting specialists with little equipment therefore often have limited transferable goodwill, while procedural specialists with rooms, equipment, staff and day-surgery arrangements have more. Income from a public hospital appointment, including visiting medical officer work, belongs to the doctor and sits outside the practice even where it is banked through the same entity. Consistent published fee and gap arrangements, supported by informed financial consent (telling the patient before treatment what they will be charged and what they can expect back), make private revenue more predictable.

From earnings to value

Capitalising maintainable EBITDA (earnings before interest, tax, depreciation and amortisation) produces enterprise value, the value of the operating business before financing. Equity value is what remains after deducting interest-bearing debt and debt-like items, including unresolved payroll tax and superannuation exposure, and adding surplus assets.

An earnings-based value assumes a normal level of working capital comes with the business: the funding tied up between doing the work and being paid. In general practice that balance is usually thin, because bulk billed claims are lodged electronically and settle quickly. It grows with private billing, veterans and workers compensation work, and with work in progress in procedural practices, where a service can be delivered well before it is billed. Rejected and pended claims, and incentives accrued but not yet received, sit in the same analysis.

Where a share rather than the whole business is valued, the interest matters. A stake that cannot direct distributions, appoint doctors or force a sale is worth less per share than one that can, and the report states whether the conclusion is on a control or a minority basis. Where a shareholders or partnership agreement sets its own exit formula, that formula may govern what is paid even though it is not market value. Price and value also differ: a reported price is what one buyer paid on particular terms, while value is a conclusion reached for a stated purpose and date.