A doctor is leaving your medical practice: how to protect cash flow while you replace them

A resignation letter on a Monday morning lands in two places at once: your roster and your bank balance. The roster problem is obvious. The cash problem is slower, and it is the one that catches practice owners out, because the doctor’s service fees stop on their last day while the lease, reception wages and software subscriptions keep coming.

This guide covers the money side of losing a key GP: what actually drops, what to do in the first fortnight, and how to cover the months before a replacement is earning for the practice. It is about business cash flow only, and the plan works whether you own the practice or manage it.

What actually happens to cash when a GP leaves?

Three things move at once.

1. Service fees stop. In most centres the doctor is an independent contractor and the practice keeps a percentage of their billings as a service fee in return for rooms, staff and systems. No billings, no fee.
2. Incentive payments shrink. Under the Bulk Billing Practice Incentive Program (BBPIP), Services Australia says payments are based on eligible MBS billing in each quarter. By default the payment is split 50% to the practice and 50% to the GP. Less billing means a smaller payment, and it arrives in arrears, so you feel it months after the doctor goes.
3. Fixed costs carry on. Rent, nurses, reception, cleaning, insurance and equipment finance do not fall because one consulting room is empty.

An illustrative example (not a real practice): a centre keeps a 35% service fee. The departing GP bills $30,000 a month, so the practice loses $10,500 of monthly fee income. If the room is empty for four months before a replacement is productive, and the new doctor takes a further two months to build a full diary, the cumulative shortfall can pass $60,000 before you count recruitment costs. Use your own fee percentage and billing figures; the point is to run the sum on day one, not in month three.

What should you do in the first two weeks?

Sequence matters more than speed. In this order:

1. Read the contract. Check the notice period, any fixed term, and the restraint clause. Avant notes that a practice must give the agreed or reasonable notice if it ends the arrangement, and that it can direct a doctor to leave immediately, in which case continuity of care becomes the practice’s responsibility.
2. Agree the patient announcement. Avant advises agreeing the wording with the departing doctor and making sure reception follows it. Patients who hear a muddled version from a receptionist are the ones who leave.
3. Secure the clinical handover. Ask for a written list of complex patients, urgent recalls, high-risk referrals and outstanding results, with a named doctor following up each one. This protects patients and the practice.
4. Run the cash sum. Build a simple 12-month view: lost fees, lost incentive share, recruitment and locum costs, and which fixed costs you can legitimately trim. Our claims gap calculator helps you see the timing gap between money earned and money received.
5. Start recruiting immediately. Credentialing and onboarding take time, so the clock starts at resignation, not at the last day.

Will patients follow the doctor, and can you stop them?

Some will, and that is a revenue risk to model rather than a surprise. MDA National notes that restraint clauses in medical employment often cover geography, contact with former patients and employing the practice’s staff, usually for months or a year or more, and that courts generally enforce them only if they are reasonable. Whether yours would hold is a question for a lawyer who knows health businesses, not an assumption to build a budget on.

A better budget assumption: plan for a base case where a share of the doctor’s regulars leave, and a better case where most stay because the practice handled the transition well. Offering them an appointment with another doctor quickly, and a clear message about who is looking after their care, does more than any clause.

How hard is it to replace a GP, and how long does it take?

Longer than most owners hope, mainly because of the recruitment pool.

• Overseas-trained doctors are generally subject to the 10-year moratorium under section 19AB of the Health Insurance Act, which usually means working in a Distribution Priority Area (DPA) to access Medicare, unless an exemption applies. You can check your address on the Health Workforce Locator with the “Distribution Priority Area for GPs” filter. A practice outside a DPA has a smaller pool.
• Credentialing and provider numbers add weeks before a new doctor can bill.
• A new doctor starts with an empty diary. Even an experienced GP needs time to build a list, and bulk billing practices with set fees often fill faster than those with gap fees, but it is rarely instant.

Because of this, a sensible plan covers six to nine months of reduced income, then reviews. If you recruit sooner, you have a buffer left over. If it takes longer, you are not scrambling.

Locum or permanent: which protects cash better?

A locum can keep a room billing and give you breathing space, but it is not free. Agency fees, travel and accommodation can eat into the service-fee income they generate, and continuity of care suffers because patients do not see the same face. A common approach is a locum for a set number of weeks to hold the patient book while a permanent doctor is hired.

Check two things before you book one. First, confirm the locum is billing under the practice’s arrangements and meets the BBPIP requirements: the Department of Health, Disability and Ageing says all eligible providers at the practice must bulk bill for the practice to be paid. Second, check your payroll tax position. If your locum or contractor arrangements are caught by the payroll tax rules, the cost of covering a gap can be higher than it looks, as set out in our guide to payroll tax for medical centres.

How do practices fund the gap?

There are three levers, and most practices use a mix.

Lever	What it looks like	Watch for
Reduce costs	Trim discretionary spend, renegotiate supplier terms, defer non-urgent purchases	Cutting nursing or reception hours can cost you the patients you are trying to keep
Use cash reserves	Draw on retained earnings or owner funds	Leaves nothing for the next surprise
Borrow against the gap	A working-capital facility or line of credit sized to the shortfall	Needs to be arranged before the dip shows in your bank statements

The timing point matters most. Lenders look at bank statements and turnover, so it is easier to arrange funding while the doctor’s income is still in your recent history than after several lean months. If you want to know what a lender is likely to want, our guide on getting a business loan for a medical clinic sets out the pack. For the wider picture of Medicare and incentive timing, see bulk billing and GP practice cash flow.

Working capital for a trading practice typically runs from $5,000 to $500,000, sized on turnover and bank statements. If you have property to offer as security, business loans run from $20,000 to $5,000,000. This is business lending to the practice only, never to patients or doctors personally.

Not sure how big the gap is? Check your options with a 60-second enquiry and we can talk it through with the numbers in front of us.

What mistakes make a doctor’s departure more expensive?

• Telling patients before agreeing the message. Avant’s advice to a departing doctor is to tell the owners first. Owners should return the courtesy by agreeing the wording together.
• Assuming the restraint clause will keep the patients. It may not be enforceable, and enforcing it costs money.
• Starting recruitment after the last day. Every week of delay is a week of lost fees.
• Not telling your accountant. A change in contractor mix can affect payroll tax, GST and the timing of your BAS.
• Waiting until the overdraft is stretched to look for funding. Options narrow as the dip shows up in the statements.

When it’s time to talk about funding

Losing a doctor you rely on is stressful, and most of it is out of your hands. The cash gap is the part you can plan for. If the sums say you will be short for a few months, it is far better to line up a buffer now than to explain a dip afterwards.

We work with medical centres and understand how service fees, incentives and contractor arrangements fit together. Enquiring takes about 60 seconds, and your credit file is not touched just for asking. We don’t send your details out to a pile of lenders, so your phone will not start ringing from strangers. A real person reads your situation and calls you to talk it through. Please fill the form in accurately, including the real size of the gap, so we can match the right option first time.

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