Thinking of Buying a Pathology Business in Australia? Here Are 3 Vital Questions to Ask
The pathology services industry in Australia generated $5.7 billion in revenue in 2025–26, with an average profit margin of 13.4%. The industry employs 24,766 people across 516 enterprises.
Revenue contracted at an annualised 2.3% over the past five years due to volatility from COVID-19 testing cycles, but it is forecast to grow at 4.2% annually through 2030–31, reaching $7.0 billion. Demand is supported by Australia’s ageing population, increased chronic illness, and technological advancements in testing, although reliance on Medicare funding continues to pressure margins.
1. How Dependent Is the Business on Medicare Funding?
Why It Matters
Nearly all pathology services in Australia are bulk-billed through Medicare, with 99.6% of claims processed this way. Revenue stability therefore depends heavily on government funding levels, fee indexation, and rebate structures. The lack of indexation over the past two decades has eroded margins, with only partial relief introduced from July 2025.
What to Check
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Funding exposure – Determine the share of revenue tied to bulk-billed Medicare items.
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Indexation changes – Review how past freezes affected profitability and whether indexation relief applies to key tests offered.
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Private billing – Assess whether the business generates revenue from non-Medicare services such as private tests or clinical trials.
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Geographic footprint – Consider exposure to regional collection centres where closures may occur if bulk-billing becomes unsustainable.
2. Does the Business Have Strong Referral Networks and Specialist Links?
Why It Matters
Around 70% of all Medicare pathology referrals come from GPs, with specialists now driving a growing share due to demand for complex testing. A pathology business’s strength depends on its ability to secure steady referrals from both GPs and specialists. Co-location near medical practices, hospitals, and clinics significantly boosts referral flows.
What to Check
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GP and specialist networks – Identify referral concentration and risk if a key partner withdraws.
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Collection centres – Review accessibility and proximity to high-volume clinics or hospitals.
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Reputation – Assess reliability, turnaround times, and service quality in attracting repeat referrals.
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Specialist demand – Look for capabilities in anatomical and genetic testing, which are experiencing strong growth.
3. Is the Business Positioned for Industry Growth and Technological Change?
Why It Matters
Technological innovation is reshaping pathology through digital pathology, AI, and automation. Demand for genetic, prenatal, and cancer testing is rising rapidly, while telepathology and mobile services are extending reach into underserved areas. Businesses that invest in these areas are best placed to capture future demand.
What to Check
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Testing range – Confirm mix across chemical, microbiology, anatomical, and haematology services.
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Technology adoption – Evaluate readiness for digital pathology, AI diagnostic tools, and telepathology platforms.
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Cost base – Review exposure to high wage (over $2.4 billion in 2025) and consumable costs.
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Competitive position – Benchmark against major players such as Sonic Healthcare (38.3% market share), Healius (23.9%), and Australian Clinical Labs (13%).
Ready to Invest in a Thriving Pathology Business?
With ageing demographics, chronic illness, and technological advancements driving demand, pathology services are set for steady long-term growth.
Success depends on strong referral networks, careful management of Medicare reliance, and alignment with new testing technologies.
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For Sellers:
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