Ministry of Health announces management fees increase for Primary Health Organisations (PHOs)
The Ministry of Health today announced a management fee funding increase for small to medium-sized Primary Health
Organisations (PHOs). The funding boost will affect PHOs that cover up to 75,000 people, with the biggest gain for those
PHOs with fewer than 20,000 people. The increase will be effective from 1 January next year.
Ministry spokesman Dr Jim Primrose said that several of the smaller sized PHOs had expressed concern about being able to
deliver services on the current fees level.
``Because 29 of the country?s 53 PHOs cover fewer than 20,000 people, and the average PHO size is just over 38,000
people, this is a significant issue,?? Dr Primrose said.
?In the longer term, the Ministry of Health will commission a thorough review of PHO management costs and this work
will be tendered early next year. It will take an in-depth look at sustainable pricing for PHO management services and
will involve the sector.?
Dr Primrose said the report back on the long-term review is expected by May next year.
The fees increase from 1 January 2004 is estimated to cost an extra $1.2 million (GST incl) for the remainder of the
2003/04 year. This increases to an extra $3.1 million (GST incl) for 04/05.
Questions and Answers
Why do PHOs get management fees? This money is used to fulfil administrative responsibilities associated with PHOs, such
as making sure there is community consultation and representation, processing patient registers, formal enrolment and
reporting and monitoring requirements.
What is the current management fee payment? The fee paid to PHOs now is $6.32 per person for the first 20,000 enrollees,
$5.74 from 20,001-75,000 enrollees and $5.17 per enrollee where there are greater than 75,000.
How was the current rate determined? It was based on the management service fee paid to primary care organisations
(PCOs) in the past, plus a per person amount that recognises new PHO requirements, such as having community
representation and processing patient registers. The tiered structure was used to recognise economies of scale.
What is the revised management fee rate? For PHOs with populations of up to 75,000 people, the first 20,000 enrollees
will get $9.46, and those with between 20,001-75,000 people will get $4.60.
For example, a PHO with 30,000 people would get $189,200 (20,000 x $9.46) plus $46,000 (10,000 x $4.60).
There is no fee change for PHOs with more than 75,000 enrollees.
PHO Enrolled Population
Proposed Rate for PHOs under 75,000
Rate for PHOs with Greater than 75,000 (current) up to and including 20,000
$9.46
$6.32
Between 20,001 and 75,000
$4.60
$5.74
greater than 75,000
N/a
$5.17
How much will this new fees structure cost?
The fees increase from 1 January 2004 is estimated to cost an extra $1.2 million (GST incl) for the remainder of the
2003/04 year. The total cost for 2004/05 is estimated at $3.1 million (GST incl).
Why is the fee being changed? Smaller PHOs have expressed concerns about the fees, particularly the level for the first
20,000 patients.
Which PHOs will benefit from this increase? All PHOs with an enrolled population of less than 75,000 will get a funding
increase.
Which PHOs will benefit most? The smaller PHOs with up to 20,000 people enrolled will make the biggest gains.
How many small PHOs are affected? Twenty-nine of the 53 PHOs established have fewer than 20,000 people on their books.
Which PHOs have fewer than 20,000 people on their books?
PHO DHB
PHO
Population
Peoples Healthcare Trust
Counties Manukau 4,386
Te Tihi Hauora O Taranaki
Taranaki
4,722
Canterbury Community Health Care Alliance
Canterbury
5,421
Te Ao Hau Primary Health Organisation
Bay of Plenty
5,437
Te Kupenga A Kahu Trust
Lakes
5,507
Taumata Hauora Trust
Whanganui
5,633
The Maori Primary Health Organisation Coalition
Waikato
5,971
Pinnacle Incorporated
Taranaki
6,834
Hauraki PHO
Waikato
6,901
Tongan Health Society Incorporated
Auckland
6,998
Kawerau Interim Primary Health Organisation
Bay of Plenty
7,137
North Waikato PHO
Waikato
7,306
Nga Mataapuna Oranga
Bay of Plenty
7,674
Wairoa District Chartiable Health Trust
Hawkes Bay
8,522
Tihewa Mauriora Charitable Trust
Northland
9,003
Wellington South East & City Primary Health Organisation
Capital and Coast
9,645
Waiora Amataga Trust
Waitemata
9,712
Coast to Coast PHO
Waitemata
10,242
Mangere Community Health Trust
Counties Manukau
11,345
Piki te Ora ki Te Awakairangi
Hutt Valley
11,781
Ngati Porou Hauora Incorporated
Tairawhiti
12,533
Kaipara Care Incorporated
Northland
12,718
Porirua Plus Primary Health Organisation
Capital and Coast
12,933
Te Kupenga O Hoturoa Charitable Trust
Counties Manukau
13,277
Mornington Primary Health Organisation
Otago
14,711
Auckland PHO Limited
Auckland
16,260
Tararua PHO Limited
Mid Central
16,826
Tamaki Healthcare
Auckland
17,902
TaPasefika Health Trust
Counties Manukau
19,689
When will the new fee be paid? >From 1 January next year (2004). Where will the extra money for the management fees
increase come from? It will come from the PHO funding path, which the Government has already announced.
Will the management fee increase mean it will cost less for people to visit providers working in a PHO? No, but the
increased funding will help PHOs improve their capacity to meet the needs of their enrolled population.
Did the Ministry of Health talk to any outside organisations when reviewing fees for small to medium-sizes PHOs? Yes,
three groups (First Health, Southlink and Health Care Aotearoa) with considerable experience with the management of
small to medium-sized PHOs shared information that contributed to the new fees structure.
Has a minimum PHO size been set? No. The Primary Health Care Strategy recognises there is no one-size-fits all PHO
option that is flexible enough to meet the needs of the many different communities around New Zealand.
How long have PHOs been around? The first two, TaPasefika Health Trust and Te Kupenga O Hoturoa, were established in
South Auckland in July 2002.
What is a PHO? PHOs are the local provider organisations through which District Health Boards (DHBs) are implementing
the Primary Health Care Strategy. The essential features of PHOs are:
• PHOs will aim to improve and maintain the health of their populations and restore people's health when they are
unwell. They will provide at least a minimum set of essential population-based and personal first-line general practice
services
• PHOs will be required to work with those groups in their populations (for example, Maori, Pacific and lower income
groups) that have poor health or are missing out on services to address their needs
• PHOs must demonstrate that they are working with other providers within their regions to ensure that services are
co-ordinated around the needs of their enrolled populations
• PHOs will receive most of their funding through a population needs-based formula (capitation)
• PHOs will enrol people through primary providers using consistent standards and rules
• PHOs must demonstrate that their communities, iwi and consumers are involved in their governing processes and that the
PHO is responsive to its community
• PHOs must demonstrate how all their providers and practitioners can influence the organisation's decision-making
• PHOs are to be not-for-profit bodies with full and open accountability for the use of public funds and the quality and
effectiveness of services.
What is primary health care? Primary health care covers a broad range of out-of-hospital services, although not all of
them are Government funded. It aims to improve the health of the people in communities by working with them through
health improvement and preventative services, such as health education and counselling, disease prevention and
screening.
Primary health care includes first level services such as general practice services, mobile nursing services and
community health services targeted especially for certain conditions, for example maternity, family planning and sexual
health services, mental health services and dentistry, or those using particular therapies such as physiotherapy,
chiropractic and osteopathy services.
Chronic diseases, such as diabetes are best managed by primary health care services so that complications can be
prevented or mitigated.
What is the Primary Health Care Strategy? Launched in February 2001 by Health Minister Annette King, the strategy builds
on the population health focus and the objectives of the New Zealand Health Strategy and the New Zealand Disability
Strategy. It outlines how a different approach to primary health care will improve the health of all New Zealanders
through: a greater emphasis on population health, health promotion and preventative care; community involvement;
involving a range of professionals and encouraging multidisciplinary approaches to decision-making; improving
accessibility, affordability and appropriateness of services; improving co-ordination and continuity of care; providing
and funding services according to the population?s needs as opposed to fee for services when people are unwell.
Is it important that people enrol with a single practice in a PHO? Yes. Enrolment with one practice offers huge
potential benefits to people who use their services, but it also requires a two-way commitment. It means the team of
health professionals will work to maintain and improve the health of those people enrolled with them. The PHO will work
with other health services in the area to make sure patients get the most benefit from good quality health care.
What benefits will people get if they keep visiting the same PHO practitioners they?re enrolled with? • They?ll help
them to better understand the health needs of the enrolled population, leading to improved health and wellbeing.
• Regular visitors will be able to tell those caring for them about the services they want.
• People enrolled will be able to visit whenever they want information on keeping well ? they don?t need to be sick to
visit for wellness checks.
• Those people with chronic illnesses such as heart disease or diabetes will have better managed care.
• We?ll be able to measure how well PHOs are doing looking after those groups of New Zealanders who have high health
needs.