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Primary Care in NZ – Viable but Vulnerable?

Primary Care in New Zealand -

Viable but Vulnerable?

An overview of Primary Health Care Strategy Implementation

Claire Austin

Chief Executive

April 2003

Primary Health Care in New Zealand - Viable but Vulnerable?


The Royal New Zealand College of General Practitioners' mission statement is "To improve the health of all New Zealanders through high quality general practice care."

Quality issues can't be addressed in isolation. An effective approach is one that considers the environment within which all health practitioners have to operate.

This paper is intended to provide a constructive overview of the issues affecting the Primary Health Sector and the management of change. The goals of the Primary Care Strategy are widely supported within the sector. However, in the past, the management of change, building of capacity and contracting issues have often been overlooked as health goals and policies are implemented.

It is very encouraging that the role of the Primary Care Sector has been recognised by Government, as well as the commitment to a significant injection of funding into the sector. However, it is critical to examine key implementation issues in order to ensure that goals are achieved and we build a vibrant and sustainable workforce. Furthermore, relationships and contracting play a significant role in fostering workforce retention and recruitment, the quality of services and the achievement of policy goals. Ultimately, the outcome of contracting impacts upon working conditions and on the grass roots in primary health care - general practitioners, practice nurses, practice managers/receptionists, allied health professionals and most critically their patients.


1. In order to ensure the viability of the Primary Care Sector, Primary Health Organisations should be supported to build their capacity in order to deliver required goals.

2. The Ministry of Health should ensure that District Health Board contracting practices with Primary Care should build capacity, rather than shifting organisational and financial risks.

3. The Ministry of Health should ensure that District Health Board requirements of Primary Health Organisations remain within the Primary Health Organisation minimum requirements (as defined by Government).

4. Contracting processes should be evaluated to ensure that contractual requirements do not undermine the viability of the organisation or the ability to provide quality, sustainable services.

5. The contracting models and Crown responsibilities agreed to in the Social Services Sector should be applied to the health sector, this includes commitments to Crown Guidelines for Contracting with Non-Government Organisations, Statement of Government Intention with Community Organisations and commitments to sector capacity building within accepted models.

6. The Ministry of Health should develop an explicit implementation plan in collaboration with key stakeholders in the sector. This plan should include process development, capacity building, roles and responsibilities and timelines.

7. Specific resources should be allocated to leadership development, governance and management training for Primary Health Organisations.

8. The Ministry of Health should take a leadership role in facilitating regular exchange of information and experiences in Primary Health Care Implementation - what's working and what's not.

9. The issue of the public/private foundations of Primary Health Care need addressing.

10. A sustainable funding and pricing model for primary health care (which realistically takes into account policy requirements, goals and quality frameworks) should be developed with key stakeholders.

11. Research and development is an essential component of capacity building and requires explicit recognition and funding.

(The College is due to release a report that examines the building of primary health care research in New Zealand by the end of May 2003.)

Where we have come from - 1990 to 2000

The health sector and primary health care in New Zealand has faced many challenges over the last decade. The sector has experienced frequent and rapid change, under going its third significant restructuring since 1993. The health reforms of the 1990s were intended to increase choice and access to consumers, encourage flexibility and innovation in health care delivery, increase accountability to purchasers, reduce hospital-waiting times and increase the sensitivity of the health system to the changing needs of society. There was a commitment to market-focused public services and competitive private-sector behaviour, with the expectation that performance would naturally improve.

The reforms lead to the important emergence of Maori Health providers, groupings of general practitioners into Independent Practitioner Associations (IPAs) and community trusts which negotiated agreements with the government on behalf of their members for the provision of publicly funded health services to their practice populations.

However, the reforms were also developed in a context of austerity and reduced public spending, with principles of user pays, and reductions in general practice subsidies. Practice nurse subsidies have also eroded over time. Funding was split from service provision, hospitals were set up as independent companies and competition was induced amongst service providers. This resulted in fragmentation of many primary care services including maternity, well-child and sexual health services.

The New Zealand health sector, as a consequence, has been challenged by a legacy of under investment in services both in primary and secondary care, increased compliance costs and an absence of strategic planning. Our performance has not compared favourably with other OECD nations in recent times. Infant mortality and disability years are high, and life expectancy is low in New Zealand compared with the USA, Australia and Canada.

Recent developments in Primary Health Care

The commitment of an improved funding environment for primary health care is therefore significant and timely. The New Zealand Government has announced increased funding which will increase up to $195m of new funding targeted at primary health care, introduced gradually over three years.

In a 2002 report, the Auditor General of New Zealand, noted that the primary health sector, could benefit from a period of stability to allow effective purchasing capability for primary health care to develop and to make progress to improve the effectiveness and efficiency of primary health care service delivery. The report further stated:

"The fact that service provision has continued to function as well as it has reflects, to a large degree, the goodwill and tenacity of health professionals working in the primary health care sector¡K."

This statement was recognition of those who have continued to provide quality health care sometimes despite the conditions within the sector rather than because of them.

The sector has recently been restructured to include 21 District Health Boards. These DHBs will have a mixture of locally elected members and those appointed by government. They will have a responsibility for assessing the health and disability support needs of its community. The DHBs, which were traditionally secondary care providers now hold the responsibility for funding and purchase of primary health care in their regions.

Primary Health Organisations and General Practice

The Primary Health Strategy signals a new direction for the health sector, and to the development of primary health organisations. These primary health organisations will be expected to provide both population health services and primary health care. However, in a time of such significant change, it is essential that change is planned and managed effectively.

New Zealand general practice operates in somewhat of a paradox. The majority of general practitioners are self-employed, approximately 30% of their income comes from the public purse. Despite being technically "independent operators', operating their own businesses and setting their own fees, New Zealand GPs are significantly influenced by public policy. Public policy which has swung from a market,"laissez faire" model in the early 1990s to a focus upon co-ordination of health services, reduction of health inequalities and community involvement at all levels of health services.

Throughout this time, general practice has continued to play a pivotal role in the delivery of health care to New Zealanders. General practice is the foundation of the health system. General practice teams provide 85% of primary health care in New Zealand. There is evidence that there are better levels of health care in countries where access to health care services occurs through general practitioners. General practitioners have a significant role to play in the future of primary health care in New Zealand, however, it will be critical that they are adequately supported to continue to provide quality services.

General practice in New Zealand is supportive of a system that encourages continuity of care for patients, is well co-ordinated and collaborative, is adequately funded, and primary and secondary services well integrated.

However, general practice is also challenged by a reduction in its workforce, low morale, increasing funding and contracting compliance costs and uncertainty about the future role of general practitioners within the New Zealand health sector. There has been a 5 percent cumulative decrease of active doctors identifying general practice as their main worksite between 1995 and 2000. A shortage of GPs in rural areas and more deprived urban areas has led to overwork, which in turn as contributed to further shortages. High levels of student debt, along with well-paid overseas opportunities, are encouraging young doctors to leave New Zealand earlier than in the past. Other challenges to be overcome are lack of available locums and opportunities for holidays and study leave. It is interesting to note that opportunities for salaried general practitioners, as noted by the ASMS, allow for recognition on the specialist scale, administration and protected professional development time.

Primary health care in New Zealand has generally been founded upon the personal investment of private business people. Access to primary health care has been, in the past, based upon the ability to pay and has led to a number of well-documented inequities. The implementation of the Primary Health Strategy is an important step for the health of New Zealanders and both a significant opportunity for general practice, as well as a significant risk.

The sustainability of New Zealand general practice is delicately balanced, and requirements upon GPs and GP organisations continue to change rapidly. There is an important inter-dependent relationship that exists between general practice and wider primary and government sector. As New Zealand moves to a fully-funded, broadly accessible primary health care system, it is critical that the business part of the sector is engaged and tensions addressed in a manner that recognises past investment and future contributions. Relationship principles should be applied in the health sector as they have been in the social services sector in recent times. (This issue is further expanded later in this paper.)

Management of change and the building of sector capacity is not an area that has had much attention in the history of New Zealand health policy. These issues need to be addressed if we are to succeed in achieving the goals and aims of both the Primary Health and New Zealand Health Strategies.

The Management of Change

Effective management of change is well documented in a range of international literature. Kotter identifies eight critical stages in an effective change process:

„« Establishing a sense of urgency

„« Creating a guiding coalition

„« Developing a vision and a strategy

„« Communicating the change vision

„« Empowering broad-based action

„« Generating short-term wins

„« Consolidating gains and producing more change

„« Anchoring new approaches in the culture.

This analysis can be applied to the current implementation of the Primary Health Care Strategy. In order to achieve the goals set by the Health Strategy and the Primary Health Care Strategy, there needs to be a much more critical analysis of implementation, the management of change and contracting processes. All of these factors have a significant impact upon achieving policy goals, patient outcomes and service delivery and capacity.

Recognised Staged Process Action and Issues - what should happen Comment - what is happening

Establishing a sense of urgency Examining the market/environment

Identifying and discussing crises, potential crises, or major opportunities The strong emphasis upon primary health care is an important opportunity to be fostered - however the current speed and management of change has potential to undermine gains made

- DHB capacity and knowledge of primary health care is limited

- Workforce capacity is fragile

Creating a guiding coalition Putting together a group with enough power to lead the change

Getting the group to work together like a team In this case the group should be defined as the Ministry, DHBs and Primary Health Care stakeholders - cohesion and collaboration between these groups is variable and needs further work. If change is to be effective, it requires appropriate, good faith engagement at all levels

In contrast to this, K1 of the National Contract confers the right of the DHB to vary specifications with or without the agreement of the PHO

Developing a vision and a strategy

Creating a vision to help direct the change effort

Developing strategies for achieving that vision We have a vision - the primary health care strategy, however, the sector needs an effective and transparent implementation plan that includes milestones and timelines

Communicating the change vision Using every vehicle possible to communicate the vision and the strategies for achieving that vision Communication varies across DHBs, as is understanding of primary care and the minimum requirements. (Please refer to implementation issues)

Empowering broad based action Getting rid of obstacles

Changing systems and structures that undermine the change vision

Encouraging risk taking and non-traditional ideas, activities and actions Relationships and contracts management across DHBs is variable

National draft contract contains clauses that breach Treasury Guidelines for contracting and funding non-government organisations

An approach that focuses upon overcoming obstacles, rather than "shifting risk" is critical

A number of contract requirements place significant management burdens upon PHOs

(Please refer to implementation issues)

Generating short-term wins Planning for visible improvements in performance or wins

Creating those wins

Visibly recognising and rewarding the people that made the wins possible Sharing gains and successful implementation strategies are urgently needed

Consolidating gains and producing more change

Using increased credibility to change all systems, structures and policies that don't fit together and don't fit the vision

Developing people that can implement the change

Reinvigorating the process with new projects, themes and change agents Supporting what works, what doesn't - be prepared to adjust implementation strategies or abandon what isn't working

Work to ensure that obstacles are overcome

Complexity of reporting and payment mechanisms will undermine capacity

Anchoring new approaches in the culture Creating better performance through customer oriented behaviour, more and better leadership, more effective management

Articulating the connections between new behaviours and organisational success

Developing means to ensure leadership development and succession The consumer-orientated vision is fully supported by the sector. Areas that need attention are:

„« Fostering leadership development in primary health care

„« Governance and management training and support

„« Quality and information management development

The Ministry of Health's early draft requirements for Primary Health Organisations in 2001 (PHOs) were considered to be both unwieldy and heavily prescriptive. However, recent requirements have evolved into a more permissive framework that takes into account the very varied models of primary health care delivery in New Zealand. Primary health organisations are being required to:

„« Provide a minimum set of essential population- based services

„« Work with groups in their populations which have poor health or are missing out on services to address their needs

„« Demonstrate that they are working with other providers in their regions to ensure services are co-ordinated around the needs of their enrolled populations

„« Use a national enrolment system to enrol people through primary providers

„« Demonstrate that their communities and consumers are involved in their governing processes and "is responsive to their community"

„« Demonstrate that all practitioners and providers can influence decision making processes

„« Be not for profit bodies with full and open accountabilities for the use of public funds, and quality and effectiveness of services.

However, as in the last decade, the funding and contracting mechanisms will be a critical influence upon the direction and behaviour of primary care providers, including general practitioners. (Given that 85% of primary health care is provided through general practice.) The 21 District Health Boards will be responsible for both primary and secondary care service coverage and contracting in their region. This is a new responsibility for District Health Boards, given that up until recently, their primary focus was on the provision of hospital and secondary services.

There is considerable variance from DHB to DHB in relationships and contracts management. It is very concerning, given the lack of knowledge of the Primary Health Sector, that little effort has been made in engaging key primary care stakeholders in business development and planning at a national level. It is noted that the Auditor General's report also noted the limited knowledge DHBs had of primary health care.

Primary Health Care Implementation - Contracting Issues Around New Zealand

The following table provides a brief overview of some of the implementation and contracting issues within different District Health Boards in New Zealand. What is notable is the shifting of requirements (and risk to providers). Without consideration to organisational capacity, this could compromise the viability of providers and undermine the successful implementation of the Primary Care Strategy, as well as further compound workforce issues, especially in more vulnerable areas of practice.

Minimum Requirement: 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 need.)

Ministry of Health DHB PHOs Comment

Requires DHBs to conduct health needs assessments of their populations

Requires DHBs to conduct health needs assessments of their populations (cont) Capital & Coast requiring PHO to:

conduct health needs assessment

provide agreed data sets of information in format set by DHB

Bay of Plenty DHB -

PHO must deliver first health needs assessment by March 2004

Otago DHB -

PHOs must have the required software systems and IT capability Differing data/information capacity and data systems nationwide

Emerging organisations may have limited or different capacity

Differing data/information capacity and data systems nationwide

Emerging organisations may have limited or different capacity

This requirement appears to shift responsibilities, risks and costs.

Capacity, planning and resourcing unaddressed - compatibility and compliance costs

Providers compromised due to lack of capacity or compatibility - how is this developed or resourced?

Has this been costed?

DHBs must be satisfied that the PHOs planning, prioritisation and service delivery will contribute to a reduction in health inequalities DHBs must be satisfied that PHOs demonstrate they are working with providers as appropriate - to co-ordinate care for their enrolled populations in ways that best meet the needs of their communities Statements of agreement required from all participating providers

Minimum requirement: DHBs will use a national formula to fund PHOs according to their enrolled population

Ministry of Health DHBs PHOs Comment

DHBs will use a national formula to fund PHOS

According to their enrolled populations PHOs will use a national enrolment system to enrol people through primary providers

DHBs prescribing different boundary and size requirements for PHOs:

„« Geographic (Auckland)

„« Numbers the DHB wish to manage (Auckland - target of 3 to 7 PHOs)

„« Have "a large enough population" (Otago)

„« Be based on a "community of interest" Enrolment occurring at a practice level

Level of public awareness re enrolment

Appears to be a slow turnaround for enrolment registration and de-registrations

Different status and funding levels of organisations

Not all practice populations geographically defined

PHOs being required to "combine to co-purchase services" (Auckland)

Administration functions required determined by Auckland DHB - may need to be purchased from a shared services provider

Some questionable practices occurring - especially on boundaries of different PHOs subject to different funding formulae -

„« Sign up here and pay less

„« Advertising and recruitment of patients from outside of the area

„« Patients unaware they are signing enrolment forms

Creates issues of viability, loss of patients to neighbouring practices - transition issues require addressing - increased funding sooner to prevent "pepperpotting"

Risk of creating competition rather than the intended collaboration

Timing of funding, especially of the adjustment of the interim formula may require review

Does the general public know what being part of a PHO means and how to enrol?

How is a community of interest defined and who defines it?

The role of purchasing of services becomes further complicated by the DHB requiring key admin functions from PHOs and if they don't have the capacity will have to purchase themselves - shifts risk and responsibility

Minimum requirement: PHOs must demonstrate that their communities, iwi and consumers are involved in their governing processes and the PHO is responsive to its community

Ministry of Health DHBs PHOs Comment

DHBs must be satisfied that community

Participation in PHO governance is genuine

And gives the communities a meaningful


DHBs will require PHOs to show how they respond

To their communities

Have sufficient processes to ensure that

Decisions take into account the range of views There are significant differences between DHBs.

Some DHBs requiring control rather than influence -

Varies from DHB to DHB

Varies from DHB to DHB Organisations at different levels of engagement - need to build and manage transition Contracting processes need to create value to both parties

Minimum requirement: 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 the services

Ministry of Health DHBs PHOs Comment

DHBs will need to be sure that:

Organisation has not for profit status

Reporting requirements and disclosure will allow

The DHB and public to fully understand the use of public funds and the quality and effectiveness

of services in order to evaluate the results Requirements upon PHOs varying considerably including:

Requiring a governance structure that is enforceable under the Companies Act

Training programmes for new PHO board members

Expectation of full capacity before approval as a PHO

Requiring "other relevant information"

Telling members of the public that any gains will be passed on to patients (Otago - anywhere else?)

How is the cost of capacity and governance development to be met?

Open-ended information requests - issues of good faith?

Requirements for organisations vary according to their legal status - have the issues under the Companies Act been adequately examined and agreed by the parties?

Important to develop governance and management expertise - see capacity building

Raises expectations without giving regard to capacity building, meeting compliance and service delivery costs

Capping of general practitioner fees

The College is concerned that the issue of fee capping is not resolved. The College also recognises the critical importance of easy access to affordable Primary Health Care Services. In order to achieve this, a sustainable funding and pricing model for primary health care (which realistically takes into account policy requirements and goals) should be developed with key stakeholders. This also needs to take into account workforce recruitment and retention issues.

Primary Health Care Sector - Viable but Vulnerable?

When considering the issues of capacity building, viability and contracting of Primary Health Organisations, parallels can be drawn with the non-government sector in the decade of the 1990s.

In 1995, Ernst and Young were commissioned by the New Zealand Community Funding Agency to study the viability of the Not-for-Profit sector in New Zealand. Viability was defined as "the capacity of the not-for profit sector to continue to providing services NZCFA wishes to purchase to meet community needs." The sector was found to be "viable but vulnerable." Key findings of the report included:

„« 81.8% of providers reported an increase on the time they spent applying for funding

„« 52.9% of providers reported that their financial reserves had decreased

„« 31.9% reported a decreased capacity to replace assets

„« 1 in 4 providers spent 30% of their time on contract compliance

In 1999, Boston noted "many of New Zealand's voluntary organisations have struggled to fill the gaps left by the state's reduction in levels of social assistance."

In 2001, the Community and Voluntary Sector Working Party recognised that a decade of social and economic change and state sector reform had left many community organisations mistrustful of government and feeling undervalued and disempowered in their dealings with bureaucracy. In response, in December 2001, the Government issued a Statement of Government Intentions for Improved Community Relationships. This statement included the following Government commitments:

„« Culture of Government - public service chief executives are expected to ensure that all staff have a good understanding of values, governance arrangements and working realities of the sector

„« Whole of Government approach - Government agencies will give priority to working together, breaking down silos and establishing co-ordinated, inter-sectoral policies and programmes

„« Government funding to community organisations - Government agencies will, together with the community sector, undertake a programme of work to address concerns about funding arrangements, effectiveness, compliance costs and related matters.

Many of the recommendations of the Voluntary Sector working party can be applied to the changing health sector:

„« Contracting practices should include negotiations conducted in good faith, with the inclusion of performance measures of value to both parties, recognising that this may require resourcing for training for both the funding agency and the contracting community organisation

„« All contracts should include a component that recognises the administrative and other overhead costs to the organisation, including training and development

In 2002 The Report of the Referred Services Advisory Group to the Ministry of Health


"The group recognises that there are significant organisational and infrastructure costs involved in the functions required of PHOs. Much better information systems are required than many of those currently available, including at practice level. The group considers that the management payments currently proposed as part of the PHO funding are inadequate and should be increased. This will be particularly important as referred services savings will no longer be available to any PHO spending above its equitable level." (2002:10)

The generic PHO National Agreement is still under negotiation. However, it is clear that if effective implementation of the Primary Care Strategy is to occur, infrastructure needs and costs need to be much more clearly identified and addressed.

Given the fragile position of many providers, it is also critical the Government funders ensure that payment mechanisms are efficient and timely. Late or omitted payments to providers do nothing to engender confidence or assist the viability of the organisations concerned.

International examples of capacity-building

The United Nations Development Programme notes that whether an entity is a formal organisation such as a government, private sector operation, or a community based organisation, there are typically several dimensions of capacity that need to be assessed and developed. At the organisational level, successful methodologies address the following:

„« Mission and Strategy

This includes role, mandate, definitions of services, clients served, interactions with broader system and stakeholders, the measures of performance and success; and the presence of core strategic management capacities.

„« Culture/Structure and Competencies

Includes organisational and management values, management style and standards, organisational structures and designs, core competencies.

„« Processes

Internal and external to the entity, supporting such functions as planning, client management, relationships with other entities, research/policy development, monitoring and evaluation, performance and quality management, financial and human resources management. Processes are central to improved capacities.

„« Human resources

The most valuable of the entity's resources and upon which change, capacity and development primarily depend.

„« Financial resources

Both operating and capital expenses

„« Information resources

Of increasing importance and how these resources (all media, electronic and paper) are managed to support the mission and strategies of the entity.

„« Infrastructure

Physical assets (property, buildings and movable assets) computer systems and telecommunications infrastructures, productive work environment

Creating strong foundations - capacity building

Extensive experience in United Nations Development programmes and other international experience identify the following factors as critical to the success of a capacity assessment or development initiative:

Visible leadership - meaningful commitment and ownership at the political and senior bureaucratic levels, sustained throughout the process.

Organisation-wide and participatory - highly consultative, with meaningful involvement of all impacted parties or stakeholders.

Open and transparent - The process itself is open, with no hidden agendas and decision-making is transparent. In some situations, external consultants may help facilitate this process and assure independence and objectivity.

Awareness and understanding - all impacted parties and stakeholders are aware of and understand the development or capacity initiative, the implied changes and capacity needs; requires strong internal and external communications, public relations.

Genuine buy-in and acceptance - understanding generates buy-in and acceptance; critical mass of commitment; resistance is managed

Appropriate methodologies - for programme and project management, tools and techniques, adapted to the local situation and needs; measures of performance established, allowance for early successes and pilots, ongoing monitoring and evaluation

Clear set of objectives and priorities - built into project and programme plans, incremental and phased, available resources appropriate to workload

Clear management accountabilities - transparent processes and decision-making; open dialogues, explicit responsibilities and accountabilities set

Sufficient time and resources - committed availability of financial, information and human resources to plan, develop, implement the capacity initiative; strong managerial resources.


So do these conditions exist in the Primary Health Care sector? The commitment to the vision and strategy is sector-wide. However, it could be argued that there is considerable variance of DHB contracting behaviours as well as organisational capacity at all levels of the sector.

The Ministry of Health needs to take a leadership in capacity building, fostering sector development and monitoring of contracting behaviours. Research and development is an essential component of capacity building and requires explicit recognition and funding. (The College is due to release a report that examines the building of primary health care research in New Zealand by the end of May 2003.)

The role of the District Health Boards requires much greater scrutiny and management. In order to successfully implement the important goals of the Primary Health Strategy, the emphasis needs to be upon capacity building to deliver services, rather than shifting risk.

Effective implementation needs to be planned in a way that engages and supports all stakeholders and identifies the obstacles to be overcome, to achieve better health care for New Zealanders.

Claire Austin

Chief Executive

Royal New Zealand College of General Practitioners

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