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Fees increase for Primary Health Organisations

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.

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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



Between 20,001 and 75,000



greater than 75,000



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?




Peoples Healthcare Trust

Counties Manukau 4,386

Te Tihi Hauora O Taranaki



Canterbury Community Health Care Alliance



Te Ao Hau Primary Health Organisation

Bay of Plenty


Te Kupenga A Kahu Trust



Taumata Hauora Trust



The Maori Primary Health Organisation Coalition



Pinnacle Incorporated



Hauraki PHO



Tongan Health Society Incorporated



Kawerau Interim Primary Health Organisation

Bay of Plenty


North Waikato PHO



Nga Mataapuna Oranga

Bay of Plenty


Wairoa District Chartiable Health Trust

Hawkes Bay


Tihewa Mauriora Charitable Trust



Wellington South East & City Primary Health Organisation

Capital and Coast


Waiora Amataga Trust



Coast to Coast PHO



Mangere Community Health Trust

Counties Manukau


Piki te Ora ki Te Awakairangi

Hutt Valley


Ngati Porou Hauora Incorporated



Kaipara Care Incorporated



Porirua Plus Primary Health Organisation

Capital and Coast


Te Kupenga O Hoturoa Charitable Trust

Counties Manukau


Mornington Primary Health Organisation



Auckland PHO Limited



Tararua PHO Limited

Mid Central


Tamaki Healthcare



TaPasefika Health Trust

Counties Manukau


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.

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