Ministry steps in to help smaller health bodies

The Ministry of Health will support small Primary Health Organisations to the tune of an extra $3 million a year after a report found it was costing small PHOs up to four times more than the ministry gives them to meet its administrative requirements.

The ministry pays PHOs management fees of $9.46 for every person enrolled, up to 20,000 enrollees, and then $4.60 per person for 20,001-75,000 people enrolled.

Those fees go towards funding PHO boards, administration, business overheads like vehicles, computers and buildings.

But in the ministry's just-released report into the management fees, the true cost for small PHOs was up to $38 dollars per patient - four times the fee they received.

"The actual management service costs that the PHOs surveyed reported varied considerably by PHO, ranging from $4 to $6 per head for large PHOs, up to $28 for medium PHOs, and up to $38 for small PHOs," the report says.

"These ranges are somewhat misleading as the financial information from PHOs was inconsistent and incomplete."

For small PHOs, up to 14 per cent of their total expenditure was on management costs. For medium-sized PHOs, the range was as high as 20 per cent. Large PHOs spent between 5 and 9 per cent of their total costs on management services.

The report said most small PHOs said their funding was inadequate.

"Consideration should be given to defining a minimum PHO size," the report, commissioned by the ministry and produced by Auckland-based business consultants Capital Strategy, said.

"Small PHOs are generally not delivering on all required management services primarily because they do not have the staff needed to undertake all requirements."

But the ministry has not decided if there should be a minimum PHO size.

"The primary health sector is still settling down into the PHO infrastructure. It could be counter-productive to define a minimum PHO size," it said in a statement. "The ministry has never prescribed a minimum or maximum size for PHOs, as it recognises that PHOs need to be flexible in size and structure to meet the needs of the communities that they serve."

It said $3 million more for small PHOs would be available in 2005-2006.

"The ministry will be working with district health boards on details of how this funding is to be applied."

In all, 13 PHOs were surveyed, with the five "small" ones being Mornington in Otago, with 14,310 enrolled patients, Ngati Porou Hauora Inc in the Tairawhiti District Health Board area, with 13,000, Piki te Ora Te Awakairangi in the Hutt Valley, 12,047 patients, Waiora Healthcare Trust in Waitemata, 10,700, and Wellington South East & City, with 10,821 patients enrolled.

- NZPA