Review of PHO Management Services

Review of Primary Health Organisation Management Services
Report by Capital Strategy Ltd for the Ministry of Health

Date of publication: August 2004
Released: March 2005

In March 2004, the Ministry of Health contracted Capital Strategy Limited to undertake a review of Primary Health Organisation (PHO) management services. The review comprised a survey/questionnaire and meetings with a sample of 14 PHOs. In addition, discussions were held with the 10 corresponding DHBs and a number of other stakeholders.

The key deliverables being to answer the following questions:

Are PHOs performing the management services outlined in PHO service agreements?
Where are PHOs deficient in providing the management services outlined in the service agreements?
What are the main contributors to deficiencies in providing the management services outlined in the service agreements?
What is the cost to PHOs of providing the full level of management services?
How do management costs vary between PHOs?
What aspects of the PHO influence the efficient and effective provision of management services?
How do management costs vary between PHOs by size?
Is the current management services fee appropriate?
Are there lessons from other sectors that can be applied to the structuring and purchasing of PHO management services?
Should the Ministry and DHBs change any aspects of its policy to achieve optimal results?

The report contains several recommendations requiring further work within the Ministry and with District Health Boards (DHBs), to explore possible implementation issues. It identifies how complicated the delivery of management services can be and that a single solution may not be possible. This conclusion has been reinforced by discussions the Ministry has had with DHBs and PHOs.

The report’s key findings are:

Small PHOs (fewer than 20,000 enrolees) are generally not delivering on all required management services primarily because they do not have the staff needed to undertake all requirements
Medium-sized PHOs (between 20,001 and 75,000 enrolees) are better able to meet the requirements than small PHOs
The actual management service costs that the PHOs surveyed reported varied considerably by PHO - ranging from $4 - $6 per head for large PHOs, up to $28 for medium PHOs, and up to $38 for small PHOs. These ranges are somewhat misleading as the financial information from PHOs was inconsistent and incomplete. For example, if the PHO reporting $38 per head is removed from the small PHO sample, the maximum in that range is reduced to $15 per head.
Consideration should be given to defining a minimum PHO size.
If PHOs are not part of a network or shared service arrangement, it was estimated that management service fixed costs could be $364,000 (or $18.20 per head) for the small PHO and $579,000 (or $7.72 to $11.58 per head) for the medium-to-large PHO. Shared service arrangements could reduce these costs considerably - down to $280,000 ($14 per head) in the case of small PHOs.

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