New Zealand's health sector has been subject to continual change since the early 1990s, undergoing three significant restructures within 10 years. These recent developments in the funding and organisation of the New Zealand health sector have been reviewed by Ashton who notes that after a decade of turbulence the sector now appears to be more stable [3
]. The 1991 Green and White Paper ushered in an era of market oriented reforms which assumed that a purchaser-provider split and competition between health care providers would result in more efficient delivery of health services and, implicitly, improved health outcomes [4
]. The reforms were intended to:
• Increase choice and access for all New Zealanders in a health care system that was effective, fair and affordable
• Encourage efficiency, flexibility and innovation in health care delivery
• Increase accountability to purchasers
• Reduce hospital waiting times
• Enhance the working environment for health professionals.
Four Regional Health Authorities (RHAs) were established, and the hospital and community services previously provided by 14 Area Health Boards were reconfigured into 23 Crown Health Enterprises (CHEs). The CHEs were required to manage their resources in a business-like fashion with the objective of being 'as successful and efficient as comparable businesses that are not owned by the Crown' [5
]. However, the anticipated benefits of this 'experiment with competition' were not delivered [6
]. In 1996 a briefing to the incoming Minister of CHEs stated 'the health reforms have yet to yield the original expectations. By a range of measures the pace of performance seems, if anything, to have weakened since the advent of the reforms' [7
]. The CHEs' experience raises questions about the degree to which business models such as quasi-markets can be applied to public health provision. There were reductions in general practice subsidies, erosion of practice nurse subsidies and many primary care services including maternity, well-child and sexual health services were fragmented [8
]. On a more positive note there emerged Maori health providers, community health trusts and most significantly, Independent Practitioner Associations (IPAs). These are similar in many respects to Australian Divisions of general practice and UK primary care groups but are owned and controlled independently by GPs themselves.
Currently over 75% of New Zealand GPs are members of over 30 IPAs which vary in size from 7 to 340 GP members (mean 74), and there is now an IPA Council of New Zealand (IPAC). IPAs cover more than 800 community-based practices, attended by some 2,200 GPs and more than 2,000 practice nurses. Developments in contracting and alternative methods of funding and managing services were initially either resisted strongly or treated with caution by the majority of GPs. The main opposition was voiced by the GP Action Group and to a lesser extent, for a short period, by the then New Zealand General Practitioners Association and the New Zealand Medical Association (NZMA). Early successes in contracting, in budget holding for pharmaceutical and laboratory services and establishing new services, arising in part from budget holding savings, led to gradual and progressive recruitment of IPA membership [9
]. In both New Zealand and Australia the 'public' provision of primary health care remains via market driven private practice. Fortunately the reforms did not have to deal with any market failures in the quasi-market arrangements.
In 1996 New Zealand's first proportionally elected National (conservative) led coalition government signalled a change of direction. A single purchaser, the Health Funding Authority, replaced the four RHAs, the CHEs became 'Hospitals and Health Services' and had their 'for profit' status removed. 'Cooperation' replaced 'competition' as the new political catch-cry [10
]. During this time the IPAs consolidated, developing well-established infrastructures, including staff, information systems, clinical guidelines, peer discussion groups, and personalised feedback on clinical performance. They also began to develop expertise in budget holding for laboratory tests and pharmaceuticals, making savings to develop new and better services [11
]. The IPAs made significant efforts to manage pharmaceutical and laboratory expenditure with the savings achieved providing significant funding for a variety of new service developments. The ability to use some of these savings was important for the development of the IPAs [12
]. However, the acquisition of such funding from savings also led to ongoing conflict with the Health Funding Authority which became embroiled in bureaucratic controlling processes in order to endeavour to recoup some of that funding.
Further radical changes followed the election of the Labour led coalition in 1999. The main structural change was abolition of the Health Funding Authority and its replacement by 21 new District Health Boards (DHBs) commencing in 2001, comprising a majority of locally elected and a minority of ministerially appointed members, accountable to the Minister of Health [13
]. This was intended to strengthen local democratic input to decisions. Funding was now to be allocated between DHBs according to a formula based on the local population weighted for relative health need. Coupled with these structural changes a series of national strategies have been developed to guide the system; these identify objectives and priorities for improving health and independence levels in the population, aim to reduce the 'health gap' between Maori and non-Maori, and specify how services should be delivered [10
The New Zealand Health Strategy was published in 2000 [14
]. This provided an overall framework for the heath sector, with the aim of directing health services at those areas that would provide the greatest benefit for the population, focusing in particular on tackling inequalities in health (see Table ). Primary health care is one of five service delivery areas in the New Zealand Health Strategy (see Table ), which identifies seven fundamental principles for the health sector (see Table ), and out of a total of ten goals and 61 objectives, highlighted 13 population health objectives (see Table ). Particular priorities included cancer, cardiovascular disease, diabetes and mental health. The New Zealand Health Strategy has set out the strategic direction for the development of health services in New Zealand, based on a model for improving health outcomes. The lesson for Australia is that Australia should have a national health strategy, including a national primary health policy. Many providers have argued this for years – to deaf Commonwealth ears.
New Zealand Health Strategy Priority Objectives to Reduce Inequalities
New Zealand Health Strategy Service Delivery Priority Areas
New Zealand Health Strategy Principles
New Zealand Health Strategy Population Health Objectives
A New Zealand Disability Strategy was also developed, with fifteen objectives [15
]. A significant policy shift towards population-based approaches was signalled by the National Health Committee [16
], based on a paper by Coster and Gribben who proposed new primary health organisations with a focus on population-based health outcomes [17
]. The New Zealand Health Strategy and Disability Strategy both informed the Primary Health Care Strategy, published in February 2001 [18
]. The latter is a key document and promised to achieve a new vision over five to ten years with the following:
• People will be part of local primary health care services that improve their health, keep them well, are easy to get to and coordinate their ongoing care
• Primary health care services will focus on better health for a population, and actively work to reduce health inequalities between different groups.
Recent health policy developments in primary health care in New Zealand are redefining general practice to align with the 1978 Alma Ata Declaration [19
]. The vision involves a new direction for primary health care with a greater emphasis on population health and the role of the community, health promotion and preventive care, the need to involve a range of professionals, and the advantage of funding based on population needs rather than fee for service. This reflects a desire by the New Zealand government to reduce health inequalities between different population groups, and protect and promote the health of its population. Central to the Primary Health Care Strategy are the new arrangements for primary health care, which are administered through the DHBs, supported by the Ministry of Health, which is the national policy advice, regulatory, funding and monitoring agency (see Figure ). Primary Health Organisations (PHOs) are the local structures for implementing the Primary Health Care Strategy, and have the following features, set out in the Minimum Requirements released by the Health Minister in November 2001 [20
The New Primary Health Care Sector. This diagram reflects the sector as envisaged under this Strategy, however, as noted previously primary health care practitioners will be free to decide whether or not they join a Primary Health Organisation
• 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 coordinated 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.
It is useful to clarify the relationships between IPAs and PHOs. IPAs, which were the original developments in organised general practice, have either been merged into or remain partially independent entities from PHOs. In general, and despite coming under the control of PHOs, IPAs have preserved the autonomy of general practice for both GPs and practice nurses. Whilst some loss of autonomy may be felt by rank-and-file GPs, this has been balanced to a certain extent by gains which organised general practice has made through the IPAs, and now especially through PHOs. The achievements have been significant in advancing the status and influence of general practice/primary health care. General practice, through PHOs, now has a much more important voice in its engagement within the health system, and particularly with DHBs, than was ever possible through individual general practice and general practice organisations.
The first two PHOs got underway in South Auckland in July 2002. To date 79 PHOs have been established with 3.72 million New Zealanders (93% of the population) enrolled. Cumming et al in a recent report note that there is a great variation between PHOs in terms of size, structure, age and context [21
]. As a generalisation, there are two main types of PHOs (Table ). Of the 77 PHOs established and studied as at April 2005, 38 were small with <20,000 enrolees; while these PHOs made up 49% of PHOs, they enrolled only 11% of the total enrolled population. Small PHOs tend to have difficulty in supplying management input within their organisation and meeting DHB requirements. Small PHOs are characterised by being made up of 76% access funded practices (see later); large PHOs are more commonly interim funded or mixed (72%) [21
]. The issues surrounding critical mass are both interesting and vital. They also reflect the Australian problem of trading off population for distance in service organisation models – and implicit in this is how catastrophic risk can be managed across a population (e.g. a flu pandemic). If either country accepts a system design that does not provide a critical population under a population resource funding formula then we are setting up primary care to fail.
Characteristics of PHOs (simplified)
The NZ Government has committed additional base funding of $NZ284 million for 2004/05, $NZ338 million for 2005/06 and NZ$425 million for 2006/07 to implement the Primary Health Care Strategy. The PHOs are funded under two formulae – Access and Interim. PHOs serving areas with people who have high health needs, i.e. Maori, Pacific Island people and those on low incomes, receive a higher level of funding, according to what is known as the Access Formula. Patients belonging to these PHOs are able to get free or very cheap visits to their GP. For example, a child under 6 years will pay NZ$14 to the practice; other age groups will pay between NZ$20–27 per consultation (normal total fee is approximately NZ$43–50). They also pay no more than $3 for a prescription. The remaining PHOs that are not on the Access Formula are funded according to the Interim Formula – so named because the Government would eventually like to see all PHOs on the Access Formula. Most patients belonging to PHOs on the Interim Formula will have to pay much the same as they do now to go to their GP. Subsides available with Community Services Cards and High Use Health Cards will still apply, but are intended to be phased out over time. Whilst historically the percentage of government funding of general practice has been low, it is now increasing but there still remain high and widely variable levels of co-payments [22
Care Plus is a new service that was introduced to Interim PHOs in July 2004. It is aimed at people with significant chronic illness who need to visit a GP frequently. The service covers such conditions as diabetes, heart disease, mental health, terminal care and others. Care Plus provides an additional 10% capitation funding for these patients and 8.5% of PHO enrolled patients are eligible for Care Plus [23
]. The key criterion is that the person is expected to need at least two hours of clinical contact time in the coming six months. All Care Plus patients will have a care plan developed for them, including quarterly reviews to check on health status, treatment, medications etc. The government introduced Care Plus around the time of the Interim Formula to assuage the concerns of the GPs who were not on the Access Formula and who felt that their high-needs patients were being unfairly disadvantaged. Care Plus aims to improve the management of chronic conditions, reduce health inequalities between population groups, improve teamwork within PHOs, and lower the cost for high-need patients [24
]. An early evaluation suggests that this is a successful programme, with moderate levels of satisfaction among patients and the primary health care team. In the experience of the pilot practices, the time involved for patients and practitioners, patient apathy towards a more active role in their own care, and staffing, were the main barriers to implementation of the programme [25
However, not all of the primary health care services will be supplied by all PHOs, and not all of the services will be subsidised by the government. From 1 October 2003 low cost healthcare for those under 18 years of age has been administered through the PHOs, and this was extended to cover all enrolled people aged 65 years and over from July 2004. Progressive introduction of the new funding means that those aged 18–24 were covered from 1 July 2005, and for 46–64 years are covered from 1 July 2006.