Healthcare disruption as GPs association opposes new super-PHO

2026-02-19 - 18:17

The largely general practice-based primary health system has received a surprise jolt by the announcement that the General Practice Owners Association is establishing its own national primary health organisation, named ‘thePHO’. Existing PHOs have expressed angst over fear of disruptive destabilisation and fragmentation, but those general practice owners reportedly looking to join ‘thePHO’ are largely silent. Except Dr Paul Hunter. He is a specialist general practitioner who owns Torbay Community Doctor on Auckland’s North Shore. His existing PHO is Comprehensive Care, which he plans to leave and join ‘thePHO’. Hunter says the system needs a shake-up. In his view ‘thePHO’ is promising to do something different for the better, he says this month in NZ Doctor. “If people were satisfied with the status quo there wouldn’t be this deluge of people running in the opposite direction...” Default systems glue Particularly since the disestablishment of district health boards, PHOs have become the default glue that holds primary healthcare together. Unlike DHBs, they are creatures of policy, not statute. PHOs can come, go, be changed, or disappear at the whim of the health minister of the day. Except for the National Hauora Coalition, a Māori-led and whānau-centred informed organisation, the current fully registered PHOs have largely covered geographically defined populations. This is a strength that enables them to better perform their functions. Another strength is that PHOs are required to be non-for-profit charitable organisations. This prevents profit considerations from affecting their decision-making. Their formation was consequential to the introduction of capitated funding for general practices in the early 2000s. The system is largely based on the population size of patients enrolled in general practices. Consequently a critical function is dispersing Health NZ funding to each of the practices they are responsible for. But PHO functions go well beyond implementing capitation. There is also population health, supporting struggling practices, primary-secondary integration, and innovation (including data and digital transformation). Some of these less visible functions can involve what is called additional ‘flexible funding’. PHOs looked to be on the way out when, in 2020, the Health Simpson review of the health and disability system recommended that over time they be replaced by geographically-based localities and their ‘transaction’ functions be picked up by the DHBs (Counties Manukau, MidCentral and South Canterbury were already moving somewhat in this direction). However, the recommendation fell apart following the unexpected decision of the Labour government to abolish DHBs. Precedent-setting corporates Since then, PHOs have been in a form of limbo land. Existing in a government policy vacuum, they continue because there is no one else to perform their vital functions. However, this period of protracted role confusion was further disrupted last year by the decision of two of the three largest corporate general practice owners to seek government approval to establish their own PHOs. The first corporate cab off the rank was relative newcomer Tend Health, which owns over 20 practices in Auckland, Tauranga, Christchurch and Ashburton. Green Cross Health, the second largest and oldest corporate, was the second. It owns an estimated 60 practices including in Auckland, Waikato, Wellington, Christchurch and Queenstown. Tāmaki Health is the largest corporate but has not established its own PHO. Under its current management is not looking to do so. It is nearly 99 percent owned by Australian private equity firm Mercury Capital but American private equity firm TPG is planning to acquire ownership. Whether this leads to a change of position towards PHOs remains to be seen. The PHOs being established by Tend Health and Green Cross Health are technically ‘not-for-profit’ and technically at least arms-length from their creators. The corporates successfully applied to Health NZ to have their requests conditionally approved. However, subject to meeting further requirements, they won’t be able to officially function as PHOs until July 1. GenPro comes in from leftfield The General Practice Owners Association, GenPro, is neither a corporate nor a ‘for-profit’ organisation. It is a membership-based national organisation comprising over 475 general practices. These practices (nearly 50 percent of all owners) are mainly GP-owned but also have non-government organisation owners, including some small corporates. In its November 13 media release, GenPro argued that the establishment of a nationwide PHO would reduce bureaucracy so more funding can be allocated to front-line patient care. However, there was no accompanying analysis provided on how this would be done or how general practices would benefit more by joining it. GenPro chair Dr Angus Chamberlain put it this way: “GenPro is supporting the application for a new PHO that is firmly aligned with GenPro’s promotion of sustainable, high-quality and accessible primary practice for all New Zealanders.” By mid-December, GenPro was reporting that 116 general practices, representing about 833,000 enrolled patients, had expressed interest in joining its proposed new PHO. It asserted that if all 116 did join, its PHO would become the largest in the country covering around 16 percent of the system’s total enrolled population. The corporate PHO applications had already triggered much disruption among the existing PHOs. Last year, more than 150 general practices had given exit notices to their PHOs, effective from July 1. This included around 110 practices leaving more than 20 PHOs in order to join ‘thePHO’. However, if practices were not happy with the new arrangement there is a ‘Plan B; return to their current PHO. In fact, in February, Health NZ confirms the number of exit notices to join GenPro’s PHO is now down to 97. PHO viability threatened Whatever the eventual number, this level of turnover poses serious risks to the viability of the largely geographic population-based PHOs. It does not take many practice departures to threaten viability. Health NZ has acknowledged this disruption risk. The experience of the impact on the Hutt Valley’s Te Awakairangi Health Network PHO provides an early example of the viability risk. It had 18 practices, two of which were fully owned by Green Cross Health. The corporate formally advised that its two practices would exit the PHO, effective this July. This was sufficient for Te Awakairangi Health Network to conclude that its viability was threatened and consequently, in October, merged into the larger Tū Ora Compass PHO covering almost all practices in the rest of the greater Wellington region. It also poses a challenge to general practice collaboration on the Kāpiti Coast where I reside. There are 10 general practices south of Otaki. One (Team Medical in Paraparaumu) is 49 percent Green Cross-owned. Team Medical has also given notice of its intention to exit its existing PHO (Tū Ora Compass) in July. This does not affect the PHO’s viability because of its greater critical mass, but it does pose an unhelpful relationship risk. Team Medical also provides the only urgent care service in Kapiti. Further, it provides after-hours cover for all the Tū Ora Compass Kapiti practices. This local fragmentation creates an unnecessary awkwardness in the relationship. It also throws into doubt whether Team Medical can continue to participate the PHO’s continuing medical education activities organised for its practices. Flexible funding, second thoughts and widening tension PHOs are nationally represented by General Practice NZ. GenPro’s announcement that it was going to establish its own PHO came from leftfield taking General Practice NZ by complete surprise. Not a relationship-building action. General Practice NZ, including through its president and Porirua GP Dr Bryan Betty, has increasingly rung alarm bells about the expected disruptive outcomes, including undermining the strength of PHOs being based on geographic populations, should GenPro achieve its objectives. PHOs are reporting that some practices that were intending to exit in July are now having second thoughts. Unsurprisingly tension is beginning to emerge between the two bodies that have previously enjoyed a respectful relationship. Recently General Practice NZ has warned these practices to make sure they undertake “due diligence” over the above-mentioned flexible funding. Specifically they should conduct a thorough assessment of what flexible funding they will and won’t receive. The catalyst for General Practice NZ’s due diligence warning was that one of the approval conditions for GenPro’s PHO includes top-slicing flexible funding (redirecting part of an existing funding pool before it reaches providers) to it for the 2026-27 year. This is to ensure the continuity of current PHO clinical patient services that are paid for through flexible funding. It is a ‘transition risk management’ measure. But it does mean that exiting PHOs that currently know how much flexible funding they currently receive may not know at least for their first 12 months with ‘thePHO’. The Auckland-based ProCare is New Zealand’s largest PHO. Its chief executive Bindi Norwell reports that it is in regular contact with practices that have given exit notices and that some are reconsidering their plans due to concern over the flexible funding issue. Andrew Swanson-Dobbs is the chief executive of WellSouth PHO (Otago-Southland). He observes that some practices that have already filed exit notices with it to join ‘thePHO’ are now having second thoughts due to the impact the move could have on services they receive through flexible funding. He adds that exiting practices won’t receive flexible funding for at least a year. What sits behind GenPro’s actionTop of Form? In response to this concern, an apparently worried GenPro is presently discussing flexible funding with Health NZ. Health NZ says it has received 97 exit notices from practices seeking to join the GenPro-led PHO, but “a number of these practices have indicated that their final decision on moving is still to be confirmed”. The actual number of practices joining ‘thePHO’ should become clearer in April, when GenPro’s application is expected to go unconditional. Tend Health and Green Cross Health provided the precedent for GenPro to lever off but this does not explain why the association has done it. What sits behind its surprise decision to push to establish its own PHO is unclear. Its original above-mentioned media announcement was based on unsubstantiated assertions, including how its PHO would do better than existing PHOs. There is certainly discontent among some general practices with their current PHOs. But much of this has to do with the uncertainty PHOs have experienced over their future since the release of the Simpson Review on the health and disability system. For six years they have been largely flying blind, struggling in uncertain limbo due to the harmful effects of a government policy vacuum on their role. PHOs vary considerably in size from small to large. This struggle has been greater for the smaller PHOs with their smaller critical mass of both practices and enrolled patients. The three bigger corporate practice owners are not behind this move. Tāmaki Health has not expressed interest in establishing its own PHO while both Green Cross Health and Tend Health are establishing them for their owned practices. If anything the GenPro initiative is a potential competitor to their expansion objectives. However, there are small corporates who are also GenPro members and likely to be supportive of ‘thePHO’. OmniHealth owns 20 practices throughout the North Island and in Canterbury. It has given notice that its practices will exit their current PHOs and move to ‘thePHO’ should Health NZ approve the application. There is also a view that another influencer within GenPro is what is called ‘old school GPs’ nostalgic for an earlier pre-PHO era. In the 1990s ‘independent practitioner associations’ were formed in response to the then government decision to base the public health system on competitive market principles. The larger ones were often quite business entrepreneurial in their approach and also profitable. That market system didn’t survive the 1990s. Independent practitioner associations were superseded by not-for-profit PHOs. In fact, some practitioner associations themselves transitioned into PHOs. There is irony in the fact that that the independent practitioner association national council was renamed General Practice NZ which, in turn and over time, morphed into becoming the national body of PHOs. The future of primary care and PHOs is uncertain. What is certain, however, is that if GenPro’s PHO application is approved then disruption and destabilisation are the likely outcomes. The only uncertainty is the extent. Dr Paul Hunter, however, is unfazed. “It might be an unintended consequence of the change,” he tells NZ Doctor. “But that’s a government and PHO problem and not mine. If they want to allow this to turn into a patient problem, that’s on them.” Dr Hunter is both confident and bold, but not necessarily wise. There is a legitimate discussion to have over the number and size of PHOs. However, a key strength of PHOs is being close to and familiar with the health needs of geographically-based populations and their general practices. They will always have a better understanding of these needs than distant national PHOs operating in a scattered patchwork. GenPro needs to think relational over these matters and remember to be careful what it asks for – it might get what it asks, with all the unintended consequences.