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PHOs are the mechanisms through which DHBs effect the Primary Strategy. Though DHBs “provide the opportunity for public participation in decision-making” (Ministry of Health, 2002b, p. v), PHOs provide, and are required to provide, an opportunity for participation at the local level. This section outlines PHOs, their opportunities, and challenges.

At a very basic level, a PHO is a non-profit organisation of primary health care practitioners (such as doctors, nurses, and health promotion workers) and providers (such as medical centres) working together to provide services that improve and maintain the wellbeing of an enrolled population. Though each PHO must include at least one general practitioner (GP) (Ministry of Health, n.d.c), membership by any practitioner or provider is voluntary. PHO decision-making must involve enrolled members and the organisation’s community. PHOs were selected as the mechanism through which DHBs efect the Primary Strategy because they are believed to increase access to primary health care and, thus, create a healthier population (Ministry of Health, n.d.c). As of July 1, 2005, 79 PHOs had been established (Ministry of Health, 2005b).

PHOs are funded by DHBs for the provision of primary-level services to enrolled members. Non-PHO practitioners and providers are funded through state-sourced General Medical Subsidy (GMS) and co-payments (user fees). To receive the state-sourced funds, a GP must see in person a patient who meets certain criteria (for example, holds a Community Service Card or High User Card; aged under six years) (Crengle, 1999).

In comparison, PHOs receive capitation funding as a per patient per annum grant with the aim of reducing co-payments and, thus, increasing financial accessibility (Coster & Gribben, 1999; De Raad, 2003). Capitation funding has been utilised as a means of containing both cost and risk, whilst encouraging the population approach to primary health care (Coster and Gribben, 1999). By removing the requirement for doctor-delivered service, over-servicing can be reduced and resources re-allocated. An argument for capitation is that it, theoretically, should support the provision of high quality service, health promotion, and preventative care. By creating an environment that encourages low expenditure outputs through a healthier population, PHOs should provide these health enhancing services to reduce usage. However, should co-payments be required to maintain profit margins, any positive effects are likely to be lost.

PHOs will be funded through ‘Access’, ‘Interim’, or combination contracts until 2007. Access-funded PHOs provide lower cost or free GP visits for all enrolled members, while Interim-funded organisations provide the same services for members aged under 25 and over 64 (MidCentral District Health Board, 2005a). Under Care Plus, additional resources are available for PHOs providing services to patients who have acute health needs or suffer chronic or terminal illness (Ministry of Health, n.d.a). In addition, PHOs can access quality payments (Ministry of Health, 2003a), enrolment funding, capitation funding aimed at health provision for specific age groups and funding for supporting rural provision (Ministry of Health, 2005c).

Until July 2007, PHO funding is targeted, with deprivation and ethnicity being used as criteria for differentiating Access and Interim-funded PHOs (Cabinet policy committee minutes, 2005b). Access funding is provided to PHOs “in which at least 50 per cent of enrolees are living in deprivation deciles nine or ten areas and/or are Maori or Pacific peoples” (Cabinet policy committee minutes, 2005b, p. 1). As an example of ethnicity-based targeting, Access funding provides a “more effective targeting on health need” and reduces cost by up to $55.5 million (Cabinet policy committee minutes, 2005b, p. 2).

PHOs receive funding based on their enrolled population. In practice, this requires the maintenance of a register of patients who have both voluntarily enrolled and been seen within a given time period. At an individual level, use of a designated provider encourages continuity of care with its numerous benefits (Ministry of Health, 2001d, p. 8). At a general level, the register allows the population-based approach to be applied to PHO service delivery.

PHOs must ensure the provision of services to enhance the health of their enrolled population. At a minimum, services must “include approaches directed towards improving and maintaining the health of the population, as well as first-line services to restore people’s health when they are unwell” (Ministry of Health, 2001d, p. viii). PHOs must provide this minimum from the establishment phase, however the requirements are limited. For example, services to both casual and enrolled users must be available at all times and, for the vast majority, within 30 minutes travelling distance during normal working hours (Ministry of Health, 2003a). However, PHOs do not have to provide all services themselves and can, unless specifically contracted, define “the extent and type of specific services that they provide” (Ministry of Health 2003a, p. 2).

PHOs have “allocative efficiency”80, however, some may lack sufficient governance or technical capacity to guarantee similar outcomes as agencies with greater economies of scale (Ringold, 2005, p. 44). Nevertheless, accountability can be strengthened via either the “long-” (responsive policymakers influencing provider policy) or “short-route” (Ringold, 2005, p. 44). Short routes allow citizens “a direct influence on service providers” (Ringold, 2005, p. 44). PHO governing processes offer one such short route.

PHOs are expected to involve their communities in their governing processes. Per the Primary Strategy, PHOs must include “members of the community on their governing boards” (Ministry of Health, 2001d, p. 7). In addition, they must maintain processes which allow “community members and those who use services to influence the organisation’s decisions” (Ministry of Health, 2001d, p. 7). An evaluation of PHOs reveals that the short route is not working evenly between different PHOs. In addition to governance procedures, some PHOs have established advisory boards, whilst others are suffering “medical dominance” (Cumming et al., 2005, p. 14). For the accountability short route to work, PHOs must be willing to meet the challenges of participation.

The PHO concept in itself has a number of challenges. Of primary concern is the interpretation by some health practitioners of PHOs as simple extensions of the general practice concept. For example, the Mornington PHO is an Organised General Practice and member of the IPA Council of New Zealand (IPAC). Though a PHO, the Mornington facility maintains the general practice concept in the simplest way: it trades as the Mornington Health Centre. Furthermore, the idea of a primary health care team is abandoned. Instead, emphasis is placed on the “twelve doctors practising [sic] at the health centre” (Mornington Health

Centre, n.d.). The other major health professionals are mentioned as an aspect of “a fully equipped nursing station [sic]” (Mornington Health Centre, n.d.). However, this dominance of PHOs by GPs, in particular in the area of governance, reflects the experiences of the English National Health System (NHS) as an “extension” of the GPs’ “current central role in primary care” (De Raad, 2003, p. ii). It is expected that long term balance between GPs and other PHO members will be reached as other key players become more effective at instigating change.