GUEST BLOG: Ian Powell – Corporate general practice ownership highlights unintended perverse outcome

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A public controversy has erupted over a Lower Hutt general practice that has wider implications for primary healthcare in Aotearoa New Zealand.

It involves the growing corporate ownership of general practices and a perverse outcome linked to the capitation funding system.

The understanding of what is behind the controversy has quickly evolved helped by good investigative health journalism from Radio New Zealand, NZ Doctor and The Post.

Background to corporate general practice ownership

Over several years there has been a steady decline in the number of general practitioners who are practice owners.

Concurrently there has been a steady growth, although not at the same rate as the above-mentioned decline, in corporate businesses ownership and operation. The two main corporates are Green Cross Health and Tāmaki Health.

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In an article published by Newsroom (29 February) I discussed what was behind this increasing profit-driven corporate ownership: Stealth takeover of general practice is about profit, not healthcare.

Subsequently (2 May), in Otaihanga Second Opinion, I expanded on this concern in the context of a leadership policy vacuum: Policy vacuum enables for-profit corporate ownership by stealth.

The Lower Hutt catalyst

The catalyst for this blog was the report by Radio New Zealand journalist Ruth Hill (2 July) on a critically short-staffed general practice in Lower Hutt which was forced to stop doing face-to-face consultations, except in urgent cases: Regular face-to face consultations stopped.

All that can now be offered are telehealth and video consultations. These can be valuable aids for GPs but only as a supplement to, not a substitute for, face-to-face consultations.

If used as a substitute they are very poor ones that provide lower quality diagnosis and treatment thereby short-changing patients.

Compounding the crisis is that patients enrolled at the High Street Health Hub have been unable to go to other practices because their enrolment books are closed.

Dr Bryan Betty: GP shortages not unique to Lower Hutt; however…

The focus of Ruth Hill’s report was on GP shortages. As General Practice New Zealand Chair Dr Bryan Betty observed, this situation is not unique to Lower Hutt.

However, there is much more in the narrative behind this crisis than workforce shortages.

Going beyond workforce shortages

Later that same day (2 July) veteran health journalist Martin Johnston, writing for  NZ Doctor, took the issue further (paywalled): Turbocharging telehealth to replace quitting GPs.

Green Cross Health: one of the two biggest corporate practice owners

He reported the concern of the main Hutt Valley Primary Health Organisation (PHO), Te Awakairangi Health Network, over the “sharp increase in telehealth”  at the practice because “…it lost most of its doctors in a year.”

In May 2023 the practice had been purchased by Green Cross Health, one of the two biggest corporate owners of general practices in New Zealand.

Since February this year it has lost all its four vocationally registered GPs (it now only has one provisional general registrant under the supervision of two specialist GPs at another practice).

Late last year Green Cross Health applied to Health New Zealand (Te Whatu Ora) to transfer all its general practices from Whanganui south from their existing PHOs into the only national PHO (the National Hauora Coalition).

Its practices north of Whanganui were already in the National Hauora Coalition. If Green Cross’ application was successful its influence within this PHO would have significantly increased.

Te Whatu Ora initially approved the request (although excluding the South Island). But, following a compelling submission from the Te Awakairangi Health Network, it rescinded its decision for the four Green Cross practices in the Hutt Valley.

Drilling down further

Journalists drill down further

Radio New Zealand journalist  Kate Green then took the issue even further (4 July): Workforce shortage not the sole reason for GP loss.

She reported the Te Awakairangi Health Network PHO commenting that GP shortages was not the only reason for the new Green Cross practice’s dramatic loss of GPs. It had also lost its nurses who had resigned on mass.

Instead, the PHO pointed the finger at what had occurred in the practice under its new ownership.

More context was provided in a Rachel Thomas front page article, under the heading ‘Hutt health in crisis’,  in The Post (6 July): Struggling to see a GP.

The crisis was well-summed up by a frustrated patient reported as saying “I understand the shortage of GPs and the difficulty of getting GPs, but High Steet Health Hub had GPs. They lost them…all of them.”

Green Cross is a profitable business venture. In addition to its general practices, it also owns over 340 Unichem and Life pharmacies. In its last financial year it recorded an over $45 million net profit after tax.

Thomas reports the worries of Te Awakairangi’s recently retired respected chief executive Bridget Allan over the impact of corporate ownership of general practices as opposed to practices that were locally owned and operated by GPs or iwi.

In her reported words:

From observing what has happened in the Hutt Valley over the last eight months, I don’t think the corporate ownership model has been looking after patients responsibly.

In a nutshell

This leads to the critical question: why has corporate ownership led to the crisis at its latest Lower Hutt practice with its mass loss of doctors and nurses. At the heart of it is the drive of corporates for profit-maximisation.

One means of achieving this overiding objective is the use of the capitation funding formula for general practice in a way that was not contemplated by its designers.

I have previously discussed the capitation system in Otaihanga Second Opinion (24 March): Capitation should not be decapitated.

In essence, capitation is per capita funding of practice enrolled patients supplemented by age and gender factors.

The more the number of enrolled patients, the greater the funding revenue to the corporate owner. The big variable is the length of patient consultations.

The shorter the consultation, the greater the patient throughput, the greater the number of enrolled patients, the greater the ring of the metaphoric cash register, and the greater the work pressures and dissatisfaction of the GPs and nurses.

Here endeth

Here endeth the lesson

Rather than being a public good, healthcare becomes a commodity. Surely this is perversity at its most naked best!

Here endeth this rudimentary lesson in profit-maximisation incentivisation which is at the core of corporate practice ownership.

 

 

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Otaihanga Second Opinion

5 COMMENTS

  1. Lower Hutt sounds like a great opportunity for a couple or three young GPs to start a practice with almost guaranteed success.

  2. True its an opportunity but the big threat they face is they will be attempting to compete against a corporation with a $43 million profit, war chest.

  3. Health, Education & Welfare are NOT government responsibilities that are amenable to the profit focused “business model” – any attempt to manage these aspects of government from this approach is ideology driven folly – end of story.

  4. look at the us experience of this process(and ‘unprofitable’ hospitals) it’s not fuckin rocket science…it’s once again a process that’s good for private equity but ordinary kiwis can fuck right off

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