Primary Health Networks Life After Medicare Locals

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1 Health Industry Group Primary Health Networks Life After Medicare Locals BULLETIN 2 25 MARCH 2015 HEALTH INDUSTRY GROUP BULLETIN a

2 Federal health policy is changing with 30 Primary Health Networks (PHNs) replacing Medicare Locals (MLs) from July 1. The Australian Bureau of Statistics has projected that the proportion of the population aged 65 years and over could increase from 13.5% to 22.3% between 2009 and This jump in the population is likely to increase the prevalence of chronic disease. According to the World Health Organisation, the global burden of chronic disease will account for almost three quarters of all deaths by This bulletin profiles the changes in Federal Health policies for primary health care services that are designed to address these issues, these issues, explaining the impacts and opportunities in transitioning to PHNs. From 1 July 2015, 30 PHNs will replace Australia s 61 MLs as the bodies responsible for preventative health and health planning February National Priority Action Council, National Chronic Disease Strategy, Australian Government Department of Health and Ageing, Canberra, p. 58, 3 Minister for Health media release 13 May 2014 HEALTH INDUSTRY GROUP BULLETIN 1

3 Medicare Local overview HISTORY OF MEDICAL LOCALS MLs are regional primary health care organisations established for addressing health needs and service gaps, including mental health, general practitioner (GP) and nurse primary care, after hours clinics and allied health like physiotherapists. They were formed in July 2010 when Health Minister, Ms Nicola Roxon, announced the merging of Divisions of General Practice (DGP) into MLs. This was part of the 2010 national health reform agreement to improve the coordination and integration of primary health care at the local level. MLs were progressively rolled out as not-for-profit companies in three stages: 19 MLs in July MLs in January 2012, and 24 MLs in July 2012 The former Labor Government also established the Australian Medicare Local Alliance in July 2012 as the peak body to support the network of 61 MLs. 61 MLs were rolled out from 2011 across the country to improve the coordination and integration of primary health care at a local level. HEALTH INDUSTRY GROUP BULLETIN 2

4 Medicare Local overview continued REVIEW OF MEDICARE LOCALS MLs have had several reviews including the Horvath Report which found MLs had different priorities, cultures, geographical limitations, resourcing constraints and poor communication. The Coalition s 2013 election policy statement noted the increasing prevalence of chronic disease, an increase in the aged population and the difficulty of accessing high-quality care in a timely fashion by many rural and remote communities. Following the change in Federal Government, several ML reviews were commissioned, including: Examination of Medicare Locals: Report of Factual Findings (14 February 2014) 4 by Deloitte, Independent Review of Medicare Locals (28 February 2014) by Ernst & Young, and Review of Medicare Locals Report to the Minister for Health and Minister for Sport (4 March 2014), by former Commonwealth Chief Medical Officer, Professor John Horvath AO (Horvath Report). The Horvath Report included a review of the functioning of MLs, an independent financial audit of MLs, 270 stakeholder submissions and interviews with key stakeholders. The Federal Government accepted all of the recommendations proposed in this report in its federal budget. The Horvath report found there was: a high level of fragmentation of ML services and a lack of integration between multi-disciplinary health professionals, and therefore a lack of power and moral authority to effectively engage and negotiate with Local Hospital Networks (LHNs), a failure to appropriately involve and engage GPs, a lack of clarity in what MLs were trying to achieve due to considerable variability in both the scope and delivery of activities in MLs, a current discharge of responsibilities as providers of services in direct competition to existing services, and a variability in financial performance of various MLs due to varying administration expenditure, varying levels of funds allocated to frontline services, inconsistent planned and actual budgets, cross program funding and varying accounting practices across all MLs. In brief, MLs had different organisational priorities, different organisational cultures, geographical limitations, resourcing constraints and poor communication practices February February 2015 HEALTH INDUSTRY GROUP BULLETIN 3

5 Transition to Primary Health Networks PHNs were created to put GPs in a more central role in primary care. A key motivation of the change to PHN s were introduced to reinforce the central role that GPs play in primary care, alongside the complementary role of other practitioners. PHNs are intended to be facilitators and purchasers, not service providers that directly compete with existing services. The exception is in circumstances of demonstrable market failure or an absence of services. As well, in order to ensure a smooth transition from MLs, PHNs may need to continue to deliver services in the first year of operation, and transition to a commissioning model in the second year. The federal budget announced: Commonwealth funding to the Australian Medicare Local Alliance would end on 30 June 2014, Commonwealth funding to MLs would end on 30 June 2015, and PHN operations would start on 1 July From July 2015, the $1.8 billion 7 Medicare Local scheme will be replaced by a smaller number of PHNs. They will be operated by entities that have been selected through a competitive tender process and have contracts with the Department of Health. PHNs will be established to network health services across local communities and improve coordination. 8 Their key objectives will be to: increase the efficiency and effectiveness of medical services for patients, particularly those at risk of poor health outcomes; and improve the coordination of care to ensure patients receive the right care in the right place at the right time. 9 Funding for PHNs will come from the existing resources of the Department of Health that had been provided to MLs. 10 The funding will be provided through four streams operational funding, flexible funding, program funding and innovation and incentive funding. 6 page 8, 26 February March February February February 2015 HEALTH INDUSTRY GROUP BULLETIN 4

6 Transition to Primary Health Networks continued Aligning PHNs with local health boundaries and with Local Clinical Councils is expected to deliver better health outcomes, greater purchasing power and flexibility. GEOGRAPHICAL REACH The 61 MLs will be replaced by only 30 PHNs. The larger scale of each PHN is intended to generate economies of scale to allow significant leverage and influence within their region and more broadly within their jurisdiction. It is expected to achieve less organisational variability, greater purchasing power, greater flexibility to accommodate for local circumstances and a reduction in duplication of effort. The boundaries of PHNs will be aligned with the 136 state based Local Hospital Network (LHNs) boundaries. This improves alignment between health services that are funded by different levels of government. It is intended to enable greater engagement with the LHNs and jurisdictional government on population health planning and a greater reflection of relevant local and community needs. The alignment is aimed at achieving deeper collaborative working relationships with public and private hospitals to reduce duplication of effort, and increase their ability to purchase care for the communities that they serve. In the past, MLs have avoided engagement with private hospitals and the private health insurance industry. GOVERNANCE Local Clinical Councils will be established with greater roles for GPs and allied health practitioners in multi-disciplinary teams in the primary care system. These Councils will be GP-led and will provide a direct link between clinicians and the PHN board to ensure effective decision making, particularly with reference to LHN relationships and developing clinical care pathways. The exact scope of the role will be determined following consultations and may vary according to local requirements. The PHNs will also establish Community Advisory Committees that will report to the PHN board and collaborate with Clinical Councils. These Committees are intended to encourage consumer involvement in PHN decision making, and are expected to be aligned to LHNs to ensure that primary health care and acute care sectors work together to improve patient care. The purpose of such Committees is to ensure accountability and relevance of PHN activities to local communities, promote patient centred decision making and needs identification, and act as a representative body to reflect the diversity and needs of the local population. HEALTH INDUSTRY GROUP BULLETIN 5

7 Transition to Primary Health Networks continued The Government considers that there will be a clearer vision and purpose for PHNs. By working more collaboratively with GPs, LHNs and other providers to establish appropriate and innovative care pathways that facilitate appropriate and innovative health care, it is said that better patient experience and outcomes will be achieved. It is intended that clear performance expectations will be tied to health outcomes and not activities. Contracts with the Department of Health will also set out clear performance expectations. The emphasis on making PHNs local and multi-disciplinary is expected to increase accessibility of health care services to rural and remote communities. In a meeting with then Federal Minister for Health, Mr Peter Dutton, and Assistant Minister for Health, Ms Fiona Nash, Chairman of the National Rural Health Alliance, Mr Tim Kelly, reiterated three principles that PHNs should adhere to in order to increase this accessibility: tailored to regional circumstances by involving people with well grounded experience of the challenges facing local communities, strongly multi-professional in terms of functions and governance, and tendered to groups or organisations that have the contacts, the will and the capacity to collaborate with Aboriginal and Torres Strait Islander people and their community controlled health services. 11 The Government expects that PHNs will have improved financial performance due to consolidated corporate functions that improve efficiency and provide economies of scale. This is aimed at maximising investment in frontline services. PHNs were set up to increase accessibility of health services to rural and remote communities February HEALTH INDUSTRY GROUP BULLETIN 6

8 Transition to Primary Health Networks continued PHN BOUNDARIES The PHN boundaries were announced on 16 October These new PHNs will expand over a vast 2.2 million square kilometres. 13 Across Australia, there will be 30 PHNs, with nine in New South Wales, seven in Queensland, three in Western Australia, two in South Australia and one each in Tasmania, the Northern Territory and the Australia Capital Territory. 14 PHN BOUNDARIES 15 The number of PHNs New South Wales Central and Eastern Sydney Northern Sydney Western Sydney Nepean Blue Mountains Queensland Brisbane North Brisbane South Gold Coast Darling Downs and West Moreton Tasmania Tasmania Northern Territory Northern Territory compared to MLs have been halved and will cover vast geographic areas. South Western Sydney South Eastern NSW Western NSW Hunter New England and Central Coast North Coast Victoria Western Queensland Central Queensland and Sunshine Coast Northern Queensland South Australia Adelaide Country SA Australian Capital Territory Australian Capital Territory North Western Melbourne Eastern Melbourne South Eastern Melbourne Gippsland Murray Western Australia Perth North Perth South Country WA Grampians and Barwon South West February February February Map can be found at HEALTH INDUSTRY GROUP BULLETIN 7

9 Transition to Primary Health Networks continued Successful PHN tenders are expected to be announced by 1 April POTENTIAL ISSUES WITH PHNs The PHN boundaries have been planned to cover very large regions. According to Deputy CEO of Western New South Wales Medicare Local, Mr Steven Jackson, it will be a challenge to deliver health services across such an expanse. Mr Jackson said he was concerned this would exacerbate problems with transport and a lack of access to services in the remote and rural areas. 16 WHAT WILL FOLLOW? The Federal Government released the PHN Approach to Market tender for the PHNs at the end of This closed on 27 January MLs operate as independent companies limited by guarantee and were all eligible to bid in the tender. Successful tenders are expected to be announced by 1 April To ensure proper development of the PHNs, the Department of Health is currently undertaking policy development work. A series of meetings will be held across the country with MLs, State and territory governments and peak health organisations to inform PHN policy development. The Department of Health has indicated that it will continue to work with MLs and PHNs to minimise disruption to services and patient care February HEALTH INDUSTRY GROUP BULLETIN 8

10 Heather Watson Swain Roberts Ren Niemann Tony Roccisano Partner Special Counsel Partner Special Counsel T T T T M M M M E E E T For more information, please contact your McCullough Robertson health industry contacts. Keep a look out for McCullough Robertson s next health bulletin or visit our Health site. HEALTH INDUSTRY GROUP BULLETIN 9

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