As part of its Better Sooner More Convenient health care strategy, the Government is encouraging GPs and other health providers to group together into Integrated Family Health Centres (IFHCs). This business model is expected to provide benefits to both patient and practitioner.

The patient benefits from having access to a wide range of medical services under one roof, and the practice owner can share support, administration staff and infrastructure costs with others. In some cases, practitioners will own the practice itself, and outside investors own the bricks and mortar.

The strategy is based on sound economic and business theory. Reality, however, is another matter.

The New Zealand Medical Association reports that progress of current IFHCs is inconsistent. Our own research, and industry experience, also indicate that well-managed smaller GP practices (even sole operators) often produce greater revenue on a per full time equivalent GP basis than multi-GP groups.

Before leaping into an IFHC model, we recommend practitioners take the following considerations into account:

• Capital investment in infrastructure would likely be significantly higher than for smaller practices. Purpose built premises, and new patient management and IT systems would be among the likely purchases. Therefore a compensatory risk premium should be built into the expected return on investment. In its position statement, the New Zealand Medical Association has already acknowledged that the move to IFHCs will require considerable financial outlay and called for the Government to provide incentives.
• Although economies of scale could be achieved, moving to a multi-GP practice almost certainly incurs the additional cost of business managers and administrative support staff. Although this could free up practitioners to concentrate on providing services to patients, some practitioner involvement at governance level would still be crucial to the success of the organisation.
• The level of control each practitioner/investor should have or would like to have on overall governance and day-to-day operations must be discussed and agreed on beforehand.
• Initial setup costs to ensure risks are managed and relationships between all parties are transparent can be significant and will typically include property developers, financiers, project managers, lawyers and accountants.
• If practitioners retain a financial interest, appropriate business structures need to be selected to meet the needs of the investors. For example, if the entity were to operate at a loss for the first few years, would investors have access to the losses?

In conclusion, a sound business case needs to be substantiated to justify a move to an IFHC, in addition to the benefits for patients. In our view there is significant work to do to minimise risks and ensure that desired outcomes will be achieved.

Further enquiries, please contact:

Pam Newlove

T +64 (0)9 308 2579

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