Opinion: Legislation introducing the UK’s first universal health system, the National Health Service, was adopted in 1948. However, this historic milestone had been headed off a decade earlier in New Zealand. In 1938, the first Labour government legislated for a universal public health system as part of its groundbreaking Social Security Act.
Secondary (hospital) care was provided by government-owned public hospitals. In communities, however, primary care was overwhelmingly provided by general practitioner-owned for-profit practices. There was also some limited primary care directly provided by the health department practices in isolated and poorer communities.
Downwards ownership trend
The prevalence of GP practice ownership continued for decades. In the 1990s there was some growth of not-for-profit non-government organisations providing primary care for poorer populations, rural and urban, but this didn’t affect the prevalence of GP ownership.
However, since the 2000s this has been increasingly challenged. There has been a generational shift among younger GPs, who want a better work-life balance. This is harder to achieve if one has to also run a small business such as a general practice.
It is also expensive for younger GPs to buy into a practice. This is made more so by having to repay high medical student loans and often growing family responsibilities. This generational shift is strengthened by an increasing feminisation of the GP workforce. General practice is the only larger branch of medicine to have more than half of its doctors female. Female GPs tend to work fewer regular hours than their male colleagues.
The net effect is that though there are still new GPs who wish to become practice owners, they are well outnumbered by the amount of older GPs retiring. Compounding that predicament for GP practice ownership is that just over two-thirds of GPs said they intend to retire in the next 10 years.
This precariousness has been eased by existing partners buying the equity of their retiring colleagues. But this could only mitigate by delay. Today most GPs working in GP-owned practices are not the owners – they’re either salaried employees or engaged contractors. About 70 percent of all GPs work in about 1,000 GP-owned practices.
The Royal New Zealand College of General Practitioners undertakes workforce surveys (previously annual, now biennial). Its 2022 survey revealed that GP practice owners were a declining minority. In 2014, nearly 40 percent of respondents were practice owners. This declined to 34 percent in 2020. In 2022 it declined further to 31 percent.
Consistent with this is that the number of GPs reporting that they worked in a GP-owned practice was falling. It was 73 percent in 2015, dropped to 69 percent in 2020, and further falling to 64 percent in 2022.
Filling the gap
So what is filling the practice ownership gap? In part, at least, it is corporates. The number of GPs reporting they worked in a fully or partially corporate-owned practice has doubled since 2015. In 2022, it was 14 percent, raising the question of whether general practice is drifting from ‘small business’ (GP-owed) to relatively ‘big business’ ownership.
The two leading private healthcare corporations are Green Cross Health and Tāmaki Health. Both own general practices but the former also has pharmacies (Unichem and Life) and the latter also owns urgent care clinics (White Cross).
Green Cross has attempted to buy Tāmaki Health’s medical practices in a joint venture with Pacific Equity Partners. But it pulled out in 2021. In 2022, Sydney-based Mercury Capital doubled its shareholding in Tāmaki Health to 99 percent.
Tāmaki Health owns 49 medical (branded as ‘Local Doctors’) and urgent care practices.
Dr Kantilal Patel provides an example of the practices now owned by this corporate. In 1977 he and his wife Ranjna established their practice in South Auckland’s largely low-income Ōtara. Forty-five years later it was purchased by Tāmaki Health thereby securing its future, for now at least.
“We make ourselves available for longer than most other medical clinics, so we can take better care of you,” the couple say on their practice’s website. “Local Doctors specialises in the health and wellbeing of people in our communities with high health needs and often low incomes.”
Green Cross Health is a more interesting corporate in terms of its future direction. It has two revenue-generating streams (divisions) – from more than 340 pharmacies and 60 medical centres (branded as ‘The Doctors’ or ‘House Calls’). It employs more than 400 doctors and nurses each, along with more than 20 nurse practitioners.
According to Green Cross’ annual report for the year ended March 31, 2023, pharmacies earned just over three-quarters of its revenue ($360m) and medical centres were nearly one-quarter ($113m). However, there appears to be a slow but discernible shift from pharmacy to medical income. Whereas the latter’s operating profit increased by 1 percent, the former’s decreased by 41 percent. Since 2016 its number of medical practices has doubled.
Auckland GP Dr Gary Wu is a GP who linked up with a corporate (in this case Green Cross) to establish a profitable ‘greenfield’ practice. This contrasts with the sale of the Patels’ practice to Tāmaki Health which is a ‘brown site’ purchase (purchasing an existing practice).
The 44-year-old Dr Wu has a 70 percent ownership stake in The Doctors Greenlane, which he and Green Cross Health established in 2021. It was a long slog to find the right premises for the Greenlane clinic, he tells NZ Doctor. “Prior to this I checked with so many sites. I failed more than 10 times.”
Along with stabilising and expanding the practice, it offers him other opportunities, such as involvement in research.
Changing profitability requirements
Corporate general practice ownership is influenced by profitability requirements. In 2014, Green Cross Health purchased Access Community Health which had been established in 1927 and was providing in-home nursing, personal care, rehabilitation, social support and household assistance to more than 33,000 people. It became Green Cross’ third division alongside pharmacy and medical.
But, in February 2023, it sold this division to Australian private equity firm, Anchorage Capital Partners, for an estimated net gain of $30m. This decision was driven by profit maximisation.
In its financial year ended March 31, 2022 the community health division increased its operating revenue by 12 percent. Its operating profit (before interest and tax) increased by $1.9m to $5.6m.
Compare this with the other two divisions. The much larger pharmacy division increased its operating revenue by 16 percent and its operating profit by $11.7m to $35.9m.
The smaller but expanding medical division increased its operating revenue by 35 percent and its operating profit by $6.6m to $16m. A financial call was made that it would be better to sell the community health division to use that return to further invest in the more profitable pharmacy and medical divisions.
From drift to stealth?
In its 2023 annual report Green Cross Health discussed its future focus in respect of medical clinics. One focus is network and patient growth through targeted purchases, partnerships and organic growth. Dr Wu’s arrangement is an example of this. In other cases, it involves ‘brown site’ shareholding agreements with existing GP partners or continuing to employ those who are not retiring as employees or contractors.
Another focus was to work closely with funders. The predominant funder of primary care is Health New Zealand – Te Whatu Ora. Most of this funding is allocated to primary care organisations.
These are responsible for ensuring the provision of essential primary health care services to their defined communities. This is either directly or (usually) through its contracted providers (mostly general practices). Health New Zealand approval is required to establish or change membership of a primary care organisation.
Overwhelmingly primary care organisations are geographically based. This is important because they need to know the health status of their communities. The exception is the National Hauora Coalition, which has a national mandate. Its more than 60 medical practices are in Northland, Auckland, Waikato, and Whanganui.
National Hauora Coalition is a Māori-based primary care organisation whose focus also includes Māori, Pacific, new-migrant and other high-needs populations. It is the only primary care organisation operating across three of the four Te Whatu Ora regions. If Green Cross had succeeded in getting full Te Whatu Ora approval, it would have extended into the fourth region (South Island).
Green Cross recently sought approval from Te Whatu Ora for most of its more than 60 general practices to switch from their current primary care organisation to the National Hauora Coalition. The stated objective is to streamline the running of the company’s medical services.
Five Green Cross practices were already with the National Hauora Coalition. There are 48 practices currently located in 11 other primary care organisations which the corporate wanted to transfer to the coalition. The remaining 12 were unaffected. If full approval had been granted, National Hauora Coalition would have increased its practices to 115 with Green Cross comprising 46 percent of them.
Future of general practice ownership
Te Whatu Ora had been asked to approve 54 requests from practices to shift to National Hauora Coalition, 48 of which were from Green Cross. However, it only approved 29 of them. These shifts are to occur by July 1.
The approved practices are all in the same locations of the existing National Hauora Coalition practices thereby preventing National Hauora Coalition from setting up south of Whanganui. They cover about 185,000 enrolled patients. Te Whatu Ora’s expressed rationale was the need to ensure continuity of services for communities and avoid causing disruption and service fragmentation.
The future of general practice ownership is uncertain. Though GP ownership is still the dominant form of ownership there is a slow but discernible downward trend due primarily to the unattractiveness of ownership to more and more younger GPs and the ageing of the workforce.
Unfortunately, under successive governments, there has been a policy vacuum allowing this situation to drift. In this environment, some primary care organisations, such as ProCare (Auckland-Northland), Tu Ora Compass (greater Wellington) and most recently Pegasus Health (Christchurch), have felt it necessary to buy a small number of existing practices.
This vacuum has enabled corporates to enter into a market that requires regulation. It is clear the corporates have good conscientious people working for them, particularly their doctors and nurses.
But the bottom line is that it is about profit-maximisation and expansion. Investor interests determine what they do. Both Green Cross and Tāmaki Health have chopped and changed not on the basis of healthcare needs but profitability. It is not a reliable formula for sustainable general practice.
District health boards were an option as practice owners. West Coast DHB saved general practice on the Coast by directly employing GPs. Taranaki DHB was starting to move in this direction, particularly around Hawera. Counties Manukau DHB was seriously considering directly employing GPs because of the lack of GPs and the high health needs of its population. With the abolition of DHBs, their successor, Health New Zealand, is a possibility. But, to date, this is another policy vacuum.
Whether GP-ownership’s decline accelerates or not, the indications are that the winner will eventually be corporate ownership. Unless something of significance changes, much of general practice will be provided by relatively big, rather than small businesses. Green Cross’ endeavours to concentrate its general practices in the only primary health organisation with a national mandate suggests a shift from drift to stealth.
Whether increased corporate control of general practice eventuates by either means, the absence of debate over whether this is a good thing and the presence of a policy vacuum is a bad thing.
Te Whatu Ora is also promoting, on its website, private companies providing electronic access to individual health records, likely with much of that information stored on overseas servers.
This analysis is long overdue. Thanks for taking the time and sharing your expertise. The health sector is replete with public-private entanglements. Some of them are pretty clear-cut, like the private hospitals. But others, like the ones you mention, and, say, radiology cross over to the public sector. On the face of it, not much wrong with that. After all, GPs generally regard themselves as “small business owners” (of a particular type). The problem is where the private actor is driven by financial imperatives. In the case of radiology, you could imagine quite a lucrative business drawing on the public purse and being linked with private clinicians with an interest in the business. But a private radiology provider responding to clinician requests, on the face of it, need not be any different from a public one (and maybe even more efficient). When I was on the DHB senior staff told us that the corporate-owned practices had a very strict bottom line whereby they quickly referred to hospital any patient that went beyond a certain level of complexity. Well, a good GP might do that as well, but that would be on clinical or professional grounds not financial ones. The other concern I have is the involvement of private equity. These outfits are not involved in the sector for anything other than financial leverage – Tony Ryall is chair of the Tamaki outfit I think, so he knows about this – and we just cannot have our system held to ransom by financial considerations. Economic considerations, yes (like ensuring a viable and functional service), but financial no (leverage, playing with debt, running down assets etc). What’s the solution? Basically, the professional bodies have to wake up. Their model of ethical and professional practice is under threat, and they don’t seemed too worried about it!
The general thrust of the global economy since the 80’s neo-liberal coups has been to increase inequality, that is widening the wealth gap and growing the multi-billionaire class. Privilege is becoming the goal of ‘who we are to become’ even more than in the colonial centuries where privilege had been established and mainstreamed. This privilege has been fundamentally challenged in our time and it is clear now that there is no future in ‘privilege’ as a global being. Hence the open, war-like politics / economics developing stronger ways of feeding the rich and starving the poor. Making profit maximisation in medical practice as described here is an interim process in developing this multi-bilionaire’s world.
When I moved into a flat in Central Auckland I needed to find a new GP practice. I initially enrolled a Shortland St Drs but later found that the practice is owned by Omni Health, a local company, and Sandford Health which is one of the largest health providers in the USA. I immediately changed to another private practice as I object to the fees I pay alongside the government subsidy providing financial input to an overseas private for profit health provider. I wrote to Andrew little suggesting that the labour govt reconsider how GP practices are funded and regulate the predatory take over of GP practices by local and overseas, for-profit, companies. No response.