Un-Funding Rural General Practice

They’re the ones that would suffer…our elderly vulnerable community who are struggling with pensions, who are suddenly going to have to pay huge amounts of money for fuel to drive to Tauranga.

This was the response of general practitioner Dr Vicky Jones working at the rural Katikati Medical Centre to formal advice from Health New Zealand (Te Whatu Ora) that a proposed new model for funding rural general practices was to take effect on 1 July.

If confirmed it would see her practice reclassified within the Tauranga urban boundary thereby making it ineligible for the rural funding it currently receives.

Owing to a “notoriously” unreliable road, travel to central Tauranga can take 45 minutes to an hour. The absence of public transport between Katikati and Tauranga significantly adds to the accessibility problem.

Dr Jones advises that the loss of its rural funding contract was expected to lose the practice hundreds of thousands of dollars. The consequence would be forcing cuts to hours and services for its nearly 10,000 patients.

Her concerns are in the context of the underlying problem facing rural general practices which is that there has not been a consistent tool for funding them.

Rural general practices funding contracts

The story of this predicament, which included Dr Jones’ above-mentioned response, was broken on 22 April in a paywalled NZ Doctor article by experienced health journalist Fiona Cassie: Rural general practices risk losing funding contracts due to urban reclassification.

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There are two funding contracts for rural general practices. Although both are financially critical, the first (with Health New Zealand) is the most influential.

The second is with the Accident Compensation Corporation (ACC) which is Aotearoa New Zealand’s government-run no-fault personal injury insurance scheme responsible for providing financial and treatment support for injuries.

ACC funding contracts are divided into three separate categories – urban, rural and urgent care.

The criteria for each of these categories are formally independently determined by ACC. However, in practice and after a time lag, they follow changes to the Health New Zealand funding contract.

Using a blunt instrument to determine funding eligibility

The decision-making process for the Te Whatu Ora funding contract centres on what is generously described as ‘negotiations’ under the rather wordy title of the ‘PHO Services Agreement Amendment Protocol’ (PSAAP). PHO refers to Primary Health Organisations.

Health New Zealand’s position is that its current rural funding contract of around $26.5 million will not be renewed from 1 July if a new funding model is approved by PSAAP.

Fiona Cassie reports that this new model is being guided by a mechanism called the ‘Geographic Classification for Health’ (GCH). It was developed collaboratively by Otago and Waikato universities.

Developed in 2022 the GCH classifies a number of communities on the edge or ‘commuter’ zones of cities as urban, even though they were previously regarded as rural.

Similarly some practices in communities not previously recognised as rural for funding contract eligibility may become eligible.

On the face of it this seems fair. However, this is an illusion. The problem is that the GCH is a blunt instrument for such decision-making.

It was never designed for this purpose. Consequently the risk of making wrong and unfair decisions is considerable.

Snapshot

Hauora Taiwhenua Rural Health Network is a collective organisation to advocate for the health and wellbeing of rural New Zealanders. Under different names it has existed for around 30 years.

In recent years its activities have included publishing the ‘Rural Health New Zealand Snapshot’. It has just published 2026 edition indicates that there are about 43 practices with more than 200,000 patients currently recognised for rural funding that could be classified as urban under the GCH.

Dr Jo Scott-Jones is a general practitioner and clinical director of the Pinnacle Midland Heath Network (a PHO). Fiona Cassie reports his belief that:

“Katikati is a good illustration of why a blunt use of the unmodified GCH is problematic.” With practices also waiting to hear about the outcome of capitation reweighting, it was a stressful time for practices facing “all this uncertainty”.

Dr Vicky Jones comments that her practice would likely have to cut weekday hours from 6pm to 5pm and drop its 8.30am-to-midday weekend clinics. In her words:

They’ve always made a loss,always, but we’ve kept them going because they are a good service to our community.

Further, Cassie reports her warning that:

The practice’s ability to offer urgent care would also be affected, including time-intensive ACC services such as major wound sutures and fracture management, currently supported through rural funding.

“I just want to emphasise the massive knock-on effect that this would have for our patients.

“They’re the ones that would suffer…our elderly vulnerable community who are struggling with pensions, who are suddenly going to have to pay huge amounts of money for fuel to drive to Tauranga along a road that is notoriously dangerous and slow.”

According to Hauora Taiwhenua Rural Health Network’s survey of rural general practices under-investment was hindering recruitment of new staff and threatening retention of existing staff.

Many are also subject to seasonal population surges with nearly half extending their staff’s working shifts.

Consequences and what the way forward should be

The controversy was also reported in an article by Stuff journalist Mildred Armah (25 April) under the eye-catching headline of ‘Life or death’: Fears patients could lose local care under rural funding review’: Life or death!

The concerns raised by Dr Vicky Jones feature with an additional observation that more patients would be pushed to either Tauranga Hospital or after-hours services further away.

Particularly for low income patients she imagined that this was “…going to cause quite a lot of distress in our community”.

Should Katikati Medical Centre lose its rural status by being re-classified as urban its eventual financial loss will be around $200,000; a big fiscal hit for a general practice. In the case of the ACC the hit would be even greater; around $300,000.

As Dr Jones described to me practices like Katikati Medical Centre have been given three months’ notice of a ‘maybe’ loss of their funding contracts.

While it would be ‘grand-parented’ for a further 12 months, the uncertainty prevents them from further investing in infrastructure for expanding patient services.

In the case of Katikati Medical Centre, even if ‘grand-parented’, a scheduled loss of the funding contract from Health New Zealand means not proceeding further with its planned fracture clinic.

What is needed to bring sense to funding rural general practices is two things. First, government recognition that they are underfunded meaning that a larger ‘funding pot’ is established.

Second, using a blunt instrument not designed for this purpose of distributing funding should be discontinued.

Instead more flexible criteria, including availability of public transport and the health status of enrolled patients, should be developed through engaging with rural practices.

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