The long-awaited PHN review has recommended two streams of immediate reforms and, after three years, a complete switch to a not-for-profit Commonwealth entity model.
Primary Health Networks are a mess of “inherent tensions” which undermine stakeholder confidence and an “unwieldy and burdensome” funding process which leaves them unable to respond to local needs, says a long-buried review by Boston Consulting Group.
The solution, according to the review, is, in the short-term, two streams of reforms designed to make the current model more workable.
But in the long term, BCG was blunt – the DoHDA should consider moving to an entirely new model after three years “if the reforms have not delivered sustained improvements in PHN capability and capacity”.
Most relevant to GPs was a section looking at the tensions over who PHNs should be accountable to.
The consultants identified three separate camps; those who thought PHNs should be primarily accountable to GPs (this was mostly made up of GPs), those who thought PHNs should be primarily accountable to the Commonwealth and those who thought PHNs should be accountable to themselves as self-governing entities.
“Some stakeholders appeared to work under an assumption that PHNs were established to improve the primary health care system by supporting general practice as the cornerstone of primary care,” the report said.
“Consequently, they believed that accountability should be more strongly aligned to general practices. This view was expressed by GPs, general practices and their representatives.
“Some stakeholders suggested significant, minimum GP representation on boards (e.g. 50% was quoted by some stakeholders) and that PHNs should not commission services that “compete” with existing, local general practices.”
Ultimately, the BCG analysts recommended the government work to “clarify” that the primary accountability of PHNs is to the Commonwealth.
The new model suggested in the paper would involve the establishment of a not-for-profit commonwealth entity as an “enabling service provider”. PHN boards and advisory groups would become Local Advisory Boards. PHNs would be funded via direct appropriations from government with five-year core and four-year program funding.
“This not-for-profit Commonwealth entity model would help to address remaining structural tensions in governance and engagement, performance management and funding processes, and unlock further efficiencies for reinvestment in primary care,” said BCG.
The review, commissioned by the Department of Health, Disability and Ageing in 2024, was delivered to government mid-year but has sat in a DoHDA desk drawer for several months.
BCG reported that the PHN business model, introduced in 2015, had not evolved with the changing primary care landscape.
Despite finding “strong and widespread” support for PHNs among stakeholders spoken to for the review, BCG found that the full potential of the program “remains unrealised”.
“The review identified a negative feedback loop in which inherent tensions in the PHN model undermine stakeholder confidence, which contributes to an unwieldy and burdensome funding process that restricts the ability of PHNs to respond flexibly to local needs, which further undermines stakeholder trust and confidence,” wrote the authors.
Who are PHNs accountable to?
Confusion over accountability led to “misaligned expectations”, said the BCG authors.
In the report’s suggested “Reform stream #1”, clarifying this lack of accountability was a priority.
“Reinforce that PHNs are funded to act on behalf of the Commonwealth in line with the provisions of their Deeds and are primarily responsible for delivering better health outcomes by improving local primary care through service coordination, provider capacity building and targeted commissioning,” said recommendation 1.1.
The second key tension was the difference between the current model allowing PHNs to set their own governance standards – within the bounds of the Australian Charities and NFP Commission – and the expectation of most stakeholders for PHNs, funded as they are with public monies, to have “more consistent and robust governance”.
Recommendation 1.2 of the review was to introduce minimum governance and engagement standards.
“Require PHNs to conduct internal minimum governance reviews using standardised guidelines,” said BCG.
“Require all PHNs to adopt a nationally consistent commissioning approach, based on the existing work that has been started by the PHN Cooperative (e.g. consistent RFP documents, KPIs).”
Evaluating performance
The third key tension identified by the review was the desire for an integrated perspective on PHN performance and the reality of a “complex, many-to-many oversight relationship between PHNs and multiple policy areas” of the department.
Since being established in 2015, when PHNs delivered activities in four policy areas, they are now delivering activity on behalf of 43 policy areas, the report detailed.
“This has led to ineffective performance measurement and management at the individual PHN and overall program level,” said BCG.
Related
Recommendation 1.3 of the review was to implement “meaningful performance assessment” involving the standardisation and integration of key reporting using an annual needs, programs and outputs report for each PHN.
A “PHN quality and improvement team” would conduct operations and performance reviews and recommend improvement actions.
An “underperformance pathway” would be implemented to manage underperforming PHNs, “ensuring they respond to improvement recommendations”.
Funding model paralysis
The review identified that the funding model for PHNs was deeply flawed.
At the heart of the problem was the nature of the grant funding model – designed primarily for “special purpose and competitive grants” – which was in direct tension with the PHN business model, using a competitive tender process to give PHN operators a sole mandate from the government.
Apart from adding a layer of administration to the process, grant schedules were “highly prescriptive” and focused on process controls, needing detailed reporting that did not deliver “usable, aggregable insights on outputs and outcomes”, said BCG.
“Many grants are short term in nature, often only 1-3 years duration even for persistent programs, and are renewed at the last minute,” said the review.
“Disbursement of funding typically takes 6-12 months from announcement to receipt by PHNs.
“Short-term, prescriptive and delayed funding” prevented PHNs from planning and delivering locally responsive services, said BCG.
“Short-term grants with late renewals constrain PHNs to simply rolling over funding and programs rather than enabling them to plan for and manage new and changing services in line with changing needs.
“Prescriptive schedules limit the ability of PHNs to tailor programs to local needs and may require directed activities that do not respond to the opportunities identified in local needs assessments.
“Delayed disbursements also lead to significant administrative burden, rushed commissioning and disruptions to service delivery.
“Combined, these impacts often leave local stakeholders conscious of a significant gap between the findings of local needs assessments and the activities actually funded.”
The second stream of reforms recommended by the review authors pertained to improving this paralysed funding process.
“Move to 3-5 year rolling grants for all persistent and core programs,” said BCG.
“Move to standard templates that cater to different levels of prescription required and focus on outputs.
“Reduce administrative bottlenecks and introduce faster pathways for routine or low-risk funding.”
What the reforms will take
In short, immediate and ongoing investment from the federal government, said BCG.
The PHN branch of the DoHDA would need a “one-off investment” to update funding deeds, simplify reporting and develop new policy proposals to support longer-term funding arrangement and “stand up the quality improvement team”.
There would then need to be ongoing increases to current funding to support quality improvement and enhance PHN branch responsibilities.
“The Department’s operating model will need to change with respect to the PHN program, with the PHN Program Board playing a stronger stewardship role,” said BCG.
“While this reform offers significant benefits, it would be complex, time-consuming and disruptive, and likely require legislative change and major shifts in contracts, systems and governance,” said the review.
For that reason, BCG recommended the immediate reforms be pursued for three years before considering a switch to a new model.
“The decision to move to a new model would ultimately rest with government.”
If one PHN’s response to the review is any guide, it will be welcomed across the 31-PHN network.
Murray PHN said via spokesperson Matt Jones that it welcomed the findings and recommendations.
“PHNs are proud of the impact we have achieved in communities across Australia,” he said.
“This review provides a clear pathway to build confidence, reduce administrative burden and ensure our focus remains on delivering better health outcomes.
“This is a pivotal moment,” said Mr Jones.
“By simplifying processes and reinforcing trust, we can unlock more time, resources and energy for what matters most – supporting healthier communities across Australia.”
