Better Sooner More Convenient Primary Care - New Zealand Doctor

In early years, the IFHS community provider is likely to continue to purchase some corporate
services from the DHB, though it may need to assess the viability of doing so beyond the first
year, in order to continue its momentum towards breakeven.
The transitional funding, and resulting forecast revenue and expenditure are set out in the
table below:
Integrated primary & community revenue and expenditure forecast
IFHC + DHB wide community Start point year 1 year 2 year 3
Base revenue - 21,765,061 - 21,765,061 - 21,765,061 - 21,765,061
Service changes - 547,500 - 690,000 - 690,000
Transitional funding - 4,600,000 - 2,100,000 - 1,300,000
Total revenue - 21,765,061 - 26,912,561 - 24,555,061 - 23,755,061
Base expenditure 27,007,811 27,007,811 27,007,811 27,007,811
service changes - 142,500 - 2,479,992 - 3,316,420
Net expenditure 27,007,811 26,865,311 24,527,819 23,691,392
Profit / loss -5,242,750 47,250 27,242 63,669
9.3 Impact on the DHB
The DHB provider arm is currently incurring a loss of some $5.75 million on its primary and
community services. This loss would reduce to nil in year one as both the revenue and
expenditure are transferred to the PHO.
The DHB funder would incur new costs associated with paying the transitional funding amount
(starting at $4.6 million in year 1 and abating to $1.3 million in year 3) and a proposed higher
price for rural inpatient bed services to reflect the actual cost of provision.
Overall, in year 1 there is a net financial gain to the DHB of $0.5 million (representing the PHO
surplus contribution defraying current losses), while by year three the net fiscal gain for the
DHB increases to $3.95 million (ie. the difference between the current loss of $5.75m and the
forecast transitional funding of $1.3m plus about 0.5m in higher bed day prices). This equates
to around a 68% improvement in the fiscal impact on the DHB bottom line for these services.
Over the following two years the transitional funding amount would reduce to zero.
Critical assumptions
Important assumptions in this business case include:
Transitional funding support is made available from the DHB on an abating basis over 5
years.
Funding flexibility – to allow savings in one area to offset losses in others.
Savings on referred services and secondary care derived from changes to primary care
are passed back to the PHO/community provider to offset losses.
Business case EoI V38 AC 25Feb10 Page 60