New Zealand Doctor print archives - 3 December 2008

Amanda Cameron

Sitting on the board of a PHO requires dedication and at least several weeks' work each year. But the more than 700 New Zealanders who choose to do so get paid far less for their efforts than their counterparts in the commercial sector.

Some get paid nothing at all.

PHOs became part of the primary care sector vocabulary in 2001 with the release of the Primary Health Care Strategy by then health minister Annette King. These new organisations, the first of which were established in 2002, were envisaged as not-for-profit bodies. They were required to be community focused and to be fully and openly accountable for all the public funds they receive.

The Institute of Directors in New Zealand points out that only a third of not-for-profit organisations pay their directors. However, in a recent review of what the board members of the South Island PHOs are paid, the institute calls the duties and responsibilities of a PHO director "onerous" and recommends annual remuneration of $15,000 for board members and $37,500 for board chairs.

The reality, however, is far from this ideal.

A New Zealand Doctor survey of what the country's 80 PHOs spend on governance found that, among the 70 that supplied the requested information (Panel 1), most reported their directors or trustees are paid an average of nearly $300 each time they attend a board meeting. About a quarter reported they pay their board members an annual honorarium averaging around $5000, either in addition to, or instead of, a meeting attendance fee.

Board chairs receive significantly more, with payment averaging under $500 per meeting and under $11,000 per year where an annual honorarium is paid, as it was in nearly 50 per cent of cases.

One PHO began paying its board members for the first time this year. Meanwhile, four PHOs pay their boards nothing at all, other than a small amount to reimburse travel costs in one case.

The results are in line with earlier smaller surveys by PHONZ and the PHO Alliance (>>nzdoctor.co.nz, 'Bits & Pieces'); the latter noted many boards accept a large degree of pro bono work from members.

Gravy train? Not so much. More of a tea trolley really.

The Institute of Directors' South Island Primary Health Organisations Remuneration Review, dated October 2008, describes direc- tors as having responsibility for providing "crucial strategic guidance and decision making in the development of primary health outcomes in their respective regions". The tasks listed include "significant stakeholder management" and "overseeing substantial government [funding] allocations".

New Zealand Doctor found board members attend an average of 10 board meetings a year, but that board meetings are just the beginning. There's all the preparation that's required and the background reading, as well as numerous stakeholder and other meetings, and time spent travelling and on professional development. The South Island PHO (SIPHO) review estimates each PHO board member spends a median of 121 hours a year (excluding travel time) fulfilling his or her duties, while board chairs spend more than twice that amount, approximately 300 hours a year.

According to the review, PHO board members have similar time commitments to the directors of organisations with about the same turnover (upwards of $600 million a year), yet get paid less than their counterparts in comparative commercial organisations, at around $31 per hour versus a commercial rate of $167 per hour last year.

And the difference is even more stark for PHO chairs, whose time commitments fall in the upper quartile for all chairs, but whose remuneration sits below the lower quartile. Last year, SIPHO chairs effectively got paid about $33 an hour, whereas chairs of the appropriate competence in the commercial sector received a median of $190 per hour.

Former Waitemata DHB chief executive Dwayne Crombie calls PHO board fees "pretty modest" and rates them as consistent with what boards of academic institutions are paid. However, Dr Crombie, who now heads large, not-for-profit, aged care provider Guardian Health Care, thinks the low level of remuneration for PHO board members is appropriate for work he sees as a "social contribution". "It's not well paid but I think that's probably appropriate," he says. "At the end of the day, you want people on those boards who want to do socially useful work."

Certainly, many PHO representatives spoken to by New Zealand Doctor echoed the sentiments expressed by Justine Thorpe, chief executive of South East and City PHO in the Wellington region: "They [SECPHO board members] are there as a commitment to the growth in the health and wellbeing of the community." Opotiki GP and Eastern Bay of Plenty PHO chair Jo Scott-Jones thinks payment for governance duties is important for the added sense of professionalism and duty it implies. However, he says, he isn't in PHO governance for the money, and his attitude towards being chair wouldn't change if he was paid more.

Dr Scott-Jones, who has been the PHO's chair for more than two years, and was a board member for about three years prior, jokes that he got involved in governance because he's a talker and volunteers for things to "fill the silences". But there's a mission behind this madness.

"It gives me the opportunity to have involvement in the health of the wider community, not just my practice, and I do really value that," he says.

A similar sentiment is expressed by Waitakere City GP Peter Woolford, who has been a board member of HealthWEST since the PHO was established. "I get some satisfaction from seeing the bigger picture and trying to improve primary healthcare for the whole community population," Dr Woolford says.

"It's extending my practice into the community to provide a better service, a more complete service." He, like Dr Scott-Jones, thinks his remuneration is sufficient. But Dr Woolford makes the point that, as an older GP, he is happy to do his bit for not much because he received his education free of charge.

"If you have younger GPs with mortgages and student loans to pay off, then that's a different kettle of fish," he says.

Dr Woolford would not, however, ever want to be the chair of a PHO - "bugger that for a joke" - because of the enormous amount of work involved. He has great respect for HealthWEST's chair, fellow GP Philip Rushmer, whom he thinks should get paid more, saying: "He earns every penny. I don't begrudge him a cent."

The chair of any organisation is critical to its success, says Dr Crombie, and it is generally accepted they should be paid between two and two-and-a-half times more than other board members. The key role of the chair is to act as a facilitator and manage relationships. "They need lots of interpersonal skills, lots of EQ," he says.

As for other board members, Dr Crombie says, the most important thing for them to do is to observe basic processes, and their most important attribute is a belief in the core mission of the PHO - improving people's health.

Getting a good mix of people is also important.

"It's more important to have a diverse board than a board full of superstars," Dr Crombie says, explaining that social research has demonstrated that a diverse group has more wisdom than a handful of smart or experienced individuals.

HealthWEST has a "really good mix" of people on its board, according to Dr Woolford, with about five GPs, one pharmacist, one nurse (and soon to be two), two community representatives, one Maori and two Pacific Island representatives. And Dr Woolford says working with such a diverse group has been fun as well as a bit of an eye-opener.

"I have learned that many different people can bring things to the table and that's an exciting and challenging opportunity and I've really enjoyed working in the team," he says.

Good governance is vital to any organisation's success, because, as the saying goes, "the fish rots from the head down", Dr Crombie says. And, he says, there's little difference between running a for-profit and a not-for-profit organisation, because a not-for-profit organisation still has to generate a surplus to invest in capital or staff or "other good things", and to enable the organisation to survive through lean times.

Given the importance of governance, the amounts PHOs spend on it are surprisingly small and varied.

The totals paid in board fees and allowances for the 2007/08 financial year ranged from nil for three PHOs to just over $156,000 for one PHO in the Auckland region's affluent North Shore City. The average amount spent on board fees and allowances last year was just over $37,000.

However, PHOs are variable beasts by their very nature, ranging from large, urban organisations catering to the needs of more than 300,000 people to small, rural PHOs looking after the health of fewer than 10,000 people.

Manaia PHO chair Chris Farrelly believes the size and complexity of a PHO is relevant to what it spends on governance. But Wairoa PHO manager Margie Sullivan says the size of a PHO does not really make much difference to the functions it has to perform: "Even though some are bigger, the work is very similar and they deserve reasonable recompense for what they do, so you can attract the right people."

And Otago Southern Region PHO chief executive Kaylene Holland makes the point that rural PHOs face greater expenses than urban PHOs. "The management services income is adjusted for being a smaller PHO, but there isn't an adjuster for being rural," Ms Holland says.

The ways PHOs set remuneration for board members are as varied as PHOs themselves, according to responses to the PHO Alliance's Governance Clearing House survey in January this year. Summary answers included the comment that setting board fees "can be seen to be creaming off funds from management budget", while another noted there's a "need to pay a reasonable remuneration to attract good people".

No one asked by New Zealand Doctor was really sure whether PHOs would attract better people to their boards if they were able to offer better remuneration, but everyone agreed that more money would probably attract a greater number of people.

Dr Crombie says Australian research on chief executive pay and performance shows "money doesn't necessarily buy commitment or passion or ownership." People in the commercial sector who work for non-profit organisations do so for the satisfaction: "It's a balance between earning money and doing things that are good for the soul or heart," he says.

"If there were fewer PHOs and they were a lot bigger then there'd be a stronger argument for paying more," Dr Crombie adds.

PHOs have come in for some criticism as yet another layer of needless bureaucracy. Indeed, the perceived waste of taxpayer money on the unquantified and faceless beast "bureaucracy", became one of the National Party's most powerful weapons in its war to win the hearts and minds of New Zealanders, ahead of this year's general election. No wonder, then, that PHOs are feeling a little vulnerable with the change of government.

During the course of collecting information for this article, New Zealand Doctor became aware of a rumour circulating among some PHO managers that this newspaper was going to "do a beat up" about the use of taxpayer money.

One PHO manager, who accused New Zealand Doctor of deliberately setting out to impugn PHOs ("You're probably sharpening your knives"), acknowledged the change of government had generated some paranoia among PHOs.

It appears, however, that this paranoia is unfounded, as the National-led Government says it has no agenda to require PHOs to merge (see story, p2).

It took two months and many phone calls and emails, but 70 PHOs answered some or all of the questions sent by New Zealand Doctor; two did not respond at all, another two felt unable to reply, and six refused outright to supply the information.

A few chief executives had to be coaxed into giving the information, despite their own admission transparency was vital. Most were genuinely interested in learning how their counterparts were paid, as all appeared to grapple with the difficulty of setting fees fairly but within budgetary means.

We've published the full results on our website, as coherently as possible (>>nzdoctor.co.nz, 'Bits & Pieces'). PHOs who supplied the requested data are not identified as the data are not comprehensive enough for comparisons to be made or conclusions reached.

Thanks to everyone who took part.

Related links

PHONZ Survey of Board Fees - February 2008

PHO Alliance Governance Clearinghouse - January 2008