Take Your Hands Off My Stash

By Jim McVeagh 16/11/2009

And with the the words of Pink Floyd’s Money echoing in our ears, we comment on the the Herald’s somewhat exaggerated headline GP clinics stash reserves of $115m. While the total is correct, the word stashed has the same pejorative meaning as Pink Floyd’s version – a pile of money that someone is hoarding. This is complete nonsense. None of this money is being hoarded at all.

I have just come from the AGM of our PHO (hence the late blogging!), so I have the financial figures right in front of me. I can tell you that the cash reserves of the PHO almost exactly equal the money paid for services in advance by the DHB. Most of this is for services which have been tendered late, and have therefore not yet been completed. Some is for services that have simply not yet been accessed. Patients do not neatly access services in measured amounts month by month. What happens in real life is that they access the services in spurts. So, at the close of the financial year, some areas will not have used their full quota and this money will still be in the PHO account.

Then there is the matter of investments:

But it did not explain a significant rise in investments — up from $41m last year to more than $60m. Those figures suggested that PHOs were building up healthy reserves with money supposed to be used for health promotion programmes, he said.

I can tell you that the vast majority of these investments, at least for the PHO I am involved with, are term deposits. These term deposits almost exactly equal our current liabilities.  So what is happening, is that the PHOs are placing a reserve approximately equal to the current liabilities in a term deposit. This is not hoarding, this is prudent money management. It allows the inefficient DHB approval process to delay the commencement of new service contracts without cessation of the service. Otherwise what would happen is that, when the contract came to an end, the service would cease until the DHB got its act together. As this may take many months, the result would be completely disastrous.

DHBs of course, have a similar problem. Their solution is to go into deficit (other things beside contract gaps cause this deficit, of course). This is not a solution available to PHOs.

Note that this is absolutely NOTHING to do with “management fees” which are merely the monies paid to cover the running costs of PHO. The threat to do away with management fees is empty because the only place that that money can otherwise come from is from services to patients. It would have precisely the opposite effect to the intended one.

A moments logical reflection would have told everyone that it is extremely unlikely that the PHOs would be withholding money. After all, the people they would be withholding it from (mostly doctor’s practices) are the shareholders of the company. PHOs are not for profit ventures and do not pay dividends. Therefore the doctors would have to be a special sort of stupid to allow the PHO boards to withhold funds.

Tony Ryall needs to take a step back from this and stop making half-baked statements to the media (who always love a good “doctors are bad” story). The PHOs currently appear to be working better than most parts of the health system. They are, at least, not in debt. Yet they are castigated for prudent financial management. This is simply stupid. The last thing the health system needs right now is to damage the only part of the system that is functioning as it should be by withdrawing funding or insisting on imprudent financial management.

Mr English might think that running a country on deficit funding is ok, but I am hoping Tony Ryall does not wish to run the health services in the same manner.


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