5 February 2018

Malcolm Parmenter’s Primary paradigm

Finance General Practice Remuneration

If Malcolm Parmeter’s vision for the future of primary healthcare, and the company he runs by the same name, is even half realised, the future is bright.

Very soon after the last CEO of Primary Health Care, Peter Gregg, announced his sudden resignation, Malcolm Parmenter, the successful and charismatic leader of Primary’s largest competitor, IPN, got a text message from a close friend letting him know the news. Parmenter was, at the time, in the US on a skiing holiday. He was actually on a ski lift when the text pinged his phone.

Even before he alighted, Parmenter knew this was an opportunity he didn’t want to miss. His logic was fairly simple. Although Primary Health Care as a brand had virtually become a pariah among GPs over the previous decade, and was on the slide on the sharemarket, Parmenter saw only opportunity and upside. As the head of the group’s major competitor, he was in unique position to assess such an opportunity.

Primary had for years been shrouded in controversy over how it was run by its enigmatic and strong-willed founder, Dr Ed Bateman. Even before Bateman’s death just over two years ago, the company’s sharemarket performance had begun to suffer. Its business model of high-volume care was strained by a changing government stance on how healthcare needed to be funded.

After the death of Bateman, the Primary board, led by chairman Rob Ferguson, chose a very different path to what many expected. That path was telegraphed via the appointment of a very different style of CEO, Peter Gregg. A past Qantas executive, Gregg was a customer-facing “people person”. Rather than pushing forward with the bottom line and formula-driven models of the past, the board had clearly made a decision to attempt a transformation.

The revenue model of high volume, walk-in, bulk-billing medical centres was largely over, and the board knew it, even if several managers left in the company did not. The company was facing increasing pressure from the government to crackdown on the MBS and high-volume medicine. That affected not only Primary’s medical centres but also its pathology business.

At the same time, Primary’s staff literally hated them. The stories emerging from the group were legendary. But many such stories were not told openly, because what was also legendary was the company’s predilection for taking court action against those who dared to tell those stories in public. Primary’s culture was one of obedience, fear and loathing.

As well as a people manager, as a past CFO of Qantas and Leightons, Gregg was also an astute financial manager. He went to work on both issues.

By the time Parmenter got his text last January, it was clear the Primary ship was starting to turn around. If it kept turning, Parmenter felt Primary could a be great company one day. While conflicted by his loyalty to IPN, in the end he felt that this was a challenge he didn’t want to miss. He felt that in the right circumstances he might contribute to changes that could reshape healthcare in Australia.

In less than three years at the helm of Primary, Gregg had demonstrated to Parmenter that he wasn’t going to have it all to himself much longer over at IPN in terms of culture, people power, and vision.

Parmenter had built IPN and led it out from a not-too dissimilar position of employee disdain many years earlier. IPN now held the high ground on culture and, perhaps more importantly, given the regulatory climate, on its revenue-model mix via a series of acquired practices which mix-billed.

In the purpose-built network of bulk-billing walk-in centres, with various ancillary services for patients, including car parks, onsite pharmacies, onsite pathology and imaging, there was a lot over at Primary for Parmenter work with. And even though these centres were built for a model that was disintegrating, for Parmenter, the ideas of purpose-built design of space and services, economies of scale, and  the enabling technology infrastructure that underpinned Primary’s past success, were applicable in many ways to a new future for primary care and for Primary, the company, as well.

When Parmenter contacted Primary’s recruitment firm, the first words he heard we: “Aren’t you the enemy?”

The Primary board had thought of Parmenter as a possible replacement CEO but had dismissed the idea as folly. The board was therefore surprised and delighted by his call.

Parmenter came with his own brand – the genial but sharp-thinking GP who had transformed IPN, who was a passionate supporter of primary care, a visionary, and, a pretty nice bloke to boot.

That he was a GP, that he was a coal-face manager, and that he had street cred with GPs for what he did at IPN made him a near perfect successor to Gregg who, though a people person, didn’t have medical heritage.

Gregg had eased much of the balance-sheet stress on the business by repairing cost lines, and selling assets, including the MedicalDirector business for a sum that was well beyond what many pundits felt possible.

Primary was well geared now for someone such as Parmenter to come on board.

Soon after he met the Primary board, Parmenter’s intuition that the group had made substantial progress in transforming itself was confirmed and the deal was sealed. He just had to sit, wait and think while his non-compete clause ran its course.

From the outside looking in, most GPs one speaks to remain, at best, suspicious of the Primary brand. This is regardless of some significant changes the group has already made, such as introducing new, plain-English 10-page contracts, with lots of working flexibility and almost no non-compete clauses as well as the announcement the group would be introducing appointments.

Indeed, even the idea that the person who made IPN a mostly well respected and admired GP brand will be running the group soon hasn’t sunk in for most GPs.

Deep wounds leave scars. Changing a brand so steeped in one way of doing things for so long may still take some time.

At its worst, you will still run into someone who and will regale you with a horror story from Primary’s past that is so outlandish you will wonder whether transformation really is feasible.

Here’s one your author has been told recently.

It starts with a bug-eyed, wide-mouthed, newish to Australia, and clearly a little naïve, newly minted Fellow, just entering his (gender and real name withheld for obvious reasons but we are going with “him”  and “Nigel”, from the UK for the story) first years of being a GP, and thinking, for some reason, that taking a five-year contract with Primary might be a worthwhile experience.

Other than the people Nigel worked with, the reality was completely the opposite. The experience was described in no uncertain terms as indentured hard labour, where it was very clear among the doctor staff that if you rocked the boat in any way, there would be some form of payback. And it usually had legal and monetary overtones.

At that time, the stories of doctors who had been acquired by Primary and were attempting to rort the contracts they had been given were almost as common as the stories of oppression. But perhaps the very creation of a class of doctors prepared to try to take advantage of their big cash upfront payments and then not do too much after that payout, is just as telling that Primary had the “people side” of their business significantly out of shape.

In any case, this doctor was not rich from a payout and many of his colleagues weren’t either.

Nigel became very unhappy working at Primary from an early stage and was worried about certain practices and happenings he was witnessing virtually from day one.  The company monitoring doctor hours via their patient management system MedicalDirector. By his second year Nigel had written to HQ and told them that the system was not accurate and he was worried about what was being recorded and how. He explained how the system was inaccurate.

He subsequently got a reply from HQ saying there had been an internal investigation into the matter and it had been established that to date he already owed the company an additional 400 hours. A colleague had been near the end of his contract and had been told he had to work beyond his contract date to make those hours up or pay up an estimated $30,000. Either that or the company would pursue him vigorously through the courts.

Nigel immediately became anxious and started writing a series of letters explaining his situation. His 400 hours represented another couple of months work or somewhere north of $50,000 in billings.

The reputation of the company to go legal and heavy on other staff added to the anxiety.

What started as a polite, “I’m sorry, but there must be some mistake,” escalated rapidly.

HQ rhetoric quickly morphed into threats of legal action over contract detail.

According to Nigel any of his colleagues at the time would attest, he was often first in and last out at that particular centre. His practice manager was perplexed and his clinical lead commented “really, they aren’t still doing this shit, are they?”. But no-one was in a position to help, or they felt that if they tried they might get targeted.

Nigel worked, in his calculation, significant additional hours to what was required of him, not significantly less. Fortunately, he was just a little OCD, and soon after a colleague had mentioned what happened to them he had started keeping a detailed diary of all his hours, and other matters he felt relevant.

He sent these to HQ. No luck. They had something else which proved he was making things up. What, he asked several times, did HQ have? HQ would not be forthcoming with this request but continued to send letters of demand.

Eventually, Nigel calculated what HQ was doing. It was a revelation that apparently many of his colleagues were aware of. They were clocking the time that his electronic patient management system, MedicalDirector, was recording his start time as the first keystroke to see the first patient at the beginning of a shift,  and the last clicking off at the end.

The problem with that, which he had repeatedly already pointed out in detail, is that it was an extremely inaccurate capture of actual overall work hours for a range of reasons. HQ didn’t want to hear about the reasons. They kept pointing to details in his contract.

For some time during Nigel’s tenure, this issue created significant anxiety and distress. It remained unresolved as HQ kept holding their ground His colleagues were either unable or unwilling to risk helping. He became highly distressed at being accused of not working his hours when he did the opposite, distressed that  it looked like he wouldn’t be able to shake the 400 hours owing claim and have to stay longer or pay the company out, distressed that he had been threatened a few times with legal action should he refuse to do the extra hours, and distressed that he was spending so much of his time trying to figure out why he was being bound to this awful company.

This story ends in an unsatisfactory manner for Nigel, despite him getting his hours waived. Eventually, Primary had appointed Peter Gregg. As a part of his very first duties, Gregg was doing the rounds of the centres to gauge employee opinion and culture. He said enough about his intent to change things in the company to convince Nigel to write a letter directly to him and test his resolve.

The wash-up of that was that sometime later, but before the five years was up, he got a letter from HQ which offered a settlement. They would of waive the hours if he signed a waiver of any liability and kept quiet. Nigel fell over the line.

But he remains angry to this day at his time with Primary. He said that worse for her than this whole story was how much pressure he and his colleagues were constantly put under by under-resourcing, largely created by doctors abandoning ship as soon as they could. He said that serious issues of patient safety were a constant as a result and it was the front line doctors wearing all the worry of that.

Stories such as this are a legacy that Parmenter admits he can do little about. He says quite frankly that “these things take time”. And adds, “It’s very hard to change the external view of a company unless you’ve fixed the inside.”

So, no all-singing all-dancing advertising campaigns and no significant external shift in marketing strategy, except to point out the basics of some of the key changes to working conditions and flexibility in their new contracts, and the intent to move the centres to appointments, as well as walk in. Not yet, anyway.

Parmenter hints that this is because the main focus at the moment is still more internal than external. Making sure things are genuinely working for the staff. And making sure that it’s a group that has enough trust in itself and its management to go on a journey of transformation and change.

He says of the past issues of employee trust and job satisfaction, a lot of work had already been done by the time he started.  He points to the rate at which doctors leave Primary being significantly lower than the past. The rate is now about the same now as IPN’s.

“It’s such a different place from three years ago. It’s a pleasant place to work. It’s rare to find someone leaving who is not retiring or got some personal reason [not to do with the work environment]”, he told The Medical Republic. 

It’s first base in the bigger picture Parmenter has rolling around in h is head. The group is currently rolling out the cloud-based version of the Medical Director patient management system, called Helix, at its Campsie centre in NSW. Among other more modern connected functionalities this is likely to introduce to the centre, appointments will be one (not yet, but coming, says Parmenter).

Appointments are a major marker of change in business model for the group. It signals an acknowledgement that Primary doctors always did appointments anyway (under the covers), so why not facilitate that desire and need? And it signals a move into more mixed-billing for all the Primary centres.

Part of Parmenter’s reluctance to crow to the market about the turnaround in culture, is that he is still amid a comprehensive process of collecting, collating and analysing information and feedback. Both from his own company and  local market, and overseas, particularly the US and parts of Europe, where primary care is, he says, quite a bit down the track from where Australia is today.

He isn’t short of a few ideas of how the future might unfold, however. Key among them is that the future for primary care is bright.

He explains that no matter what the funding regime is today, if you look at how the economics of healthcare are unfolding, whether it be in Australia, the US or Europe, the system will naturally and inexorably move towards growth in primary care in order to manage the expanding needs of increasingly chronically ill populations and the ballooning costs of tertiary care.

Outcomes based funding and quality of care are inevitable to a large degree.

But he isn’t counting on the federal government moving fast on changing the funding regime. He doesn’t even think it should be changed quickly. He says that having been knocked around so thoroughly in the last few years on pay, changes such as Health Care Homes, and what it might telegraph about how GPs will be paid into the future, need to be considered and handled with care.

He is also sceptical about the whole idea that the government will somehow see the light, at least in the near term, and start remunerating general practice at an ‘appropriately’ higher level. He thinks that anyone relying on the government to open up the purse, at least in the near term, probably isn’t being realistic.

He has a different answer to the income conundrum, which neatly segues into how Primary might manage the  government’s penchant for more  austerity in primary health and desire to rein-in the MBS and pathology more in the short term.

It goes a bit like this:

Primary care will expand upwards towards the tertiary system in the form of “mid-level emergency and day-procedure centres”, which stop a lot of patients going into a major hospital. It will also move downwards, right into the patient’s home, business and where ever else it is convenient to interact with them, probably on the mobile phone, as we now see with banks and our finances.

The downwards journey will be facilitated by technology, such as tele-health, but patient-centred, cloud-connected patient-management systems, patient-connected apps,  portals, and so on. Systems and services, facilitated by technology will reach out to become more patient centred, an more convenient. It will include things like online consults, prescribing, repeats and referral letter services. It will serve patients and doctors more effectively.

This, he suggests,  will significantly increase the variety and self-fulfilment of a GP’s job and career. In large part because the GP will inevitably be at the centre of a spectrum of connected care that is longitudinal for a patient that is more relationship based and involves nearly everything, including what in the past might have been hospital-based procedures.

In this vision, Parmenter sees plenty of room for Primary to expand its revenue and profitability, work collegiately (even with its competitors), serve the community much better, put the patient in the centre of healthcare picture, and provide his doctors with more interesting and fun stuff to do at work. All of which puts paid to the idea that mixed billing much of  what Primary needs to do to change to grow.  And you can’t go there unless you actually offer noticeably better value, Parmenter says.

A spectrum of services, including co-payment, is feasible, if you offer added value to the right demographic, at the right time, he says.

To do this you need to design your businesses more around patients. And technology is going to help with that.

But this is just a vision, right?

Profit and delivering medical care have a controversial and, at times, scandalous, history. The two concepts just don’t sit as comfortably as say ,financial services and profit, or even, travel and profit. There will be cynics, as there must be.

But as far as visions go, this is a fairly well thought out one. It’s not an over-the-top BHAG (big hairy audacious goal), which is something you see a lot of in corporates trying to sell transformation. The pieces are there, especially the technology, and Parmenter seems fairly realistic about the timeframe for change and the challenges he faces in putting those pieces together.

And you are going to struggle to find someone who doesn’t like Parmenter. He’s the closest thing Australian healthcare has to  “Simon the likeable” (the TV series Get Smart’s character).

Awkwardly perhaps, a challenger for that moniker is Parmenter’s direct adversary at IPN, Dr Ged Foley. Perhaps even more awkwardly, Foley and Parmenter are very good friends. Not entirely surprising, given Parmenter was Foley’s boss for years at IPN and Foley succeeded him.

Parmenter says that over beers, no business is discussed.

“It’s like two Premier League footballers playing for different sides that are long-term rivals. We leave our competitive spirit on the field.”

If you were given any odds that in 2018 the evil overseers of some 60% of all corporate medicine in in the country and some 13% of all GPs, would be two “nice blokes” who love the profession and people, and are both GPs … from Sydney’s leafy prosperous enclave of Mosman? I would not have taken that bet at any odds. Which is why the cynics will need to be careful. Business, when transformation is in play, can sometimes surprise you. Initially anway.

If there is one big unknown in Parmenter’s vision, and Parmenter won’t bite on the topic in this interview, it’s just how agile and effective the government is going to be in helping the market facilitate some of these changes.

Parmenter neatly sidesteps this line of investigation. He says that it will sort itself out and that part of that sorting will be organisations such as Primary taking the lead on things like Health Care Homes, tele-health, connectivity and social responsibility.

He says Primary is already looking at some loss-leading ventures around patient-centred projects which are likely to repay the group in long term by proving out the return for the government and other institutions, not just Primary.

Wow.

That is not the Primary wev’e  all  come to know and (not) love for just how comically bad and predictably corporate it had become over the years.