Hiya!
For PC's...not sure if I'd go that route. If I did, I'd have it not be so much "HP's as we know them...'ish", but more along the line of a sort of "Buffer HP" that gets whittled down, and when it does is when individual PC's start taking 'physical damage'. So if a PC Party had 100hp, any "large attacking group/effect" would go towards that first. I'd classify a "large attacking/group or a specific incident with PC's near each other" effect as things like a choking mist, Fireball, swarm of rats, or even a 'dozen goblins', or where the group of PC's are all within "reaching distance" of one another. As long as the Party was near each other (say, no PC greater than X feet away; start with 10' and see how that works) they draw from this PC Party HP.
Individual PC's could, however, take "normal, individual damage" as appropriate; the thief triggers a slicing-blade trap while picking the lock, or the barbarian gets 3 magic missiles cast into his chest from the orc shaman, etc, bypassing the PC Party HP.
Something like that COULD work...but it would have to be explained and worded correctly and given a "believable fiction in the world" as to why. I'd word it with emphasis on the "all within 10'" idea so that it would be assumed that other PC's were looking out for one another and calling out potential attacks, dangers, etc, as well as physically intervening to help...like grabbing the fighters backpack RIGHT before he triggers a covered pit trap (the DM rolls damage, gets 16; the pit is triggered, but the narrative is the ranger right behind the fighter grabs his backpack just as the pit cover drops, the fighter leaning forward at the edge, looking into a deep, dark pit!...saved only because the ranger's quick reactions and perception [PCPHP 100 down to 84 now].
That said...for BAD GUYS, this would work much better.

A super hero game called
SUPERS! does this with "
Mooks and Citizens" mechanic. In short, it's a d6 pool based game, roll, beat a target number; every 6 points of success is a 'success level'. The "group" of mooks have a rating, say, 2D for 10 thugs. That "group" all attack as a group and defend as a group, with the GM and Player describing the narrative. So if they attack the hero, the GM rolls 2D and gets a 6. That's one Success Level. "The thugs pull out chains, bats and lead pipes and attack, swinging wildly with deadly force!"...the PC then rolls whatever defense they want (say, just a simple Reaction to dodge, duck, dip, dive and dodge out of the way). If the PC's Reaction score is 3D (pretty good, btw) and gets a 12, that's 2 Success Levels. This means the mooks try their best, but they are no match for the skill of Patches (the Hero)! Patches returns the favour by throwing a bunch of wrenches at his attackers from his Practice Bag. He has 4D in this Power, so he rolls 4D6 and gets 19 (3 Success Levels). The mooks roll their rating of 2D and get 8 (1 Success Level). Try as they might, they are no match for the onslaught of flying wrenches and the group takes 2 damage (Patches 3 SL - 1SL Mooks). This comes off of their 2D rating...reducing it to 0D. Patches stands up, the camera pulls back, and we see Patches standing victorious, with 10 thugs all unconscious or semi-conscious on the flor, moaning and groaning, surrounded by a bunch of wrenches.
That sort of "group HP" works well for the 'bad guys', but for the PC's, well, as I said. It would have to be described the right way and have certain requirements/restrictions. More like a "you can use this HP pool IF...[criteria]". That could be a nice buffer for the squishier PC's in the group.
PS: In case it wasn't obvious... go check out SUPERS! on DriveThru! Even if you never play it, I think it's "vibe" on how to run a collaborative/narrative-sharing type of game is wonderful!
DriveThruRPG.com - SUPERS! - The Largest RPG Download Store!
^_^
Paul L. Ming