The submission addresses the first term of reference of the commission.         

 

Executive Summary

In this submission, the Hospital Reform Group argues that there are three fundamental, systemic issues affecting the management and function of the NSW hospital system, and undermining the effective delivery of high quality health care.  

As a result of these three fundamental issues, the NSW Health Department has become a dysfunctional but powerful, centralised, hierarchical autocracy with little or no external accountability. 

The Hospital Reform Group sees these issues as being of such importance that unless they are addressed, all other attempts to improve the NSW Health System will ultimately be unsuccessful.

The three fundamental issues to be addressed are:-

• the lack of an effective system of ‘checks and balances’ within the power structure of the NSW Health Department;
• the lack of any clear linkage between clinical activity and resource allocation;
• the need to re-integrate ‘private’ and ‘public’ healthcare in the NSW Health System.  

The Hospital Reform group believes that the actions needed to address these issues include:-

1. Development of a formalised structure for representative involvement and engagement of clinicians in decision-making at every level of the hierarchy of authority.

2. Development of a supported framework for involvement of the community (both current and potential patients) at every level of the health system. The Area Health Advisory Council structure should be redesigned to have a more effective local role through devolved, legislated responsibilities which provides local accountability of the Chief Executive and the Area administration to the Councils and thus to the community.

3. Establishment of an independent Clinical Audit and Review Authority, with authority and powers comparable to the Auditor-General and the State Coroner, to measure, monitor, and guide improvements to the standards of health care in NSW.

4. Introduction of a healthcare funding system that provides a clearly defined linkage between clinical activity and resource allocation, as has been established in other jurisdictions.

5. Re-integration of public and private patient services into a shared system with that is accessed and ‘owned’ by all the community.

6. Widespread discussion of the expected role of the Minister, in order to develop a general acceptance of the principle of separation of responsibilities, so that the Minister is responsible for policy direction, and the Department is responsible for policy implementation.

This submission has been authored and compiled on behalf of the Hospital Reform Group, and is specifically endorsed by the following.  The submission reflects these person’s personal views, not that of the institution where they work. 

 

Emeritus Professor Kerry Goulston AO.  (Primary Contact Person)
University of Sydney
Convenor, Hospital Reform Group

 

Dr Ross Kerridge (Secondary Contact Person)
Director, Perioperative Service
John Hunter Hospital, Newcastle

 

Professor Mary Chiarella
Professor of Clinical Practice Development and Policy Research
Centre for Health Services Management
Faculty of Nursing, Midwifery & Health
University of Technology, Sydney

 

Mr Hugh Ralston
Community representative
Strategic Consultant and Mentor, Work-Out Associates

 

Professor Michael Fearnside
Neurosurgeon
Westmead Hospital

 

Professor Stephen R. Leeder AO.

Director The Australian Health Policy Institute

The Menzies Centre for Health Policy

The University of Sydney

 

Professor Jeffrey Braithwaite
Professor and Director
Centre for Clinical Governance Research
University of New South Wales

 

Dr Clare Skinner
Emergency Registrar
Royal North Shore Hospital

 

Professor Bruce Robinson
Dean
Faculty of Medicine
University of Sydney

 

Dr Jonathan Page
Head, Dept. of Medical Oncology
Northern Beaches Cancer Service

 

Dr Jeff Streimer
Coordinator Consultation-Liaison Psychiatry
RNSH
RANZCP NSW Director AT-Psychotherapy

 

Associate Professor Andrew Keegan
VMO Gastroenterologist
Nepean Hospital

 

Dr Ian McPhee
Senior Staff Specialist Anaesthetist
Tweed Heads Hospital

 

Professor Danny Cass
Professor of Surgery,
Childrens Hospital at Westmead

 

Professor John Dwyer AO.
Emeritus Prof of Medicine,
University of NSW

 

Dr Garry Nieuwkamp
Emergency Medicine Specialist
Wyong Hospital

 

Professor Malcolm Fisher AO
Area Director Intensive and Critical Care Networks
North Sydney Central Coast Area Health Service

 

The Hospital reform Group was established in 2004, and has previously released public statements and discussion documents relating to the problems in the Australian Healthcare System.  An earlier policy document, released in early 2007, is also attached.

 

Submission to the Special Commission of Inquiry

The Terms of Reference of the Special Commission are broad, but include specific mention of particular problem areas and issues to be addressed.  The Hospital Reform Group is a broad-based group of clinicians and others with long collective experience of the achievements, and the problems, in the NSW Health System.  We are confident that the Commission will receive many submissions addressing particular issues identified within the Terms of Reference.  Among the particular issues that we are concerned about are (1) the sustainability of the health workforce – especially nursing;  (2) the need to sustain high-quality clinical teaching and training in the NSW Health system; and (3) the need to address deep-seated cultural issues affecting performance of clinicians in the workplace.

We feel confident that these and other particular issues will be comprehensively addressed in other submissions.  We therefore have chosen to confine this collective submission to the first term of reference, and discuss three fundamental, systemic issues that have profound long-term negative consequences for the effective delivery of high quality health care for the people of NSW.  These three fundamental issues need to be addressed and changed.  We see these issues as being of such importance that unless they are addressed, all other attempts to improve the NSW Health System will ultimately be unsuccessful.

The three fundamental issues to be addressed are, firstly, the lack of an effective system of ‘checks and balances’ within the power structure of the NSW Health Department; secondly, the lack of any clear linkage between clinical activity and resource allocation; and thirdly, the need to re-integrate ‘private’ and ‘public’ healthcare in the NSW Health System.   These three fundamental issues interact with each other, but will be dealt with separately.

Checks and Balances within the Power Structure of NSW Health.

In the last forty years, control of the acute hospital system of NSW has become progressively more centralised.  Hospitals were originally largely autonomous, and controlled by a community-based board, with the Department and Minister providing ‘distant’ supervision.  Over time, the hierarchy of NSW Health has become more clearly defined, and the autonomy, independence, identity, and authority of Hospitals, Districts, and Areas has become progressively less and less.  With the most recent restructuring of NSW Health, the centralisation of authority, and definition of a clear hierarchy of power, has become more entrenched than has ever been the case in the past. 

Simultaneously with the concentration of authority into a centralised hierarchy, there has been a diminution of any system of ‘checks and balances’ to provide a ‘balance of power’ within the NSW Health system.  In particular:-

• Since 1973 there have been fifteen different Ministers of Health.  The position has been occupied by a rapidly changing succession of politicians who have rarely been able to establish an effective knowledge or information base independent of the Departmental hierarchy. Inevitably, the Minister becomes dependent on the Department, and is incapable of being an external check or balance on the department’s power.   
• The input of experienced clinicians (such as bedside Nurse Managers and senior Doctors) into decision-making has been greatly reduced.  This has occurred because authority has been deliberately taken from them, and because clinicians have chosen to become less engaged with the public hospital system. 
• Engagement with the community has virtually ceased.  Small locally-controlled hospitals with hospital boards were successively amalgamated into a smaller number of larger hospitals.  Hospital Boards were replaced by District Boards, and then by Area Boards, with diminished community authority.  More recently, these Boards have been replaced with one Area Health Advisory Council (AHAC) in each of the eight Area Health services of NSW.   Simultaneously, the commitment to consumer input through a state-wide consumer advisory committee, recommended in the Menadue report, has been whittled away over time to minimal consumer representation on these AHACs.

These Councils have no authority and provide advice to the Chief Executive only. They are merely “window dressing” so that the public may feel assured that there is a mechanism by which community views can be fed into the system. Whether any notice is taken of these views is entirely the decision of the Chief Executive and the Council functions only by the goodwill of the Chief Executive and his or her communication with the Council. There is a dismal failure of local accountability of the administration to the community it serves.

All these changes have combined to result in the NSW Health Department becoming a powerful, centralised, hierarchical autocracy with little or no local input or accountability.  Further, the culture of the bureaucratic hierarchy has profoundly stifled the capacity for necessary innovation and change in the NSW Health system.  

As in all such organizations, the exercise of power and authority becomes motivated around hierarchical politics rather than achievement of externally defined goals.  Control of information and information flow becomes an activity to support internal politics.  Information is shaped to serve the needs of the officer passing on the information (e.g. telling the boss what they want to hear) rather than to judge the performance of the organization against external demands.  The internal organisational language becomes modified for internal purposes.  The power of any individual within the hierarchy is defined by control of resources, budgets and information, rather than performance to fit external goals.

All the above features of a hierarchical autocracy can be seen in NSW Health.  The only solution is to either destroy or profoundly fragment the hierarchy altogether (which is not realistic or appropriate) or to insert appropriate external “Checks and Balances” as counterpoise to the centralised power structure.  There are three options for these external, balancing, sources of authority – the Minister; the Clinicians; and the Community. The three sources of external power are complemented (or undermined) by control of two other factors – information, and control of funds.

The Minister

The Minister, as the representative of the government of the day, should be expected to provide overall external control of the Department; this should be exercised by the Minister providing policy direction, and appointing the Departmental executives.  The Minister should not be seen as responsible for, or be directly involved in implementing policy.  When this happens, the Minister becomes identified directly with the Department hierarchy, compromising their effectiveness as an external control over the Department.  The Minister then becomes obliged to defend all the actions of the Department, rather than ‘just’ the policy direction.  The current expectations of the political commentariat in Australia make this unlikely to change.

Without fundamental change, we do not foresee a time in the medium-term future when a Minister will have enough stability, experience or knowledge to be able to exert sustainable external authority over the Departmental hierarchy.

Clinicians

We believe that clinicians must be engaged in decision-making at all levels, and in the oversight of the exercise of authority.  For these purposes, we would define ‘Clinicians’ as those directly involved in treating patients, (i.e. bedside Nurses, Doctors and Allied Health professionals); or those working immediately with them (e.g. ward clerks, cleaners, ward assistants).  These are the staff who are confronted by the day-to-day realities of patient care, and have a profound understanding of the challenges of delivering care.  Any innovation or change in the system must be implemented through the clinical staff.  These clinical staff understand where and how genuine improvements in care can be made.  Therefore they must be involved in decision-making at all levels. 

The involvement of clinicians has recent successful precedents in NSW.  Many successful innovations have been introduced where committed and enthusiastic clinicians have worked in genuine partnership with the management hierarchy.   The model of clinician engagement developed by the GMTT (Greater Metropolitan Transition Taskforce – now GMCT) achieved results in resolving difficult health service planning decisions that had previously been considered insoluble.  With regard to senior Medical staff, those hospitals that have supported or maintained active, representative, and engaged Medical Staff Councils have been manifestly more successful at maintaining appropriate clinical standards than other hospitals. 

Clinician (re)engagement and involvement in delegated decision-making is realistic and achievable.  It will however, require a formalised, active program establishing a supported framework for representative (not appointed) involvement at every level of the hierarchy of authority.  As this is established, and trust is rebuilt, genuine progress to sustain and improve the NSW Health System will be possible.  Without clinician engagement, no sustainable improvements will be achieved.

The Community – both current and future patients

Ultimately, the goal of the health system is to care for the health of the people of NSW.  The system is funded by the people of NSW.  It is a basic tenet of public policy that the system should be managed at all levels for the people of NSW.  As described above, this can no longer be assumed, because formalised community involvement in the management of the health system has been progressively reduced until it is now largely limited to tokenistic ‘Advisory Councils’ and to ‘community consultation’ processes managed by the internal hierarchy. 

Individual hospital boards are not always remembered positively.  In particular, they sometimes fostered inappropriate decision-making based on loyalty to individual hospitals rather than the overall system.  Perhaps more commonly, they supported points of view held strongly by the community rather than those of bureaucrats.  Rather than eliminating community engagement, these ‘problems’ should be addressed by enhancing community engagement at all levels, so that it is clear that the broad community is involved genuinely, is educated and empowered so that they can genuinely represent the community’s appropriate choices, and can enact the decisions the broad community wishes to make.  For meaningful community involvement, some authority should be delegated to Area Health Advisory Council, and  the Chief Executive should be responsible to the Council. The designation “Advisory” should be removed from the title. As with clinicians, community engagement will require the development of a supported framework for involvement at every level of the hierarchy of authority, including both corporate and clinical governance.  This will take time, but must be developed if a sustainable health system is to be achieved.

Information

The centralisation of power within the hierarchy, and the complex nature of health care, makes external measurement of the quality of the acute health care services extremely difficult. The definition of performance measures becomes shaped to serve the perceived needs of the hierarchy, and the collection and interpretation of data becomes corrupted. ‘Gaming the system’ to produce results which appear good becomes the norm.

This situation will continue unless there is an independent clinical audit and review Authority entirely separated from the Department of Health.  This body should have independence and authority comparable to that of the coroner or the auditor-general. This body should be capable of defining appropriate measures of activity and outcomes, and be able to independently verify the validity of information gathered, and should report this information directly to parliament.  This Authority should produce similar reports on all health service providers (public and private) in NSW.

Funding  

The current system for control of funds within the NSW Health reinforces the centralisation of power.  “Budgets” are defined in detail by the hierarchy, and management decision-making by Managers is constrained by those defining budgets.  Alternative funding models, such as case-mix based funding (funding defined by activity – see below); or incorporation at the base of the management hierarchy of external funding sources (such as private activity – see below) will result in dissemination of power away from the centralised hierarchy.  These alternative funding models may provide an intrinsic reward system for both clinical activity and actions to increase the attractiveness of services to patients. 

The current model for control of funds within NSW Health reinforces the centralisation of power within the hierarchy.  Alternative funding models, such as those used in other jurisdictions, may provide a supporting structure for external ‘checks and balances’ within the NSW Health system hierarchy.

 

A Clear Linkage between Activity and Resource Allocation

Resources for health care are limited, and the appropriate allocation of scarce resources is one of the major challenges of health care policy.  While this means that difficult choices must be made at public policy level, and implemented throughout the system, the current system of resource restrictions acts to demoralise staff and stifle appropriate activity, rather than reward it.  In particular, resources are commonly allocated to front-line managers as a fixed budget, and managers are then expected to ‘manage their activity’ within the budget.  Most front-line managers have minimal ability to control their clinical load.  As a result, front-line managers (such as ‘Charge Nurses’ on wards) are forced to provide care at less than appropriate standards, or are forced to adopt behaviours that limit immediate activity (e.g. limiting the number of cases performed on a procedural list to stay within budget), even if this ultimately decreases efficiency or increases overall costs of patient treatment by the system as a whole. 

We believe that the appropriate place for strategic resource allocation decisions is away from the front-line and middle-management staff. These are public policy decisions that should be made at the highest level, guided by agreed and defined principles.  Clinical service managers should be able to fully focus on effective service delivery, rather than resource allocation issues.  Ultimately, clinical service managers at all levels should be allocated resources in accordance with their activity.  In many other health systems and jurisdictions (including Victoria) this has been achieved.  Thus, hospital managers and Clinical Unit managers understand that if their clinical load is increased (such as extra procedures to be performed), they will be ‘rewarded’ with extra resources, and can thus confidently employ the required extra staff or order the additional equipment or clinical disposables required to do the work.  The methodology for implementing these systems  (‘casemix funding, or pay per episode of care or procedure) is well established.   In Victoria, the introduction of this system led to a rapid and unexpectedly large increase in system efficiency, and ultimately to better morale amongst front-line managers.  In NSW, there has only been limited application of these principles, and has not been targeted at front-line managers.  Clearly defined linkage of activity with resource allocation should be implemented throughout the NSW Health System.

 

Re-Integration of ‘Public’ and ‘Private’ Health Care

One of the most obvious changes in the delivery of health care in NSW in the last two decades has been the separation of ‘private’ patients out of the public hospital sector.  The reasons for this are multiple.  Some are reflections of changing social values; some are a result of demand for procedures that are performed by clinicians who have become disengaged from the public sector.  Some arguments in favour of this change are superficially attractive, but nevertheless spurious, such as the contention that the development of the private sector ‘takes the pressure off the public hospitals’. 

It is self-evident that the private sector exists to make a profit, not to altruistically ‘help’ the public sector. These profits from privately funded patient activity can be used to increase the overall capacity of the acute hospital system.

There are numerous advantages to a mixed system where ‘public’ and ‘private’ patients are treated in the same system.  Among these advantages are:-

• Profits that are currently made by private hospitals treating private patients can and should be made by public hospitals. The income derived from treating private patients will support the overall system. Given that the hospital is incurring a marginal (rather than an average) cost per episode of care, a well-managed hospital will incur a ‘profit’ from each additional private patient treated.
• The private sector is already funded on a ‘pay per procedure’ basis. As already discussed (above), this engenders behaviours that focus on rewarding activity rather than staying within budget.
• There is inevitable ‘cross-fertilisation’ of behaviours such as client focus between public and private sectors. This can be appropriately directed to improve attention to the needs of the patients, particularly for non-clinical issues.
• The inclusion of private patients in the public sector reinforces the reality that the hospital system exists for all the community. In particular, this encourages the engagement of the community with the hospital, as it is clearly ‘their’ hospital.
• Inclusion of private patients in public hospitals can act to maintain the involvement of senior clinicians, rather than the progressive disengagement from both public clinical practice, and non-clinical activities to support the public hospital system, particularly involvement in clinical teaching.

Arguably, the wealthy members of the community are entitled to treatment in the public hospital.  It is patently ridiculous to suggest that wealth should be a reason why a patient should be denied the right to be treated in a major teaching hospital. 

The best analogy to an appropriate public/private mix may be an international airline flight.  All passengers travel from the same destination, but some pay extra to have a more comfortable experience, while others pay a premium to book their flight ‘at the last minute’, or to suit their particular requirements for timing or scheduling.  Nevertheless, all passengers end up at the same destination, with the same degree of safety, and with the same pilot.  

There are currently some systemic issues acting against the (re)-integration of public and private patients in public hospitals.

• The current health insurance rebate system discriminates against the public sector: – For the same procedure, total insurance rebates can be substantially more if it is performed in a private hospital. This is clearly inequitable.  There must be a ‘level playing field’ for appropriate competition.
• Administrative systems within the public sector are not designed to maximise billing where patients are insured. In some settings, income from private patients is diverted to budgets other than those incurring the cost.  This can lead to perverse incentives, so that staff deliberately encourage patients to register as public patients.
• As discussed previously, there are poorly developed systems to provide appropriate resource allocation for increased activity whether public or private.
• Facilities (such as individual rooms) are inadequately provided because of restrictions on capital expenditure. Thus, despite the relatively low marginal cost of additional rooms, the potential income of treating private patients is lost.
• Some attitudes against private patients ‘jumping the queue’ must be addressed. While going to a separate private hospital, patients are ‘jumping the queue’ anyway.  Appropriate rules for ensuring (say) that each VMO surgeon provides an appropriate level of public service, and that private activity is in addition to this, must be developed to enable this concern to be addressed.

Most of the constraints on pursuing private patient activity are organisational.  Some are entirely artificial constraints arising from internal accounting procedures.  A large private patient population may be seen as a threat to the power of a senior hospital administrator, as it represents a source of resources (and thus power) outside of the control of the central hierarchy.  Furthermore, private patients may have expectations of service, and may feel empowered to complain effectively if these expectations are not met.  The dis–integration of private patients from public hospitals has assisted the centralisation of power and the establishment of the hierarchical autocracy of the NSW Health System.  Thus it is of fundamental importance that this third issue is also addressed. 

Conclusion

Systemic, fundamental flaws compromise the current structure and function of the NSW Acute Health system.  If these issues are not addressed, any foreseeable improvements in the system will not be sustained.  The actions needed to address these flaws include:-

1. Development of a formalised structure for representative involvement and engagement of clinicians in decision-making at every level of the hierarchy of authority.

2. Development of a supported framework for involvement of the community (both current and potential patients) at every level of the health system. The Area Health Advisory Council structure should be redesigned to have a more effective local role through devolved, legislated responsibilities which provides local accountability of the Chief Executive and the Area administration to the Councils and thus to the community.

3. Establishment of an independent Clinical Audit and Review Authority, with authority and powers comparable to the Auditor-General and the State Coroner, to measure, monitor, and guide improvements to the standards of health care in NSW.

4. Introduction of a healthcare funding system that provides a clearly defined linkage between clinical activity and resource allocation, as has been established in other jurisdictions.

5. Re-integration of public and private patient services into a shared system with that is accessed and ‘owned’ by all the community.

6. Widespread discussion of the expected role of the Minister, in order to develop a general acceptance of the principle of separation of responsibilities, so that the Minister is responsible for policy direction, and the Department is responsible for policy implementation.