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Actions for Ensuring contract management capability in government - HealthShare NSW

Ensuring contract management capability in government - HealthShare NSW

Health
Management and administration
Procurement
Project management

This report examined whether HealthShare NSW, a part of NSW Health, has the required contract management capability to effectively manage goods and services contracts valued over $250,000. 

The report found that HealthShare has a procurement framework that should support effective contract management, but it is not applying it consistently. In particular, the audit found that HealthShare was not applying key contract management elements to over 80 per cent of the high-value contracts it manages. The audit also found that HealthShare’s contract management practices were limited by inadequate performance monitoring.

'Effective contract management is essential to ensure the contracts HealthShare enters into are delivering as expected and ensuring value for money,' said the Auditor-General. 'Without this, the value for money or savings HealthShare achieves when it negotiates these contracts is at risk of being eroded over the life of the contract.'

The report recommends that NSW Health develop a performance improvement plan to ensure HealthShare is fully compliant with procurement policies and that NSW Health meets its obligations under the Government's Accreditation Program for Goods and Services Procurement.

HealthShare is a NSW Health entity responsible for providing shared services, including procurement, to support the delivery of patient care within the NSW health system. In 2018, HealthShare procured high value goods and services contracts with an annual estimated total spend of around $1.8 billion, with most of the contracts of long duration.

NSW Government agencies are increasingly delivering services and projects through contracts with third parties. These contracts can be complex and governments face challenges in negotiating and implementing them effectively. A robust contract management framework helps ensure all parties meet their obligations, contractual relationships are well managed, agencies achieve value for money, and deliverables meet the required standards and agreed timeframes.

Contract management capability is a broad term, which can include aspects of individual staff capability (such as staff knowledge, skills and experience) as well as organisational capability (such as policies, frameworks and processes).

The NSW Procurement Board is responsible for overseeing the Government's procurement system, setting policy and ensuring compliance. It has accredited the Health Administration Corporation (HAC) to procure goods and services with no upper financial limit. Under the terms of this accreditation, the Secretary, NSW Health (as head of HAC) has delegated the procurement of high-value (over $250,000) goods and services contracts within NSW Health to only the Ministry of Health and HealthShare NSW (HealthShare).

HealthShare NSW (HealthShare) is a NSW Health entity responsible for providing shared services, including procurement, to support the delivery of patient care within the NSW health system. In 2018, HealthShare procured high-value goods and services contracts with an annual estimated total spend of around $1.8 billion, with most of the contracts of long duration.

HealthShare’s Contract Management Guide states that, without rigorous contract management, 75 per cent of projected sourcing savings can disappear within 18 months of the contract starting.

This audit examined whether HealthShare has the required capability to effectively manage high-value goods and services contracts. Contracts we examined included critical items such as food services in hospitals, patient transport services, intravenous equipment and kidney dialysis services, where risks include patient safety as well as value for money. We did not examine infrastructure, construction or information communication and technology contracts. We also did not examine HealthShare’s sourcing processes, including identifying business needs, tendering and contract award.

We assessed HealthShare against the following criteria:

  1. HealthShare's systems, policies and procedures support effective contract management and are consistent with relevant frameworks, policies and guidelines.
  2. HealthShare has capable personnel to effectively conduct the monitoring activities throughout the life of the contract.

We included the NSW Public Service Commission and NSW Treasury, through NSW Procurement, as auditees because they administer policies which directly affect contract management capability. These include:

  • NSW Procurement Board Directions and policies
  • NSW Government Procurement Policy Framework
  • Accreditation Program for Goods and Services Procurement
  • the NSW Public Sector Capability Framework.

NSW Procurement was transferred to NSW Treasury from the former Department of Finance, Services and Innovation on 1 July 2019 as part of changes to government administrative arrangements.

Conclusion
HealthShare is not applying the capability needed to effectively manage high-value (over $250,000) goods and services contracts. HealthShare's procurement framework includes elements that should support effective contract management, and it has a systematic approach to managing staff contract management capability. That said, HealthShare is not implementing key contract management elements of its own framework. As such, the value for money or savings it achieves when it negotiates contracts is at risk of being eroded over the life of these contracts.
Effective contract management is essential for HealthShare to ensure contracts it enters into are delivering the goods and services expected and achieving value for money, safety and quality. The Ministry of Health and HealthShare have invested in developing and implementing systems and tools to support effective contract management. In line with its obligations under the Agency Accreditation Program for Goods and Services Procurement (accreditation program), the Ministry of Health mandates the use of contract management plans for high-value contracts. The Ministry of Health also requires that all health entities use the PROcure contract management system for ongoing management of contracts with a value over $150,000. HealthShare is not complying with these directions for over 80 per cent of the contracts it manages.
In the absence of HealthShare following its framework, and the Ministry of Health’s directions, we looked for other evidence that HealthShare was effectively managing high-value contracts. We found that HealthShare’s contract management practices were limited by inadequate performance monitoring.
When Local Health Districts (LHDs) need to procure high-value goods and services, the Ministry of Health’s procurement policy requires that they use HealthShare to source and manage the procurement. This is to manage risk and provide oversight of procurement and contracts across the NSW health system. Despite this policy, HealthShare was only managing the sourcing stage of the procurement and transferring responsibility for contract management to the relevant LHD.

Appendix one – Response from agencies

Appendix two – Contract performance management summary

Appendix three – About the audit

Appendix four – Performance auditing

 

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary Reference: Report number #328 - released 31 October 2019

Published

Actions for Mental health service planning for Aboriginal people in New South Wales

Mental health service planning for Aboriginal people in New South Wales

Health
Management and administration
Project management
Service delivery
Workforce and capability

A report released by the Auditor-General for New South Wales, Margaret Crawford, has found that NSW Health is not forming effective partnerships with Aboriginal communities to plan, design and deliver appropriate mental health services. There is limited evidence that NSW Health is using the knowledge and expertise of Aboriginal communities to guide how mental health care is structured and delivered.

Mental illness (including substance use disorders) is the main contributor to lower life expectancy and increased mortality in the Aboriginal population of New South Wales. It contributes to a higher burden of disease and premature death at rates that are 40 per cent higher than the next highest chronic disease group, cardiovascular disease.1 

Aboriginal people have significantly higher rates of mental illness than non Aboriginal people in New South Wales. They are more likely to present at emergency departments in crisis or acute phases of mental illness than the rest of the population and are more likely to be admitted to hospital for mental health treatments.2 

In acknowledgement of the significant health disparities between Aboriginal and non Aboriginal people, NSW Health implemented the NSW Aboriginal Health Plan 2013 2023 (the Aboriginal Health Plan). The overarching message of the Aboriginal Health Plan is ‘to build respectful, trusting and effective partnerships with Aboriginal communities’ and to implement ‘integrated planning and service delivery’ with sector partners. Through the Plan, NSW Health commits to providing culturally appropriate and ‘holistic approaches to the health of Aboriginal people'.

The mental health sector is complex, involving Commonwealth, state and non government service providers. In broad terms, NSW Health has responsibility to support patients requiring higher levels of clinical support for mental illnesses, while the Commonwealth and non government organisations offer non acute care such as assessments, referrals and early intervention treatments.

The NSW Health network includes 15 Local Health Districts and the Justice Health and Forensic Mental Health Network that provide care to patients during acute and severe phases of mental illness in hospitals, prisons and community service environments. This includes care to Aboriginal patients in the community at rates that are more than four times higher than the non Aboriginal population. Community services are usually provided as follow up after acute admissions or interactions with hospital services. The environments where NSW Health delivers mental health care include:

  • hospital emergency departments, for short term assessment and referral
  • inpatient hospital care for patients in acute and sub acute phases of mental illness
  • mental health outpatient services in the community, such as support with medications
  • custodial mental health services in adult prisons and juvenile justice centres.

The NSW Government is reforming its mental health funding model to incrementally shift the balance from hospital care to enhanced community care. In 2018–19, the NSW Government committed $400 million over four years into early intervention and specialist community mental health teams.

This audit assessed the effectiveness of NSW Health’s planning and coordination of mental health services and service pathways for Aboriginal people in New South Wales. We addressed the audit objective by answering three questions: 

  1. Is NSW Health using evidence to plan and inform the availability of mental health services for Aboriginal people in New South Wales?
  2. Is NSW Health collaborating with partners to create accessible mental health service pathways for Aboriginal people?
  3. Is NSW Health collaborating with partners to ensure the appropriateness and quality of mental health services for Aboriginal people?
Conclusion

NSW Health is not meeting the objectives of the NSW Aboriginal Health Plan, to form effective partnerships with Aboriginal Community Controlled Health Services and Aboriginal communities to plan, design and deliver mental health services.

There is limited evidence that existing partnerships between NSW Health and Aboriginal communities meet its own commitment to use the ‘knowledge and expertise of the Aboriginal community (to) guide the health system at every level, including (for) the identification of key issues, the development of policy solutions, the structuring and delivery of services' 3 and the development of culturally appropriate models of mental health care.

NSW Health is planning and coordinating its resources to support Aboriginal people in acute phases of mental illness in hospital environments. However, it is not effectively planning for the supply and delivery of sufficient mental health services to assist Aboriginal patients to manage mental illness in community environments. Existing planning approaches, data and systems are insufficient to guide the $400 million investment into community mental health services announced in the 2018–19 Budget.

NSW Health is not consistently forming partnerships to ensure coordinated care for patients as they move between mental health services. There is no policy to guide this process and practices are not systematised or widespread.

In this report, the term ‘Aboriginal people’ is used to describe both Aboriginal and Torres Strait Islander peoples. The Audit Office of NSW acknowledges the diversity of traditional countries and Aboriginal language groups across the state of New South Wales.


1 Australian Burden of Disease Study: Impact and causes of illness and death in Aboriginal and Torres Strait Islander people 2011 (unaudited).
2 Australian Institute of Health and Welfare data 2016–17 (unaudited).
3 NSW Health, The Aboriginal Health Plan 2013-2023.

In May 2019, the Audit Office of New South Wales invited Aboriginal mental health clinicians and policy experts from government and non-government organisations to attend a one-day workshop. Workshop attendees advised on factors that improve the quality and appropriateness of mental health care for Aboriginal people in New South Wales. They described appropriate mental health care as:

  • culturally safe, allowing Aboriginal people to draw strength in their identity, culture and community
  • person centred and focussed on individual needs
  • delivered by culturally competent staff with no bias
  • holistic, trauma-informed and focussed on early intervention where possible
  • delivered in places that are appropriate including outreach to homes and communities
  • welcoming of the involvement of local Aboriginal community and connected to local knowledge and expertise including totems and kinship structures. 

The definition of 'appropriate' mental health care for Aboriginal people throughout this report is based on this advice.

Aboriginal people access emergency services at much higher rates than non-Aboriginal people

The choices that people make in relation to health service options provide some insight into the suitability and appropriateness of the service to their needs.

Aboriginal people have different mental health service use patterns than non-Aboriginal people. Aboriginal people are much more likely to be in a crisis situation before receiving mental health services, usually in an emergency department of a hospital.

Aboriginal people make up three per cent of the total New South Wales population, but they constitute 11 per cent of emergency department presentations for mental health treatments. In regional areas, Aboriginal people make up 20.5 per cent of presentations at emergency departments for mental health reasons. 

A number of factors help to explain Aboriginal mental health service usage patterns. According to government and non-government mental health organisations:

  • emergency department services are better known to Aboriginal people than other mental health services
  • community-based models of care are not appropriate for Aboriginal people
  • Aboriginal people are reluctant to access community-based mental health services to prevent crisis situations
  • community mental health services are not available for Aboriginal people after hours and during the weekend, so emergency services are the only option.

The statewide proportions of Aboriginal people presenting at emergency departments for mental health treatments has been increasing over time (Exhibit 6).

Appendix one – Response from agency

Appendix two – The NSW Aboriginal Health Plan

Appendix three – About the audit

Appendix four – Performance auditing

 

Parliamentary Reference: Report number #326 - released 29 August 2019

Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Published

Actions for Managing native vegetation

Managing native vegetation

Environment
Management and administration
Project management
Regulation
Service delivery

The report found the clearing of native vegetation on rural land is not effectively regulated and managed. The processes supporting the regulatory framework are weak and there is no evidence-based assurance that clearing of native vegetation is carried out in accordance with approvals. 

In 2014 an expert panel completed a review of biodiversity legislation in NSW. The panel’s recommendations included repealing the Native Vegetation Act 2003, proposing a new Act with the goal of maintaining a healthy, productive and resilient environment for the greatest wellbeing of the community, and recommending that management of native vegetation in the context of existing agricultural management would be assisted and supervised by Local Land Services (LLS).

Following the panel report, the NSW Government undertook major biodiversity conservation and land management reforms which saw the introduction of the Biodiversity Conservation Act 2016 (NSW) and the Local Land Services Amendment Act 2016 (NSW). The reforms commenced in August 2017. The Native Vegetation Act 2003, the Threatened Species Conservation Act 1995, the Nature Conservation Trust Act 2001, and parts of the National Parks and Wildlife Act 1974 were repealed.

Under the legislative reforms, the Biodiversity Conservation Act 2016 and Local Land Services Amendment Act 2016, which amended the Local Land Services Act 2013, aim to ensure a balanced approach to land management and biodiversity conservation in NSW.

A core objective of the Biodiversity Conservation Act 2016 is to conserve biodiversity at bioregional and state scales. A core objective of the Local Land Service Act 2013 is to ensure the proper management of natural resources in the social, economic and environmental interests of the state, consistently with the principles of ecologically sustainable development.

The integrated package of reforms included:

  • new arrangements that allow land owners to improve productivity while responding to environmental risks
  • new ways to assess and manage the biodiversity impacts of development
  • a new state Environmental Planning Policy for managing impacts on native vegetation in urban areas
  • significant investment in conservation of private land
  • a risk-based system for regulating human and business interactions with native plants and animals
  • streamlined approvals and dedicated resources to help reduce the regulatory burden.

Transition to this land management framework began on 25 August 2017 with the commencement of the Land Management (Native Vegetation) Code.

The overall objectives of the reforms are:

  • to arrest and ultimately reverse the current decline in the state’s biodiversity while facilitating ecologically sustainable development, in particular efficient and sustainable agricultural development
  • enable landholders to improve the efficiency of their agricultural systems and take a more active role in providing incentive and supporting landholders to improve the condition and function of their ecological systems. 

The objective of this audit is to assess whether the clearing of native vegetation in rural areas is effectively regulated and managed by the Office of Environment and Heritage (OEH) and LLS under these legislative frameworks. The audit also examined the progress of the Biodiversity Conservation Trust in implementing the Biodiversity Conservation Investment Strategy as a counterbalance to rural land clearing. 

At the time of this audit OEH was responsible for preparing the Native Vegetation Regulatory map and for compliance enforcement in relation to unlawful land clearing. Post 1 July 2019, under machinery of government changes, OEH will be abolished and its activities relevant to this audit will be moved to the new Department of Planning, Industry and Environment. For the purposes of this audit we will continue to refer to it as OEH. 

Conclusion
The clearing of native vegetation on rural land is not effectively regulated and managed because the processes in place to support the regulatory framework are weak. There is no evidence-based assurance that clearing of native vegetation is being carried out in accordance with approvals. Responses to incidents of unlawful clearing are slow, with few tangible outcomes. Enforcement action is rarely taken against landholders who unlawfully clear native vegetation. 

There are processes in place for approving land clearing but there is limited follow-up to ensure approvals are complied with.
Procedures and systems are in place for assessing applications and issuing approvals for land clearing. Approvals contain conditions for managing clearing and setting aside land for conservation as a counterbalance to permitted clearing. 
There is limited follow-up or capacity to gauge whether landholders are complying with the conditions of approvals and effectively managing areas of their land that have been set aside for conservation (i.e. 'set asides'). 
Certificate assessments are used to grant landholders permission to clear. All assessments we reviewed generally complied with the Land Management (Native Vegetation) Code 2018 (the Code). 
The rules around land clearing may not be responding adequately to environmental risks.
The Code, which contains conditions under which the thinning or clearing of native vegetation can be approved on regulated land, is intended to allow landholders to improve productivity while responding to environmental risks. That said, it may not be achieving this balance. For example, the Code allows some native species to be treated as ‘invasive’ when they may not be invading an area, provides little protection for groundcover and limited management requirements for set asides. There is also limited ability under the Code to reject applications for higher risk clearing proposals.
The release of the Native Vegetation Regulatory (NVR) map has been delayed, limiting landholders' ability to determine if their plans for clearing are lawful.
OEH has applied significant effort in developing a native vegetation regulatory map to guide landholders on which land they can and can’t clear without approval. However, in November 2016 the then Minister for Primary Industries advised Parliament that the two largest land categories of the NVR map will not come into effect until the relevant Ministers are satisfied stakeholders have sufficient confidence in the maps’ accuracy. Not releasing the map has made it harder for landholders to identify the portions of their land that are regulated and ensure they comply with land clearing rules. It has also limited OEH’s ability to consult on and improve the accuracy of the map.
There are significant delays in identifying unlawful clearing and few penalties imposed.
Unexplained land clearing can take over two years to identify and analyse, making it difficult to minimise environmental harm or gather evidence to prosecute unlawful clearing. Despite around 1,000 instances of unexplained clearing identified by OEH and over 500 reports to the environmental hotline each year, with around 300 investigations in progress at any one time, there are only two to three prosecutions, three to five remediation orders and around ten penalty notices issued each year for unlawful clearing. Further, OEH is yet to commence any prosecutions under the current legislation which commenced in August 2017.
Land clearing and private land conservation investment have both increased.
Clearing of native vegetation has increased in recent years. At the same time, the government is also investing in properties with high environmental value with a focus on improving the mix of endangered ecological communities conserved in perpetuity. Processes are in place for identifying and prioritising areas of land for investment but the funding provided to each region is not always consistent with these priorities. 

Local Land Services (LLS) is responsible for processing notifications and issuing certificates to landholders for managing the thinning or clearing of native vegetation on rural land through the ‘Land Management (Native Vegetation) Code 2018’ (the Code). This work includes monitoring and reporting on the implementation of the Code, including the establishment and management of set asides.

OEH is responsible for compliance and enforcement in relation to unlawful land clearing. It is also responsible for producing the NVR map, designed to show landholders where land clearing can occur without approval, where approval is required, and where land clearing is not permitted. Post 1 July 2019, under machinery of government changes, OEH will be abolished and its activities relevant to this audit will be moved to the new Department of Planning, Industry and Environment.

Appendix one - Response from agencies

Appendix two - Authorisations for thinning and clearing, and restoration initiatives under the Native Vegetation Act 2003

Appendix three - About the audit

Appendix four - Performance auditing

 

Parliamentary Reference: Report number #324 - released 27 June 2019

Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Published

Actions for Contracting non-government organisations

Contracting non-government organisations

Community Services
Compliance
Fraud
Management and administration
Procurement
Regulation
Service delivery

This report found the Department of Family and Community Services (FACS) needs to do more to demonstrate it is effectively and efficiently contracting NGOs to deliver community services in the Permanency Support Program (a component of out-of-home-care services) and Specialist Homelessness Services. It notes that FACS is moving to an outcomes-based commissioning model and recommends this be escalated consistent with government policy.

Government agencies, such as the Department of Family and Community Services (FACS), are increasingly contracting non-government organisations (NGOs) to deliver human services in New South Wales. In doing so, agencies are responsible for ensuring these services are achieving expected outcomes. Since the introduction of the Commissioning and Contestability Policy in 2016, all NSW Government agencies are expected to include plans for customer and community outcomes and look for ways to use contestability to raise standards.

Two of the areas receiving the greatest funding from FACS are the Permanency Support Program and Specialist Homelessness Services. In the financial year 2017–18, nearly 500 organisations received $784 million for out-of-home care programs, including the Permanency Support Program. Across New South Wales, specialist homelessness providers assist more than 54,000 people each year and in the financial year 2017–18, 145 organisations received $243 million for providing short term accommodation and homelessness support, including Specialist Homelessness Services.

In the financial year 2017–18, FACS entered into 230 contracts for out-of-home care, of which 49 were for the Permanency Support Program, representing $322 million. FACS also entered into 157 contracts for the provision of Specialist Homelessness Services which totalled $170 million. We reviewed the Permanency Support Program and Specialist Homelessness Services for this audit.

This audit assessed how effectively and efficiently FACS contracts NGOs to deliver community services. The audit could not assess how NGOs used the funds they received from FACS as the Audit Office does not have a mandate that could provide direct assurance that NGOs are using government funds effectively.

Conclusion
FACS cannot demonstrate it is effectively and efficiently contracting NGOs to deliver community services because it does not always use open tenders to test the market when contracting NGOs, and does not collect adequate performance data to ensure safe and quality services are being provided. While there are some valid reasons for using restricted tenders, it means that new service providers are excluded from consideration - limiting contestability. In the service delivery areas we assessed, FACS does not measure client outcomes as it has not yet moved to outcomes-based contracts. 
FACS' procurement approach sometimes restricts the selection of NGOs for the Permanency Support Program and Specialist Homelessness Services
FACS has a procurement policy and plan which it follows when contracting NGOs for the provision of human services. This includes the option to use restricted tenders, which FACS sometimes uses rather than opening the process to the market. The use of restricted tenders is consistent with its procurement plan where there is a limited number of possible providers and the services are highly specialised. However, this approach perpetuates existing arrangements and makes it very difficult for new service providers to enter the market. The recontracting of existing providers means FACS may miss the opportunity to benchmark existing providers against the whole market. 
FACS does not effectively use client data to monitor the performance of NGOs funded under the Permanency Support Program and Specialist Homelessness Services
FACS' contract management staff monitor individual NGO performance including safety, quality of services and compliance with contract requirements. Although FACS does provide training materials on its intranet, FACS does not provide these staff with sufficient training, support or guidance to monitor NGO performance efficiently or effectively. FACS also requires NGOs to self-report their financial performance and contract compliance annually. FACS verifies the accuracy of the financial data but conducts limited validation of client data reported by NGOs to verify its accuracy. Instead, FACS relies on contract management staff to identify errors or inaccurate reporting by NGOs.
FACS' ongoing monitoring of the performance of providers under the Permanency Support Program is particularly limited due to problems with timely data collection at the program level. This reduces FACS' ability to monitor and analyse NGO performance at the program level as it does not have access to ongoing performance data for monitoring service quality.
In the Specialist Homelessness Services program, FACS and NGOs both provide the data required for the National Minimum Data Set on homelessness and provide it to the Australian Institute of Health and Welfare, as they are required to do. However, this data is not used for NGO performance monitoring or management.
FACS does not yet track outcomes for clients of NGOs
FACS began to develop an approach to outcomes-based contracting in 2015. Despite this, none of the contracts we reviewed are using outcomes as a measure of success. Currently, NGOs are required to demonstrate their performance is consistent with the measures stipulated in their contracts as part of an annual check of their contract compliance and financial accounts. NGOs report against activity-based measures (Key Performance Indicators) and not outcomes.
FACS advises that the transition to outcomes-based contracting will be made with the new rounds of funding which will take place in 2020–2021 for Specialist Homelessness Services and 2023 for the Permanency Support Program. Once these contracts are in place, FACS can transition NGOs to outcomes based reporting.
Incomplete data limits FACS' effectiveness in continuous improvement for the Permanency Support Program and Specialist Homelessness Services
FACS has policies and procedures in place to learn from past experiences and use this to inform future contracting decisions. However, FACS has limited client data related to the Permanency Support Program which restricts the amount of continuous improvement it can undertake. In the Specialist Homelessness Support Program data is collected to inform routine contract management discussions with service providers but FACS is not using this data for continuous improvement. 

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

 

Parliamentary Reference: Report number #323 - released 26 June 2019

Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Published

Actions for Governance of Local Health Districts

Governance of Local Health Districts

Health
Internal controls and governance
Management and administration

The main roles, responsibilities and relationships between Local Health Districts (LHDs), their Boards and the Ministry of Health are clear and understood, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. However, there are opportunities to achieve further maturity in the system of governance and the audit report recommended a series of actions to further strengthen governance arrangements.

Fifteen Local Health Districts (LHDs) are responsible for providing public hospital and related health services in NSW. LHDs are:

  • established as statutory corporations under the Health Services Act 1997 to manage public hospitals and provide health services within defined geographical areas
  • governed by boards of between six and 13 people appointed by the Minister for Health
  • managed by a chief executive who is appointed by the board with the concurrence of the Secretary of NSW Health
  • accountable for meeting commitments made in annual service agreements with the NSW Ministry of Health.

The NSW Ministry of Health (the Ministry) is the policy agency for the NSW public health system, providing regulatory functions, public health policy, as well as managing the health system, including monitoring the performance of hospitals and health services.

The current roles and responsibilities of LHDs and the Ministry, along with other agencies in NSW Health, were established in 2011 following a series of reforms to the structure and governance of the system. These reforms began with the report of the 'Special Commission of Inquiry into Acute Care Services in NSW Public Hospitals' ('the Garling Inquiry'), which was released in 2008, and were followed by reforms announced by the incoming coalition government in 2011.

These reforms were intended to deliver greater local decision making, including better engagement with clinicians, consumers, local communities, and other stakeholders in the primary care (such as general practitioners) and non-government sectors.

The reforms empowered LHDs by devolving some management and accountability from the Ministry for the delivery of health services in their area. LHDs were made accountable for meeting annual obligations under service agreements.

This audit assessed the efficiency and effectiveness of the governance arrangements for LHDs. We answered two questions:

  • Are there clear roles, responsibilities and relationships between the Ministry of Health and LHDs and within LHDs?
  • Does the NSW Health Performance Framework establish and maintain accountability, oversight and strategic guidance for LHDs?
Conclusion
Main roles, responsibilities and relationships between LHDs, their boards, and the Ministry of Health are clear and understood, though there is opportunity to achieve further maturity in the system of governance for LHDs.
Main roles and responsibilities are clear and understood by local health district (LHD) board members and staff, Ministry of Health executive staff, and key stakeholders. However, there is some ambiguity for more complex and nuanced functions. A statement of principles to support decision making in a devolved system would help to ensuring that neither LHDs or the Ministry 'over-reach' into areas that are more appropriately the other's responsibility.
Better clinician engagement in LHD decision making was a key driver for devolution. This engagement has not met the expectations of devolution and requires attention as a priority.
Relationships between system participants are collaborative, though the opportunity should be taken to further embed this in the system structures and processes and complement existing interpersonal relationships and leadership styles.
Accountability and oversight mechanisms, including the Health Performance Framework and Service Agreements, have been effective in establishing accountability, oversight and strategic guidance for LHDs.
The Health Performance Framework and Service Agreements have underpinned a cultural shift toward greater accountability and oversight. However, as NSW Health is a large, complex and dynamic system, it is important that these accountability and oversight mechanisms continue to evolve to ensure that they are sufficiently robust to support good governance.
There are areas where accountability and oversight can be improved including:
  • continued progress in moving toward patient experience, outcome, and quality and safety measures
  • improving the Health Performance Framework document to ensure it is comprehensive, clear and specifies decision makers
  • greater clarity in the nexus between underperformance and escalation decisions
  • including governance-related performance measures
  • more rigour in accountability for non-service activity functions, including consumer and community engagement
  • ensuring that performance monitoring and intervention is consistent with the intent of devolution. 
There is clear understanding of the main roles and responsibilities of LHDs and the Ministry of Health under the structural and governance reforms introduced in 2011. Strongly collaborative relationships provide a good foundation on which governance arrangements can continue to mature, though there is a need to better ensure that clinicians are involved in LHD decision making.

NSW Health is large and complex system, operating in a dynamic environment. The governance reforms introduced in 2011 were significant and it is reasonable that they take time to mature.

The main roles of LHDs and the Ministry are clear and well-understood, and there is good collaboration between different parts of the system. This provides a sound foundation on which to further mature the governance arrangements of LHDs.

While the broad roles of LHDs, their boards, and the Ministry are well understood by stakeholders in the system, there are matters of detail and complexity that create ambiguity and uncertainty, including:

  • the roles and relationships between the LHDs and the Pillars
  • to what extent LHDs have discretion to pursue innovation
  • individual responsibility and obligations between chairs, boards, executive staff, and the Ministry.

These should be addressed collaboratively between boards, their executives, and the Ministry, and should be informed by a statement of principles that guides how devolved decision making should be implemented.

Better clinician engagement in health service decision making was a key policy driver for devolution. Priority should be given by LHDs and the Ministry to ensuring that clinicians are adequately engaged in LHD decision making. It appears that in many cases they are not, and this needs to be addressed.

The quality of board decision making depends on the information they are provided and their capacity to absorb and analyse that information. More can be done to promote good decision making by improving the papers that go to boards, and by ensuring that board members are well positioned to absorb the information provided. This includes ensuring that the right type and volume of information are provided to boards, and that members and executive managers have adequate data literacy skills to understand the information.

Recommendations

  1. By December 2019, the Ministry of Health should:
     
    1. work with LHDs to identify and overcome barriers that are limiting the appropriate engagement of clinicians in decision making in LHDs
    2. develop a statement of principles to guide decision making in a devolved system
    3. provide clarity on the relationship of the Agency for Clinical Innovation and the Clinical Excellence Commission to the roles and responsibilities of LHDs.
       
  2. By June 2020, LHDs boards, supported where appropriate by the Ministry of Health, should address the findings of this performance audit to ensure that local practices and processes support good governance, including:
     
    1. providing timely and consistent induction; training; and reviews of boards, members and charters
    2. ensuring that each board's governance and oversight of service agreements is consistent with their legislative functions
    3. improving the use of performance information to support decision making by boards and executive managers.
Accountability and oversight mechanisms, including the Health Performance Framework and service agreements, have been effective in establishing accountability, oversight and strategic guidance for LHDs. They have done this by driving a cultural shift that supports LHDs being accountable for meeting their obligations. These accountablity and oversight mechanisms must continue to evolve and be improved.

This cultural shift has achieved greater recognition of the importance of transparency in how well LHDs perform. However, as NSW Health is a large, complex and dynamic system, it is important that these accountability and oversight mechanisms continue to evolve to ensure that they are sufficiently robust to support good governance.

There are areas where accountability and oversight can be improved including:

  • continued progress in moving toward patient experience, outcome and value-based measures
  • improving the Health Performance Framework document to ensure it is comprehensive, clear and specifies decision makers
  • greater clarity in the nexus between underperformance and escalation decisions
  • by adding governance-related performance measures to service agreements
  • more rigour in accountability for non-service activity functions, such as consumer and community engagement
  • ensuring that performance monitoring and intervention is consistent with the intent of devolution.

Recommendations

3.    By June 2020, the Ministry of Health should improve accountability and oversight mechanisms by:

a)    revising the Health Performance Framework so that it is a cohesive and comprehensive document
b)    clarifying processes and decision making for managing performance concerns
c)    developing a mechanism to adequately hold LHDs accountable for non-service activity functions
d)    reconciling performance monitoring and intervention with the policy intent of devolution.