Managing health services through devolved governance A perspective from Victoria, Australia Authors Chris Ham Nicholas Timmins October 2015 This work was paid for and commissioned by the then Department of Health in Victoria, now the Department of Health and Human Services. Editorial control of the contents of the report, however, remained with The King’s Fund throughout. Acknowledgements This work would not have been possible without a huge amount of time freely given by a large number of people, both inside and outside Victoria, for interviews, discussion, guidance, dispute, and in some cases, comments on drafts. This list, alas, is not exhaustive. But in no particular order many thanks are due to Frances Diver, Terry Symonds, Aaron Doty, Chris Brook, Gabrielle Grohn, David Ashbridge and colleagues at Barwon Health, Alan Lilly and colleagues at Eastern Health, Andrew Way, Ben Fielding, Gareth Goodier, Andrew Crow, Anna Burgess, Bruce Prosser, Barbara Yeoh, Joanna Flynn, Daniel Borovnicar, Bronwyn Pike, David Watters, Diane Watson, Deborah Picone, Jim Birch, John Ballard, Kath Cook, Shane Solomon, Fergus Kerr, Kellie O’Callaghan, Martin Lum, Judith Dwyer, Lance Wallace, Pradeep Philip, Paula Wilton, Paul Smith, Ross Cooke, Rob Knowles, Stephen Smith, Sylvia Barry, Tim Ross, Tom Symondson, Tony O’Connell, Tony Sherbon, Trevor Jones, Brendan Murphy, Alex Cockram, Heather Wellington, John McTernan, Larry McNichol, Paul Zollinger-Read, Paul Bates, Ayela Thilo and Rupert Gowerley. Natalia Aulia and Jane Dinh cheerfully and effectively supplied much of the organisation that made it possible. Most particular thanks goes to Stephen Duckett, who provided an invaluable initial guide to the complexities of Australian health care and consistent challenge and help throughout. For all that extensive assistance, however, the conclusions, comments, errors and omissions remain the responsibility of the authors. The King’s Fund is an independent charity working to improve health and health care in England. We help to shape policy and practice through research and analysis; develop individuals, teams and organisations; promote understanding of the health and social care system; and bring people together to learn, share knowledge and debate. Our vision is that the best possible care is available to all. www.kingsfund.org.uk @thekingsfund 2 The King’s Fund 2015 Contents Preface 4 Executive summary 6 1. Introduction: Australia and its health system 8 2. The origins of Victoria’s ‘devolved governance’ 17 3. Devolved governance in Victoria today – the positives 22 4. Victoria’s health service performance 29 5. How might Victoria’s values be updated? 42 References 48 3 The King’s Fund 2015 Preface In 2014 The King’s Fund was approached by the health department in the Australian state of Victoria to undertake an independent review of the model of the state’s devolved governance of health services. This report presents the findings of our review, drawing on three visits to interview key stakeholders and analysis of relevant documents and data about performance. In commissioning the review, the health department agreed to our stipulation that the Fund should retain full editorial control of the resulting report. In the pages that follow we highlight both achievements and areas for further development, reflecting what we heard from stakeholders as well as our own assessment of how Victoria’s governance model and performance compare with those of other jurisdictions. The picture that emerges is of a health system performing well. Available data shows that Victoria delivers good results in comparison with other parts of Australia, being at, close to and sometimes above the average on many indicators. Underpinning Victoria’s performance is a well-understood governance model that gives the boards running health services at a local level considerable autonomy within a state-wide framework of priorities. It is also important that there has been a high degree of organisational stability (unusual and enviable from an English perspective) and the pioneering use of case mix-funding that has contributed to the costs of care being lower than in other states. Recognising these achievements, we conclude that there are several areas in which Victoria could make improvements. These include reviewing the number of boards – from our perspective there seem too many – and bringing greater independence into the appointment of board members to ensure they are selected on the basis of skills and experience. There is also a compelling case for more collaboration between boards. This is particularly important in the case of boards responsible for regional and rural health services, where isolation from other health services creates risks in relation to the safety and quality of patient care, as illustrated by recent failures of care at Djerriwarrh Health Service. The transparent reporting of data on performance is another area for improvement. Not only would this strengthen accountability to the public, but also it would support health care providers to compare their performance with others and identify areas in which they can improve. The ‘disinfectant of sunlight’, as it has been dubbed, is being used increasingly in other health care systems, including within Australia, and it could be a powerful means of providing an early warning of performance problems. Increased transparency on safety and quality would also provide boards with the information they need to discharge their responsibilities. 4 The King’s Fund 2015 A recurring theme in our review was the proper role of the health department in a model of devolved governance. We heard many different views on this and concluded that it ought to have greater involvement in the planning and oversight of clinical services. To do this, the health department would need to strengthen its own capabilities in clinical services planning and monitoring. In advancing these suggestions, we are clear that the principles of devolved governance are fundamentally sound. The challenge for health care leaders in Victoria is to ensure that the practice of devolved governance is fit for purpose by making incremental improvements of the kind we have proposed and avoiding the destabilising and damaging lurches in policy seen in some other systems. Chris Ham Chief Executive, The King’s Fund 5 The King’s Fund 2015 Executive summary The present position Since 2003, health services in the Australian state of Victoria have been run through a system of ‘devolved governance’. Boards appointed by the state’s health minister are responsible for overseeing the delivery of health services in their areas, operating within a ‘statement of priorities’ set out by the minister and the health department. The ‘statement of priorities’ includes a small number of key performance indicators (KPIs) which, if they are met, see boards subject to much less detailed surveillance of their performance than in the past – a system, in effect, of ‘earned autonomy’. When the KPIs, which chiefly relate to finance and access, are not being met, this prompts graded intervention from the health department. This performance management occurs within a system that is explicit and understood, and helps generate trust between leaders at different levels. Victoria’s approach has enabled the recruitment and retention of experienced chief executives, contributing to a culture of innovation and agility that has been underpinned by organisational stability. Analysis of the easily available public data shows that Victoria delivers good results in comparison with other parts of the country, being at, close to and sometimes above the Australian average on many indicators. It has used case-mix funding since the mid-1990s, and that appears to be one factor that has allowed it consistently to deliver lower costs of care. Victoria can therefore make the case that it delivers the best value health care in Australia. Where next? In a system that in many respects is working well, there nonetheless remains a case for making incremental changes and improvements that would avoid the destabilising and often damaging lurches in governance and reform seen in some other jurisdictions, both within Australia and outside it. Our discussions with leaders in Victoria and informed observers outside the state generated many ideas for how that might be done. There are choices to be made over the balance of centralised control and devolved decision-making, over how far to use competition and collaboration to stimulate innovations in care, over how far to publish performance data as a stimulus for improvement, and over whether the department, even within a model of devolved governance, should play a greater role in the planning of clinical services and in supporting the development of leadership and improvement capabilities within the state’s health services. Ideas for consideration outlined in this report include: ● publishing performance data and establishing an agency independent of the health department to take on this role 6 The King’s Fund 2015 ● reviewing how decisions on the use of capital are made to ensure greater transparency and consistency in these decisions ● giving responsibility for board appointments to an independent appointments commission to avoid perceptions that these are not always based on skills and experience; or at the least creating an independent commission to advise the minister on appointments ● balancing an understandable focus on hospital care with greater attention to services provided