Board Health

Clinical governance requires strong leadership, a knowledge of government and a deep understanding of the healthcare sector, writes Domini Stuart.

Rather than maximising profits, the focus of a health sector board must be on achieving financial sustainability and good health outcomes for patients. “Serving on a public hospital or, more commonly, a health service or network board, offers an opportunity to support and grow two public goods – health and healthcare,” says Stephen Leeder AO, an emeritus professor of public health and community medicine at the University of Sydney and former chairman of the Western Sydney Local District Health Board.

“Financial stability is important but there is more to governing than ensuring that the budget balances. The level of tolerable risk is low, there are no rewards for making mistakes and cost-cutting redundant elements in ignorance can lead to disaster. Ultimately we are serving people, not a bottom line,” he says.

To achieve this, directors must work within a triumvirate of government, health and enterprise. “Independent directors need to have a knowledge of government, a knowledge of the health sector and know how to run an enterprise so that money is effectively spent,” says Peter Achterstraat AM FAICD, administrator of the National Health Funding Pool, former auditor-general of New South Wales (NSW) and president of the Australian Institute of Company Directors’ NSW Division.

The state government makes or approves all board appointments and sets a Statement of Priorities (SoP), which is agreed with the health organisation. “The SoP is the road map for what the organisation wants, or has agreed, to achieve,” says Dr David Mackay FAICD, a director of Barwon Health. “In the private sector this is called a business plan, this is something we also have: the difference is that the SoP reflects government policy and overall strategic direction – for example, a focus on preventing domestic violence or reducing waiting times for elective surgery.”

In health, the framework for governance can be a double-edged sword. “It ensures probity of decision-making but it can reduce the speed with which a decision can turn into an action,” says Mackay. “It’s harder to act swiftly when there are so many stakeholders that need to be part of the journey.”

Limited control

Lack of agility and autonomy can be frustrating. “Some directors struggle with the inevitable greyness of being accountable for the operating and financial performance of the entity with limited responsibility and accountability,” says Bill Mountford, executive chairman of Newly, which sources care and support staff for the aged care and disability sectors, and a former director of Melbourne Health. “You’re answerable to the public and also to the state government so you’re operating within a wider system of control and constraints. This is quite different from a corporate environment where you’re absolutely answerable for the entity, but only to shareholders.”

There are also particular demands on the chair. “I believe that he or she should have established credentials and experience with large, complex organisations along with a respect for the essence of healthcare, an inclusive temperament and tolerance,” says Leeder. “No chair should arrive laden with a sackful of private enterprise assumptions or a narrow political agenda. If you believe that privatisation is the way forward you should employ your skills in the private sector – it needs you. Anyone with a big anti-medical shoulder chip should also look elsewhere.”

Dr Zoe Wainer GAICD, chair of the Dental Health Services Victoria (DHSV) and the head of public health at Bupa Australia and New Zealand, believes that the chair also needs to work with the board and the executive to ensure that the board’s culture is healthy and robust.

“I think that’s true across all boards, health or otherwise,” she says. “At DHSV I see my role as ensuring that the voices of my very skilled board members are heard and that we work as synergistically as possible as a team. I believe that a good culture is a critical factor of a high-performing board.”

A large and complex system

Whatever the industry, directors’ duties are fundamentally the same. “As most directors are aware, their role primarily revolves around key aspects of setting strategy, managing risk, ensuring all legal and financial compliance is met, engaging with stakeholders and promoting good communication,” says Mackay. “Particular aspects of how these principles can be achieved will differ according to the industry and the nature of the organisation but they’re no different for a health board than, for example, a mining company or a financial institution.”

However, the health system is larger and more complex than many corporate entities. “Individual silos of clinical practice such as surgical, mental health, women’s health, children’s health and general medical each have their own governance arrangements,” says Mackay. “These need to be integrated into the whole hospital environment governed by an appointed board of directors.”

There is also a global context. “Many of the challenges our local health systems face are mirrored internationally,” says Wainer. “Gaining an insight into responses in different jurisdictions can help directors to think strategically and work more effectively with established models, and models that are emerging both locally and internationally. It is very important for directors to maintain that vision of the future.”

Clinical governance

Dr Deborah Cole FAICD, chief executive officer (CEO) of DHSV, has seen significant improvements in governance over the past decade.

“I think boards are thinking a lot more about their orientation, what is needed in terms of continuous professional development and how they can ensure they have the right mix of skills on the board,” she says. “There has also been a particular emphasis on clinical governance. I would expect all boards to be spending more time on matters of safety and best practice.”

The DHSV board has a continuous quality assessment process in place and regularly reviews governance performance. “We’re seeing this at a system level now as well as in high-functioning boards at a local level,” says Wainer.

Clinical governance is addressed first in the orientation process and a quality committee reports to the board on matters of patient feedback, adverse clinical incidents, infection control and clinical risk management systems.

“As a dental hospital there are elements of clinical governance that differ slightly, so it’s important for directors to understand that,” says Wainer.

Good clinical governance is about achieving positive outcomes and minimising risk. It is not contingent on clinical expertise. “Our board has a mix of backgrounds and we certainly don’t try to second-guess clinical decisions,” says Elizabeth Johnstone FAICD, a director at Macquarie University Hospital – the only private hospital to be located on an Australian university campus. “We are assisted by two board members who have deep experience in medicine and, like all other hospitals, we have a medical advisory committee to provide a peer review of clinical activity.

“Of course we must have a basic understanding of the processes involved in running a hospital and we are provided with all of the information we need to understand the context in which decisions are made. But this is no different from the background information I get when I’m in the boardroom of the ASX or a listed agribusiness. Continuously building your knowledge of the context, the vocabulary, the processes, the stakeholders and the competitors are just part and parcel of being a competent non-executive director on any board.”

Leeder adds that the board should hold the managers of clinical governance accountable but not concern themselves with its detail or management. “In my opinion, boards can get themselves into terrible trouble by attempting to micromanage clinical care,” he says. “They are not skilled or equipped to do it. Appalling problems that have resulted from governance getting muddled with management have been well documented and should be enough to scare them off. Yet I’m aware of boards that start their meetings with a clinical case – a kind of religious ceremony and no doubt fascinating, a bit like watching an episode of RPA – but utterly distracting from their principal business.”

Growing challenges

The government is committed to curtailing rising costs in the face of growing demand for services due to the ageing population and the increasing incidence of chronic disease. This will inevitably ratchet up the pressure on hospital boards. Technology has also introduced a new category of risk.

“Most organisations today rely on accurate information systems for safety and reliability – for example, to ensure there are no errors in dispensing medications to patients and that medications are always available when they’re needed,” says Mackay. “The risks managed by the board will increase as medical professionals continue to adopt new technology and to place greater reliance on information systems such as an e-record to provide access to patient information. The recent problems experienced by the new Adelaide Hospital as they attempted to adopt a fully-electronic patient record, is a perfect example of the kinds of difficulties boards face in implementing good practice.”

The board must also ensure that there are measures in place to protect sensitive information. “This is not peculiar to health, but is seen as more personal in nature,” says Mackay. “Given the extent and nature of these risks I believe that most hospital boards would benefit by including IT expertise in their skills matrix.”

The heroism of the incremental

Atul Gawande, an American surgeon, writer, and public health researcher, argues that healthcare systems need to focus on what he describes as the heroism of the incremental – the course of a person’s health over time. Leeder believes this should be on the agenda of every hospital board.

“It’s as though we are now running two health services in parallel,” he says. “There is a growing need to integrate incremental care – principally general practice in the community – for the growing number of older patients who have complex, serious and continuing problems with the high-end, high-tech rescue interventions that cost a motza.

“The biggest problem is that most community care is provided by private enterprises which are reimbursed by the Commonwealth, whereas public hospitals are run out of the state budget. This creates an opportunity for cost-shifting. McKinsey has shown how a single payer can help resolve this, though much else is needed to make it work well.”

Many hospitals are already investigating options for out-of-hospital care as the demand for beds is set to outstrip supply. “I don’t think this is making governance more difficult, though we are seeing a certain amount of shake-up in both the disability and the aged care sectors following the introduction of the National Disability Insurance Scheme (NDIS),” says Johnstone, who also chairs KinCare, a leading provider of in-home health and well-being services to older people and people with a disability. “I think this will be a very interesting year as we’re likely to see a number of new entrants, some of whom might be under the impression that this is an easy area in which to set up a business and, as such, a short cut to gold. They will soon discover that it’s actually very highly regulated. The government doesn’t hand over large amounts of money to organisations that don’t take compliance seriously.”

Governing through a crisis

The media has little interest in the hundreds of thousands of hospital admissions that go without a hitch every year – but they are fascinated by every single one that goes wrong. And now social media is spreading bad news faster than ever.

“If there should be a clinical – or a financial – crisis the board must respond with integrity and in a timely way,” says Achterstraat. “It needs to gather all of the facts from the CEO and ask questions that get right to the heart of the matter. All of the information that leaves the hospital must be rock solid – but, at the same time, there’s no point in waiting any longer than necessary to respond. If there’s a vacuum, it will undoubtedly be filled with information from a less reliable source.”

The board might need to resist pressure from the government to act in haste. “There is a lot of attention on the health system and people tend to look for fast and easy answers,”says Mountford. “If the politicians are pushing for a knee-jerk reaction there’s a danger the board will succumb.”

Good governance means being prepared for any crisis. “Obviously, your first consideration is to ensure that all of your patients and staff will stay safe,” says Cole. “A good board will identify the crises that are most likely to occur and have a range of plans in place to cover everything from major disasters to reputational issues. There should also be a generic plan for anything you weren’t able to anticipate. The plans must all include a clear communications strategy – for example, if the matter is serious, the minister or the department might need to be informed. If it’s less serious, you might need to notify different stakeholders. Board members should be familiar with both the plans and the role they would need to play in each scenario so that the organisation can respond quickly and appropriately if things go wrong.”

The right stuff

Leeder advises anyone thinking of joining a hospital board to examine his or her motivation. “If healthcare is not your primary motive there are plenty of options elsewhere,” he says. “This is not an argument in favour of boards that comprise warm, fuzzy financially-incompetent people with excessive humane concern, but directors do need to be crystal clear about their primary role – the care and comfort of sick and injured people and the promotion of health in the community they serve. A health board is not an adventure playground or a hothouse for egos or political aspirants.”

Even within the health sector there are considerable variations in the culture of both hospitals and their boards. “It is important to find one that aligns with your values,” says Cole. “Before you submit your application I also recommend finding out as much as possible about the organisation and making sure you understand the issues it faces at both a national level and a local level. This is particularly important if you’re thinking of joining a small rural or regional board as local issues will be very, very different there from those you would have to manage on a national or a major capital city board.”

Mountford reiterates that this is not a role for someone who thrives on clarity and control. “You have to be able to work with ambiguities and tensions,” he says. “This can be particularly frustrating when you’re challenging and asking the probing questions that are an important part of a director’s role, then find you’ve reached a point when it would be counter-productive to continue. A good chair will have a well-developed sense of this issue and help the board to govern through these situations.”

However, he is quick to point out that a seat on a well-functioning board within the health network can be both satisfying and fruitful.

“Notwithstanding these constraints you can have an impact on the organisation and, more widely, on the system,” he says. “That makes the role very rewarding.”

Covering the basics before joining a hospital board

Elizabeth Johnstone FAICD is very familiar with governing in a highly-regulated environment. As well as sitting on the boards of Macquarie University Hospital and KinCare, she is a director of the Royal Flying Doctor Service, which is regulated by various health authorities as well as the Civil Aviation and Safety Authority (CASA). She recommends that directors cover three areas of due diligence before agreeing to join a hospital board.

1. Legislation
   The Australian health sector has a very complex legal framework and directors should have a good understanding of this. They should also be familiar with the broader regulatory framework, how the disciplinary processes work, the relevant hospital by-laws and how regularly these are reviewed.
2. The workings of the board
   What is the relationship between the advisory committee and the board? How robust is the audit and risk committee? What are the particular provisions beyond normal constituent elements such as your constitution, by-laws and the regulatory framework?
3. Past problems
   Has the hospital had problems in the past? If so, how were they dealt with? Are they likely to be legacy issues for someone joining a board?

Rising to the challenge

Directors on a hospital or health sector board must deal with a particular set of challenges.

• They must be familiar with the workings of both the health sector and the government as well having the skills to help run a financially-sustainable enterprise.
• Having a number of stakeholders limits agility and control.
• The health system is very complex. Separate areas of clinical practice have their own governance arrangements which need be integrated.
• Directors need to maintain a global outlook and monitor emerging models locally and internationally.
• The board is responsible for clinical governance but directors must resist the urge to micromanage clinical care.
• The ageing population and growing incidence of chronic disease are putting increasing pressure on services and funding.
• There are growing risks associated with the use of technology, including the collection and storage of sensitive information.
• If there is a crisis, the board may struggle to maintain integrity in the face of government pressure for a rapid response.