Governance in the spotlight at Aged Care Royal Commission

In mid-November, the Aged Care Royal Commission sat in Hobart. For the first time, the focus of the commission was governance in aged care, the links between governance and outcomes and how the commission may look to improve governance in the sector.

The commission examined these questions by looking at two case studies of issues in Tasmanian aged care facilities owned by Southern Cross Care Tasmania and Bupa.

Breakdowns in clinical governance

Both organisations had clear breakdowns in clinical governance, with sanctions placed on them by the Department of Health. The commission heard extensive and harrowing evidence from family members talking about the effect this had on the health and wellbeing of elderly residents. In both cases, the commission heard evidence that the need to reduce costs, including in response to changes in government funding, was a driver for the decline in care standards, in particular the reduction in staff.

The commission heard evidence about breakdowns in communication between senior management, the board and employees running the facilities. Reports and internal audit outcomes that should have raised red flags were not making their way to decision-makers. This was being compounded by significant turnover in staff, including management. Evidence from the inquiry suggested that financial decisions had led to cost-cutting by management, and consequently diminished the care of residents.

Directors need to walk the floor

The culture of both companies was also considered, with the commission looking at the recommendations on culture from the Financial Services Royal Commission. There was a view that there had been cultural failings, particularly regarding management dialogue with residents and their families, and a tendency to reject criticism. High workloads, low pay and staff not being provided with respect and engagement were also identified as concerns that impacted culture. The commission considered whether directors and senior managers need to engage better with residents and staff by spending more time “walking the floor” of care homes.

One specific area of reform the Commission flagged for further discussion is whether directors of companies running aged care facilities should have a statutory duty to take reasonable steps to ensure that the provider delivers quality and safe care.

The composition of boards was also the subject of extensive discussion, specifically whether there was the need for directors with clinical experience on boards. Both entities examined had taken steps to reform their governance structures and both had clinical governance committees as sub-committees of their boards. The need to get sufficient information to directors to allow them to make appropriate decisions without overburdening the board with voluminous material was also the topic of some debate.

Lessons for boards

The Royal Commission hearings are a timely reminder for directors in the aged care sector – and in other sectors that care for vulnerable people – to test whether legal, risk and compliance systems are being implemented in practice. Boards also need to be asking questions regarding information flows and whether they are being advised of the practical consequences of key decisions. As with the Financial Services Royal Commission, this inquiry has also highlighted the importance of culture, and the board’s role in overseeing this important part of governance. Need more information? Click through to the AICD resource on board oversight of culture.

The Royal Commission also emphasises the importance of board composition and the need to have the right skills and experience to provide effective oversight of management.

Looking ahead

The AICD will continue to monitor the hearings and provide updates to members through a director lens. Directors should note that the discussion of governance is still at an early stage and that directors and boards may be the focus of future hearings, with the commission not set to provide its final report to government until 12 November 2020.

The AICD offers courses in governing to protect vulnerable people. Contact us for more information and for course dates.