From tragedy to farce: NSW hospitals

In the last 15 years, there have been four major revisions of the governance structure of NSW Health in a futile effort to address longstanding dissatisfaction with the centralised Area Health Service administrative system.

Originally, there had been 23 metropolitan and 23 country area health services in the mid-1980s. The Carr government cut the number to nine and eight respectively in 1997.

In 2005, then Minister for Health Morris Iemma further cut the number of area health services from 17 to just eight, covering the entire state.

Under all configurations the same complaints have been made: management is too remote and bureaucratic and local management of public hospitals needs to be restored.

The 2007 Garling report reiterated these criticisms and recommended that managerial authority be devolved to the local level. But before the NSW Labor government could act, state initiatives were swamped by the Rudd-Gillard government’s national health reform agenda.

In return for extra Commonwealth funding, states and territories agreed to establish Local Hospital Networks (LHNs). In NSW, this meant 17 Local Health Networks replaced NSW’s eight Area Health Services. This re-established a structure virtually identical to one that had been discredited and abolished a few years before.

In the year since its election, the O’Farrell Coalition government has managed to turn tragedy into farce.

The centrepiece of the O’Farrell government’s health policy is yet another largely cosmetic administrative reorganisation. This has re-established an administrative system consisting of the same number of Local Health Districts (LHDs) with precisely the same boundaries as the Local Health Networks the Keneally Labor government established in 2010.

Both the state and federal governments are still eager to claim that their ‘reforms’ have put local communities back in charge of health services. To understand how chimerical this is, you have to understand that NSW Health has retained its position as ‘state-wide system manager.’

Ultimate responsibility for service planning, and most critically, control over state-wide industrial relations in health remain centralised in the remit of the state health department.

Command and control management by NSW Health will also remain the norm, with the department retaining a high level of involvement in operational matters to prevent Local Health Districts from blowing their budgets.

This key point is overlooked amid all the talk from both sides of politics about restoring local management. This rhetoric is meaningless unless their policy insists on stringent financial accountability.

Hospital administration was centralised in the mid-1980s to establish greater financial control over the system. Prior to the introduction of the area system, the local boards that ran public hospitals were prone to overrun their budgets and then lobby government for a bail-out from the NSW Treasury. They could do this with relative impunity because their financial accountability was diffuse – and because financial risk (or ultimate responsibility for their debts) was held by the state government.

If the governance riddle is to be solved, then health policy needs to combine genuine local management with real financial accountability by challenging the greatest taboo of all. The privatisation of the delivery of public health services needs to be embraced by policymakers as part of a comprehensive micro-economic reform agenda.

SOURCE