National Health Reform - Corporate Governance in the New Era of Australian Healthcare
Alison Choy Flannigan, Partner
The Council of Australian Governments (COAG) has agreed out of session in August 2011, the National Health Reform Agreement (2011) which is designed to deliver major reforms to the organisation, funding and delivery of health and aged care.
The reforms are aimed to achieve better access to services, improved local accountability and transparency, greater responsiveness to local communities and provide a stronger financial basis for Australia's health system.
There have been a number of key agreements in addition to the National Health Reform Agreement including:
• National Partnership Agreement on Improving Public Hospital Services 2011; and
• National Healthcare Agreement 2011.
Local Hospital Networks
Under the National Health Reform Agreement, the States are required to establish Local Hospital Networks by 1 July 2012.
The responsibilities of the Local Hospital Networks are set out in the National Health Reform Agreement.
Local Hospital Networks are to be established as separate legal entities under State legislation. The States will be accountable for financial management and audit of Local Hospital Networks.
Local Hospital Networks will have separate bank account, will be able to receive funding from the National Health Funding Pool independent of State treasuries or health departments and will be audited as separate entities.
Local Hospital Networks will have a professional Governing Council and Chief Executive Officer. Their responsibilities are set out in the National Health Reform Agreement.
Local Hospital Network Governing Council members will be appointed under State legislation by State Health Ministers. Each Local Hospital Network's CEO will be appointed by the Governing Council, with the approval of the State Health Minister or their delegate, and will be accountable to the Governing Council.
Medicare Locals
Medicare Locals will be established by the Commonwealth by 1 July 2012. The strategic objectives for Medicare Locals are set out in the National Health Reform Agreement.
Medicare Locals will be independent legal entities (not government bodies) with strong links to local communities, health professionals and service providers, including GPs, allied health professional and Aboriginal Medical Services. It is expected that Medicare Locals will be companies limited by guarantee incorporated under the Corporations Act 2001 (Commonwealth).
The Australian Government published a Discussion Paper on Governance and Functions of Medicare Locals in November 2010 and there have been a number of submissions in response.
The Director-General of NSW Health published her report on Future Arrangements for Governance of NSW Health on 24 August 2011.
Governance Framework
Each and every one of the Local Hospital Networks and Medicare Locals should have already implemented a comprehensive and rigorous corporate governance framework, which applies to both the organisation and the Governing Council / Board.
This corporate governance framework should cover the following:
• Regulatory compliance, including the National Health Reform Agreement and State legislation• Code of conduct and conflicts of interest
• Clinical governance
• Finance and solvency
• Managing stakeholder expectations, including consumers, health professionals and government
• Board committees – terms of reference, etc.
• Contractual obligations, including compliance with Commonwealth/State funding agreements
• Risk and audit
• Experienced and qualified members of the Board / Governing Council
• Delegation and remuneration
• Compliance with common law duties
• Compliance with other legal obligations, such as privacy laws, the Competition and Consumer Act
• 2010 (Commonwealth); Health Insurance Act 1973 (Commonwealth); occupational health and safety laws and workers compensation, environmental legislation, equal opportunity and anti-discrimination legislation
• Insurance and indemnity
Corporate Governance Challenges
There are a number of corporate governance challenges for Local Hospital Networks and Medicare Locals including:
• the challenge of balancing statutory, service and funding duties and the requirement of solvency (under the Corporations Act for Medicare Locals), particularly when funding is tight; and
• the challenge for CEOs to be accountable to what is effectively two key supervisors, the Board /Governing Council on the one hand and the State Health Department/Commonwealth on the other.
Alison Choy Flannigan
Partner
T: +61 2 9390 8338
E: alison.choyflannigan@holmanwebb.com.au