49. A regulatory framework will establish specific obligations on DHBs in respect of their performance and will supplement the principles enshrined in the legislation. This framework will include, for example, the financial operating requirements for DHBs and the nationwide service coverage (the range of services, the terms of access to those services including user part charges and specific quality and safety requirements) to be funded, and requirements related to nationwide data collections.

50. The development of this framework will need to consider the specific issues and risks related to Mäori provider development that may arise in the sector arrangements.

51. Further work is required to identify the most appropriate mechanisms for giving effect to nationwide requirements. However, the legislation should provide a regulation making power in respect of establishing minimum operating environment requirements in respect of Government's purchase and ownership requirements. Further work will be done to establish the most appropriate mechanisms for giving effect to these requirements. Officials will report back to the Ministers on the scope and content of a proposed regulatory framework for DHBs by 31 August 2000.

    Operational Policy Framework

52. DHB accountability arrangements will also need to establish various standard decision frameworks and performance tools described at the national level. This could include prioritisation processes, service descriptions including quality requirements, audit tools and standards for service agreements with providers. Further work will be undertaken to identify the appropriate mechanism for giving effect to operational policy requirements.

DHB DEVELOPMENTAL FRAMEWORK

53. The key principle in determining levels of decision-making authority is to ensure that DHBs have sufficient authority to achieve the Government's performance expectations of them, and the Government has sufficient control over DHB activities to mitigate the risks that may arise related to the performance of the DHB(s).

    DHB Autonomy

54. The Government has agreed to a model that envisages DHBs initially being required to operate within a centrally constrained policy and regulatory framework but, over time, being given greater autonomy over decision-making by the Minister if she is satisfied with their capability and performance track record. This scope for increased autonomy provides a strong incentive for DHBs to perform well and to develop the necessary infrastructure of management systems and controls.

55. A detailed developmental framework for DHBs setting out the criteria and process by which DHBs will move along a continuum of autonomy [CAB (00) M 11/1A] will be developed and published. At this stage, Officials envisage five modes of DHB autonomy, as illustrated in Figure 2:
    1. Mode A - High Autonomy
    2. Mode B - Moderated Autonomy
    3. Mode C - Low Autonomy.
    4. Mode D - Central Intervention (replacing and/or appointing additional members)
    5. Mode E - Central Control (Commissioner appointed).
    Figure 2: Modes of Autonomy

    

56. Under this model, a well-performing DHB could, for example, have a greater say over the best mix of services to be delivered to contribute to desired outcomes, for example, and may be monitored less intrusively. A pattern of poor performance by a DHB could result in the removal or reduction of decision-making authority and the imposition of constraints. In the case of a DHB where there are significant performance concerns the Minister may provide specific ministerial direction, remove and/or appoint additional Board members, and/or appoint a Commissioner. Further work will be completed prior to the establishment of DHBs on establishing firmer criteria for determining the "hurdles" between each mode.

57. In addition to the incentive of increased autonomy for well-performing DHBs, discussed above, sanctions and rewards provide a further means of incentivising performance. The use of sanctions and rewards provides the Minister of Health with additional levers to secure DHB performance improvements. Of particular relevance to this paper will be the ability of the Minster to apply sanctions to DHBs for poor performance in respect of the DHB's accountability documentation. This could include for example directing a DHB to include certain matters in its Annual Plan, or to provide certain performance information. In addition, Ministers sought advice on the appointment of a Commissioner to a DHB, and merging DHBs, as potential sanctions [CAB (00) M 11/1A(3) nnn vii and x refers].

58. Figure 3, below, outlines some of the rewards and sanctions that may be applied to DHBs. Officials will report back to Ministers on the rewards and sanctions to be covered in the legislation by 30 April 2000. Officials will report back to the Ministers on a comprehensive framework of rewards and sanctions, and the criteria for their application by 31 August 2000.

59. There will also be a number of other checks and balances on Board performance. Communities will be able to participate in consultation activities and to exercise their right to vote for elected representatives on Boards. Cabinet has also decided [CAB (00) M 11/1A recommendation vv refers] that Board meetings will "be open to the public, subject to the normal restrictions applied to local authority meetings". DHB performance will also be subject to scrutiny by Parliament through the tabling of an SOI and Annual Report. In addition, the Office of the Auditor-General will audit the financial and non-financial performance of DHBs from an effectiveness and efficiency perspective.

Figure 3: Possible Rewards and Sanctions Available within the Incentives Structure