THE DIVISION OF ROLES BETWEEN DISTRICT HEALTH BOARDS AND THE MINISTRY OF HEALTH
   

MEMORANDUM TO CABINET SOCIAL POLICY AND HEALTH COMMITTEE

THE DIVISION OF ROLES BETWEEN DISTRICT HEALTH BOARDS AND THE MINISTRY OF HEALTH



Single services which cover populations of more than one DHB

  1. Concerns have been raised that some providers may face additional administration costs if they have to enter into complex agreements with many DHBs, and that DHBs will incur administration costs from managing cross-boundary flows or funding coordination. These concerns pertain to:

    1. services which are provided by only one provider for a number of districts or for the whole country, for cost, quality or historical reasons (for example, tertiary services, health helplines, Equipment Management Services, and forensic mental health services)

    2. local services which are provided by regional or national non-government organisations (for example, IHC Family Planning and Plunket)

    3. services which require a lot of coordination (for example, some health promotion activities, screening, and the purchase and storage of vaccines).

  2. Options to address these concerns are: to fund such services separately through the Ministry of Health; to separately fund a regional or national DHB arrangement; to give DHBs the responsibility to initiate solutions; and/or to have the Ministry of Health facilitate or lead the planning of some services and use accountability arrangements (such as the funding agreement and operating environment and powers to direct) to ensure DHBs fund services accordingly.

    Separately funding some national services/organisations

  3. It is possible to identify and separately fund specific services, particularly if DHBs have little control, in practice, over the use of low volume and high cost tertiary services (such as lung transplants), and if these services risk conflict between DHBs. A significant separation of funding has disadvantages:

    1. it would undermine the integrity of DHBs to fund the best mix of health and disability support services for their populations, by reducing the clarity of this role and DHBs' ability to respond to local needs

    2. it creates opportunities for DHBs to shift responsibility for funding a service to another agency (cost-shifting) by redefining services that would have been paid from their own budgets to fit the criteria of other funding streams. People could 'fall through the cracks' and services would be harder to coordinate

    3. the emergence of local providers would be stifled if national organisations are funded centrally. This may be particularly relevant for health and disability services for Mäori and Pacific people. Over time, similar services may well be offered by local providers, instead of national organisation or to fill gaps in areas where national organisations have a low presence

    4. it is not clear that separate funding of some services would save administration costs. A single national contract would save a provider additional administration costs, but those costs would be shifted to the Ministry. That is because the Ministry (or a national DHB arrangement) would still need information from, and would need to negotiate and coordinate with, each of the DHBs

    5. the Ministry of Health may take on too many varied, and potentially conflicting, functions. Performance of its core functions (policy advice, monitoring the sector and DHBs, administration of the regulatory environment, and ministerial servicing) may be inhibited if the Ministry also undertakes significant detailed service funding.

    DHBs and providers initiate solutions

  4. DHBs and providers will both have incentives to reduce administration costs. They can do so, for example, by developing standard base contracts; agreeing a framework to deal with cross-boundary flows; and/or by setting up a regional or national funding team funded by and working for some or all of the DHBs. HHSs (with the HFA and the Ministry of Health) have already set out on a process to think about DHB collaboration. The HFA and Crown Health Association have a memorandum of understanding to support a partnership relationship for this purpose. In the recent past, HHSs and the HFA have worked collaboratively on a national purchasing framework, including nationally consistent service definitions, prices, and contracts.

  5. The advantage of this approach is that it puts DHBs in control of, and accountable for, finding the best funding and coordination solutions. This way, DHBs and providers can develop agreements that suit specific local circumstances. DHBs and providers can build from the HFA's arrangements, including current contracts, which will roll over while DHBs are established.

  6. Disadvantages are that standard base contracts or frameworks may not always suit local circumstances. This might be the case, for example, if contracts are designed around the needs of more powerful DHBs. This risk can be mitigated by DHBs having the ability to 'opt out' of the standard contract; DHBs would only want to incur additional costs of re-designing a contract if that would advantage their population.

    Ministry of Health initiates nationwide contracting and service frameworks

  7. The Ministry of Health will be assisting DHBs by maintaining and developing policy, contracting, and service frameworks. For example, DHBs would find it easier to collaborate on cross-boundary flows or joint funding teams if prices were based on a national pricing framework (building on the HFA's current service pricing framework). The Ministry of Health could also provide other administrative infrastructure to reduce DHB costs, such as developing standard base contracts, forecasting and actuarial services. This reduces potential conflict between DHBs and providers if the Ministry is seen as objective.

  8. A key issue is that the Ministry may be too removed from the operational issues and does not face the same incentives as DHBs and providers who must work within budget. DHBs must therefore be closely involved and have ownership of the solutions; often the Ministry would be better to facilitate. From time to time, the Ministry of Health will need to take responsibility for coordination, for example, when central leadership is required to put emphasis on a policy priority or to manage specific fiscal or quality risks. DHBs would still fund and/or deliver the services but would operate within a centrally-led framework.

  9. The current Health and Disability Services Act 1993 has a section (s51) which enables acceptance of payment by a provider (for services provided) to constitute acceptance of the funder's terms and conditions. These terms and conditions are notified either publicly or individually. These notices have been used extensively in primary care contracts: more than 16,000 notices have been issued. The savings in administrative costs on funding agencies and on the providers have not been quantified, but are large. Officials recommend that s51 of the Health and Disability Services Act 1993 be adopted in the new legislation for use by DHBs and/or the Ministry of Health.

    Using DHB accountability arrangements

  10. The Minister will also use accountability arrangements to support the achievement of necessary co-ordination or to encourage or require administrative cost-saving initiatives. For example, funding agreements could contain nationwide minimum service coverage requirements (such as lung transplants or vaccine schedule) and funding ring-fences that apply to all DHBs. Such requirements (formulated in consultation with DHBs and forming part of their funding agreements) will reduce potential areas for conflict among DHBs.

  11. The use of accountability arrangements has the advantage of maintaining the integrity of the DHB model. It also avoids the disadvantages of separate funding or any risks that DHB-initiated solutions do not meet expectations. It does rely, however, on DHB compliance and performance. Another distinct risk is that the DHB environment becomes so specified that its efforts on local initiatives and services are stifled: specification could flow over to areas that would be more appropriately the responsibility of DHBs.

    Recommendations regarding services that cover populations of more than one DHB

  12. DHBs can take responsibility for funding regional or national services and regional or national organisations (acting in a collaborative manner where appropriate). For a small number services, however, it may be that planning and funding functions are better undertaken by the Ministry of Health. There is no systematic way, however, to identify which option is best, without being able to compare actual proposals for DHB collaborative arrangements with the alternative of direct funding of specific health and disability services by the Ministry of Health.

  13. As part of the transition management, the enhanced HHS boards will be reporting to the Minister of Health by 1 September 2000 with proposals for DHB shared services, and national and regional funding alliances. The HHS Boards will work with the HFA and the Ministry of Health on this. To provide a formal basis for managing establishment issues, the Director-General has set up a DHB Establishment Unit within the Ministry's Sector Funding & Performance Directorate. This unit (incorporating staff from the Ministry and the HFA and with formal links to other central agencies) will work closely with HHSs/DHBs.

  14. I propose that officials report back to the Ministers of Health and Finance in November 2000 on whether those proposals will be effective to address the concerns raised, whether or not funding arrangements should be imposed, and for which services responsibility will be retained in the Ministry. Potential candidates include the planning and/or direct funding of national advisory groups, such as the Laboratory Services Advisory Group, the General Practitioners Group, some high cost and low volume tertiary services, some national services, and arbitration mechanisms on cross-boundary disputes.

  15. During the transitional period, the Ministry of Health will fund a number of services whilst DHBs are being established. All service planning and funding functions (apart from a small number of exceptions) will be devolved to DHBs in accordance with specific criteria and the processes which are to be reported to the Minister of Health by November 2000 [CAB (00) M11/1A]. The exact division of roles at the outset of the transition will depend on Ministers' assessment of the transitional plans presented by the enhanced HHS Boards.



 
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