SPECIFIC SANCTIONS FOR DISTRICT HEALTH BOARDS REQUIRED FOR INCLUSION IN LEGISLATION
   

MEMORANDUM TO CABINET SOCIAL POLICY AND HEALTH COMMITTEE

SPECIFIC SANCTIONS FOR DISTRICT HEALTH BOARDS REQUIRED FOR INCLUSION IN LEGISLATION



  1. Whilst specific DHB accountability documentation and the use of subordinate legislation will provide important mechanisms for rewarding and sanctioning performance, the primary legislation provides the ultimate mechanism for the Minister to exercise authority over the Board of each DHB. This specifically relates to Board performance, in terms of the Board meeting statutory responsibilities and other specific performance expectations as proposed for legislation and set out in the Board's Funding Agreement with the Crown.

  2. The incorporation of specific sanctions in the enabling legislation supports transparency in the operation of the health and disability sector. These sanctions would provide a safety net to protect the Crown's fiscal and other interests in DHBs. They involve the Minister of Health intervening at a high level in DHB governance and operations. This will provide certainty to both the public and Government that inferior performance will be addressed, and that appropriate measures are available to the Minister of Health to ensure their expectations are achieved over time.

  3. I consider that it is not necessary to include provisions for specific rewards in legislation because these rewards are inherent in the regime. Rewards are also likely to occur at levels below that required in legislation. These rewards will be covered in detail in the report back on a complete rewards and sanctions framework by 31 August 2000.

  4. The sanctions proposed for legislation involve high levels of intervention in the DHBs' governance and operations. They would be applied where there is failure at a governance level to resolve performance problems. They are also 'last resort' sanctions that would be applied after less serious sanctions, such as more intrusive monitoring by the Ministry of Health, have not resolved the issue. This is unless the specific situation warrants that a more severe sanction is imposed on the DHB as an initial step (for example a DHB refusing to implement Government policy).

    DUTIES OF BOARD MEMBERS

  5. Having majority elected Board members is a unique variant of the Crown entity model. It will be important that both the elected members and their associated electorates are clear as to Boards' and individual Board member's duties for transparency, particularly where failure against duties results in sanctions. The duties, therefore, should be included in legislation.

  6. The Crown Entities Reform Initiative proposes comprehensive and consistent duties for Crown entity Boards and individual Board members. I expect that these duties will be sufficient for DHB purposes.

  7. There is a timing issue as the proposed Crown Entities legislation is likely to follow the health legislation. However, it is expected that the Crown Entities legislation will precede the election of Board members in October 2001. It is therefore possible for the current provisions to stand in the interim until the Crown Entities legislation is passed. That is, all Board members will need to be advised that their duties are the same as directors under current guidelines and precedents established under case law.

  8. It is recommended that there is provision to amend health legislation to include duties of the Board and individual Board members if the enactment of the Crown Entities Initiative is delayed beyond the October 2001 elections.

    SPECIFIC SANCTIONS

  9. In instances where a Board's performance has been identified as being unsatisfactory, and less serious sanctions have not resolved the situation, it may be appropriate for the Minister of Health to apply specific sanctions to the DHB Board to gain Government's desired performance objectives.

  10. I propose that the New Zealand Public Health and Disability Bill should provide for the Minister of Health to impose the following sanctions on DHB Boards:

    1. the removal of specific functions from the DHB

    2. a ministerial power of direction

    3. the appointment of a Crown Monitor

    4. replacement of the Chair and/or the Deputy Chair of the Board

    5. replacing the Board with a Commissioner.

  11. These sanctions will form part of a cohesive graduated framework. Individual situations will dictate what sanction is selected and the extent to which it is applied. The trigger for applying these sanctions will be deterioration in the performance of the DHB against a graduated monitoring framework. This will be detailed in a report back which is due on 30 November 2000.

The Removal of Specific Functions from the DHB

  1. 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 if the Minister is satisfied with DHB's 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.

  2. There may be situations where a DHB has inadequate performance and/or capability to carry out one of its functions. In these instances it may be appropriate to temporarily withdraw those specific functions from the DHB and transfer them to another organisation, for example the Ministry of Health. This balances the desire to give DHBs greater autonomy over decision-making, with the need to ensure that this autonomy can be withdrawn if performance is unsatisfactory.

  3. I consider that this sanction can be achieved through provisions in the Funding Agreement and via ministerial power to direct. However, more policy work needs to be undertaken to work through problems with applying this sanction. I recommend that this sanction be canvassed in more detail in the report back due on 31 August 2000 covering the detailed framework for rewards and sanctions.

    Ministerial Power of Direction

  4. The Minister of Health will have the power to:

    1. direct DHBs, subject to checks to avoid inappropriate use of this power [CAB (00) M 11/1A (ddd) refers]. This power of direction would need to be consistent with Government's health and disability policy, and be lawful

    2. require the DHBs to produce particular outputs [CAB (00) M 11/1A (fff) refers]. This is to provide, or arrange the provision of, particular services

    3. direct DHBs on matters related to the development and provision of their accountability documents, including the ability to direct the Board to include certain matters in their Annual Plans [SPH (00) M 9/6 refers].

  5. Following the passage of legislation, the DHBs must legally comply with such directions.

  6. I recommend the following checks be included into legislation to ensure that this power is used appropriately:

      the Minister of Health shall consult the affected Board(s) as to the direction given in the notice

    1. no direction given by the Minister of Health may require the supply to any person of any information relating to an individual that would enable the identification of the individual concerned

    2. the Minister of Health shall take account of the objectives of the DHB as specified in legislation before issuing a notice of direction

    3. the written notice of direction shall be published in the Gazette and tabled before Parliament as soon as practicable after the direction has been issued. This will make the Minister's direction transparent and give Parliament the opportunity to debate the issue.

  7. Ministerial directives will also be subject to judicial review as a matter of existing Government practice. Under judicial review the courts are concerned about whether the Minister acted within the scope of the power of discretion conferred and whether the Minister acted reasonably and fairly. The courts are concerned with the process of decision-making rather than the outcome [Cabinet Office Manual 5.136 refers].

    The Appointment of a 'Crown Monitor'

  8. The Minister may wish to appoint a monitor to the Board of a DHB if close monitoring and ministerial direction have not achieved a satisfactory improvement in performance, or as a first step to address serious concerns. This would provide closer scrutiny of DHB decisions.

  9. The Crown Monitor's role would be to:

    1. observe the Board's decisions and decision-making processes

    2. assist the Board in understanding Government's policy and wishes so they can be reflected in the Board's decisions

    3. advise the Minister of Health on the performance of the Board, and how the Minister's specific expectations are being addressed by the Board.

  10. If concerns are not being adequately addressed, then the Minister would seek advice from the Crown Monitor and the Ministry of Health on whether it is appropriate to take further action, for example, dismissing individual members, or dismissing the collective Board.

  11. I recommend that a Crown Monitor would attend Board meetings, but not be a member of the particular Board. As such, the Crown Monitor would not have voting rights on the Board's decisions, but would have all other rights of Board members, for example, the rights to attend all board meetings, and receive all reports and minutes for the Board and its committees.

  12. I recommend that where DHB performance is unsatisfactory the Minister of Health is able to appoint one or more Crown Monitors to the Board. It is generally envisaged that there will be one Crown Monitor appointed to a Board. However, in circumstances where multiple skills are required it may be appropriate to appoint multiple Crown Monitors to a particular Board.

  13. A Crown Monitor would not change the Board's accountability to the Minister of Health for the decisions it makes. As the Crown Monitor would not be a member of the Board, he or she would not be held accountable for the decisions made by the Board. The Crown Monitor would be directly accountable to the Minister of Health, to whom they would report directly on an on-going basis.

  14. I consider that the appointment of a Crown Monitor would be the most effective in situations where there are specific problems that need addressing, for example financial performance. This sanction is likely to be less effective in situations where there is overall governance problems. In these situations other mechanisms identified in this paper, for example replacement of the Chair, may be more effective in addressing this type of problem.



 
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