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



Dismissal and/or Demotion of the Chair and/or Deputy Chair of the Board

  1. Cabinet has decided that the Minister of Health will appoint the Chair and Deputy Chair of each DHB [CAB (00) M 11/1A(3) (v) refers]. Cabinet has also decided that the Minister can dismiss individual members from the Board [CAB (00) M 11/1A (s) refers]. This includes the power to dismiss the Chair and/or the Deputy Chair.

  2. The role of the Chair of a DHB is pivotal in ensuring the success and smooth functioning of the organisation. The Chair will be responsible to the Minister of Health for the overall performance of the DHB in meeting expectations and delivering outcomes.

  3. The Chair will also be expected to undertake performance monitoring of individual Board members and address any concerns as they arise. This would include, identify and address the failure of individual Board members to act:

    1. in good faith

    2. with reasonable care, diligence and skill

    3. with honesty, probity and integrity in accord with any code of conduct. This includes objectivity, impartiality, honesty, fiduciary responsibility, and accountability.

  4. The ultimate individual sanction for failure to act in this manner would be dismissal from the Board by the Minister of Health [CAB (00) M 11/1A refers].

  5. 53. In situations where the leadership of the Board is unsatisfactory and it is leading to poor Board and/or organisational performance, it may be appropriate to replace the Chair and/or Deputy Chair of the Board as a sign of no confidence in the Board. I consider that additional flexibility is needed to give the Minister of Health the power to demote the Chair and/or Deputy Chair without dismissing them from the Board entirely. It is recognised that in some circumstances it may not be desirable for a poorly performing Chair and/or Deputy Chair to remain as a member of the Board.

  6. I recommend that the legislation provides a mechanism for the Minister of Health to dismiss, or demote to ordinary Board members, the Chair and/or the Deputy Chair of a DHB.

    Dismissal of the Entire Board and Replacement with a Commissioner

  7. Cabinet has also decided that the Minister of Health will have the ability to dismiss the entire Board and replace them with a Commissioner in defined circumstances [CAB (00) M 2/4 (m) refers].

  8. The dismissal of an entire Board and its replacement with a Commissioner is the ultimate sanction a Minister can impose on a DHB. It is likely that this will be applied when either the specific situation is immediate and so serious that dissolving the Board is the only feasible option to remedy the problem (for example a collective Board refusing to adhere to a ministerial directive), or when a number of other sub-legislative and legislative-level sanctions have not been able to rectify the problem (for example, increased intrusive monitoring, and dismissal of the Chair).

  9. This sanction could be applied where the Board fails:

    1. to give effect to the purposes and objectives set out in the empowering legislation, Statement of Intent, or Funding Agreement with the Crown

    2. to act so that its activities are conducted efficiently and effectively

    3. to act in a manner consistent with the spirit of service to the public

    4. to maintain the financial viability of the organisation and have regard to the position of creditors.

  10. Further detail will be provided on the criteria for applying this sanction in the report-back on a detailed framework for rewards and sanctions by 31 August 2000.

ADDITIONAL MECHANISMS TO REWARD OR SANCTION DHBs

  1. There are additional, more subtle mechanisms that can be used to reward or sanction DHB performance. These include the public dissemination of performance information on a routine basis, and agreeing to DHBs retaining unspent funding.

    Public Dissemination of Information

  2. Ministers have agreed that performance reports should be publicly disseminated [SPH (00) M 9/6 refers]. This provides a subtle means of rewarding and/or sanctioning DHB performance. This will support a more open and transparent information process than currently exists, or has existed in the past.

  3. The Official Information Act 1982 provides specific regulations around an individual, or a group of individuals, requesting information. It does not make provisions for the proactive dissemination of reports to the public. It is likely that the DHBs will consider performance reports, for example those detailing quarterly reporting, audits or reviews, to be sensitive. DHBs may thus be reluctant for reports highlighting poor performance to be made publicly available.

  4. I consider that making specific performance information publicly available is likely to be a powerful incentive to motivate good DHB performance, particularly when the focus is on high performance and benchmarking practices rather than being used for punitive purposes. Elected Board members will want to be recognised for doing a good job for the community which elected them, and the community will rightly be interested in the performance of their elected representatives.

  5. Considering the sensitive information that is likely to be made publicly available, and the possible reluctance of some DHBs to have poor performance made public, I recommend that provision for the public release of performance reports will be included in the New Zealand Public Health Services Bill. This will mean that from the outset the DHBs and the public will be aware that this will be part of the framework from within which the DHBs will operate.

    Retention or Removal of Surpluses

  6. Section 16 of the Public Finance Act 1989 (PFA) gives the Minister of Finance the power to require DHBs to repay "as the Minister thinks fit" any surpluses that are generated. This will allow the Crown to require the DHBs to repay any surpluses that have been generated through non-performance against its Funding Agreement with the Crown. Section 16 of the PFA does not, however, rule out surpluses being retained by DHBs. I recommend that the status quo provided in the PFA remains for DHBs. The freedom to use any unspent funds in a discretionary fashion will provide incentives on the DHBs to make best use of their budgets.

MERGERS OF DHBs

  1. Cabinet has sought further advice on the legislation containing reserve powers for the Minister to merge two or more District Health Boards as a sanction [CAB (00) M11/1A3 (nnn) (x) refers].

  2. More conventional means of managing DHB performance, such as the Funding Agreement, provide the Minister with significant levers to intervene if there are performance concerns.

  3. Merging of a DHB with one or more other DHBs (in effect a ministerially mandated take-over) would be a very serious intervention, and it is assumed such a reserve power would be invoked only after persistent performance failures, and after other forms of intervention have failed. It is therefore unlikely that the threshold for a merger, as a response to persistent performance failure, would ever be reached. This would, therefore, be a week sanction.

  4. A key disadvantage of a ministerially imposed merger is that this would reduce the local community's ability to participate in decisions about health and disability services. An imposed merger may be seen as a sanction on the community, rather than the Board (which is likely to have been replaced by a Commissioner). Another disadvantage is that DHBs and communities may perceive mergers to be negative events, that only occur in cases of performance failures. However, a high-performing Board could seek opportunities to merge with a neighbouring DHB if that would benefit the local population (for example, if a DHB is not able to deliver on its statutory obligations because its population-base is too small). Therefore, I recommend against using merger of DHBs as a sanction.

  5. The legislation will allow for DHBs to merge voluntarily [CAB (00) M2/4 refers]. DHBs may do so if there are mutual benefits, in terms of better health and independence outcomes, improved ability to manage funds, improved quality of planning and funding of health and disability services, or more cost-effective administration.

  6. It may be that DHB Boards do not merge with other Boards even if there are significant benefits to all local communities in question. In such circumstances, and given the Crown's significant purchase and ownership interests in DHBs, the Minister of Health may want to be able to require DHBs to merge.

  7. A first step would be for the Minister of Health (assisted by the Ministry of Health) to facilitate negotiations between the relevant boards, for example as part of the normal production of Funding Agreements and the process around approving the respective Statements of Intent. It is proposed that the Minister of Health should have a reserve power to merge two or more DHBs only if an impasse is reached, and if the Minister finds that there is a compelling case that a merger will result in significant benefits to the local communities in question (in terms of improved health and independence, and community participation).



 
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