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A Modest Proposal

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					           A MODEST PROPOSAL
              ODEST ROPOSAL



                  Rick O''Brien
                  Rick O Brien
             Principal, Berino Projects

                     MARCH 2009

I thank the National Health and Hospital Reform Commission (NHHRC) for the
opportunity of responding to its Interim Report published in February 2009.
This response focuses principally on Chapter 12 of the Interim Report, and touches
on Chapter 13. My proposal puts arguments for practicable reform of the governance
of the Australian health care system as an essential precondition for managing
inevitable future tensions and providing for the optimum delivery of health care.
The proposed new structural and governance arrangements in the health care system
amount to a variation of Option B in the Interim Report.
I do not claim the views expressed to be entirely novel or solely my own – they are
an amalgam of ideas that have been circulating for some time. With wide experience
in health policy, what I propose that is novel is a practical means of implementing
those changes felt by so many to be necessary and long overdue*.

What is the optimum size for a health service? The most important factors that
suggest themselves are population size and distribution, followed by geography and
transport, then by availability of resources (notably sufficient skilled clinical and
other staff), and finally by existing clinical and referral relationships.
None of this is surprising: access, safety and quality, clinical effectiveness and
affordability in my view inevitably form a complex, sub-optimal tetrad that requires
trade-offs. So economies of scale in population and resources help. But not too much,
otherwise we jeopardise access, responsiveness and effective service co-ordination.
There are a number of key functions for a regional health authority (RHA) of the type
contemplated by the NHHRC: they must be comprehensive across primary,
secondary and tertiary health care. They must also integrate health promotion and
disease prevention with chronic and aged care. And, in my view, each service should
have a minimum of one tertiary level hospital – some could have two – conducting
teaching and research as well as complex health interventions.
The widely held view, with which I concur, is that the optimum population range in
Australia is 500,000 to 750,000. Say, on average, about 600,000 people with room for
growth. This would result in roughly 30-40 RHAs as proposed in Option B of the
NHHRC’s Interim Report. Populations would range from 500,000 in Tasmania and
northwest Australia to 750,000 in the major urban areas.
These parameters would require some RHAs to traverse State and territory borders. I
propose two options for trialling – one relatively simple and straightforward, the
other more complex and demanding#.
The first option is Tasmania. This would provide an opportunity to test the vertical
integration of a State and the Commonwealth in a new governance arrangement.
The second is the ACT and (much of) the Greater Southern Area Heath Service in
NSW, covering the NSW south coast up to Batemans Bay, north to Goulburn, west to
Wagga Wagga, and southeast to the Victorian border. This option would test the
prospects of integration both vertically and horizontally across a State and territory.
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                A Modest Proposal to Reform the Australian Health System – March 2009

As noted above, there must be integration of health care service delivery in any new
structure. But how can this occur with the persistent Commonwealth and State
divide? In my view, the only viable means of ensuring cooperation and coordination
of services across the primary and acute sectors is to build it into the governance
structure of public health services across Australia, coupled with pooling of funds.
I believe this can be done best not through a takeover, but through uniform
Commonwealth, State and territory legislation creating RHAs as either beneficent
statutory corporations or public companies limited by guarantee, with each party
agreeing to a shared funding mechanism for each service. The precise legal structure
would be determined by the best advice on the present constitutional limitations.
There must also be provision for supra-regional health services – notably quaternary
or super-specialist services – that may be provided only in some or all of the five
major mainland cities. There are also key questions about public health
responsibilities – notably Aboriginal health, mental health, drug and alcohol services,
dental health, food standards, and HIV/AIDS and infectious diseases functions.
Some of these can and should be provided by RHAs on behalf of the Commonwealth
and States/territories as funders – others will have a national or supra-regional
element that requires a wider policy response. My argument here is not to exclude
either sovereign level of Government, but to fashion a mechanism that provides a
uniform and cohesive health system to flourish with and around them.
The key principle is joint participation in a truly national health system. The table
below shows the roles and responsibilities for each level in the system:

 Level of Entity         Financial role                 Functions                  Legal status
Commonwealth         Funder (pooled with       National policy – MBS,           Pooled funding,
                     States and territories)   PBS, Aboriginal health,          and contracts to
                                               Health workforce, Quality,       manage PBS/MBS
                                               Research and education,          and provide
                                               Inter-RHA flows                  related services?
States/territories   Funder (pooled with       Programs - Mental health*        Pooled funds and
                     Cwlth)/                   and D&A, Oral health*,           direct contracts
                     Purchaser-                Food safety, AIDS and            with RHAs to
                     commissioner/             Infectious diseases, Major       deliver program
                                               Quaternary services              and quaternary
                     Capital provision
                                               * Possibly National              services
Regional Health      Fund holder/              Delivery - Emergency and         Incorporated
Authorities          Purchaser-                Acute services, Non-             beneficent entities
(RHAs)               commissioner/             acute/chronic health care,       with power to
                     Provider/                 Health transport, Ageing,        contract and
                     Title-holder or lessee    and Population health            deliver services

NGOs/private         Provider                  Elective and non-                Contracts with
sector                                         emergency services,              RHAs under
                                               primary health care, non-        national structure
                                               acute and aged care

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                A Modest Proposal to Reform the Australian Health System – March 2009

Under this arrangement, the Commonwealth, States and territories are funders; the
States, territories and RHAs are purchasers-commissioners; and the RHAs and the
NGO and private sectors are providers.
The States and territories would also retain the major role of capital provision, with
the title of existing and planned facilities either transferring to the RHAs, or being
provided through 99-year leases. Employment arrangements of public sector health
staff should be maintained, as occurred with the recent Mersey Hospital transition.
I note the Federal Government’s commitment to retain the current rebate
arrangements for private health insurance, which at this stage would rule out the
pooling of taxation and other revenues foregone from that stream.
A further important question is how to deliver and fund primary health services
currently provided by GPs and other private practitioners. My proposal is amenable
to a range of primary health governance models. Questions about the extent of funds
pooling – should we continue with the MBS and PBS as is, or pool the funds through
the RHAs; should we include aged care? – also remain open with this model.
The politics of governance suggests a board structure for each RHA with a CEO and
representatives of: the Commonwealth; the relevant State/s and/or territory; the
local community of health consumers; the regional private health sector; the NGO
sector; the local division/s of General Practice; a health researcher/educationist;
medical, nursing and allied health clinicians; a person with general business
experience and/or economics expertise; and a health sector employee representative.
Depending on whether the RHA traverses one State/territory or two, this results in a
board of 13 or 14 members - an appropriate size for a major business entity with an
annual budget of over $1 billion per annum and perhaps up to 10,000 FTE staff.
The Commonwealth and the relevant State/territory should agree board
membership. As the principal funder, the Commonwealth should appoint the Chair
from the members of the board. All board members except the CEO should be part-
time, but remunerated at professional per diem rates. The Chair should not be the
CEO. The boards should select the CEOs through a transparent, competitive process.

* This paper acknowledges the work of Emeritus Professor John Dwyer of the University of
NSW, the submission of the Australian Health Care Reform Alliance in June 2008 to the
NHHRC, and the discussion paper prepared by Judith Dwyer and Kathy Eagar for the
NHHRC in August 2008. It also develops ideas proposed by Andrew Podger and others on
size and numbers of regional health services, and by John Menadue on trialling of those.
#I thank both Prof John Dwyer and Catherine Katz, Deputy Secretary, Tasmanian
Department of Health and Human Services, for reviewing and commenting on an earlier
draft of this submission. It should however be noted that the proposals are the author’s own -
no endorsement by any other person or jurisdiction has been sought, and none is implied.

Note on the author: Rick O’Brien, principal of Berino Projects, is a consultant working in
policy and related projects in the health and human services sectors, chiefly in NSW and
Tasmania. Based in Sydney, he has formerly held a range of senior policy and management
positions in various portfolios in the NSW and Commonwealth public sectors, including a
total of eight years with NSW Health. (For further details, please contact Rick O’Brien by
email - - or on mobile ‘phone 0411 484 229.)
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                A Modest Proposal to Reform the Australian Health System – March 2009

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