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                                             VICTORIAN GOVERNMENT RESPONSE
                                                                October 2003

                                    RECOMMENDATION                                                                     RESPONSE
Clarity of roles, functions and accountabilities

1. That the roles, responsibilities and accountabilities of the key parties – the Minister, the            Support
    department, the Board and the CEO – should be clearly stated and articulated in the Act.

2. That the role and legitimate authority of the Minister should be further articulated in the Act         Support. Noting that boards are,
   and encompass:                                                                                          strictly speaking, appointed by the
                                                                                                           Governor in Council on the
   •   The boards of Health Services are appointed by the Minister to govern their Health                  recommendation of the Minister.
       Services in accordance with government policy expressed from time to time in policy
       documents and directives, including the annual departmental plan;

   •   In fulfilling its role the board is accountable to the Minister for the delivery of services to a
       high quality in a cost-effective way;

   •   The Minister should have legislative authority to set high-level government performance
       priorities for Health Services, to fund them and monitor whether or not KPIs are being met.
       Specifically, the Minister should have a new power to agree an annual Statement of

   •   The Minister should have legislative authority to approve strategic plans of Health Services.
       (The Panel notes that this power currently exists under s.65ZF of the Act.) These plans
       should be consistent with and reflect state-wide and regional government policy and
       planning documents;

   • 	 The Minister should have a new legislative power of direction in relation to government

       policy and matters between a board and the Minister; 

   • 	 To provide certainty to the government, Parliament and the community, the Minister               

       should have sufficient statutory powers for intervention to ensure the performance of            

       Health Services - in the event that routine steps to improve performance fail. While the       

       current Act allows the Minister to replace a board with an administrator it does not enable    

       the Minister to take less drastic steps to improve performance. Specifically, the Minister     

       should have the power to appoint a Ministerial delegate(s) to a Health Service to assist the   

       board with improving performance. 

3.	 That the role of the department should be articulated in legislation and encompass:                     Support

   • 	 The department is the Minister’s principal adviser for state-wide strategy, policy 

       development, planning, resource allocation and monitoring of performance of the system. 

       The department is also responsible for regional strategy and planning (eg. the Metropolitan 

       Health Strategy and rural/regional strategies); 

   • 	 The department’s annual plan should make it clear what it will achieve for the year in its 

       accountability to the Minister;

   • 	 The department is responsible for monitoring the performance of Health Services and 

       should seek to develop and focus on a minimum set of measurable KPIs; 

   • 	 The department should be working in partnership with Health Services and providing 

       appropriate support for them to undertake their operational roles; 

   • 	 The department should have a stronger clear role to engage with Health Services in co

       ordination, benchmarking and the dissemination of best practice; 

   • 	 The department has a legitimate role to intervene in Health Service affairs and/or require
       more intrusive reporting where: 

          - there is significant non-performance with respect to agreed targets; 

              programs are in a developmental phase and data are being collected for evaluation

                purposes; and/or
            -   there is a major risk to community safety;

     •   The department’s auditing powers should be extended to enable the accounting and
         financial management practices, and quality standards of Health Services to be reviewed in
         situations of non-performance relative to agreed performance targets; and to ensure
         compliance with standards for benchmarking purposes.

4. That the Secretary should have the authority to approve the salary and conditions of               Support
    employment of Health Service CEOs on the recommendation of the board chair within base
    salary levels and criteria outlined in government executive remuneration policy.

5.    That the Secretary should explore replacing CEO performance bonuses with a proportion of        Support. The Secretary of DHS to
     salary at risk if key performance targets relating to own Health Service and wider system are    discuss with relevant government
     not met.      The proportion of salary should be meaningful.         Salary levels should be     bodies with a view to resolution by
     commensurate with complexity of management task and performance indicators should be             March 2004.
     measurable and achievable.

6.   That the role of the board should be articulated in legislation and encompass:                   Support

     •   appoint a CEO and set salary consistent with government policy and directions (with
         approval of the Secretary, DHS);

     •   provide ethical and effective leadership;

     •   adopt and monitor a strategic plan approved by the Minister;

     •   adopt and monitor an annual business plan;

     •   agree and monitor a Statement of Priorities annually with Minister and report on KPIs;

     •   approve and operate within a budget;

     •   establish and evaluate annually a performance agreement with the CEO;

     •   monitor the performance of the Health Service, including:
           - ensuring that audit and accounting systems accurately reflect the financial position
               and viability of the entity;
           - ensuring that systems and frameworks for improving safety and quality of health
               care are established and consolidated;

     •   ensure that rigorous risk management systems are developed and consolidated and ensure
         compliance with statutory requirements;

     •   ensure that statutory committees are established and operating effectively;

     •   adopt a code of conduct;

     •   develop and adopt a governance charter based on and consistent with the sector Charter
         when this is developed;

     •   ensure appropriate induction and ongoing training for directors;

     •   consult with and ensure engagement of clinicians and the community in decisions of the

     •   maintain effective communication with the Minister and DHS and key stakeholders;

     •   ensure the Minister is kept fully informed of major and emerging issues and board
         decisions and that the CEO deals effectively and proactively with public issues;

     •   balance the interests of the organisation with engagement and participation in the wider
         Victorian health system in the interests of optimising patient outcomes and sector
         operating costs.

7.   That the Act should clearly state that the CEO is appointed by and accountable to the board.   Support

8.    That the role of the CEO should be articulated in the Act and encompass:                      Support
     • responsible to the board for the ongoing management of the Health Service in accordance
        with strategy, policies and budgets approved by the board;

• 	 support and advise the board in developing the strategic plan;

• 	 present to the board an annual business plan for approval;

• 	 work with the board and DHS in agreeing an annual Statement of Priorities for agreement
    with the Minister;

• 	 provide the board and statutory committees with agreed information that is timely and
    enables effective monitoring of performance;

• 	 establish best practice internal controls and accountability;

• 	 establish and consolidate systems and frameworks for improving safety and quality of
    health care, promote a culture of open disclosure and effectively address any problems
    identified with safety and quality;

• 	 promote leadership and engagement of clinicians in management, the achievement of best
    practice, and the creation of an environment that optimises patient outcomes and the cost-
    effectiveness of care;

• 	 support, communicate and implement the board’s policies and decisions throughout the

• 	 ensure the board, DHS and the Minister are well informed of critical or emergency issues
    and major emerging risks;

• 	 maintain effective liaison with DHS;

• 	 balance the interests of the organisation with engagement and participation in the wider
    Victorian health system in the interests of optimising patient outcomes and sector
    operating costs.

9.   That the major regional Health Services should be subject to the same governance and               Support
     accountability arrangements as metropolitan Health Services. The Act should be amended to
     achieve consistency of approach.

10. That a Governance Charter for Health Services be developed to facilitate clarity and aid shared     Support
    understanding of the roles of key parties and other governance aspects. The HSIB should
    oversee development of the Charter. It should document governance arrangements that are
    system-generic and consolidate statutory and policy based elements, which are currently
    fragmented across the Act, by-laws and policy and administrative documents. The Charter
    should be widely disseminated and up-dated regularly. Individual Health Services should
    expand the Charter to include agency specific aspects.

Accountability instruments and tools

11. That when the Metropolitan Health Strategy is released each Health Service board should             Support
    develop a three-year strategic plan for approval by the Minister. Where relevant the plans
    should extend out to a longer-term horizon, say five to ten years. Ideally, these plans should
    be completed and approved by February 2004 to provide the strategic context for the
    development of the 2004-05 Statement of Priorities.

12. That:                                                                                               Support
    • The Minister should agree with each board an annual Statement of Priorities which
       outlines performance expectations and targets for the year;

     •   This annual agreement will be the key accountability document. It should be concise, be
         developed collaboratively by DHS and the CEO on behalf of the board with scope for
         negotiation, and be signed by the board chair and Minister within the first month of the
         financial year;

     •   While there should be the ability to vary the Statement of Priorities, the process should be
         simple and discipline should be exercised to limit budget variations;

     •   In the event that agreement is not reached within three months of the beginning of the
         financial year, the Minister should use her power of direction to ensure a Statement of
         Priorities is in place;

    •       The Statement of Priorities should replace the current HSA as a part of the streamlining of
            arrangements by DHS;

    •        The Statement of Priorities should include as a minimum:
               - outputs and key deliverables;
               - key strategies and developmental activities;
                   annual budget;
               - a small number of measurable KPIs across key performance dimensions which
                   would form the basis for monitoring and assessing performance throughout the
               - the reporting cycle;

        •    The Act should be amended to reflect these changes;

        •    The Statement of Priorities should be publicly available.

13. That boards should, as a minimum, adopt a standardised reporting template to be used for              Support
    reporting to boards to enable them to adequately assess and benchmark performance with
    peers. The report should comprise a minimum standard set of data and indicators to support
    board focus on critical issues and key aspects of performance. The standard template should
    be enhanced by individual boards to suit the particular needs of their Health Services.

14. That DHS should have a stronger, clearly defined role to engage with Health Services in               Support
    benchmarking activities. The development, introduction and consolidation of a common
    chart of accounts and workforce information data systems should be high priorities. These
    and other benchmarking projects should form part of a work plan for HSIB.

15. That DHS should develop a minimum set of measurable KPIs across key aspects of Health                 Support
    Service performance, including financial, activity/access and quality. This small number of
    core KPIs should be included in the annual Statement of Priorities and form the basis of
    assessing performance throughout the year.

16. That DHS should conduct a review of all other reporting requirements and develop a policy for      Support maintaining high levels of
    reducing the amount of reporting. A greatly reduced amount of reporting should be balanced         accountability while eliminating
    by an expansion in DHS’s powers to conduct audits from time to time.                               unnecessary duplication of

17. That DHS consider rewarding high-performing Health Services by requiring less reporting and        Support
    providing more flexibility to re-allocate funding. Non-performing Health Services should
    expect more intrusive monitoring.

18. That a calendar for the annual planning and accountability cycle be adopted. The calendar          Support
    should indicate the timelines for submitting and approving strategic plans, developing and
    signing the annual Statement of Priorities, and reporting on KPIs.

Ability for Minister to intervene

19. That the Minister’s powers under the Act be amended to clearly state that failure to take          Support
    timely and appropriate action to address significant variation from agreed performance
    targets (outlined in Statement of Priorities) will be grounds for a board to be dismissed and an
    administrator appointed.

20. That DHS develop criteria for implementing a graded monitoring system for Health Services.         Support

21. That in the event of non-performance relative to agreed performance targets the Minister           Support
    should have the power to direct a Health Service, for example to prepare an agreed recovery
    plan. (This would be covered by the power to direct in recommendation 2.)

22. That the Act be changed to give the Minister the power to appoint one or more Ministerial          Support
    delegates to a Health Service in the event that key performance targets (outlined in the
    Statement of Priorities) have not been met, or if the board requests this course. The purpose
    of the delegate would be to assist the board with improving performance. The delegate would
    not be a board member but would have access to all board papers and documents and be
    able to attend all meetings, including board committees. The delegate would be directly
    accountable to the Minister, and would not change the board’s accountability to the Minister.

Communication and relationships

23. That the Minister should meet regularly with the group of board chairs (twenty members).         Support
    The Minister should chair the meetings, there should be an agenda and the Secretary of DHS
    and relevant Executive Directors should also attend. The meetings should provide a forum for
    the Minister to communicate key messages and for board chairs to raise issues or provide
    advice on high-level strategic matters.

24. That the board chair of each Health Service should meet annually with the Minister to sign the   Support
    Statement of Priorities and account for the previous year’s performance. The CEO would
    probably also be present.

25. That DHS should attend Health Service board meetings from time to time.                          Support

26. That a joint CEOs-DHS forum be established. The group should meet monthly. The use of            Support
    co-chairs and joint agendas should be explored as well as the rotation of venues. The
    meetings should provide a forum for discussing and debating common problems, resolving
    issues that may arise from time to time, sharing information and pursuing a collaborative
    approach to inter-agency activities. The forum should provide advice on state-wide issues
    and priorities for inclusion on the HSIB work plan to ensure its work is focused on key
    priorities that add value to the health service system.

System-level governance mechanisms

27a. That a Health System Improvement Board (HSIB) be established to enable a more collegiate,       Support the establishment of HSIB
    corporate approach for progressing system-wide projects. Its role should be to provide           focussed on development and
    strategy, policy and planning advice to the Minister and drive the development and               implementation of system-wide
    implementation of system-wide initiatives. Its focus should be on strategic joint objectives     initiatives.
    and strategies to improve the performance of Health Services, including strengthening
    governance and management, and the application of best practice to maximise patient
    outcomes and system efficiencies.

27b. That the membership of HSIB should comprise:                                                    Support

   •   five Health Service board chairs - three metropolitan, one regional, one rural (the pool
       should include St Vincent’s and Mercy Health & Aged Care). The Minister would appoint
       the five representatives from a panel of names submitted by board chairs;
   •   the Secretary of DHS;
   •   one representative each from the Departments of Treasury & Finance and Premier &
       Cabinet (either Secretary or Deputy-Secretary level);
   •   the chair of the CEO-DHS Executive Group (see below) or an agreed alternative;
   •   two senior clinicians.

27c. That the Minister should nominate the chair of HSIB. HSIB should meet and report to the         Support
    Minister regularly. HSIB should develop a work plan which is approved by the Minister and
    covers high priority issues and projects for the sector. HSIB should be supported by a small
    secretariat, jointly funded by DHS and Health Services. Health Service board representative
    members should be paid fees.

28. That a CEO-DHS Executive Group be established which would be responsible to HSIB for             Support
    developing and implementing HSIB’s work program. The membership would comprise six
    CEOs elected by their peers plus appropriate senior DHS personnel. The Executive Group
    should elect a chair, meet monthly, be supported by the same secretariat as HSIB, and
    would engage clinicians, community and other key stakeholders.

29. That government move to establish HSIB and the CEO-DHS Executive Group as early as               Support
    possible to drive strategic initiatives critical to enhancing performance of the sector. A
    planning group comprising DHS, board chair and CEO representatives should be established.

30. That to be effective a legislative framework for HSIB and the CEO-DHS Executive Group            Support
    should be considered when the roles, accountabilities and operational details are fully agreed
    and bedded down.

Board effectiveness

31. That selection of board directors should focus on requisite skills, experience and other         Support
    attributes and the addressing of key gaps. It is desirable that appointments be made in close
    consultation with the board chair. The appointment process should be consistent for

    metropolitan and major regional boards.

32. That board appointments be staggered to achieve a balance between renewal and corporate           Support
    memory and that consideration be given to succession planning for chairs.

33. That boards should develop a comprehensive induction package for new members.                     Support

34. That boards should formally assess and satisfy the ongoing training and education needs of        Support

35. That HSIB should develop an ongoing training and education program specifically tailored to       Support
    Health Service boards of governance. The program should embody the principles of best
    practice governance.

36. That each Health Service board should evaluate its own performance annually to achieve best       Support
    practice governance.

37. That the finance and audit committees should be replaced with a Financial Performance, Audit      Support
    and Risk Committee.

38. That as part of working differently and stepping up to best practice governance and               Support. Fees will be reviewed and
    accountability, serious consideration should be given to increasing board fees to ensure          considered by Government in early
    commitment and contribution.                                                                      2004.

39. That consideration should also be given to establishing a fee structure more closely aligned      Support. Fees will be reviewed and
    with size and complexity of Health Services. The option of paying additional fees for statutory   considered by Government in early
    committee work should be seriously considered.                                                    2004.

40. That there should be consistency in fee levels between metropolitan and regional Health           Support, consistent with
    Services.                                                                                         recommendation 39. Fees will be
                                                                                                      reviewed and considered by

                                                                                                   Government in early 2004.

Other elements of a new way forward

41. That DHS review funding allocation policy and practice to reduce the number of specified       Support
    grants where possible.

42. That Health Services should know their total funding allocations at the beginning of the       DHS will endeavour to provide
    financial year to maximise potential for planning and provide incentives for managing within   certainty at the beginning of the
    budget. Unexpected funding adjustments should be kept to a minimum and explained and           financial year to the extent possible.
    communicated to boards.                                                                        Some funding allocations are outside
                                                                                                   the control of the State, eg. HACC
43. That - in order to enhance the extent to which boards can be held accountable and to           Three-year rolling funding for Health
    maximise opportunities for good management and high performance – Health Services should       Services will be considered in the
    have three-year rolling funding.                                                               context of the 2004-05 State
44. That – on the basis of discussions with the Auditor-General, boards and CEOs – the issues of   Support
    depreciation cost funding and capital investment should be included on the work plan of the