GUEST BLOG: Ian Powell – The madness of health system restructuring in a pandemic

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Three main pillars were described in the ‘health reforms’ for New Zealand’s health system announced by Minister of Health Andrew Little in April. The ‘reforms’ are being lined up to take effect in July next year.

Two of these pillars make good sense and have the potential to help improve the health system’s effectiveness including addressing the biggest driver of demand and cost – external social determinants of health. They are establishing a Māori Health Authority and a new public health agency.

These organisations’ effectiveness will be influenced by how the system functions at an operational level, and here is where the third pillar comes into play – disestablishing the 20 district health boards (DHBs). They are to be replaced by a new second additional health bureaucracy, Health New Zealand.

The abolition announcement was a complete surprise to the health sector. It was not part of the narrative around the review of the health and disability system, led by Heather Simpson, nor of the lead-up to Mr Little’s announcement. Simpson recommended both that Health NZ be created and DHBs continue although the number would be reduced.

What are DHBs?

DHBs arose out of the Public Health and Disability Act 2000. They were established to replace the failed market experiment in the 1990s to run the health system as competing commercial businesses. The Act rejected business competition and promoted cooperation (including integration between community and hospital care).

The 2000 Act expressly requires DHBs to be responsible for the health and wellbeing of people in specified geographic areas (described as “resident populations”). Aside from the short interlude of area health boards (late 1980s to 1993), for the first time the one structure, DHBs, took statutory responsibility for primary, community and hospital care.

DHBs being responsible for geographically defined populations and for promoting the integration of all community – including GP and aged residential care – and hospital health services has been a strength of our public health system. This includes the obligation to “regularly investigate, assess, and monitor the health status of its resident population”.

Structurally, this gives New Zealand’s public health system significant advantages over many other modern health systems, including those of Australia and England where, for different reasons, community and hospital care are much less integrated. It also made the health system better able to implement a pandemic vaccine rollout.

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Narrative failure

There was a failure to develop a narrative to justify abolishing the DHBs. Instead, soundbites were produced based on an embellished claim that New Zealand has 20 different health systems, as well as a factually inaccurate assertion that abolishing DHBs was consistent with the National Health Service in the United Kingdom.

The reason for this failure was that the decision to abolish DHBs was made late in the process. It appears to have gained traction when business consultants Ernst & Young (EY) got into the engine room of decision-making. (The reforms’ Transition Unit is led by EY senior partner Stephen McKernan.)

DHB abolition was never part of Labour’s election campaign in 2020. Instead it was disingenuously kept secret right up to the April announcement. The combination of this lateness and the failure to engage with the health sector in advance of the decision greatly affected its robustness.

Rushed law-making is scrambled and, therefore, flawed law-making.

‘Localities’ and ‘locality plans’ lacking in detail

The Pae Ora (Healthy Futures) Bill has been referred to a select committee. The Bill establishes Health NZ to “lead system operations, planning, commissioning and delivery of health services, working with the Māori Health Authority”.

After its own establishment next July, Health NZ will also establish new bodies called “localities” to “plan and commission” primary and community health services. Apart from covering geographically defined populations, localities are undefined. What they are and how they will work is omitted.

Instead, without context, we are left with vacuous statements like engaging with communities “at the appropriate level”. It will be left for Health NZ to determine, further down the track and with the agreement of the Māori Health Authority, what these localities will be.

This is alarming because the purpose of localities is to arrange primary and community health services covering all of Aotearoa. Currently this is the responsibility of DHBs.

Health NZ will then develop “locality plans”. As well as including nationally determined decisions such as a national health plan, locality plans will set out the priority outcomes and services for the locality.

Potentially, these locality plans are important. But it is clear they will be directed and determined by Health NZ. This signals a much more centralised system than we currently have.

No one seems to know what localities and locality planning mean or look like. The Bill recognises this problem by ignoring it. Both were recommended in the Simpson review but with only a brief explanation.

Consequently there will be no identifiable local structure to take responsibility for primary and community health services next July when DHBs are abolished.

The madness of poor leadership

So, DHBs are to be abolished in new legislation that is vacuous on primary and community care and virtually silent on hospitals (other than public hospitals being run by Health NZ).

Replacing existing structures with new ones that have not been worked through demonstrates poor political leadership and governance irresponsibility. Before leaving the health system we have, we should know much more about what we are going to.

What makes it even more irresponsible, if this were possible, is to do this in the midst of an out-of-control pandemic overseas. Whether or not the newly discovered and quickly running rampant Omicron variant is more deadly than Delta remains to be seen. It is certainly more transmissible.

Two things are certain, however. First, if Omicron gets beyond our border isolation and quarantine facilities (as all earlier variants have eventually done) into community transmission both our general practices (and other primary care providers) and hospitals will be overrun.

Second, at not too long after DHBs have been abolished (if not before), a new variant more deadly or transmissible than delta and omicron will emerge in New Zealand. It is a question of when, not if.

Aotearoa will need to continue to reach communities for booster vaccinations and potentially new vaccines for newer Covid variants. Existing DHBs are better placed to do this than a new, much more centralised structure led by newbie bodies with key parts that will still to have be worked out after it comes into force.

These DHBs will know their populations much better than Health NZ, particularly in the absence of any alternative such as the currently vacuous new localities. Since the arrival of delta in the country the vaccine rollout has been very impressive and protective.

Especially when central government implementation constraints have ceased, DHBs have been critical to this in penetrating deep into diverse communities and working with non-government providers.

Conscious of public safety, accessibility to healthcare, and the wellbeing of health professionals and other staff, a responsible government would put the abolition of DHBs on hold at least until there is a better understanding and consensus over what any workable and robust replacement might look like.

The reasons for discontinuing the abolition of DHBs are as self-evident as the United States Declaration of Independence was to Thomas Jefferson.

[This is a revised version of my column published by New Zealand Doctor published on 15 December 2021]

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Otaihanga Second Opinion

19 COMMENTS

  1. Like 3 Waters this government is pushing through their ideology while our media is following the virus and the Opposition is just waking up from a long time of infighting

  2. Restructuring a skeletal hulk doesn’t do much more than redistribute the bones.
    What is needed is a complete rebuild of our once enviable public health system.
    But it will require a shitload of money which we don’t have.
    That’s why it will never happen, and our health system will just creak on and on – somehow sustained by the weight of its own bureaucracy but always struggling.

  3. The question I always ask is, “who benefits the most?”
    As someone who has a “complex medical history” the NZ public health system for 40 years has been an abject failure. The pandemic has only highlighted the frailties of an under-resourced, under-staffed and, in the main, conservative public health system.
    The private health insurance sector has for the most part, grown exponentially over decades because of these failures.
    Almost as an example of personal success and the need for a health service back up plan, or both, New Zealanders have rushed to sign up.
    The problem with the ever-widening income disparity that officially exists in our community is that the private health insurance cost is beyond most of us and mirrors freehold house ownership.
    This leaves most of us at the mercy of a public health system that is on the runway “taxiing” into the waiting arms of a profit-driven private health insurance industry.
    This has guaranteed over many years the routing of our salaried public health clinician staff and the hours they actually spend working in a public hospital after they have gone into the private sector but contract back to the public health system.
    Unless there is categorical research to prove it would be a success it could be the final nail in the coffin for a health service that could be swallowed whole by a voracious private sector.
    This would leave many Kiwis in an even more precarious position than they find themselves already.

  4. At the end of the day, this endeavor can be no worse than an already wrecked health system. The health system can’t fall over when it’s already on the ground and this hasn’t happened overnight.

    • It is a pity that politicians of both colours do not take advise from those on the front line it must be very frustrating.
      Hope despite the pressure you must be under you and yours can enjoy this xmas period . I fear it is going to be a bumpy ride for the next few months if not years.
      My hope is we will be able to exchange views over the next year on the way our respective leaders decide to try and take us now we have a leader that hopefully will be of more substance than the last 2
      Happy xmas

  5. Thank you Ian for another excellent article. However I am not convinced that your claim the existence of local DHB’s has ensured a timely role out of the vaccine programme. From anecdotal evidence it could be argued that many of the ‘missteps’ have occurred at DHB level, but in general I believe the major problem has been the lack of a seamless national organisation. Local Iwi organisations have stepped up and done sterling work. The creation of the National Cancer Control Agency would be an example of the failure of the DHB’s to provided consistent care nationwide; but there are also many other areas where care is a post-code lottery.
    The planned replacement of the DHB’s with a national hierarchy is very similar to the 1975 replacement of the Fire Boards and Fire Services Council with the Fire Service Commission and a national Fire Service. I think few would now argue that a return to the local Fire Boards would be beneficial. Ironically it was a National Government that that carried out that change and then later the creation of FENZ that amalgamated Urban and Rural Fire authorities. In both cases there was a lot of opposition to the changes.
    Like all organisations in the end it comes down to the quality of those working at all levels within it, and adequate funding.

    • Thanks Peter but I disagree with most missteps being at the DHB level. DHBs were severely constrained by the health ministry in what they could do and when they could do it (including vaccine distribution) and also in what they could communicate publicly and relevant community bodies. When things went wrong or hiccups occurred they became the scapegoat but were under such control that they couldn’t publicly defend themselves. DHBs are much less independent than city and district councils.

      Our health system does need more national cohesion but much of this weakness is due to topdown managerial leadership culture in the health ministry and other parts of central government.

      I agree with you over the fire service but in terms of complexity it is an apples and oranges comparison with the health system.

      • I would add severely underfunded. Obvobotj government’s but appallingly under the Key led National 9 year government.
        When we have Mental Health key workers leaving in droves because case load numbers are over 50( recommended safe working numbers 24)due to an explosion in population and a restraint by DHB in employing safe staffing levels we have a very serious issue here in NZ.

      • Thanks Ian, but I wonder if a lot of the current ‘complexity’ existing in the health system is necessary and the cause of a lot of the huge administrative overheads. With multiple boards, independent providers, sub-contracts, suppliers, private/public interfaces, etc isn’t this part of the problem. There are a lot of providers just clipping the ticket as the funds get distributed to the coal face.
        The multiplicity of computer systems across the sector that don’t interface is an example of a very fragmented structure.

  6. Many thanks for another excellent article. As I already wrote in comment on a previous article, this reform is a textbook example of everything that should not been done when a minister wants to engage a healthcare system reform. The fact that nowhere funding of the healthcare system just shows how botched the process is. Every new structure or revamped process or else is completely useless if funding does not follow in an appropriate manner. You can build your ‘localities’ for community healthcare under this new shiny name, but if local providers get less funding through ‘localities’ than they were having through DHB contracts, then your localities are actually worse than the previous arrangements…

    I am starting to wonder if all of this incompetence might be purely intentional with huge conflicts of interest behind the scenes: A. Little being commissioned to give the last kick to an already failing system through a botched reform with the help of EY actually playing the long run for private interests, a bet that National is elected in 2023, and the future National government, witnessing a healthcare system in ruins, ‘selling’ it to private insurance companies.

    There are a lot of restructuring behind the scenes at the moment. Green Cross Health, for example, has been constantly buying GP practices after finishing establishing its almost monopoly on pharmacies. Other actors, notably Australian, are also on the market to buy GP practices and local specialist rooms. Iwis and Pasifika entities tend to organize healthcare provision more and more, compensating for the failures of the public system. In 10 years, it is likely that the GP- or specialist-owned practice would be the exception rather than the norm. The last brick that is missing for them at the moment is being able to provide within a framework of financial sustainability for low- or medium-income Kiwis (i.e. State-sponsored healthcare). Little’s reforms are maybe just a way to sell this brick in the near future…

    • 2 edits for more grammatical clarity:
      *nowhere funding is mentioned

      “the last brick that is missing for them” – them equals private companies.

    • Thomas, let’s not forget that this “restructuring behind the scences” is happening hnder the multiple DHB model. The enormous amount of publuc funding pouring into multiple coffers makes it a targst for many corporate and private entities.

  7. I have to say I agree with Peter. There are major examples of how the fragmentation of 20 DHB s has led to different levels of healthcare response and service depending on where you live.
    The formation of the Cancer Agency absolutely highlighted the issue of the post code lottery. Chris Jackson (when he was head of the Cancer Society) alluded to the issue frequently and still does. I am pretty sure his opinion is well worth listening to. I would find it unlikely that this lottery is restricted to just cancer treatment.
    I would also like to ask what are all these elected health boards (as in the executive level) accountable for? There are a lot of stories about crumbling infrastructure (Northland, Middlemore etc), lack of staff, poor working conditions. This does not just happen overnight. Either the boards let them get to this state, and seemingly face no consequences, or they are powerless to do anything to address the situation. That’s a lot of cash tied up in boards that seem to be largely ineffective one way or the other.
    As a country we have rubbish investment in pharmaceuticals as a percentage of GDP (in comparison to other OECD countries) but that’s not the case for overall healthcare spend (as a GDP percentage). That’s not to say we don’t need more money but were should also look at how that money is being spent.
    IT systems that don’t talk to each other, duplication of back-office type services (NOT patient facing) is just plain stupid in a country this size.

    • Completely agree and I’ll counter the title page with “The madness of the health System is doing the same thing over and over again and expecting a different result.”

      Something must change Ian, if this is a failure, so be it, at least they are attempting to change to get a better result.

      • This change is being driven by business consultants and the overall experience of their work in the health system to date has been either poor or destructive.

        The trick is to build on the strengths of the current health system (there are many) and address the weaknesses (mainly leadership culture and resourcing), not blow the whole thing up.

        • Thank-you for your response, whilst I only partially agree, and respect your opinion, I strongly agree with your comment on leadership and by leadership, I mean within the Governance level of the DHB. The levels of different management, the quality of management, even at a governance level drives poor decision making. The vast levels of staff dissatisfaction, quality clinicians leaving in big numbers all the whilst managers make decisions based on bottom dollar figures, leave our DHB at dangerously low levels. Fear is used to drive performance which sadly has never ever ended well.

    • Much of whate you refer to come within the ambit of central government (mainly health ministry). This is most obvious with crumbling infrastructure where all the decision-making sits at central government level. DHBs are not able to be the decision-makers. The health ministry project manages major rebuilds and was responsible for the Christchurch fiascos.
      The health ministry has been the biggest problem in addressing the health system’s serious IT issues.

  8. reforms fail –
    disastrous covid variant runs riot –
    health system fails because of weight of unvaxxed patients –
    general cries of unfit for purpose –
    US interests step in to help as they are poised to in the UK –
    LINO mission successfully completed.

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