4 Decentralization of State Hospital System Governance

The 2011 reforms sought to create a ‘nationally unified and locally controlled health system', with the objective of improving system responsiveness, per­formance and accountability.

Greater local autonomy and clinician and community engagement are expected to improve accountability, service integration, efficiency and respon­siveness. These desired outcomes are entirely consistent with the international evidence on decentralization, which suggests that by changing the level where power resides and strengthening ‘strategic capacities at the intermediate level of the health care system' there can be beneficial effects on performance and accountability (Denis 2002, p. 5). Prior to the commitment to decentralize, most state health systems had gravitated towards more centralized control, attributed at the time to the alleged dysfunctionalities of hospital boards. Those dysfunctionalities included their resistance to reform; ‘political cro­nyism'; and dominance by senior clinicians ‘hostile to any change'.

4.1 Progress under the nhra

Eight years after the signing of the nhra, there are 134 Local Hospital Networks (lhn s) across the country (Administrator 2017).^[LIV] An lhn is a single, or small group of, public hospitals and health services spread across a geographical area, generally with an average catchment population of 300,000-500,000 in most states and territories. The Agreement quite prescriptively stipulated that lhn s be separate legal entities, governed by a council or board, with board members to have an appropriate mix of skills and expertise including health, business or financial management; clinical expertise; or other professional skills and experience where appropriate (Commonwealth of Australia and States and Territories 2011). The objectives and responsibilities of lhn boards as set out in the Agreement include shaping and delivering hospital and health services according to the needs of their local catchment population; meeting budget, performance, clinical governance, reporting and other requirements outlined in service agreements negotiated with state departments of health; improving engagement with local communities and clinicians; and strength­ening system integration through collaboration with local providers and stake­holders such as phn s (see below). lhn boards are also obliged to contribute local knowledge and expertise to inform the work of state departments of health in state-wide system planning, purchasing, capital, industrial relations and performance management.

New South Wales (nsw) and Queensland (Qld) were early implement­ed of devolution, while Victoria continued to operate a pre-existing decen­tralized model of governance. The less populous states were more cautious, implementing boards of governance in a transitional manner, with some even opting to wind back decentralization after initial adoption. Tasmania initially established three lhn s but later consolidated these into one, which acts as the lhn but is directly accountable to the department; the act government initially operated its single lhn as a departmental division, but more recently re-established a separate CEO-directed lhn ; while the Northern Territory (nt) opted to replace its two lhn boards with an advisory committee governance structure.

4.2 Changes in Intergovernmental Workings

The Agreement specifically requires lhn s to engage with the local commu­nity, clinicians and other key stakeholders, including mls/phns. Common or cross-board membership between the two is explicitly ‘expected... where possible', and states and the Commonwealth have also committed to working cooperatively to align the geographical boundaries for phn s and lhn s ‘wher­ever possible'. There are currently 31 phn s across the country, with one of their roles being to ‘develop partnerships that bring together different health pro­viders and State and Territory-based health authorities to create a more holis­tic system of care' (Health 2018). While phn s and lhn s have been studied, the former more extensively, there has been less research on the federalism aspects of the new arrangements, or the local ‘intergovernmental' relations between the state-managed lhn s and the Commonwealth-funded phn s.

Studies undertaken on lhn s to date have been jurisdiction-specific, look­ing at lhn relations with their system manager (that is, health department), structural issues, or at aspects of hospital and board operations and perfor­mance, in particular quality and safety (for example, Bismark and Studdert 2014; Bismark, Walter and Studdert 2013; Gadiel and Sammut 2012; Ham and Timmins 2015; Saunders and Carter 2017; Veronesi, Harley, Dugdale and Short 2014).

It would also appear that the strengthening of health-system integration (and, by default, intergovernmental workings) is, at present, more central to phn objectives, leaving them somewhat dependent on the commitment of the lhn s, which tend to have a larger physical and political influence at ground level. The vast difference in relative local influence between these two orga­nizations is captured by this telling observation from one lhn, ‘well, look, Medicare Local is not terribly relevant. I don't know how long they're going to be around for and through coag and everything there has been this lack of cooperation and... [are] really are not relevant to us' (Brown et al. 2013, p. 24).

This asymmetrical pattern was further validated by two separate but related analyses undertaken as part of a larger research project by two of the authors in 2017-18. The first was a desktop assessment of annual reports and websites for phn s conducted in October 2018. This found that most phn s do appear to have actively pursued collaboration with lhn s through including board members with lhn experience.

By contrast, the influence of phn members on lhn boards is much lower. This is partly an inevitable outcome of there being so few phn s (31) in com­parison to lhn s (over 130). But it is also due to phn s being much less signifi­cant for lhn s and their operations, than vice versa. Our survey of lhn board members indicated only a marginal proportion (13.3 per cent) of members

table 8.1 Proportion of phn board members with association to lhn s

source: authors’ analysis of phn websites and annual reports.

participating, or having participated, on a phn /ml board or other equivalent primary health care organization (see Figure 8.1).

Consistent with earlier research, we also found phn s held a lower profile than lhn s, due to their smaller budgets and political standing at a local community level, and when considered against the quite ambitious results expected of them. Our interviews with senior officers in lhn s and departments/ministries identified that phn s are not ‘awash with funding... [and] have struggled a lot... some... have a fabulous relationship [with lhn s]... [but] it seems to be a bit ad hoc [and] far too people dependent. Surprisingly, we also noted some hesitation over board cross-membership due to concerns about phns being potentially dominated by lhn board members and also the risk of conflicts of interest.

The survey also sought to understand lhn board member views on the qual­ity of their current engagement with phn s (see Table 8.2). Although a quarter of respondents believed the relationship to be excellent, a third of respondents believed their relationship with phn s to be average, poor or very poor, indicat­ing there is still significant room for improvement.

In interviews, both lhn board chairs and senior officers commented:

[phn s] are still finding their way... the jury is still out as to what they are doing and whether they are doing it well... Some are starting to fly...

figure 8.1 Proportion of surveyed lhn board members with association to phn s and other primary care organizations (n=2io)

Note: The online survey (with funding from the Australia and New Zealand School of Government) was constructed using Qualtrics software and distributed in April 2018 to either board chairs or board secretariats in Nsw, Victoria, Qld, wa and Tasmania (the act and nt had no active boards at the time). A total of 212 valid responses were recorded, representing a 20.3% response rate, based on the estimated number of board members nationally. The response rate was validated by our department/ministry contacts as being consistent with their internal survey completion rates.

we've got a real opportunity to try and start to coordinate budgets and to cooperate a lot more.

There were no kpi s or other incentives to encourage the building of partner­ships or increased integration. Other interviewees noted that phn s are ‘still in their infancy' and ‘there's a lot of rhetoric but not particularly a lot of action', with phn boards being hampered by ongoing leadership changes, issues of capability and capacity, a lack of role clarity and sustained funding. Some inter­viewees suggested that officer-level working groups had proved more effective in building collaboration than joint board meetings or membership; and that regional and remote lhn s and phn s appeared to have made much more progress than their metropolitan counterparts who had to deal with a larger number of stakeholders, competing interests and service demands. A common observation was that the relationships and outcomes achieved were heavily dependent on the personalities involved.

table 8.2 lhn board member views on the quality of their board's relationship with phn s (n=192)

This range of responses suggests there is opportunity for lhn s and phn s nationally, as well as for future research, to further illuminate ways and means of strengthening local intergovernmental partnership and system integration. Further, as proposed by Robinson and colleagues (2015), these results confirm the need for ongoing involvement and support from Commonwealth and state governments, if stronger local integration and join working capability is to be realized through these new arrangements.

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