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Australian Health System Decentralisation – A Comparison of Organisational Changes in the Primary and Acute Health Care Settings A report for Strategic Policy Unit Department of Health Renata Filtrin Pessanha An Intern with the Australian National Internships Program 21 st October 2013
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Research Report - Australian Health System Decentralisation

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Page 1: Research Report - Australian Health System Decentralisation

Australian Health System Decentralisation –

A Comparison of Organisational Changes in the Primary and

Acute Health Care Settings

A report for

Strategic Policy Unit

Department of Health

Renata Filtrin Pessanha

An Intern with the Australian National Internships Program

21st October 2013

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Executive Summary

The Australian health care system has been evolving since its creation, in

terms of health services, workforce, funding and governance. This paper

focuses on governance changes in primary and acute care.

Chapter one will introduce the importance of the topic decentralisation in

international and Australian contexts.

Chapter two will outline governance trends, particularly focusing on

decentralisation. It will discuss definitions, typologies and central issues of

decentralisation.

The third chapter will outline the potential benefits, risks, enablers and

barriers of a decentralisation policy.

Chapter four will detail the Australian health system. It will provide the

context for the next section that outlines the governance changes in primary

and acute health care, notably changes from Divisions of General Practice to

Medicare Locals and from Hospital Districts to Local Hospital Networks.

The chapter five will then analyse the key features of governance.

It is expected that explaining these changes in the context of

decentralisation‟s definitions, typologies, benefits, risks, enablers and barriers

will help to inform decision-makers when setting future health policy.

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Acknowledgements

First, I am thankful for the National Council for Scientific and

Technological Development (CNPq) for giving me the chance to come to

Australia and paying my scholarship during the program Science without

Borders (CsF).

I would like to thank the Australian National University (ANU) for receiving

so many Brazilians students (including me) during a year. Thanks for the

Australian National Internships Program (ANIP) for accepting and placing me

at Department of Health which taught me so many things about health reform,

politics and Australia. Thanks to Dr Marshall Clark, who placed, lead and

helped all the students during the internships. Thanks for Cheryl Wilson and

Patricia Oxborrow, two patient women who always help the interns.

I am thankful for all the Strategic Policy Unit (SPU). Specially Professor

David Cullen who believed I was able to complete this important project; Miss

Barbara Whitlock, my supervisor, who helped me and advised me so many

times; Miss Rita Raizis, for the comforting smiles and the insights; Mr Richard

Juckes, for the advices; Miss Libby Gonsalves, who helped me to understand

the project, the health system and presented me to the department.

Thanks for Lizzie Moore, who was an important friend when I most

needed one and helped me with my English.

I am thankful for my parents and my family (especially Fábio and Mônica

Filtrin) for the support in this new journey called Australia.

Thanks for my friends, Carolina Azevedo, Erika Cunha, Ernesto Junior,

Julia Coelho, Priscila Shibao and Thamires Mirolli for staying by my side

during this trip and helping not to get depressed.

Thanks for Iara Araujo and Juliana Fuzati, those who introduced me to

ANIP, and helped me to enrol in this course. Thanks for my friends: Giullia

Kurt, Luiz Moreira and Thiago Melo de Oliveira, those who became my family

and showed me Australia.

Last but not least, thanks for Mariana Sacco. An unforgettable friend that

spent hours listening my problems and helped me here to find a way to be

happy.

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Table of Contents

Executive Summary ......................................................................................... ii

Acknowledgements ..........................................................................................iii

Table of Contexts ............................................................................................ iv

List of Figures and Illustrations ........................................................................ v

List of Symbols, Abbreviations and Nomenclature .......................................... vi

CHAPTER 1: INTRODUCTION ....................................................................... 1

CHAPTER 2: DECENTRALISATION ............................................................... 2

Definition ................................................................................................. 2

Typologies ............................................................................................... 4

Decentralisation in Practice: Central Issues ............................................ 7

CHAPTER 3: DECENTRALISATION‟S RISKS, BENEFITS,

ENABLERS AND BARRIERS ................................................... 9

Risks and Benefits ................................................................................. 10

Enablers and Barriers ............................................................................ 12

CHAPTER 4: AUSTRALIA ............................................................................. 13

Geographic Profile ................................................................................. 13

Health Care Profile ................................................................................ 16

Primary Health Care Governance Arrangements ............................ 18

Divisions of General Practice .................................................... 18

Medicare Locals ........................................................................ 19

Evaluation ................................................................................. 22

Hospital Governance Arrangements ............................................... 23

Queensland Health ................................................................... 24

Local Hospital Networks ........................................................... 25

Evaluation ................................................................................. 26

CHAPTER 5: ANALYSIS OF DECENTRALIZATION..................................... 27

REFERENCE LIST ........................................................................................ 29

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List of Figures and Illustrations

Figure 2.1: Types of network structure ............................................................. 3

Figure 2.2: Summary of decentralisation typologies ........................................ 4

Figure 4.1: Australian population density ....................................................... 14

Figure 4.2: Indigenous population clusters .................................................... 15

Figure 4.3: Projected Australian population ................................................... 16

Figure 4.4: Waiting time for an „urgent‟ appointment with a GP ..................... 22

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List of Symbols, Abbreviations and Nomenclature

Symbol Definition

$ Australian Dollar

AIHW Australian Institute of Health and Welfare

AMA Australian Medical Association

AMLA Australian Medicare Local Alliance

ANIP Australian National Internships Program

ANU Australian National University

ASGC Australian Standard Geographical Classification

CHERE Centre for Health Economics Research Evaluation

CNPq National Council for Scientific and Technological Development

COAG Council of Australian Governments

CsF Science without Borders

DGPs Divisions of General Practice

DoHA Department of Health and Ageing

GP General Practitioner

LHNs Local Hospital Networks

MRSA Methicillin-Resistant Staphylococcus Aureus

NCCSDO National Co-ordinating Centre for Service Delivery and Organisation

NHA National Healthcare Agreement

PHI Private Health Insurance

PIP Practice Incentive Program

PSD Portfolio Strategies Division

SBOs State-based Organisations

SCoH Ministerial Standing Council on Health

SPU Strategic Policy Unit

UNDP United States Development Programme

USA United States of America

WHO World Health Organization

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CHAPTER ONE – INTRODUCTION

In 1993, the World Bank released the World Development Report,

encouraging a decentralisation policy in developing countries aiming to

improve the quality and efficiency of government health services. As a result,

not only developing countries, but developed countries, such as France, Italy,

Portugal and Switzerland, also decentralised their health systems (Saltman &

Bankauskaite 2006; Wyss & Lorenz 2000).

In general, the most desired effects of decentralisation are strengthening

community participation in decision making and increasing coverage (Taal

1993); enhancing cost-consciousness (Bergman 1998); implementing health

care based on need (Jervis & Plowden 2003); and improving efficiency,

management and responsiveness of public health service (WHO 1995).

However, in other central European countries, important elements have

been recentralised as a result of concerns raised about inequity and

ineffectiveness of some health delivery services due to decentralisation

(Saltman, Bankauskaite & Vrangbæk 2007).

In addition, some different classifications of decentralisation are

demonstrated in the literature. This divergence may be the result of the

differing contexts when the term is applied (Bankauskaite & Saltman 2007).

In terms of decentralisation in Australia, some characteristics of the

Australian primary acute health care have been recently modified. Divisions of

General Practice (DGPs) have become Medicare Locals and State-run

hospital districts have become Local Hospital Networks (LHNs).

This work starts with presenting a broad definition of decentralisation, in

order to achieve clarity. Then, it will discuss three different approaches to

classifying and the points to consider when implementing decentralisation.

The third chapter will discuss the enablers, barriers, risks and benefits of

decentralisation. Finally, this report will examine the structural changes

implemented in the Australian primary and acute health care: Medicare Locals

and LHNs.

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It is expected to provide principles and set explanations about the

possible gains from decentralisation. So, this work can inform decision-

makers when setting health policy.

CHAPTER TWO – DECENTRALISATION

Decentralisation is a complex and difficult term to be defined. Applying

decentralisation policy is also not easy, mainly because there are different

aspects of the health system that can be decentralised and there are many

issues around its practice. For this reason, this chapter will explore different

definitions of decentralisation towards a better understand of it, hence

analysing its different components. Thus, decentralisation will be classified

using the widespread points of view in the literature. The central issues will

also be discussed.

Definition

The following extract made by Furniss (1974) shows just one

unsuccessful attempt at transparency of the meaning of decentralisation:

“Decentralization may mean the transfer of authority over public

enterprises from political officials to a relatively autonomous board; the

development of regional economic inputs into national planning efforts; the

transfer of administrative functions either downward in the hierarchy, spatially,

or by problem; the establishment of legislative units of smaller size; or the

transfer of responsibility to subnational legislative bodies, the assumption of

control by more people within an economically productive enterprise, the hope

for a better world to be achieved by more individual participation.”

In another way, Vrangbæk clarifies decentralisation (2007b) as:

“The transfer of formal responsibility and power to make decisions

regarding the management, production, distribution and/or financing of health

services, usually from a smaller to a larger number of geographically or

organizationally separate actors.”

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Following this reasoning, decentralisation suggests transference in formal

accountability and decision-making structures (Vrangbæk 2007b). The author

explains decentralisation is done “usually from a smaller to a larger number”

of entities, i.e., these can happen in the same or in a different organisational

structure (political and administrative). Also, the term “geographically or

organizationally” refers to creating spatial or functional boundaries,

respectively, to the actors‟ action.

Despite this broad meaning of decentralisation, some authors may not

have used the term appropriately. For example, relocating acute services from

hospitals to home care was termed as decentralisation, which is not a shift in

the structure of power or authority (Bankauskaite & Saltman 2007). Therefore,

understanding the meaning of decentralisation is important to avoid erroneous

conclusions.

The Figure 2.1 shows the difference between centralised and

decentralised system.

Figure 2.1 Types of network structure: a) centralized network and b) decentralized network. Adapted from M‟Chirgui & Pénard (2011).

Vrangbæk (2007b) also defines responsibility, power and health services

to achieve a better understanding of decentralisation. Responsibility is

explained as the “formal responsibilities for making decisions”, power is the

range of decisions that can be taken and health services can be the “health

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care services, management, production, distribution and/or financing of public

goods”.

Typologies

Different typologies of decentralisation are found in the literature. Authors

present divergent opinions even within the same approach of decentralisation.

Also, different approaches often overlap. For example, a differentiation made

by Sherwood (cited in Bankauskaite & Saltman 2007) shows decentralisation

and devolution as the first term refers to intra-organisational structure and the

second as an inter-organisational pattern of power relationships. Collins and

Green (cited in Bankauskaite & Saltman 2007) discern decentralisation and

privatisation. They explain decentralisation as a transfer of power,

responsibilities, and/or resources from the centre to periphery and

privatisation from the public to the private. Meanwhile, the World Bank (1983)

allocates privatisation and devolution as two categories of decentralisation.

The following section presents the major points of view on decentralisation

in the health context literature. It can be classified using three different

approaches. The figure 2.2 represents them.

Figure 2.2 Summary of decentralisation typologies.

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The first approach can be made in terms of the amount of power

transferred to local levels. Rondinelli (1980) distinguished Functional and

Areal Decentralisation. The first one focuses on the transfer of authority to

execute specific activities to specialized institutions in national level or local

jurisdictions. The Areal Decentralisation, also called Geographical

Decentralisation, aims transfer broad responsibilities to organisations within

precise spatial boundaries. When comparing both types, the minister of health

may have more power to control the degree of decentralisation in the

functional rather than in the areal decentralisation (WHO 1990).

The second typology of decentralisation, called functional perspective,

evaluates three spheres according to the different policy making-decisions:

Political, Administrative and Fiscal Decentralisation (Saltman & Bankauskaite

2006). Political Decentralisation referred to democratic rules (Saltman,

Bankauskaite & Vrangbæk 2007), transferring policy making responsibility

from the central government to the local level. Administrative Decentralisation

involves the field of public administration, i.e., according to managerial

concepts that enlarge the number of lower-level workers. Fiscal

Decentralisation conceptualizes raising funds and/or expenditure activities in

a central or in a lower (regional or local) level rather than central/national

level. For example, allocating the budget to Local Hospital Networks (LHN)

with consideration of how it will be spent.

A third perspective was made by Cheema & Rondinelli (1983), in a Public

Administration Approach. This perspective focuses on the distribution of

authority and responsibility (Bossert 1998) and classifies four different forms

of decentralisation: Deconcentration, Delegation, Devolution and Privatisation.

Deconcentration is the transfer of responsibility and power from a smaller

to a larger number of administrative actors (Vrangbæk 2007b), i.e., from the

central government to peripheral offices within the same administrative level.

For example, the Ministry of Health establishes its local offices with defined

administrative responsibilities (WHO 1990).

Delegation means delegating defined responsibility and authority to semi-

autonomous entities (Rondinelli 1980), often implemented through contracts

(Vrangbæk 2007b). To exemplify it, this technique has been used to manage

teaching hospitals (WHO 1990).

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Devolution shifts responsibility and authority from the central government

to separate public administration (Bossert 1998). In this case, central

authorities have little or no direct control upon the entities. For example, shifts

from the Ministry of Health to local governments of municipalities.

Privatisation is the transference of functions from the government “to

organizations institutions or to private profit-making or non-profit-making

enterprises” (WHO 1990).

Vrangbæk (2007b) named this third approach as Dynamic/Processes

Perspective. The name originates from the perspective that it looks at the

implementation and politics of the decentralisation policy. It raises a relevant

point: the possibility of transferring responsibility between two different

spheres – from political to administrative dimension. Vrangbæk (2007b) also

adds a fifth form of decentralisation on this approach: Bureaucratisation. It

raises a relevant point: the possibility of transferring responsibility between

two different spheres – from political to administrative dimension.

An important characteristic of decentralisation is the possibility of

differentiation of Horizontal and Vertical Patterns. It was raised by Bossert

(1998) in his decision-space analysis and depth by Vrangbæk (2007b) as

structural dimensions of the policy, dealing with sharing power and/or

responsibility.

The Horizontal Pattern represents the creation of levels of actors that are

not in a hierarchical model, within or between actors. It may mean that within

an institution it is possible to create positions that are not subordinate to each

other; or create entities around the country, for example, that are concerned

with their own spatial boundary; or create entities concerned with their own

responsibilities, for example, one institution deals with hospital and other

deals with general practitioners.

The Vertical Pattern presents the creation of hierarchic levels. It is

possible to establish new functions within institutions and between institutions,

for example, a hierarchy model with central and regional/local government.

Despite of these proposals, the most commonly referenced approach is

the Public Administration, where authors tend to discern Deconcentration,

Delegation, Devolution and Privatisation in the context of health reforms.

Furthermore, focusing only on these mechanisms of decentralisation can limit

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the diversity of mechanisms adopted (WHO 1990). For this reason, WHO

(1990) suggests that countries should develop their own proposals without

being limited by classification. Moreover, a combination of these proposals

can be done, widening the diversity of options available to decisions-makers.

Decentralisation in Practice: Central Issues

As cited during the decentralisation‟s classification, this policy can create

vertical levels of government. These can be identified as central, regional or

local governments depending on the area boundary taken. Special attention

has to be made when differentiating local and regional governments. Aktar

(2011) differentiates as the local government being service-oriented and the

regional government an administrative unit correspondent to geographic,

historic, economic entity. For example, a German region is on average the

size of Denmark, i.e., that is a decentralised structure in one place might be

considerably different to a centralised structure in other. In general, the size of

the area unit has to be convenient to the management of health care

(Bankauskaite, Dubois & Saltman 2007).

Bossert (1998) states that even in decentralised health systems local

governments will always be manipulated and shaped by the central

government within the same organisational framework. Thus, a balanced

degree of centralisation and decentralisation is required (WHO 1990).

Controlling expenditure is another sensitive point. Central government

should consider if the local entity should have the right to decide how the

health budget is spent, i.e., if it will be spent with priority services or

programmes (WHO 1990). Once again, the balance of decentralisation-

centralisation is an important point (WHO 1990).

Further, differencing of levels of performance between regions (case of

inter-regional inequity) can trigger a recentralisation process (Maino et al.

2007), resorting to a balance of the two policies. Different mechanisms of

decentralisation can offer different degree of entities‟ autonomy.

Thus, decentralisation is recognised as a process in a system. WHO

(1990) shows that decentralisation policies take 5-10 years from formulation

until implementation.

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The context where decentralisation is undertaken is also important.

National context and history (Vrangbæk 2007a), sets of institutions within the

country, values and missions, social and cultural values (Bankauskaite &

Saltman 2007), financial situation (WHO 1990) and particular political

interests (UNDP & Government of Germany 1999) are important in deciding

the way to take on the issue of decentralisation. Financial situation is

important, as the cost of the policy may increase immediately through the

need of building new edifices and contracting more people. If there are

insufficient resources, patient outcomes are more likely to be poor that will

indicate a sense that decentralisation does not solve all the problems.

As the methods of implementing decentralisation, national contexts and

aspects of health care are different among countries, cross-national analysis

is restricted (Smith 1985). For this reason, Smith (1985) suggests analysing

the changes during the process of decentralisation.

Along with decentralisation comes a loss of regulatory tools by the central

government (Smith & Häkkinen 2007), at the same time the central authority

empowers the regional/local levels. However, regulatory supervision will

always be needed (Smith & Häkkinen 2007). Thus, there are some concerns

in collecting and verifying good quality of data. For example, regional/local

government could distort unverifiable data, in order to achieve the goals

asked by the central government or to gain benefits.

Ham (1998) discusses another point that a failure over centralist policy

may rebound against politicians, for this reason they may decide to

decentralisation. However, at the same time, if problems arise after

implementing decentralisation policy, the central government may be also

blamed.

A different term appears when discussing decentralisation:

regionalisation. Some public sectors and providers use regionalisation to

explain the health reform started in 1970 in Canada (Lewis & Kouri 2004) or

the recent changes made in Australia since 2010 (DoHA 2011b). Lewis and

Kouri (2004) argue there is no consensus about the definition of

regionalisation and the complexity to define it. Marchildon (2005) defines it as

devolution of funding from the central government to regional authorities,

based on regional needs, which implies set boundaries. The term also

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requires a centralisation of delivery management from individual facilities to

the regional authorities. As discussed, devolution can be classified as one

type of decentralisation, in this case devolution of funding. It is also required a

centralisation of some health delivery elements. On the other hand,

decentralisation does not mean excluding centralisation, but a balance of both

policies. For this reason, regionalisation can be exemplified as a specific type

of decentralisation.

The World Health Organization (1990) argues the “top-down”

implementation of decentralisation is likely to fail because of the possible wide

gap between the purpose of the policy and the real situation. As the local and

regional authorities/organizations are empowered to make decisions, they

need to accept the new work. Hence, consultations are necessary, using “top-

down” and “bottom-up” interactions.

Changes during the process of decentralisation happen to achieve the

outcomes. Also, country health profiles vary along time requiring structural

changes. For example, recentralising and decentralising different aspects of

health system. As Bossert (1998) pronounced decentralisation is “a means

toward the ends of broad health reform, rather than an end in itself”. Thus,

depending on the circumstances, it may be vigorously pursued at times and

less so at other times.

CHAPTER THREE – DECENTRALISATION’S RISKS, BENEFITS,

ENABLERS AND BARRIERS

As discussed, decentralisation is an evolution and occurs over time. This

policy is a process and does not occur alone but is balanced with

centralisation. To implement it and decrease risks, a number of points should

be considered before making decisions. Consequently this section will outline

the risks, benefits, enablers and barriers of decentralisation.

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Risks and Benefits

One major reason for adopting decentralisation is based on its malleability

which allows coexistence of different local agendas and national priorities.

(Saltman, Bankauskaite & Vrangbæk 2007). Nevertheless, a decentralised

government, which tries to conciliate national and local priorities, may have

problems when intervening without local support (Wyss & Lorenz 2000).

The promotion of democracy and accountability are important outcomes

of decentralisation to the local population (Bossert 1998). Moreover, public

participation is strongly correlated as a key factor to improve allocative

efficiency (Bankauskaite & Saltman 2007). The principle is that smaller

organisations are able to perform better than bigger entities, because they are

closer to the population (NCCSDO 2005) and can understand and solve

problems of a defined framework. It means empowering the local government.

However, despite the correlation between decentralisation and increased

accountability, the former does not imply causation of the latter (NCCSDO

2005). Innovation may be a benefit of decentralisation as well, due to a more

production of approaches, solutions and products in decentralised

jurisdictions.

Decentralisation can alert the local workforce about the costs in health

services, encouraging a more careful understanding of costs and benefits

(Vrangbæk 2007a), which would lead to the most cost-effective service.

Reducing costs is another major goal on health system given to „explosion of

costs in the health sector‟ (Wyss & Lorenz 2000). Nevertheless, a

decentralised system does not necessarily provide the most cost-effective

service. In fact, implementing this policy increased administration costs and

bureaucracy in some countries (Saltman, Bankauskaite & Vrangbæk 2007;

WHO 1995).

There are contradictory views about staff satisfaction in a decentralised

model. NCCSDO (2005) argues that despite some articles associating

decentralisation with staff satisfaction, there is little empirical evidence related

to support this argument.

The most frequent concern amongst decision-makers is the possibility of

inequity arising from decentralisation (Bankauskaite & Saltman 2007). This

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policy has the potential to increase equity, if looks local authorities seem to be

better at answering local needs (WHO 1995). Decentralisation may also

increases inequity, by creating variation between groups or geographical

areas (NCCSDO 2005).

Attempts are frequently made to reduce inter-regional inequity. Due to

differences in wealth among regions of a country, central government often

creates formulas to equalize budgets across a nation, such as, special funds,

resource allocation and national subsidies (Saltman & Bankauskaite 2006).

The adjustment is important to ensure inter-regional equity of funding

(Saltman & Bankauskaite 2006). However, the studies do not differentiate

between the various forms of inequity, such as, geographical, class, age and

gender inequity which makes the analysis difficult (NCCSDO 2005).

Koivusalo, Wyss & Santana (2007) argue inequalities are associated with

the different decentralisation policies, local decisions and previous health care

organisations. The authors mention inequity also exists in centralised

systems. For Kutzin (in WHO 1995), equity primarily depends on the resource

allocation of decentralised units. Applying cross-subsidies between population

groups and geographical areas and considering previous inequities and

special needs may avoid this result (Bankauskaite & Saltman 2007;

Koivusalo, Wyss & Santana 2007; WHO 1995). Other actions, such as social

protection (Wyss & Lorenz 2000), regulation, standard setting and

performance criteria (Koivusalo, Wyss & Santana 2007), could also be

implemented.

Decentralisation may also result in “fragmented” documentation, i.e., the

same information being found in multiple places. That can result in confusion

and duplication of data (United States Environmental Agency 2012).

Rondinelli (1980) argues that the failures of decentralised systems are

often related to two reasons: first, the lack of a concise conception of its

meaning; second, the variety of forms that decentralisation can take. The

potential problems of this policy can also be due to a lack of attention to the

political and economic context (WHO 1995).

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Enablers and Barriers

There are a number of enablers and barriers which can affect how well

decentralisation works.

One enabler is to have sufficient data to analyse each area or institution

performance, for example, aged care beds numbers, immunisation levels,

waiting time, etc. The clarity of performance targets along with well-developed

performance indicators and transparency though annual reports may assist

decision-makers.

A sector regulator, as used in the United Kingdom, may assist and advise

the central government decision-makers along the decentralisation process.

This function would have the ability to monitor the system based on risk

ratings; create and apply contingency strategies when services became

problematic; develop payment systems rewarding quality and efficiency; and

ensure that choice and competition are operating in the best interests of

patients.

Appointing expertise-based boards, rather than representative-based

boards may also improve performance. Alternatively local decision makers

should use the information provided by expert planners, as well as the

community values to set priorities (WHO 1995).

To avoid duplicated actions, the new roles should be clear with a tightly

defined scope of practice. This allows staff and institutions to understand their

functions. Constitutional and legal changes may be required to ensure

responsibility is vested in an appropriate body (WHO 1990). These changes

avoid duplicated roles and lack of responsibility to a defined role.

The geographical boundaries must be well planned. That is considering

the legally recognized areas (Rondinelli 1980), the absolute and relative size

of the units, population density, country size, homogeneity of population

(Bankauskaite, Dubois & Saltman 2007), the cultural difference and proximity

of services-community.

As discussed previously, context is important. For example, an economic

recession may create a barrier to success. The transition to decentralised

situation may require some extras payments, such as additional training, new

buildings or new equipment (WHO 1995). Political context is also important.

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The powerful interest groups need to understand the meaning of

decentralisation and the central government‟s intention. They also need to be

actively willing its implementation, because they will receive the

responsibilities associated with serving the local community (WHO 1995).

If the local autonomy does not support decentralisation, tension between

it and the central control may occur (WHO 1995). Tensions may also arise

between the central and decentralised bodies if the goals set by the central

government are perceived as too high (Bankauskaite & Saltman 2007).

All these enablers added to good governance processes and systems

delineate the policy to achieve the best outcomes.

CHAPTER FOUR – AUSTRALIA

As discussed previously in this work, there are a number of potential

benefits and risks of decentralisation. It has also been discussed that the

particularities of a country determine the policy context for structural changes.

This section will first explain Australia‟s health and geographic profile.

Understanding the health care profile is important to analyse how the health

system is set out. Understanding the geographic population is important to

plan and analyse provision of services, in particular tailoring them to where

people live and work (AIHW 2013). Second, it will examine the structural

changes within primary and acute health care respectively namely: Divisions

of General Practice/ Medicare Locals and Hospital Boards and Districts/Local

Hospital Networks.

Geographic Profile

Australia is the sixth largest country in the world in geographic area

(Australian Government c. 2013) with around 23 million people in April 2013

(AIHW 2013). Australia‟s population is concentrated along the Australian

coastline, from Adelaide to Cairns with a small concentration around Perth

and sparse population in the centre (Australian Government c. 2013).

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As the distance between health service provider and client is important to

set boundaries and ensure welfare, the Australian Standard Geographical

Classification (ASGC) classifies five types of remoteness categories, based

on the distance between urban to centres: major cities, inner regional areas,

outer regional areas, remote areas and very remote areas. According to

Australia‟s Welfare 2013, 70% of the population lived in major cities in 2012

and 2% lived in remote and very remote areas. The figure 4.1 represents the

population density in Australia.

Figure 4.1 Australian population density, in June 2010 (AIHW 2013).

The Aboriginal and Torres Strait Islander population of Australia has a

different service delivery approach due to their special needs and their

distribution across the country. Three per cent of the total population were

Indigenous Australians in 2011 (AIHW 2013). The figure 4.2 illustrates their

distribution.

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Figure 4.2 Indigenous population clusters, 2006 (AIHW 2011).

The population is also ageing: in 1972 8% of the population was 65 years

and over, compared to 14% in 2012, which affects the various types of health

services demand (AIHW 2013). The Indigenous Australians are younger than

the total Australian population (WHO & AIHW 2012). As policies have to

attend to actual framework and also to future demand, a projected population

from 2013 to 2032 was made by AIHW (Figure 4.3).

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Figure 4.3 Projected Australian population, by age, from 2013 to 2032 (AIHW

2013).

Health Care Profile

By international standards, the Australian health system is considered to

be one of the best in the world by international standards (DoHA 2012). The

self-perception of health and welfare is good to excellent in general (WHO &

AIHW 2012). There are however discrepancies between the Indigenous

population health, people living outside capital cities, people who have low

socio-economic status and other Australian residents (WHO & AIHW 2012).

The federal government (the Commonwealth) has a powerful role in

policymaking (Commonwealth Fund 2012). It funds and administers the

national health insurance scheme, medical and pharmaceutical benefits;

funds public hospitals and health programs; regulates the health system,

pharmaceuticals and medical services; and develops and promotes strategies

to solve health issues (Commonwealth Fund 2012; DoHA 2012).

The state and territory governments (the states) also share some

responsibilities with the Commonwealth. They provide a broad range of health

services, such as public hospital services, specialist mental health services,

ambulance services, community health and environmental health (DoHA

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2012). They assist the federal government in training health workers and

regulating the health professionals and private hospitals (DoHA 2012).

The shared responsibilities are made between the states and the

Commonwealth through National Healthcare Agreement (NHA) which focuses

on improving the health care outcomes for all Australians and sustainability of

the health care system (COAG 2012). It was first signed in 2008 by the

Council of Australian Governments (COAG) (DoHA 2012) that jointly with the

Ministerial Standing Council on Health (SCoH) sets goals for health services

with specific roles.

The states have flexibility to provide and use funding, but the NHA

identifies priority areas for reform, assessed by the COAG Reform Council

annually. Despite the clear objectives of the NHA, the issues are complex

(DoHA 2012).

The health insurance scheme can basically be divided in two forms: public

and private. The Australian national public health insurance scheme,

Medicare, is provided to all Australian citizens and permanents residents

(Commonwealth Fund 2012). It can however be complemented with the

private health system that is subsidized by the federal government through

private health insurance (PHI). It allows individuals to pay less for PHI with a

greater choice of care delivered (DoHA 2012). With this policy, the

government aims to attract people to buy private insurance, avoiding an

overcrowded public system.

The primary health care is usually provided in community-based settings,

such as general practices, state-run Community Health Centres and

Aboriginal Community-Controlled Health Services. Primary health service is

largest provided and co-ordinated by General Practitioners (GPs), with about

85% of the Australia population seeing a GP at least once a year. On the

other hand, the hospital services are delivered currently via LHNs. Both

aspects and changes made by the government during the last few years will

be discussed separately.

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Primary Health Care Governance Arrangements

Divisions of General Practice

Divisions of General Practice (DGPs) were introduced in Australia in 1992

with $17 million of federal funding. They were separate legally incorporated

entities aiming to improve integration and to provide a mechanism for GPs to

become involved in local health planning and priority setting (Clark 2003).

Over time, their goals were broadened, including care co-ordination,

information managements systems, public health initiatives, continuing

medical education, after-hours service delivery and other programs

(Department of Health 2010).

Membership of DGPs was voluntary and consisted of legal entities with

eight boards of directors on average. The boards of directors usually had

members with different expertise, such as accounting skills and community

representatives. They also had on average 10 full-time staff per Division

(mainly non-GPs).

From 1992 to 1998, defined geographic boundaries emerged in the

country. By 1998, all Australia territory was completely covered by DGPs.

State-based organisations were designed to build the capacity of DGPs, help

co-ordinate national programs and link to the state governments. Australian

General Practice Network, on the other hand, helped to co-ordinate the

network, supported the national programs delivery, advised on performance

standards, collaborated with academic organisations and provided input into

submissions.

In 1998, the Divisions were reviewed by the General Practice Strategy

Review Group and funding changes were made. The changes provided

stability associated with enhanced planning and reporting requirements

moving from a short-term infrastructure subsidy to outcome-based funding for

three years (the „block funding‟). Moreover, the Practice Incentive Program

(PIP) was introduced to reward practices with minimum standards for

infrastructure, access to care and evidence-based activity in chronic disease,

mental health and prevention. PIP was funded by Medicare Australia, but the

GPs payments were facilitated by DGPs.

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In 2003, the Phillips Review was released, with a government response in

April 2004. It concluded there was too much diversity of Divisions, which

needed a set of common objectives. It included changing priorities, a new

National and Quality Performance System and improving governance and

accountability arrangements. The performance indicators were then agreed

between DGPs and the Department of Health and Ageing (DoHA, nowadays

Department of Health). They included governance, prevention, access,

integration, chronic disease management, practice, quality and workforce

support, and consumer focus.

By 2005, there were 120 DGPs based on area (local governance), eight

state-based organisations (regional governance) and one national

organisation (Australian General Practice Network, central governance).

More than 94% of GPs were members of divisions. The DGPs received

$140.6 million, which nearly 50% was core funding. Additional funds were

made by specific federal government programs as well as a small amount of

funding from other public and private sources.

In 2007, an evaluation of DGPs found them engaged in a broad range of

activities, with non-quantitate data. The priorities varied across area, with rural

areas focusing on attracting doctors and providing locum relief, while regional

cities focused on after-hours services. Over time, all these different priorities

ended in inter-regional inequities. The evaluation also found a statistically

significant effect of the DGPs on health care performance, in which the largest

effects were in areas of improving GP infrastructure. It also showed the strong

effect of Divisions on accessing PIP payments, which culminated in a larger

number of staff associated and higher proportion of GPs enrolled to receive

PIP payments (Australian General Practice Network 2007).

Medicare Locals

In June 2009, „A healthier future for all Australians: final report’ was

delivered to the Kevin Rudd Government (2007-2010). It presented 123

recommendations about changes in the Australian health system, focused on

primary health care, centralising and integrating governance arrangements

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(as the Commonwealth funding the entire primary health care) and creating

Comprehensive Primary Health Care Organisations to replace DGPs.

The government responded to it producing a report titled A National

Health and Hospitals Network for Australia’s Future in 2010. It created the

Medicare Locals to reduce service gaps, improve the service delivery in local

level and access to integrated care. The Medicare Locals, then, would play a

role in delivery services funded by the federal government. They also would

be drawn from existing DGPs which had the capacity to take on the roles and

functions expected under new arrangements.

In late 2010, the Julia Gillard Government (2010-2013) provided a more

developed view of Medicare Locals, as independent legal entities, providing

more co-ordinated care and accountability to the Commonwealth and their

local community. Their objectives also included identifying local health needs

and operating as health system planners, focusing on prevention; improving

co-ordination; supporting clinicians through prevention and management of

chronic disease; helping to implement primary health care programs; and

improving efficiency and accountability with strong governance and effective

management.

To establish the initial operations of Medicare Locals, DoHA release

guidelines in 2011 to implement them in three stages. From July 2011 to July

2012, 61 Medicare Locals were created. They work with local primary health

care, Local Hospital Networks, aged care providers and communities. In some

instances, Medicare Locals deliver services themselves or they can sub-

contract other organisations to do it (for example after hours clinical services).

They have a skills-based governance structure, where the Board member

selection varies between seven to nine people, being sometimes also

members of LHNs. They are selected based on the range of professional,

industry and personal skills required to achieve the strategic objectives.

The governance arrangements were determined with each Medicare

Locals individually, that is, they have different approaches to governance

across the country.

On 30 June 2012, all core funding under the DGPs, under state-based

organisations (SBOs) and under Australian General Practice Network would

have been ceased. However, on 19 July 2011, Minister Butler (Minister of

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Health and Ageing) announced that funding provided to SBOs not forming a

Medicare Local would be extended until 31 December 2012, enabling to

continue their transition work.

On the first July 2012, the Australian Medicare Local Alliance (AMLA) was

established to co-ordinate and support the Medicare Local network and

engage primary health care providers. It facilitates stakeholder consultation at

the national level and, since January 2013, has some co-ordination by state

level.

The expenditure on Medicare Locals is made by the Department of Health

and can be classified into three major types: core funding, flexible funding and

program funding.

The first one is distributed to meet the required governance arrangements

with more responsiveness to the local population needs on strategic

objectives. It is allocated on weighted-population basis which considers health

inequalities for people living in rural and remote areas, the Indigenous

population, English-language proficiency in overseas-born population, socio-

economic status and age profiles. It is also attentive to relative cost

differences associated with staffing and operating Medicare Locals across the

country, and the travel costs in remote areas.

The non-core funding (flexible funding) considers the similar parameters

as the core funding.

The third funding type is provided for specific programs, such as face to

face after-hours care, mental health, rural health, immunisation and

Indigenous health. It is calculated through individual Program Schedules

under a Deed, managed by program areas through the Department of Health.

The Medicare Locals provide reports to the Department of Health

including Needs Assessment Report, Annual Plans and Budgets, Strategic

Plans and six and twelve Month Reports, including financial reports. Another

Department‟s responsibility is monitoring the performance of each Medicare

Local, addressing five strategic objectives. The Health Communities Reports,

which are about access to services, quality of service delivery, financial

responsibility and patient experience in Medicare Locals are monitored and

produced by the National Health Performance Authority. They provide

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nationally consistent and locally relevant information about the primary health

care system and Medicare Locals.

Evaluation

A review of primary care performance between 1991 and 2003 showed a

significantly improvement practising GP population (Charles, Britt & Valenti

2004). In 2007, an evaluation found that DGPs were engaged on the area,

with statistically significant effect (Australian General Practice Network 2007).

For the most part, Australians could see a GP for an urgent matter within

4 hours in 2011-12 (63.6%), whereas, about one third of the population

reported they had to wait longer than 4 hours. From 2009 to 2012, these rates

have remained stable. Waiting for 24 hours or longer to see a GP slightly

decreased from 2009 to 11% in 2010-11. However, the number increased

statistically significantly to 24.4% in 2011-2012 in all States and Territories

(COAG 2013). In 2009, 17.8% of Australians felt they were waiting an

„unacceptable‟ time to see a GP. This rate increased to 27.4% in 2011-12

(COAG 2013). The figure 4.4 illustrates the numbers.

Figure 4.4 Waiting time for an „urgent‟ appointment with a GP (COAG 2013).

From 2007-08 to 2011-12, the rate of people hospitalised for a potentially

preventable conditions fell 7.3%. These preventions are made by GPs that

can intervene early in chronic diseases, reducing the need for hospitalisations

(COAG 2013).

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The number of structures on the infrastructure to support GPs decreased

from 120 boundaries area in 2005 to 61 Medicare Locals currently. It shows

that a geographical centralisation happened on the primary health care

evolution in Australia.

In terms of funding, during DGPs, the central government funded the

divisions using the „block funding‟. DGPs were also funded by the state level

and were allowed to attract funding from other sources, such as membership

fees. The non-Commonwealth funding incomes had to be detailed to the

federal level, but the funding was not held accountable to the Commonwealth

for its use (AMA 2002). Nowadays, the federal government resources

Medicare Locals using three types of funding, but they are also allowed to

raise money by themselves. The flexible funding provided allows Medicare

Locals to inject money according to their local needs. Then, it could be

considered as a decentralisation policy due to providing a financial flexibility.

For these reasons, saying that a slightly fiscal decentralisation process

occurred is possible.

Moreover, according to DoHA (2013), the structural primary health care

changes reduced significantly administrative overhead and directed funding to

service provision.

Attributing the primary health performance changes solely to the operation

of the new system (Medicare Locals) is problematic. There are many factors

which influence health system performance such as workforce and population

health status. The federal government has also injected more money into

primary health care after The Health Reform. Isolating and evaluating the

Medicare Locals‟ impact is, therefore, difficult. It is likely they are instrumental

in ensuring the services are delivered appropriately. Proving this through

evaluations is difficult given the interdependencies and dynamic nature of the

health system.

Hospital Governance Arrangements

A National Health and Hospitals Network for Australia’s Future, a report

released in 2010, not only modified the primary health care but also the public

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hospitals‟ management. After its released, the geographical boundaries, the

funding and some aspects of hospital management were changed.

To achieve a full context of policies driven in the whole country, an

analysis of the governance arrangements should be done in all eight

states/territories. In order to illustrate one of them, a review of Queensland

Health will be presented.

Queensland Health Changes

In 2005, a review of Queensland Health was undertaken by Peter Forster

(Department of the Premier and Cabinet 2005). It was written in a response to

the disquiet about safety following the practices of Dr Patel at the Bundaberg

Hospital. There were concerns about the excessive layers of decision making

and administrative staff with centralised formal structure at the hospital. This

structure included lack of responsiveness; decision-making bottlenecks;

fragmentation between policy development, governance, service delivery and

performance management; lack of accountability; lack of forward service

planning; inability to provide adequate statewide services; and limited

engagement with local communities in health decision making.

The review made a number of recommendations such as increasing

community engagement, devolving budgets, integrating health services and

increasing performance monitoring and management. Key recommendations

also included maintaining the 37 districts that covered 180 hospitals on the

state and setting three Area Health Services (according to population

number). They aimed to increase leadership, management, planning, policy,

responsibility and accountability.

In 2007, Queensland Health was restructured reducing the districts

numbers from 37 to 20, based on boundaries (Queensland Government

2008a). This change was made due to the belief that larger districts would

consolidate health services and improve integration within districts between

communities and hospitals. Developing District boundaries also considered

the boundaries of Divisions of general Practice.

In August 2008, Queensland Health was again changed. The Area Health

Services this time were abolished. Despite the Forster Review, these areas

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didn‟t increase local decision making, but they “got in the way of decision

makers and the local communities they serve” (Queensland Government

2008b). In addition, the 20 districts were reduced to 15 Districts, based on

geographic boundaries, apart from Children‟s Health Services being

separated as a district.

Local Hospital Networks

The report titled „A healthier future for all Australians: final report' (2009)

focused on hospital governance, primarily leaning towards more centralised

governance arrangements. The report made by the Rudd Government

(2010a) outlined strategies to devolve governance and management of

hospital services to a local level called Local Hospital Networks (LHNs).

These networks "would be single or small groups of public hospitals with a

geographic or functional connection, large enough to operate efficiently and to

provide a reasonable range of hospital services" (Australian Government

2010a). It was also expected that LHNs would have common geographic

boundaries with Medicare Locals wherever possible. The decision making

would be devolved to LHNs "to give communities and clinicians a greater say

in how their hospital are run" (Australian Government 2010a).

LHNs would have a professional Governing Council and Chief Executive

Officer, responsible for delivering agreed services and performance standards

within an agreed budget. Governing Councils would include local health,

management and finance professionals, with an appropriate mix of skills,

expertise and backgrounds.

The state health departments would support LHNs by providing system-

side service planning, performance management, negotiate service

agreements, fund LHNs and transfer good practices. They would only

intervene in LHNs‟ daily operations when the performance was not meeting

standards.

The LHNs were responsible to set local activity targets (agreed with state

departments), receive funding for services under activity-based funding from

state and federal governments and managing the budget, corporate services

(for example human resources), implement clinical guidelines and pathways.

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The state health departments would plan the workforce with the federal

government, provide funding to LHNs, plan capital and ownership, manage

and remediate performance and negotiate industrial relations.

The national health bodies would determine the efficient price for hospital

services (being done by the Independent Hospital Pricing Authority), fund

LHNs, set national governance arrangements, set the national performance

and accountability framework (being done by National Health Performance

Authority) and set guidelines, safety, quality and national clinical leadership

(being done by the Australian Commission on Safety and Quality Healthcare).

There are 123 geographically-based networks and 13 statewide networks

delivering specialised services. A total of 136 LHNs were established across

the country by first July 2012, all of them have governing councils (DoHA

2011a).

Evaluation

The creation of LHNs, in the most recent reforms, improved the data

collection and identified performance benchmarks and indicators to support

analysis. The performance benchmark achieved is related to a lower rate of a

resistant bacteria strain (MRSA). The indicators include waiting times for

elective surgery, emergency department care, health-care associated MRSA

(a resistant bacteria strain), unplanned hospital readmission rates; survival of

people diagnosed with notifiable cancers and rate of community follow-up

within first seven days of discharge from psychiatric admission.

Queensland health shows improvements. For example, the infection

benchmark and indicators such as shorter days in emergency departments

and shorter waits for elective surgery and specialist outpatient clinics have

been achieved.

Since 2005, in Queensland, there have been ongoing reforms aimed at

decentralising hospital administration. The changes included: clinician and

community involvement at the local level; devolving budgets to the local level;

setting performance agreements and monitoring them at the state level;

providing services required by all the hospitals (such as pathology and

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recruitment) at the state level; and supporting local service provision by

gathering and distributing data about services at national level.

It is possible to say that accountability and transparency of health services

has improved. Much of the transparency improvement is from better data

collection and reporting done by central bodies such as AIHW and the

National Health Performance Authority. And, Queensland Health‟s LHNs have

been active participants in collecting and reporting data.

In terms of hospital management in Australia, a decentralisation policy

occurred (DoHA 2011a). Some functions also seem to be placed on the

appropriate level of governance. For example, pathology services and

standard setting were placed as statewide and national services. On the other

hand, boundaries placed around LHNs seem to be contentious due to some

pressure to redefine the boundaries combined to Medicare Locals and Aged

Care Planning Regions with the local government reference (CHERE 2013).

CHAPTER FIVE – ANALYSIS OF DECENTRALISATION

There have been few comprehensive empirically-based evaluations of the

governance arrangements for hospitals and DGPs. Government reviews,

academic studies and surveys provide some insights into their impact.

However, these reviews do not identify which aspects for governance

arrangements were responsible for improving outcomes. These analyses are

difficult because of the interdependencies and dynamic nature of factors

affecting health services.

Part of the difficulty with evaluating governance arrangements stems from

the lack of agreement among academics over which governance features will

ensure improvement in health outcomes. This is highlighted by the inability to

agree on definitions for key governance arrangements such as

decentralisation.

Governance arrangements exist in a nuanced realm. There are

dependent on the values of the country where they are implemented which

are designed to encourage innovation may be regarded as promoting inequity

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in a different country. The method of implementing change may be just as

important to outcome as the change itself.

Governance arrangements may be described along a continuum, rather

than precise points. They are not an end itself, simply a means to an end. It is

also evident that there is no permanent solution with changes in design as

circumstances change.

The literature emphasizes:

regarded and desirable key features are more likely to occur under

particular governance arrangements and contexts;

some particular roles and responsibilities are better located at

certain points in the governance hierarchy.

The features consistently called for include:

clinician and community involvement at local levels;

devolving budgets to local level;

setting performance agreements and monitoring them

providing services required

supporting local service provisions by gathering and distributing

data about services at national level.

They also include accountability, efficiency, innovation, integration, co-

ordination, empowerment and responsiveness. There risks: duplication,

inefficiency, inequity, inability to maximise economies of scale and taking on

roles.

Factors which can enable good governance include data provision, role

clarity, agreed performance targets, adequate payment systems, regular

reporting and expertise-based boards rather the representative based-boards.

Barriers can include many existing bodies with undefined roles, inappropriate

geographical boundaries and inappropriate functions being selected for

decentralisation.

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