Communiqué

South Metropolitan Health Service Board This communiqué highlights key discussions of interest at the Board’s most recent meeting.

October 2016 Board Meeting The monthly South Metropolitan Health Service (SMHS) Board meeting was held on 24 October 2016 at Fiona Stanley Hospital, where the following reports and presentations were received and discussed:

• SMHS Chief Executive presented two patient experience outcomes. • SMHS Chief Executive report, which included information on Emergency Department

performance, inpatient bed demand, progress on the development of the SMHS strategic plan and a report on the recent UK Study Tour. The UK Study Tour summary report is attached.

• SMHS Executive Director, Corporate Services & Finance presented the September 2016 Finance Performance Report.

• The Board discussed the SMHS Futures Program which is focussed on achieving sustainable improvement in a range of areas including patient safety, quality of care and satisfaction; staff satisfaction and engagement; leadership and organisational culture; innovation; financial performance; and optimal efficiency and productivity.

Summary of Matters for Decision • A monthly Board meeting evaluation process was endorsed and implemented during the

meeting to ensure ongoing improvement of its corporate governance practices. • A Board Position Statement to remind staff of their obligations with regard to contact with

the media, for distribution when required, was agreed to and will be finalised by the Chair and SMHS CE. The SMHS Board believes integrity, good judgment and accountability are key factors to success and that open and respectful dialogue with one another creates a culture where all contribution is valued.

Summary of Matters for Noting • The Minutes and reports for the following Committee’s were noted: SMHS Board Interim

Audit and Risk Committee, Interim Finance Committee, Interim Safety and Quality Committee, Interim Engagement and Culture Committee and Interim Governance, Contracts and Planning Committee.

Next Meeting SMHS Board meetings are held at all major sites across SMHS. The next SMHS Board meeting will be held on 28 November 2016 at Fremantle Hospital. Rob McDonald Chair, South Metropolitan Board

1 November 2016

SMHS Board Communique, 24 October 2016 Page 2 of 2

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United Kingdom Study TourSeptember 2016

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ContentsIntroduction 3

Recommendations 5

1. Communicating the case for change 5

2. Revenue in vs cost out 5

3. Engaging the workforce 6

4. Leadership stability 6

5. Engaging external management consultants 7

6. Regulatory compliance 8

7. Program resourcing 8

8. Focus on clinical variation 9

9. Devolved management 9

Western Australia and NHS England 10

Common themes and points of difference 10

Devolved commissioning 10

Health and social care integration 10

System regulation 11

Mergers and acquisitions 12

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IntroductionThe WA health system is facing significant challenges in achieving financial sustainability while maintaining a strong and enduring focus on patient safety and the quality of health care – as the pre-eminent and defining hallmarks in service delivery in Western Australia.

Following a long period of significant growth in operational funding for the WA health system over the 10 year period since 2004 (when annual expenditure growth averaged 8%–9%), the State’s capacity to sustain substantial growth funding for health services has been significantly curtailed by its economic circumstances. It is noted that, in 2016/17, the State plans to spend $29.6 billion on general government services (including $8.6 billion – 29% – on health services). In addition the Government has to borrow $3.9 billion to finance this level of operating expenditure.

Put another way, forecast State revenue in 2016/17 can only fund 87% of its planned expenditure – the balance has to be borrowed, adding to State debt. The unsustainability of this situation is clear to all. At the same time, the relatively high cost of health care in Western Australia in comparison to other Australian states has come into increasingly sharp focus. Data from the Independent Hospital Pricing Authority (IHPA) identifies Western Australia as the highest cost State for health care delivery, with estimates that the average cost per episode of care is upwards of 15% higher than the national average. Factors influencing the high cost of health care include wage outcomes and the impact of unique locational factors reflecting Western Australia’s geography. System design factors and operational efficiency are also major contributing factors.

Against this background, the WA Government has introduced far-reaching and ambitious reform of the governance of the WA health system through devolved management involving the appointment of boards of governance for each of Western Australia’s five health services. Health service boards are expected to work with, and support, the executive teams within each health service to strengthen governance and improve system performance, including operational performance and financial sustainability.

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Programs of transformational change are being scoped to assist boards and executive teams to build financial sustainability while preserving and enhancing the safety and quality of health care in Western Australia. To inform the design of these programs in the South Metropolitan and North Metropolitan Health Services, a study tour was undertaken to the United Kingdom with the following specific objectives:

1. Exchange knowledge and experience that will result in the implementation of ideas and strategies on best practices in leadership and management in health service delivery;

2. Review hospitals that have undergone a major transformation and learn from them how they dealt with the challenges during that process;

3. Identify contemporary models of care and see how they actually work in practice, especially where things are done differently to Australia;

4. Speak with clinicians and management with turnaround experience in successful organisations to identify key success factors and risks;

5. Form relationships for ongoing support, advice and mentoring for WA Health staff as SMHS and NMHS progress their own programs.

The study program was undertaken by Dr Robyn Lawrence, Chief Executive SMHS; Mr Wayne Salvage, Chief Executive NMHS; Dr Steve Wright, A/Medical Co-director and Head of Department General Medicine, Fiona Stanley Hospital; and Dr Dave Mountain, ED Physician, Sir Charles Gairdner Hospital and Chair of the NMHS Clinical Advisory Committee. This report provides a summary of key findings and lessons learned from each of the site visits and discussions with senior NHS leaders, and recommendations to be taken into account in the design and implementation of transformational change programs in the WA health system.

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Recommendations1. Communicating the case for change

RationaleA sustainable program of change focused on supporting clinicians to deliver safe and effective care while improving financial sustainability must be led by a strong, consistent and engaging narrative at all levels. Assurance that clinical safety and quality will remain the overarching priority as clinicians become more effectively engaged in the business of managing health care delivery is critical.

RecommendationThat a Communications Plan be developed to support transformational change initiatives in Health, incorporating a set of key messages for Government, the Department of Health, health service boards and service leaders. This must provide a coherent narrative around the case for change using language that is direct and readily communicated to the Health workforce.

2. Revenue in vs cost out

RationaleWhile Western Australia retains a cap on purchased hospital activity, the capacity of individual health services to become more financially sustainable by delivering more activity from the same cost base is limited. Nevertheless, over a period of 3-5 years, budgeted growth in activity can have an impact if increased activity can be delivered within the same (or lower) cost base.

RecommendationSustainable cost improvement in the WA health system should combine measurable cost improvement initiatives and recognise the contribution of activity growth to overall financial sustainability.

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3. Engaging the workforce

RationaleAny program focused on medium to long term improvements in financial sustainability must be based on strong, enduring, and consistent engagement of the health workforce, in particular the clinical workforce. Such engagement should be characterised by effective facilitation, liaison, communication and partnership. It should seek to build a culture in which everyone in the Health workforce is engaged in the business of managing health care delivery on the basis that such engagement is ultimately beneficial for patients.

RecommendationThat a clear strategy for workforce engagement, focused primarily on engagement of the clinical workforce, be implemented as part of the change program. Elements of the strategy must include:

� Early engagement of clinicians in the development of solutions and service model improvements.

� Mechanisms to involve clinicians in reviewing proposals for cost improvement to provide assurance that schemes are not implemented if there is a significant risk of adverse impact on the safety and quality of care provided to patients;

� Consideration should be given to senior clinical leadership (separate to operational leadership) within the program structure;

� Provision of tools and information in user friendly formats to enable clinicians to become more effective partners in the business of managing health care delivery;

� Programs to build understanding and awareness of health system financing, in particular the way in which budgets are determined and allocated;

� Identification of early opportunities for quick wins, to build trust and cement a partnership based approach;

� Skills training for Clinical Directors and other clinical leaders to lead initiatives as part of the overall program.

4. Leadership stability

RationaleIt is evident that programs involving major transformational change in the health sector require strong leadership and a drive at all levels of the organisation, but especially at board and executive levels.

Those NHS Trusts with established programs of cost improvement and higher levels of performance across all parameters tend to be characterised by relative stability in executive leadership, with chief executives in post for 3 years or more. This is matched with expectation of accountability and performance of the individuals. Likewise stability in organisational arrangements (board governance and membership, configuration of hospitals and health services) are important enablers of organisational change and performance.

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RecommendationThat a premium be placed on stability in organisational arrangements and executive leadership at health service levels as critical enablers of organisational change and performance.

5. Engaging external management consultants

RationaleAll NHS trusts visited had engaged consultants to assist them in developing and implementing financial recovery/cost sustainability programs. The general observation was made that the ability of consulting firms to provide flex capacity, analytical expertise, and program and project management discipline were necessary, notwithstanding the fact that these are expensive resources and there is scepticism, particularly, among clinicians, about the role and value add of consultants. Innovative ways of engaging consultants were explored and witnessed, including structuring engagement on a payment by results basis, embedding consulting staff in hospital project teams for time limited periods, and having clear contractual requirements in relation to knowledge and skills transfer to NHS staff.

RecommendationWhen engaging consultants to assist with sustainable change programs, consideration should be given to the following:

� A phased approach to engagement. There may be merit in separate engagements (not necessarily with the same firm) for a diagnostic phase followed by a program design and implementation phase;

� The option of structuring the implementation phase of any engagement on the basis of payment by results should be considered. Under this arrangement, fees paid to consulting firms are determined usually after the engagement has ended on the basis of measureable cost improvement facilitated and achieved by the engagement;

� Careful consideration should be given at the outset to clarifying the specific objectives of any engagement, and the respective roles and responsibilities of the health service and consultants in any engagement. The brief needs to be clear, and the health service should position itself upfront to be able to exert maximum control over the activities of the consultancy and the deployment of resources;

� The consultancy should be tasked with delivering a standardised and repeatable program of activities that can be applied (without consultancy support) in a range of situations;

� Knowledge and skills transfer must be incorporated into any engagement with the clear expectation that, over a clearly stipulated period of time, health service staff and resources should replace consultancy support.

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6. Regulatory compliance

RationaleThe review team observed that much executive and health service attention is directed towards meeting the requirements of the system’s regulators, principally NHS Improvement and the Care Quality Commission.

NHS commentators observed that, as financial pressure on NHS trusts has increased, the regulatory burden has also increased and frustration was expressed that regulatory intervention amounted to micro-management with disproportionate effort to tangible benefit.

It is noted that the approach to performance management in the WA health system is evolving with the introduction of board governance of health services, with the underlying principle being that intervention should be limited to those situations where failure, or potential of failure, in achieving agreed performance expectations is evidenced.

RecommendationThe current emphasis in Western Australia on defining the performance relationship between health services and the Director General of the Department of Health on the basis of a relatively small number of strategic performance indicators be maintained, and the risks of developing an overly burdensome regulatory environment and implications for innovation be noted.

7. Program resourcing

Rationale

Programs of transformational change require dedicated resourcing, particularly in the early stages. The ability to marshal resources to implement a clear program structure with the required level of program and project support for individual initiatives requires investment.

RecommendationThat a Project Initiation Document (PID) be developed as a guide to investment of resources to support transformational change programs in Western Australia. The PID should:

� Define program governance, roles and responsibilities, using an agreed project management methodology;

� Identify work streams, and a leadership model for each; � Specify the specific role, project scope, accountability and performance expectations

of any consultancy support required; � Identify technical skills required in program and project management and analytical

support (which may be sourced initially via a consultancy) � Ensure adequate resourcing for clinical leadership and engagement.

PIDs should be endorsed by the relevant health service board.

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8. Focus on clinical variation

RationaleA key area of focus in most change programs involved a high degree of attention being paid to tackling clinical variation in care delivery, resulting from lack of standardisation in models of care across the same or similar service lines. It was noted that timely access by clinicians to data indicating variation in clinical performance linked to model of care differences is a critical enabler of clinical engagement and results in demonstrable reduction in care variation.

RecommendationA process for clinical engagement in defining standardised care pathways for high volume and/or cost procedures needs to be adopted, and implementation supported through the roll out of data systems and clinically relevant business intelligence.

9. Devolved management

RationaleMost units/departments that had achieved both major financial transformations, sustainable change and clinical engagement had over time allowed greater autonomy at unit level management. They encouraged flexible approaches, innovative change and a willingness to experiment with new models of care or governance. The sine qua non for these changes were that the added decision making was supported by good information and data, strong accountability and early interventions for breakouts in performance and support from senior management to facilitate, protect and nurture new leaders and innovation. Unit level management should have strong combinations of good business/ financial management and clinical leadership

RecommendationThat an objective of transformation programs in WA should be on achieving devolved responsibility for operational management decisions, resource management and accountability for important outcomes (financial and clinical), to unit management within hospitals. Such devolution must be supported by reliable timely business intelligence, strong senior management support, and clear, mutually agreed measures of accountability and a performance management framework that allows for the monitoring of outcomes and intervention (including the removal of delegated authority where required).

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Western Australia and NHS EnglandCommon themes and points of differenceWhile in many respects the health systems in WA and NHS England are very different, there were also some common themes and challenges brought out in discussions with NHS leaders.

Devolved commissioningA key difference between WA and NHS England relates to the purchasing/commissioning function which is devolved in England to local commissioning organisations. Typically a single NHS Trust will provide commissioned services under contract to 2 or 3 local commissioning groups. Until relatively recently, activity commissioned in this way was uncapped – this meant that NHS Trusts could balance cost improvement measures with the option to “trade out” of financial difficulties. Trading out essentially involves generating more revenue by delivering more activity while maintaining the same cost base, on the understanding that commissioning groups will pay. The ability to trade out has been curtailed by the imposition of funding caps at commissioning level.

Health and social care integrationLike WA, the NHS in England went through a period of high expenditure growth in the 2000s under the Blair Government, which was ended abruptly by the 2008 Global Financial Crisis. This period of growth enabled the system to expand without directly addressing underlying issues, among them the lack of integration between services provided by the NHS and the social care sector which, in the UK context, is primarily a local government responsibility. The absence of a robust workforce planning framework is another consequence of a system kept going by unsustainable expenditure growth, and is evidenced today by high reliance on agency staff and high staffing vacancies in the majority of the trusts visited.

The NHS – social care divide has been further exacerbated by differential budget treatment in the period since 2008; while the NHS has had the benefit of moderate annual expense growth over the period, the social care sector has contracted in the face of funding reductions applied to local government – a figure of 40% reduction was quoted by a number of commentators. The consequences for taking a “system” view to care planning and the timely flow of patients through acute hospitals continues to be highly problematic and a major challenge.

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The UK Government has recognised that strategic alignment between the NHS and the social care sector is critical for a sustainable future. To that end England has been divided into 44 areas in respect of which Sustainability and Transformation Plans (STPs) are being prepared. The implementation model differs between STP areas – in some areas a NHS Trust CE is the interagency lead, with responsibility for pulling the plan together with support and input from commissioning groups and the social care sector. In other cases, the lead might be drawn from a local commissioning group or local government. The STPs are intended to provide a framework for future integration activities. Criticisms were directed at the planning assumptions that underpinned their development and delivery – the associated financial plan uses a “forced balance” methodology, meaning that STPs cannot be used to signal service shortcomings that will, for example, prevent timely transfers of patients from the acute sector because of the need to expand social care.

The situation in Manchester is particularly noteworthy as regards NHS-social care integration.

The UK Government is committed to significant devolution of responsibility for health and social care services to the Greater Manchester region (the so-called “Devo Manc” program). Under Devo Manc, the eight local governments in the Greater Manchester area have formed a voluntary association through a Greater Manchester Combined Authority (GMCA), headed by an elected Mayor to be appointed next year.

Led by the GMCA, work is underway to align health and social care priorities for the £6 billion invested in the NHS and social care sectors in Greater Manchester that will be devolved. The planning work involves the eight local authorities together with 27 NHS organisations (10 acute hospital trusts and local commissioning groups, and 2000+ points of primary care contact (GPs, pharmacies etc)). The option of pooling NHS and social care funding at the locality level, aligned to each of Greater Manchester’s local governments, is being actively considered.

System regulationThe impression is that the NHS and its senior leadership operate under a regulatory system and compliance regime which is overly intrusive and burdensome. As one senior NHS commentator put it, Trust Boards, Chief Executives and their executive teams are expected to lead programs of transformational change for highly complex, rapidly evolving organisations. In reality, much of their focus is on managing regulatory compliance almost to the point of paralysis.

The main regulators are NHS Improvement (successor body to Monitor) and the Care Quality Commission – the latter providing oversight and statutory based regulation of the health, mental health and social care sectors.

In terms of productivity and performance improvement, NHS Improvement is the main regulator. In response to increased financial pressure, NHS Improvement established a voluntary Financial Improvement Program which partners external consultants with NHS Trusts to help them identify and deliver efficiency savings. In the first wave 16 trusts – a number of which were included in the study program – were selected out of 80 volunteers.

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Mergers and acquisitionsStructurally, a number of NHS Trusts (Royal Free, Frimley Park, Lewisham, Nottingham) have acquired, or are in the process of acquiring, additional hospital sites, while Colchester hospital is in the process of being aligned to the Ipswich NHS Trust. These mergers and acquisitions are primarily driven by the need to deal with poorly performing trusts by taking them into larger and more successful organisations. This is also seen as a way of increasing scale, so that corporate overheads and cost structures can be shared across larger service volumes, and hence drive productivity and efficiency. Change management where mergers and acquisitions occur generally emphasises the need to create a strong new identity across merged services – a One Service philosophy. It is worth noting that unlike WA, the NHS have not centralised any corporate or clinical support services (e.g. Pathology) and this is now being considered in association with many of these mergers.

A further advantage for acquiring trusts is that mergers tend to be associated with access to capital for redevelopment and transition funding for up to 5 years provided by Government.

This document can be made available in alternative formats on request.

Compiled: South Metropolitan Health Service and North Metropolitan Health Service, October 2016 © State of Western Australia, South Metropolitan Health Service 2016 SM 0000029