Opinion The hospital governance challenge

With the Rudd Government moving closer to its proposed health reform, John Mero flags some of the governance issues and challenges a new breed of hospital boards is likely to encounter.

Hospitals are good at many things, including crisis management, treating large volumes of people and caring for individuals who are often vulnerable. Many have quality services and specialisations. They also employ some of the most dedicated and passionate people in the Australian economy. These qualities, however, are often not supported by the organisations for which they work.

No matter what structural reforms are put in place, there will be complex organisational governance issues awaiting future boards that will determine whether hospital-based health outcomes improve or not. The main governance issue involves how future boards will create the conditions for the clinical and organisational excellence that has eluded the existing system. This will require directors who are able to effect real improvements in the complex organisational environments that are hospitals.

To start with, hospitals are seldom integrated organisations and this can be a major barrier to clinical and organisational improvement. Instead, many hospitals are a series of units with highly specialised workforces, which develop distinct cultures and professional alignments. This lack of integration results in performance issues, including compartmentalised patient care. In effect, hospitals can be many entities in one. Wrapped around these entities is often an ineffective administration.

The nature of hospitals – for example, specialised work groups – can also result in administration and clinical areas acting separately. This often results in a broken chain of command and weak leadership. For example, many clinicians do the business of health with scant regard to administrators. It is easy to understand why – clinicians tend to stay employed in or associated with hospitals for long periods while administrators tend to come and go.

The degree of clinical capture varies but can, in extreme cases, result in clinicians taking it upon themselves to defend the organisation. Few things unite rival clinical groups like a reforming administrator who has not engaged the clinical workforce.

In some cases, the connection between administration and clinical groups becomes a “thin thread”. The administration deals with external stakeholders and clinicians deal with patients and related matters. Often in these situations, cultures of poor accountability and blame develop, which further interferes with the work of health delivery. Of course, there are exceptions where management stays long enough to build empathy with, and be of value to, clinicians while holding them accountable for their part of the effort at organisational improvement. The successful engagement of all clinicians is one of the most important aspects of health improvement.

A symptom of a distortion in the relationship between administration and the clinical workforce can be found in the composition of the executive. The typical hospital executive will have administrative areas represented at the executive level – for example, IT, finance, communication, strategy, systems improvement and human-resource management – and perhaps two people representing core business, for example, a medical director and head of nursing. This design risks disengagement from the purpose of the organisation.

The notion that we are in the business of health and not administration should drive the design of every hospital executive.

The weak organisational systems found in many hospitals further exasperate good performers every day. For example, useful information is difficult to access and financial management is limited to cumbersome expenditure checks without more important analysis. The organisational structure (if there is one) will not inform staff as to whom they report on what and weak systems cost precious time and energy. For example, the entire senior nursing staff of a large tertiary teaching research hospital estimated that 30 per cent of a typical nurse ward manager’s time is taken up with matters arising from poor internal systems. (Could any company survive with such inefficiency?)

The presence of weak systems is widely recognised and multiple efforts are made to address this, but often by great starters and poor finishers, resulting in broken promises and wasted resources. If you are used to governing in other sectors, this is where you may be able to add value – that is, how will directors support hospital management to prioritise complex and competing needs and complete projects that deliver improved results on time and within budget?

History tells us Prime Minister Kevin Rudd’s notion of clinical people being involved in governance has proven less than stellar. In any event, the practice of having staff on not-for-profit boards has largely ceased due to employees not being compensated for the liability of being a director, conflicts of interests, difficulties maintaining confidentiality or of owing their primary allegiance to the organisation. For example, loyalty to colleagues is greater than deference to corporate norms. If health networks are compelled to have clinical staff, then get them from outside your employee base. Some hospitals do have clinical champions who have the respect of peers across professional boundaries and who understand organisational requirements, but are there enough to go around? Also look for retired clinical leaders with fewer conflicts and loyalties to manage.

There are also inherent tensions in the clinical workforce and medical, nurse and allied health staff are in many instances still learning about leadership, change management and teamwork. They also often lack the ability to manage conflict. This makes the concept of representation difficult. In some hospitals there are also “war lords”. These are medical staff who are driven to achieve, who crusade to develop their own departments and are often effective at building impressive departments at the expense of others. War lords do not make good governors.

One irony of hospitals is that the innovation that continues in many clinical areas is not reflected in innovation at the organisational level. Forming a network of local health providers offers no certainty of stimulating organisational innovation and the task of overcoming disincentives to innovation awaits every board. These disincentives include some government departments that dictate instead of allowing local solutions to local challenges. Many, if not all, hospitals could find some way of doing something better, but reform without ownership seldom produces better results. Being able to say it is in our hands and up to us may offer an opportunity that no board or clinical group wants to miss.

However, organisational change in hospitals is hard work, in part because of the above factors, and because the culture of a hospital is such that externally required change often bounces off. For change to occur, it has to grow from within. This requires leaders who can sow seeds, support growth, are capable of harvesting results and can plant good practice.

Rudd’s proposed reforms suggest states and territories will remain involved as contract managers for the Federal Government’s funding and policy framework. This means the players that delivered the current poor state of healthcare governance retain a role in the new model. How this will reduce bureaucracy, improve accountability and empower local governance is unclear – especially given the tendency of government and the public service to micro-manage in response to the latest crisis. While this tendency to interfere appears less in Victoria, perhaps due to legislation that defines the role of the hospital board, it still occurs, implying an inherent tendency by the public service to want to be close to the action instead of concentrating on its role as a purchaser and monitor that identifies need and plans long-term resource deployment.

Therefore, if boards are to govern and achieve the integration, systems, innovation and change needed to improve acute health results, they must be given a clear legal mandate that quarantines the role by defining the duties, powers and functions of directors. Otherwise, boards will struggle to meet their responsibility to control and direct the organisation in the long-term best interests of patients and governments will fail to hold boards accountable.

From a business design point of view, the best reform that could occur for hospitals is to resource and reform primary healthcare to improve health in general, resulting in lower demand on hospitals. This raises the interesting possibility of public hospitals having to move from the crisis model with too many patients to having to sell their reputation to compete for custom. Now that is a reform Australia would like to see.