L11 The Bayleys Building, 36 Brandon Street, PO Box 10763 Wellington, New Zealand P + 64 4 499 1271 F + 64 4 499 4500 E asms@asms.org.nz W asms.org.nz

168393

Ian Powell

Executive Director

Association of Salaried Medical Specialists

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Thank you for the opportunity to address you again. As always, my comments are personal

observations, although in broad terms at least I believe they are consistent with the Association’s

view on the matters discussed. In this address, I would like to focus on the theme of what has

happened to the standard of health leadership in the health sector and do we have a Minister of

Health or a Minister of Airbrushing and Soundbytes. To avoid any ambiguity this latter point is a

rhetorical question.

By leadership I include the Minister of Health, Ministry of Health, Treasury and the DHBs at the

level of Chairs and Chief Executives. This dynamic should be seen in the context of the

abandonment of clinical leadership as a priority for Government health policy by the Minister of

Health through the repeated symbolic omission of it from his annual letter of expectations to

DHBs. The Ministry, in turn, has dropped clinical leadership for a more generalised and less

focussed form of leadership linked in to its mantra of ‘disruptive innovation’.

Further down, DHBs at the higher level have overall (there are exceptions) weakened their

commitment to clinical leadership suggesting that previously their adherence was more to do with

political expectations than genuine belief.

In summary, the dominant traits of our leadership culture are short-sightedness and neglect.

I’m usually interacting with members in at least one DHB once a week. Overwhelmingly I pick up

increasing concern (sometimes despair) over the difficulties in providing safe and accessible

quality care in such a retrenched environment. I also see increasing pressure on operational

management to cope and increasing signs of managerial dysfunction. I have a sense of pending

implosion if things continue as they are.

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If a survey revealed that half of the most specialised workforce in public hospitals was burnt out,

then one would have expected a responsible health leadership to be seriously concerned

especially if they already were aware of a high level of presenteeism (working while ill) among the

same workforce. One would have expected that health leaders would have put their minds to

engage with this workforce to remedy a situation that should be considered without question to

be unacceptable.

This is not a hypothetical musing. A survey of burnout among DHB-employed ASMS members

conducted by us last year and subsequently published in the BMJ Open revealed an alarming

burnout rate of 50%. The results were severe everywhere (including gender, age and size of DHB).

So, how did our health leadership respond. Both the Minister of Health and his Ministry reverted

to silent mode and similarly not a squeak from the Government’s advisory body, Health Workforce

New Zealand. DHB chief executive responses have been below the radar, somewhat empathetic

but overall underwhelming although in Waitemata on the initiative of the Chief Executive a joint

project with ASMS on specialist well-being is underway. It is hard to beat this overall indifferent

response to specialist burnout as an example of a leadership dereliction of duties.

For some time now ASMS has been messaging that entrenched specialist shortages in DHBs have

become the norm. In response, the leadership in health has turned a blind eye to what is in front

of their noses.

Our research, based on surveys of clinical leaders at several DHBs, confirms that official DHB data

on specialist vacancies is misleading and significantly understates the size of the problem. Official

vacancies are only those positions DHBs elect to advertise. We know that the advertised roles are

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far fewer than that what is needed to sustain safe accessible services delivered through patient

centred care. The high rates of presenteeism and burnout further illuminate the pressures that

the specialist workforce is under to maintain service provision.

It appears that if official vacancies were to be at a level consistent with actual shortages then they

should be increased by somewhere between a factor of three or four.

Compounding this situation is the far too common approach within DHBs of obstruction when we

endeavour to address this state of affairs. In our national collective agreement, we have an

agreed process called job sizing. This requires an objective assessment of the average hours

necessary to complete all duties and responsibilities (including after-hours and time for non-

clinical duties) which lead to an assessment of the necessary specialist staffing levels for a specific

service and can flow on to remuneration.

While our industrial officers have through job sizing achieved significant gains for members

through this process, too often this involves battling through managerial obstruction indifferent in

the exercise of duty of care to their staff.

Recently published ASMS research into specialist workforce intentions reveals that around a

quarter of respondents to another ASMS survey are either likely or extremely likely to leave the

DHB workforce over the next five years. This conclusion is consistent with the Ministry of Health’s

own internal modelling.

Much of this is attributable to the fact that like the rest of society the specialist workforce is aging

and many simply wish to retire. They have concluded that they are at an age where this is the

right decision and DHBs can do little about this, if anything. But they do need to plan for this.

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But, of great concern but at the same time presenting an opportunity to turn this around, job

dissatisfaction also looms as a significant factor behind this pending retention crisis. Excessive

workloads and the lack of a sufficient engagement culture in DHBs are significant contributors.

The main specific factors across DHBs are failure to recognise good work, hours of work, and

remuneration.

It is unacceptable that this extent of dissatisfaction exists among such a highly trained and

committed vocational workforce that makes such a difference in people’s lives, provides a highly

appreciated public good, and is so professionally rewarding. It is an indictment of DHB leadership

that this has occurred. It is both avoidable and fixable. A more responsible leadership culture

could significantly mitigate against this pending retention crisis.

In late 2014 the Government’ key health workforce advisory agency, Health Workforce New

Zealand, identified specialist shortages in DHBs as a key priority for it to address. One would have

thought that because of this unambiguous statement that over the past 30 months or so there

might have been some evidence of work to help turn this parlous around. Unfortunately, there

isn’t.

Instead, Health Workforce New Zealand appears intent, without an adequate problem definition,

on radically deconstructing our funding model for vocational training by seeking to replace our

current underfunded but professionally and exigency based system with a still underfunded but

highly bureaucratic, excessively transaction cost and expensive business-like edifice. The model

would be based on a phased contestability process.

Contrary to the principles of clinical engagement, a cabal of HWNZ and Ministry officials are

attempting to push this proposal through. Chief medical officers who should be at the centre of

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this piece of action are side-lined. The professions themselves are marginalised in this process to

the status of a frustrated bystander (as are DHBs from what they tell us privately). It is all about

bureaucratic capture and empire building. This has all the hallmarks of a messy fiasco with

significant unintended consequences.

Common sense may prevail but at the very least this has been an avoidable disruption from

addressing more serious issues.

Instead of addressing the vulnerability of its most highly trained and specialised workforce, the

Ministry of Health has migrated to a different planet with its focus on disruptive innovation.

Trothplight is an example of a word that makes no sense. It is an old English term from the 1600s

that as a noun meant engagement to be married or betrothal and to betroth as a verb. The only

thing I can link to is that those that make decisions that have ‘troth’ in them then find themselves

in a ‘plight’. If so, it is hardly an incentivising term for marriage. But, as a word that makes no

sense, it is an apt term to describe the Ministry of Health’s obsession with ‘disruptive innovation’.

At a theoretical level, disruptive innovation attempts to understand and analyse why some

commercial businesses have failed while others have thrived. The emphasis is on the disruptive

power of unanticipated technological developments (eg, digital photography versus Kodak, Uber

versus traditional taxi companies) that have transformed the way in which a business or service

has been delivered.

At the heart of disruptive innovation theoretically is a fundamental belief in market forces. When

applied to the ‘business of healthcare’, the view is that the health care industry simply need open

its doors to these ‘high-tech’ market forces to raise the quality of health care for everyone.

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Existing powers need to ‘get out of the way’ to let market forces ‘play’. Once this ‘natural process’

of disruption can proceed, it will be possible to build a new health system.

But disruptive innovation is not a new law of nature, health care is generally assumed to be

beyond for profit and not an economic ‘growth factory’. Further, given that people are not disk

drives, it should be questioned whether this theoretical premise is appropriate as a discourse to

frame a new direction for the New Zealand health system.

Part of the underpinning of disruptive innovation is the misleading assumption that technology is a

driver of innovation. Technology did not drive day surgery. It enabled it but what drove it was

clinical leadership and the development of new models of care.

Sometimes technology, because of the exciting things it can do, is seen as a cross between a magic

bullet and a fundamentalist religious discovery. Being seen as a driver rather than enabler of

change is a logical next step. A lesson from education is apt. Recently I read an interesting article

in the New York Review of Books that observed:

The ‘ed-tech’ market swells constantly, as more school systems hand out iPads or

virtual-reality goggles.…the One Laptop Per Child global initiative…. demonstrated no

gain in academic achievement.

Furthermore, the same article noted that an OECD study in 2016 concluded that “students who

use computers very frequently at school do a lot worse in most learning outcomes.”1

1 Bill McKibben, ‘Pause! We Can Go Back’, NYRB, 9-22 February 2017.

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Treasury’s release of papers about Canterbury District Health Board’s financial performance last

week appears to have been deliberately designed to intimidate and silence senior DHB officials

who have dared to question the adequacy of government funding.

The papers contained repeated criticisms of the performance of the acting chair, the chief

executive and appointed members of the board, and some border on threats to the positions of

these individuals (including the Chief Executive). But the papers lack factual evidence to

substantiate the criticisms.

Treasury itself acknowledged there is no ‘fact-based rebuttal of their arguments’. The criticisms

are based on only ‘high level’ data which takes little or no account of the ongoing impact of the

2011 earthquake and subsequent earthquakes. There is no acknowledgement that while the

formula for funding DHBs (Population Based Funding) is very comprehensive in what it provides

for, it is not designed to cope with the aftermath effects of natural disasters.

As the Canterbury DHB and senior medical staff have emphatically pointed out, the DHB has been

performing well, relative to other DHBs, in many service performance measures, despite the

difficult conditions. That is down to the hard work and skills of DHB management and clinical staff,

who have pulled together to keep services running extraordinarily well in the circumstances.

For Treasury officials to publicly vilify the DHB’s leadership for having the temerity to suggest the

DHB is being unfairly funded is shameful, especially when they lack evidence to the contrary.

It is also disturbing. Too often information is released under the Official Information Act (OIA) with

many sections blacked out to hide sensitive or embarrassing information, officially on the grounds

of protecting the flow of ‘free and frank’ opinion. These papers are no exception, with numerous

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redactions – except where the ‘free and frank opinion’ relates to criticisms of the DHB’s senior

officials. OIA releases of this nature will have been discussed with the Health Minister’s office.

The message from Government to all DHB senior officials is that if you dare to question the

adequacy of funding, regardless of the validity of your arguments, your heads could be on the

block. At a time when organisations are trying to address workplace bullying, we are witnessing

one of the two most powerful Government agencies (Treasury) trying to bully and intimidate a

DHB for demonstrating its commitment to responsibility for the staff it employs and the

population it serves.

Partly through ideology and partly through the short-sighted incentive of short term gain, the

Government is pressuring DHBs that require major capital works development to adopt a funding

arrangement like Private Public Partnerships in England that will worsen DHBs finances.

The first example is the small new $12 million ‘integrated family health centre’ in Westport. The

Government, through its misnamed partnership group, is pressuring West Coast DHB to adopt a

method of funding branded as ‘capital recycling’ that is a PPP by another name. A third party will

purchase the crown land, build the facility and then lease it back to the DHB

The practical effect is that the DHB is likely to pay between $750,000 to $1,000,000 annually for

about the next 34 years more than would it would have to under the normal way (Government

loans repaid at a lower interest rate). To rub it in this lease amount would be Consumer Price

Adjusted each year. In a word, it is a scam.

To make the Government’s books look good, the DHB’s financial position must worsen, thereby

increasing the likelihood of deficits. Imagine if this new system of funding continues with the

next and much bigger new outpatient facility as part of the post-earthquake Christchurch Hospital

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rebuild. This new facility could end up costing somewhere in the vicinity of $100 million which

would then involve Canterbury DHB incurring extra annual costs of up to say $10 million.

In fact, one does not have to imagine anything. It has already been acknowledged that ‘capital

recycling’ is on the cards and it was inappropriate involvement in it by the former Canterbury

Board Chair that led to his resignation (much to the embarrassment of Government).

It is not good for one’s health to contemplate the financial implications for the struggling Southern

DHB, with the extensive rebuild of the rundown through neglect of Dunedin Hospital now

reported to cost over one billion dollars.

As an aside, there is a $10,000 threshold for major capital works where Government approval is

required through its National Capital Committee. This has been unchanged for several years. In a

hospital the size of North Shore, for example, the rebuilding or redesign of a ward can exceed this

threshold. Given that the financial and compliance requirements that flow as a result are

disproportionate to the amount of money involved, this is excessive national micromanagement.

There is a compelling case to significant raise this threshold. But we appear not to have the level

of insight at a national leadership to go down this path.

Incidentally, while on the theme of funding major capital works in DHBs, the Government has

developed the misnomer of ‘partnership groups’. These are Government appointed bodies

supposedly involving partnership with the relevant DHB that make determinative decisions

(subject to Government approval).

The experience of the new Westport facility is instructive. These are Government controlled

bodies where the DHB input is heavily marginalised. The West Coast Board had a gun to its head

when it was forced to accept the more costly ‘capital recycling’ approach – either accept it or no

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new facility. The Board has put some caveats on its approval of what was forced upon it which

appears to have caused some irritation higher up but the point remains that this is partnership in

name only and an abuse of the plain meaning of words.

My understanding is that the ‘partnership group’ is functioning in a similar way in Canterbury

including an anticipation of being pushed down the road of ‘capital recycling’ for the new

outpatient building.

Attitudes towards deficits are a huge driver of behaviours by DHB leaders, at times appearing to

assume greater importance than standards of patient care even though this is never

acknowledged and always denied. The Treasury ‘Pearl Harbour’ attack on Canterbury DHB

illustrates this.

Health Minister Jonathan Coleman requires the Ministry of Health to closely monitor DHB financial

performance and plays hardball over whether a deficit can be approved or not. If the deficit is too

much, the DHB can be placed under ‘intensive monitoring’ and a crown agent added to the board.

High transaction cost compliance requirements bog DHBs down. Chief executives, chief finance

officers and other senior managers can understandably sweat and lose sleep when under this

pressure.

The most recent financial data available shows DHBs recording combined deficits of $50.6 million

for the 10 months to April 2017, $38.3 million worse than their plans. But as concerning as this

might be to Government, it is not something that should dominate the focus of the leadership of

the health sector.

Funding and its relationship with increasing costs is critical to the understanding of deficits.

Analyses of annual Vote Health budgets by the Council of Trade Unions and the ASMS have found

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successive funding shortfalls since 2009/10 which have accumulated to more than $1.4 billion,

most of which is carried by DHBs. The BERL economic forecasting agency has a higher estimate. Is

it any surprise that we have deficits? It is more surprising that DHBs, given this extent of

underfunding, don’t have far greater deficits.

But other Government actions also contribute to deficits. Pressuring DHBs undertaking major

capital works to do this through ‘capital recycling’ would add significantly to ongoing DHB annual

costs as discussed earlier.

The DHB with the greatest deficit is Canterbury, which is unsurprising given the ongoing impact of

the earthquake devastation discussed earlier. The Population Based Funding formula is not

designed to deal with unanticipated natural disasters that cause devastation which, among other

things, significantly disrupt the reliability of population data and leads to unplanned large scale

capital works requirements.

This has served to blow out Canterbury’s deficit. But, as with other rebuilds, the Government is

requiring that it repay it with the standard capital charge. As it happens the capital charge for the

earthquake rebuild to date roughly equates to Canterbury’s deficit.

There is a compelling argument that, given the exceptional nature of Canterbury’s circumstances,

the Government should waive the capital charge, thereby removing the deficit and the

consequential additional pressures on this victim of a natural disaster.

The Government also has investment options. It had the option of investing in the specialist

workforce capacity in DHBs. In 2009, ASMS and the DHBs jointly developed a document known as

the ‘Business Case’ which concluded that by improving the specialist workforce capacity (ie,

employ more numbers through more competitive terms and conditions of employment) to free up

more time for specialists to spend time on clinical systems improvements. This would include, for

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example, reducing clinical variation and adverse events. Through this approach, considerable

financial savings could be made while improving quality.

Unfortunately, through a negative attitude from then Health Minister Tony Ryall and lack of

backbone from chief executives, the DHBs reneged on the agreement. Thus, the opportunity was

lost; had the DHBs not lost their nerve, then arguably today’s deficits would have been avoided.

Government has lost another opportunity to reduce costs by its failure to learn from the

experience in Canterbury DHB of the clinician-led and developed health pathways between

community and hospital, known as the ‘Canterbury Initiative’ which has both improved the

effectiveness of patient care, constrained acute demand growth and saved considerable health

dollars.

So, while chief executives and their immediate circle may sweat over deficits, why should

specialists and other health professionals be subjected to this? Deficits are a consequence of

government decisions in areas where they have options.

Further, the pressures on specialists at the clinical and diagnostic front line, trying to provide

quality patient care in a financially retrenched health system, far exceeds the pressures that chief

executives come under. Unlike clinical workforce pressures, operational expenditure deficits do

not carry over to the next financial year.

Chief executives pay for these politically induced deficits with their sweaty brows. Specialists fund

for it with their health including burnout.

In broad terms, there are two ways in which DHBs can function. One is relational as evidenced by

Canterbury and also the South Island DHBs in the Health Benefits Ltd era. The other is contractual.

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The most immediate example of the latter is the leadership of the three Auckland DHBs who find

themselves under their joint Chair Lester Levy in a virtual state of war with primary care due to the

high transaction cost and contractual nature of their relationship and the leadership culture that

shapes it.

If we had effective leadership from Government in the health sector, this could have required

these DHBs to look at Canterbury’s much more effective relational approach to the community-

hospital relationship and adapt this to their own populations. Given Lester Levy’s close political

ties to Government this is unlikely; he is not nicknamed the Minister of Health for Auckland for

nothing.

Sitting behind this relational versus contractual approach is what is known as the funder-provider

split. This was the mechanism used to try to create a competitive market in our public health

system in the 1990s. The ‘funder’ would make allocative funding decisions to competing

‘providers’. The system failed because it was highly transactional, those in the ‘funder’ who made

allocative decisions had less expertise and were distant from practical reality than those in the

‘providers’, often poor allocative decisions were made, it undermined necessary collaboration

between ‘providers’, and it was very disruptive. Apart from that it worked well.

The structures that provided this split disappeared with our new non-competitive legislation

passed in 2000. But in many DHBs it continued internally with what were unhelpfully called

‘funder’ and ‘provider arms’. This did not lend itself to sensible integrated decision-making and

over time in many DHBs the practical functions of funding were merged into the rest of the DHB

rather than as a virtual separate entity within it.

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Lester Levy was appointed Chair of Waitemata DHB in early 2009. As it happened that DHB was

one of those still rooted in the old ‘funder arm’ system that many DHBs including Auckland and

Counties Manukau had shifted away from. When he became Chair of Auckland DHB its funding

roles were merged with Waitemata’s and ran along the same line as Waitemata’s. Now Counties

Manukau is also tucked under his armpit, all the indications are that this third DHB will be forced

back into the outmoded funder-provider split under a new ‘virtual structure’. The obvious risks of

this is the likelihood of poorer allocative decisions and higher transaction costs.

It is interesting that in 2012 the ‘funder-provider’ split was enshrined in legislation for England

through the mechanism of ‘clinical commissioning groups’. In the short space of time since then it

is generally recognised that this has failed. Instead NHS England is endeavouring to get around it

through new non-statutory formations such as ‘Sustainable Transformation Plans’ and

‘Accountable Care Services’. In that most unusual election in which the Conservative Party both

won and lost concurrently, the governing party indicated it was moving away from this split.

Currently we have a ballot under way over whether to accept a recommended settlement of our

multi-employer collective agreement with the 20 DHBs. I don’t want to comment of the specifics

of the proposed settlement here but there are some brief observations worthy of noting given

that the determining body of the DHBs’ approach in these negotiations was chief executives.

There were attempts to:

Remove the current rights to agreed hours of work and job sizing.

Loss of a week’s annual leave.

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Loss or abatement of clinical leadership allowances as a trade-off for an additional step on

the salary scale.

But if this was not enough then at the 11th hour they attempted to reduce consultation rights and

then were perplexed why we were angry and reported it back to members.

Both this behaviour and failing to comprehend why it would cause upset and anger is of itself a

powerful indictment of the calibre of collective chief executive leadership at a national level at

least.

I am not confident at all to predict the outcome of the election in September but I am confident

that regardless of who wins there will be a new health minister. So, what should a new minister

do to address this leadership malaise? In my view, this should include:

1. Full commitment to distributive clinical leadership in DHBs.

2. Require DHBs to take immediate steps to address specialist shortages and consequential

burnout by requiring them to correct capacity and hours of work in according with the

collective agreement obligations (job sizing).

3. Require DHBs to address unacceptable levels of specialist job dissatisfaction in order to

mitigate the effects of the pending retention loss.

4. Require Health Workforce New Zealand to get its act together by addressing specialist

workforce vulnerability, significantly improving its engagement with health unions and

professional bodies, and (if it has not already done so) dropping its contentious funding

proposal for vocational training.

5. Require the Ministry of Health to bin ‘disruptive innovation’.

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6. Require Treasury not to engage in intimidation or bullying of DHBs.

7. Require DHBs to develop relational rather than contractual approaches including in

respect of community and hospital services.

8. Reverse moves to reinstate or strengthen the funder-provider split within DHBs.

9. Objectively review the funding needs of Canterbury DHB in the context of the impact

and aftermath of natural disasters.

10. End ‘capital recycling’.

11. Either make ‘partnership groups’ for major capital works genuine partnerships with

DHBs or abandon them leave DHBs to have the lead role of recommending to

Government.

12. Require a more nuanced and sensitive approach to deficits.

13. Invest in the specialist workforce consistent with the principles of the joint ASMS-DHBs

‘Business Case’ (2009) in order to improve the quality of care and improve financial

performance.

14. Review DHBs approach to collective agreement negotiations to make it a more

constructive process that is understanding of and respectful towards affected

workforces.