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Cracking the governance code

As with many other parts of the Government’s health agenda, the formation of the much-lauded Hospital Groups has been much slower than initially anticipated. The plan was for the boards to be established on an administrative basis at the beginning of 2013, which would lead to the introduction of independent hospital trusts for all hospitals by December 2015. Given that many positions on Group boards still remain unfilled, including in some cases that of the CEO, the Government’s ultimate aim of creating a network of hospital trusts on a statutory basis seems a long way off.

One area that has received increased attention in recent months is how voluntary hospitals are to fit within the Group structure. The Government’s health strategy document, Future Health, published in 2012, states that the system of governance in Irish hospitals is unsatisfactory, with the distinction between the voluntary and statutory sectors creating an “uneven terrain for optimising patient care”. Future Health states that the best of the governance and autonomy currently found in the voluntary sector should be used to create a new governance system, through the Hospital Groups, that can give the benefits of increased independence and greater control of local clinical and managerial leaders to every hospital in Ireland. Yet what the creation of these Groups will mean for the autonomy of voluntary hospitals, which have their own boards of management, remains largely undefined.

The number of voluntary hospitals varies significantly between the Groups. For example, Saolta University Healthcare Group contains no voluntary hospitals, while six out of the 11 hospitals in the Ireland East Hospital Group are voluntary hospitals (Mater Hospital; St Vincent’s University Hospital; National Maternity Hospital; St Michael’s Hospital, Dun Laoghaire; Cappagh National Orthopaedic Hospital; and the Royal Victoria Eye and Ear Hospital), as are all of the three hospitals in the Children’s Hospital Group.

‘Simply setting up ad hoc hospital Groups as they have done, with chairpersons, that doesn’t solve it; that doesn’t tell you what it is you are asking the voluntary hospitals, the public statutory hospitals and the health board hospitals to sign up to’

The issue of the position of voluntary hospitals within the Groups is significant, given voluntary hospitals constitute a third of the acute hospitals in Ireland and receive a third of the funding provided to the sector. Unlike statutory hospitals, voluntary providers are legally required to comply with all aspects of company law and governance standards, given their legal construct, and some voluntary public hospitals are incorporated by charter or statute and are run by boards often appointed by the Minister for Health.

Their board members are usually selected from community or professional backgrounds and serve without pay.

These distinctions, which are further complicated where the hospitals have been historically run by a religious order, such as the Sisters of Mercy in the Mater Hospital, with their own particular ethos, makes the question of governing voluntary hospitals within the groups a challenging one.

Higgins report

Examining the 2013 Higgins report (The Establishment of Hospital Groups as a Transition to Independent Hospital Trusts), it is striking how little reference there is to voluntary hospitals.

According to the report, in a Hospital Group where there are pre-existing voluntary boards with statutory authority, it is critical that these boards fully support the decisions of the interim group board during the transition phase before the establishment of the trusts.

The report states that common membership on the boards of the voluntary hospital and the Group should be considered as a way of securing this support. Where a Hospital Group has one or more pre-existing hospital boards, the hospitals in the Group must work, through voluntary delegation of powers and common membership, to reach a position where the interim Group board is the effective decision-making body for all hospitals in the Group. Voluntary hospitals, given their current independent legal status, should retain their own management teams who will be responsible to the Group leadership team for delivery of their element of the Group business plan or memorandum of understanding (MoU).

‘Voluntary hospitals will be funded by Groups and are at the moment by Group Chief Executives through SLAs and that will continue to be the case unless and until anyone changes the 2004 Health Act’

However, as the Group management team begins to deliver Group corporate functions, it should be possible for voluntary hospital Group members to begin to reform their management teams within an overall agreed framework for the group.

Although designed as a template for the formation of the Hospital Groups, health policy expert Prof Ruth Barrington told the Medical Independent (MI) that the report does not provide any practical measure of how the hospital boards and the voluntary hospitals should interact.

“The fundamental problem I had when I read Higgins Report in particular is that I didn’t get any sense that anybody has thought through what the governance implications were for the voluntary hospitals of the proposed merger into hospital groups,” according to Prof Barrington.

“There is a bit of wishful thinking that somehow just by working together governance will emerge. To be very precise, the Higgins report says that it wants to keep the best of the governance of the voluntary hospitals and incorporate that into the Hospital Groups. But nowhere does it say how this is going to be done or what that means.”

Prof Barrington has previously stated that neither Future Health or the Higgins report mention in detail the legal basis upon which voluntary hospitals were established — by Royal Charter, under Acts of Parliament, as limited companies with charitable status, or Public Juridic Persons — and the fiduciary duties of the guardians, governors or directors arising from their legal obligations. Instead, they are described in basically the same way as HSE hospitals, which have no tradition of independent governance.

Prof Barrington contended that the slow progress in establishing the groups is the result of the lack of a clear, identifiable pathway, labelling the evolution of the groups as “the greatest piece of ad-hocery we have seen for a while in the health service”.

“If you are going to change your whole governance structure for the hospital, it seems to me that for anybody who is proposing to make that change, there is an obligation on them to describe what it is that is going to replace that,” she argued.

“Simply setting up ad hoc Hospital Groups as they have done, with chairpersons, that doesn’t solve it; that doesn’t tell you what it is you are asking the voluntary hospitals, the public statutory hospitals and the health board hospitals to sign up to. For some people, governance doesn’t matter, but it is pretty fundamental in terms of the evolution of the health service, in terms of accountability of public money, in terms of quality of care in our hospitals.

“Proper governance structures are necessary to ensure that there is great clarity around who is actually responsible and about who is actually delivering high-quality care within a budget of public funding.”

Relationship with the HSE 

It is easy to forget that the relationship between voluntary hospitals and the HSE is a recent one, which accounts for the tensions that often arise between the two groups. Former Master of the Rotunda Hospital Dr Sam Coulter Smith pointed out that, before the creation of the HSE, voluntary hospitals dealt primarily with the Department of Health, rather than the health boards.

“When the HSE came into existence, most of the people working within the HSE wouldn’t have had any great understanding of what the voluntary hospitals were, how they worked or what they stood for,” Dr Coulter Smith told MI.

“I think it has taken quite a bit of time for that to happen and there is still a bit of work to do there. But there is a growing understanding that the voluntary hospital is slightly different and they have their own governance structures and that has created complex reporting relationships over the years and it is something that is gradually working itself out.”

The HSE has attempted to exert greater control over voluntary hospitals in recent years, particularly following the controversies over bonus and top-up payments to executives and doctors in the sector.

‘It is very important for us as a voluntary hospital to maintain our governance structure, which has allowed us to develop and provide good governance within our own service, so what we would like to see is a similar model being replicated within the Group and the clinical director model that is being adopted by the Group is trying to do that’ 

Speaking at the inaugural meeting of the Voluntary Healthcare Forum, which was established to represent the interests of voluntary hospitals, last May, the Secretary General of the Department of Health Mr Jim Breslin acknowledged the importance of the sector to the Irish health service. However, he added that some of his most frustrating experiences over the years were with one or two voluntary hospitals. 

“They will be nameless but they were atypical in being stuck in an earlier era and found it very hard to adapt to wider developments,” he said.

In his speech, Mr Breslin said that the HSE and Hospital Group Chairs were working together to finalise a proposal to immediately establish the Group boards as committees of the Directorate with clear terms of reference.  Making the Groups committees of the HSE would ensure that these boards would be given a legal status within the Executive, providing clarity on the extent of authority delegated, relationships with the Group CEOs and, where relevant, the relationship with voluntary hospitals. This decision, however, was soon reversed, meaning that the establishment of legal clarity between hospitals and the Groups has been postponed.

 A spokesperson for the Department of Health stated to MI that upon further consideration, it was agreed to not proceed in this manner. A precise reason for the decision was not provided.

Prof Barrington said the Department is correct to abandon the original plan.

She pointed to the recent HIQA report into Midland Regional Hospital, Portlaoise. The report stated that the creation of the Hospital Groups should be expedited, finding serious governance deficiencies in the HSE-run hospital. 

“Does anybody hold the HSE up as a model of governance for our health service?” Prof Barrington commented.

“Does anybody defend it? Now, if the boards of the Hospital Groups become committees of the HSE, did anyone think this would have improved the governance of our hospital system?”

However, Prof Barrington acknowledged that there is a continuing lack of clarity about the remit of the Group boards, particularly in relation to voluntary hospitals.

The current position is that the Department, HSE and Hospital Group chairs are working together to finalise a proposal to establish the Group boards, initially on a non-statutory administrative basis, pending the establishment of hospital trusts. This transitional administrative arrangement will be documented by way of an MoU between the Department of Health, the HSE and the academic partners.

The accountability relationship between the Group CEO and the voluntary hospitals under their remit is governed exclusively through the service level agreements (SLAs) entered into between the HSE and each voluntary hospital.

SLAs, which have been signed between voluntary hospitals and the HSE since the establishment of the Executive, will continue to be the principal accountability agreement between the HSE Acute Hospital Division, Hospital Group CEOs and voluntary hospitals, according to the Department.

The difference now is that the SLAs are being signed-off by the Group CEO rather than centrally by the HSE.

Speaking to MI, the HSE’s National Director of Acute Hospitals Mr Liam Woods said: “Voluntary hospitals will be funded by Groups and are at the moment by Group Chief Executives through SLAs and that will continue to be the case unless and until anyone changes the 2004 Health Act, because that is the only basis we have. That is basically saying money we are giving to the voluntary entity and what service is it providing. Of course, our relationship is much deeper in terms of how we plan and deliver services because a lot of clinical leaders in key areas of care are in voluntary hospitals.”

Mr Woods confirmed that all voluntary hospitals signed their SLAs for 2015.

The Department also stated that the recent MoU concluded between the Coombe Hospital and Portlaoise Hospital points to the potential for collaboration between large voluntary hospitals and smaller statutory services in developing enhanced clinical networks and promoting service quality and sustainability.

The need for autonomy

At a recent meeting of the Joint Oireachtas Health Committee, Dr Coulter Smith warned that the voluntary sector could be at risk of “extinction” with the establishment of Hospital Groups.

He was more circumspect on the subject when speaking to MI, acknowledging that the Hospital Groups have a number of benefits, and the potential to address some of the problems that have plagued the health service in recent years. He cited the regional neonatal transport system as one example of an innovative service that is already operating at Group level. The Rotunda is also working to provide additional gynaecological facilities at Connolly Hospital, Blanchardstown, as a result of the significant waiting list for services, and new posts have been approved for the area.

””
Dr Sam Coulter Smith

Dr Coulter Smith said that the ability of the Groups to facilitate the rotation of NCHDs at regional level was another significant benefit. But, like Prof Barrington, Dr Coulter Smith said that adequate thought was not given to how voluntary hospitals would interact with the Groups when the plan to establish the new structures was announced.

He also contended that the problems in appointing a board for the RCSI Group and the lack of continuity at CEO level (the Group has already had two CEOs, and a third CEO is currently in place on an interim basis) have not helped in terms of establishing relations between hospitals, both voluntary and public, and the Group.

“We have to work out a way for the Rotunda to have an influence within the Group, maintaining its governance structure,” he stated.

“It is very important for us as a voluntary hospital to maintain our governance structure; that has allowed us to develop and provide good governance within our own service, so what we would like to see is a similar model being replicated within the Group and the clinical director model that is being adopted by the Group is trying to do that. But we want to work to try and overcome some of the issues that are there in relation to how a Rotunda Hospital employee can have a governance and oversight role within the Group setting.”

Dr Coulter Smith maintained that the Mastership system has worked well in the Rotunda for the past 200 years, allowing the service to develop and evolve and respond to the needs of patients and have good oversight in terms of clinical services. He argued that one danger of governance structures becoming detached from front-line services is that there could be too great a focus on financial targets at the expense of patient care, which is what occurred in some hospital trusts in the UK.

At the same time, he said that there are good models in the UK where voluntary hospitals work within the trust system, yet maintain a level of autonomy. Dr Coulter Smith stressed that voluntary hospitals are not independent entities, given their dependence on State funding, but he maintained it is vital that they retain freedom on how to use their resources.

“When we realised there was a need for infertility services 25/30 years ago, the Rotunda was able to set up a fertility unit and to respond to the need of parents,” according to Dr Coulter Smith.

“When it became apparent that we needed to develop foetal medicine services for the diagnosis and treatment of foetal anomalies, we were able to do that. We didn’t have to go cap-in-hand to the HSE to develop those services — as long as we were able to do these things within budget, we could do them.

“They are the sorts of advances in service that you can do without having to go to someone else for a decision that might have to go through multiple layers of bureaucracy. If it is the right thing to do, you can do it. That has been a really positive thing from the Rotunda’s point of view and from a patient’s point of view.

“That is why we are the ones who have the 20-week anomaly scans, when many of the HSE hospitals don’t have those services, because we have been able to develop them. We want to protect our ability to provide those things but at the same time we understand [and] we absolutely agree that the Rotunda, as the lead maternity and gynaecological provider within the region, we need to be able to assist and have an oversight role and advisory role in some of the other units within the Group.”

Maintaining this autonomy, while fitting into a new role within the Group, is a complex and sometimes unwieldy process.

Voluntary hospitals, including the Rotunda, were concerned about the additional controls sought by management in the 2015 SLA (see panel on p5).

The Rotunda is also currently working on an MoU with the RCSI Hospitals Group to cover its additional responsibilities and new position.

“It has been toing and froing between ourselves and the Group,” according to Dr Coulter Smith.

“We are generating it, we are looking at it, we are getting advice on it. We are trying to evolve a situation which satisfies the needs and desires of the Group, at Group executive level, but also respects the voluntary nature of the hospital, where our board is happy to sign-off on it.

“We have come a long way; I think we are getting close to something that is manageable but this doesn’t exist anywhere else. It is something we have had to start from scratch, respecting the arrangements that currently exist. It is complicated. It is important and something that shouldn’t be rushed.”

However, the Department of Health stressed to MI that, from its perspective, the SLAs will be the main method in which accountability between the voluntary hospitals and the Groups will be ensured. These layers of SLAs and MoUs are a result of the complexity of the governance arrangements that have arisen as a result of the new Groups, in the absence of legislation.

Voluntary Healthcare Forum

Dr Coulter Smith said that the establishment of the Voluntary Healthcare Forum has been a valuable resource for voluntary hospitals. The Forum was set-up with the intention of supporting the voluntary sector in the face of the threat to their autonomy posed by the restructuring of the health service. Already, it has helped voluntary hospitals in negotiating SLAs for 2015.

The Forum, which is chaired by Mr Alan Ashe, says it is supportive of the formation of the Hospital Groups, but states that it needs to be included in the development and roll-out of health system reforms. The Forum also seeks recognition that the distinctive contributions of voluntary providers will be developed in ongoing arrangements for health provision. According to Mr Ashe, one of the key objectives of the Forum is to push for the development of a formal national framework, which defines the strategic relationship between the voluntary acute sector and the State over the next 12 months. The governance issue is also being taken seriously at Group level.

For instance, a head of governance for the University of Limerick (UL) Hospitals Group and a comprehensive review of all governance structures and arrangements is planned for early in 2016 within the Group.

Minister for Health Leo Varadkar made positive remarks about voluntary hospitals at the November Institute of Chartered Accountants conference. “Voluntary hospitals have made a valuable contribution to the development of health services in Ireland down the years,” the Minister stated. “I value their ethos and history and where their financial affairs are in order, it is our intention to retain their boards and governance. Where earned, their autonomy will be expanded, provided they fulfil contracts or SLAs with their Hospital Group or trust.

“Voluntary hospitals may come together to lead their Hospital Groups. In others, new governance arrangements will be required at Group level. In some, they exist already. The Groups are in place and functioning; we need to drive on with the objective of providing the groups with a legislative base by 2018.”

Until this legislation is introduced, however, the position and future of voluntary hospitals within the Groups is difficult to predict.

Voluntary hospitals’ different funding model  

The signing of SLAs between the voluntary hospitals and the HSE generated much discussion within the sector in 2015. The arrangement is traditionally in two parts — part 1 is for five years and part 2 is signed each year, as it details service levels to be achieved in the year. Within the Hospital Group structure, the Group CEO now has delegated authority from the HSE to agree the SLA. A group of 25 voluntary hospitals engaged the advice of Mason Hayes Curran regarding the structure and significant changes to the SLA.

According to minutes of the Rotunda Hospital Board in February 2015, seen by MI, the new format of part 1 of the SLA was expanded to include more controls, which was a concern for voluntary sector. As previously reported in MI, concern was also expressed during the meeting regarding the establishment of a Group Employment Control Committee (ECC), whose remit was to consider and respond to staffing requirements for the RCSI Hospital Group.

The Chairman said these matters were discussed by the hospital’s Strategic Development Committee, which had sought legal opinion on the status of the hospital for other reasons.

“It is clear that the Rotunda Board cannot delegate responsibility to another agency,” according to the minutes.

A letter was written to the then RCSI Hospital Group CEO Mr Bill Maher to resolve the issue. Concern was also expressed during the meeting that the voluntary ‘ethos’ of the Rotunda could be lost or eroded, should the hospital be co-located with Connolly Hospital, but the board was reassured about the work being done to protect against such a scenario.

Regarding the 2015 SLA, significant amendments were suggested as a result of the Mason Hayes Curran review. It was also deemed necessary that significant amendments were necessary for Part 2 of the SLA also by hospital CEOs and Chairs.

At a Rotunda board meeting in April 2015, these changes were discussed, along with a letter from the HSE’s National Director of Acute Hospitals Mr Liam Woods concerning “direct line of report and accountability”. The reporting and accountability lines for the post of CEO/Master for both the Rotunda and the RCSI as outlined in the SLA were discussed.

In May, the Rotunda’s General Manager Ms Pauline Treanor recommended that Part 1 of the SLA be signed with the proviso that a covering letter stating this was being done in good faith, on the understanding that a forum to progress any difficulties in implementing the agreement was being established. It was agreed to sign part 2 of the SLA at a later board meeting.

Debtor days

One area where voluntary hospitals have the edge over HSE hospitals is in the collection of private health insurance charges. This fact is acknowledged in a recent report from the Comptroller and Auditor General (C&AG). According to the C&AG’s report on the management of private patient income in the health sector, HSE statutory hospitals are consistently slower in collecting patient-related debt than voluntary hospitals. At the end of 2014, total private patient debt outstanding equated to 212 debtor days for HSE statutory hospitals and 158 days for voluntary hospitals.

At the end of 2014, claims had been, on average, with consultants for 58 days — 68 days in HSE statutory hospitals and 47 days in voluntary hospitals.

Out of all the hospitals nationwide, Tallaght Hospital had the lowest number of debtor days, coming in at under 100 days.

Head of Finance at Tallaght Hospital, Mr Dermot Carter, told MI that a big incentive for voluntary hospitals is that they are allowed to keep the money they raise through private health insurance for themselves.

“Private health insurance for voluntary hospitals does not form part of the HSE contract, as they acknowledge in the report,” according to Mr Carter.

“It is not part of their income, but it is actually taken into account in the funding of voluntary hospitals by the HSE. So what they are saying to us is that whatever private health insurance income you generate, you can hold onto it. It is an opportunity for us to hold onto funding, to commit funding on a sustained basis within the hospital.”

Tallaght Hospital’s total private income in 2014 was €43 million, which Mr Carter said is a “substantial” part of the hospital’s budget. Although the HSE allows hospitals up to 15 days to bill a patient, Tallaght performs the task within three working days.

One aspect that separates Tallaght from HSE hospitals (though some other voluntary hospitals have a similar process) is that it contracts a ‘managed service’ for the collection of private insurance income.

“We have our own staff who work alongside the team of people, but the team of people who deal with it is a contracted group of people, a managed service that we have implemented in the hospital.”

Mr Carter said that this allows the hospital to focus on the collection of insurance in a way that otherwise would not prove possible.

“We set ourselves a target and we go after it,” according to Mr Carter. “That is the approach that we take.”

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