Health Policy Monitor
Skip Navigation

Taskforce report on health system restructuring

Country: 
New Zealand
Partner Institute: 
The University of Auckland
Survey no: 
(14) 2009
Author(s): 
Tim Tenbensel, CHSRP
Health Policy Issues: 
System Organisation/ Integration, Political Context, Quality Improvement, Access
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no no no no

Abstract

In January 2009 a Ministerial Review Group (MRG) appointed by the incoming Minister of Health was asked to report on reform options for New Zealand's publicly funded health system. The MRG report was publicly released in August 2009. Its major recommendation was a partial restructuring of the health system. New national agencies would be responsible for service planning and support services, functions previously undertaken by District Health Boards and the Ministry of Health.

Purpose of health policy or idea

The Ministerial Review Group (MRG) report is a broad-ranging review which addresses issues such as responsibility for service planning, promoting new models of care, improving patient safety and quality of care, and promoting clinical and management partnerships.

The MRG was appointed by an incoming government to provide high-level advice from across the health sector regarding health system reform. The terms of reference provided by the Minister of Health were: to focus on improved performance through enhanced clinical leadership; to review infrastucture capacity and planning; and to move resources from 'low quality spending' to 'frontline' services. In its report, the MRG came up with two broad types of recommendations: 'those aimed at encouraging changes in culture and processes' (e.g. around clinical leadership) and 'changes in structure aimed at reducing waste and bureaucracy, improving safety and quality, and enhancing clinical and financial viability' (Ministerial Review Group Report: 4).

The parts of the report that have attracted the most interest and comment are the proposals to restructure responsibility for service planning and monitoring of DHBs.

Main points

Main objectives

The key recommendations for structural reform from the MRG report can be summarised as follows:

1) Transferring the planning and funding of those services that are truly national services from District Health Boards (DHBs) and the Ministry of Health to an organisation provisionally called the National Heath Board (NHB). This organisation would also take on the role of monitoring DHBs which the Ministry of Health currently undertakes. The NHB would also consolidate strategic planning and funding future capacity (IT, facilities and workforce).

2) Requiring DHBs to plan on a regional basis, and establish the governance and support arrangements to deliver those plans.

3) Creating a new government agency to provide shared services to DHBs and reduce the cost of common 'back office' functions (e.g. recruitment).

4) Strengthening the National Health Committee (NHC), so that it focuses on its original role of assessing the appropriateness and cost-effectiveness of new services, and progressively reassessing existing services.

5) Replacing the Quality Improvement Committee (QIC) with an independent national quality agency and reducing by two thirds the overall number of health committees.

Type of incentives

The structural recommendations may not require specific incentives, although they may require some amendment of legislation. There are few institutional impediments to government if it opts to make these changes. Nevertheless, implementation of structural change is always somewhat dependent on the co-operation of restructured agencies and their staff. While no incentives are necessary to ensure compliance, smooth structural change would require well functioning relationships between personnel of the NHB, Ministry and DHBs.

Groups affected

Ministry of Health, District Health Boards, Health service providers

 Search help

Characteristics of this policy

Degree of Innovation traditional rather traditional innovative
Degree of Controversy consensual controversial highly controversial
Structural or Systemic Impact marginal neutral fundamental
Public Visibility very low high very high
Transferability strongly system-dependent system-dependent system-neutral

The restructuring proposal is both highly visible and rather controversial as health restructuring is a salient electoral issue. While some elements of the restructuring proposal are novel, the proposed structure resembles past structures in some key respects.

Political and economic background

Governments in New Zealand have a comparatively high capacity to reshape the structure of the health system. This is primarily due to New Zealand being a tax-funded system in which government agencies at the national and local level are responsible for allocating nearly 80% of all money spent on health. New Zealand's political system also presents very few institutional roadblocks to structural reform (Ashton & Tenbensel 2009). Between the late 1980s and 2001, New Zealand's health system was restructured four times, each initiated after a change of government. Two of these restructures (1993 and 2001) were extremely wide-ranging and caused significant disruption in the short term. In both cases, questions have been raised about the degree to which structural changes have facilitated health system improvement (Ashton & Tenbensel 2009).

These oscillations reflected fundamentally different structures of the health system preferred by the two major political parties, Labour (center-left) and National (center-right). National (the dominant government party from 1990 to 1999, and since 2008) has consistently preferred a structure of the publicly funded health system which emphasises economies of scale, organisations designed around core functions (policy, purchasing, provision) and corporate governance. This contrasts with the longstanding preference of the Labour Party (in government from 1999 to 2008) for more decentralised responsibility for planning and funding services, combining functions within organisations and democratic models of governance.

However, after 2001, health sector and public fatigue with restructuring led the then Opposition National Party to rule out restructuring the health system if elected. Nevertheless, over the past few years, frustration has been growing across the health sector and the political spectrum about the effects of decentralised responsibility.

Towards the end of its term in government, the last Labour Minister of Health, David Cunliffe, showed increasing impatience with the slow and patchy pace of change in the health sector and supported stronger mechanisms to ensure inter-DHB collaboration in planning and service delivery.

Significantly, the new Minister of Health, Tony Ryall, chose as chair of the MRG Murray Horn, a former head of Treasury and longtime advocate of functionally separate organisations in the public sector. Other MRG members included the Director General of the Ministry of Health, a DHB chief executive, a DHB chief medical officer, primary care representatives and two public health clinicians with governance experience.

So far there has been criticism of the restructuring proposal from opposition political parties, unions and public health advocates. It remains to be seen whether this proposal, if adopted, would prompt a public backlash against the government for breaking election promises. 

Change of government

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no no no no

Origins of health policy idea

The report is further indication of a shift in health policy emphasis from an 'upstream' preventative and population health agenda to a greater focus on issues of service delivery and integration. Some key themes, such as clinician engagement in decision-making, and explicit processes of priority-setting have re-emerged on the policy agenda, having had a low profile for the past decade. The structural reform proposals bears some resemblance to the Health Funding Authority (HFA) that existed between 1997 and 2000 and which was responsible for purchasing all publicly funded health services. However, proposed NHB responsibilities are more limited than those of the HFA.

Initiators of idea/main actors

  • Government: There is some considerable support within government health sector agencies for some realignment of responsibilities, tempered with concern about the practical implications of implementing structural change.
  • Providers
  • Payers
  • Civil Society
  • Private Sector or Industry
  • Opinion Leaders
  • Political Parties

Approach of idea

The approach of the idea is described as:
renewed: There are some similarities between the proposed NHB and the Health Funding Authority of the late 1990s.

Stakeholder positions

There has been  a substantial and wide-ranging response from across the health sector to the MRG report. 170 responses were received by the Minister of Health. Many key stakeholders have cautiously supported the report's recommendations, and the specific recommendations around health sector structuring. However there is a lack of consensus around many of the details, with some groups being strongly opposed to some aspects of the report.

Government agencies affected by the restructure have been broadly supportive. The joint submission by the 21 District Health Boards expressed 'strong support with refinements'. The refinements suggested are a requirement that the NHB works collaboratively with DHBs, and that the NHB not be based on the Crown Health Funding Agency.

Groups representing medical professions differed in their reactions. The New Zealand Medical Association broadly supports the proposed structural changes. However, the Association of Salaried Medical Specialists (ASMS) has been the most visible and vocal opponent of the NHB proposal on the grounds that the NHB would not be democratically accountable, and that the proposed functions should be undertaken by the Ministry of Health.

Non-government provider organisations support the creation of an NHB because it will simplify contractual arrangements for those organisations operating at a national or regional level.

Organisations with a public health focus are worried about the shift of attention away from health inequalities and public health, and see the proposed restructuring as a distraction. The main public sector union opposes the creation of the NHB for similar reasons to the ASMS.

Opposition political parties (Labour and the Greens) have been critical of the proposed restructuring. However, the National Party would most likely be supported by some or all of its support parties (ACT, United Future and the Maori Party) although none of these parties have made their position on restructuring public as yet.

Actors and positions

Description of actors and their positions
Government
Crown Health Funding Agencyvery supportivevery supportive strongly opposed
National Health Committeevery supportivesupportive strongly opposed
Providers
Maori providersvery supportivesupportive strongly opposed
Payers
District Health Boardsvery supportivesupportive strongly opposed
Civil Society
NGO Forumvery supportivesupportive strongly opposed
Public Health Associationvery supportiveopposed strongly opposed
Public Sector Associationvery supportiveopposed strongly opposed
Private Sector or Industry
Information Technology Industryvery supportivevery supportive strongly opposed
Opinion Leaders
Independent Practitioners Association Councilvery supportivevery supportive strongly opposed
Association of Salaried Medical Specialistsvery supportiveopposed strongly opposed
Royal New Zealand College of General Practitionersvery supportivesupportive strongly opposed
New Zealand Nurses Organisationsvery supportiveopposed strongly opposed
Independent Practitioners Association Councilvery supportivevery supportive strongly opposed
Political Parties
Labour Partyvery supportiveopposed strongly opposed
Green Partyvery supportiveopposed strongly opposed

Influences in policy making and legislation

It is not clear to what extent the proposed restructure would require new legislation. The MRG suggests that the NHB could be formed by simply expanding the existing Crown Health Funding Agency. However, the creation of an NHB would most likely require legislation regarding formal DHB accountability requirements to the NHB.

Actors and influence

Description of actors and their influence

Government
Crown Health Funding Agencyvery strongweak none
National Health Committeevery strongweak none
Providers
Maori providersvery strongweak none
Payers
District Health Boardsvery strongstrong none
Civil Society
NGO Forumvery strongweak none
Public Health Associationvery strongweak none
Public Sector Associationvery strongweak none
Private Sector or Industry
Information Technology Industryvery strongweak none
Opinion Leaders
Independent Practitioners Association Councilvery strongneutral none
Association of Salaried Medical Specialistsvery strongneutral none
Royal New Zealand College of General Practitionersvery strongneutral none
New Zealand Nurses Organisationsvery strongneutral none
Independent Practitioners Association Councilvery strongneutral none
Political Parties
Labour Partyvery strongneutral none
Green Partyvery strongneutral none
Crown Health Funding Agency, Information Technology IndustryIndependent Practitioners Association Council, Independent Practitioners Association CouncilNational Health Committee, Maori providers, NGO ForumRoyal New Zealand College of General PractitionersDistrict Health BoardsPublic Health Association, Public Sector AssociationAssociation of Salaried Medical Specialists, New Zealand Nurses Organisations, Labour Party, Green Party

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

At the time of writing, the Minister of Health was still considering the report and the responses to it. The government is under no obligation to accept the recommendations in the report. However it seems likely that at least some of the recommendations will be adopted, including the formation of a National Health Board.

Implementation of any restructure most directly involves the employees of public sector health organisations such as District Health Boards, the Ministry of Health and the National Health Committee. In the short to medium term, there will be implications for many non-government providers of publicly funded services as many contracts will be affected by organisational changes. In the previous round of restructuring the devolution of contracts from the HFA to the DHBs was beset by many problems and inefficiencies. In the longer term, the major risk associated with implementation is the prospect of organisational rivalries and turf disputes between the NHB and DHBs on one hand, and the Ministry on the other. Much will depend on the management of inter-organisational relationships in the early stages of implementation.

Expected outcome

At the time of writing, it is not clear how the government will respond to the report. The Minister has claimed that no proposal will be accepted if it increases bureaucracy. If the recommendation to create an NHB is accepted, there is likely to be some initial and significant disruption to the health sector for the first twelve months, and some public criticism due to the perception of broken election promises. In the longer term, the key issue would be the nature of the relationships between the NHB and DHB, and between the NHB and the Ministry of Health. It will be difficult, in practice, to separate the roles of policy and purchasing, and there are likely to be many areas in which both the Ministry of Health and the NHB will have an interest in shaping. In the 1990s, the relationship between the HFA and the Ministry was not smooth for this reason.

Impact of this policy

Quality of Health Care Services marginal neutral fundamental
Level of Equity system less equitable neutral system more equitable
Cost Efficiency very low neutral very high

The Minister's policy intention is to reduce bureaucracy and increase the efficiency of the publicly funded health sector. Many stakeholders consider that the proposal has the potential to improve efficiency in certain areas such as IT services. However, past experiences with restructuring in New Zealand - some of which have been justified on similar grounds - have demonstrated that gains in efficiency are difficult to achieve through restructuring, and that it may result in greater inefficiency due to factors such as increased transaction costs. While the scale of the proposed restructure is much smaller than 1993 or 2001, so a conservative assessment of the likely impact on cost-efficiency is that the improvements due to the reform, and the costs associated with it will cancel each other out in the medium term.

References

Sources of Information

  • Ashton, T. and Tenbensel, T. 'Reform and Re-form of the New Zealand Health System'. In K. Okma and L. Crivelli (eds) Six Countries, Six Reform Models: The Healthcare Reform Experience of Israel,The Netherlands,New Zealand, Singapore,Switzerland and Taiwan. Singapore: World Scientific Books. In press.
  • Ministerial Review Group. Meeting the Challenge: Enhancing Sustainability and the Patient and Consumer Experience within the Current Legislative Framework for Health and Disability Services in New Zealand. Report of the Ministerial Review Group. Wellington: Ministry of Health. 31 July 2009.
  • Ryall, T. Ministerial Review Group Report Released. 16 August 2009. www.beehive.govt.nz/release/ministerial+review+group+report+released
  • New Zealand Doctor. 9 October 2009. www.nzdoctor.co.nz/coverage?pub=8c3a3048-b350-49bc-9b33-74a0980aa0eb

Author/s and/or contributors to this survey

Tim Tenbensel, CHSRP

Suggested citation for this online article

Tim Tenbensel. "Taskforce report on health system restructuring". Health Policy Monitor, October 2009. Available at http://www.hpm.org/survey/nz/a14/2