GOVERNMENT EXPENDITURE AND ADMINISTRATION (EXG)
Health Sector Review
Terms of Reference
These terms of reference describe the scope and process for reviewing the health sector’s approach to improving performance and obtaining value for money.
In February 2006, Cabinet agreed that a programme of expenditure reviews occur in 2006 and that the Cabinet Committee on Government Expenditure and Administration (EXG) would oversee these reviews. The overall aim of the reviews is “to improve performance and value for money within and across votes.”
Cabinet agreed that the health sector be reviewed with a view toward “lifting productivity and improving performance management processes in specific health areas.” This paper describes how this review will address the specific tasks defined
in the Annex to the Cabinet paper.
In a letter following up on the Cabinet decision, Hon Trevor Mallard, who is chairing the Cabinet Committee, informed Hon Pete Hodgson, Minister of Health that the terms of reference for the health sector review could be put on a slower track in recognition of the fact that a search is underway for a new Director-General of Health and that the new appointee should have the opportunity to approve the terms of reference. Hon Trevor Mallard indicated the terms of reference from health may be considered in late May or early June 2006.
Scope of the review
The review should take into account existing health sector activities to achieve the review’s aims as well as opportunities to build on these activities. This document
focuses primarily on review work to take place in 2006 and early 2007. With the appointment of a new Director-General, there may be changes introduced that affect the scope of the review.
The Cabinet guidance states that this review should “develop robust processes for getting better organizational performance (at all levels) considering: ; options to better define and operationalise government health priorities;
; the appropriate role of the Ministry of Health in resource allocation and
; what allocation decisions should be made locally, regionally, and nationally;
; ways of improving DHB and PHO performance.”
The Cabinet guidance states that the health sector should conduct “reviews of
specific health interventions [and] propose challenging, quantifiable outcome
goals and performance milestones, with detailed plans for achieving such goals and milestones within the service area.” Additionally, the guidance states that these
service reviews should be conducted “with full engagement of all concerned
including frontline clinicians and administrators.”
The EXG guidance states that the chief executive of the spending agency should chair the review steering group and central agency representatives should be members of the steering group. The current Performance Assessment and Management Steering Group is chaired by the Director-General and includes representatives from Treasury and DPMC (as well as DHBs, DHBNZ, and two Ministry directorates). The addition of a member from SSC would make the PAM Steering Group fully compliant with the EXG guidance.
Using the PAM Steering Group as the body to guide the EXG review is ideal because the PAM Steering Group has a track record of considering performance management issues for the health sector and includes the key agencies who are in positions to effect change in the sector. The PAM Steering group meets every other month.
Approach to the review
As discussed above, the current PAM Steering Group, with the addition of SSC, will direct the EXG review of the health sector. At present, the PAM Steering Group has established two working parties to progress work on the development of productivity measures and the overall outcomes management framework. These working parties consider issues at a detail level and present recommendations to the PAM Steering Group at its bi-monthly meetings. Both groups are coordinated by the Ministry and include representatives from Treasury and DHBs.
These working parties, particularly the outcomes management working party, can be used to advance consideration of issues concerning performance management noted in the EXG review.
To date, the outcomes management working party has been considering the following issues:
; The identification of high priority areas that might be suitable for national target setting;
; Options for national target setting;
; Rewards and sanctions for DHBs based on performance against national targets; and,
; Types of assistance required by DHBs and PHOs to facilitate improvement and options for providing such assistance.
Building on the current work, the Ministry will develop recommendations for a comprehensive performance management system as part of the EXG process. Among other things, these recommendations will address how current accountability arrangements can be improved and rewards/sanctions can be introduced to achieve the desired outcomes.
The team handling this work includes a senior analyst from the System Performance section in the Sector Policy Directorate (lead, .6 FTE), the Manager of this unit (.4
FTE), Principal Medical Advisor for the Ministry (.1 FTE), the Manager of the Performance section of the DHB Funding and Performance Directorate (.5 FTE), analyst DHB Funding and Performance Directorate (.5 FTE) and project manager (.25 FTE). Additionally, the working party includes several representatives from District Health Boards.
Service Areas Reviews
The primary objective of service area reviews is to find ways of achieving better health outcomes within existing resource limits for particular disease or population health areas. A secondary objective is to clarify the value of the next best spending opportunities that cannot be realistically afforded within existing resource limits.
The Ministry will engage in a process to identify those service areas that are appropriate for reviews under the EXG framework. The following general criteria will guide this process:
; New Zealand’s performance is deteriorating or is below that of other comparable
; There is considerable variation in performance among DHBs and PHOs; ; There are evidence-based, cost effective interventions that can be implemented that will lead to improved performance in the medium term; and,
; The area is of importance to the health sector as measured by burden of disease, reducing inequalities, or impact on trust in the health system.
Based on a review of potential service areas, the Ministry will recommend to the Steering Group an initial service area for the EXG review. Independent of the EXG process, the Ministry has initiated reviews of cardiovascular disease and diabetes (which comprise the biggest disease burden for New Zealanders and have a rising incidence among certain population groups) and well child services (where the government has announced a considerable new investment). The Ministry has decided that the well child review will be the initial review for the EXG process.
The initial review will take place in several stages. The first stage will include: ; assessing strategic and performance management settings;
; analysing variations among DHBs, PHOs, and other providers against outcomes and performance indicators;
; estimating the extent and type of DHB, PHO, and other provider expenditures; ; reviewing the literature on cost effective interventions;
; identifying feasible opportunities for service improvement; and,
; assessing implications for service planning, performance management, and resource allocation decision-making.
This first stage will result in an identification of the key issues, selection of priority areas and a preliminary set of options for service reconfiguration. The second stage will involve an assessment of DHB and PHO interventions against best practice in the priority areas. The third stage will entail the development of detailed recommendations for changes to existing service configurations and/or the introduction of new services, including the financial implications of these proposals. Included in these recommendations will be ways to ensure that service performance
is measured and monitored and good performance is encouraged through tangible rewards or other means.
The Ministry will establish a steering group, consisting of Ministry and DHB representatives to direct the review. The Ministry also will establish a reference group which will meet periodically to provide feedback on various aspects of the review. Through the reference group and periodic site visits, the review team will engage with frontline clinicians and administrators to gain a more complete understanding of problem areas and opportunities for improvement.
The Ministry will develop principles for service reviews, keeping in mind the criteria noted above. Once these principles are approved by the Steering Group, the Ministry will develop a schedule of future reviews for consideration by the Steering Group.
There are two risks in conducting service reviews. First, any service review could turn into an opportunity for the sector to lobby government for more resources, rather than focusing on getting better value from existing resources. Second, there may not be sufficient information to answer the questions sketched out above. This is why high-quality, credible preparatory work would be essential to the ultimate success of the reviews.
To progress the reviews, the Ministry will assemble an interdisciplinary team, led from the Clinical Services Directorate that will include a project manager (1 FTE), policy analyst (1 FTE), chief advisor (Child and Youth Health) (.4 FTE), paediatric registrar (.8 FTE), manager primary health team (.2 FTE), executive assistant (.2 FTE).
Additionally, the Ministry has contracted or will be contracting for external parties to conduct a literature search, analyse the literature, and undertake cost effectiveness analysis. The combined value of this work is approximately $100,000.
The Manager of the System Performance team (.2 FTE) and the Principal Technical Specialist (.1 FTE) in that team will assist with economic analysis and provide linkages with the rest of the EXG Review. Finally, government officials and sector representatives will contribute their time to the steering group and reference group.
In 2005, the Ministry and DHBs launched the Service Planning and New Health Intervention Assessment: Framework for Collaborative Decision-Making (SPNHIA Framework), which is a joint approach to resource allocation decision-making. SPNHIA provides a rational, evidence-based process (including cost effectiveness) for DHBs and the Ministry to follow when considering new investments or when dis-investing from current services. Having been launched last year, SPNHIA is in the process of establishing itself in the sector.
The Ministry will review the introduction of the current framework and make recommendations to the Steering Group on how it can best be positioned for the future. In addition, the Ministry will review its wider role in resource allocation
decisions. In particular, there will be an effort to examine how resource allocation decisions are made in light of system performance.
The team handling this work will include a senior analyst currently coordinating the SPHNIA work (.5 FTE), a policy analyst in the Sector Policy Directorate (.4 FTE), and the Manager of the System Performance section of the Sector Policy Directorate (.2 FTE).
Milestones and Deliverables
The table below outlines the milestones and deliverables for the work that will take place in 2006 and early 2007. As the work progresses in 2006 and a new Director General is appointed, there will be a need to develop new terms of reference outlining future work.
The Ministry will report to the EXG Committee via the OXG (officials) Committee on a monthly basis describing progress against milestones and key issues for consideration.
Activity # Activity Description Specific tasks Completion
1 Describe the current ; Discuss at outcomes
performance management management working
programmes for DHBs and party
PHOs and the Ministry of ; Consult with DHBNZ
Health role; consider ways re: PHO programme
of strengthening these ; Recs to SG
programmes Nov 2006 ; Report to Ministers
2 Consider options for the ; Describe current MoH
most appropriate and role
effective role for the Ministry ; Discuss options with
in performance new DG
management. ; Recs to SG
Mar 2007 ; Report to Ministers
Service area reviews
3 Identification of key issues, ; Analyse strategic and
priority areas, and performance
preliminary options for management settings
service reconfiguration ; Review literature on
; Assess DHB, PHO,
and other provider
; Estimate expenditures
; Identify priority areas for service improvement ; Assess implications for
Activity # Activity Description Specific tasks Completion
; Recs to SG
Nov 2006 ; Report to Ministers
4 Propose principles for a ; Propose principles to
series of reviews of major SG
service areas Aug 2006 ; Report to Ministers
5 Propose a schedule of ; Apply principles to
reviews of major service other potential review
areas for the next three areas
years ; Consult with new DG
; Recs to SG
Dec 2006 ; Report to Ministers
Resource allocation decision-making
6 Describe the current ; Summarise resource
methods for making allocation processes
resource allocation ; Assess ways of
decisions locally, regionally, strengthening
and nationally and and the ; Recs to SG
Ministry of Health role; ; Report to Ministers
consider how these
methods could be improved Nov 2006 7 Consider options for ; Describe current MoH
optimising the Ministry role role
in this area ; Discuss options with
; Recs to SG
Mar 2007 ; Report to Ministers