Towards Public Sector Goals: New Zealand's Recent Experience in Health Services Reorganization LAURENCE A. MALCOLM INTRODUCTION FTER at least a decade of formal debate about the shape and direction of New Zealand's health services, politig /1 2 cal decisions and implementation are now imminent. The debate has centered upon the place and role of the area health board, not only as an administrative amal- L t~& gamation of hospital and traditional public health services, but as the authority, with central funding, to plan, coordinate and largely provide for all health services, public, voluntary, private, treatment and preventive for a defined population (i). With their emphasis upon services, as opposed to institutional approaches to organization, area health boards appear to be a uniquely New Zealand concept in health services organization. This paper briefly describes and analyzes these developments and their potential impact upon the public health and the comprehensive delivery of better health services. BACKGROUND The present New Zealand system has its roots deeply embedded in the past, especially the early colonial period of the mid-nineteenth century (z). Locally funded and managed hospital services were established with the state being responsible for only those residual services, e.g., lunatic asylums, which were felt to be a liability for local initiative (z). The growth of the central government funding and control, together with amalgamation of smaller boards, resulted in increasing tension between the center and the periphery. District health offices, as agents of the Department of Health, assumed responsibility for environmental health problems and to an increasing extent those residual services which II7 Palgrave Macmillan is collaborating with JSTOR to digitize, preserve, and extend access to Journal of Public Health Policy www.jstor.org
ii8 JOURNAL OF PUBLIC HEALTH POLICY * SPRING I989 were not adequately provided by either private or voluntary agencies, e.g., public health nursing and school dental services. The outcome of these developments was a fragmented service which, in the I970S, was characterized by locally elected hospital boards but centrally funded and controlled by the Department of Health; a multitude of private and voluntary agencies, includin general practitioners, subsidized to a varying extent by government subsidy; and public health services provided by district offices of the Department of Health. A major attempt to further centralize and control this fragmented system was made in the 1974 White Paper which was modeled on the 197z reorganization of the United Kingdom NHS (3). However, its proposals were widely rejected because of the perceived threat to existing interests, including the institutionally-orientated hospital boards, the medical profession, local authorities, and voluntary and private agencies. Despite this, an important outcome of the debate surrounding the White Paper was the proposal that area health boards should be established, and that planning and coordination of all services be achieved under such boards through service development groups (4). Each service -medicine, surgery, primary health care, mental health, etc. - should be planned and coordinated through its own SDG comprised of practicing health professionals of different disciplines drawn from all sectors of the health services, statutory, voluntary, and private (1,4,5). These proposals were tested in pilot situations in Northland and Wellington, with a positive outcome (6,7) in that legislation enabling hospital boards to choose to become area health boards was passed in I98 3. The first three area health boards were formed in I985 and, as a result of firm government policy towards wider implementation, it is now expected that such boards will replace all hospital boards by I989. THE AREA HEALTH BOARD CONCEPT An area health board brings together the two public sector agencies involved in health care, the hospital board and district office (recently renamed health development units) of the Department of Health (i). However, a potentially more significant role may result from their ability to exert leadership and coordination over all health services in an area, including primary health care, and their principal responsibility of promoting the health of the population for the area. Successful efforts to achieve health promotional goals have already been reported in the media by the Wanganui Area Health Board.
MALCOLM * NEW ZEALAND S HEALTH SERVICES II9 LEVERS FOR REFORM Associated with the gradual implementation of health boards have been two important levers applied to hospital boards to promote wider population-based thinking and service planning. These have been population-based funding and the associated requirement for boards to prepare comprehensive service plans assisted by service planning guidelines (I). In I983, boards, instead of being funded on the basis of the previous year's budget, moved to population-based funding (8). This was modelled upon the RAWP (Resource Allocation Working Party) principles in which population became the fundamental factor for funding of boards with adjustments for such factors as standardized mortality ratios, cross boundary flows, and size of the private sector (9). Since then boards have either had their funding increased or decrease depending on the extent which they were over or under-funded. Boards were required to produce service development plans showing how they would either use the additional funding to which they were entitled or were adjusting to reductions in funding (i). At the same time these plans were expected to show how boards were providing services which adhered to sets of guidelines produced by the Department of Health (i). This planning requirement, in response to population-based funding, compelled boards for the first time to thoroughly examine their services, to think epidemiologically and of priorities, rather than merely making adjustments at the margin which tended to focus upon the development of facilities (i). In this transition boards have become increasingly more concerned about services rather than facilities. The service concept, that the basic organization unit of the health system is not an institution but a service, i.e., primary health care, mental health, care of the elderly, medicine, surgery, etc., has come to be widely accepted and embodied in the area health board legislation through service development groups, service planning guidelines, and, more recently, the reorganized Department of Health which is now restructured along service program divisions (i). The next step towards a more completely service-based organization is the move towardservice management. This is being facilitated through specialty or service costing, and the requirement that boards produce budgets along service lines. Some services, particularly in areas such as mental health and mental handicap, are developing boardwide programs
I20 JOURNAL OF PUBLIC HEALTH POLICY - SPRING I989 which are to be managed as entities cutting across the present institutional framework. However, while becoming accepted in principle, major difficulties are envisaged in actual implementation, particularly in the area of primary health care which is largely in the private sector (i o). The development of primary health care, as an organized and managed service, would involve a transfer of the present subsidy arrangements to area health boards and the development of an entirely new management structure (io). PRINCIPLES OF REFORM Since the election in I984 of the present Labour Government, a number of fundamental developments have occurred including a wide-ranging review of economic and social policy. In the economic area, the government has implemented the most comprehensive reform in New Zealand's recent history with almost total deregulation of the economy, a tight monetary policy to control inflation, and the transfer of a large proportion of commercial-type government activity i.e., post office, railways, to state-owned enterprises or the private sector. Undesired but perhaps inevitable consequences have been major redundancies and business failures leading to rising unemployment. In the social policy area, wide-ranging reviews have occurred of use of the health benefit system (i o), hospital and related services, the Accident Compensation Corporation, and, with the Royal Commission on Social Policy, a new basis for social policy is being developed. The government has also recognized the importance of the Treaty of Waitangi signed in I 840, as a basis of the partnership between the indigenous Maori population (approximately io% of the total) and the dominant European population. This has been associated with a major thrust towards community-based Maori health movements and the recognition that the serious problems affecting Maori health will only be solved if tackled by the Maori people themselves. A major debate, in all of these developments, has been the extent to which health services, like other areas of government activity, could be corporatized or even privatized. Those government members with an overriding commitment to making New Zealand's economy more competitive, supported by Treasury, have favored moves towards privatization and a national health insurance system rather than the present publicly-funded model. However, strong countering traditional Labour forces have successfully argued that health is a public good and that social
MALCOLM * NEW ZEALAND S HEALTH SERVICES 121 justice requires the public provision of health care. They see a privateenterprise market-led system as failing to meet the needs of the poor, handicapped or old. This debate may now be largely over with recent statements from the Minister of Health that health is seen to be an intrinsic aspect of government and that the health system ought to remain essentially publicly funded and publicly provided (ii). THE THRUST TOWARDS BETTER MANAGEMENT Better management, rather than privatization, is now seen to be the preferred approach to achievin greater efficiency. New Zealand spends about 7.z% of its GDP on health services, which appears to be high given its relatively low per capita GDP in comparison with other OECD countries. It has become clear that no additional funding for health can be expected, despite the increasing demands of an aging population and new technology, and that more resources will only come from improving the efficiency of existing services. There is considerable potential for this in the primary care sector through controlling the growth of pharmaceutical expenditure and in the secondary sector through reductions of grossly over-bedded hospitals, especially in the acute and mental health services. The recent introduction of general managemento replace the older form of team management could do much to improve the quality of management, specially when combined with the present vigoroustmoves toward improving management capabilities through new and innovative training programs. There are few incentives for efficiency, and clinicians, as in most health services, are not accountable for the cost outcomes of their decisions. The move toward service management, however, is expected to make clinicians more accountable and to provide incentives in which savings, within a finite budget, could be used for new technology or new services. CONCLUSION New Zealand's health services are now entering a period of major transition. The discussion and debate which has characterized the last I4 years is now leading to the widespread implementation of area health boards. The major role of these boards is the promotion of the health of the population served and the planning and coordination of all health services, public, private, and voluntary, for the area. The major organizational issue yet to be resolved is the place of primary health care. There is emerging agreement, at least in principle, that it is
I22 JOURNAL OF PUBLIC HEALTH POLICY SPRING I989 the most fundamental of all services provided by an area health board and that its funding and management should come under such boards. However, in practice, there is still much to be achieved in implementing such a policy. Both management and associated information systems are now widely regarded as the main constraint to the successful implementation of these policies and achievement of the goals of health for all. Some important steps have been taken to improve the quality of management and to introduce more comprehensive information systems. These developments give some optimism that New Zealand is gradually putting into place the organizational arrangements that will ensure both a better health service and better health. REFERENCES i. Malcolm, L. A. "Progress Towards Achieving Health for All New Zealanders by the Year zooo," Soc. Sci. Med. z5 (i987): 473-79. z. Brunton, W "Hostages to History," N. Z. Hith Rev. 3 (i983): 3-6. 3. A Health Service for New Zealand. Department of Health, Appendix to the Journals of the House of Representatives, H-z3, Wellington, I975. 4. Legal and Administrative Consultative Group, Report to the Minister of Health, Department of Health, Wellington I976. 5. Malcolm, L. A. "Service Development Groups," N. Z. Med. J. 97 (I984): I 83-84. 6. Northland Health Services Advisory Committee, Report to the Minister of Health, Department of Health, Wellington, I98 I. 7. Wellington Health Services Advisory Committee, Report to the Minister of Health, Department of Health, Wellington I 9 8 I. 8. Advisory Committee on Hospital Board Funding. The Equitable Distribution of Finance to Hospital Boards. Department of Health, Wellington, I980. 9. Report of the Resource Allocation Working Party. Sharing Resources for Health in England. Department of Health and Social Security, Allocation Working Party. HMSO, London I976. io. Report of the Benefits Review Committee to the Minister of Health. Choices for Health Care. Wellington, I 9 86. i i. Caygill, D. Address to the Institute of Policy Studies Seminar, March I 9 8 8. Minister of Health, Wellington, I988.