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In the absence of this analysis, some suggestions have been made below, but they must be tested to
ensure that they are likely to provide better arrangements for hospitals with a stronger incentive
environment for lifting performance. This work usually takes several weeks, rather than a day or two,
so it is critical that the draft provisions below are thoroughly tested.
The provisions for the Health Law suggested in this note have been designed with hospitals in mind.
Consideration should be given to whether they can be applied (possibly refined) to cover other
agencies in the health sector such as the NIPH, KMA and others. There has not been sufficient time
to consider this in preparing this note.
The framework
The Public Enterprise Law provides a potentially robust governance and accountability framework that
can be adapted to suit the situation for hospitals. Some key features include:
Clear roles and responsibilities for ministers and local government exercising ownership
responsibilities; monitoring unit for monitoring ownership performance including capability;
and board of directors for overseeing performance.
Mechanisms for specifying performance (business plan) and reporting on this, providing
ministers with a way to influence the performance ex ante via the business plan and to
monitor progress via the reports.
Incentives for performance through clarity of specification of intended performance and the
reporting including publication of these documents; through the influence of the role of the
board of directors monitoring progress and exercising governance functions; through the
influence of internal audit and external audit; through the monitoring of the POE Policy and
Monitoring Unit; and through the increased flexibility to manage resources- note that these
arrangements for hospitals potentially remove many of the issues about the detailed
budget controls and inflexibilities that are impeding hospital management but these
freedoms need to be matched with increased accountability for performance
expectations (financial forecast and statement of service performance expectations),
reporting, and good internal financial controls including internal audit. While these
steps involve modern accounting standards, good quality performance specification and
reporting and service auditing, it is possible to take simple and valuable steps to develop
better information in all these areas, matched to the evolving capability in the health sector
institutions.
Very transparent appointment process for boards of directors designed to avoid conflicts of
interest and to result in the appointment of qualified people.
Requirements to use an accounting approach that would raise the level of transparency about
the finances (full accounts with a balance sheet and P&L rather than the current cash
budgeting- but should still have a cash flow statement) and potentially provide the hospitals
with flexibility to manage resources.
Subjects public sector health entities to the same standards as private sector ones so helps
create a more level playing field for the public and private sector should the health insurance
model be implemented.
Has potentially robust provisions if implemented well that are designed to limit conflicts of
interest which will become increasingly important if Health Sector Public Enterprises develop
service for paying clients (private health insurance companies, Health Insurance Fund,
consumers not covered by insurance, others).
The adjustments that can be made to this framework include the following:
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