How the NSW Coalition should govern health

This largely cosmetic restructure has re-established an administrative system of Local Health Districts (LHDs) that is virtually identical to the Local Health Networks (LHNs) the Keneally Labor government (2009–11) agreed to establish in return for additional Commonwealth funding as part of the Rudd government's national health reforms.

The Coalition's overhaul of health administration in NSW seems unlikely to achieve its ostensible purpose of offering health providers the benefit of genuinely independent governance.

Under the Coalition's 'new' district model, centralised command-and-control management prevails. Hospitals remain, via LHDs, de facto branch offices of NSW Health. LHD managerial independence is compromised because financial risk continues ultimately to be held by the state.

LHDs do not have the power to borrow or incur debt; nor can they accumulate reserves as a reward for efficiency-as is the practice of Foundation Hospital Trusts in England, for instance.

This restricts the scope for local innovation and competition and augurs the retention of high departmental involvement in operational matters (including service planning) as well as enforced financial control to prevent LHDs from overspending their budgets.

Furthermore, control over the health workforce remains a state responsibility, with centralised departmental control persisting over rigid statewide employment conditions. Retention of restrictive clinical work practices in the public system continues to have major implications for its capacity, productivity and cost-effectiveness.

The public health sector should no longer be quarantined from the structural reforms that have improved the performance of other government instrumentalities and sectors of the economy over the last 30 years.

As a first step towards meaningful purchaser-provider relationships, NSW's revised PFP model should be reviewed with a view to introducing new criteria incorporating a wider range of services-as has occurred in other states.

New PFPs should be considered and evaluated for impending suitable hospital projects; they could offer innovative opportunities for contracting for full accountability and devolution of risk via LHDs onto private operators of public hospitals, including responsibility for all clinical, accommodation and related services.

Public provision of hospital services in NSW has long supported government jobs at attractive wages and conditions. Undoubtedly, there remains a role for government in health service supply-especially in service monitoring and quality control-but without compromising the efficiency or unreasonably intruding into every aspect of hospital operations as a source of workforce protection.