NEED OF TRANSFORMATIONAL CHANGES IN SASKATCHEWAN:

Healthcare reform and Authoritarian Management

By Mario deSantis, October 4, 1998

Saskatchewan healthcare governmental expenditures are about one third of the provincial budget

District Health Act ...supposed to decentralize and democratize health services

Today, October 4/98, we find that such services are more than ever centralized

authoritarian and centralized managerial approach is not compatible with the health legislation

Saskatchewan had one 135 hospitalsand one of the highest number of acute beds: 6.7 for every 1,000 people

till the early 90's...both healthcare providers and politicians, supported programs for additional hospital beds

main recommendation of this study was the restructuring of the health care delivery system through the creation of fifteen health services division councils

health reform has materialized with the decentralization of health services through the establishment of thirty District Health Boards

the closing of fifty-two smaller hospitals due to health reform has effected the loss of many jobs

Elections of Board members will occur this Fall

it is generally accepted, that innovative and service oriented organizations cannot perform with a command-and-control management system

non compliance of legislation, occurrences of accounting irregularities,

(budgeting/planning) processes are all inadequate

the Department is not providing clear directions

assumptions and the related computational procedures have no statistical significance

Some recommendations point specifically to the lack of proper accounting practices for both DHBs and Saskatchewan Health

1995-96 Health Plan processes are all inadequate, and therefore these processes do not satisfy the public accountability of DHBs

with an intelligent push of a button we could automatically produce the relevant information which would be the basis for i)the assessment of the district health needs

Health reform should support a new health care system which is democratic, decentralized, competitive, consumer oriented and community controlled

most of the problems of accountability and performance of the DHBs are logical consequences of the continuation of the traditional centralized and authoritarian management practices

PREMISE

Saskatchewan healthcare governmental expenditures are about one third of the provincial budget and affect some 35,000 healthcare employees out of a total provincial population of about one million people. Therefore, any economic and management redirection of healthcare services would have a strong influence on any other sector of the provincial economy.

In the Summer of 1992, the Honourable Louise Simard, Minister of Health, released the blue print for health reform: "A Saskatchewan Vision for Health, A FRAMEWORK FOR CHANGE". One year later theDistrict Health Act was passed and thirty District Health Boards (DHBs) were created. Such reform were supposed to decentralize and democratize health services; in fact, when in the Spring of 1995 I met with Mr. Wayne Strelioff, Provincial Auditor of Saskatchewan, to discuss the economic implications of health reform, he stated that the districts were independent entities, and that the health care information technology market will eventually become more competitive. Today, October 4/98, we find that such services are more than ever centralized. The health care reform legislation [1] empowers in principle the independent authorities of the districts, however in practice, the continuation of the authoritarian and traditional approach to the administration of health services has reinforced a patriarchal health care environment where every information system is supposed to be centralized [2] and where people are intimidated [3] and can't speak out for the fear of losing their jobs. This authoritarian and centralized managerial approach is not compatible with the health legislation, it could interfere with individual rights [4], and it is an impediment to the entrepreneurial requirements of the emerged new knowledge economy [5][6].

In June 1995, I wrote the working paper "THE NEED FOR A MANAGEMENT ACCOUNTING SYSTEM TO ADDRESS THE CURRENT PROBLEMS OF ACCOUNTABILITY AND PERFORMANCE IN SASKATCHEWAN HEALTH REFORM". I realize that we live in a rapid changing world, but it is interesting to point out that this paper is still effective in addressing the current problems of a centralized and autocratic health care system. Therefore, in the course of providing future insights in what is wrong in the management of healthcare, I find appropriate to reproduce this paper at this time.

INTRODUCTION
(re: paper of June 1995 as mentioned in the PREMISE)

Prior to health reform, the Saskatchewan healthcare system was built on the traditional model of hospital care. Many rural hospitals were built across the province with the result that Saskatchewan had one hundred thiry-four hospitals and one of the highest number of acute beds: 6.7 for every 1,000 people. Other health services included local special care homes, regional hospitals, regional mental health, regional long term care facilities, ambulance, and home care. All such services were under different jurisdictions and had different geographical boundaries.

This fragmented and expensive health care system was managed by some 410 local boards with their approximate 4,500 non elected members, and kept together through autocratic [7] management practices. Such a health care network system created by so many boards and agencies has been a contributing factor to the distortions of our competitive economic system. In fact, till the early 90's, at a time of escalating health care costs, both healthcare providers and politicians, supported programs for additional hospital beds [8] and the construction of new integrated healthcare facilities.

The weaknesses of this fragmentary, uncoordinated and politicized system became evident with the economic downturn of the 80's, the related trend for the decentralization of governmental authorities, and the current economic adjustment to the new information age and global competition. As a consequence, in 1988 the Saskatchewan Government established the Murray Commission to find solutions to the issues of quality, accessibility and cost efficiency of healthcare services. The Commission prepared the study Future Directions for Health Care in Saskatchewan, 1990. The main recommendation of this study was the restructuring of the health care delivery system through the creation of fifteen health services division councils. However, this regionalization of services was thought to be too revolutionary in threatening the economic viability of rural Saskatchewan; therefore, the recommendations of the Murray Commission were not accepted.

The new government, which came to power in 1991, inherited an accumulated debt of about fourteen billion dollars, and made the proper management of public finances its top priority. In the Summer of 1992, the Honourable Louise Simard, Minister of Health, released the blue print for healthcare reform: "A Saskatchewan Vision for Health, A FRAMEWORK FOR CHANGE". This paper, along with the related legislation [9] is the blueprint for the undergoing health reform taking place in Saskatchewan. Today, health reform has materialized with the decentralization of health services through the establishment of thirty District Health Boards. These boards have been given the mandate to provide comprehensive, affordable, coordinated and integrated health services.

CURRENT PROBLEMS IN HEALTH REFORM
(re: paper of June 1995 as mentioned in the PREMISE)

The transition from an autocratic and fragmentary healthcare system to a district based/owned and comprehensive one is a very difficult process which takes time and patience.

Healthcare has been used as an economic infrastructure for rural Saskatchewan, and the closing of fifty-two smaller hospitals due to health reform has effected the loss of many jobs. The effected rural communities have adamantly opposed health reforms and formed a coalition for lobbying the government for the continuation of essential services. One criticism regarding health reform has been the establishment of District Health Boards (DHBs) through the appointment of board members by the Government. Many changes have occurred in healthcare and the fact DHBs did not have elected members has impinged on the governmental claim that health changes have been supported with the organizational participation of the districts residents. Elections of Board members will occur this Fall and the districts residents will henceforth own and manage the healthcare resources.

Today, it is generally accepted, that innovative and service oriented organizations cannot perform with a command-and-control management system [10]. In Saskatchewan, we have examples that organizations with decentralized and innovative democratic management practices perform better than organizations which practise a centralized and authoritarian management [11] . However, the traditional healthcare providers have been resistant to needed competitive changes and are still causing wastes of taxpayers money [12] .

DHBs have been able to change their organizations to reflect a flattening of their hierarchical structure, but they are still operating under the traditional authoritarian healthcare system [13]. As a consequence, DHBs are not asserting their acquired independence and are suffering from serious problems in regard to their accountability and performance. Important shortcomings reported by the Provincial Auditor [14] were: non compliance of legislation, occurrences of accounting irregularities, no provision for reporting actual versus budgeted accounting/financial figures and operational deficits.

District Health Boards and the Department of Health (Saskatchewan Health) have addressed only the qualitative components of the requirements needed to satisfy the legislative public accountability of the districts' operations and of the health status of their residents. As a consequence, the assessment of the district health needs [15], the Department of Health funding "needs-based funding allocation" [16], and the 1995-96 Health Plan [17] (budgeting/planning) processes are all inadequate.

Saskatchewan Health has prepared the "Health Needs Assessment Guide for Saskatchewan Health Districts". The guide doesn't provide specific assistance in the assessment and financial evaluation of health needs. Some excerpts from this guide are:

"...When planning health services, informed assumptions are often made about community needs and they are valuable. Success in meeting the needs depends on the accuracy of your assumptions..."

"...In addition, support is available from the Department of Health reform consultants with whom you have been working..."

The first assessment of community health needs has not been completed yet by some districts and as a consequence, contrary to the expectations of Saskatchewan Health, for the past two years the districts have not been able to allocate resources in accordance to their health needs. We must stop using empirical tools in the financial evaluation of any service affecting taxpayer money! Further, the repetitious reminder that Saskatchewan Health will be of assistance in every step of this needs assessment process is an indication that the Department is not providing clear directions. It is important to emphasize that the main cause of setbacks in public sector reforms over the years has been the lack of clearly established and challenging performance expectations [18].

With the implementation of health reform, Saskatchewan Health shifted its attention from the universal budgeting and accounting processes [19] to the "needs-based funding allocation". This approach of funding the health boards uses demographic characteristics and makes assumptions on local mortality rates, transfer-ins, transfer-outs, weights of characteristics, adjustments, and other factors. These assumptions and the related computational procedures have no statistical significance [20] and they have not been understood by DHBs.

We are in June 1995 and most DHBs have not completed yet their April 1, 1995 to March 31, 1996 Health Plan. The Health Plan should be completed by DHBs to comply with their detailed public responsibility to report on their financial planning activities, on the health status of the district residents, and on the effectiveness of their health programs[21]. Instead, the Health Plan includes a set of "key questions" the districts are required to answer, and another set of "questions to consider" for the proper completion and understanding of the plan process. The last portion of the Health Plan is devoted to the financial and administrative aspect of the plan and includes reports regarding the utilization rates of resources for all DHBs. We are working in an environment of global competition where Total Quality Management (TQM) and Quality Improvement philosophies have been embraced by most businesses for their long term survival and success. Also, at this time of information and technological changes we are setting ever increasing sophisticated systems to support our administration and decision making process. Under this educational, quality management and technological driven economic environment, the inclusion of i)the "key questions" and "questions to consider", and ii)the financial and administrative portion of the plan, is inadequate to satisfy the current public accountability of DHBs[22]. In particular, the utilization rates of resources and the related ranking of the districts do not provide valuable information to assist DHBs in redirecting their resources.

ADDRESSING THE PROBLEMS OF ACCOUNTABILITY AND PERFORMANCE
(re: paper of June 1995 as mentioned in the PREMISE)

In its 1995 Spring report, the Provincial Auditor made recommendations affecting the management and accountability of DHBs and Saskatchewan Health. Some recommendations point specifically to the lack of proper accounting practices for both DHBs and Saskatchewan Health.

In the previous section we stated that the assessment of the district health needs, the governmental funding, and the 1995-96 Health Plan processes are all inadequate, and therefore these processes do not satisfy the public accountability of DHBs. A system such as the implementation of the MIS Accounting and Statistical Guidelines of the Canadian Institute for Health Information would support a decentralized administration and comprehensively satisfy most of the current management accountability problems of DHBs. These Guidelines are based on a comprehensive and detailed General Ledger Chart of Accounts where these accounts are identified by standardized numerical codes defining source of funding and functional centres. As an example, the account defined by "712 10 3 50 40 42" could refer to the DHBs' expense for Canada Pension Plan contributions charged to the Nursing Medical Unit. Such General Ledger Accounts would be linked to corresponding Statistical Accounts reporting the units of provided/purchased services. The related computerization of the MIS Guidelines implemented through data base management languages will produce extremely flexible reports of the type "provide me with the cumulative figure of all the balances of general ledger accounts such that the first three digits of such account codes are 712 and the 6th digit is 3, for the period Jan 1/95 to Feb 15/95". The proper computer system implementation of such Guidelines would allow the DHBs to account and manipulate all costs incurred and services provided. DHBs would also be able to compute unit cost and workload measurements for their services, provide financial reports instantaneously, and produce relevant reports for assisting management and boards in making informed decisions and evaluating the performance of the utilized resources. Saskatchewan Health was planning the compulsory implementation of such guidelines in 1991[23], however they were never implemented. Some of the reasons were:

- the high cost of implementation,

- lack of trained personnel with adequate accounting and micro-computer literacy background,

- integration of health services without support mechanisms to update the Guidelines and include all such services,

- political and bureaucratic reluctance to allow the individual implementation of the Guidelines by DHBs,

- reorganization of the department Saskatchewan Health and support for immediate administrative policies to put a cap on healthcare expenditures.

Today, under a proper perspective of global competition, most of the reasons for stalling the implementation of the Guidelines are not valid. The effective and economic implementation of the Guidelines would address most of the current problems of accountability and performance evaluation of health services and their resources. Further, with an intelligent push of a button we could automatically produce the relevant information which would be the basis for i)the assessment of the district health needs, ii)the funding of the DHBs, and iii)the budgeting and planning processes.

CONCLUSION
(re: paper of June 1995 as mentioned in the PREMISE)

Health reform should support a new health care system which is democratic, decentralized, competitive, consumer oriented and community controlled. In this period of change the District Health Boards (DHBs) and Saskatchewan Health have been experiencing problems in striving to achieve this new system as envisioned by the "Saskatchewan Vision for Health".

We have shown that most of the problems of accountability and performance of the DHBs are logical consequences of the continuation of the traditional centralized and authoritarian management practices. Some recurring shortcomings of the current health reforms were the lack of i)clearly established directives from Saskatchewan Health, and ii)proper management of accounting functions. In addition we have shown that with the competitive implementation of a management accounting information system such as the MIS Guidelines, both Saskatchewan Health and DHBs would be able to meaningfully support their individual public responsibility of accountability and performance. DHBs would be able to financially evaluate their services with respect to their budgeted or past performances and take meaningful measures to more effectively redirect their resources; Saskatchewan Health would be able to evaluate the relative performance of all the DHBs, and design new policies to complement the current procedures of funding and ranking DHBs.

REFERENCES

[1] "District Health Act", Saskatchewan 1993

[2] Paper: "A Historical Perspective of The Saskatchewan Health Information Network",: by Mario deSantis and James deSantis, March 1998 http://www3.sk.sympatico.ca/desam/paper-SHIN.htm Also refer to: "Managing Information Technology-A Vision for the Future-Information Technology architecture", Saskatchewan Health, April 1995
[3] "EXAMPLES OF MENTAL MODELS IN SASKATCHEWAN HEALTH CARE AND RACISM",: by Mario deSantis, July 29, 1998 http://ftlcomm.com/ensign July 1998

[4] "Privacy, not price matters: Strelioff", Leader-Post, Regina, Sept. 26, 1997.

[5] ELECTRONIC COMMERCE, INTERNET AND CULTURAL CHANGES,: by Mario deSantis, July 24, 1998 http://ftlcomm.com/ensign July 1998
[6] "NEED OF TRANSFORMATIONAL CHANGES IN SASKATCHEWAN: The Learning Organization, and Knowledge Economy": by Mario deSantis, September 20, 1998, http://ftlcomm.com/ensign September 1998
[7] "New Directions for Healthcare Labour Relations in the 1990s".: A report to the Minister of Health, Province of Saskatchewan, May 1993, by Ron Reavley and Dr. Ray Sentes.
[8] "Invitation by the Regina Health Board to comment on the Atkinson Report",: brief by Mario deSantis, May 8/1992.

[9] "Health Districts Act", Saskatchewan, 1993.

[10] "The performance and accountability challenge-Part IV",: by James McCrindell, CMA Magazine, February 1995.
[11] "Programming Change", Article in the Weyburn Review,: May 2/1995, Weyburn, Saskatchewan.
[12] "Do we need centralized payroll and bigger bureaucracy in healthcare",: by Mario deSantis, February 7/1995.
[13] "Presentation of the Saskatchewan healthcare systems architecture to vendors-January 12/1995",: a report by Mario deSantis.

[14] "Report of the Provincial Auditor", Chapter 2, Saskatchewan, Spring 1995.

[15] "Health Needs Assessment Guide for Saskatchewan Health Districts", Saskatchewan Health.

[16] "Introduction of Needs-Based Allocation of Resources to Saskatchewan District Health Boards for 1994-95",: Saskatchewan Health.

[17] "Guidelines for the Preparation of the 1995-96 Health Plan", Saskatchewan Health.

[18] "The performance and accountability challenge-Part II",: by James McCrindell, CMA Magazine, November 1994.
[19] "Immediate need of new budgeting processes for Saskatchewan Health and District Health Boards",: by Mario deSantis, March 9/1995.
[20] "Effectiveness of our Bureaucracy in healthcare",: by Mario deSantis, February 17/1995.

[21] "Districts Health Act", Saskatchewan, 1993. Sections 31 and 37.

[22] "Health boards deficits provincial concern",: by Nikki Hipkin, The StarPhoenix, Saskatoon, March 24/1995.

[23] "Report: Shared Systems Saskatchewan Health-Care Association", by Ken Enion,

1990 Annual Report of the Catholic Health Association of Saskatchewan. APPENDIX: "The performance and accountability challenge-Part IV", by James Q. McCrindell, CMA Magazine February 95.

Excerpts with the permission of the author. (re: paper of June 1995 as mentioned in the PREMISE)

In my previous three articles on this subject, I have emphasized that, whether one is dealing with private or public sector organizations, implementing and maintaining successful performance and accountability is very difficult. I have stressed the need for:

- a sustainable--or learning--organization;

- clear accountability relationships with performance expectations being understood and enthusiastically agreed upon by both parties;

- committed employees who are directly involved in the development and maintenance of the performance management system and can readily identify their own accomplishment with the information it produces;

- the importance of management accounting in producing the right performance information; and, flexibility in the total process in recognition of the current dynamic environment in which all organizations currently must operate.

- ...a modern organization cannot function effectively with a business process that doesn't deal adequately with performance and accountability.

-

...Today, it is generally accepted by senior management of every type of organization that innovative, service oriented performance by its employees is not feasible with a command-and-control management system; decision making must be delegated to those responsible for delivering the service. On the other hand, because those doing the delegating are not freed from their personal responsibility and accountability, they must install a process whereby they have some assurance that their delegated powers are being exercised properly. This process includes a means of holding those empowered accountable

- ...accountability is what is exchanged for empowerment and performance is the means of rendering accountability.

TRADITIONAL CONTROL:

...we often hear that we must focus on results, not processes. We must indeed focus on results throug sound performance management, but we must not undermine the notion of process ...Unfortunately, process is often interpreted as a multitude of front-end procedures that inhibit flexibility and creative decision-making. In other words, it is seen as the dreaded "c" word: control.

FUNDAMENTAL TO MODERN CONTROL:

...it is outcome-based control where the organization's members are held accountable for results. We also stated that a clear mission, common objectives, shared values and ethics, are critical as they will lead to self-control and instinctively good behaviour by managers and employees on behalf of the organization ...In my view, performance and accountability are the bedrock of modern, outcome-based control as they provide the insurance for the stakeholders that those making the decisions in the organization will be accountable for their actions and have to provide evidence of their accomplishments -- or failings -- through performance, result based information. And with new information technology, this performance feedback control can be reasonably tight and instantaneous, or more relaxed and periodic; it allows for varying levels of control depending on the degree of trust or risk that is present. The well known paradox that "the more you delegate, the more you need to control" is still valid. However, what it means today is that the more you empower, the better must be your performance and accountability processes, and that it is important for all employees and managers to respect the formal and informal boundary lines of conduct that they and their organizations have jointly agreed are important.

	`"...When planning health services, informed assumptions are often made about community needs and they are valuable. Success in meeting the needs depends on the accuracy of your assumptions..."`

	`"...In addition, support is available from the Department of Health reform consultants with whom you have been working..."`

	-	the high cost of implementation,
	-	lack of trained personnel with adequate accounting and micro-computer literacy background,
	-	integration of health services without support mechanisms to update the Guidelines and include all such services,
	-	political and bureaucratic reluctance to allow the individual implementation of the Guidelines by DHBs,
	-	reorganization of the department Saskatchewan Health and support for immediate administrative policies to put a cap on healthcare expenditures.

1990 Annual Report of the Catholic Health Association of Saskatchewan. APPENDIX: "The performance and accountability challenge-Part IV", by James Q. McCrindell, CMA Magazine February 95. Excerpts with the permission of the author. (re: paper of June 1995 as mentioned in the PREMISE) In my previous three articles on this subject, I have emphasized that, whether one is dealing with private or public sector organizations, implementing and maintaining successful performance and accountability is very difficult. I have stressed the need for:
	-	a sustainable--or learning--organization;
	-	clear accountability relationships with performance expectations being understood and enthusiastically agreed upon by both parties;
	-	committed employees who are directly involved in the development and maintenance of the performance management system and can readily identify their own accomplishment with the information it produces;
	-	the importance of management accounting in producing the right performance information; and, flexibility in the total process in recognition of the current dynamic environment in which all organizations currently must operate.
	-	...a modern organization cannot function effectively with a business process that doesn't deal adequately with performance and accountability.
	-	...Today, it is generally accepted by senior management of every type of organization that innovative, service oriented performance by its employees is not feasible with a command-and-control management system; decision making must be delegated to those responsible for delivering the service. On the other hand, because those doing the delegating are not freed from their personal responsibility and accountability, they must install a process whereby they have some assurance that their delegated powers are being exercised properly. This process includes a means of holding those empowered accountable
	-	...accountability is what is exchanged for empowerment and performance is the means of rendering accountability.
TRADITIONAL CONTROL:
	...we often hear that we must focus on results, not processes. We must indeed focus on results throug sound performance management, but we must not undermine the notion of process ...Unfortunately, process is often interpreted as a multitude of front-end procedures that inhibit flexibility and creative decision-making. In other words, it is seen as the dreaded "c" word: control.
FUNDAMENTAL TO MODERN CONTROL:
	...it is outcome-based control where the organization's members are held accountable for results. We also stated that a clear mission, common objectives, shared values and ethics, are critical as they will lead to self-control and instinctively good behaviour by managers and employees on behalf of the organization ...In my view, performance and accountability are the bedrock of modern, outcome-based control as they provide the insurance for the stakeholders that those making the decisions in the organization will be accountable for their actions and have to provide evidence of their accomplishments -- or failings -- through performance, result based information. And with new information technology, this performance feedback control can be reasonably tight and instantaneous, or more relaxed and periodic; it allows for varying levels of control depending on the degree of trust or risk that is present. The well known paradox that "the more you delegate, the more you need to control" is still valid. However, what it means today is that the more you empower, the better must be your performance and accountability processes, and that it is important for all employees and managers to respect the formal and informal boundary lines of conduct that they and their organizations have jointly agreed are important.