Why governance and accountability matter in the provider sector

07 July 2016

I want to make an extended argument this morning about the importance of governance and accountability in the provider sector. And then explore what we need to do to safeguard that governance and accountability as we add a needed focus on local systems to our current focus on individual providers.

It’s worth starting by reflecting on why governance and accountability matter in our world.

They matter because:

Providers are spending £70 billion of taxpayers money, 9% of all public spending;
The services providers deliver are central to the communities they serve;
In each of those communities, providers are one of the largest local employers and often the largest public sector employer;
An NHS provider is one of the few organisations in our national life where treatment, care or support for ourselves and our loved ones can irrevocably and profoundly change our lives - for the better, and sometimes, sadly, for the worse;
And healthcare is also a high risk part of our national life where providers need to reduce avoidable mortality and avoidable errors and where it is right that they should give appropriate account when things do go wrong. And this is an environment where things can, do and, to a certain extent, probably always will, go wrong given the level of risk involved.

How providers have developed effective governance and accountability mechanisms

I’m struck, as a relative newcomer to the NHS, by how much time and effort NHS foundation trusts and trusts have invested in developing effective corporate governance and ensuring appropriate accountability for what they do. And, by and large, how effective and well developed governance and accountability mechanisms in the provider sector now are.

I’m struck by how much time and effort NHS foundation trusts and trusts have invested in developing effective corporate governance and ensuring appropriate accountability for what they do.

The time and effort that has gone, for example, into creating effective unitary boards that confer identical rights and liabilities on executives and independent non-executives. This means executive directors can be challenged by both their peers and independent non-executive directors as part of the continuing business of the board. This allows boards to hold the executive effectively to account as part and parcel of its regular work, rather than as a bolt-on, which is often the case in other governance models.

The investment in an extensive set of Board sub committees that spend appropriate time scrutinising and assuring the detail of what is going on at ward and service level. The robust and rigorous quality assurance frameworks that look at patient experience and service quality. The effort invested in engaging and supporting frontline staff, to encourage them to raise issues of concern candidly in a spirit of improvement, not blame. The gathering and scrutiny of extensive data to see what is happening at patient level, for example rigorous interrogation of HSMR and SHMI data to assess avoidable mortality. The time invested in assessing, managing and mitigating the ever present risk across what are very large and complex organisations.

For foundation trusts, the development of a whole new governance model of members and governors to ensure that the board is accountable and responsive to its local community. For all providers, the time invested in meeting the requirements of a wide ranging set of accountabilities: to commissioners; to regulators and system managers like NHS Improvement and the CQC; to local health and wellbeing boards and scrutiny committees; and, in the case of FTs, to parliament itself.

I deliberately rehearse the list at length because I think it’s important everyone in the service understands just how much time and effort has been and is being expended to ensure that governance and accountability in the provider sector are effective and fit for purpose.

Adding a local system focus to the focus on individual institutions

All of this activity has, of course, been focused on individual provider institutions. That’s not entirely surprising given the emphasis the policy framework has placed on provider autonomy, patient choice, and appropriate competition between providers. The individual provider has been the lynchpin, the focal point, the centrepiece of the system, with a matching degree of focus on the individual CCG.

But we are now heading for a different policy framework with a different set of emphases. A framework where the local system, not the individual provider, is the focal point. Where secondary care, primary care and social care are much more integrated. Where competition between providers is replaced by collaboration between them, across a wider geographic footprint. Where the organisational focus is on accountable care organisations, MCPs, PACS, federated provider boards and Devo governance mechanisms covering whole regions rather than individual providers and CCGs.

I think we’re in danger of leaving the governance and accountability behind

We are pursuing this direction of travel at high speed. The NHS Five year forward view set out the vision. The STP process is designed to create the strategic plans. The vanguards and Devo Manc are piloting ways of getting there. The 2016/17 planning guidance set out the early steps everyone has to follow. And the new NHS Improvement oversight framework includes a whole domain, one of five, to assess how providers are enabling strategic change at a local system level.

More than that, all kinds of new ideas are now floating around. Combined authorities as a potential new organisational form. System control totals as a new way of allocating money. Acute bed days per thousand head of population as a new way of measuring performance. The STP process as a new way of overriding individual provider veto of plans that other providers support.

We mustn’t leave governance and accountability behind in the rush to local systems

The problem I want to highlight today is that I think we’re in danger of leaving the governance and accountability behind. In the words of one chief executive, whilst the vision, the strategy, the planning and, increasingly, the proposed delivery are hurtling towards the world of local systems, governance and accountability are still stuck in the world of individual institutions.

I think this carries significant risk.

If we are to move to new care models, if we are to adopt new integrated organisational forms, if we are to deliver services effectively across a wider geographic footprint we have to ensure that the governance of service delivery and the accountability for that service delivery remain robust and effective.
This means maintaining our investment in good corporate governance by organisations but developing a more robust approach to governance between organisations and being clearer on lines of accountability at the local system level.

And although the current narrative emerging from the centre sometimes implies that we are moving from an individual institutional focus to a local system focus, the reality is that we need both. It’s not an either/or. We have to find ways of making governance and accountability for individual institutions and local systems complementary not mutually exclusive.

Worrying about governance and accountability isn’t pedantry

I know that some in the centre think that raising these issues is being pedantic, legalistic or is a way of blocking change. It isn’t. Good governance and clear accountability allow risk to be managed and mitigated. They need to be developed thoughtfully at times of peace to enable us to manage effectively in times of trouble.

We all understand the need for that local system focus. That’s why so many providers are leading vanguards. That’s why, in most places, providers are the key driving force behind the STP process. And that’s why providers are at the front of developing new organisational forms be it the Royal Free developing a provider chain, Salford developing an accountable care organisation or Southern Healthcare developing an MCP with its local GP federation.

Important questions that must be answered in adding a local system focus

But many of you are now asking questions about governance and accountability in these emerging structures that need urgent answers:

What happens if an STP footprint develops plans that require an individual provider to sacrifice its individual interests for the greater good of the local system as a whole – how is that reconciled to the provider Board’s, its NEDs’ and its Governors’ statutory duties?
What happens if some parts of an STP agree to a plan but others don’t? How far and when is it reasonable for the interests of an individual provider to be trumped by the needs of a wider local system?
How much and what delivery will be put through STP footprints when?
How will accountability actually work if money and delivery is allocated, managed or measured at the level of a local system rather than an individual institution?

These are just a few questions from a more extensive list. Urgent work is now needed to develop robust answers to them.

If this work isn't done there is a danger that while providers are prepared to plan at an STP footprint level, because it’s just a plan, they won’t be prepared to deliver services, handle money, agree to service reconfiguration, or be held to account for performance at that local system level. In other words, we can’t do what we now need to do without some concentrated work on how governance and accountability will function with this new, additional, focus on local systems.

Principles for answering the key questions on governance and accountability

How do we go about answering these questions and doing this work? I would like to finish by suggesting three principles:

Co-production between local and national

The first is that any work must be co-produced by the centre and local institutions. Too much of the existing policy structure has been developed by the department and its arms length bodies without appropriate consultation with frontline organisations. Front line organisations have the statutory responsibility for local delivery and they have to make the framework developed by the centre work on the ground. It is vital that skills and expertise are pooled. Particularly when much of the expertise, knowledge and skill on governance and accountability resides in provider boards and other local organisations. It doesn’t sit at the centre.

Compliance with the law

Secondly, the answers we develop must have a sound and explicit legal basis. While we all understand the wish to avoid primary legislation, we simply cannot pretend that the 2012 Act does not exist. In a complex and risk laden sector like health care, front line boards must have the protection of a governance and accountability framework that is compliant with the law. We all know that when things go wrong, which is likely to happen more frequently if we are experimenting with new ways of working and as the overall strategic environment deteriorates, the first recourse is the law. What were the legal responsibilities and have they been met? Our system leaders need to acknowledge that provider board directors have duties set out in statute that cannot be wished away or ignored. If we don’t have a legally compliant framework we are exposing our senior leaders to unacceptable risk. And when we do the difficult things we know we have to do, like reconfigure services, they will simply fall apart in our hands at the first legal challenge if they are not legally robust.

Replicate what works at individual institutional level

Thirdly, the principles of good governance we have already developed at individual institutional level should be reflected in the governance we now need to develop at a local system level. These include appropriate autonomy from the centre; clear lines of accountability, including to local communities; appropriately robust and detailed assurance and risk management systems and processes; and a degree of independent challenge from a non executive function. A number of you have rightly pointed to these as significant issues in the current STP planning process governance. Chairs and NEDs, for example, have been unclear about the role they should be playing here.

The role that NHS Providers will play

NHS Providers as an organisation will play its part in this important debate. We’ll continue to raise these issues at system level, even if they make us unpopular. We will develop provider sector thinking in this area as we will do with a separate session with Chairs at the end of today’s conference. We will discuss these issues in the relevant networks. We’ll incorporate these themes into the emerging Board Development Programme we have agreed to create with NHS Improvement. And we will continue to share good practice and emerging thinking on paper as we have done in the joint publication on lessons and tips from new care models that we are launching today with Hempsons and which you will find on your chairs.

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