Governance in healthcare series Part II: Corporate Governance
Written by Tom Varghese
In the previous post, we briefly looked at clinical governance which includes caring for patients, managing clinical practices and administration. We now turn to corporate governance.
A healthcare board of directors and executive management are in charge of all aspects of corporate governance. New Zealand is perhaps the only country where elected health boards have long been a feature of the healthcare system. Across OECD countries the jury is out as to how to fully realise public participation that is not tokenistic or controlled.
Research demonstrating an association between governance engagement and healthcare quality measures has highlighted the importance of participation in corporate governance work. The dominant model of corporate governance is for organisations to be under the direction of a board. The board model of corporate governance is characterised by board directors acting together, with equal influence, to collectively make decisions about the organisation. Decisions made by the board are informed and guided by information and advice provided by management.
The board and the executives have many things to juggle on both sides of governance (clinical and corporate). Both sides establish goals and objectives to strive for and they need to manage risks as well. Administration is vital for health care. Its importance may increase as health care systems become more complex. Spending on administrative activities by governance and financing agencies currently takes up around 3% of health spending on average in the countries of the OECD. The remaining 97% is spent on health care delivery itself.
Governance in healthcare organisations continues to evolve as they navigate their way to implementing an integrated governance system that transcends clinical governance and corporate governance effectively. Without a model to follow, healthcare organisations attempt to define their own vanguard governance models to help achieve their corporate and clinical objectives.
Of ongoing interest in the NZ healthcare sector is the establishment of an interim entity of Health NZ as a Departmental Agency within the MoH, before legislation making it a permanent entity comes into effect in July 2022. A Board has also been appointed to provide independent advice on establishing the permanent entity and support the transformation and transfer of functions as the health reform takes effect.
It is worth noting that emerging literature points towards a 'fit-for-purpose' hybrid model integrating clinical and corporate governance philosophies.
