Conference Review: Fly in the governance ointment

  • Date:01 Oct 2011
  • Type:CompanyDirectorMagazine
Tony Featherstone discovers that “tiny” risks can quickly become big problems for healthcare boards after attending Company Directors’ inaugural Healthcare Conference:11 in Melbourne in September. He provides some tips on how Australia can accelerate the clinical governance journey.


Clinical governance seeks to improve multiple outcomes, including:

  • Increase patient care, outcomes and satisfaction.
  • Quality control and quality improvement.
  • Culture change.
  • Risk mitigation.
  • Legal and regulatory compliance (and protection of director liability).
  • Cost management.
  • Competitive advantage.
  • Accountability and stakeholder satisfaction.

Source: ‘The Board’s Role in Clinical Governance’, Australian Institute of Company Directors, 2011.


It is hard to imagine how a tiny fly in one cottonwool bud could do millions of dollars of reputational damage to a large healthcare organisation. Or how that fly could expose far more serious organisational culture issues, where problems were not measured, were covered up or staff lacked initiative to solve them.

That was one of many challenges KMPG Australia’s healthcare leader Shane Solomon faced in a five-year stint as CEO of the Hong Kong Hospital Authority, which managed the region’s 57,000-staff public hospital system.

Solomon’s presentation at the Australian Institute of Company Directors’ inaugural Healthcare Conference:11 in Melbourne in September graphically illustrated how small risks can become big problems for healthcare boards. In the "fly-gate" episode, the hospital authority decided to source cheaper cottonwool and gauze tape from China, thinking it came from a more recognised area of Chinese manufacturing. It did not, and Hong Kong newspapers ran pictures of fly-infested cotton medical supplies, to the public’s horror.

In another risk-management episode, Solomon asked staff if there was any chance that hospital USB memory sticks containing computer files could be lost, after reading about Hong Kong police losing such files. His staff downplayed the risk and, sure enough, a missing hospital USB stick was found containing 10,000 patient records. After a detailed security review, the authority found other hospital USB sticks had been lost; some were found in the pockets of medical garments at laundries. The problem was another example of bad people, culture and systems.

Such incidents seem minor in the scheme of potential risks. Yet in the healthcare industry, no risk is too small when it comes to safeguarding patient wellbeing. Solomon gave another example of a poor patient identification system leading to human error and a woman wrongly having a breast removed because of a mix-up in a blood test. In a further example, he spoke about introducing an information system to track surgical outcomes, to ensure there would never be a rogue surgeon killing people.

Solomon’s insightful talk showed the range of risks healthcare organisations face and how good managers design systems to minimise them, and help boards make decisions. It also showed the unique risks healthcare directors confront. The role of strong healthcare governance was a key theme at the sold-out conference. Almost 200 healthcare professional and directors attended, to learn about key issues facing healthcare boards in Australia and overseas, and powerful trends in health insurance, private hospitals and e-health.

Company Directors’ chairman Rick Lee FAICD launched a report, The Board’s Role in Clinical Governance, on behalf of Company Directors. The 73-page guide provides insights on how healthcare boards can respond to the unique challenges of clinical governance. It should be mandatory reading for any director thinking of joining the healthcare sector and for boards of healthcare organisations determined to engage in best-practice clinical governance and continually improve their performance.

Clinical governance is a vitally important topic. Well-governed public, private and not-for-profit (NFP) healthcare organisations ensure their people, culture and systems are aligned with strategy; quality of care is measured and maintained; risks minimised; and the organisation achieves its objectives. Strong clinical governance also safeguards the interests of other key stakeholders, such as taxpayers or charity donors, who need to know there is an adequate social return on their investment.

In some ways, clinical governance is no different from governance in other industries. It is fundamentally about directors of healthcare organisations ensuring their product – the patient experience – is delivered with consistent quality. The two main differences are: that clinical systems rely far more on human activity and judgements than most industries that are more automated; and a single bad product experience in the healthcare system can kill people and wreck organisation and individual reputations overnight.

Company Directors’ clinical governance guide says: "Without strong clinical governance, the board cannot be sure quality care is being delivered, that unacceptable events are being prevented, that risks are being well managed, that accreditation will be maintained, and that the organisation will survive and prosper over the long term." Or, looked at another way, healthcare directors face significant personal risk if they do not ensure strong clinical governance systems are designed and maintained.

This no easy task. As the guide notes: "Strong board involvement in clinical governance is a relatively recent trend ... The board’s role in clinical care receives scant attention in both governance and healthcare sector literature and remains, in many cases, a source of tension between boards, management and clinicians."

Another conference speaker, Dr Heather Wellington FAICD, a lawyer and medical practitioner, said Australia was "at the start of a journey" in healthcare governance. "I believe there is a sense that a lot of healthcare boards are doing very well in governance," she said. "From where I sit, I’m not sure that is based on robust evidence for the size of the task. I believe we still don’t fully understand what ‘quality’ is in healthcare. We are still developing the skills and expertise and don’t want to fall into the trap of thinking we have conquered [healthcare governance] in a short space of time, because we have not. Perhaps we are at the point where we have not quite understood the complexity of it."

Company Directors’ guide says an absence of board leadership in clinical governance in some instances may have been due to concerns about the technical clinical competence required by directors; the independent contractor model of doctors in hospitals and healthcare services; resistance from clinicians; and a fear or awe of clinicians. Simply put, some directors who did not have a clinical background may have been reluctant to challenge the healthcare CEO or other directors with medical skills.

Yet, as the guide says: "It is not the role of the board to get involved in the design of the patient experience, but to understand how the patient experience informs both the perception and reality of the quality of care and clinical outcomes, and to ensure that a patient-centred culture is pervasive in the organisation." Clinical governance is, in fact, a sub-set of broader, traditional governance functions, such as risk management, overseeing strategy and safeguarding organisation culture.

The challenge of dealing with medical professionals and other risks could easily see top-notch directors from other sectors overlook healthcare. The high stakes and heavy reliance on human activity, often in fast-moving situations, means healthcare boards arguably face more risk than boards in most industries. And, there can be incredible media scrutiny and pressure on healthcare executives who run budget-constrained public healthcare organisations.

The conference’s keynote speaker, Lorraine King, a leadership development consultant with prominent UK medical think-tank The King’s Fund, said the average tenure of a CEO in Britain’s National Health Service was less than 700 days because of intense pressure in running such organisations.

Other challenges complicate healthcare governance. Many healthcare organisations are NFPs, with directors volunteering or receiving low fees. Smaller organisations, in particular, may have extra governance challenges for boards and management because they do not have the same resources as larger enterprises. And compared with other countries, the healthcare sector is not well represented on the Australian Securities Exchange (ASX), which restricts the ability of healthcare organisations to raise equity capital or pay competitive board fees to top directors from other sectors.

Australia’s most prominent directors of listed companies typically look for roles in ASX 100 companies in the finance, industrial or mining sectors. That is not to say Australia does not have enough high-calibre healthcare directors. Far from it. Rather, there is an argument that the sector should consider recruiting leading directors from other industries who bring different perspectives, skills and experiences dealing with organisational transformation and regulatory reform.

Outstanding healthcare governance has never been more essential, given the risks facing the sector. An ageing and increasingly obese Australian population will put incredible strain on the healthcare sector later this decade and next, and kill organisations that cannot innovate and adapt. At the conference, Medibank Private managing director George Savvides FAICD, called on healthcare boards to challenge their management teams to "understand the future" and have a plan to deal with long-term threats and opportunities.

"Australia cannot swallow the growing cost burden from an ageing population on a business-as-usual basis," Savvides warned. "The Australian economy can’t afford it, let alone players in the healthcare sector. [Healthcare companies] have to change or the future will hit them." He said the problems were about much more than healthcare delivery, with a healthy Australian economy relying on a strong healthcare system that encourages higher workforce participation.

Regulatory reform is another challenge. Lee told the conference: "The way in which healthcare organisations are governed will be an important factor in determining the success of any reforms, by setting the framework for operational capacity and continuous improvement." He also warned that reforms must encourage good governance and organisational performance, not just compliance. "If we settle on a system that focuses only on compliance, we have sold ourselves short."

So how can Australia accelerate the clinical governance "journey" and ensure its healthcare sector is full of outstanding boards well-equipped to deal with the challenges?

King believes a big part of the answer is in training at all levels. "Considerable work has been done in the UK and internationally to evidence how good leadership leads to better patient care," she said.

"This is not nice to do, this is not interesting to do, it’s essential if we are going to deliver on the challenging times ahead [in the healthcare sector]. From the board to the ward, there is an increasing importance in leadership across the system of care and within individual healthcare organisations."

Solomon says the answer is in "people, culture and systems", a theme he reinforced throughout his talk at the conference. Smart healthcare boards ensure they have the right mix of directors who can work with management to ensure strong information systems are designed and implemented – and that the right information flows to the board. Smart boards also ensure the organisation has well-trained people at all levels who can maintain these systems in an honest, open, performance-based culture that has patient excellence at its core. When that is achieved, innovation often takes care of itself, as management can focus on improving patient care rather than minimising risk.

A fly in a cottonwool bud or a lost USB stick almost seem inconsequential against these immense governance challenges. Nevertheless, it is amazing how little problems often flash the biggest warning signs for directors who are alert to the challenges of governing complex, vital healthcare organisations.

The role of the board in clinical leadership should be to:

  • Establish and communicate the desired approach and framework for clinical governance.
  • Establish and foster a patient-centred culture.
  • Define, monitor and support the role of the CEO in clinical leadership, especially as it relates to:
    • Identifying, supporting and developing new and existing clinical leaders in the organisation;
    • Creating and supporting the spaces (forums) within the organisation for the necessary discussion about clinical governance as it takes place; and
    • Ensuring clinical education programs are in place.
  • Approve and monitor clinical governance frameworks, structures, and high-level policies.
  • Lead any change-management process required to establish or improve clinical governance.
  • Guide continual improvement of patient healthcare.
  • Create a positive organisational culture.
  • Encourage local, professional self-regulation.
  • Monitor accreditation.
  • Delegate levels of authority.
  • Adopt safeguards and censure methods.
  • Take responsibility for and interest in clinical governance and model-desired behaviours.

Source: ‘The Board’s Role in Clinical Governance’, Australian Institute of Company Directors, 2011.