There’s a single thread which might unravel many of the serious underlying issues of our PHN management paradigm.
Anyone seen or heard of the Department of Health, Disability and Ageing’s Boston Consulting Group review of PHNs which took a year to do, cost about $2 million and was completed and handed over to DoHDA about nine months ago?
Nope? Didn’t think so. We can’t even find any PHNs who will publicly admit to having seen any of it.
The more DoHDA holds off its release the more of a conspiracy halo this review gets.
What could possibly be in a review commissioned by the Department on how PHNs run that the Department, which runs them, does not want any of us to see?
A big possible problem here is that in the end, if PHNs are running badly, whose fault would that most likely be? After all, PHNs are run, ultimately, by DoHDA.
This week we got a fascinating insight into this dilemma.
DoHDA released a specific audit it had commissioned into what ostensibly has been a star-performing PHN over the years, WentWest, in Sydney’s western suburbs.
Why was WentWest singled out for what is a very detailed governance, compliance and finance audit? It feels like someone on the inside may have done a bit of whistleblowing.
But if you read this week’s audit summary from DoHDA here, you’d probably give up thinking that a few pages in, because for the first eight pages of a nine-page summary the auditor describes an organisation with a glittering track record of financial and governance goodness and wellbeing.
Indeed, if you don’t persist until the very last page (page 9) you’d suspect that DoHDA had called for the audit to show everyone just how great PHNs run from a governance perspective.
But then, unfortunately, there is page 9: Healthicare.
If you read that page, by the end of it, you realise that every glowing tick in the summary report that auditor McGrathNicol gives WentWest for the first eight pages, is effectively made redundant by how WentWest managed this project.
You simply can’t do what WentWest did in the Healthicare project and get any of those ticks in the first eight pages. It reveals some serious issues with governance, process, strategy, management and finance. The same people getting the good marks in the first eight pages are doing the bad stuff on page 9, but the auditor for some reason sees page 9 as being unrelated.
What’s wrong with page 9?
Auditor’s words here, not ours:
“The establishment of Healthicare by WentWest raised potential concerns as to the use of Commonwealth funding. In particular, we found WentWest’s definition, recording and use of ‘Unencumbered Funds’ to be potentially not in accordance with the Commonwealth’s funding arrangements.
- “We have made three recommendations in relation to WentWest’s establishment of Healthicare: It is recommended that:
- “WentWest re-evaluate its practices regarding accumulation and use of ‘Unencumbered Funds’ and ensure it does not include Commonwealth funding.
- “WentWest refine its financial management and record-keeping practices.
- “It is recommended that WentWest reassess its practices regarding reporting of unspent funds through the annual audited acquittals.”
Our translation now. WentWest:
- Spent significant government funds – the summary report doesn’t reveal the amount but the first annual report of Healthicare does and its more than $1 million – on something they originally never formally got signed off on with the government and didn’t account for it for quite a while after the project was in full swing. Its first annual report was released in January this year when the project started in 2023.
- Established a new GP facility that, whether it was testing new models of care or not, competed directly with local GP practices (and probably any nearby urgent care clinics), using government funds. A few nearby GP practices complained and were angered by the project as they felt it was competing with them for patients.
- Entered into a series of deals which represented conflicts of interest. For what and with who isn’t revealed in the summary report, or the first annual report of Healthicare, but searches of company records reveal a few avenues to look at, including some people who have worked closely with WentWest in the past.
- Broke with normal financing and governance protocol to do all the above.
- Intends now to somehow fix the problem by some process of separating Healthicare from the control of WentWest, a process anyone would have to consider in the light of all of the above, another potential minefield of bad governance and conflict. In other words, it seems to be saying it will abandon any relationship with the project now.
Based on what actually happened, the first and most important summary point of the auditor’s report probably should have read more like this (totally our words):
“MacGrathNicol uncovered some substantive and worrying breaches of governance and financial reporting and management protocols, including a series of potential serious conflicts of interests, some which may involve people who have been involved in current management of the PHN or have been in the past.”
Reads a bit different, right?
For all we know, the actual audit report is a bit more like this. We’ve asked DoHDA to send us a copy so we can check, but we aren’t holding our breath.
Even if the actual audit report is as bland and blurred as the summary report as to the real issues at hand, the problems aren’t any less serious.
But are we perhaps going in too hard on WentWest here. After all, as the auditor’s summary reads, it’s an isolated project transgression, right?
Yes and no.
WentWest has done the same thing before – that is, build out a project which isn’t in the least in scope of their core remit from DoHDA (see below), using Commonwealth funds, featuring quite commercial goals and outcomes if it succeeds, with a lot of potential conflict with people associated with the running of the PHN, and very little transparency around reporting, process, finances and outcomes.
LinkedEHR is a long story but see if you recognise any similarities to Healthicare:
- It essentially was a multimillion-dollar project to build a new (commercial?) software product for monitoring care plans and integrating them into GP patient management systems.
- It was built for WentWest by a private company, Ocean Informatics, which won a tender to do the work.
- If the product was successful, it would end up competing with several privately built commercial products already in market.
- There existed lots of potential points of conflict in the process between people who worked for WentWest, or had in the past, and those who worked with vendors associated with the project.
- The product failed (suspiciously so did Ocean Informatics at the same time), WentWest starting losing a lot of money, so they then they sold it to a commercial vendor which already had a care-planning product in market.
- The vendor it ended up with had people working for it who had worked with the PHN and Ocean Informatics. There are questions over what value was exchanged in the transaction which were never asked by anyone.
Okay, so WentWest has done it before.
But now ask yourself, is WentWest an outlier here, or is this behaviour we see with other PHNs, in which case, what is going on?
Turns out, it’s not just WentWest who has had grand ambitions to build cool new software or develop new services that might have a big commercial upside, notwithstanding they at times compete either with existing commercial providers or, as in the case of Healthicare, local GP practices.
The same thing WentWest has been called out on by the auditors on this week – albeit ever so gently – has been occurring all over our PHN network for years now and is hardly ever called out.
If a lot of other PHNs have engaged in similar “off reservation” activity using government money, and never really been pulled up, is it the management of PHNs at fault here, or do we have an issue with the framing and guidance of their core function?
It’s almost certainly the latter.
Related
PHNs think what they are doing it fine. They rationalise projects like these as sitting within their core functions, something that is probably reinforced by the fact that a host of PHNs have been doing similar off-grid projects for many years now, without any formal recourse.
Below is what DoHDA says in its own words PHNs should be doing. See if you can easily fit the WentWest projects and then some more we list below into this reasonably clear framework:
“Primary Health Networks (PHNs) assess the health care needs of their community and commission health services to meet those needs, minimising gaps or duplication.
“They:
- “Coordinate and integrate local health care services in collaboration with Local Hospital Networks (LHN) to improve quality of care, people’s experience and efficient use of resources.
- “Commission primary care and mental health services to address population health needs and gaps in service delivery and to improve access and equity.
- “Capacity-build and provide practice support to primary care and mental health providers to support quality care delivery.”
Below are a few more examples of projects like LinkedEHR and Healthicare, done by other PHNs over the years.
- $10 million to build a data lake in WA for all PHNs to house the data they collect from their local GPs. This project currently looks likely to be subsumed and eventually controlled by the Australian Institute of Health and Welfare as the position of DoHDA is that 31 PHNs should not be individually trying to extract, store and manage their data. They should mostly just be analysing it for commissioning purposes.
- Millions to two separate PHNs to build out their own data extractor software products, which they have on-sold to other PHNs, in direct competition with existing commercial extractors, who had been doing the same job for many years.
- About $600,000 for a PHN to build a bespoke e-referral solution for its region, where at least already two existed in market when they started the project, and one is now gaining huge traction across the country. After two years of development, the PHN solution hasn’t seen the light of day.
- Who knows how much money to apply to the ACCC to establish that PHNs could set up their own monopoly on GP data, against existing commercial vendors who extracted and analysed data on their behalf in the past.
If you dig through the annual report archives of PHNs there are more you will never have heard about, because, unsurprisingly, most failed. Others have never made PHN annual reports formally while others, like the WA data lake project, have become talking points on what PHNs should and shouldn’t be doing at their core.
What we’re down to here might be why the BCG review is emerging as a mystery in the health sector.
Why does DoHDA continue to be happy running PHNs in a manner where they can use a lot of money to do things that are way outside the scope of the core remit DoHDA has given them, and which any auditor would say is a crazy way to spend taxpayers’ money – trying to build competitive products and services to either the private sector or their own GP constituency – especially when our health system is so stressed?
Having said all of this you can also understand why PHNs want to do projects like these. They are tangential to what they do and they are often seductive chances to prove themselves as entrepreneurial and innovative.
Even if they have read that single page on the DoHDA website about what they are supposed to do, who wouldn’t do some of these things if it was clear by how many other PHNs were getting away with it, that you could too?
Given the opportunity of easy funding, who wouldn’t want to lean into some of these challenging, often technology-based projects, particularly if they had embedded as a goal some huge potential commercialisation opportunity down the track.
The problem of course for PHNs is twofold:
- It’s not their core function to be on the bleeding edge of product or services development in healthcare;
- There is no downside to failure of their investment. DoHDA hasn’t been watching and PHNs haven’t been reporting the failures transparently either. Everyone just moves on. Mostly none of it is properly audited.
In the WentWest auditor summary this week we still aren’t given any inkling of the financial performance or indeed market performance of their new model clinic.
We are, however, in the first annual report of Healthicare, and it doesn’t look very good.
In summary, by the end of its first formal year of operation, with a total of nearly $1.8 million in funding, including an unsecured loan of $1.2 million, Healthicare is reporting a technical profit of $212 – yes, that’s $212 — but in cash terms is running so far at a loss of about $1.2 million.
If you want to read Healthicare’s first annual report you can here.
All of this is, of course, a significantly different dynamic to how the private sector has to raise money for product development and wear the failure in their P&L over the course of time if it fails. Which means of course that the private sector is much more careful in how it plans, builds and runs these projects. For starters, they hire staff who have experience and skill in building new products and services.
One more big problem here.
If anyone cares to audit every single PHN annual report over the years, every one of them has the same banal declaration about board members and management who have a conflict of interest in some project that the PHN has commissioned in that year.
Declared projects in possible conflict (but given the green light by the auditor) exceed the $100 million mark across the country’s PHN network each year, so we aren’t talking rounding errors.
Because of the regional nature of PHNs, and the fact they need local experts to help to assess commissioning, some conflict is inevitable, and acceptable, if managed the right way.
If you run the biggest private residential aged care network in a region and you end up on the board of a PHN that also happens to commission your network for services, you aren’t acting corruptly if everything is transparent with the right governance.
But you need to be extremely careful in how you manage and report this conflict.
This is all something that DoHDA has largely let run out of control over the years without any deep analysis or auditing of whether there might be some systemic problems.
There are lots of potential points of conflict across the whole network with a lot of opportunity for transactions to become questionable.
Who is looking at all that? Maybe BCG did?
A perfunctory peep below the waterline on just a few of the projects declared in conflict on some of the PHN annual reports, followed by a few cross-referencing Google searches, suggests that DoHDA should probably do a more systematic checking of the conflicts register, just to be sure.
But there’s the problem of PHN control and management right back in our faces.
If the BCG report, or any auditing by the DoHDA, uncovers systematic mismanagement and waste of government money, who really is to blame?
You almost certainly couldn’t plant much of the blame at the feet of the PHNs at the moment. Their management and governance by DoHDA is clearly all over the place.
They haven’t even been properly measured for performance in the last four years or so, and even if they were, a lot of people have poked lots of holes in DoHDA’s performance framework for being task based, not outcomes based.
If you pull at the loose thread of this WentWest episode, the whole fabric of how PHNs are run by the Department starts to unravel.
What’s happened with Healthicare has been happening all across our PHN network for a long time and it’s pointing to significant issues of mismanagement and waste by these vital organisations, overseen by the DoHDA.
DoHDA isn’t holding PHNs to its own reasonably clear operational framework, and a lot of money and time is leaking away as a result.
So, yes, we have indeed been a little too hard on WentWest here.
The problem is, without proper guidance, PHNs are still clearly of the view that projects like Healthicare and LinkedEHR are well in scope, and even important somehow for the betterment of their patients and healthcare providers in their region.
In response to our news story on the Wentwest audit yesterday the current CEO seemed to be doubling down on the worthiness and relevance of Healthicare as a PHN project, despite the quite damning implications of page 9 of the auditor summary.
He argued that:
- “Healthicare was a not-for-profit company with a separate board.” Well, yes, but with members who’ve been tightly associated with WentWest in the past, some of whom may have conflicts;
- “It came about from consultation with local GPs, government and business.”Not actually relevant if it’s out of scope for what a PHN should be focusing on and also not appropriate that it competes with local GP clinics when a PHN is supposed to support local GP clinics;
- “That Western Sydney has one GP for every 903 residents.”Maybe, but Healthicare is surrounded by a lot of competing GP practices and based on their revenue in year one, there wasn’t a need for another one.
- “That Healthicare aligns with Strengthening Medicare.” Hmmmm, so does every GP practice in the country.
Okay, I’m honestly not trying to lay into the CEO of WentWest here.
The point I’m trying to make is that WentWest feels that the Healthicare project is in no way, shape or form out of scope of their core reason for being.
Somehow, they’ve convinced themselves that they can use $500,000 of leftover Commonwealth cash, plus a $1.2 million unsecured loan on a clinic to pilot some new care ideas they’ve had, one which essentially competes with the very GPs they are supposed to be supporting.
All without letting anyone know upfront what they were intending on doing, without reporting any financials on investment and performance until about two years into the project, and without, so far, any reporting of the learnings they might have that might be useful to others – PHNs and GPs – from their pilot.
The only way this is possible is if DoHDA keeps allowing wayward stuff like this to go through to the keeper all the time.
It’s been a lot of times.
