1. The intersection between corporate and clinical
governance – implications for directors of health
services

2. Introduction
• Acknowledgement - You – Professional Directors, long
standing, specific qualifications, highly
experienced, well aware of
governance issues and legislative
framework
• Program for today - Explore examples of corporate
and clinical governance failures and the
consequences both in Australia and
overseas
Examine models of good corporate and
clinical governance
Examine the matrix of obligations
imposed on Directors of health service
boards
Refresher about how health service
directors ensure obligations pertaining to
good corporate and clinical governance are
discharged
• Questions and Discussion

3. Corporate Governance -
Definitions
• “The framework of rules, relationships, systems and processes within and by
which authority is exercised and controlled in corporations’. It encompasses the
mechanisms by which companies, and those in control, are held to account”
(see ASX Corporate Governance Principles and Recommendations ASX Corporate
Governance Council (2nd Edition) 2010)
• “Corporate governance’ refers to the processes by which organisations are
directed, controlled and held to account. It encompasses authority,
accountability, stewardship, leadership, direction and control exercised in the
organisation.”
(see Australian National Audit Office Public Sector Governance: Vol 1: Better
Practice Guide: Frameworks, Processes and Practices. ANAO Canberra 2003)
• Dimensions for the Board – Performance and Conformance
• Separation of management and governance

4. Elements of good corporate
governance
• Accountability – both internal and external;
• Transparency/openness;
• Recognition of stakeholder/shareholder rights;
• Legal compliance;
• Ongoing financial scrutiny and control.
Good governance elements are assumed to lead to good
performance. On the whole, they are measures that can be
assessed objectively from externally available and
verifiable information.

5. What governance factors add to the
value of a high performing
organisation?
• Separation of the roles of Chair and CEO
• Majority of non-executive or independent directors
• Small board size
• Balance of director skills and competencies
• Audit and other board committees
• Effective board performance evaluations
• Linking CEO rewards to performance
• Transparent appointment processes
• Adequate communication with investors and
stakeholders

6. Examples of failure in corporate
governance in Australia and
overseas• Australian Wheat Board
– Cole Royal Commission found that the AWB paid AUD300M to a Jordanian
trucking company associated with the Hussein regime in breach of UN
sanctions. The conduct of the AWB and its officers was due to a failure in
corporate governance. ‘There was a closed culture of superiority and
impregnability, or dominance and self-importance. Legislation cannot create
a satisfactory culture…it is the task of the board. The AWB and its Board
failed to create, instil and maintain a culture of ethical dealing’. Andrew
Lindberg CEO disqualified from managing companies until 2014
• HIH Insurance
– Owen Royal Commission found that collapse of HIH not due to fraud but
rather failure of corporate governance. ‘Lack of attention to detail, lack of
accountability for performance and lack of integrity in company’s internal
processes coupled with a failure to challenge leadership decisions’
• ABC Learning Centres
- ASIC found value of intangible assets overinflated, ballooning debt, crisis of
liquidity. Groves and Kemp both faced criminal charges of breaching their
duties as directors. Charges dismissed but auditor Simon Green banned from
practice for 5 years.

7. More examples of corporate
governance failures
• Centro
- Centro's 2007 annual accounts had misclassified a number of
borrowings as non-current liabilities when they were actually current.
ASIC commenced proceedings against the directors for breach of duty.
The Federal Court held that a certain level of financial literacy is an
essential qualification for directors and they should have been familiar
with the accounting standards. The directors were found to have
breached their duty of care and diligence.
• James Hardie Industries Limited (‘JHIL’)
– Jackson Report – Special Commission of Inquiry 2004 found JHIL
formed a Medical Research and Compensation Foundation to meet
the claims of employees who had contracted asbestos related
diseases. The Directors of JHIL permitted the release of a
statement to the ASX claiming that the Foundation had sufficient
funds to meet all legitimate future asbestos-related claims and that
the amount of the funding had been checked by an independent
actuary. In each case this was misleading. High Court upheld an
appeal by ASIC and penalised the directors with a combination of
banning orders and fines.

8. Clinical Governance -
Definitions
• ‘The system by which the governing body, managers, clinicians and staff
share responsibility and accountability for the quality of care, continuously
improving, minimizing risks, and fostering an environment of excellence in
care for consumers/ patients/residents’ (see Victorian Clinical Governance
Policy Framework 2009)
• ‘A framework through which NHS organisations are accountable for
continually improving the quality of their services and safeguarding high
standards of care, by creating an environment in which excellence in clinical
care will flourish’ (see Robert Francis QC report, Independent Inquiry into
care provided by Mid Staffordshire NHS Foundation Trust, Feb 2010)
• ‘A systematic and integrated approach to assurance and review of clinical
responsibility and accountability that improves quality and safety resulting in
optimal patient outcomes.’
(see Dept of Health WA Setting Standards for Making Health Care Better-
Implementing Clinical Governance in WA Health Services 2005)

9. Elements of a robust clinical
governance system (Victoria)
• Priorities and strategic direction are set and communicated clearly.
• Planning and resource allocation supports achievement of goals.
• Culture is positive and supports patient safety and quality
improvement initiatives.
• Legislative requirements are complied with.
• Organisational and committee structures, systems and processes
are in place.
• Measure performance and monitor quality and safety systems within
the service.
• Report, review and respond to performance to support continuous
improvement of quality and safety within the service.
• Roles and responsibilities are clearly defined and understood by all
participants in the system.
• Continuity of care processes ensure that there is continuity across
service boundaries. (see Victorian clinical governance policy
framework 2009)

10. The National Framework
(ACSQHC) - features
• Reporting
• Regulation
• Adequate funding
• Building Trust
• Monitoring and measuring
• Ongoing education
• Clinician participation in partnering with patient to improve
experience and choice of care
• Role of board and senior management team
• Good governance program
• Health service culture
• Complaints management
(see Australian Commission on Quality and Safety in Health Care,
Safety and Quality Improvement Guide Std 1: Governance (2009)

11. Examples of failure in clinical
governance in Australia and
overseas• Mid Staffordshire NHS Foundation Trust
- Francis Report (2010) found systemic failure to deliver basic
standards of nursing care. Staff complaints about quality and
safety of care were ignored. Insufficient staffing and other
resources. Poor communication characterised by lack of
openness. Focus on meeting target-driven priorities rather than
patient safety. Loss staff morale. Reliance on external
assessments. Poor clinical audit program and poor complaint
investigation. Lack of suitably qualified directors on the board.
Long term serious organisational challenges coupled with a lack of
urgency for resolution.
• Bristol Royal Infirmary
- Kennedy Report (2001) following death of 29 babies operated
on by two cardiac surgeons, found the need for a single unified
accessible system of reporting and analysing sentinel events.
Need for creation of an open and non-punitive environment where
it is safe to report and admit such events.

12. More examples of clinical
governance failures
• James Peters
- Supreme Court hearing before Forrest J found Fentanyl addicted
anaesthetist guilty of deliberately infecting 55 patients with Hepatitis C.
Subject to Medical Board supervision but was never tested for the
presence of Fentanyl or its metabolites. Judge found ‘Your conduct fell
so greatly short of the standard of care expected of the reasonable
anaesthetist and involved such a high risk of serious injury that
punishment under the criminal law is merited’ (see R v Peters
(2013)VSC 93
• King Edward Memorial Hospital
- Douglas Inquiry (2001) found 47% clinical error rate in treatment of
high risk obstetric cases. Also found ‘inadequate’ Clinical policies and
guidelines; Care planning, care delivery and documentation; Incident
reporting and management; Staffing problems; Education and training;
Consultant accountability and cover; Junior doctor supervision and
training; Credentialing of doctors; Performance management of

13. More examples of clinical
governance failures
• St Georges Hospital (NSW)
- Grace Wang, maternity patient in labour with first child injected with
chlorhexidine instead of anaesthetic during routine epidural procedure.
Now high level quad. NSW Department of Health Inquiry into St Georges
Hospital NSW (26 June 2010) refused to release findings but SMH
obtained and published findings. SMH obtained a copy and reported the
following findings: SKIN antiseptics should be banned completely from the
sterile equipment table used during epidural procedures to prevent them
being injected by accident and Antiseptics should be distinctively coloured
so they could not be mistaken for the saline solution
• Royal North Shore Hospital (NSW)
- Patient presented at hospital in labour, told by nurse that no bed
available, suffered miscarriage in the toilet. Investigation by NSW Joint
Select Committee into the quality of patient care at RNS (Oct 2007) found
Lack of clinical governance, Long standing structural and administrative
issues and chronic underfunding meant focus of administration was on
finances not patient safety

14. And some more
• Chelmsford Hospital (1990) – death of 24 patients following ‘deep
sleep’ therapy
• Canterbury Hospital (1999) – Endoscopy patients injected with
phenol solution
• Royal Melbourne Hospital (2002) – Coroner Graeme Johnston
ordered exhumation of patients deceased whilst under the care of
two drug addicted nurses. Death suspected to be caused by insulin
overdose administered by nurses.
• Dr Jayant Patel and the Bundaberg Base Hospital (2005) -
Queensland Public Hospitals Commission of Inquiry recommended
Dr Patel be charged with manslaughter following the deaths of 17
patients and found hospital administration guilty of systematic failure
of clinical governance

15. Common themes
• Ineffective or inadequate systems to monitor and report
adverse events
• Absence of transparent systems and support to deal with
patient/staff concerns about quality and safety
• Lack of effective medical credentialing and performance
review system
• Difficulty of consultants to engage with patients who
actively seek to make health care choices (‘the expert
health professional culture’)
• Lack of trust amongst administrators/clinicians and poor
communication amongst health care teams
• Focus by management on financial outcomes not patient
safety
• Human error

16. Obligations matrix for directors of
health services
Corporations Act (2001)
S180 – duty to act with care and
diligence
S181 – duty to act in good faith
S182 – improper use of position
S183 – improper use of information
S191 – disclosure of material personal
interest
Part 7.10 – Insider Trading
Your mission and values
Catholic healthcare service
Compassion
Integrity
Courage
Respect
Regulatory framework
(APRHA/ASIC)
Company limited by guarantee
regulated by ASIC
APRHA oversight with responsibility
for implementing the National
Registration and Accreditation
Scheme
Stakeholders (importance of patient
decision)
Autonomy of clinician and assumption
of risk being overlaid with significantly
increased role for patient as decision
maker and assumption of risk being
shared with hospital

17. ‘Nose in, fingers out’
• Directors duties – fiduciary and non-delegable
• Increasingly, performance and conformance linked to
funding support from private health insurers
• Reputational risk to hospital and directors
• Hospital responsibility and performance expectations
balanced against employment status of consultants and
ability to direct/control
• Triple line of defence
• National safety and quality framework – ACSQHC
Standards

18. Implications for directors
• Flow of information – right data at the right time and the right to
challenge it
• High trust, High challenge and High engagement with the
executive team
• Patient experience as the primary focus of clinical and corporate
governance framework
• Board familiarity with business drivers and remedial measures
specifically in relation to resourcing and best practice
• Understand different models of patient safety (local and
international) and be open to consider adoption of different
frameworks (WHO, Mayo clinic, NHS)
• Investment in leadership, culture, link between
structural/operational characteristics and improved safety
performance
• Insure – check the limits, conditions and exclusions match the
liability exposure