Health on the block

by

Corporatisation and privatisation of government services in NSW

Jenny Haines

Big business and employers in Australia have brought about radical reform of the Australian economy over the last 30 years. They have:

  • Restructured industries, shutting down the manufacturing base of this country and largely shipping it to the Third World.
  • Encouraged successive governments to reduce tariffs and protective payments so that those industries that remain in this country struggle to compete with the Third World.
  • Internationalised capital, contributing to a huge flow of profits out of the country and our current controversial balance of payments deficit.
  • Deregulated the financial markets so that billions of dollars can flow in and out of the country in a single day, making flights of capital easy if there is any threat to big business investment interests.
  • Deregulated industrial relations at the federal level, and the next step is the Howard Government’s takeover of the state industrial rlations systems and the spread of individual workplace agreements to state-based workers.
  • Sold off public-sector and nationalised companies such as the Commonwealth Bank and Qantas, and the next stage is the full sale of Telstra.

To bring about this radical reform, big business and the employers had the help of successive governments of both parties. Federal Labor deregulated the financial markets, federal Labor sold the Commonwealth Bank and Qantas, federal Labor brought in enterprise bargaining in 1993, federal Labor reduced tariffs. The Howard Government has pushed the full sale of Telstra, deregulated the public service in Canberra and staff and services, and introduced individual workplace agreements.

Of course, several union leaderships helped too. Starting with the ALP-ACTU Prices and Incomes Accord in 1982, unions voluntarily reduced their own power, first to a centralised system that they ought to have known at the time would not deliver real cost of living increases, and it didn’t. Paul Keating was able to boast in the 1990s how the Accord had cut wages to assist business in making more profit. Later many unions formed the large amalgamated structures that divorced union leaderships from their members. Most unions became passive. Many union militants faded away. When deregulation came along, there was comparatively little strength left to fight off individual workplace agreements.

Big business and the employers now want to take the next step: the plunder of public-sector services for even more private profit. In NSW, they are ably assisted in their ambitions by the Carr Labor Government, which is happily skipping down the yellow brick road, like Dorothy heading for the land of Oz, towards corporatisation of all public-sector services, turning them into business units with a view to contracting out the profitable sections to the private sector. Trade union officials of previous generations must be rolling in their graves.

In the health industry, the Financial Review, the newspaper of the happy capitalist, reported on May 25, 2005, that NSW Health has ambitious plans to slash $100 million from “back-office services” and force as many as 10,000 jobs out of the public sector.

NSW Health has been developing a four-step procurement process for its plan to centralise finance, information technology, pathology and warehousing services. Job cuts are to be made.

Public and health sector unions are being pacified with assurances that these jobs will be redistributed “to realise the NSW government’s long-held goal of redirecting $100 million into front-line health services. The government has promised to redeploy and transfer affected staff and has pledged there will be no forced redundancies.”

The Financial Review report goes on:

The shared-services plan affects up to 10,000 jobs and follows the amalgamation of 17 area health services into eight, which took effect on January 1. The procurement plan calls for the department to take the unusual step of prefacing a call for expressions of interest with a “pre-EOI” document, followed by an EOI.

By October, 2005, a request for proposals is expected to be circulated to selected suppliers, with final contract negotiations slated for early 2006. The department briefed potential suppliers on the shared-services program late last year. The pre-EOI, originally slated for January, is expected in the next few weeks.

Accenture is expected to be among the companies that bid for the work. IBM is also expected to make a pitch to win back the account after Accenture won the contract to complete a feasibility study for the shared-services plan.

The initiative is not without its critics, and a number of concerns have been raised over the probity of the massive project, and the accuracy of savings estimates. NSW auditor-general Bob Sendt is considering a number of complaints and will shortly determine whether to conduct a review of contracting for health department projects such as shared corporate services.

The services to be put on the block are expected to include human resources, finance, supply, asset management and computing services, as well as linen, food, warehousing and pathology.

The shared-services program is slated to eventually generate $58 million a year in savings, with the remaining $32 million cost reduction to come from the amalgamation of area health services.

Departmental and area health service executives are split over the proposed program, and a number of vendors have expressed concerns that Accenture is free to bid for work under the controversial initiative. The program, along with efforts to centralise computer and communications projects, has met bitter resistance from some departmental staff and area health service employees who are reluctant to give up control of projects.

In December last year, a group of disgruntled NSW Health executives lodged an unofficial report criticising technology project management at the department and levelled serious allegations against the program’s feasibility planning process. “Accenture carried out at least four strategic reviews of the shared-services proposal in 2003 and 2004,” the executives’ report says. “Accenture produced various recommendations from analysis that is based on a set of poorly constructed services.”

They also alleged that the department “ignored” concerns from Ernst and Young over the speed with which the project was executed. Ernst and Young had been contracted to help prepare the business case for the shared-services program.

The report was filed with the Independent Commission Against Corruption, the NSW Auditor-General and Health Minister Morris Iemma. The Auditor-General is considering whether to conduct a formal review of the matter.

An executive from one hospital software vendor, who declined to be named, also expressed concerns over the probity of Accenture carrying out the feasibility study as well as bidding for tenders, but acknowledged NSW Health had limited choice.

“The reality is, hopefully, NSW Health will have satisfied themselves that the Chinese walls [at Accenture] are up and that the same people aren’t working on the response to the shared services as were working on the specification,” he said.

Well, well! This is only the planning stage, and already the Auditor General is involved and ICAC has been briefed. I can’t wait for the rest of this program!

For big business this is only the beginning. Standing on the sidelines waiting, with million-dollar signs in their eyes, they are going to want more than is planned for here. Much more!

How will all of this affect nurses in NSW?

Initially the current leadership of the NSW Nurses Association took an ostrich approach, ie head in the sand, to this, the biggest restructuring of the NSW health system in recent times. At the November 2004 meeting of delegates from all over NSW, the attitude of the leadership was “this is nothing to do with us, it’s a Health Services Union HSU matter” (the HSU covers administrative and non-medical staff in the health service).

A resolution moved by my branch opposing the program was lost 50 to 70 at the November delegates’ meeting. However, at the January 2005, meeting of the association’s committee of delegates, Royal Prince Alfred Hospital and Concord branches sent the following resolution to the delegates’ meeting:

The NSWNA opposes the corporatisation and contracting out of ancillary services and administrative functions in the NSW public health system. The moves currently under consideration, and the moves towards implementation of these proposals, are contrary to the fundamental policy objectives of the NSWNA. This branch calls on the Department of Health, the Minister for Health and the Premier to ensure that these proposals do not proceed, are withdrawn and the services continue as publicly managed services with public sector employees. This resolution to be sent to the Minister for Health and the Premier.

This resolution was carried by an easy majority, about 60 per cent in favour 40 per cent against at the delegates’ meeting despite opposition to the resolution from some officers and councillors. There were a number of middle managers in the health system at that meeting whose interests and, maybe, jobs are directly and indirectly affected by this program.

The basic arguments of those who opposed the resolution were:

1. That the issue did not affect nurses, that it was primarily a campaign for the HSU. But nurses will be directly and indirectly affected if these services are corporatised and PPPed. Nurse managers in the health system often manage or partly manage these services. Nurses are employed in these services. If these services are contracted out to the private sector and the private sector does not perform to expectations, the experience of the health system over and over again is that nurses are the most affected, being the largest group of 24-hour, 365-day-a-year employees in the system. It is the nurses who will have to pick up the slack and make the system work. Two basic and essential services on the list to be PPPed are food and linen. Are we going to have nurses going to the shops after hours to buy patients food because the contractor can’t deliver? Are we going to have nurses doing the patients’ linen or taking it home to wash because it’s a weekend and the state-contracted linen service in Orange is closed until Monday?

2. That on the basis of assurances from the Minister for Health that “it is not the NSW Government’s intention to undergo privatisation of hospital services” (letter from Health Minister Morris Iemma to Michael Williamson, secretary of the HSU, November 16, 2004), the HSU’s council has decided not to campaign in opposition to the program. However, NSWNA assistant general secretary Judith Kiejda noted in a report: “the HSU Council has decided that while opposing shared corporate services, the HSU will not be campaigning against the progress of Health Support on the basis that it has received a written commitment that it is not privatisation or contracting out and that the staff will be public health employees with all their current award and public sector conditions.”

All the HSU has, however, is a piece of paper, just like British Prime Minister Neville Chamberlain had on his return from Germany in 1939, with a guarantee of peace in our time – and we all know what that led to!

Anyone who believes the current moves are not just the first stage of a privatisation program is naive in the extreme! The private sector has million-dollar signs in their eyes when they look at the NSW public hospital system. They are rubbing their hands in glee.

If, after 2007, we have a Liberal government in NSW, they won’t have to change a word of the legislation that passed the NSW Parliament on December 7, 2004, and they can privatise the lot. John Brogden recently announced that if the Liberals were elected in 2007, he had $20 billion worth of PPP projects ready to go.

He has promised to hand over the NSW industrial relations system to the Commonwealth. Stand by for deregulation and lower living standards for NSW workers if a Brogden government is in power after 2007.

I would like to share with you a gem from Brett Holmes, the current general secretary of the NSWNA. This comes from a press release issued by Holmes on December 23, 2004, following the state government’s re-purchase of Port Macquarie Hospital, which had been privatised in December 1992:

Public hospitals are not about profit they are about providing essential services to the community. That is why they should always stay in government hands. Governments are accountable to the people for the quality of the services they provide. Private corporations are not subject to the same level of public accountability.

Well said Brett! Now actions have to match words!

On December 6, 2004, the following resolution was carried unanimously by the Marrickville state electorate council of the Labor Party, in the presence of Andrew Refshaughe the local member, who did not argue against the resolution:

The Marrickville SEC opposes the corporatisation and contracting out of ancillary services and administrative functions in the NSW public health system. The moves currently under consideration, and the moves towards implementation of these proposals, are contrary to the fundamental values, principles and ideals of the ALP. These proposals should not proceed, should be withdrawn, and the services should continue as publicly managed services with public sector employees.

On December 15, the same resolution was endorsed unanimously by the Socialist Left caucus of the ALP in the presence of a number of members of the Legislative Council, who did not argue against the resolution.

On December 16, 2004, the same resolution was endorsed unanimously by the combined meeting of the Annandale-Leichardt-Lilyfield branches of the ALP in the presence of federal members, state members and a minister, who did not argue against the resolution.

The NSW Government passed, on the December, 7, 2004, legislation enabling the Minister for Health, on his own, to corporatise and contract out ancillary and administrative services in the NSW health system. This legislation established the body to oversee the corporatisation of the relevant services, Health Support.

Since the legislation was passed we have not heard much from Health Support but we know there is plenty going on behind the scenes. I am going to a joint consultative committee meeting tomorrow that may tell me more about the plans.

The above potted history of Sydney inner-city branches’ responses to the Carr Government’s proposals to corporatise, contract out health services, or tie them up in PPP projects, shows that significant sections of the ALP have shown by their unanimous endorsement of the resolution that there is disquiet in the ALP about the Government’s actions and direction.

That disquiet surfaced again at the 2005 NSW ALP conference, where there was a lot of anger from the right and left unions about the Government’s proposals. John Robertson and Unions NSW harnessed that anger in a resolution that called on the Government to immediately establish an independent inquiry into PPP projects planned for the NSW public sector.

There was no doubt at that conference that this resolution would be passed with right and left union support. Tim Ayres of the AMWU called on the Government to accept the findings of this inquiry whatever the result.

That inquiry could bury these proposals, but that would only happen as a result of a strong, united push by unions, right and left, the Greens, progressive independents and socialists to ensure that outcome. This may be an historic and vital opportunity, in the interests of the viability and the efficiency of the health system, for all of these forces to work co-operatively.

Let me say this without reservation. We have a Prime Minister who says there is no crisis in the health system. He is delusional, and that’s the nicest thing I can say about him.

The health system has huge problems: structural problems, financial problems, staffing shortages. Sometimes it all seems overwhelming and unsolvable. The last thing the health system needs now is this program of corporatisation, contracting out and use of PPPs on the scale being proposed, for the services it is being proposed for.

There is a very real danger that whatever efficiency is left in the system will be lost. There is great concern among administrators in the health system that the integrity of the policy directive system will be lost.

When the policies of NSW Health are not integrated and followed by area health services, situations like the horrors of Campbelltown and Camden can arise.

How are the bureaucrats going to maintain financial control over the system? What happens when a contractor does not perform but has a contract for specified period? Who pays out the contract? Are area health services going to be asked to meet those costs from within their budgets? That will take funds away from patient care to pay out underperforming contractors! Not good value for the taxpayers’ dollar.

Great care has to be taken when in managing the health service. We are dealing with people’s lives. Get it wrong and lives can be seriously damaged or even lost, as Campbelltown and Camden showed us.

Based on a talk to a forum on the corporatisation of NSW health services, sponsored by the NSW Greens at Parliament House, Sydney, on June 23, 2005.

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