ATC130618: Report of Select Committee on Appropriations on Hearing on Third and Fourth Quarter Expenditure on National Health Insurance Grant in 2012/13

NCOP Appropriations

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE HEARING ON THE THIRD AND FOURTH QUARTER EXPENDITURE ON THE NATIONAL HEALTH INSURANCE GRANT IN THE 2012/13 FINANCIAL YEAR, DATED 18 JUNE 2013

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE HEARING ON THE THIRD AND FOURTH QUARTER EXPENDITURE ON THE NATIONAL HEALTH INSURANCE GRANT IN THE 2012/13 FINANCIAL YEAR, DATED 18 JUNE 2013
 

1. Introduction

 

The hearings formed part of the Committee’s ongoing interaction with national departments and provinces to monitor their spending patterns on conditional grants allocated to them. The strategic goal of the National Health Insurance Grant is to improve the service delivery platform, strengthen the performance of the health system in readiness for the full roll-out of National Health Insurance (NHI) through the selected pilot sites in health districts; and to have a more viable NHI design based on experience at pilot sites.

 

 

2. Terms of reference

 

The Committee requested the National Treasury and the National Department of Health to report on the third and fourth quarter spending on the National Health Insurance Grant during a hearing on 04 June 2013. The departments were advised to report as follows:

 

· Data on trends in allocations, transfers and actual expenditure (over/under) of the Grant;

· What capacity constraints impacted on these outcomes;

· A brief assessment of the department’s monitoring capacity for the 2012/13 financial year;

· Whether monthly reports are received from provinces, and if not, what is the department doing in order to ensure compliance with monthly reporting;

· Include spending plans/business plans on the Grant;

· Any other relevant information that the department wanted to share with the Committee.

 

 

3. Reports by National Departments

 

3.1 Report by National Treasury

 

National Treasury reported that the programme is being run in ten pilot districts – two in KwaZulu-Natal and one in each of the remaining eight provinces. A total of seven central hospitals are also included, of which four are in Gauteng , two in KwaZulu-Natal and one in the Free State .

 

National Treasury presented the provincial spending on the Grant for the 2012/13 financial year as follows:

 

 

 

 

 

 

 

Table 1: National Health Insurance Grant expenditure as at 31/12/2012 and 31/03/2113

Province	Adjusted budget     ‘000	Actual payments as at 31 December 2012   ‘000	Actual payments as at 31 March 2013     ‘000	Actual payments as % of adjusted budget	Amount under- Spent   ‘000
Eastern Cape	11 500	273	8 093	70.4%	3 407
Free State	16 500	4 147	9 337	56.6%	7 163
Gauteng	31 500	3 241	8 066	25.6%	23 434
KwaZulu-Natal	33 000	1 080	16 127	48.9%	16 873
Limpopo	11 500	140	4 118	35.8%	7 382
Mpumalanga	11 500	2 197	5 570	48.4%	5 930
Northern Cape	11 500	509	8 005	69.6%	3 495
North West	11 500	1 392	8 818	76.7%	2 682
Western Cape	11 500	1 977	9 885	86.0%	1 615
TOTAL	150 000	14 956	78 019	52.0%	71 981

 

 

National Treasury reported that the following challenges had impacted negatively on the performance of the Grant:

· Business plans were amended between October and December 2012, following a decision by the National Health Council;

· Slow progress on the finalisation of key policy documents, such as the delegations, led to delays in appointing staff and slow supply chain management processes;

· The finalisation of contracts for General Practitioners, a national process, was delayed;

· There is a lack of staff to deal with the National Health Insurance (NHI) deliverables at the district and institution level. This places a burden to ensure better and more frequent communication;

· Change management is required, as there is apathy towards the NHI piloting among some district officials.

 

With regard to new developments in the 2013/14 financial year, National Treasury reported that part of the Grant has been reconfigured into an in-kind or indirect grant from 1 April 2013. It forms one of the components of the National Health Grant, with the other component supporting infrastructure. The National Department of Health and National Treasury would monitor the effectiveness of the new in-kind method of allocation. R291 million has been allocated for the Grant for the 2013/14 financial year and R1.16 billion over the Medium Term Expenditure Framework (MTEF). The National Department of Health would spend the Grant on behalf of provinces focusing on the following:

 

· Developing innovative models for contracting General Practitioners for NHI sites;

· Strengthening patient information and developing and piloting alternative hospital reimbursement tools at ten central hospitals; and

· Supporting central hospitals to strengthen health information systems and revenue management.

 

During discussions National Treasury expressed the view that the historical neglect of administrative functions like finances and human resources would have a negative impact on the new programme. Treasury further indicated that more staff had been added to the health sector in provinces than any other sector. However, Treasury wasn’t convinced that it had been in strategic places and has led to improved service delivery. According to Treasury, specialist skills like logistics, supply chain, infrastructure and facilities management were critical to the success of the programme.

 

With regard to incentives for revenue collection by hospitals, National Treasury indicated that the best incentive for hospitals was revenue retention. However, this meant that there would be no potential to redistribute funds to where they could be needed more, and a balance would have to be found in this regard.

 

 

3.2 Report by National Department of Health

 

The National Department of Health (NDoH) reported that the purpose of the National Health Insurance Grant was to test innovations that were necessary for the implementation of National Health Insurance (NHI); to undertake health system strengthening initiatives in identified districts; and to provide strategic resources for supporting the pilot districts in implementing selected health service delivery interventions. The NDoH further reported that key output indicators were developed to measure the success of the NHI Grant. These outputs included enhancing managerial autonomy, delegation of functions and accountability in districts and health facilities; providing a scalable model including the required institutional arrangements for a district health authority as a contracting agency; testing the linkage between health service management and administration and how it relates to the function and responsibilities of district health authorities; providing a model for contracting private service providers that include innovative arrangements for harnessing private sector resources at a primary health care level; providing a referral system based on a re-engineered Primary Health Care (PHC) platform with a particular focus in rural and previously disadvantaged areas; providing a model for revenue collection and management for identified central hospitals.

 

The NDoH reported that the National Health Insurance (NHI) Grant allocation in the 2012/13 financial year was R150 million. Six provinces ( Eastern Cape , Limpopo , Mpumalanga , Northern Cape , North West and Western Cape ) received R11.5 million each. The Free State Province received R16.5 million; the Gauteng Province was allocated R31.5 million and KwaZulu-Natal received R33 million. The NDoH reported that in the third and fourth quarters of the 2012/13 financial year all provinces spent below their projections.

 

With respect to the expenditure report per province during the last two quarters in the 2012/13 financial year, the NDoH reported that the Eastern Cape spent only R8.088 million; the Free State spent R9.337 million; Gauteng spent R6.829 million; KwaZulu-Natal spent R14.319 million; Limpopo spent R4.118 million; Mpumalanga spent R4.998 million; the Northern Cape spent R7.861 million; the North West Province spent R 8.796 million; and the Western Cape spent R7.945 million. The overall amount spent by provinces on the NHI grant was R78.019 million (52 percent) of the R150 million allocated in the 2012/13 financial year. Preliminary outcomes of the 2012/13 financial year indicated that the provinces had under-spent by R71.981 million (48 percent). The NDoH further reported that provinces had made commitments and therefore applied for roll-over funds which amount to R49.350 million. These commitments were due to unpaid invoices that were not submitted in time for processing.

 

With regard to the challenges experienced by provinces, the NDoH reported that the Eastern Cape Provincial Department of Health failed to notify the district office about the availability of conditional grant funds on time; the district office had capacity constraints, lacking key human resources in essential categories and experiencing inadequate technical support; and there were delays in supply chain management processes. In the Free State there was reprioritization of funds allocated for activities of the NHI Grant and there were supply chain management hurdles. In Gauteng there was no support from relevant officials at the provincial office. There were significant hurdles in procurement processes and there were delays in getting information on budget codes which was caused by staff shortages in key areas. There was an inability to employ staff, like clinic staff and sessional doctors, on a long-term basis using the NHI Grant funds. In KwaZulu-Natal the bureaucratic processes hampered the innovative principle of the NHI project. The delegation of authority to district level was very limited. There were significant hurdles in supply chain management processes. In Limpopo budget codes were incorrectly captured, and there were significant delays in supply chain management processes. Relevant service providers were not available to perform certain activities due to the limited database. And there was inadequate provincial support on technical and administrative matters.

 

The Committee was further told that in Mpumalanga there were too many vacancies at the top management level. In addition, there was limited delegation of authority to allow for activities to be undertaken at district level and supply chain management hurdles impacted on key activities. Regarding the challenges experienced by the Northern Cape Province , the NDoH reported that the Provincial Treasury delayed to inform the Provincial Health Department about the availability of NHI Grant funds and there were supply chain management hurdles. Moreover there was lack of technical support in key areas which led to significant delays in getting necessary approvals; there were challenges in identifying relevant service providers to undertake some activities due to a limited database and the NHI programme was not fully supported because the majority of the key staff complement was based in Kimberley . In addition the top management team had limited delegation of authority.

 

With regard to challenges experienced by the North West Province , the NDoH reported that there was incorrect capturing of the budget at provincial level and the pilot district submitted an incorrect business plan to Provincial Treasury. In addition there was poor prioritization of allocated funds; the provincial health department lacked technical support in key areas; there was no provincial NHI Coordinator and there were challenges in identifying relevant service providers to undertake some activities due to a limited database. The provincial department was also unable to spend infrastructure funds. The Committee was told that in the Western Cape the delay in finalising a business plan impacted on the implementation of NHI projects. The provincial department encountered some challenges in undertaking work around governance arrangements at community level - that is community health centers (CHCs) - there were delays in getting a legal opinion on the exact roles, responsibilities and functions of clinic committees.

 

The NDoH summarised the challenges experienced by provinces as follows:

· Weak human resource capacity in some districts;

· Weak provincial technical support;

· Delays in budgets being communicated to some pilot sites and incorrect budget capturing;

· Significant supply chain management challenges in many districts; and

· Lack of necessary delegations to perform outlined activities.

 

With respect to monitoring and evaluation of the Grant, the NDoH reported that it has established a NHI Grant Management Unit which employed a financial economist, a health economist and a Monitoring and Evaluation Skills specialist. All provinces submitted month-on-month financial data which is used to compile In-Year-Monitoring reports. The NDoH received quarterly reports and held meetings in all project sites, where shortfalls and challenges, as well as “quick win” activities and interventions were mutually identified and implemented. In addition, expenditure on commitments in line with approved business plans was expedited and progress on operational plans was assessed, including a prioritisation process. The focus of the NDoH was reported to be on quality spending and evidence gathering.

 

The NDoH reported that when the spending by provinces was too low in the first and second quarter of the 2012/13 financial year, the National Health Committee intervened and this resulted in some improvement in spending in the third and fourth quarter. The NDoH reported that the 2013 Division of Revenue Act framework has adjusted the purpose, focus activities, and funding allocations to provinces. The framework allows the NDoH a stronger and more interventionist approach and influences the scope of work to be undertaken at national and pilot site levels. The framework also provides for changes in allocations across districts - each district must be allocated the same amount of conditional grant funds. The Grant has been split into two components, that is, the direct grant for district pilot projects and an in-kind grant for contracting General Practitioners and for work at central hospitals.

 

Moreover, the NDoH reported that it would strengthen supply chain management; support the roll-out of Primary Health Care streams and their role within the district referral system and strengthen district level monitoring and evaluation capacity. The NDoH further assured the Committee that it would mobilize funding for the appointment of provincial NHI Coordinators and ensure that the majority of them are appointed. The provincial NHI Coordinators would also assist in coordination, project management and monitoring and evaluation functions.

 

The NDoH further reported that it had utilised development aid funds to test new innovations within the health sector before the implementation of NHI. Unemployed finance, human resources and information technology graduates were contracted to work in various hospitals, like Charlotte Maxeke, to look at a model for revenue collection. However, this work uncovered other problem areas which needed to be addressed. The NDoH reported that one example of this was that computers at Charlotte Maxeke were always out of order and people could not perform their work and revenue could not be collected. The NDoH bought 200 computers for this hospital from aid funds.

 

The Committee was further informed that overall systems are in place to implement the NHI project in all pilot districts and 360 General Practitioners were ready to be contracted and attached to NHI pilot projects. These projects were reported as follows:

 

Table 2: NHI Pilot districts

 

Province	NHI Pilot District
Eastern Cape	O.R. Tambo
Free State	Thabo Mofutsanyane
Gauteng	City of Tshwane
KwaZulu-Natal	Amajuba Umzinyathi uMgungundlovu
Limpopo	Vhembe
Mpumalanga	Gert Sibande
North West	Dr Kenneth Kaunda
Northern Cape	Pixley ka Seme
Western Cape	Eden

 

 

When the Committee enquired about the caliber of chief executive officers the Department intended to employ, the NDoH responded that they had commissioned the Development Bank of Southern Africa to assess CEOs in all hospitals and report identified gaps. The CEOs were categorised based on the size and capacity of the hospital (central, regional, tertiary or district hospital) they were working for. After receiving the report from DBSA, the NDoH resolved to establish an academy to train CEOs and health managers on-site. The Committee was told that the academy courses were offered by specialists from Harvard , Italy and the United Kingdom . All posts of CEOs were advertised and most applicants had masters’ degrees in different fields but some had been doing the same job for over 12 years. That is why on-site training in hospital management is so important.

 

The NDoH reported that it views central hospitals as centres of excellence, to be used for a higher kind of services, research and development. There are four central hospitals in Gauteng , two in Western Cape , two in KwaZulu-Natal , and one each in the Eastern Cape and Free State .

 

 

4. Findings

 

During interactions with the National Treasury and the National Department of Health, the Committee made the following findings:

 

4.1 Revenue collection is a major challenge in most hospitals.

 

4.2 Effective service delivery requires devolution of powers to districts.

 

4.3 All provincial expenditure only picked up in the last quarter of the financial year, leading to March spending spikes (especially in Eastern Cape where 70.4% was spent by March 2013 as compared to 2.4% in December 2012; Northern Cape 76.7% compared to 4.4%; North West 76.7% compared to 12.1% and Western Cape 86% compared to 17.5%).

 

4.4 There is a need for clarity on the roles of district councils and health authorities, health committees and hospital boards.

 

4.5 Business plans were amended between October and December 2012, following a decision by the National Health Council.

 

4.6 Slow progress on the finalisation of key policy documents, such as the delegations, led to delays in appointing staff and slow supply chain management processes.

 

4.7 The finalisation of contracts for General Practitioners, which is a national process, was delayed.

 

4.8 There is a lack of staff to deal with the National Health Insurance (NHI) deliverables at the district and institution level. This places a burden to ensure better and more frequent communication.

 

4.9 Change management is required, as there is apathy towards the NHI piloting among some district officials.

 

4.10 Some of the provincial expenditure figures from the National Department of Health (NDoH) differ from those of National Treasury (NDoH showed R6.829 million for Gauteng while Treasury showed R8.066 million; KwaZulu-Natal R14.319 million against R16.127 million; and Western Cape R7.945 million against R9.885 million).

 

4.11 There are some capacity constraints for both administrative and professional staff in most hospitals.

 

 

5. Recommendations

 

After the interactions with the National Treasury and the National Department of Health, the Committee recommends the following:

 

5.1 The National Department of Health should continue to provide support to hospitals to ensure that they are able to collect revenues due to them.

 

5.2 The National Department of Health should develop policy, norms and standards that will shape devolution of powers to districts for effective service delivery.

 

5.3 The National Department of Health and National Treasury should conduct regular monitoring of spending to avoid March spending spikes that might lead to fiscal dumping.

 

5.4 The National Department of Health should develop policy that will provide clarity on the roles of district councils and health authorities, health committees and hospital boards.

 

5.5 The National Department of Health should avoid ad hoc amendments of business plans since funds are released on such approved plans.

 

5.6 The National Department of Health should ensure speedy finalisation of key policy documents, such as the delegations, in order to unblock delays in appointing staff and slow supply chain management processes.

 

5.7 The National Department of Health should ensure the speedy finalisation of contracts for General Practitioners.

 

5.8 The National Department of Health should ensure that there is staff to deal with the National Health Insurance (NHI) deliverables at the district and institution level.

 

5.9 The National Department of Health should speedily take the lead in change management to avoid any further apathy towards the NHI piloting among district officials.

 

5.10 The National Department of Health should in future reconcile its figures before submission to the Committee to avoid inconsistency in reporting.

 

 

Report to be considered.