ATC170620: Report of the Standing Committee on Appropriations and the Portfolio Committee on Health on the Health Sector Meetings held from 22 to 24 March 2017, dated 20 June 2017

Standing Committee on Appropriations


The Standing Committee on Appropriations and Portfolio Committee on Health, having heard briefings by the national and all provincial departments of Health reports as follows:


  1. Introduction


The Standing Committee on Appropriations as part of its oversight interactions with the National Department of Health identified a need for improved coordination and alignment between the national and provincial health departments in order to ensure value for money and efficient planning and resource allocation. To this end the Standing Committee on Appropriations together with the Portfolio Committee on Health (the Committees) convened meetings with national and provincial health departments as well as other relevant stakeholders from Wednesday, 22 March 2017 to Friday, 24 March 2017 under the theme “Effective co-ordination and alignment of national and provincial spheres of government in the delivery of health services so as to ensure value for money, efficient planning and resource allocation.”


The Committees were briefed by the National Department of Health and all the provincial departments of health on the following:


·         Alignment between the national budget processes and the provincial budget processes (challenges and measures to strengthen the alignment);

·         Ensuring alignment in health information systems (including revenue and billing, patient, pharmaceutical application, network infrastructure, etc) between the province and other national information and communications technology (ICT) systems for effective coordination in the health sector;

·         Ensuring critical functions such as procurement, human resources and financial management are appropriately devolved to designated levels for service delivery efficiencies and better performance;

·         Ensuring the effective management of personnel expenditure in the health sector;

·         Alignment of national and provincial health infrastructure priorities and improving infrastructure budget expenditure (challenges and opportunities for improvements; and

·         Any other matter that may assist the hearings in ensuring improved alignment and coordination in the health sector for improved delivery.


For the meaningful engagements, the Committees were briefed by the following stakeholders:

  • The Auditor-General of South Africa on the Health Sector Report for the 2015/16 financial year.
  • The Financial and Fiscal Commission on health care performance and the economy; Inter Government Fiscal Relations; and the departmental budget analysis.
  • National Treasury on key budget and spending issues in health infrastructure, personnel, and information and communications technology (ICT) systems across all provinces; and key Intergovernmental Relations (IGR) issues in budget formulation and spending in the health sector.



  1.             Findings & observations


  1. The Committees noted with concern that the health sector faces significant funding pressures. The health sector budget estimates indicate that the sector is under-funded by approximately R11 billion over the 2017 Medium Term Expenditure Framework. The Committees also noted that the rising disease burden and population growth rates have outpaced the rate of growth in funding allocations for the health sector. The Committees noted the need for fiscal consolidation and the application of cost containment measures in the face of stagnant economic growth and declining state revenues and recognise the need for the sector to make double efforts to improve efficiencies and fast track promotion of private sector partnerships and civil society stakeholders. In addition, the Committees were of the view that fiscal consolidation should not affect the quality of services nor result in a need to reduce health services and that health expenditure is not consumption expenditure but investment expenditure aimed at the achievement of government’s goal of a long and health life for all South Africans.


  1. Benchmarking of health allocations between provinces reveals uneven allocations in item spending per capita on critical items such as medical supplies, medicines, food, labs, fuel/gas, and others with significant variations between provinces. The Northern Cape and North West provinces allocations for health from the Provincial Equitable Share are below the national benchmark/threshold. Furthermore, allocations for Emergency Medical Services (EMS) are often the lowest across all the provinces. The Committee were of the view that the quality in the provision of health services should be standardised across all provinces and is concerned about the lack of standardisation and benchmarking in health spending per capita.


  1. The Committees noted the increase in the number of performance indicators that the health sector reports on.  For instance the Financial and Fiscal Commission highlighted that the Department of Health was set to report against 142 performance indicators for 2016/17, an increase of 40% against the number of indicators reported on in 2014/15, yet the budget for Department only increased by 1% in real terms. This raised concerns about the ability of the sector to achieve all additional targets given the limited resources. The Committee emphasised that it is important that the health sector focus its mandate as per governments outcomes approach philosophy and entrench SMART principles into its prioritisation and setting of targets.


  1. Medico-legal claims pose serious risk to the going concern of provincial departments of health.  More specifically, the Committees noted the high and growing medico-legal claims in the Eastern Cape, KwaZulu Natal, Gauteng and Mpumalanga.  This seriously undermines budget planning and budget execution with significant risks posed on the sustainability of the delivery of health care services. The Committees noted the work of the Minister of Health’s Advisory Committee currently underway to address this challenge. In particular, the Committees welcome the action plan focused at patient safety, administration and clinical governance in health facilities. However, the Committees are concerned that the growth in these legal claims is extremely high and abnormal and warrants further investigation for reasons and validation. The Committees were of the view that the national and provincial departments should embark on community awareness programmes to alert the general population of the negative ramifications of pursuing such claims and possible abuse of state resources.  


  1. The level of accruals in most provincial departments of health, is unacceptably high. A major concern for the Committees was that the accruals are not cash-backed which leads to over spending and unauthorised expenditure in the new financial year. The other observation made was that the payment of National Health Laboratory Services is a challenge in some provinces. The Committees were of the view that provincial departments of health need to put in place mechanisms for tracking invoices as well as strengthening financial planning and cash flow management.


  1. There is pressure on Compensation of Employees budgets which some provincial departments of health are subsidising through goods and services budgets. This highlights a need for the protection of core health service delivery posts and critical goods and services budget items. The Committees also noted that some provinces are embarking on a rationalisation and restructuring process in this regard. It is imperative that provincial departments of health adhere to norms and standards set by the national department for balancing administrative, management and clinical posts.


  1. Exchange rate fluctuation is a key contributor to the escalating cost of medicines and medical equipment thus adding to the significant cost pressures facing the health sector. For example, vaccine costs have increased by 22% and ARVs by 36 % in the last financial year. The Committees noted the current interventions by the National Department in utilising the Office of the Chief Procurement Officer to negotiate transversal contracts to achieve savings through benchmarking and price negotiations. The Committees also noted that currency volatility raises the need to consider an establishment of a state owned pharmaceutical company. The Committees were of the view that there should be enhanced efforts aimed at finding cost effective solutions in the procurement of medical supplies.


  1. The Committees were of the view that an efficient, effective and intelligent health sector supply chain management (SCM) system can help in significantly improving the quality of health care. The Committees noted with concern submissions indicating that many provincial SCM offices were very small. The SCM offices did not work with specifications daily and there was poor demand management and procurement planning. The Committees noted that work was underway on the feasibility of Public/Private Partnerships (PPP) which were affordable.


  1. The Committees noted with concern that the district health system is not functioning optimally. The Committees noted the critical role of districts in ensuring an equitable, efficient and effective health system. The Committees supported the Financial and Fiscal Commission’s recommendation that the indirect NHI grant should be used to build capacity at district level as they are central to the implementation of the NHI.


  1. The Auditor-General’s health sector findings for the 2015/16 financial year highlight challenges with regard to health infrastructure, medical equipment, and medical waste management. The Committees view the implementation of action plans in addressing findings made by the Auditor-General of South Africa as non-negotiable as this is a critical first step in improving the delivery of quality health care. The following are some of the challenges highlighted by the Auditor-General of South Africa:
    1. Infrastructure challenges include poor planning and sub-standard workmanship by contractors.  This is as a result of poor monitoring, underutilisation/non-utilisation of new or upgraded infrastructure, poor contract management,  lack of policies and plans for routine maintenance.. National Treasury also indicated that there were a number of challenges in the delivery of health infrastructure and these include slow progress in filling of posts specifically for infrastructure units, delays in procurement process, approval of projects, and the delays in handing over of completed projects by provinces leading to  delays in the inclusion of projects in the asset register. 
    2. Medical equipment challenges relate to delays in procurement processes limited budget allocations for procurement and maintenance, sub-optimal utilisation of equipment due to skill deficiencies,  delays in maintenance of equipment, and staff shortages in clinical engineering departments.
    3. Medical waste management challenges include lack of action plans to address prior year findings, inadequate implementation of policies and procedures for appropriate disposal of healthcare waste, weaknesses in internal control processes, and non-adherence to obligations in contracts.


  1. Full operationalisation of new health facilities is still a challenge in the sector. For instance, the Free State submitted that two state of the art buildings could not be officially opened due to lack of staff to operationalise the facilities. The Committees also noted that the National Department of Health emphasised that provincial departments of health should strike a balance between building new facilities and maintaining current health infrastructure.


  1. Most public health facilities do not have adequate ICT infrastructure and internet-connectivity. In addition, the alignment of health information systems is a concern and many provinces have stand-alone information systems which do not integrate with other national health information systems and government systems such as BAS and PERSAL. This includes the lack of integration of pharmaceutical systems between pharmacies, medical depots and hospitals. Provincial departments also indicated that State Information Technology Agency (SITA) connectivity costs are high and that network infrastructure layout in rural areas is severely limited. The Committee noted that ICT and information systems improvements in the health sector will reap significant efficiencies such as reducing patient waiting times, limiting unnecessary dispensing of medicines, preventing unnecessary repeat tests, and preventing non-adherence to medicines due to stock outs. The Committees were of the view that the updating of information systems should be prioritised and the roll-out of broadband connectivity to all health facilities should be accelerated.



  1. The Committees emphasised that every province needs to cut down on the number of registers to be filled in by nurses and health professionals and ensure that basic office equipment such as filing cabinets is in place and is well maintained. This will simplify record keeping, prevent the theft of files and ensure a conducive working environment for health professionals.


  1. With regard to the delivery of health services, Emergency Health Services remain a concern especially in rural areas. Rural areas face difficulty in retaining medical professionals. For the Northern Cape, extreme distances between communities and the poor quality of roads make the cost of emergency medical services exceptionally high. This was also the case in many other rural settlements of the KZN, Limpopo and the Eastern Cape. In addition, housing allowances and staff overtime claims were extremely high in some provinces due to the shortage of health professionals and the lack of suitable accommodation where many health facilities are located.


  1. Free State indicated that there were challenges in the provision of healthcare services partly due to the flow of patients from Lesotho with significant debt incurred as a result.


  1. The Cuban doctors programme is benefiting the health sector especially in the rural areas where the need for doctors is most acute. Following the completion of their training, the doctors need to be accommodated within a cost of employment budget that was already facing significant pressures. This requires enhanced human resource planning from all provincial health departments.


  1. The Committees welcomed the fact that the number of doctors has been largely retained with around 19864 doctors within the public health system as at the end of 2016 though the decline in Limpopo remains a concern.  


  1. The Committees noted that the Western Cape produces a third of the doctors and 77% of the dentists in the country and raised concerns on the decreasing allocations with respect to Tertiary Services and Training & Development. The Committees are of the view that allocations for training should be equitable and expand capacity in other provinces without hampering institutions which are currently producing doctors, dentists and other professionals. 



3.         Recommendations


The Standing Committee on Appropriations and the Portfolio Committee on Health having engaged with the national and provincial departments of health and other relevant stakeholders, recommends as follows:


  1.  That the Minister of Health should ensure the following:


  1. That the Department of Health incorporates a capacity component in the indirect grant of the National Health Insurance in order to strengthen district health services in preparation for the implementation of the National Health Insurance.
  2. That the Department of Health reconsider the number of performance indicators for the sector so that critical performance indicators are prioritized for the 2017/18 financial year.
  3. That the Department of Health as well as the State Information Technology Agency and the Department of Telecommunications and Postal Services accelerate the roll-out of broadband connectivity to all health facilities.
  4. That consideration be given for decentralised budget for all health district services.  
  5. That the Department of Health in consultation with National Treasury considers the feasibility of establishing a government pharmaceutical company to reduce the costs of procuring medicines abroad.
  6. That Provincial Health Departments promote transparency in their budgets and clearly specify all allocations made. The SMART principle be followed in their Annual Performance Plans.
  7. That the Department of Health ensures that feedback on the Performance Based Incentive Grant Scoring is prompt and detailed.
  8. That the Department of Health in partnership with Department of Planning, Monitoring and Evaluation (DPME) ensure the development, enhancement and implementation of partnerships with national and provincial sector departments such as Public Works, Department of Human Settlements, Department of Science and Technology, Department of Trade Industry, Department of Energy, the private sector, universities, NGO’s and bi-/multi-lateral organisations in areas such as health technology innovation and life-cycle management and maintenance of infrastructure and technology assets.
  9. That the Department of Health investigate and implement feasible Public Private Partnerships that are affordable.
  10. That the Department of Health in partnership with the DPME develop and implement systems to enhance the current planning tools of provinces and enhance inter-governmental planning structures and forums including benchmarking to ensure the delivery of uniform health services across the country.
  11. That the Department of Health in partnership with the Department of Arts and Culture embark on education outreach programmes to all health facilities on the importance of proper filing of patient records and the effect that illegitimate medical claims have on the delivery of health services.
  12. That the Department of Health formalise performance evaluation with the aim of boosting performance by emphasising high competence of health personnel.
  13. That the Department of Health integrate best practices across provinces in dealing with Medico-legal claims and to develop and implement a comprehensive national strategy in dealing with rising Medico-legal claims.
  14. That the National and Provincial Departments of Health prioritise the refurbishment and maintenance of existing health infrastructure over the building of new health infrastructure.
  15. That the Department of Health ensure that allocations for training is equitable and capacity expanded in some provincial departments without hampering institutions which are currently producing doctors, dentists and other professionals.


  1. The Minister of Health and Minister of Public Service Administration should ensure that: 
    1. All provincial departments of health have costed organograms in place and that these are aligned with programmes and budget structures.
    2. Human resource planning is enhanced in all health facilities.
    3. All critical funded vacant posts in health facilities are timeously filled.



  1. The Minister of Finance should ensure that National Treasury effects the following:
    1. Integrate and validate all health infrastructure maintenance plans and ensure that budgets are appropriately ring fenced and spending levels are maintained.
    2. Develop and implement innovative mechanisms for reducing costs and enhancing efficiencies in the main cost drivers in the health sector.
    3. Develop and embark on a comprehensive and sector specific capacity building programme for all supply chain management offices within the entire public health system.
    4. Develop comprehensive cost containment guidelines targeted specifically at the cost management of all major cost drivers within the public health sector.
    5. Assess and re-evaluate all ICT and health information system contracts across the health sector with the aim of finding efficiencies and preventing the procurement of health information systems that do not integrate with health sector and government wide information systems.



4.         Conclusion


The responses to the recommendations as set out in section 4 above by the relevant Executive Authorities must be sent to Parliament within 60 days of the adoption of this report by the National Assembly.




Report to be considered.







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