Health Sector Failures in New Zealand: Act of God, Act of Man or Inadequacies in Control Design

Abstract

While the Cartwright Duffy and Cull inquiries investigated in some detail the health system processes that led to the specific instances of malpractice that prejudiced the health states of the main 'whistleblowers' a key element of these processes - the design incentives and monitoring of the contracts both explicit and implicit that make up these processes - has been consistently overlooked. New insights can be found in a systematic exploration of both the individual contracts and the nexus of contracts that makes up the publicly funded health system in New Zealand. This paper utilises the economic theory of contracts to examine the ways in which contracts between patients and their practitioners for the delivery of services and between the public and their political agents politicians and public servants and public servants and health practitioners for the funding of services interact. In particular the paper examines ways in which these contracts and the information asymmetries that are associated with them both facilitate and frustrate the flows of information required to monitor and enforce performance of the myriad of contracts involved. The paper also analyses the incentives associated with monitoring and enforcing contract performance in an environment where there may be considerable distancing of the incentives to monitor and enforce the contract from the information necessary to do so.Evidence from the Duffy Inquiry is used to show how failure to address the systemic interrelationships between contracts both implicit and explicit in the design of the New Zealand National Cervical Screening Programme (NCSP) resulted in the creation of obstacles that actively prevented the nexus of contracts from performing either efficiently or effectively in the interests of the patients concerned. Further this example illustrates that the use of a contracting model reliant upon practitioner and public servant monitoring and enforcement of service provision processes inside a public funding model reliant upon monitoring and enforcement of political process performance without due consideration given to the information necessary for adequate monitoring and enforcement led to a system where patients were left with few avenues via which to discipline their errant agents irrespective of whether it was the political agent or the medical agent who had erred. Thus the 'problem' is found to lie not in the corporate contracting model of the 1990s but within the inconsistent alignment of incentives monitoring and enforcement within the publicly-funded model.