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The basics of good governance in aged care

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A guide to resetting risk and governance in aged care


This is chapter 2 in our step-by-step guide to ‘getting the basics right’ when it comes to aged care governance and risk management. Chapter 1 focussed on understanding how the risk and governance bar is lifting (and is the best starting point for the series). In this chapter, we look at the basics of good governance in aged care, in light of the Royal Commission into Aged Care Quality and Safety (aged care royal commission) and it's likely impacts on the sector to come.

What do we mean by governance? 

Governance involves the systems, frameworks and practices of the board and the leadership team to set an organisation's objectives; to oversee and supervise the work done to achieve those objectives; and to control the organisation. Governance includes clarity of decision rights, and how decisions are made, recorded and communicated.  

Characteristics of good governance include:

  • A strong ethical and moral compass.
  • Consumer at the centre.
  • Clear standards set for conduct and transparency, with consequences applied.
  • Effective and efficient, responsive and accountable.
  • Respect for the spirit and not just the letter of the law.

The board and the senior leadership team each have a different role to play in achieving good governance.

What did the aged care royal commission recommend on governance?

The royal commission’s final report called out the need for aged care providers to lift their governance, by: 

  • Establishing a skilled, capable and independent board1 to oversee the organisation.
  • Ensuring the board is active in monitoring and ensuring accountability for the quality of care delivered to its consumers through a Care Governance Committee.
  • Having the board attest annually to the provider having the right structures, systems and processes in place to deliver safe and high quality care.

Set out below are practical ideas to help you prepare for these requirements and take steps to reach a level of good governance that is expected by your consumers, regulators and the community. 

An independent board 

Oversight and challenge by an independent board brings many benefits to an organisation, which is why independence is either mandatory or accepted practice for leading boards2.  Independence has now been identified as a future governance requirement for the boards of aged care providers. 

What do we mean by independence? 

There are different tests for ‘independence’, but as a general rule, independence speaks to the board member: 

  • Not holding an executive position in the organisation (and not holding one recently).

  • Not being a significant shareholder.

  • Not having a conflict of interest calling into question their ability to act in the best interests of the company.

How independence makes a difference

Skilled and independent directors are better able to bring ‘outside in’ perspectives, see things in an objective light and provide robust challenges to gaps in performance, in the way a non-independent board member might be constrained from doing so. Independence provides a ‘check and balance’ to the leadership team.

Questions to ask: 

Looking at the composition of your board or governing body today: 

  • Are the majority of the members independent? 

  • Do you have processes in place to verify and record the declaration of conflicts of interest that could compromise independence?

A skilled and capable board

Recommendation 90(a) in the aged care royal commission’s final report speaks to board members possessing, between them, a “mix of skills, experience and knowledge of governance responsibilities... to provide governance over the structures, systems and processes for ensuring the safety and high quality of the care”.

To encourage growing the capability of board members mix of skills, experience and knowledge of governance responsibilities, much can be learnt from current best practice boards:

  • The board maintains a skills register that tracks the core skills and experience necessary to effectively oversee the organisation. The register tracks each member against industry knowledge and functional knowledge categories (e.g. clinical, risk, financial, strategy, people, governance responsibilities etc.). 

  • The board is aware of the gaps in its skills and capabilities and works to address those gaps via training, succession planning and/or skilled advisors to adjunct the board.

  • The board achieves a level of diversity of skills and capability and also demographics, ethnicity and thinking styles.

  • The board has independent review of its performance to call out blind spots on gaps in its skills and capabilities. 

Questions to ask: 

  • Does your board have a comprehensive and current skills register for the board? 

  • Does the register capture all the key skills and capability needed to oversee the complexity of your organisation?

  • Is there an objective assessment of members against the desired skills and capabilities? 

  • Does the board have a shared view on the gaps? 

  • Does the board have documented strategies in place to address the gaps?

The right board committee structure

The aged care royal commission’s final report asks boards who oversee aged care providers to establish a care governance committee. This is to be chaired by an independent board member with appropriate care experience. The committee will monitor and ensure accountability for quality care provided to consumers (clinical and personal care and support for daily living). 

As well as a care governance committee, consideration should be given to the following better practices in the design of board committee governance, which are mandated or followed by leading Australian boards: 

  • A combined audit and risk committee (or stand alone committees).
  • A people/remuneration committee to provide an objective review and oversight of people and remuneration related policies, frameworks and practices that is accountable and compliant.
  • A nominations committee to ensure formal, rigorous and transparent procedures are applied to recommended board appointments, with diversity in skills and experience aligned to the provider.
  • A consumer advisory committee to ensure the consumer voice is present for decision making, independent advocacy and strategic initiatives. Where a consumer committee is not feasible, a consumer representative may be considered for operational committees or boards.

If your operations are relatively small, a single committee (the care governance committee) may be enough. However, providers with large and more complex operations should look to the better practice (described above) to guide their board governance design.

Questions to ask 

Review your board structure in place today: 

  • Do you have a care governance committee in place with a clear charter and composition, chaired by an independent director? 
  • Is the overall design of your board committee structure fit for purpose, given the scale and complexity of your aged care operations? 

By reviewing and answering these questions, you will begin to identify gaps in your governance structures, enabling you to take steps to proactively work to remedy these before they possibly become legislated standards focussed on improving quality across the sector.

For more information on governance hot topics and board issues, visit PwC’s Governance Insights Centre.


Look out for the next chapter to help you with your reset journey, including questions, tips and ideas - Chapter 3: Effective risk management.

 


References
1
Or other governing body
For financial institutions, publicly listed companies and many government agencies

Contact us

Nicola Lynch

Nicola Lynch

Partner, Health & Wellbeing, Assurance, PwC Australia

Tel: +61 425 147 707

Edwina Star

Edwina Star

Risk Consulting Lead, PwC Australia

Tel: +61 416 301 798

Tracy Robertson

Tracy Robertson

Senior Manager, Assurance, PwC Australia

Debra Frances

Senior Executive Advisor, Risk Consulting, PwC Australia

Tel: +61 421 056 456

Richard Ainley

Richard Ainley

Partner, Health & Wellbeing, PwC Australia

Tel: +61 408 146 897

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