COMMITTEE OF PUBLIC ACCOUNTS díospóireacht

Chapter 47 - Management of the Health Service Executive Vote

Mr. Cathal Magee (Chief Executive, Health Service Executive)called and examined.

Chairman

We are dealing with No. 7, the 2010 annual report of the Comptroller and Auditor General, Vote 40 - Health Service Executive; Chapter 42, procurement in the health service; Chapter 45, consultancy and external report; and Chapter 47, management of the Health Service Executive Vote.

I ask members and witnesses and those in the Gallery to turn off their mobile telephones because they interfere with the sound quality of the meeting.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If a witness is directed by the committee to cease giving evidence in relation to a particular matter and the witness continues to so do, the witness is entitled thereafter only to a qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and witnesses are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable. Members are also reminded of the provision within Standing Order 158 that the committee should also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Mr. Cathal Magee, chief executive officer of the Health Service Executive, and I invite him to introduce his officials.

Mr. Cathal Magee

Today I am accompanied by Ms Laverne McGuinness, national director of integrated services; Mr. Declan Lyons, who is assistant national director for finance in the Dublin and mid-Leinster region but is currently acting national director for finance; and Mr. John Swords, head of procurement. Also in attendance is Mr. Paddy Burke, head of PCRS, and he is available to the committee for any questions about medical cards.

Chairman

I welcome Ms Oonagh Buckley, principal officer, and Mr. Tom Heffernan, principal officer, Department of Public Expenditure and Reform. I invite the Comptroller and Auditor General, Mr. Seamus McCarthy, to introduce Vote 40 - Health Service Executive, Chapters 42, 45 and 47.

Mr. Seamus McCarthy

Gross expenditure in 2010 under Vote 40 was €14.5 billion. The bulk of the expenditure comprises payment for directly provided services in the four HSE regions; grants to help bodies, including voluntary and joint board hospitals; the costs of medical card services and community schemes; and the cost of long-term residential care. Appropriations-in-aid of the Vote amounted to €3.5 billion. Receipts from health contributions amounted to just over €2 billion of that total.

Chapter 47 reports on a set of issues relating to the management of HSE expenditure. Employment numbers in the health service stood at around 111,000 whole-time equivalents at the end of 2008. This includes staff engaged in health and social care services and staff working in the voluntary sector. By the end of May 2011, the total number employed in the sector had fallen to around 105,400. Around 1,000 community welfare service staff transferred from the HSE to the Department of Social Protection. Voluntary redundancy and early retirement schemes resulted in a reduction of approximately 1,600 whole-time equivalent staff at an estimated cost of €103 million. A further 630 staff left under the incentivised early retirement scheme. The balance of the staffing reduction was due to the net impact of the general moratorium on recruitment across the sector. It was noted that the HSE had hired almost 800 retired staff to provide services at a cost of more than €14 million in 2010.

The HSE's primary care reimbursement service administers a number of schemes providing free or reduced cost health services to the public at a cost of more than €2.5 billion in 2010. This includes €1.9 billion paid for pharmaceutical services and €572 million paid to doctors and dentists. A review of pharmacy claim payments found the HSE did not hold complete and up-to-date information in relation to persons on behalf of whom payments were made. We found that almost €10 million had been paid in 2010 in respect of medical prescriptions where the medical card number was not recorded or was incorrectly recorded on the claim. A further €16 million was paid in 2010 in cases where the medical card had expired. In November 2010, the HSE agreed a revised protocol with the Irish Pharmacy Union for managing such incomplete claims.

The HSE made excess payments to GPs estimated at almost €1.5 million in 2010 due to delay in notification of death of registered patients. The HSE stated that it does not seek to recover such excess payments on the basis that doctors do not claim payments in respect of newborn children from birth. The report concludes it should be possible for a doctor to notify the date a child is first attended in order that the HSE pays for a measured service that is actually delivered.

The report also found there was potential in certain cases for dual reimbursement by the State under two dental service schemes. It concluded there would be merit in more regular data-matching of the records of the HSE and the Department of Social Protection and greater use of computer-assisted checks in mitigating the risks. The report also examined the recovery of accommodation charges for private patients treated in public hospitals and found that certain restrictions on charging apply. In particular, public hospitals can only charge private patients for accommodation in designated private beds. Overall, it was found that in 23 hospitals, 45% of patients treated privately by their consultants were not charged maintenance costs. While revenue generation objectives cannot take precedence over medical concerns such as infection control, the report concludes there seems to be scope to improve revenue generation through improved bed management.

The report also reviewed the systems in place in the HSE for monitoring the voluntary hospitals, which received funding of €1.9 billion in 2010. The HSE and the hospitals agree service level agreements and business plans linked to the funding provided. The examination concluded that the HSE had reasonable systems in place to monitor the financial and operational performance of the hospitals. It suggested a number of areas which might merit a review including closer monitoring of compliance with employment ceilings and their alignment with the budget, as well as the scope for more refined treasury management.

The other two chapters for consideration this morning deal with aspects of procurement by the HSE, which is the largest purchaser in the State. Framework agreements with one or more suppliers potentially allow purchasers within the HSE to place contracts without being obliged to carry out multiple open tendering procedures, thereby cutting down the administrative cost of tendering and benefiting from bulk buying. As of July 2011, the HSE had 52 framework agreements in place. These were multi-party framework agreements that provide for tendering competitions between the suppliers on the framework list for supply of goods and services. Criteria for selection are set as part of the agreement. The audit examined the use of the agreements in two hospitals and two health board areas. It found there was considerable scope for further use of framework agreements in the hospitals. The examination also looked at contracting practice in the hospitals and health board areas. We found that the hospitals did not have contracts in place with 21% of their suppliers, measured by value, and that contracts with 26% of the suppliers were out of date. Contracts were not in place with suppliers for 69% of the spend in the health areas reviewed. The report also found that a wide variety of inventory systems is in use across the health system. The HSE has identified that there are gains to be had from introducing computerised inventory management systems but there also would be resource implications in introducing them. The report recommends that the HSE should undertake a cost-benefit analysis to inform the long-term development of its inventory management.

In general, it is difficult to gauge accurately how many different products and suppliers are involved in HSE procurement because of the absence of national product and supplier codes. The report found the absence of a co-ordinated ordering system has hampered the generation of accurate, timely and consolidated information on vendors, products, use and user locations across the HSE. This works against the desirable approach of constructing strategies for procurement categories and tenders that accurately reflect the buying power of the HSE.

Finally, Chapter 45 deals with procurement by the HSE of consultancy and other external support services, based on a review of a sample of 27 consultancies that cost the HSE a total of more than €41 million over the period 2006 to 2010. Our review found that business cases identifying the rationale for the consultancies, the activities to be carried out and the outputs to be delivered were not in place for most of the consultancies. Only ten of the consultancies had been tendered openly and only ten had contracts or service level agreements in place. In many projects, there were limited details in respect of agreed pricing and expected project durations and monitoring of delivery was limited. It was found that the activity or output paid for was delivered in all cases but the lack of contracts or agreements with financial and delivery terms makes it difficult to validate the rates paid and whether the services are delivered to a specified standard and timescale. Overall, it was found that the HSE's procurement and management of consultancies needs to have more of a performance focus.

Chairman

I thank Mr. McCarthy and invite Mr. Cathal Magee to make his opening statement.

Mr. Cathal Magee

I thank the committee for its invitation to attend today. Members will have received updates on each of the chapters, namely, chapters 42, 45 and 47, arising from the Comptroller and Auditor General's report of 2010 and a separate briefing report from the primary care reimbursement service, PCRS, on medical cards as requested at the last meeting. I therefore will be brief in my opening statement.

As for Chapter 42 on procurement, in his conclusion to this chapter, the Comptroller and Auditor General is drawing attention to the opportunity to deliver improved value through the extended use of contracts, including framework agreements, as well as investing in logistics and stock management systems to support the business of the HSE. The Comptroller and Auditor General also refers to conformance with Circular 40.02 on reporting requirements as a means of achieving better value outcomes. The HSE accepts these conclusions and has, over the past 18 months, implemented revised management arrangements within the procurement directorate to better support the business and improve compliance with the procurement rule set. Over the past 18 months procurement cost reductions of €112 million have been delivered. I should explain this figure comprises €75 million in respect of 2011 and €40 million in the current year. While that is dealt with under the procurement directorate, the total savings in 2011 were €180 million when one combines the savings driven by procurement and locally by the various operations. While the target was €200 million, we delivered €180 million.

Over the past 18 months, the procurement directorate has supported the organisation to achieve best value for money in terms of quality of product, service support and pricing, while maintaining an appropriate level of patient and clinical choice on a health sector-wide basis. The HSE has engaged in a significant process of review of all its supply and services contracts. The key purpose of this process was to deliver cost savings to the HSE under existing contracts in the context of the current challenging financial environment. Among the approaches adopted by the HSE has been, in accordance with and permitted by the terms of the relevant contracts, to vary their terms either for the purposes of simply effecting cost reductions or to deliver better value for money to the HSE in other ways, such as by obtaining additional services or supplies for the same overall contract sum. To date this process has delivered significant savings. In cases in which existing suppliers and service providers have been unwilling to put forward or agree cost savings, the HSE is in the process of making arrangements to re-tender those services and supplies. Many of the re-tenders conducted to date have been on a national or framework basis. We would have expected that approximately 50% of the spend now is covered by framework agreements and this largely has been achieved over the past 12 months. Economies of scale can be derived from national procurements and the use of mini-competitions on frameworks can promote continued competitive tension and, therefore, even better value even after an initial tender exercise has been completed. It was possible to deliver these efficiencies through the implementation of a single procurement model which involved moving to a single procurement organisation. The integrated model is a key enabler in achieving cost reduction, increased efficiencies and the adoption of streamlined standardised procurement processes to avoid duplication of effort in line with leading practice in procurement.

The strategy developed to maximise procurement opportunities in 2011-2012 was to harmonise pricing for existing business across the health sector - that means picking the best price that exists through the health system and trying to use that price on a contract basis for the wider system. Tendering processes are now under way to maximise the buying power of the health sector through national-regional contracts. Despite the limitations in management information and IT systems referred to in the Comptroller and Auditor General's report, good progress has been made in the past 18 months on the issues raised. The next phase of improvement will require significant upgrade of IT procurement systems into a single, more integrated model and ongoing investment in procurement capability.

The HSE has taken action to implement the recommendations of Chapter 45 - consultancy and external support. This has been achieved through the implementation of revised procedures for engaging consultancy put in place by the procurement directive. Expenditure on consultancy and professional services has reduced significantly in 2011. Excluding the ESRI contract for the hospital inpatient inquiry scheme, the figure is down to €4.6 million for 2011. A listing of all consultancies, external support and professional services engaged in 2011 was provided to the committee in our update last week.

Chapter 45 of the report draws attention to non-compliance with the HSE procedures relating to the acquisition of consulting services. The report reflects an unacceptable level of non-compliance. While there is a strong assurance process in place in the HSE, in the absence of a single procurement system to track and control compliance with contracts, there are weaknesses that must be addressed in the next phase. These matters are referred to in more detail in the published statement of internal financial control as part of the year end reporting process. In the HSE, non-compliance with the controls environment is a matter to be considered under the disciplinary code of the organisation. In February of last year, I wrote a detailed memorandum to all budget holders reflecting all of the learning from the various internal audit reports and Comptroller and Auditor General reports and requiring adherence to the controls environment and to the processes, and implementation of that is under audit in the current year. Where necessary, management or internal audit undertake a report and management ensures appropriate action is taken to address non-compliance.

On Chapter 47, management of the Vote, the primary care reimbursement service, PCRS, manages a wide range of primary care services across 12 community health schemes, including the medical card scheme, to a population of over 3.6 million people. These services are provided by more than 6,660 primary care contractors, involving 77.9 million transactions annually, with an associated expenditure of €2.517 billion. As of 1 May 2012, there were 1,787,839 medical cards and 128,929 GP visit cards in circulation, an increase of 183,536 on the 1 January 2011 figure. When compared to 1 January 2005, there has been an increase of 771,685 cards in circulation, which is 67% more than the 2005 level.

In 2011, a major change programme was initiated, planned and developed by the HSE to centralise medical card processing in PCRS, effective from 1 July 2011. This very significant change programme involved the redeployment and training of significant numbers of staff and considerable changes to processes which were not standardised. The purpose of the centralisation project was to provide for a single uniform system of medical card application processing, replacing the various different systems previously operated through more than 100 offices across the country; streamline work processes and reduce the numbers of staff involved in medical card processing from approximately 450 to 150; and, ultimately, ensure a far more accountable and better managed medical card processing system. While considerable progress has been achieved in improving the medical card system, it is acknowledged that during the first six months after centralisation, a significant backlog in processing accumulated. This backlog, which related to applications between July and December 2011, stood at 57,962 in January 2012. This backlog was cleared to zero by the end of April 2012.

As part of the six month review, PricewaterhouseCoopers, PwC, also undertook a high level assessment of possible excess registrations on the medical card register. In its analysis, PwC indicated a range of potential exposure if such excess registrations were to be substantiated. However, it also stated that this is preliminary assessment which should be treated with caution and was only indicative in nature. A forensic analysis of all the medical card database is now under way and this analysis is scheduled to be completed by the end of September.

In relation to the outstanding legacy issued raised by the Comptroller and Auditor General and raised at previous meetings here, the HSE has completed an analysis in respect of all old cases of a time delay between the death of an individual and the DEPS notification back to 2005. The amount to be recouped is in the order of €3.095 million. In parallel, an analysis of the historic amount due to GPs in respect of new births was conducted and this amounts to €2.807 million. Arrangements are being put in place to give effect to these repayments and recoupments. Since the processing of medical cards was centralised from July 2011, the HSE has recouped €344,791 automatically as part of each end of month process in respect of deaths. From July, this issue is now corrected but the legacy issue has to be addressed.

On income, in Chapter 47 of the report, the Comptroller and Auditor General refers to the treatment of private patients in public hospitals. The conclusions refer to the opportunity to grow the income of hospitals through growth in the numbers of patients charged by ensuring they are placed in privately designated beds within hospitals. The chapter refers to 45% of private beds in 2010 being used for public patients. This figure fell to 41% in 2011. The primary reasons for use of private beds for public patients related to managing patients with infection, providing privacy for patients and their families at the time of death and dealing with volumes of admissions through emergency departments. Since the conclusion of the chapter the Minister for Health indicated in late 2011 that he would bring forward legislation to address a number of issues in bed designation. This would resolve the issues raised by the Comptroller and Auditor General.

The chapter also referred to the fact that the HSE was submitting a business case to implement a claims management system. The business case was approved, a tender process completed and a project is under way for a new claims management software in hospitals. This will roll out in five hospitals during 2012, in Limerick, Beaumont, Galway, Waterford and the Mercy University Hospital in Cork.

This concludes my statement and together with my colleagues, we will take any questions that you might have.

Chairman

May we publish your statement, Mr. Magee?

Mr. Cathal Magee

Yes.

Deputy John Deasy

I am trying to piece together the bigger picture of the matters under discussion, the numbers at the end of the process and the efforts that the HSE has been making. What is being done about the overrun? If we want to deal with the deficit, where does the solution lie? If people do not want front line services to be cut, we must examine where the bulk of the money in the health budget is being spent. If pay accounts for 70-90%, I can reach a quick conclusion.

The Minister discussed targeting pay increments and allowances over time. When I examined the data, I felt the need to understand the history of how that element of pay had grown within the budget. I examined the increment and pay trends from 2002 onwards. I asked the Comptroller and Auditor General's officials to help me. I would like to thank the liaison officer from that office for her work. I asked the officials to analyse the trends and growth. The Minister for Health, Deputy Reilly, wants to reduce the €800 million bill for overtime and premium payments without cutting pay. We examined the annual financial statements. According to the HSE's accrual accounts and annual financial statements, the 2002 outturn pay figure for the health boards was €3.5 billion, which increased to €4.71 billion, or 35%, by 2012. These are rough figures. The relevant figure in the voluntary hospital sector was €1.13 billion in 2002, which increased to €1.55 billion in 2012, some 37%. The trend is approximately 36%. It is a rough figure, but it gives one an idea of the increases during that ten-year period.

I examined individual areas within the HSE's annual financial statements in terms of employees' basic pay, allowances, overtime, night duty, weekends, on-call, arrears, etc. Basic pay increased by 24% between 2005 and 2011. The level of increases grew in the last six years of the decade since 2002. Allowances increased by 22%, nighty duty pay increased by 18%, employer's PRSI increased by 21% and superannuation increased by 89%. There were also reductions. On-call pay decreased by 2% and overtime pay reduced by 6%. Generally speaking, though, there was an increase and the trend accelerated. We examined the HSE's pay costs of management and administration between 2005 and 2011. There was an increase of approximately 24%, from €462 million to €574 million. These are the basic figures. A great deal of work went into finding them - reading the annual financial statements and the accrual accounts. They paint a stark figure of where the bulk of the money, between 70% and 90%, is going and the increases that occurred in that seven-year period.

When I examined the HSE's genuine attempts to cut costs, they were unconvincing. The measures implemented have been problematic - Mr. Magee can interrupt. I examined the early retirement and severance schemes, in respect of which the Comptroller and Auditor General quoted a figure of €103 million. How many years will it take the HSE to recoup the costs? They are big ticket items. Although the use of agency staff has received a great deal of attention, the saving has not amounted to much. Under a recent EU directive, agency staff must be paid the same as HSE staff. The HSE must pay agency staff €2.5 million in back pay and the directive will cost an additional €30 million per annum, which will cancel out most of the savings. It is not the HSE's fault. Agency costs have increased by 38% since 2009. What progress has been made in the planned reduction of 50% by 2012?

The HSE announced savings in its expenditure on drugs. It was hoped that up to €100 million would be saved, but this figure is under question. We will not generate anywhere near the €140 million in additional revenue from health insurance companies.

Having have examined pay and the HSE's bona fide attempts to make cuts, I have concluded that the cost cutting measures have not gone to plan - an expensive retirement scheme, an EU directive on agency staff that stymied the HSE's efforts, fewer savings on drugs than expected and less money from the health companies than was planned. At the same time pay across the board has risen steadily and staff numbers have not decreased significantly. The briefing which we asked for and received from the HSE is slightly misleading. The figures provided by the Comptroller and Auditor General indicate that by end May 2011 the total number employed in the sector had fallen to approximately 105,000 and that there were 111,000 whole-time equivalents in 2008. The figure the HSE provided is a peak figure, which does not paint the true picture. Also, the date used by the HSE was random. We did our own research, using the annual financial statements, and the reality is that in the seven years about which I am speaking there was no great decrease in staffing levels in the HSE. Staff levels have increased and then decreased. The reality is that there were only 1,000 fewer staff in the HSE in 2011 as compared with the figure for 2005. The figure for 2005 is 101,000 compared with 102,000 in May 2012. Staffing levels are the same and pay has increased. The genuine attempts by the HSE to recoup money and make savings have not worked which, with the commentary made in the past week or so, lead me to the conclusion I have drawn. Perhaps Mr. Magee might respond on that point.

Mr. Cathal Magee

On employment numbers, we do have available a detailed employment census report which includes figures in respect of the statutory and voluntary system, each operating unit and covering every discipline in the system. The information dates back to pre-2005. As such, there should not be any argument around data. In 2001 there were 90,000 people employed in the health system. Staff levels peaked - we have previously used this number - at 112,771 in September 2007. We furnished the committee with the most up-to-date number as at 31 May 2012, which indicates staff levels are down to 102,343, a reduction of almost 10,500 from the peak figure in 2005.

Deputy John Deasy

The peak number does not paint the true picture. There have been few reductions in numbers during the past seven years.

Mr. Cathal Magee

As I have reviewed the data and done a number of presentations on the profile over a year, I am reasonably familiar with it. Growth in employment in the health system took place in the five to six year period between 2001 and 2007, when an additional 22,771 staff were recruited. This figure has decreased by approximately 10,500. The main areas of growth were medical, in which the rate of growth was 2,000; nursing, in which the rate of growth was 7,500, and therapies. In 2001 there was a very low base of physiotherapists, occupational therapists, social workers and speech therapists. When one looks at these profiles, one of the biggest dramatic percentage increases in the past decade was in the recruitment of 6,500 therapy professionals, many of whom were recruited into the disability service in which there was significant investment. The number of administrative staff grew throughout that period by 3,700. Staff levels in respect of other care staff grew by 3,300. They are the figures up to 2007.

The figure for current staff levels of 102,000 is the same as that in the period 2005-06. This figure must be viewed in the context of the significant development of the health service during the past decade. When there is growth in an economy, growth in the health spend increases. There has been significant service development. It must also be acknowledged that there has been significant growth in the population which has grown by 17% since 2002. Demographics and service development must be taken into account. Nonetheless, the argument that the Deputy makes in regard to the data-----

Deputy John Deasy

I accept that. It is evident in my constituency. What I am getting at is the deficit and how the HSE proposes to cut it. I accept everything Mr. Magee has to say. I am doing the figures in my head, taking into account the figure of €45 million for increments and 10% for overtime, night duty, weekend and on-call allowances, which amounts to €60 million, which add up to a total of €105 million. I am concerned about how the HSE proposes to address its deficit and overrun. When one makes the basic calculation of 10% in allowances plus €45 million for increments, one does not arrive at anything near the figure with which we will end up at the end of the year. I am concerned about how the HSE proposes to cut this figure at the end of the year.

There is a political issue, although I accept Mr. Magee cannot comment on policy matters. The Minister for Public Expenditure and Reform, Deputy Brendan Howlin, is quoted as saying any significant overrun in the health sector this year would not be sustainable and undermine our national recovery efforts. He has communicated this by letter to the Minister for Health, Deputy James Reilly. If one accepts the figures I have outlined in respect of the health budget and people are against cutting front-line services and that the Croke Park agreement is preventing a reduction in pay levels throughout the HSE despite this may be what is necessary to bring the budget under control, the conclusion I reach is that the agreement is undermining our national recovery efforts. I make this conclusion having analysed the figures provided, the increases in budget and what needs to be done. I do not expect Mr. Magee to comment on this. However, having analysed the figures, that is the conclusion I have reached. Leaving political constituencies aside, that is a basic conclusion when one examines the data provided.

I was surprised to hear the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, say at a recent joint financial performance monitoring meeting that the HSE had been unable to provide monthly profiles of expenditure by programme, adequate explanations of the drivers of expenditure or adequate projections of when and to what extent the savings measures in the 2012 service plan would result in an abatement of these spending measures, which was a pointed and strong statement on financial management procedures and systems within the HSE.

I would like to return to the issue of pay and allowances. I thank the liaison officer for pointing this out. I am speaking about employees and pay, allowances and overtime payments for 2009 and 2010. Under the heading of maximum individual payments made in 2009 and 2010, in 2010 one individual received €186,000 by way of allowances, while another received €135,000 in overtime payments. In respect of night duty payments, one individual received almost €20,000, while in respect of weekend duty payments, another individual received €30,000. For on-call duties one individual received €111,000. There are other categories that are not explained. The numbers of recipients of €10,000 or more in all the different categories are mentioned. It is a considerable four-figure number for many cases and in some cases it is a five-figure number. Will the witness comment on that with respect to the comments of the Minister for Public Expenditure and Reform, Deputy Howlin, regarding financial management systems within the HSE and the figures I have before me?

Mr. Cathal Magee

I will deal with the systems issue first. Reading our annual reports for 2010 and 2011, particularly my CEO statement and our statement of internal financial control in both of those accounts, we make clear that the financial system environment in the HSE is not fit for purpose. That has been acknowledged in discussions with a number of committees. We have a significant systems challenge in that we still have the legacy systems embedded in each of the agencies and health boards that existed, and they are not integrated.

The Deputy referred to the comments of a Minister but I have not seen the letter. The point is that we do not have our financial systems on a programme basis, and that is an important structural element to understand. It is not a criticism but a reality. The Ministers for Public Expenditure and Reform and Health, as part of the Government, would like to gain insight into the spend on a programme basis and control it using that process. One can understand that as it is possible to line up outputs and outcomes with programme spend. Mental health, child care, acute hospitals or any of the range of services to be provided could be lined up through programme spend and programme outcomes. The operating design of our financial systems in the HSE are not programme-based.

I thank the witness for the response. I appreciate it.

Deputy Michael McCarthy

I welcome Mr. Magee and his colleagues. Will he take us back on the figures he mentioned on reductions in staff levels in the recent past? Will he specifically refer to the amount of people availing of the package at the end of February this year?

Mr. Cathal Magee

Yes.

Chairman

They are still in the system.

Another assumption was that the level of activity could be contained, particularly in our acute hospital system. This was a difficulty in shaping the plan, as further cuts of €750 were to be implemented on top of the cuts of €1.5 billion in the previous two years. As my colleague, Ms Laverne McGuinness has said, our acute admissions are 6.1% above plan and 1.6% over last year; elective admissions are 4% over the last year; inpatient discharges are 8% up on our plan; day cases are up 5.5% and today we have 157 less bed closures than last year. Our acute hospital system was faced with very significant budget reductions in the plan - the plan was built on containing service level activity - whereas in the first six months we have seen very significant growth and increased demand. I think the very good work of the special delivery unit in driving improvement of performance in our emergency departments and trying to begin to deal with our waiting list challenges is having an impact on demand.

There is much more detail available on it but our requirement is to try to drive cost reduction and take costs out of the system. We have been very successful on reducing pay costs and, as I said earlier, €160 million will be delivered by the reduced pay costs. We are also on target for delivering on our saving on procurement. The savings agenda continues but some of the assumptions of the plan, as of today are no longer valid.

Deputy Simon Harris

Deputy Deasy raised the issue of increments and in response Mr. Magee told him that the cost to the HSE is €45 million to €50 million this year. The question I have put to every Accounting Officer and to the Minister for Public Expenditure and Reform is to differentiate between the cost of increments for those in the low and middle pay grades and the cost for those in higher paid grades. Has Mr. Magee a breakdown of the numbers in receipt of increments, the number of people earning above a certain figure who are in receipt of increments this year? If so, he will be ahead of his colleagues in other Departments. Could Mr. Magee tell me how many of those earning in excess of €70,00 per annum in the HSE are in line for increments this year?

Mr. Cathal Magee

I am unable to do so but I am happy to try to get that analysis for the Deputy.

Deputy Simon Harris

I would appreciate that as it is important to have such a breakdown. We are having a fake debate in society, where we are trying to lump together all public sector workers, as if everybody is earning the same income and carrying the same level of responsibilities. From this committee's point of view in terms of protecting the taxpayer's interests and in terms of the HSE living within its budget, it is useful to know the difference between clerical grade staff who may depend on their increment and people earning generous salaries in the higher echelons. If it was possible to compile that data, it would be very useful.

My final point refers to a very important issue on procurement and medical technology. A good deal of work has been done at an academic level on procurement and medical technology. I refer to a damning report, A Review of Current Procurement Practices in Ireland, authored by Dr. Paul Davis, in conjunction with IMSTA, DCU and Enterprise Ireland. The key findings of this DCU procurement research were that there is no coherent policy for medical technology procurement, that international research findings conclude that a singular focus on procurement price reduction can result in a failure to reduce total health care costs; and that medical technology procurement must be seen as a strategic activity in order to focus on total health care costs. It goes on to make the point that the current practices in public procurement in Ireland focus on price only, with little or no tender engagement with lack of specialist knowledge and tenders being used to seek market information. It also asks that Government and industry start to establish a formal dialogue.

The report hits a very interesting point on the head, if I can put it to Mr. Magee, which is the idea of the HSE operating in silos, that people in the procurement division are so desperate to achieve the savings that he has outlined to this committee that they are not looking at the total health care costs, a phrase we do not hear enough in Ireland. To give a simplistic example, in the HSE, one could have a procurement unit that would procure the cheapest bandage for a wound possible, not knowing that the bandage might need to be changed on a daily basis, whereas the couple of euros they have saved on the bandage will result in much more significant costs in the primary care service, where community nurses must replace the bandage more often. My point is that the HSE has not got a joined-up way of calculating total health care costs, which is accidentally misleading in terms of the savings and is not serving patients as well.

Mr. Cathal Magee

Deputy Harris makes valid comments. My response, is that in the past two years, we have seen very significant engagement of our clinical leaders in the whole management and decision making of both costs and cost benefit in our health system. We have a very significant number of clinical programmes that are programme leads who would be blueprinting what the future service model would look like and the steps that enable it. That would include the cost benefits of different models of delivery of care and the different technologies underpinning that. We are bringing that clinical capability to a judgment around how to drive costs down and how to benefit from technologies in total health value. That work is now beginning. I compliment our clinical leaders and our clinical teams for the work they are doing in this area. They are also beginning to engage in the procurement process, and we have very good examples where clinicians are leading very significant procurement processes for certain services. Let me give some examples - renal services would be a good one - where they are taking a more holistic view, taking account of the whole.

This is a new area and this is where I expect to make progress, with the specialist procurement teams working to support clinicians, who are looking at total cost and value and driving the systems required to underpin that. Another example is the stroke programme that is led by two clinicians who are looking at a technology enabler that we can provide through access to specialist consultants across 16 to 17 centres to be provided on a hub and spoke basis, through advanced technology.

In reply to Deputy Harris who asked about the cost benefit analysis of technology, I outline the following considerations. To use technology as a tool to achieve the best cost benefit analysis in terms of drugs and technology itself, it must be clinically led and supported by procurement specialists in looking at what savings can be driven and where value for money and cost benefit can be driven into our health system.

Deputy Simon Harris

This is an area where progress will be made as a result of ongoing change.

I have two final points. To further develop the point on saving money, we are misleading ourselves, as there are people in hospital beds that may be taking up a bed because the technology or an innovative device is not available in the next location or because it is not listed on the GMS scheme. That is another example of a fake saving and I ask Mr. Magee to consider this. Is he aware of the work being done by the NHS on this, as it is significantly ahead of us, both in terms of the actual work it has done but also in the culture in which it is engaging. I am not sure if Mr. Magee is familiar with the publication, Innovation Health and Wealth: Accelerating Adoption and Diffusion in the NHS. Mr. Magee's counterpart, Sir David Nicholson, the chief executive of the NHS, in the foreword to his report, describes the opportunities provided by medical technology are "tantalising". He cites the example of fluid management monitoring technologies which can he states, "reduce mortality rates for elective procedures, improve the quality of care for more than 800,000 patients a year, and save the NHS at least £400m annually." Given the current financial climate, Mr. Magee may be particularly interested to note the savings that can be achieved. In certain areas of the HSE there appears to be a misplaced view that we cannot afford such technologies. Is the finance directorate availing of the services of a health economist?

Mr. Cathal Magee

Yes. A number of people who are health economists are employed. We do not have a strong health economy capability, but we have health economists.

Deputy Simon Harris

Is Dr. Valery Walshe still with the HSE?

Mr. Cathal Magee

Yes, she is in Cork.

Deputy Simon Harris

It is important that the HSE use more health economists. The NHS asked medical technology companies how they could help it to make savings while improving care. I would be delighted to have a further exchange with Mr. Magee on this matter at a future meeting.

Mr. Cathal Magee

Going back to the clinical approach, one of the first initiatives within each of the clinical programmes is to benchmark international best practice and examine what solutions are offered internationally. We are looking at which countries are most advanced in terms of service delivery or the provision of certain services. As a country, we plug in and benefit from best international practice or experience. That is a key component of the clinical programme design and blueprint.

Deputy Sean Fleming

I thank Mr. Magee and his personnel for their attendance. I also thank him for his work as head of the Health Service Executive in ensuring the report on the deaths of children in care was published. Before his appointment two years ago, we did not even know how many children had died in care as there had not been any report published on the issue. Shortly after his appointment, I spoke to Mr. Magee who indicated that he would publish regardless. Prior to that, there was an attitude that publishing would have legal implications. I am satisfied that the decision to publish the recent report is related to Mr. Magee's arrival in the HSE as no report had been published beforehand. The relevant information may or may not have been available at the time. Perhaps it was easier for Mr. Magee to act in this matter as the events in question did not take place on his watch.

I compliment the HSE, the Department of Health and the Department of Children and Youth Affairs on the openness they have shown on this issue. Such openness was not evident hitherto. We owe it to the 196 children who died to be open. The committee had a few skirmishes when some reports were published about two years ago. A member of the Fine Gael Party which was then in opposition who is now a Minister raised the matter and there was considerable controversy about publishing the report. Its publication was a good decision because it forced everybody's hand.

I acknowledge the role of the Minister for Justice and Equality in getting the ball rolling. I also welcome the appointment of Mr. Gordon Jeyes and the establishment of a new Department of Children and Youth Affairs. These decisions may be what is needed. It is important that the children in question did not die in vain and we learn lessons which may prevent the deaths of other children. We will support the referendum on children's rights when the time comes. Having discussed this issue previously, it is good to have a report, although I was disappointed by the coverage it was given. An issue of that nature should have been the dominant event of the week, but many other issues have taken centre stage in recent days. I am confident that those with the authority and ability to act on the report will do so.

I thank Mr. Magee for his undertaking to try to obtain information on the cost of increments for highly paid staff on salaries in excess of €70,000. The HSE which employs approximately one third of all public servants has been helpful in providing the committee with information on issues in the public service. We have not been as successful in obtaining such information from other Accounting Officers or line Ministers. We have been able to extrapolate from the information provided by the HSE, on which I compliment Mr. Magee and his staff, a picture for the entire public service, although I accept this is not an exact science. I look forward to receiving the information Mr. Magee has undertaken to provide.

Can Ms McGuinness give me an indication? The committee received a letter arising from her earlier visit on 9 March 2012. The letter dealt with the issue of nursing home costs and we were given a chart on each of the 128 nursing homes. The average weekly cost per patient varied from €2,518 for Our Lady's Hospice - we understand that the hospice is very expensive - right down to St. Joseph's Hospital in Dungarvan at €430. Most of them are in the €1,100 to €1,200 per week bracket. These are the figures for 2010. I have a document here published by the HSE in May 2012 for the midlands called "Older Person Services - Information and Consultation Document". This contained proposals to close down two units in County Laois. I compared the figures on costs per patient in the chart for 2010 with the cost per patient in the midlands that was published in this recent document. If the 2010 figures are correct, then I cannot believe the change in the 2011 figures published last month.

In Tullamore, Mountmellick, Birr, Longford, Mullingar, Abbeyleix, Edenderry and Athlone, the costs have gone up from year to year by 53%, according to the HSE document. If we compare the costs Ms McGuinness gave us three months ago for 2010 with the costs for the midlands region published last month, the cost for the nursing home in Longford has gone from €1,246 per patient per week to €2,448, which is a 96% increase. There is an increase 84% increase in Athlone, a 64% increase in Abbeyleix, and a 36% increase in Mountmellick. I cannot believe that the costs have gone up that much. It looks as if the HSE is trying to construct a case that it is very expensive to keep people in public nursing homes so that they can be moved out of HSE facilities and into private nursing homes.

I will go back to my first comment. There appears to be a policy to contract out some of the care of the elderly and I have quoted two reports in this respect. I cannot understand how an organisation that must reduce its budget by 5% for this year is able to stand over figures for the nursing homes I have chosen - they are the only nursing homes for which I have figures and I have no reason to believe they are any different from the other 119 public nursing homes - where the smallest increase is 9% and where there are some increases up to 96%. How can these figures tally for an organisation whose budget has been cut by 5%? Can the witnesses explain that? It is hard to reconcile those figures at face value, and they are the HSE's own figures. I am probably taking them by surprise in this area, but they are probably aware of what I am talking about and this is a recent HSE document. They can come back to me with more detail, but I would like them to make a general comment.

Mr. Cathal Magee

I will make a general comment. In the next few weeks we will have completed the financial viability analysis of our community nursing units, examining the precise unit costs, the staff ratios, the potential investment costs for upgrade and so on. This will be examined for each nursing unit within the statutory system. The Deputy will know from the previous published documents that the unit costs vary significantly.

Ms McGuinness spoke about people exercising choice within the fair deal system. Where there is a loss of staff and a reduction in bed occupancy, the economies of scale work significantly against the nursing home, so some of those increases are driven by reduced occupancy and significant overhead costs, which lead to increased unit costs. That is a dynamic within the statutory nursing unit system. As people choose to migrate to private care under the fair deal scheme and as staff leave our public nursing unit system, there can be a contraction of the number of occupied beds. If the numbers go down, the unit costs go up. I think we have to strip out those issues to understand exactly how to compare units with units. That is the key issue. It is a difficult to maintain occupancy levels within the public nursing unit system in order to keep unit costs on a comparative basis with the funding issue of the standard costs of the fair deal system.

Deputy Sean Fleming

This is a compliment to the HSE facilities, but I do not know any person who would not be happy to go into any of its facilities before going into the private system. It would be their first, second, third and up to ninth choice before the private system, because we all know of the medical care involved in the public system. There is normally a GP attached to some of these while they are not necessarily attached to private nursing homes. There tends to be a bit more physio and activity in the area. I compliment the public nursing homes and community residences for the elderly and I do not believe anybody chooses to go to the private system under the fair deal. Almost everyone I have come across would much prefer to be in a HSE facility for all of the good reasons I have mentioned. I do not believe people are migrating from them because they prefer to go elsewhere. The numbers are reducing because the HSE is not letting people in. There are patients in all of the hospitals in the midlands region who should be discharged. The HSE has stopped admissions on an ongoing basis. If it lets no one in, a unit which had 40 patients last year at a certain unit cost may reduce that number to 20 or 30 patients, but then the unit costs would double, not because costs had gone up but because of the number of patients. There is a queue of people seeking to get in, of which the HSE should be mindful. In some cases it is overusing HIQA. I realise certain places must register in several years time, but none of these places have problems with HIQA.

Mr. Cathal Magee

The fair deal scheme and the way it operates in the private and statutory systems are under review. The Minister has initiated a consultation process and a review of the mechanics. The scheme operates in a precise way in the way it interfaces throughout the private and statutory or public delivery systems. Some of the issues surrounding the statutory and private systems must be examined. There are anomalies in respect of the issue of cost and capacity in the statutory system and how it is funded. We will publish the revised up-to-date costs of care in all of these units.

Deputy Sean Fleming

Will Mr. Magee send them to us?

Mr. Cathal Magee

Yes.

Chairman

Deputy Sean Fleming raised several issues about terms of the fair deal scheme. Is there a backlog?

Ms Laverne McGuinness

No, there is no backlog. All forms and applications are being processed within a maximum period of six weeks, but 90% are processed within four weeks. We do not have a backlog; we are up to date. There are 22,709 people supported under the fair deal scheme in subvention contract beds and fair deal scheme beds.

Chairman

I will return to that issue, but that has not been my experience. I am unsure how other Deputies will respond to that information. My experience with constituents is that under the fair deal scheme, it can take a considerable period for an application to go through. There are several patients in beds in acute hospitals waiting for decisions under the fair deal scheme. Figures released by the HSE suggest that in the first four and a half months of the year some 93,698 bed days were lost in hospitals. I am trying to assess this figure. Was it the case that patients did not go home, or were they still in bed when they should have been elsewhere? What is the cause of this? Is what I perceive to be a backlog or delay in making decisions under the fair deal scheme part of the cause?

Ms Laverne McGuinness

There are a number of reasons for there being what we call delayed discharges. It is not nice terminology, but that is the term we use. This relates to patients medically fit for discharge but who have not gone home. A total of approximately 664 delayed discharges have been recorded throughout the entire country. These are not all patients waiting for a long-term care bed. Some are waiting to get the bed of their choice. For example, a person may choose a particular bed in a particular nursing home and it may not be ready. Such a person may not move for a given period. Others may be waiting to attend rehabilitation and in these cases it would not necessarily be long-term care. A small proportion are waiting to be discharged while they have occupational aids or supports fitted in their homes or adapted for their homes. A small number, perhaps 13, are waiting for home help or home care services. These are the most recent figures available. Some are waiting for long-term care, but they may not have submitted all the forms. There may be legal issues in getting some of their relatives to sign certain parts of the forms.

Of course.

Deputy Paschal Donohoe

I welcome Mr. Magee and the rest of the deputation. I will begin on a complimentary note. I echo the point made by Deputy Sean Fleming on the recent report which described a litany of tragedies at a time when the country was awash with money. There was an unflinching nature to the report in detailing what had occurred and it does credit to those involved and the HSE. I add my compliments to those of Deputy Sean Fleming.

I have been struck by the increased quantity of information the HSE is sending to us. In some reports it has provided a more up-to-date perspective which was not been the case heretofore with State agencies. I acknowledge and welcome this move by the HSE.

I wish to focus on three areas. One issue not touched on to date relates to some of the points made by a former colleague of the deputation, Mr. Sean McGrath, who finished up with the HSE and I understand went on to become human resources director of the World Bank. The nature of the roles undertaken by the deputation is highlighted by the fact that he became a director in an organisation such as the World Bank. He had some interesting things to say about the way consultants operated in the hospital service and their levels of pay. Two points struck me about the interview he gave in The Irish Times last March. He said that overall, we have up to 500 consultants now earning in excess of €200,000. How many consultants are earning in excess of €200,000?

Mr. Cathal Magee

The number is 500.

Deputy Paschal Donohoe

Approximately €100 million is going to 500 people. He also made the point that some hospital consultants are able to complete their 37 hour commitment to public hospitals by Wednesday lunch time and then to devote the remainder of the week to their private practice while receiving additional allowances for being on call while doing their private practice, I assume. What is this allowance?

Mr. Cathal Magee

A consultant contract was negotiated a number of years ago after three or four years of protracted discussions. This is quite an extensive contractual document which sets out the terms of engagement and the conditions of employment, pay rates and allowances to govern the consultant relationship with both the statutory hospital and it also covers private hospitals.

There are a number of different types of contract. Type B contract allows for a limited private practice where 20% of the consultant's time can be devoted to private practice. Type C contract allows for a consultant to engage in private practice on a multi-site basis outside his or her individual hospital. Type C contracts and their former B star contract, which was people who did not opt-in to new contracts, provide the opportunity for consultants to provide a public service in a hospital and also to have a private service and a private service in other locations, in other private facilities.

The existing contractual arrangements, the range of different types of consultant contracts and the terms and conditions associated with all those contracts, are all approved, published and available. I am not sure of the name of the precise contract to which the Deputy refers.

In the current phase arising out of public discussions on the issue of how to deliver savings, under the Croke Park agreement we have tabled with the Hospital Consultants Association quite a significant set of proposals which are to do with reducing costs and making hospitals more operationally effective, particularly with the consultants who are key decision-makers. Those proposals have been tabled and some initial discussions have taken place. These are the response from both the HSE and the Department to try to deal with first, the challenges in funding and the challenges in transforming our hospitals to being more operationally effective and second, the challenge of trying to deal with the issue of coverage on both a five-day and a seven-day basis.

Deputy Paschal Donohoe

I refer to a book by Professor Brendan Drumm, who devotes an entire chapter to the consultants' contract, which I read with interest. The figures provided by Mr. McGrath in his interview are just a very stark illustration of how much money some people are still being paid. I understand the level of service they are providing and I understand how we hope to migrate the health service towards consultant-led health care delivery and the role of clinical directors. The interview revealed that hospital consultants have more than 100 salary rates based on various contracts and ranging from €130,000 to €185,000. Very generous allowances are also paid. Clinical directors receive €46,000 in allowances and on-call call-out and continuing medical education programmes. Mr. Magee has said that 500 consultants earn in excess of €200,000 and Mr. McGrath stated that some of them are earning in excess of €250,000. This is just the money they receive from the taxpayer because on top of that, they have their earnings from private practice. I am sure Mr. Magee and his colleagues work a lot more than 37 hours a week. I think many people in this room-----

Ms Laverne McGuinness

Part-timers.

Deputy Paschal Donohoe

-----would aspire to work such hours. I am trying to reconcile this reality.

I looked up the pay rates for consultants in the NHS for this year. The Threshold 1 contract starts at £74,000. Threshold 8 is the highest tier and it pays £100,000. The NHS also has clinical excellence awards for consultants which at level one start at £2,957 and a platinum award is £75,000. I can only assume that not all consultants in the NHS are on Tier 8 and have received platinum recognition. If they were, it would amount to £175,000 which is still less even when exchange rates are factored. Either way it is still less than what 500 people earn as consultants in our health system. We are trying to get the country out of bankruptcy. I ask Mr. Magee to correct me if I am mistaken in the figures but it seems surreal that such salaries are being earned for this kind of working week. It appears extravagant when compared with the NHS.

Mr. Cathal Magee

The figures are the negotiated contracted rates. There has been commentary about the international benchmarks. The pay expenditure over the various categories such as medical and dental, are 18% of the HSE's total pay costs and probably represents about 9% of our workforce. Everyone would agree that our health system is very well served by the quality of clinicians and we have been able to attract back into Ireland clinicians who have trained and worked abroad. There is general acknowledgement that the capability in our clinical system is very good, relative to other systems.

Clinicians are very important in managing our health service. They need to step up and to take responsibility for the management of the services they deliver. I refer to the importance of the evolution of clinical directors, the development of clinical programmes, the blueprinting of how services should be delivered. The health system is essentially a clinical service and for too long in our Irish health system our clinicians have not been taking management and leadership roles. The work done by Brendan Drumm, which has continued in recent years, is beginning to transform this system. Clinicians are taking responsibility and ownership and there has been an emergence of a management and leadership cadre within the consultant community which is very important. They are attracting increased allowances and payments because of this.

The Minister has led on the trade-off between the costs and the rates of pay and the productivity and transformational impact. We are at a critical juncture in this very important debate in that there is an expectation that the consultant community and the hospital consultant association will step up and engage with the agenda which would have significant benefits for the overall operational effectiveness, including costs, of our hospital system. We are dealing with very complex contracts, various types of consultant relationships and an agenda for change. There are choices to be made in all of this and, in that context, discussions between the Minister, the Department, the Health Service Executive and the representative associations are critical.

Deputy Paschal Donohoe

Absolutely. I acknowledge what Mr. Magee has done in recognising the need to change elements of these arrangements. The Minister has expressed the same view. Mr. Magee said that choices must be made, but we are rapidly getting to a point where there will be very stark choices indeed in terms of the services that are provided and how they are funded. We will not be able to do both and whatever decisions are made will have a significant impact on large numbers of people. More is required than for the consultant community to step up to the mark on this. As important as their work is, the reality is that the country is bankrupt. We cannot hope to restore solvency in a situation where people are being paid €200,000 for a 37-hour working week.

Mr. Cathal Magee

It is important to note that many consultants and clinicians within the system work far in excess of the required hours. I am not saying that is universally the case, but there are categories of consultants and individuals across the health system who work 50, 60 or 70 hours per week. However, I agree with the Deputy regarding the contracted hours. If an individual chooses to work only the contracted hours, that is his or her prerogative.

Deputy Paschal Donohoe

The difficulty is that one could say about any profession which is paid for by the taxpayer that there are people who work the average hours and those who work far in excess of them. That is the case in any walk of life, including political life. Our objective must be to reach a point where any consultant or politician, for example, who is paid more than his or her counterparts in other countries is only in that position because he or she is demonstrably working harder or working better. Any situation where pay differences are justified by anything less than performance must be tackled. Otherwise it is service users who will suffer, particularly those who are less well represented within the system.

Mr. Cathal Magee

The Deputy makes a valid point. In terms of consultants' working week, a standardisation of working hours across the public system would have huge benefits and create huge additional capability within the health service. An increase in the standard working week to 39 hours, for instance, would be the equivalent of adding 5,000 to 6,000 man years to our service. It is of that order of magnitude, although it must be moderated by the reality that many people already work significantly in excess of the standard working week.

It should be borne in mind that some 10,500 staff have left the health service since the peak in 2007, which includes 3,500 nurses, yet we have not reduced patient numbers and therapies continue to grow. In other words, despite the reductions in staff numbers, we are able to continue to deliver the services because of the commitment and flexibility of the people who work in the system and the additional effort and hours they are putting in. It is very difficult to make a judgment in terms of what is contracted as opposed to what people actually deliver. An individual can choose to do the contracted work, but many will go way beyond that.

Deputy Paschal Donohoe

Mr. Magee has already made that point and I accept it. However, we could say the same about teachers, to use just one example. It is a matter of germane consideration to me that there will be 158 Deputies in the next Dáil as opposed to 166.

Deputy Gerald Nash

I hope we all will be part of that number.

Deputy Paschal Donohoe

When the Garda Commissioner attended a meeting of the committee, he made the same point. Mr. Magee has agreed that there are very significant choices to be made. The difference between what is prevalent in Britain's national health service, based on the figures I have seen, and what is being paid out in this country is extraordinary. If we do not tackle this issue, the capacity to treat patients will be reduced.

Mr. Cathal Magee

If one looks at the funding challenges in the current year and at the outlook, one can see there are choices to be made if we are to protect the volume and range of services we provide.

Deputy Paschal Donohoe

Yes.

Arising out of the issues that have emerged and come to my attention, I have asked Dr. Geraldine Smith to lead a forensic audit of section 38 remuneration. We may have to move on to section 39, which has quite a large agenda, later. I have asked Dr. Smith to look at senior management remuneration and privately and publicly funded elements. I am not sure whether we will get compliance with disclosures around privately funded elements but we are asking for information on all benefits paid and any contributions to pension funds. We will also ask in the audit for information on the extent to which any prior approvals existed on a board, a department, the HSE or communications to that effect and look at all the issues related to remuneration and protocols in agencies that are largely funded by the State. We need to do a root and branch analysis, examine the findings of that and determine how we will move forward and what are the policy or approval implications. It is a piece a work. It will take probably three months to do it properly, to make sure that we get full disclosure and that we establish the protocols associated with those arrangements. That is not to say there is a major problem but arising out of the HIQA report certain issues came to our attention which we need to audit across all the voluntary hospitals and all the services that are covered by that.

Chairman

I do not want to delay on this but I want to explain my position. Mr. Magee's organisation spends approximately €14 billion. On an issue such as this one, where an organisation gets €42 million of that allocation, I would have thought there would have been a mechanism in place that provided for engaging with that organisation in regard to its audit and that Mr. Magee would know what percentage of its activity or spending is covered by the €42 million, therefore, enabling Mr. Magee to know what kind of muscle he had in bringing an organisation such as that one to account. I am not saying there is anything wrong, I am just reflecting, as previous Deputies did, on the cost of salaries and everything else because taxpayers are looking at these various organisations, at what we do, and at what the HSE does. As this is the Committee of Public Accounts I would like to get some comfort from Mr. Magee and the HSE that Mr. Magee is in control of this and that he is aware of where that money goes in terms of the end user. In this instance, I find it difficult to accept that while there is now a plan for the future in regard to how Mr. Magee will engage with these organisations, there does not seem to have been any plan in place in the past or if there was, it was sketchy. That is not good enough for an organisation like Mr. Magee's that spent €94 million from 2005 to 2011 on general consultancy of one kind or another, and included in that list is management consultants and IT consultants of one kind or another.

The HSE took over from the health boards in 2005 and it went on from there. In that period €94 million was spent and the HSE still has not got to grips with its total spend in the context of what we are talking about. I find that hard to grasp. In regard to these reports Mr. Magee talks about the spending of significant money for the future in terms of IT, or that because the HSE inherited systems from a number of different health boards from 2005, one computer system did not talk to the other. I have heard this before. How long more will we have to listen to it? Having been a member of the PAC, previously a trend emerges and in this instance the trend seems to be that vast amounts of money are being spent on management systems, consultancies of one kind or another, yet we do not seem to have a grip of the total management of the funds going to the HSE. I recognise the good work Mr. Magee is doing but in terms of the odd matters that come before us, of which there is quite a number, as in the case of expenditure of €42 million, getting answers amounts to a significant issue.

Mr. Cathal Magee

First, in regard to consultancy, we shared the full list, and it was not only consultancy but external providers and professional services. We published the full list for 2011. We have dramatically reduced our discretionary spending on these areas and brought in very significant controls. As an Accounting Officer, I have commented in our control assurance statement and annual accounts. I would agree that the governance arrangements in place around sections 38 and 39 funding are not adequate for me as an Accounting Officer to satisfy the State that we are satisfied about the manner in which all those funds have been discharged. This issue was raised by the Comptroller and Auditor General in 2005. Much progress has been made in building service level agreements.

In regard to section 39, I have spoken to many people about putting a panel of auditors together to deal with audits outside our statutory system because they are not subject to audit by us on a regular or programmatic pattern and that may be required. It is timely to take stock and to take a review. HIQA has made recommendations in terms of governance. We have to strengthen our service level agreements and to get this sorted from a remuneration point of view and from other governance points of view. It is an area that should be a priority for attention in terms of governance, financial control and management of and accountability for State funds.

Chairman

We took stock in 2005 and the Comptroller and Auditor General highlighted the issue generally and now seven years on from that while we might have made progress we still do not have a complete package of governance in terms of those organisations. That is the problem with the management of the HSE, namely, it takes so long to deliver on these issues. We will end up some day measuring how much taxpayers' money was lost in those seven years because we may have come across poor governance issues, poor spending, poor efficiencies and so on. At a time when the country is in difficulty, had these issues been in place, we might be a little more comfortable looking over our shoulder and saying we have that sorted. I urge Mr. Magee to put in place the necessary management within the HSE to ensure that he can answer questions such as this on the €42 million expenditure or about ensuring people comply in regard to the salary levels. From listening to what Mr. Magee has said this morning, I fully appreciate the range of issues with which he and his staff have to deal but fundamental to all of that is that what gets counted gets done. There is a good deal of counting to be done in regard to those organisations to bring them into line and I urge the Mr. Magee to do that as quickly as possible.

Deputy Mary Lou McDonald

Anybody who has interfaced with the system at any level could not but be struck by the capacity of clinicians and their commitment to their patients and to the service. I do not want to give the impression that I am questioning any of that but it is important that as members of the Committee of Public Accounts, given that substantive proposals to which we are not privy have been tabled and given the fact that there is an indefensible excess in respect of the payment to a significant cohort of consultants that the message from the committee is that we expect a full engagement with the proposals as tabled and we expect to see some kind of result. I am conscious of the fact that Mr. Magee is in the middle of an industrial relations negotiation but on behalf of taxpayers and the people I represent I wish to say clearly and categorically to the 500 consultants in receipt of in excess of €200,000, who also have a private practice, that it is not a tenable proposition in a situation where the State is insolvent. I say that with the greatest of respect for their medical expertise and professional commitment but there is a financial reality and it must be faced up to by all, including consultants.

More broadly, in respect of the issue of pay across the system I wish to inquire about top-up payments. We have focused on the consultants and I wish to broaden the discussion. HIQA reported that in Tallaght Hospital, which has already been mentioned, that sizeable top-up payments were made to senior managers in addition to their basic salaries. In one particular case a staff member was in receipt of an additional €150,000. Could Mr. Magee identify how widespread is the phenomenon of top-up payments across the system and what it is costing?

Mr. Cathal Magee

On Tallaght, following the findings of the HIQA report a significant audit process is taking place within the hospital by the audit committee, with the help of external consultants, to outline the exact origin, arrangements and authorities within Tallaght on the payments. As I outlined to the Chairman, I have asked Dr. Geraldine Smith to conduct a forensic audit of the arrangements in place across all our section 38 hospitals. That is under way and should be completed within the next three months to identify any situations where allowances, benefits, pension fund contributions and remuneration outside of the approved scales are in place, including whether separate payroll systems in place of which we are not aware. We will also look at the interfaces with the HSE in any circumstances where there was awareness of those payments or the existence of different arrangements.

Yes. The intent of the regulations, and I am not completely au fait with them, is that if one comes back in to work as a retired staff member one cannot earn more than one’s original remuneration between one’s pension and the services one is then being paid for. If, say, one is on a full pension, a 50% pension, one could not be paid more than the balance of the 50% or could not be engaged beyond that. When I looked at a lot of these examples, people are employed for two and a half days. That is the maximum, which is up to the limit of payment. Does the Deputy follow?

I would say two things on that. Many of these arrangements work quite well for the service in that they are local people who know and can fill in for somebody who is on holidays, and particularly where one has to distribute out into remote locations, not necessarily just in the city. There has been a functional use, and we set out in our commentary part of the rationale. Some of them were very short cover, but as a matter of policy going forward we have to exit this arrangement. It is subject to question. There are high levels of unemployment. We have a lot of people coming through on our training programmes who are looking for work. It is down now to fewer than 300 and we will seek to exit that completely, but the payment arrangements would be in order.

Deputy Mary Lou McDonald

The HSE was commended on the publication of the report on deaths of children in State care. That is only fair but it begs a comment to the effect that the report itself was pretty damning in some cases about the incoherence of the HSE's service and the extent to which very vulnerable children were let down. Deputy Fleming referred to giving children due recognition. In doing so, that fact must be put on the record.

Chairman

Deputy McDonald, in the course of her exchange, referred to how the HSE manages its systems. Under the last Administration, an employee of the HSE worked as a consultant in the HSE during a career break. Having learned from that and the concerns expressed in regard to it, I would have believed there would be a better register of those who leave the HSE and who are rehired by it. As events such as this happen, we must pick up on them. We must exercise a little more care in respect of how they occur.

Deputy McDonald referred to allowances and the highest allowance of €186,000. Deputy Deasy raised this in his opening remarks. I do not believe the Deputies received a reply.

That is Mr. Magee's understanding of the position and I entirely respect that. My difficulty with it is that it is entirely unenforceable. It will be up to the Minister to return to the table and make good on those commitments as he sees it. However, there is no immediate benefit for the taxpayer, considering the commitments the Minister had made previously in respect of reducing Ireland's enormous pharmaceuticals bill.

I wish to make a further remark regarding the HSE's engagement with the Irish Hospital Consultants Association, IHCA. It appears to me as though the Minister had two options. He could have decided to confront the issue of contracts, which he decided not to do. He then decided to take the alternative view that he would engage constructively with the Irish Hospital Consultants Association to address issues pertaining to flexibility and so on, as Mr. Magee noted earlier. That is all well and good. While it is not necessarily an approach I would support, it is the approach the Minister has decided to take. The critical issue is that any negotiations with the IHCA are time-limited. One wishes to avoid a scenario in which the IHCA runs down the clock and no return at all is gained from consultants with regard to work flexibilities and the sort of leadership I wish to see them take and which, in fairness, many consultants now are taking each day. Can Mr. Magee assure me that this process of negotiation will be time-limited and there is a certain expectation that there will be delivery upfront in this regard?

Mr. Cathal Magee

I note the Deputy's comments on being time-limited. The agenda is such that it will become clear very quickly whether the Irish Hospital Consultants Association has a mandate or is willing to engage seriously on these agendas. While substantive engagement is yet to take place, the proposals have been with the consultants for quite a number of weeks. It will become clear whether they will embrace that agenda and I agree there are time-limits on this issue.

Deputy Sean Fleming

I wish to ask questions of Mr. Magee regarding two points I did not get to cover previously, as I wished to give the opportunity to others to come in. Does the HSE know how much on average a medical card costs the executive? As I look at the figures before members, I note 1,916,768 such cards are in existence at present, of which a few are GP-only cards. The fees being paid to doctors in this year's budget amount to €439 million, which suggests the average fee the HSE appears to be paying GPs for a card is approximately €230. The pharmacy cost specific to medical cards is €369 million, or an average of €193 for each card. Consequently, the total, between the GP and the pharmacy, is well over €400. Can the witnesses provide a figure for accident and emergency department visits that were taken up by people with medical cards? I refer to those who did not incur the inpatient costs that a private person who goes to hospital is obliged to pay for a certain number of days. How much of that pertained to medical cardholders? What level of community nursing was covered by people with medical cards? I ask in an attempt to establish information on what is the average cost of a medical card, by which I mean the average benefit to a person who receives such a card from the HSE.

Chairman

Has Deputy O'Donnell a question?

At an operating level, if a hospital unit has weekly information and a procurement system to give staff visibility, that is where the requirement is probably more evident. It is at that level the real-time information is required. That is where there are gaps, and I agree with the Deputy in that regard.

Deputy Kieran O’Donnell

I have three quick questions on my local area, Limerick. Where does the HSE stand on the mid-west trust being established to run the hospital network? Obviously, there are major ongoing issues with the accident and emergency department in terms of the lack of space and the critical care unit. Perhaps Mr. Magee would provide an update on when he expects the critical care unit will be up and running. Expansion plans for accident and emergency are being examined. The staff on the ground do great work, but there is, clearly, a capacity issue. Ms McGuinness might address the questions on the accident and emergency department and when the critical care unit will be up and running.

Ms Laverne McGuinness

Chapter 47 - Management of the Health Service Executive Vote

Mr. Cathal Magee

Mr. Seamus McCarthy

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Ms Laverne McGuinness

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Ms Laverne McGuinness

Ms Laverne McGuinness

Ms Laverne McGuinness

Ms Laverne McGuinness

Ms Laverne McGuinness

Ms Laverne McGuinness

Mr. Cathal Magee

Ms Laverne McGuinness

Ms Laverne McGuinness

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Declan Lyons

Mr. Declan Lyons

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Ms Laverne McGuinness

Ms Laverne McGuinness

Ms Laverne McGuinness

Ms Laverne McGuinness

Ms Laverne McGuinness

Mr. Cathal Magee

Mr. Cathal Magee

Mr. Cathal Magee

Ms Laverne McGuinness

COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 28 Jun 2012