Chapter 21: Control over the Supply of High-Tech Drugs and Medicines

Mr. Tony O'Brien (Director General, HSE), called and examined.

I remind members, witnesses and those in the Gallery to turn off their mobile phones as they interfere with the sound quality and transmission of the meeting. I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, 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 to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. Members are reminded of the provisions within Standing Order 163 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. Tony O'Brien, director general of the HSE, and ask him to introduce his officials.

Mr. Tony O'Brien

I am joined by Mr. Stephen Mulvany, chief financial officer of the HSE, Mr. John Hennessy, national director for primary care, Mr. John Swords, head of procurement, Mr. Paddy McDonald, assistant chief financial officer, and Ms Mairead Dolan, assistant chief financial officer.

Mr. Greg Dempsey from the Department of Health is also welcome as is Mr. Barry O'Brien from the Department of Public Expenditure and Reform. I ask Mr. Seamus McCarthy to make his opening statement.

Mr. Seamus McCarthy

The appropriation account for Vote 39 indicates that the Health Service Executive's gross expenditure for 2014 amounted to €13.54 billion. This was approximately €585 million more than provided for in the original Estimate for the Vote approved by Dáil Éireann. Approximately 10% of the total spend in the year was funded through a range of appropriations-in-aid of the Vote, which amounted to €1.34 billion in 2014. This was €68 million below the amount of receipts forecast in the original Estimate. The net result was a requirement for Exchequer funding of €12.2 billion for 2014, around €653 million, or 5.6%, more than originally budgeted for. This budget overrun was met by a Supplementary Estimate in December 2014 which allocated an additional €680 million for the HSE. The €27 million that remained unspent at the end of the year was liable for surrender back to the Exchequer. The budget overrun in 2014, with its consequent Supplementary Estimate, continued a pattern that has extended over many years. Notes 3 and 4 of the appropriation account provide explanations of significant variances in spending and receipts. The variance relative to the budget was more significant in some spending and receipts areas than in others. Members will recall that for 2015, the Vote for health includes Exchequer funding for the Health Service Executive. Consequently, this is the last appropriation account that will be prepared by the HSE. It will continue to produce accrual-based annual financial statements.

The Accounting Officer has included in the appropriation account a comprehensive statement on the system of internal financial control in place in the HSE. This reflects the complexity of the HSE as an organisation and the range of services and facilities it provides. I draw the committee's attention to certain matters dealt with by the Accounting Officer in that statement. These relate to the extent to which the HSE does not comply with the relevant procurement procedures which are set out in detail in the HSE's national financial regulations. I have reported previously on this matter in my 2013 annual report. The committee considered that report on 23 April 2015. I also draw attention to a comprehensive review by the HSE examining its compliance with tax rules, which was completed in 2014. The HSE made an unprompted voluntary disclosure to Revenue, including interest and penalties, amounting to €21.6 million in 2014 and €800,000 in 2015. We have also prepared three reports that deal with areas of HSE activity, which are before the committee today.

Chapter 19 deals with compliance with prompt payment legislation in the HSE in Beaumont Hospital and in St. James's Hospital. The two hospitals are section 38 bodies funded by the HSE whose financial statements are subject to audit by me.

There are a substantial number of other section 38 bodies that I do not audit.

Legislation providing for automatic penalties for late payment of invoices was first enacted in 1997, in response to concerns about the impact on suppliers, particularly small and medium enterprises, of onerous payment terms and conditions. The initial provision was for automatic payment of interest by public sector bodies where suppliers had not been paid within 45 days of receipt of an undisputed invoice. In 2002, late payments were redefined as those not paid within 30 days. At that time, the legislation was also extended to private companies, as well as public bodies. Specific contract terms can be agreed with suppliers, allowing longer or shorter credit periods. The prompt payment legislation was further amended with effect from March 2013, requiring the automatic payment of flat-rate compensation payments of €40, €70 or €100, depending on the value of the invoice, in addition to late payment interest.

In the 2014 audits of the financial statements of the HSE and the two hospitals, we examined compliance with the revised legislation. In all three cases, we found there was a failure to pay the statutory compensation, even where late payment interest had been paid. The HSE subsequently recognised in its financial statements a liability to pay compensation to suppliers. It estimated that this amounted to €9 million in respect of the period from March 2013 to the end of 2014. As of September 2015, these compensation amounts had not been paid. Additional liabilities in St. James’s and Beaumont relating to non-payment of late payment interest and compensation are estimated at €389,000 and €200,000, respectively.

We also found a variation in credit terms in operation within the HSE. Some HSE areas use a standard credit period of 30 days, while others operate a standard 45-day credit period with suppliers. Separate payment terms are in place under contracts for payments to nursing homes and drug suppliers, and we noted that the HSE was not late in making payments to nursing home or drug suppliers. As a result, suppliers to the HSE may not be treated equally.

Chapter 20 looks at another routine business function in the health sector, this time dealing with the collection of income - specifically, the collection by major hospitals of private patient income due from health insurers. We examined the situation in five hospitals, three of which are HSE managed, namely, Cork University Hospital, University Hospital Galway and Midland Regional Hospital, Tullamore. The others were the two major section 38 hospitals within my remit, namely, St. James's Hospital and Beaumont Hospital. Patient income accounted for €410 million of the HSE's total current income in 2014. Almost three-quarters of this related to charges in respect of private patients, and the bulk of this was recoverable from private health insurers. Patient income in section 38 hospitals does not form part of the HSE's current income but is taken into account in the funding of these hospitals by the HSE.

New legislation enacted in July 2013 revised the charge rates for private inpatient services that came into effect in January 2014. There was uncertainty in hospitals about the application of the charges following the commencement of the new legislation, despite the provision of a six-month lead-in period. The process of clarifying the details, involving the hospitals, the insurers, the HSE and the Department of Health, continued until August 2014. As a result of the clarifications, additional private patient charges totalling circa €25.7 million had to be levied by hospitals in respect of 2014.

Delays in collecting income due from private health insurers means that the Exchequer is effectively meeting the funding gap at hospitals until payment is made. At the end of 2014, the total private patient debt outstanding from insurance companies was €290 million. The age of the private patient income debt - calculated in debtor days - was 186 days. This measure reflects the equivalent number of days' average income the hospitals would have to generate from private treatment of private patients, to accumulate the current outstanding debt level.

At the end of 2014, claims on hand had been with consultants awaiting sign-off for an average of 58 days, up from an average of 43 days at the end of 2013. Delays in sign-off were longer in HSE hospitals, at an average 68 days, than in the section 38 and voluntary hospitals, where the average was 47 days, a difference of almost one third. In both sectors, the averages are well above the target of 20 days agreed with consultants as part of a Labour Relations Commission agreement in September 2012. The HSE noted that the changes in charges implemented in January 2014 had resulted in an increase in the number of claims requiring consultant review, contributing to increasing delays at the consultant sign-off stage during 2014. The HSE does not currently analyse the value and age of debt awaiting sign-off for each individual consultant.

The value of claims queried by insurance companies also increased significantly, by approximately 69%, over the course of 2014. The sharp increase in queried claims appears to be the result of the changes in the charging regime introduced at the beginning of 2014 and additional information being requested from consultants to justify the length of stay of patients.

Chapter 21 deals with the HSE's control over the supply of high-tech drugs and medicines. Expenditure by the HSE on the provision of high-tech drugs and medicines was €485 million in 2014, representing an almost 50% increase when compared with 2009. While the associated patient care fees paid to pharmacists have remained relatively stable at around €17 million a year, payments to the suppliers of drugs and medicines increased from €315 million in 2009 to €468 million in 2014. The HSE needs to have good controls in place to ensure that all drugs invoiced and paid for have in fact been delivered to pharmacies. We found that the controls in this regard were not adequate. Even though the majority of the expenditure on the scheme relates to the purchase of drugs, the checks conducted by the HSE are focused on checking pharmacists' claims rather than supplier invoices.

Excess expenditure can occur where high-tech drugs and medicines delivered to a pharmacy, and paid for by the HSE, are not subsequently used. This situation can arise, for example, where a patient’s prescription changes or where the patient decides to use an alternative pharmacy and the first pharmacy does not have another patient requiring the drug, within the available product life. In general, pharmacies cannot return unused stock to suppliers or transfer stock to other pharmacies. At 31 December 2014, the value of stock of high value drugs and medicines held in community pharmacies was just under €45 million. Returns from individual pharmacies indicated that stock on hands, valued at €2.7 million, had gone out of date. This, however, is a measure of loss at a point in time, and probably understates the actual level of wastage of high-tech drugs occurring over the course of a year.

The HSE does not require pharmacies to complete declarations of stock disposals or destruction of out-of-date stock. It also lacks information on the level, cause and cost of wastage due to excess stocks or in respect of the incidence of losses due to patients opting to use a different pharmacy. Even though the HSE operates an annual programme of pharmacy inspections, it does not conduct independent checks of stock levels in individual pharmacies. This could be done on a sample rather than a comprehensive basis, for example, checking stocks of specific kinds or brands of drugs. Instead, the HSE relies for stock information on annual returns by pharmacies, providing details of stock on hand.

In the context of ordering stock, it is important to acknowledge that an appropriate balance must be struck between ensuring that drugs are available to satisfy patient needs in a timely way, while minimising wastage due to excess stock. In 2011, and again in 2013, the HSE requested pharmacies to co-operate in maximising a just in time facility designed to reduce stock to a level compatible with immediate patient needs. The examination noted that the stock level in pharmacies at end 2014 was equivalent in value terms to just over a month's supply of stock, which seems high by reference to the frequency of delivery of drugs and the lead time for orders. On the other hand, the HSE has pointed to complaints that some patients had to wait over a weekend for essential stock to be delivered to their pharmacies.

In all the chapters, we have made recommendations for improvement. I am glad to note that the HSE has agreed to implement most of these, subject in some cases to practical challenges being overcome.

Thank you, Mr. McCarthy. Mr. O'Brien, may we have your opening statement, please?

Mr. Tony O'Brien

Apologies again for the false start. I thank the Chairman and members for the invitation to attend today's meeting to discuss the 2014 appropriation report and the chapters which have been referenced. We have submitted information and documentation to the committee in advance of the meeting. In my opening statement, I will brief members on the following issues, the first of which is the financial outturn for 2014.

The Revised Estimates Volume provided a net Vote Estimate of €11.552 billion for the HSE. On a like-for-like basis, this amounted to an overall reduction in the gross allocation of €272 million. It also included total additional savings targets of €619 million, which were required to be achieved in 2014 to deliver the service commitments within the funding available. In order to maintain existing levels of service, continue to improve patient safety and deliver priority service initiatives within the funding available, significant budget and expenditure reductions were required. The 2014 national service plan identified the financial risks associated with these reductions and highlighted in particular the scale of the pay and pay-related savings targets being imposed on the system.

While many of the efficiency and cost-containment measures delivered substantial savings over the course of the year, it was not possible to realise the required amounts in full. A net Supplementary Estimate of €680 million was passed by the Dáil in December 2014 relating to expenditure pressures, including €390 million for statutory and voluntary services, primarily in the acute hospital sector, €165 million for the primary care reimbursement scheme, PCRS, and other demand led schemes, €55 million for the State Claims Agency, €50 million for patient and miscellaneous receipts and €20 million for statutory pension lump sums.

In the period 2008 to 2014, €406 million was allocated to the HSE in net Supplementary Estimates in respect of areas within its direct control. This equates to 0.49% of the €82.829 billion total original net Vote over the same period. Some €640 million in Supplementary Estimates was allocated to the HSE in respect of the PCRS, to include medical cards, general practitioner fees, drugs and other demand-led schemes, the dental treatment services scheme, etc., which equates to 0.77% of the €82.829 billion total original net Vote over the period. Some €1,632 million in Supplementary Estimates was allocated to the HSE in respect of Exchequer-related and other items outside the control of the HSE, which equates to 1.97% of the total.

With regard to prompt payments, in the conclusion to Chapter 19 of the Comptroller and Auditor General's report, Compliance with Prompt Payment Legislation in the Health Sector, the Comptroller and Auditor General drew attention to a number of issues and made a number of recommendations. The HSE acknowledges these conclusions and the related recommendations and continues to implement actions to address them. The HSE wishes to acknowledge that it is fully committed to further improvements in respect of prompt payment, particularly with regard to the liquidity position of the small and medium enterprise, SME, sector. Almost half of the payments to vendors in 2014 were for sums of less than €5,000, with only 10% of suppliers receiving payments of €100,000 or more. It is important to acknowledge the complexity of the work of the HSE in context of payment of its suppliers. The HSE processes almost 2 million invoices annually to 20,000 suppliers through eight major payment centres using multiple financial payment systems. Despite these challenges, the HSE in 2014 incurred prompt payment interest of less than 0.01% or €300,000, based on non-pay expenditure of €4.1 billion representing almost 2 million invoices processed.

HSE areas that have single systems and locations for the processing of invoices can pay vendors on time and, therefore, do not incur prompt payment interest charges. Specific examples of this relate to the fair deal and primary care reimbursement schemes where no interest charges arise on a spend of €2.8 billion. Average payment terms based on analysis of data from our regions that have single systems show that we pay on average within 28 days. The HSE compares well against other European Union countries as the EU average is currently 36 days. Further, only 11 of the 26 EU member countries pay within 30-day directive terms.

Health business services, HBS, is currently reviewing 45-day payment areas to bring these into line with 30-day payment terms across the HSE. The HBS team is also engaging with various representative bodies such as the Small Firms Association, IBEC and Chambers Ireland on a regular basis to acknowledge and identify issues for suppliers. To date, the feedback from these groups indicates that their members are generally satisfied with payment of invoices and prompt payment interest on same. Thus far, we have not yet been able to secure a meeting with ISME. The HSE is engaging with the Departments of Health and Jobs, Enterprise and Innovation with regard to the payment of the prompt payment compensation of €9 million which has been accrued in 2014 for the period from March 2013 to December 2014.

On tax compliance, the HSE is the largest employer in the State, with a staff of more than 100,000 and an average annual tax bill of in the region of €1.6 billion. As part of its commitment to continued improvements in internal controls and compliance, the HSE performed a detailed internal review of its tax heads for the years 2011, 2012 and 2013 in order to identify areas of risk in tax compliance. The HSE worked within the Revenue's co-operative compliance programme to submit a formal unprompted qualifying disclosure of all identified underpayment of taxes. As a result of this process, the HSE and Revenue Commissioners agreed a full and final payment of underpaid taxes, including penalties and interest of €22.4 million, which was formally accepted by Revenue in August 2015. This payment amounts to less than 0.05% of the overall budget of the HSE for the years 2011 to 2013, inclusive. Further, it amounts to around 0.6% of the overall taxes paid in these three years. More important, this payment has not impacted on the delivery of services.

As a result of this tax review, the HSE set up a tax department which is currently being resourced and developed. Further, the HSE is currently in an agreed process of finalising its internal tax review of 2014 with Revenue. It is expected that this review will conclude in November of this year. As the tax review of financial years 2011 through 2012 was not completed and submitted to Revenue until December 2014, the HSE is aware that there may be broadly similar issues arising in 2014 and the expectation is that improvements will start to be reflected in financial year 2015 and will continue into 2016 and beyond.

The Comptroller and Auditor General, in Chapter 20 of his report, Management of Private Patient Income in the Health Sector, made recommendations which the HSE acknowledges. The HSE will actively work to put in place processes and practices to support these recommendations. The report highlights specifically the delay the HSE is subject to in receiving private patient income from the main private health insurers. Currently, the HSE is developing a memorandum of understanding, MOU, with the main private health insurers in the Irish market to address outstanding debt issues by negotiating improved payment terms and cash collection for the HSE. These MOU negotiations commenced in July 2014, initially with the VHI. Since then, negotiations have been expanded to include Laya, Aviva and GloHealth. All MOU negotiations are at various stages with all four private insurers.

Chapter 20 also contains recommendations relating to integrated claims processing. Currently, the HSE is utilising the Claimsure claims processing system across 47 of the 48 acute hospitals. Further, Claimsure can process almost 99% of private insurance claims where the HSE has a direct payment agreement with a private insurer or occupational health scheme such as the ESB, the Prison Officers Medical Aid Society, POMAS, etc. Claimsure also manages any statutory levy from private insurers where private insured patients opt to be treated publicly.

In terms of high-tech drugs and medicines, aggregate spending on medicines under the general medical services, GMS, scheme, direct payment scheme, DPS, and long-term illness scheme has reduced since 2009, despite the growth in numbers with eligibility and the introduction of more expensive new medicines such as new oral anticoagulants, for example. This is due to a sustained and ongoing programme of price reductions and guidance to prescribers regarding preferred products. The exception to this pattern is expenditure on high-tech medicines, which increased from €315 million in 2009 to €485 million in 2014 as a consequence of the introduction of highly expensive new medicines and the increased use of existing high-tech medicines.

In the future the expectation is that new medicines will, in the main, be in the high-tech area. Such medicines are generally only prescribed or initiated in hospital and would include items such as anti-rejection drugs to transplant patients, medicines used in conjunction with chemotherapy or hormonal therapy and medicines for conditions such as cystic fibrosis, multiple sclerosis and hepatitis C, etc. The medicines are purchased by the Health Service Executive and supplied through community pharmacies, for which pharmacists are paid a patient care fee. The cost of the medicines and fees are paid for by the primary care reimbursement service.

The challenge in this area – as in many others - is to ensure that the correct balance is struck between controlling costs on the one hand and ensuring, where possible, that Irish patients have access to new drug therapies as soon as possible after they are developed. The Comptroller and Auditor General's report on the issue is therefore timely and will assist the HSE in managing this growing area of expenditure.

May we publish your statement?

Mr. Tony O'Brien

Yes, of course.

I welcome Mr. O'Brien and his colleagues before the committee. We have met representatives of the HSE for a good few years but there is something very different today. What the Comptroller and Auditor General has stated was confirmed in the HSE statement. The HSE's purpose is to deliver the health service to the country but the witnesses have told us it is an organisation not compliant with the taxation rules of the State. They have told us that the annual report indicates the organisation is not compliant with its own procurement rules. The HSE's annual financial statement for 2014 confirmed that €56.5 million of contracts were awarded by the HSE without competitive tendering processes. Shockingly, this figure is up by €38.7 million on the 2013 figure of €17.8 million. This represents a systemic problem that is deteriorating, based on the HSE's annual financial statements.

We have also found out that the HSE has breached prompt payment legislation and there is a compensation issue involving €9 million, which the executive wishes to discuss with the Department of Health. Moving on, we find the HSE is not in compliance with the guidelines issued by the Department of Health regarding the collection of income from private insurance companies and patients. As well as that, there is inadequate control over the supply of high-tech medicines, with the taxpayers paying €2.7 million for medicines sitting on a shelf or in a fridge out of date. We are expected to shrug our shoulders and say nothing about that. I understand that recently the HSE has cancelled discussions with the Irish pharmaceutical representative association regarding a new contract for medicines.

If this is how HSE national governance works and that is how it runs its end of the business, is it any wonder we have a crisis in the health service? This is the worst catalogue I have seen. We could just take this as a routine meeting, as we do all the time, as representatives of the HSE appear here regularly, but I have never seen such a bad catalogue of disregard for the laws of the land by a State agency. I actually asked myself where I should start as we could spend a day on each of those topics.

I will start with the taxation issue that has emerged. I do not have the HSE's audited 2014 financial statements so will the witnesses confirm if the €22.4 million was included in that? I know the Comptroller and Auditor General has included it in the appropriation account but I do not know if it is in the HSE financial statement. It is disturbing that the €22.4 million only relates to 2011, 2012 and 2013, and we will return next year to discuss how much money was not paid to the Revenue Commissioners for 2014. It is obviously continuing this year because the HSE has only recently completed the process for the past three years. It has indicated that it expects to see improvements in tax compliance to be reflected in 2015 and continuing into 2016. The HSE has not yet got to the end of the issue. There is a three-year bill for 2011 to 2013, inclusive, but we do not know the figure for 2014 and 2015. Based on what the witnesses have said, this will continue to some extent into 2016. When will the HSE start being tax-compliant?

I can understand mistakes in interpretation in contracts for service, for example, but the witnesses must give us a detailed note as to how this arose and how a State body did not get this right to this extent. I accept the figures from today but I did not like the witness going on, as chief executive of the largest organisation in the country, to in some way minimise this by saying it only represents 0.05% of the budget, or in other words, it is 0.6% of all taxes paid. I expected a bit of contrition today when the HSE indicated it did not pay its taxes. The Minister will be coming to the Dáil seeking a Supplementary Estimate for this before the end of the year because the HSE did not meet its taxation liabilities. We will want to know the liability for this year and 2014. An effort to come here and almost minimise the issue by saying it is a tiny percentage of the overall figure is not good enough. If I heard people found not to be properly paying tax, with their names published in the newspaper, whinging about it being only a small amount of tax relative to the tax they paid, I would tell them to get lost, "'fess up" and face it. The witnesses have come in here with a little whinge about it when they should be apologising.

I will deal with this as a first question. Will the witnesses give a run-down on why the HSE did not know how to meet its taxation obligations? My second question will deal with what is primarily a procurement issue.

Mr. Stephen Mulvany

Reference was made in our 2014 accounts to the controls issues and it was a matter of emphasis in the Comptroller and Auditor General's certificate in those accounts. The HSE is fully compliant in respect of 2011 to 2013, inclusive. It is important to stress that we are not in any way seeking to minimise our tax issues. We fully accept it, we wish to be always compliant in tax affairs and we are working to do that. With the percentages, we are simply trying to reference the context of the scale of the HSE as the largest organisation in the State.

It is important to differentiate that this was the HSE operating under its own volition in 2012 to review its tax position, enter into a Revenue Commissioners co-operative compliance programme and make a voluntary, unprompted disclosure within that overall programme. There is no denying that the HSE had issues in achieving full compliance but we have tried to be up-front in saying that we still have those issues. However, there is a significant volume of work under way to address that, which we have also referenced.

There is a variety of different tax heads and we can certainly provide the detail. The payment comprises €18 million in tax and €4 million in interest and penalties. Of the €18 million paid in tax, €14 million amounts to payroll taxes; the bulk of that - we can provide the figure - is a delayed payment of employer's PRSI. That is not an additional payment but one which the HSE would have had to pay and has paid, albeit late, under this programme. The VAT payment is approximately €2.5 million over the three years. That is not an additional cost borne by the HSE but a cost that the HSE would have had to pay in overall terms. This is not to minimise the issue but the tax payment has, unfortunately, increased our deficit but has not been paid for out of direct service budgets.

Despite the challenges around our myriad systems, to which we will come, we are working to improve tax compliance. The level of awareness is significant and while we are obviously only concerned with dealing with our own tax issues, on which we are working, it is not true to state the Health Service Executive is the only public body that has made an underpayment of tax to Revenue. While I am simply trying to give this as the overall context, we take this very seriously and are working to improve it.

I ask Mr. Mulvany to send us a detailed note on this issue. People will be shocked to hear the HSE was not paying PRSI for its employees on time. I would have considered this to be a no-go area for any employer. I am simply picking up on what Mr. Mulvany said. He can understand the concerns he has raised in saying this.

Mr. Stephen Mulvany

I absolutely understand the concern but, again, without trying to use percentages to minimise, my point is we are paying more than 99.99% and what occurred amounted to a gap between what one would call contracts of service and contracts for service for a relatively small number of employees. Nevertheless, it is still a significant issue for us.

I ask Mr. Mulvany to provide a detailed note for the committee because we are only having a cursory discussion in public this morning.

Mr. Stephen Mulvany

We certainly can.

This is a matter on which members seek a detailed note. I accept that other public bodies have been caught for taxation in respect of benefit-in-kind, including the Houses of the Oireachtas.

Mr. Stephen Mulvany

The Deputy also will accept that we entered into this voluntarily.

Yes. I accept that there is a system in place for public bodies to get their house in order.

Mr. Stephen Mulvany

This is not a tax default; it is not a settlement; there will not be publication.

No; I understand the name of the HSE will not be published, or those of other bodies might not be.

I will move on to a procurement issue. The witnesses heard my comment that the HSE's annual report noted how €56.5 million in contracts had been awarded by the executive without a competitive tendering process. Moreover, this figure has escalated to being much worse than in the previous year. I refer to the area of procurement, albeit not specifically about these breaches. I wish to discuss a television programme which all members saw some months ago. The witnesses will remember the programme to which I refer, the subject of which was Eurosurgical Limited contracts. I note that some of the hospitals identified are HSE hospitals, including St. Columcille's and Mullingar hospitals - there may be others - in which there was an issue regarding what were called kickbacks as shown in the aforementioned RTE programme for arranging procurement orders from a medical supplier. I am merely citing the contents of a public television programme. Some of it concerned the private sector, where the staff members concerned were dealt with promptly because it was a serious breach of their contract of employment. Am I correct in stating those employees paid by the taxpayer through the HSE, including those in St. Vincent's University Hospital which was mentioned and is funded by the taxpayer - are still on the payroll, despite what happened, as shown in the aforementioned television programme? Is the taxpayer still paying the salary or a payment in lieu of salary where the person concerned is not actually at work at this time? The witnesses should contrast this with what happened at the Beacon Hospital, a private company that also was implicated in the same programme in similar circumstances. Why does the HSE continue to pay the people involved? It was a gross breach of any person's contract of employment. The witnesses might also indicate the current status of the HSE's investigation because shortly after this issue had emerged, the Minister announced that the HSE would suspend all payments to the company in question. Did this happen? Obviously, this is a major systemic issue if it has happened in several bodies, some of which are HSE hospitals, while others are hospitals funded by the HSE and the taxpayer. It had been ongoing for a considerable time. I understand the HSE conducted an internal audit in some of these places but found nothing amiss. What is the current position on overcharging? Are taxpayers still dealing with the company that did this to them?

Mr. Tony O'Brien

I will ask Mr. Swords, head of procurement, to give the Deputy an update on those issues.

Mr. John Swords

In respect of the Beacon Hospital, I understand the person involved resigned; there was no action taken.

As Mr. Swords knows; it was a case of "resign or".

Mr. John Swords

The person resigned. That is all I know about it.

Of course, the person did.

Mr. John Swords

It is a private company.

I recognise that it is private.

Mr. John Swords

Yes. On the overall programme which we found shocking, we do not condone such behaviour at any time with any of our suppliers. However, these are allegations, until there is a legal footing on which we can remove a company or payments. We did stop the payments on an interim basis. I met representatives of the company and asked them to explain their view. At that point, it had suspended one of its directors who also happened to be a family member. On foot of this, we also met the Garda to ascertain whether it was carrying out an investigation. It informed us that its work was ongoing. At the time it had no evidence of any illegal action. We are carrying out a forensic review of our transactions within business done in the period 2014 to 2015. That is ongoing. In addition, an internal review is under way at St. Vincent's University Hospital, which I understand is near completion. The HSE has a representative on that board as part of the review. Until we have a legal footing in terms of any wrongdoing, we are not in a position to take action.

Mr. Swords is telling me that someone can beat him up and until he has a judge stating he or she is guilty, he will do nothing about it.

Mr. John Swords

No, it is not that we will not do anything about it.

What is the HSE doing about it?

Mr. John Swords

We have taken all necessary steps to investigate the incidents thoroughly. However, we have nothing but allegations. While we understand the whistleblowers have met the Garda, it has not acted. Because this falls under the Criminal Justice Acts, it is the Garda that will take action, as appropriate.

Mr. Swords met representatives of Eurosurgical Limited. Has he met the whistleblowers?

Mr. John Swords

I have not met them personally, no.

Surely, the person who was involved in this regard is a key person. The television programme could not have been made without somebody speaking to journalists. Is Mr. Swords stating this person has spoken to RTE and everyone else and that Mr. Swords has approached Eurosurgical Limited? Subject to data controls and whatever limitations the HSE may put on the matter, I wish to know the amounts of payments made by the HSE to the aforementioned company each month this year since the matter came to light. Is the HSE still paying?

Mr. John Swords

Yes, we are.

Will a cheque go to the company this month, despite what the HSE knows?

Mr. John Swords

As for the services it is providing, some of which pertain to patient safety, they are proprietary services and the company is an agent of manufacturers. They have not taken action either in that regard. In respect of the standing of the company, it is in good standing-----

Why should it? It is the taxpayer who is paying for it.

Mr. John Swords

----- until the allegations are proved otherwise.

The manufacturer is winning, as it is selling its product. We are paying for it and paying inflated prices and kickbacks. What I wish to ask is-----

Mr. O'Brien wishes to come in.

Mr. Tony O'Brien

It might be helpful for me to be clear that we did suspend all payments for some time to this company. Payments made since were strictly in accordance with what was due; there was a heightened level of scrutiny of invoices. The HSE has purchased a limited amount from this company, but where we have purchased things, we have a legal obligation to pay for them, provided the amounts are-----

Priced correctly.

Mr. Tony O'Brien

Exactly. The payments are subject to a heightened degree of scrutiny. In respect of some of the HSE locations and matching the level of financial activity, while we cannot do so now, we are happy to provide the information for the committee. The level of financial activity in some of the smaller hospitals mentioned simply was not commensurate with the nature of the allegations made. In other words, the level of trading was so small it could not have supported the type of kickbacks being alleged. The major issue exposed by the programme obviously was in St. Vincent's University Hospital, which has been carrying out a forensic audit to which Mr. Swords has referred and where the scale of activity was much greater than in any of the smaller HSE hospitals.

I accept that. I was equally as concerned about those hospitals with which the HSE had a service level agreement and the taxpayer ultimately was paying, even though the hospital in question might not directly have been operated by the HSE.

When Mr. Swords met Eurosurgical Limited, I presume he started off by stating the HSE wanted its money back and that he sought a refund. Has he discussed the issue of a refund where there was overcharging?

I will make another point about the HSE's procurement. In a situation such as this the HSE has tied itself in, with the effect that it cannot approach any other supplier in the world. Into what kind of procurement contract did the HSE enter that did not allow it, when there was prima facie abuse by the supplier in terms of price, to have a way out and the option of cancelling the contract and moving to some other supplier in Switzerland, Germany or the United States? How can the HSE still be tied to it?

The supplier ran rings around the HSE. It could do what it liked and the HSE could not breach the contract.

Mr. John Swords

These contracts are complex. Naturally, we have clinical input into the contracts that we establish. We also have clinical engineers. We have checks and balances in our tender process that do not allow any one individual to make decisions. Let us get that clear.

The items used are not simple swap-in, swap-out implants. Their use in procedures is subject to clinical clearance. It is more complex than just swapping in and swapping out. We must go through a process to get the clinicians on side if we are to ensure that any change is correct and in the patients' interests. That is what we-----

Could any other supplier in the world supply that material?

Mr. John Swords

Not for those particular products. There may be different ways of carrying out procedures, but that is a clinical decision, not a procurement one. The clinicians set the specifications for the implants for any patient.

I accept that, but besides there being a clinical input, this is a commercial contract.

Mr. John Swords

Yes. There may be options-----

Under a commercial contract, if someone was robbed, he or she would not deal with the other person anymore.

Mr. John Swords

The Deputy will appreciate that I must be careful in terms of the legal footing of what the HSE says.

Mr. John Swords

Unless we are certain that we will dismiss a company, we are subject to legal challenge.

Mr. John Swords

That is where I do not want to-----

I would love to see that company taking the HSE to court.

Mr. John Swords

I appreciate why but,-----

I would encourage the company to do that.

Mr. John Swords

-----for us, that would be the wrong course to take because we do not have legal grounds to do so. We have allegations. Until wrongdoing has been determined, we cannot do that. What we will do is schedule these issues into our work plans and put those products out to tender. It will then be for the parent companies - the manufacturers - to make adjustments in how they deal with the HSE. We may be able to do some work there.

If it was Mr. Swords's money and someone who did a job for him ripped him off, would he continue dealing with that person, not ask for the money back and only decide on whether to take a court case down the line? Would he pretend it had never happened and just carry on, albeit being more careful about paying the person in future? No one would look after his or her own money in that manner.

Mr. John Swords

No. I accept that.

We expect that level of care for public funds by every State body, not just the HSE.

Mr. John Swords

Yes.

This gives people a carte blanche to do what they like to public bodies because the bodies can do nothing until court cases years down the road found those people to have been wrong.

Mr. John Swords

The Deputy is right to draw down the horrific catalogue of allegations, but he must consider this from our point of view. As a contracting organisation, we must have certainty on this.

Mr. John Swords

We are not happy about it by any means. We do not like being in this position. However, our legal situation means that we must be certain in what we do and, when we make a move, we do not leave the taxpayer to take on a large legal bill. We must be cautious in this.

Will the HSE review all of its "complex" procurement contracts and ask a commercial lawyer to draft a suitable paragraph to be inserted in future versions so that if there is a basis to believe that there has been wrongdoing, the HSE has the ability to cancel the contract?

Mr. John Swords

We can do that currently, but we must have the evidence to do it.

Mr. Swords has not yet spoken to the whistleblower. No wonder the HSE does not have the evidence to do it.

Mr. John Swords

No, I-----

Mr. Tony O'Brien

At this point,-----

He said that he had not spoken to the whistleblower.

Mr. Tony O'Brien

He had not, but I want-----

I am sorry. I misheard Mr. Swords. He did talk to the whistleblower.

Mr. Tony O'Brien

Let us be clear, in that he did say that he had not.

He did not talk to the whistleblower.

Mr. Tony O'Brien

Yes.

That is surprising.

Mr. Tony O'Brien

But it is important to stress that, at this point and based on our internal audit process, there is no evidence in the direct dealings of the HSE with this company of the type of overcharging practice that is at the heart of the allegations relating to St. Vincent's hospital. In terms of that hospital, which has forensic auditors going through a process right now, this matter is not concluded and Eurosurgical is not out of the woods.

Regarding the company that Mr. O'Brien mentioned, Eurosurgical, and direct dealings with a HSE hospital, will Mr. O'Brien discuss the information given to me to the effect that the company was taking surgical equipment from a clinic - I will name it if Mr. O'Brien wishes - to Tallaght hospital to be surgically cleaned before being reused in a clinic in Dublin when it should not have been used in further operations? Is he aware of this incident at Tallaght hospital?

Mr. Tony O'Brien

I am not.

I will tell Mr. O'Brien about it later.

Mr. Tony O'Brien

By all means.

If the HSE had spoken to the whistleblower, it might have known about this. Beyond everything else, it is a public health matter.

What are the guidelines for people employed by the HSE accepting benefits from those who supply goods and services to it? I am referring to kickbacks, vouchers, holidays, weekends away, etc. What are the ethical rules in this regard?

Mr. John Swords

The rule is basically that one does not accept gifts, particularly holidays, weekends away and so on. That is not acceptable.

Mr. O'Brien will explain who paid for his trip to a recent conference in Madrid that was sponsored by a company that supplies clinical equipment. He knows its name.

Mr. Tony O'Brien

My attendance and participation at the conference, including my flights, transport to and from the hotel and hotel costs, were paid for by the company that organised the conference, whose name is Acelity.

I find it unusual that there is a major controversy about someone down the line in the HSE accepting a voucher, weekend away, holiday or the like from a supplier when the chief executive may accept flights to and from Madrid and accommodation from a different supplier. Does Mr. O'Brien see why I believe that there is a contradiction or hypocrisy? Does he understand how this looks?

Mr. Tony O'Brien

Let us be clear.

Mr. Tony O'Brien

The allegations that Deputy Fleming opened up with and that were featured in the programme concerned persons going on private holidays for periods of weeks or more to sun destinations. I attended and spoke at a Europe-wide conference at the invitation of its organiser. Rather than have the taxpayer bear the cost, I felt it reasonable for the organisers to bear it. I was not on holiday. I was speaking at a conference.

Okay. I will revert to this issue when I conclude. Does Mr. O'Brien believe it to be good practice for any State body, or senior executive therein, that will be paying a supplier certain amounts - I do not know how much - for services and goods to have flights abroad and accommodation paid for by that supplier? In future, public servants should not accept flights from suppliers. If a conference is running, then fine, but this is a supplier that will be approaching the organisation next month to sell it goods. Does Mr. O'Brien get the point?

Mr. Tony O'Brien

I know where the Deputy is going. Prior to agreeing to attend the conference and to the company paying the costs thereof, I took advice from our legal and procurement services to ensure that doing so was in order. I have no direct dealings with that company. I do not know which of our hospitals it supplies and I have no involvement in the procurement processes. I believed it to be a worthwhile conference, given the range of participants, the subject matter and the other speakers. My choice was on whether it would be reasonable for the HSE, à la the taxpayer, or the company to bear the expense of my attendance. Given the fact that the company had paid the expenses of every other speaker at that conference, I felt that it was reasonable to do that. I still feel that it was reasonable.

I see the point.

Mr. Tony O'Brien

It will be included in my declaration to the Standards in Public Office Commission, which is the appropriate process.

I am happy about that, but Mr. O'Brien can understand how some people might view one person further down the line-----

Mr. Tony O'Brien

I-----

Does Mr. O'Brien see any comparison?

Mr. Tony O'Brien

No. In fact, I resent the comparison.

Mr. Tony O'Brien

The allegations made in respect of certain persons in the "Prime Time" programme were different in nature. There is no suggestion, and I do not believe that the Deputy is making it,-----

Mr. Tony O'Brien

-----that I benefited personally as a result of this.

Therefore, I do not see how the two things really line up.

There is an issue there about any public servant accepting benefits from a company that deals with-----

Mr. Tony O'Brien

Yes, but it was not a benefit. That is my point. I did not benefit personally.

Okay. We will move on. I have two small points. I understand there will be a report issued today on the death of baby Mark Molloy in the maternity hospital in Portlaoise in 2012, three years on. Why three years on? Is it being issued today?

Mr. Tony O'Brien

It will be published today at the request of, and with the consent of, the parents.

Róisín and Mark.

Mr. Tony O'Brien

Róisín wrote to me three weeks or so ago. She asked me could the report be published. I undertook to get back to her within two weeks, which I did, having ascertained that there was currently no impediment to it being published. I indicated to her last week that it would be published this week. Today is the date that has been agreed for that publication. These reports are not generally published immediately, because sometimes that gets in the way of the implementation of the recommendations. The recommendations in this report have all been implemented at this point and there was no impediment to its publication. I was happy to accede to Róisín Molloy's request for its publication and she, indeed, has thanked me for doing so.

I do not want to be too parochial, but there have been good improvements made to the maternity service of Portlaoise general hospital under the auspices of the Coombe, which we welcome. Mr. O'Brien is the chair of the task force on the accident and emergency trolley crisis.

Mr. Tony O'Brien

Yes.

Mr. O'Brien is the chairman of that group. How does his work fit when some of his regional managers announce unilaterally, without consultation with local GPs, that they will close accident and emergency units from 8 p.m. to 8 a.m in Portlaoise? That had to be stopped. Why does Mr. O'Brien allow his people to make these statements when essentially they have to be put aside and forgotten about and a consultation process started? It adds to the lack of confidence in the accident and emergency departments on which Mr. O'Brien is now chairing a task force.

Mr. Tony O'Brien

These two issues are slightly separate. The task force that I chair is on patient flow, to seek to limit the number of patients who are delayed post-admission and accommodated on trolleys in emergency departments, with a specific focus on this winter. I think the colleague that the Deputy referred to is Dr. Susan O'Reilly, the group chief executive of Dublin Midlands. The issue that she is dealing with across that group is how to ensure patient safety in all facets of all services and she expressed a view and is going through a process, as are all the group chief executives, of formulating strategies to optimise patient safety in services. There are, as the Deputy knows, arising from the Portlaoise report, certain issues about sustainability of emergency department services, ICU services, critical care services and so on in Portlaoise, which all need to be addressed in the same way as the maternity service issues have been addressed. She is working her way through that.

My last quick point is a very short one on State Claims Agency payments. It is a big issue. Given that NAMA and the State Claims Agency handle it sometimes, we ask them about it and sometimes we ask Mr. O'Brien about it. In a nutshell, the figures presented to us today for 2014 show that at the end of 2013, the estimated outstanding liability was €1.084 billion. I am taking that directly from the figures. During the course of the year, in respect of that liability, €134 million was paid out to the State Claims Agency. They are HSE figures. The liability at the end of 2014, based on the figures before us, was €1.227 billion. That shows that the estimated liabilities increased by €273 million during the year. The figure went up €143 million. During the year, we paid out €130 million. That means that an extra €273 million came into the system in 2014, which seems a very high figure given that there was only €1 billion there to start with and it probably covers cases going back over many years. I know that all Mr. O'Brien does is write the cheque that the State Claims Agency asks for and we put it into Supplementary Estimates, as Mr O'Brien said we did last year. We will probably have to do the same again.

Mr O'Brien might send us back information. He might have to talk to the State Claims Agency for an estimate of the breakdown of that new €273 million that went on in 2014 and the breakdown between compensation to people for medical negligence and the other legal costs that are associated with that. We have seen on several occasions in the past that the legal and other costs associated with a claim can be 50% on top of the costs and, ultimately, one third of the total payment. Mr. O'Brien might comment but also send us his best analysis. I worry about that figure because nobody is responsible for it. It happened in the HSE, the State Claims Agency manages it, and we are here to settle the price. The State Claims Agency does not feel ownership of getting the best value for money because it happened in Mr. O'Brien's department. He has no involvement, to some extent, in the final settlement, because it is over to the HSE. I am afraid that from the taxpayer's point of view, nobody feels complete ownership of this problem because it is split between the two areas. Mr. O'Brien might comment and send us a report on it.

Mr. Tony O'Brien

We will request that detail from the State Claims Agency and we will supply it to the committee. The total figure, €1.2 billion, is in the nature of not quite an actuarial projection, but in that general vein and therefore it is subject to change. From the point at which a legal case is initiated, the State Claims Agency manages it. We manage it up to that point.

I have a slightly different concern from the one the Deputy has elaborated, which is that the overall effect of this process to some extent disconnects the point of care from the settlement.

Mr. Tony O'Brien

If we leave aside the HSE and State Claims Agency, effectively the settlement process and the cost and implications thereof are so far removed from the point at which the incident occurred it is almost invisible to the service providers. Over time, within the framework that we have, what I would like to do is make a greater connection between the care setting - or lack of care setting, as the case may be - and the claims process, so that it is experienced as a more meaningful, real thing which will undoubtedly have an effect upon the learning culture and learning environment if we can get to that point. I am quite satisfied that the State Claims Agency does a good and effective job but the overall architecture creates a certain disconnect I think.

I agree with Mr. O'Brien completely.

I am dismayed by Deputy Fleming's point because I know as a former Minister of State that travelling, whether on business to Madrid or wherever else, that there are certain inferences about going on a trip or a conference. I have no doubt there is a record of many Oireachtas Members travelling to destinations when there was no obligation on them to do it, without the Oireachtas paying for it, and there was nothing improper in that. I am more than surprised that a Deputy of Deputy Fleming's calibre would doubt the integrity of Mr. O'Brien and compare it with the revelations made on television where people took holidays. I know that there is no fun in attending an event and returning within a short period of time. I am very surprised that comment was made.

We are going through the budget here. The report made reference to a supplementary budget for health over the past number of years and the moneys received. How much relates to areas that Mr. O'Brien has no control over?

Mr. Tony O'Brien

In terms of the 2008-14 period, €640 million of those supplementaries, which totalled 0.7%, related to areas which are demand-led in the true sense of the word - medical cards, GP fees, drugs, and other demand-led schemes - where we operate the scheme in accordance with legislation and eligibility guidelines. Where those costs arise, apart from doing something extraordinary, there is not much that we can do to control them down. There were other sums in respect of Exchequer-related and other items. For example, the budget in a particular year might have been constructed in anticipation of certain legislation coming through and having a particular effect on costs. When that did not come through and that effect did not materialise, then clearly the budget and the cost did not match.

We tend to talk about things being in our direct control, which is in areas where we can make management decisions. It is also fair to say that a very substantial amount of the supplementaries in that period, €406 million, related to those areas also.

I ask Mr. O'Brien to explain that again. Is he saying that the over-estimate was outside his control?

Mr. Tony O'Brien

There are two types or arguably three types of things that give rise to additional expenditure above that which was originally envisaged. We categorise them as, first, things that are within our direct control. In this category, we are referring to areas where it would have been possible to make the decision to turn off expenditure but, for whatever reason, we did not do so. Then there are other areas which relate to schemes under which there is a statutory basis of entitlement and where we could not make the decision to turn off expenditure, such as with the medical card scheme and so forth. The third area is where, in the Estimate that was provided and consequently in our service plan, there was an anticipation of the effect of a certain negotiated provision or legislation that did not come into effect and, therefore, costs arose that it was envisaged at the start of the year might have been avoided. We see things in those three categories.

Did the Comptroller and Auditor General's audit team investigate the overrun?

Mr. Seamus McCarthy

Note 3 in the appropriation account gives an explanation of where there is a significant variance from the budget. Where there was a significant difference, we would certainly have looked at that and at the explanations given for it.

That was not made clear in the Comptroller and Auditor General's report. We are talking about an overrun and how the money was spent in areas that are not under the control of the HSE. We are talking about schemes that are demand led, for example. How is that not incorporated into the report?

Mr. Seamus McCarthy

Explanations are given for the variances in terms of the kinds of factors referred to by the chief executive. Some of them are demand-led factors. The key question that arises is why the Estimate is what it is; that is the beginning of the process and what the variances are designed to explain.

In the context of services that are demand led, what are the implications for the future in terms of the HSE not receiving supplementary funding?

Mr. Tony O'Brien

I suspect the Deputy is referring to the new fiscal arrangements-----

Mr. Tony O'Brien

-----under which there will not be provision for Supplementary Estimates. The primary implication is that it is very important that the opening budget matches the closing expenditure. Where one particular area may run over budget, the expectation will be that we will need to take measures within our overall envelope to balance that off. We have not begun the process of service planning for 2016 yet but this will be one of the complexities that we will have to take into account as we do that.

Will the new system of fiscal controls not impact on the demand-led services? There is constant talk about trolleys, medical cards and so forth but if something comes down the track that is not foreseen, how will the HSE deal with it?

Mr. Tony O'Brien

It is fair to say that for the national Exchequer and for individual Departments and services, this is something of a game changer. As we construct the service plan, we will have to take a view as to what is the best way to deal with this. Obviously, that will be done in close dialogue with the two Departments and with our Minister. We will have to determine the best way to provide for that eventuality. Logically, if the Estimate we are given for the demand-led heads is over-run, we will have to take funds from elsewhere in the system to counter balance that. We have not yet had those detailed discussions because this is the first year of this new fiscal arrangement.

I ask the Department of Health officials to respond to a question about the new hospital groups and the autonomy that has been given to hospitals. Given that the HSE is accountable for service provision, how will this impact on the services being provided by the new hospital groups? How will it effect the deficits and budgets?

Mr. Tony O'Brien

It might be easier for me to answer that. For now, all of the hospitals in the Saolta group are wholly owned parts of the HSE. They do not become independent entities until such time as legislation is drafted and passed by the Oireachtas to do that. However, in a sense where we are heading to next year is a not dissimilar position to what that will bring. Much like the current situation with the voluntary hospitals, it will be as though that group becomes a separate legal entity, has its own bank account and gets monthly transfers from the successor body to the HSE, the health care commission, and must live within that. If it does not, it will have to talk to its bank manager. However, for now, those changes have not occurred and all of those hospital groups will continue for now under exactly the same governance arrangements that have pertained since the establishment of the HSE. We have put in place group chief executives who have delegated authority from me, through the national director of acute hospitals. The hospital groups all have boards or partial boards which are effectively advisory in nature and have no legal standing.

What are the biggest challenges for the HSE at the moment? It is easy for members to come in here and to criticise and find fault with the executive but we must bear in mind the size of the organisation, the number of staff it employs, the different services it provides, including demand-led services, HIQA inspections and so forth. I do not envy Mr. O'Brien's job. What, in his view, are the biggest challenges for the organisation?

Mr. Tony O'Brien

This could take a while. I will give the Deputy a list, in no particular order. We are having trouble sustaining our overall level of staffing. While we are heavily involved in recruitment and have slightly new arrangements in place for that, we are seeing a continual attrition of staff, with people exiting the system or going overseas. Maintaining a balance of staffing commensurate with our service needs is a constant challenge. That said, there is some positive news on that front. Approximately 97% of this year's graduating nurses are being retained in our system. Four years ago, that figure was around 3%, with the rest going abroad.

We have rising demand for certain types of services. The number of people being referred for outpatient and consequently inpatient treatment is on the increase, partly as a result of our growing and our ageing population. While that in itself is a good thing, as we age, we become more intensive consumers of health care.

The regulatory environment is very important and some of the standards which are now being applied are long overdue, particularly in the area of residential settings for those with intellectual disabilities. However, our capacity to meet the bill for compliance is constrained and is a significant part of this year's Estimate.

The onward march of technology and the development of new drugs brings great opportunities. There are now cures for diseases which simply could not be cured before but the costs associated with those cures are significant. Most of the new drugs coming down the pipeline are in the high tech and high expense zone.

Not unlike other health systems, I see demand rising and costs increasing. Furthermore, we do not have some of the underpinning systems that a health service organisation of our size needs in order to operate at its best. The fact that we do not have a single integrated financial system, for example, as discussed here before, as well as some other systems means that we are not getting the best use out of all of our resources.

That is a relatively short synopsis of some of the big challenges we face.

I wish to refer to the issue of moving people from hospital into long-term care settings. During the recession there was a shortage of long-term care beds. The new HIQA standards dictate that ward sizes must be limited. If HIQA carries out an inspection and a facility is found to be in breach of the standards, what happens if that facility seeks funding from the HSE in order to carry out works to make it compliant?

Mr. Tony O'Brien

HIQA's formal powers relate to nursing homes. If it finds breaches in nursing home facilities, it can close those facilities to new admissions until the breaches are remedied. Breaches take many forms but more commonly, both in nursing homes and facilities for those with intellectual disabilities, we are seeing infrastructure-related issues arising, although not exclusively, which require investment in things like fire safety, for example. This year these issues account for a large proportion of our supplementary budget. In the area of disabilities, approximately €37 million additional costs are arising for compliance. We do not disagree with the need to make these improvements - our difficulty is funding them.

If this year were next year, we would not be able to meet the costs if they were in excess of our budget. A provision in HIQA's legislation would have to kick in which would require it to have due regard to the financial resources available to us to implement these measures.

A very important issue which was debated in the public domain is the lifesaving drugs that cost €1,000 or €2,000 per week to a category of patients who are taking trial drugs. What is the position on funding new trial medicine in a situation where it is life or death?

Mr. Tony O'Brien

Generally we do not fund trial drugs. Most trials are funded by the developers of the drugs. In Ireland we are fortunate that we have good access to trial medicines and programmes. We have a new drugs approval process which uses the quality adjusted life years, QALY, calculation. Where the calculation is that the QALY figure is less than €45,000 which signifies that the cost of medication is less than €45,000 per quality-adjusted life year and it is passed by our medicines approval committee regarding quality and safety, as well as being licensed by the Health Products Regulatory Authority, it is automatically added to the list of available medications. Above that figure, we get into negotiations on price and sometimes it has to come up to my level or the leadership team and we have to make difficult judgments on whether to allow a particular medication to be added to the list. If we are subject to an overall cash limit, it will create a context in which we make the decisions which may be different from the present context.

We heard about the issue of small companies involved in procurement and the supply chain, the co-ordination of buying and duplication. I was previously Chairman of the committee and since I have returned to it there has always been an issue with how procurement is run and the integration of the service. While in theory it sounds easy to implement, what are the challenges in implementing it?

Mr. John Swords

There have been a number of changes in procurement. Since 2010, when we collated the health boards and brought procurement under one roof, we have had two significant changes. One was the introduction of a decision made by the Government in April 2013 to collate public procurement across the public sector and have divisions within it to help one of them to take the lead in health sector procurement across the public sector, not just within its own area.

Was the HSE involved in the InterTradeIreland cross-Border meet the buyer event at the RDS?

Mr. John Swords

Yes. I had a good contingency. It is very important to support InterTradeIreland. We do it, North and South, each year and attend other events. On the issue of prompt payment, we regularly meet, as Mr. O'Brien said, ISME, the Small Firms Association and other trade organisations. We interact with the Small Firms Association, in particular, regarding SMEs and various companies across the country at least twice a year with InterTradeIreland. We have a large contingency of category specialists to assist companies in how to do business with the health service and point them in the right direction, working hand in hand with the Office of Government Procurement.

On value for money, which is the adjudication of the committee, how do the HSE’s reports stack up?

Mr. John Swords

Our progress in making savings has been very steady. Since 2010 we have saved €260 million in cash. Our savings target for the year was €30 million, which we have achieved at this point, as expected. However, one can only take out a certain amount before value disappears and the quality of service decreases. We must be very careful to strike a balance. During the austerity programme, pressure was put on us to create cash that could be put back into patient care and we did our job. In the future we will rationalise services and bring much more into procurement and compliance in contracting. One of the areas where we see it happening is the development of services through the National Distribution Centre based in Tullamore. This will standardise our stockholding arrangements and approach and give more options for small to medium enterprises. In the event of their not having the logistics to deal with the whole country, we can do it for them.

Does the HSE have any connection with Mr. Paul Quinn of the OGP?

Mr. John Swords

Absolutely.

What role does the OGP have in the roll-out of Mr. Swords’s job as head of procurement?

Mr. John Swords

Mr. Quinn is the chief procurement officer at the OGP and we work very closely with him in transferring and transitioning the common goods and services in the health service into the mix across the whole public sector. The objective is to drive better value for money and greater compliance across all contracts. Mr. Quinn’s office has a policy and procedure attached to it, to which we align, as we are expected to. We are obliged to put any of our plans before the OGP to agree them in advance and ensure we are all singing from the one hymn sheet.

Does Mr. Quinn have autonomy over the procurement rules and procedures?

Mr. John Swords

Yes.

Are all services procured by Mr. Swords’s office put up on eTenders?

Mr. John Swords

Yes. Anything over €25,000, the ceiling for eTenders, is put up on eTenders or included in the Official Journal of the European Union.

What is Mr. Swords's opinion on the General Medical Services, GMS, system with the pharmacies and the demand-led system?

Mr. John Swords

It might be difficult to give my opinion. If we are requested to produce tenders for the GMS, we do it through the offices by way of area and the clinicians involved draw down specifications for whatever we need to do.

A question was raised in the Comptroller and Auditor General's report about the stock on order and the just-in-time principle. Does the HSE operate the just-in-time principle in the delivery of drugs to pharmacies, which is very important?

Mr. John Hennessy

Yes. There are controls in place for high-tech medicines - the subject of the Comptroller and Auditor General's report. There is room for improvement and the report contains five recommendations which are implementing and which will strengthen them.

The issue in high-tech areas, as in most others, is finding the balance between supplying a service on which patients who need drugs and medicines can rely and control. Approximately 30,000 patients rely on the delivery of high-tech medicines every week and month across the 1,800 pharmacies around the country. Typically, they include patients with cystic fibrosis or multiple sclerosis, MS; transplant patients who need anti-rejection medications and some very serious metabolic disorder cases. They tend to be the sickest patients in our system and are very reliant on a reliable supply of medicines. As the report also pointed out, it is a growth area. Expenditure is increasing, contrary to what is happening in most other areas where we are securing substantial cost reductions. Therefore, controls are important, although supply is also very important and the first priority.

We implement stock controls and the just-in-time delivery principles and provide stock management guidance for pharmacies. The aim is to minimise the level of out-of-date stock. It often occurs for very understandable reasons.

Patients' circumstances change. They go into hospital, often at short notice, and pharmacies are left with stock on hand that, perhaps, they are unable to use. Our efforts with the pharmacies are to try to minimise that to the greatest extent possible. The recommendations from the Comptroller and Auditor General's report will help us to do that and to strengthen those controls in the form of sample validation and electronic stock control systems. Incidentally, we have already commenced the implementation of those.

While the level of out-of-date stock sounds high at €2.7 million, it represents approximately 0.5% of our expenditure on high-tech medicines. That is not to underestimate it. Our efforts will always be towards bringing that down further, but obviously there is a balance between the two issues of control on the one hand and ensuring that patients are able to get their medicine.

I give credit to the HSE on the sell-by date issue. I come from a retail background. On the discretion of pharmacies, consider the appalling programme on television recently which showed how people can get medicines online. They were non-generic and branded, but they were forgeries. There should be no temptation whatever to sell out-of-date stock to a customer. The code of practice in the retail trade regarding the sell-by date is very clear that stock is taken off shelves and discarded. That is commendable, lest there be any temptation to reduce the sell-by date stock. There is a margin in retailing where sell-by date stock is dumped out in the retail business, so I compliment the level of caution and care. If sell-by date stock might be a risk to the patient and there were an over-rigorous control whereby sell-by date stock would be given out to patients, it would be outrageous. I am pleased that it is the reverse.

As a retailer, I am aware of the amount of stock that is thrown out by every retailer in the country. Where the sell-by date is down from two weeks, they take it off two or three days beforehand. The margin in the report is very low. In the retail trade the margin can be considerably higher. It is a demand-led system. The stock might not sell to customers so one must take it off the shelves and put it in the dustbin or shred it. That level of discretion is very commendable.

Finally, with regard to the GPs and the contracts with the new primary care centres, how does the witness view participation in that?

Mr. John Hennessy

Obviously, we would prefer if it was better than it is at present. The emphasis is on trying to negotiate with GPs in such a way that their level of co-operation with the developments taking place in primary care is improved. By and large, that improvement is occurring. The recent developments with the GP contract regarding improved access for children under six years of age and people over 70, and the negotiation process around that, have improved the atmosphere between the HSE and general practice considerably. However, this is an area on which we must work further. We have close liaison with the representative bodies and with the Irish College of General Practitioners. The Minister for Health is extremely interested in this as well. We are making progress on it. Many of the new primary care centres have strong general practitioner participation and we hope that pattern will continue and improve.

Where there was a GP contract, can a general practitioner who would not be in the confined area set up in a primary care facility?

Mr. John Hennessy

What does the Deputy mean by "confined area"?

Let us say it is a primary care centre in Sligo and the GPs would sign the contract to participate. Can a qualified practitioner be restricted from joining that facility if he wished to do so?

Mr. John Hennessy

No. The restrictions were removed about two years ago and there is free entry into the market for qualified general practitioners.

With regard to the participation of other outreach services, the aim of the primary centres is to take patients away from hospital care and the emergency departments. Does the HSE intend them to be places where people can come to get an ECG and so forth, a permanent medical facility so people would not have to go to the accident and emergency department for a minor cut and the like? Will these primary centres be a first stop before referral to an emergency unit, where they might be hours waiting for attention?

Mr. John Hennessy

Absolutely. What the Deputy has described sums up the thrust of the overall direction of the health services, which is to reduce the reliance and dependence that many people have on the acute hospital system, particularly on emergency departments, and to move as much of that routine activity out of the hospital environment and into primary care. The big opportunities would be the ones the Deputy mentioned, particularly regarding access to primary diagnostics and perhaps also in the area of management of chronic illness conditions in primary care.

The big issue, and one of the reasons there are so many people waiting in emergency units, is that the GP will not take any risk. If there is any doubt, he refers the patient to the emergency unit straight away. Will primary care have permanent, credited, certified staff that would be a back-up to the GPs in the centre whereby a qualified nurse could do an ECG, a scan or whatever in the centre, rather than send people to the emergency unit? Will that type of management be in place or will the centre be solely GP-led in the hours they are there?

Mr. John Hennessy

To be fair, the general practitioners in the main would only refer to a hospital if it is absolutely necessary. Where some risks occur is in the out-of-hours period. We have been putting in structured, out-of-hours general practitioner services. They are designed to try to prevent and reduce that element of referral into acute hospitals.

"Yes" is the answer to the Deputy's question. Incidentally, they would not just be reliant on GPs alone but would have supports in the form of practice nurses, therapists, community intervention teams and all of the supports that will enable GPs to refer to other services rather than just the emergency department.

I welcome Mr. O'Brien and the other witnesses. I had not intended to raise this but I will. It relates to what Deputy Sean Fleming asked Mr. O'Brien with regard to the conference in Spain. One can ask questions about the guidelines and the policies around them without impugning anybody's integrity. It is fair to ask whether it is wise for the head of the HSE, which has a budget of €13 billion, to have a major supplier to Irish hospitals pay for a trip abroad, regardless of how beneficial Mr. O'Brien might consider that conference to be. I question the wisdom of it. Deputy Perry suggested that by asking these questions one might impugn somebody's integrity, but I do not believe that is true.

When one goes to a doctor's office, the office always has fancy pens. The reason is that drug companies and medical device companies try very hard, from GP level up, to sell their wares. Everybody knows that. There is intense commercial competitiveness in industry in the health services area. Is it wise potentially to compromise oneself with regard to somebody who is a supplier to an Irish hospital when the HSE might pay that supplier down the line? What are the guidelines for Mr. O'Brien and HSE staff with regard to their dealings with private companies and their acceptance of benefits-in-kind from those companies? Mr. O'Brien said he spoke to counsel within the HSE and informed people or asked them regarding the propriety of this and they gave him the all clear. What are the guidelines within the HSE?

Mr. Tony O'Brien

First of all, I accept that the Deputy is not questioning my integrity. I understand that. The comment I made to Deputy Sean Fleming was merely in the juxtaposition with the other matter.

That is fine.

Mr. Tony O'Brien

There is no benefit-in-kind in that the costs were the direct costs of my attendance. It is also on the record that this company, which organises these conferences annually-----

It paid Mr. O'Brien a fee which he gave to charity. Is that correct?

Mr. Tony O'Brien

It will; it has not yet done so.

There was, therefore, a benefit.

Mr. Tony O'Brien

To a charity but not to me.

Okay, but there was a benefit.

Mr. Tony O'Brien

I had a choice to make. The first choice was whether the conference was worthwhile and I made that choice. The second choice was whether it was sufficiently worthwhile that I should spend taxpayers' funds.

I am parking that and moving to the policy issue. Mr. O'Brien should proceed.

Mr. Tony O'Brien

The third choice, therefore, was this: If there was a contribution available which could go to an Irish charity, should I say "No" or "Yes" to it?

I am parking that issue too. I wish to get to the root of the issue. Is it wise for the head of the Health Service Executive or any other HSE employee to accept a fee, even if it goes to charity, and expenses for attending a conference? We must bear a very important thing in mind, namely, that the HSE deals with these companies which supply services to it. This is, therefore, a pretty obvious question. If I asked the Comptroller and Auditor General if he would accept a trip to Madrid from a private company, the immediate answer would be "No". My guess is that if there was a-----

Perhaps a company the Comptroller and Auditor General audits.

I do not need to ask the Comptroller and Auditor General that question. I would be amazed if the Secretary General of the Department of Health would allow a private company to pay his expenses for a conference abroad. What makes Mr. O'Brien different? I am not sure what the answer is to that question. It is reasonable to question the wisdom of any HSE employee at this point accepting such a benefit from a private company, notwithstanding whether Mr. O'Brien regards it as a benefit. I will ask Mr. O'Brien again what guidelines apply to him or any other HSE employee in such circumstances.

Mr. Tony O'Brien

An individual who would deal directly with a supplier or would have any hand, act or part in any procurement by that supplier or in connection with the business the supplier is in would not attend.

That is fair enough.

Mr. Tony O'Brien

In this instance, of the range of people who I know to have been invited to participate in, as distinct from speak at, the conference, there was a member of the procurement staff and a decision was made by the head of procurement not to attend. I know that to be the case. In my own case, I have no direct dealings with any supplier. I would not be involved in the selection of any of the products that this supplier is involved in and I do not personally sign off on those procurements.

I made a decision that this conference was worthwhile.

That is fair enough. Mr. O'Brien has said that, which is fine.

Mr. Tony O'Brien

I will declare the full cost in accordance with the guidelines that exist.

I understand that. I will give Mr. O'Brien my opinion. If he goes down that road, that is fine, and he stated that safeguards are in place and went through the process and so forth. Individuals - I am not referring to Mr. O'Brien personally - open themselves up to compromise, however, in accepting such from a private company that operates and deals directly with the HSE and Irish hospitals. Regardless of the HSE's internal checks and balances, this opens up Mr. O'Brien to being compromised. HSE employees will see this in the newspaper and I am not sure it will send out a good message with regard to how the State operates and the head of a State agency with a budget of €13 billion operates. That is my personal opinion and it does not question Mr. O'Brien's integrity in any respect.

I am sure officials from the Department of Health are listening to this conversation. They should examine the propriety of such trips and benefits-in-kind with regard to suppliers to the health service. It is unwise and it may be an area that should be changed and that should be done by the HSE voluntarily. That is just an opinion.

With regard to the independent review panel which the Department of Health communicated to us yesterday evening, I thank the HSE for the work it has put into this issue. The Department is examining the proposals the Health Service Executive has produced and will deal with them when it is appointing the independent review panel. Having read the document a couple of times, I assume it is the intention that the chairperson and members of the review panel will not be former HSE employees. This is not stated implicitly or specifically in the document, however. Will Mr. O'Brien clarify whether it is intended that the membership of the independent review panel will not consist of former HSE employees?

Mr. Tony O'Brien

The intention is that the chairman will determine the make-up and will do so on an independent basis. It is not the intention to preclude the chairman from reaching a view, if the chairman is satisfied that no conflict of interest arises, that the panel could have access to someone who may, at some point, have worked in the Irish health service, given that we are, through the former health boards and today, quite close to being monopoly provider. The intention is to create independence with regard to the selection and supervision of the processes, as set out in the paper.

The Department is examining this matter and may provide observations on the document the HSE has produced on the proposals.

Mr. Tony O'Brien

Sure, that is the nature of the process we engaged in.

We met Mr. Breslin two weeks ago. He has already followed up on this issue, on which work has been ongoing since our meeting. The Minister of State at the Department of Health, Deputy Kathleen Lynch, began this work in earnest in June. The process is that the Department will now review the HSE's proposals, make observations and the HSE will make a final decision with regard to the implementation of the proposals. Is that the case?

Mr. Tony O'Brien

Yes, that is our understanding.

There are three strands to this issue. The first is the public policy stand. The main reason the committee took on this issue was to weed out any potential conflicts of interest when it came to very serious cases and incidents, particularly regarding the care of children. The committee has been dealing with specific incidents or circumstances for the past year. That is the public policy part of the issue that is being dealt with. I genuinely appreciate the work everyone has put into this. It is good work which will help to protect children in the years ahead.

The second strand is related to the senior counsel who, I understand, has been appointed to examine certain aspects of this matter. The individual in question will not examine everything because we have issues with regard to the terms of reference. We will allow the senior counsel to do his or her work.

The third strand is the release of the Conal Devine report. The landscape keeps changing in this regard. I refer to the response the Chairman received from the Garda when he asked whether criminal prosecutions would be taken. It was clearly indicated to him that there would not be criminal prosecutions. If the Director of Public Prosecutions has made clear that there will not be any criminal prosecutions in this case, one must ask what is the problem with releasing the report. It is now my understanding that the Office of the Information Commissioner has investigated this issue. A senior investigator who examined the matter under the Freedom of Information Act found that the reasons for non-publication of the Conal Devine report were completely different from the reasons cited previously. It is interesting to note what the investigator found. I will read out fragments of the findings because it is important that members are aware of this information given that we have been dealing with the issue for the past year. In a lengthy decision letter, the senior investigator outlined that the HSE did not present any meaningful argument to the Information Commissioner as to why the report should be exempted from release owing to the ongoing Garda investigation.

Indeed, the senior investigator found that the mere assertion that release of the report will affect ongoing investigations without explaining precisely why or how the harm to these investigations will occur from the release of the report is inadequate. In respect of justification for refusing access to the report, it was stated that it was the view of the senior investigator that the non-personal parts of the report do not contain any information which would give rise to any of the harms envisaged by this section of the Act. Nothing in those parts could, if released under freedom of information, be reasonably expected to prejudice or impair any Garda investigation. Accordingly, the investigator found that the HSE was not justified in refusing access to the report under this section of the Act.

I learned this last night and it changes the rationale and reasons we have always been given when it comes to the non-publication of this report. It is my understanding that one of the individuals involved will now get the recommendations of the Conal Devine report almost intact and some general information. This will be released to that individual. Where are we going with this? We dealt with Mr. Breslin a couple of weeks ago. This committee is not going to stop. The excuse that is now being given is that third-party information is involved in this that would be potentially injurious under the Data Protection Act. That has been thrown into the mix. Where is the HSE with regard to this? How does it see this going when it comes to the ultimate publication in its entirety in an unredacted form? Our intention has been made clear over the past two or three months to Mr. Breslin and he accepted that we are not going to stop until we get the publication of that report because we think it is important in the public interest for that report to be published and viewed.

Mr. Tony O'Brien

I thank the Deputy for raising the issue because when we were last here, it would have been possible to leave the room with the view that we were saying that we were constrained by An Garda Síochána, that members of the committee had completely contrary information to that and, therefore, we were in some way saying things that the committee did not accept to be true. In order to be able to give the committee the most up-to-date information, I asked for a full briefing note from Arthur Cox, the lawyers dealing with this matter on behalf of the HSE, and I can circulate the note to the committee, if it wishes me to do so. It would be helpful for me to share certain salient information.

This is basically an update of the current position relating to HSE publication of the reports in question. A letter to us from Arthur Cox stated that:

1. As you know, the HSE has been engaged in consultation with An Garda Síochána in relation to this matter for a considerable period of time. In order to try to ascertain the status of An Garda Síochána's investigations and the ongoing implications in respect of publication of the Reports by the HSE, we were asked by the HSE to formally engage with An Garda Síochána in relation to the matter.

2. In this context by letter dated 26 March 2015 we wrote to An Garda Síochána enclosing a copy of the Conal Devine Report with suggested redactions. We indicated that it was the intention of the HSE to publish the Report and requested that they revert if they had any objection to the release of the Report.

3. When we received the Resilience Ireland Report, we also sent a copy of that Report with suggested redactions to An Garda Síochána by letter dated 15 April 2015 and requested that they revert if they had any objection to the release of the Report.

4. On 30 April 2015, An Garda Síochána raised queries which were addressed by us on 1 May 2015, and the consideration of the matter was then passed to An Garda Síochána legal section. We suggested further redactions to An Garda Síochána. An Garda Síochána wrote to us to request that the HSE "hold off on publishing" the Report pending a reply from An Garda Síochána's legal section.

5. We sent follow-up letters to An Garda Síochána in relation to the Resilience Ireland Report on 2 June 2015 and in relation to the Conal Devine Report on 19 June 2015 and in relation to both Reports on 23 July 2015.

6. On 7 August 2015, we received a letter from An Garda Síochána dated 31 July 2015 which stated "regarding the release of the Conal Devine Report and the Resilience Ireland Report I am to inform you that, at this time, we do have concerns that the release may adversely affect ongoing investigations". By way of response dated 13 August 2015, we told An Garda Síochána that "we have advised the HSE of your correspondence and confirm the HSE does not propose to release the Report at this time". We requested that An Garda Síochána update us if the position in relation to publication changed and in particular if/when the investigations concluded.

7. In addition an Addendum Report to the Resilience Ireland Report was furnished to us on 10 September 2015. We carried out appropriate similar redactions in line with the earlier Reports and furnished the Addendum Report to An Garda Síochána by letter dated 14 October 2015. In our letter of that date to An Garda Síochána, we also sought an update as to An Garda Síochána position in relation to the publication of the Report and asked for an update as to if/when the investigations might conclude.

That is the most up-to-date position we have. By sharing it with the committee, it may be clearer that we are in a position of wanting to publish the reports.

In respect of the FOI request, the same correspondence stated that:

8. On 30 September 2015, the Office of the Information Commissioner ("OIC") furnished us with its review in relation to an appeal by an FOI requester seeking access to the Conal Devine Report under the Freedom of Information Acts 1997 and 2003. The HSE had initially not granted access to the Report for a number of reasons, primarily because of the confidentiality rights of third parties having regard to the sensitive personal information that is contained in the Report.

9. The OIC decision was that the HSE is to release certain parts of the Report i.e. the methodology and recommendations of the Report (to the extent such parts do not contain any personal information of service users).

10. As you know, disclosure of the documentation is expressly stated by the OIC (in their decision letter of 30 September 2015) to be subject to appeal to the High Court by any person affected by the decision of the OIC. Subject to any appeal by any relevant party, the disclosure will be made in due course pursuant to the Freedom of Information Acts 1997 and 2003 on 24 November 2015 (i.e. 8 weeks after the OIC decision). As you know, we have notified relevant parties of the decision.

That is in both respects the most up-to-date information we have available to us.

From what Mr. O'Brien said, and there are two parts to it, An Garda Síochána is making it clear that its investigation has not been completed but at the same time, this individual is actually going to get parts of this report and its recommendations. Is there a contradiction there?

Mr. Tony O'Brien

There is potentially one but we will seek to abide by both the request of An Garda Síochána-----

In two weeks' time, the Department of Justice and Equality will appeared before us.

Mr. Tony O'Brien

We will seek to abide by both the request of An Garda Síochána and the direction of the OIC. The OIC's direction is subject to High Court appeal. We will not be appealing it but other parties might.

The HSE will not be appealing that.

Mr. Tony O'Brien

No.

In the meantime-----

Mr. Tony O'Brien

It has always been our intention that they would be published.

Fragments and recommendations from the report will be released to this individual shortly. Has An Garda Síochána an opinion about that? Obviously, it does not.

Mr. Tony O'Brien

Not that I am aware of. I would not suggest it does not have an opinion but I do not know what it is.

Can we get a copy of-----

Mr. Tony O'Brien

Yes.

I do not know if the Chairman has any questions about this particular issue.

Has the HSE conducted an investigation into who at that time would have been responsible in this area and the actions or lack thereof of the individuals or the section that would have been responsible?

Mr. Tony O'Brien

We have not conducted any investigations beyond the resilience and Conal Devine reports. Obviously, when they are concluded and publishable, they will be available to be shared as part of any further investigation we might need to undertake.

Before Mr. O'Brien gets to that, I am asking, as part of the issues raised by the whistleblower, and I understand that whistleblower raised them publicly with Mr. O'Brien who was present at some conference or other when no action was being taken-----

Mr. Tony O'Brien

Well she-----

-----whether the Health Service Executive, HSE, has undertaken a look-back at the structures at that time. Who, within those structures, were the individuals responsible for taking the actions? Has Mr. O'Brien identified how that structure was made up, the personnel who were in that structure and the information they knew?

Mr. Tony O'Brien

We have not carried out a look-back at this stage.

Why would that not have happened? I am interested in it because if an employer got a complaint about something that happened within the system, they would probably go immediately to the person it referred to or the section in control of it. Mr. O'Brien is saying now that did not happen.

Mr. Tony O'Brien

No. To clarify, the raising of the issue at a conference I was present at was extremely brief.

I understand that.

Mr. Tony O'Brien

The more substantial information I got was by way of a referral from this committee when the dossier was sent. The main concern at the moment is to get these reports published. I personally have not read them because they are not publishable yet but when I have them, I will be in a position to decide what further action I should take.

Mr. O'Brien has not read the Conal Devine report.

Mr. Tony O'Brien

No. I have not.

I have to ask Mr. O'Brien again if it is a fact that right now, no effort has been made within the HSE to establish the structure of the section that would have been looking at this area within the south east, and the personnel involved.

Mr. Tony O'Brien

I would not say that definitively because at earlier stages, there would have been examination of that. What I am saying is that since the receipt of the dossier, I have not initiated such an additional review.

Is it not incredible that Mr. O'Brien would not have wanted - not so much out of curiosity but to know the facts - the HSE, or that someone within the HSE would not have been instructed, to go back to the base of this complaint and find out what was involved?

Sorry, Chairman. What is incredible is that this report was finalised years ago. It is collecting dust in the HSE. I find it extraordinary that a report has been commissioned, public money has been used to document that report, and the head of the HSE has not actually read a report his organisation commissioned which, potentially, has very serious recommendations and findings when it comes to the care of children. That is what I find extraordinary. How can Mr. O'Brien commission a report and park it for years? To say the least, if the findings were useful and important with regard to care of vulnerable people in this country, why would he not read it?

Mr. Tony O'Brien

Reports are commissioned at many levels and for many purposes. I have a particular role when it comes to some of these issues, which means I should not see these reports until they are in their final and finished form, and so I do not do so. If I were to do so, it would be a further complication in the entire process.

The Conal Devine report has been finished for years.

Mr. Tony O'Brien

It is not cleared for publication.

What is the point in doing this in the first place? This is crazy stuff, seriously.

Mr. Tony O'Brien

The people who commissioned the report have the report and will have taken the relevant actions in regard to that. If I were to read every single report, I would do little else. I did not commission that report. The commissioner of that report has had that report and has been in a position to take the relevant action. That is true of many different reports that are conducted throughout the organisation.

Mr. O'Brien has got to admit that is a hell of a way to operate. This report has been available for years, commissioned by Mr. O'Brien's organisation. We are not dealing with Mickey Mouse stuff here; we are dealing with some very serious issues. It has been left there. We can talk about the technicalities and why Mr. O'Brien does or does not read these reports-----

Mr. Tony O'Brien

This is not about the technicality. The person who commissioned the report will have received it and is not here to tell the Deputy what action the person took.

I get all that but that is what is incredible. I will conclude. We look forward to the guidelines, the independent review, being finalised. We should follow up with the Department to find out what recommendations it will make, when it will make them and when it expects implementation of the review panel. At the very least, we should continue that process and get that out of the way. Let the senior counsel do his job. There is a contradiction in what Mr. O'Brien has said. We will hear from the Department of Justice and Equality representatives in two weeks' time when I will ask them their opinion, when it comes to this report, and what the Garda is telling them because, on one hand, the Information Commissioner has facilitated the release, partially, of this report but, on the other hand, Mr. O'Brien is saying the gardaí do not want this released. The picture as to what is going on is very unclear. Mr. O'Brien said he will not appeal it to the High Court but my view is that the Department of Health will not tolerate this much longer. Mr. O'Brien said he wants publication of this report, and that is fair enough, but we are getting to the end of this and we should just deal with it once and for all.

Mr. Tony O'Brien

I hope that by sharing the correspondence-----

Mr. Tony O'Brien

-----in which our lawyers document the efforts we have been making, it is clear that we have not been suggesting to the Deputy in previous meetings or this meeting things which are not based on fact. Clearly, it would be damaging from our point of view if he were left with that impression.

I welcome Mr. O'Brien and all his officials. I want to refer briefly to chapter 20 on the management of private patient income, which is a problem that has gone on for many years. It seems to be no different in 2014, and the Comptroller and Auditor General called it a routine business function. I will go to the Comptroller and Auditor General first. He looked at three hospitals - Cork, Galway and Tullamore.

Mr. Seamus McCarthy

Three run by the HSE plus two that are section 38 hospitals.

Can the Comptroller and Auditor General give us a brief outline of the issues those three hospitals faced on an individual basis?

Mr. Seamus McCarthy

I do not think I have the detail of that.

Were all the same, or were there any specific differences?

Mr. Seamus McCarthy

I think it was broadly similar in most of the hospitals. Essentially, we looked at the actual processing of individual claims in each of the hospitals. We have aggregated the findings from those samples in the report.

The Comptroller and Auditor General's report states that a legislative change in July 2013 caused problems in 2014. What were those changes that happened in regard to this area?

Mr. Stephen Mulvany

The legislative changes were in regard to the charging. Prior to the legislation that was enacted, charges could only be levied in respect of designated private beds whereas they were public beds and undesignated beds, typically intensive care and critical care beds, and those two categories, public and critical care non-designated beds, did not attract a charge. The legislation introduced a charging regime where any bed in the hospital could be charged if it was in respect of a private patient, and a private patient being somebody who had elected to be treated privately.

From the way Mr. Mulvany describes it, it does not sound like a massive change. It was a legislative change but not a massive change and yet it seemed to cause a great deal of trouble.

Mr. Stephen Mulvany

It caused difficulty in terms of the interpretation. One of the nubs of the issue was around whether it was in respect of every bed for every admission or whether it was only emergency admissions versus planned admissions. The legislation is complex enough despite the fact that it may appear to be a relatively small issue. Clarification was pursued and, ultimately, we got the clarification in the middle of August and issued a note to the system on 3 October.

There was a six months lead-in process for this change.

Mr. Stephen Mulvany

There was a period between the legislation going through its process and being commenced on 1 January 2014.

During that time it would have been discussed with individual hospitals, and health insurers, what this change would mean for them and how they were to charge.

Mr. Stephen Mulvany

Discussions with the hospitals would obviously take place when the legislation was finalised-----

Mr. Stephen Mulvany

-----and then commenced.

It says that at the end of 2014, the total private debt outstanding from the insurance companies was €290 million. How is that year on year for the last three or four years?

Mr. Stephen Mulvany

It has certainly increased. Just to be clear, the HSE is not in any way satisfied with the overall performance in regard to the collection of the private charges. That figure has increased significantly. The €290 million figure was at December 2013. My sense is that it was probably somewhat less at the end of the previous year because there were advance payments then. To be clear, it is a significant issue for us and has been for some time. That is not in doubt. There are a number of components to it which I can go through.

Mr. Stephen Mulvany

Very briefly, if one thinks of the total amount of money involved, the first thing to say is that we start counting the money outstanding from the day the patient is discharged. As such, there is a certain amount of the €290 million which one would expect to see. Given the complexity of the bills, we would expect it to take 13 or so days to issue that bill and the insurer should have about 30 days to pay it. As such, approximately 60 of what I think is 184 or 186 days would be the norm. Everything beyond that, which is by far the biggest part of it, is unacceptable to us. If one looks at the four components of that, there is an administrative piece where we are filling out the form before we bring it to the consultant to sign. That piece, we have, in fairness, steadily improved to reduce the amount of days . We measure this in debtor days, the number of days, so we can compare hospitals. That is because the picture across hospitals is very variable. We have steadily reduced that to the stage where our target is 15 days for all of that administrative processing. The actual average in 2014 was 16 days. The introduction of the claim assure system, which we can talk about more if the Deputy wishes, has assisted us significantly in that respect. The second piece is the time spent for our own consultants to review and fill out the second part of the form, which is the clinical part, and sign off. That piece has got worse and is continuing to get worse, which is a significant problem for us.

Why is it getting worse?

Mr. Stephen Mulvany

We are having difficulty getting the forms signed off by our consultants.

Why are the consultants not signing off on the forms?

Mr. Stephen Mulvany

There is a variety of reasons. Consultants are busy and focused on treating patients. It is a minority of our 2,200 consultants, but the top five amounts outstanding for each of the top five consultants in our 40 odd hospitals accounts for nearly 40%. In fairness to the bulk of our consultants, they are doing what is necessary, albeit there are still time issues. However, there is a significant number of consultants for whom this is a big challenge.

What makes those consultants different?

Mr. Seamus McCarthy

The Deputy was asking how the picture has changed over time. The figure on screen, figure 20.4, is showing that the debtor figure at the end of 2011 was approximately €200 million. It was similar in 2012 and 2013, but there was a significant increase in 2014. At the end of the chapter, the debtor days per hospital, which I think is what the Deputy was asking me about earlier, are set out. The graphic shows the age of the private debt by individual hospital. Statutory hospitals are in light blue while the voluntary or section 38 hospitals are in dark blue. The Deputy will see that there is very considerable variation. For Tallaght Hospital, it is approximately 85 debtor days equivalent whereas University Hospital Galway is in excess of 200 days. The next graphic shows the private inpatient debt in hospitals awaiting consultant action. This is a subset of the debt. This is the amount that is awaiting action. If one looks at Connolly, it is in excess of 150 days whereas St. Vincent's in Elm Park is down at about 20, which is what the target is. There is considerable variation across the system.

On the 40% of consultants where the problem lies, what is happening there?

Mr. Stephen Mulvany

To seek to address this, if one visits Tallaght hospital, which I have and which performs well as the Comptroller and Auditor General said, consultants there sign off in under 30 days. That is a reasonably good performance overall. However, at Connolly and Mullingar, the main difference one sees is not around the administrative process, albeit there is some, but around the level of focus it gets. In Tallaght, it is at every level of the organisation. The medical board is met, the senior executive team shares detail by consultant as to which consultants are and are not signing and the individual business directorates follow it up. At a number of levels, including the board, this issue gets significant additional focus at Tallaght Hospital. There is no two ways around the fact that this is not the case as much in Connolly and Mullingar but it needs to become the case.

Is Mr. Mulvany putting the blame on the individual hospitals?

Mr. Stephen Mulvany

In fairness, I do not see it as blame. I am simply saying factually that this is what needs to happen.

Some hospitals are doing it right and some are doing it wrong.

Mr. Stephen Mulvany

Within what the Comptroller has set out, there is definitely variation. We can see that on all four parts: the administration piece and the consultant piece and, importantly, the two pieces on the other side of the line when it is with the insurer. On our piece, there was a significant unacceptable part on the hospitals on our side which is largely around the consultants. We need to tackle that one, which is about focus. The question will be raised about whether we have taken disciplinary action. That is obviously an issue but it is not a place we want to go because these are the clinical leaders of our service in many respects. However, this is an issue that is hurting hospitals, particularly in the context of next year with the new fiscal rules. It is very much an issue that will have a significant impact on the overall viability of hospitals next year.

I know it is the last place the HSE wants to go, but has any disciplinary action been taken? It is a problem that is getting worse.

Mr. Stephen Mulvany

I do not have specific detail on that. I understand a number of hospitals have considered that and may have commenced that route, but it is a last one.

How does the HSE not know what disciplinary action has been taken by individual hospitals? How does it not have that level of detail?

Mr. Stephen Mulvany

It is perhaps a fair question. Perhaps I should but I do not. We have 2,200 consultants.

However, Mr. Mulvany said the problem lies with 40% of the consultants.

Mr. Stephen Mulvany

I said 40% of the problem is caused by the top five consultants in each of the 48 hospitals we have.

As such, it is a relatively small number.

Mr. Stephen Mulvany

Relatively.

Has that relatively small number been causing the problem for the last number of years?

Mr. Stephen Mulvany

I am sure people move in and out of the problem but the issue is that it is a relatively small number. The overall signing by a number of our consultants is not where we want it to be, but that relatively small number is responsible for a disproportionate amount.

Without naming names, I think Mr. Mulvany has a fair idea of where the problem lies here.

Mr. Stephen Mulvany

Absolutely.

I am guessing the hospitals know where the problem lies.

Mr. Stephen Mulvany

They absolutely do.

I want to know what is being done about it when the problem is getting worse.

Mr. Stephen Mulvany

What has been done is a great deal of follow-up with hospitals. That has been more successful, more structured and operated at more levels in hospitals such as Tallaght, which have achieved a significant reduction. In other hospitals, it is clear that it has not been as focused. Our role as the HSE is to encourage, require and support hospitals to do that.

To get down to the bare bones of it, we all know the role consultants play in our hospital sector and how crucial they are. What happens to a consultant who is not doing this work?

Mr. Stephen Mulvany

At the moment, it does not involve as a routine matter disciplinary action. I am not suggesting that is an easy or the only option, but I suggest that it needs to involve far more engagement with consultants at every level and focus, including perhaps a little bit of naming and shaming, which happens to an extent in the hospitals that do this well, and an acceptance by all consultants that this issue is one that matters. In fairness, a lot of demands are placed on consultants in what is a very busy clinical schedule around ensuring they are available to do a great many tasks. At the moment, this one does not get as much focus.

The overall point is that where it is not signed off, the hospital picks up the bill from the taxpayer. Is that correct?

If they are not signed off and the private insurance is not paying up, the public hospital picks up the tab.

Mr. Stephen Mulvany

As the Comptroller and Auditor General said, until it is paid it is effectively paid for by the State in a Supplementary Estimate. Ultimately, though, the money is collected and does come in.

There is such a variance between one hospital and another and one consultant and another. I hear a lot from the HSE on what it would like to do, or is doing, but it does not seem to be fixing the problem. The figures speak for themselves.

Mr. Stephen Mulvany

I do not want to take away from our issues but by far the largest part of the change in the problem is not on the hospital side or with consultants. It is with the insurers. If the Deputy had asked this question three years ago, slightly more than 50% of the total debtor days and the associated money was in our administrative process, which we have effectively halved, or with insurers, which went down a bit but has gone up in the past year. The bigger part has gone from being approximately 50% to 65% and involves waiting for insurers to pay or to make their queries. Querying is, to some extent, absolutely reasonable but the level of querying by insurers has increased and our engagement with insurers to get an agreement on better payment terms has led to an element of delay in some payments. Our issues are our issues but we are experiencing significant difficulty with insurers who are delaying payments.

Can Mr. McCarthy explain figure 20.7?

Mr. Seamus McCarthy

Figure 20.7 compares the situation at the end of each year from 2011 to 2014, broken down by what stage the debt is actually at. As members will see, the overall position at the end of 2011 is that debtor days were 148 in total, which dropped in 2012 to 134. In 2013, it went up to 159 and in 2014, it increased to 186. As Mr. Mulvany has explained, most of the growth from 2012 has been at the level of the insurers, other than an increase of 15 debtor days where we are awaiting the consultant sign-off. From an administrative point of view, things are being processed relatively quickly. The debt is still over the 15-day target which was set but there are several moving parts in this. The increase affected queried invoices, which have gone up from 35 days' equivalent to 51 days' equivalent, an increase which is quite substantial.

Is the increase in the queried side because of the change in legislation?

Mr. Stephen Mulvany

That goes back to the negotiation process. It is certainly causing an increase in the queried side. A number of insurers are pending invoices relating to beds that previously would have been public or non-designated and would not have attracted a charge.

Where are the negotiations with the health insurers at the moment?

Mr. Stephen Mulvany

They are at different stages with different insurers but we are at a very advanced stage with the biggest insurer, the VHI. They involve ourselves, senior colleagues in the Department and the highest level of the VHI. We are seeking to reach an agreement but we do not have an agreement yet.

What is the HSE looking for? Does it have a ballpark figure in mind relating to the 51 days?

Mr. Stephen Mulvany

Without going into the contractual or commercial terms, we are looking for a change which would introduce a payment on account system to significantly reduce the level of debtor days. We are looking to be able to issue the insurers with a bill, which we are able to do because, as the Comptroller and Auditor General said, there are a number of moving parts to this. We aim to collect the statutory charge the Oireachtas has set out, which is a per diem charge. To collect that charge we must submit our bill, which we can do on average within five or six working days. The issue is that we must also produce the private fees bills for consultants and various secondary consultants. We are looking to get a payment on account which only requires us to send a file for the statutory charge and to get a percentage of that paid upfront. That would make a significant difference to this situation.

One of the witnesses said that he felt the problem might get worse next year.

Mr. Tony O'Brien

Its significance will be greater and the benefits of bringing down the overall number of days will be greater than next year because of the fiscal environment. It relates to the conversation we had earlier on the new fiscal treaty and the impact it has had. Those hospitals that manage down their number of debtor days, either through the national negotiations or through local action, will see direct benefit as a result but conversely there will be a significant negative impact if they do not.

It was said that individual hospitals which did not meet outpatient timelines could have a cut in funding as a penalty. I am not going to name individual hospitals but, if this gets worse and hospitals do not get this money but receive the penalty, how does Mr. O'Brien square those two things up? The hospitals lose funding as a result of an issue that is not their problem and yet they face a cut for not doing their job.

Mr. Tony O'Brien

This will be a self-executing cut. If the funds do not come, in they will not be available to be spent. It is not that we need to impose a penalty, the failure to collect the funds will be its own penalty.

Mr. Tony O'Brien

Yes. Its ability to trade will be limited to the extent that they do or do not successfully recoup this income.

Mr. Stephen Mulvany

To be fair to the hospitals, the pieces we ask them to address are the administration piece, which they largely have addressed, and the consultant piece. The consultant piece is absolutely within their control and within ours. We are seeking to address the insurer piece nationally because it is not necessarily within the individual control of hospitals and we would certainly not seek to penalise them for that.

Going by the chart, the two biggest issues are submitting and waiting payment and queried claims, which are outside the control of hospitals.

Mr. Stephen Mulvany

Yes, and that is why we are engaging at the very highest levels with-----

The hospitals could still end up paying the price for something which they cannot do anything about, even if they solve the administration issues and the consultants' problem.

Mr. Stephen Mulvany

Yes, Deputy.

On the flip side, if they do not meet their targets, they could have their funding cut.

Mr. Tony O'Brien

In this case, the effect is a cashflow one but cashflow is much more real for the system next year than it has been hitherto. The penalties that have been applied for waiting lists can be retrieved. Hospitals that do not meet minimum standards mid-year stand to be penalised for those breaches if they do not meet those standards by the end of the year. By improved performance at year end, however, they can effectively escape the penalties that would have applied for mid-year breaches.

Is Mr. O'Brien suggesting that for individual hospitals, this is not a funding problem and there is another structural problem for why they are not hitting these targets?

Mr. Tony O'Brien

We have put in place a number of measures and the Minister has been central to this. The first is chronological waiting list management and the other is ensuring waiting lists are properly validated. One of the features of a system which has long waiting lists in multiple locations is that patients are often referred multiply for the same referral so they need to validate to make sure patients are not on their waiting list as well as that of other hospitals. Where they can identify that they simply cannot provide the treatment, whether it be with an outpatient or inpatient appointment or day case treatment, within the time required, they have to declare it to us centrally and we will then make appropriate arrangements, either for insourcing somewhere else within our system or outsourcing. The penalty comes from doing none of those things and allowing patients to go beyond the maximum waiting times without having taken appropriate action to enable the hospital itself or somebody else to ensure that does not happen. Solutions are available and the penalty applies where those solutions are not available. That is something to which the Minister has committed and to that extent, it is a policy issue. He has been very keen to ensure we implement it.

I know the consultants' issue is not the biggest part of the problem as they are a small percentage of the total but has there been an ongoing problem with the same consultants for the past number of years?

Mr. Tony O'Brien

Our view is that consultants come in and out of the top or bottom five depending on how one looks at it.

Are there many repeat offenders?

Mr. Tony O'Brien

There are probably one or two but the key difference between some hospitals and others which have been able to improve performance has not arisen through sanctions but through help and support.

When a consultant gets to a position where he or she has such an outstanding amount, getting back into good order requires a huge effort and work on their part while we are also pressurising them to treat patients. It is often about providing the individuals concerned with supports to enable them to get their files in order so they can sign them off. The experience in hospitals which have been successful is that the support works. However, there have been instances, and will be in the future, where despite all of that if people really are not co-operating then the issue of whether a disciplinary offence has arisen has to be considered. Primarily the situation is one of support.

What is the longest delay the HSE has had with any consultant?

Mr. Stephen Mulvany

Some consultants have bills outstanding for a number of years.

Years? And still outstanding?

Mr. Stephen Mulvany

Yes, still outstanding. As Mr. O'Brien has said, we are not saying that we would rule out disciplinary action. I asked Tallaght hospital and it said it had not taken disciplinary action against consultants, and there is no reason to believe that its consultants are any more compliant than-----

I do not want to name any particular hospital but in regard to the one amount that has been outstanding for years, perhaps Mr. Mulvany would clarify the situation there. He is aware of the problem and that it has been ongoing.

Mr. Stephen Mulvany

I hear what the Deputy is saying and I agree the situation is unacceptable. The hospital views it as unacceptable. The issue is that the consultant has to be tackled on it by management, by clinical directors and by his peers in order for a resolution to be found. My colleague, Mr. O'Brien, has already made reference to the backlog and how it becomes difficult to deal with. There are ways and means around that. Hospitals are willing to step in and we can encourage more to do that. It makes sense for some consultants to use the services of medical billing companies which takes away part of the workload. However, at the moment there is no way of getting around the fundamental fact that the consultant has to sign the form. In regard to our bills, we are seeking to pursue the notion that since the HSE has other consultants who work as teams, and who discharge patients across the team, why should we not also apply this to the situation where the consultant is required to sign the form?

Perhaps Mr. Mulvany could clarify if there is just one consultant in the "number of years outstanding" category.

Mr. Stephen Mulvany

One consultant in the State?

Mr. Stephen Mulvany

No, there would be a number of consultants in the State who would have bills outstanding for years and one of the recommendations in the Comptroller and Auditor General's report is the need to look at the HSE's capacity to report, by individual consultant, at a national level. That should be feasible and is currently being checked.

Will the witness indicate how many consultants are in that category?

Mr. Stephen Mulvany

I would not want to, I would be guessing-----

Mr. Stephen Mulvany

I would say there could be 50 or more, but that is a guess.

Is it hoped then-----

Excuse me but I wish to follow on from Deputy Connaughton's point. One can get tired of listening to the toing and froing that happens between Deputies but according to Mr. Mulvany's explanation, the HSE has failed to bring consultants into line. The Committee of Public Accounts has had this discussion with the HSE previously. The committee has heard all of the explanations about what is required to be done to make consultants comply. While we are talking about a significant amount of money it is also a problem for the process. When the HSE finally submits a bill to the private insurer, from those consultants who have not signed off for years, there is bound to be a query. If I received an invoice for a job done two or three years ago I would have difficulty in paying it and would take a double look at it. Yet the HSE has consultants in hospitals who ignore the HSE's endeavours to settle bills. Am I correct in my understanding that the HSE provides somebody with an iPad to chase these consultants to sign off?

Mr. Stephen Mulvany

Yes, Chairman, that is correct.

I understand the predicament in which the HSE finds itself - these people are consultants and it is not easy to replace them - but if this was to happen anywhere else something would be done. Someone would lose their job. However, because the taxpayer is picking up the bill everyone is fine with just an explanation. I do not wish to be personal, Mr. Mulvany, and sometimes Mr. O'Brien takes my comments personally but my comments are not personal nor are they said for political reasons. I am here to do a job and I wear my PAC hat, not my political party hat nor my opposition hat.

I find that the explanation which has gone around this room time and time again is now at a point where it is ridiculous. This is why people ask questions about the HSE and its processes. If consultants have performed operations or carried out medical procedures for which they have not claimed payment for two years then there is something seriously wrong. Why not introduce a system whereby should that form not be signed, there would be interest and penalties applied to the amount due to the consultant just as when one's taxes are not paid? As penalties are introduced and moneys are withheld from the hospital it would impact negatively on cashflow and then the patients would suffer. Patients are currently being asked to bring their own pillows and bed-linen into hospital and to clean up under their bed after previous patients. This is happening in some hospitals while at the same time there is this farcical situation that for years consultants have not signed off with one signature. Mr. O'Brien has said it is a huge task for consultants to get up to date on the process of signing off.

Then there is the other problem with the private health insurers when these old invoices arrive as there is nothing that can be done. It is probably pointless asking the Department of Public Expenditure and Reform about whether it has a plan because it probably has no plan. If the Department had a plan it might be the same plan that the HSE has, which is to chase the consultants. I do not know where this is all going to end but it is not good governance.

Regarding the ballpark figure of 50 consultants, can the HSE indicate if anyone met with the consultants at any stage?

Mr. Stephen Mulvany

I wish to be clear and I will respond first to the Chairman's comment on whether I accept that the HSE has failed so far to address this issue in a satisfactory manner - yes I do. Regarding the Deputy's query on meeting with consultants, absolutely yes that has happened.

What did they say then?

Mr. Stephen Mulvany

Like any human interaction there are a variety of answers and the Deputy will understand that some people will do what they say and others will not, or will try but fail.

Which consultants said they would not do it?

Mr. Stephen Mulvany

Pardon?

Which consultants said after the meeting, "We are not going to" or "We cannot".

Mr. Stephen Mulvany

The Deputy will appreciate that I am not involved in those conversations but from talking with the managers involved, and with some consultants who are involved in trying to encourage colleagues, one would get every flavour of answer. Significant efforts are made, which I appreciate are not good enough, to support, cajole or force the individual consultants into actually completing the task. So far we have not been successful in that effort.

Who is paying the consultants?

Mr. Stephen Mulvany

The hospital, because the HSE is responsible for the funding.

So the HSE is the boss?

Mr. Stephen Mulvany

Exactly.

Mr. Seamus McCarthy

I wish to point out that the consultant's fee being recovered from the insurance company is actually going directly to the consultant, it does not go through the hospital. When Mr. Mulvany said that the HSE pays the consultant he is referring to the consultant's salary. The actual consultant's fee that is being invoiced goes directly from the insurance company to the consultant.

Mr. Stephen Mulvany

It is of no interest to the HSE other than we are not able to get our statutory charge until we assist the consultant to make the claim to get that amount.

Mr. Seamus McCarthy

They are locked together.

Yes, but the overriding concern is that there is a rule for some of these consultants and another rule for others. Some rules will work and others will not.

Mr. Stephen Mulvany

There is one set of rules, but there are different levels of compliance. While the HSE would not use or suggest disciplinary action as the first measure, it clearly has to be considered at some point if we cannot get compliance.

I do not wish to be flippant but at what point does one say, "Now wait a second"?

Mr. Stephen Mulvany

Without being flippant in return, it is a significant step to take in terms of an overall clinical service in going down that route. I said it should not be done in some cases.

Are you afraid of them?

Mr. Stephen Mulvany

Personally, absolutely not. To me they are employees; they are important but employees nonetheless. A different culture has been around for a number of years around consultants and that is changing over time. Their contract has changed over time. In some hospitals, no doubt, the culture remains. Consultants are, in some cases, rightly revered. In some cases there may be genuine reasons they have not been able to attend to this fully. There are a number of individuals who we are either going to be able to reach out to, support and realise change or we may have to consider alternative strategies. We must remember, of course, that the notion in the first place that the statutory charge is dependent on having to help a consultant collect his or her private fees is in some ways perhaps questionable in itself. It is the task we have been given.

It is also a cost that the taxpayer is bearing.

Mr. Stephen Mulvany

Absolutely.

It is chasing money that the taxpayer is entitled to but some individual has decided not to play ball and sign off. He is causing the taxpayer further pain. He may be satisfying the pain of one taxpayer on his table but he is causing much pain for other taxpayers, who must cough up more money to keep the system going. What is the plan, Mr. O'Brien?

Mr. Tony O'Brien

Your point is well made and you are encouraging us to be even more robust on this than we have been. We will certainly take that away and discuss it with our colleagues in the Department of Health to see what the best next step should be. We will report to the committee on that.

The five biggest examples in annex A, relating to figures of approximately €25 million, €18 million, €29 million-----

Mr. Seamus McCarthy

That is the value of debt outstanding.

Is it not possible that with the bigger ones, we could get a specialised group to assist in clearing the backlog, albeit with a cost to the taxpayer? I know the HSE has been trying to do this directly in the hospital. Is there not some arrangement that can be made with individual consultants on the big end of the scale? The HSE could go to the hospital, take out the files and work through them so as to get signed off on the process.

Mr. Stephen Mulvany

That can be done. One of the recommendations from the Comptroller and Auditor General, if I remember correctly, is to identify the differences between sites doing it well and those which are not. We are going to engage in that process to try to examine-----

Never mind who is doing it well or who is doing it badly. Could we focus just on the examples that are doing it badly, perhaps the top five? They are making a mess of this and have been there for years. A crack team could be sent in to clean out the files, sort them, sign them and get them back so money can be collected. Is that not a reasonable action?

Mr. Tony O'Brien

It sounds like a very reasonable suggestion.

"Kick ass", I think, is what they would say.

Mr. Tony O'Brien

That is a phrase that would be in conformity with our goals.

I am sure the consultants would understand that.

Mr. Tony O'Brien

Yes.

Otherwise, name them.

Mr. Tony O'Brien

In the past I have wanted to publish a table and I have run into data protection issues in that regard. All the other parts of the suggestion are doable.

We have fleshed out the issue. The witnesses have said they would come back to set out some sort of plan as to how this will be fixed. If a nurse did not sign off on a chart for three years, there would be a problem. Consultants are an extremely vital cog of the health service but that is what they are. There are many other moving parts and I doubt other professionals in the area would get away with some of what we have discussed.

Mr. Stephen Mulvany

I would not disagree with the Deputy.

Mr. Tony O'Brien

To clarify, this is not about signing off on charts. This is a parallel process and they sign off charts.

I know but it is part of their job.

Mr. Tony O'Brien

Yes. The Deputy's fundamental point is correct.

Mr. Seamus McCarthy

I will comment on the growth in query claims. In general in an invoicing system where queries arise, it is a shared problem, as a query should not be raised unless the information is defective. When we examined a sample, we identified that the types of queries coming back from insurance companies related to the basis for the accommodation charge but there were also queries that needed to be addressed by the consultants. There would be queries justifying length of stay, provision of medical notes as to whether a patient had a pre-existing condition or why particular treatments were given or other information relating to the consultant. Apart from a kicking ass response, we can deconstruct the problem and say that if we are not getting the correct information on the claim at the beginning, it will result in a query. By sharing the lessons from places where they are getting good-quality accurate information on the invoice at the beginning, there will be fewer grounds for raising queries.

One would expect to see some improvement in 2015 as the system has bedded down from 2014 but that remains to be seen. There needs to be a more analytic approach to solving the problem than just getting in and-----

But that helps. The unspeakable does help.

Mr. Seamus McCarthy

It is no harm.

Mr. Stephen Mulvany

I agree.

I welcome Mr. O'Brien and his colleagues and thank them for staying with us this morning. The area I wish to speak of is the internal financial control system, and we have been talking about that for many years at this stage. Representatives of the Department of Health were here two weeks ago and I was informed that it will take at least another five years. I also asked about skill sets in the Department. I was told there are four accountants, three data analysts and two statisticians. The previous question related to collecting money and managing data, which seems to be a big problem, but where are we in getting an integrated system that is robust and can share information? We have spoken about consultants signing off forms but could this be done online or in a process that integrates technology to make it easier for users? My colleagues may not be very complimentary to some of our consultants but we need them and there is a shortage. Would it not be a better approach to make it easier for them to do their job? I agree with the Chairman that perhaps we need to outsource the existing backlog and get it cleared up as soon as possible. I am sure there are some very good accountancy firms around the country that would be more than happy to help. There are also companies looking after outsourced data management.

What percentage of the €13.5 billion budget is going to innovation and putting in place new processes to help doctors and nurses on the ground? I am a regular user of the health service who goes in every month and I still see a very large brown file with all the information in it that nobody could read in one sitting. There are many mistakes in it and I am asked the same questions by four different people. This is so far away from conversations about lean management, processes and technology. This is probably one of the most fundamental issues in the system but I am not a clinician, so I cannot speak about it from that perspective. I comment from the perspective of managing processes, building the capabilities of a team and enabling people to give accurate information on time. I presume that would help with decision-making processes in how we can go further and ensuring that the Health Service Executive corporate plan can be implemented by its 2017 target. I cannot see that happening without technology supporting all the services provided by the HSE.

Mr. Stephen Mulvany

With regard to making the process easier for consultants, the unfortunate reality is we have made it easier. Consultants can sign their forms online and we have implemented a system, and although it is not yet integrated with every billing system, it has been integrated with the vast majority of the necessary systems in hospitals. That has led to improvements in the administrative side, which the Deputy mentioned. It also means that, largely, we do not have paper around the overall claims process. Consultants may sign online and there are billing companies that consultants can and do use to do practically everything but the signature. Unfortunately, the issue is not about making it much easier for the consultants - it may the case with some examples - it is largely about attitude and culture in getting the form signed. We have done all that.

We completely agree with the Deputy on the need for an integrated financial and procurement system. We are making progress on that. The Deputy may take it that there is nobody more frustrated than the chief financial officer on this team by not having an integrated financial and procurement system-----

May I flesh that out before we go further? When the witness says the HSE is making progress, is it being managed internally?

Mr. Stephen Mulvany

We are at the stage where we have three key actions around our finance systems. If one thinks about it, any financial system the HSE is going to have which we also want to use for our bigger funded agencies will have about 10,000 users; therefore, it is a large undertaking. If one takes three key work streams, in the next year we see ourselves as being able to upgrade significantly what we call our business intelligence reporting tools. As the Deputy can imagine, there are many old legal systems, from which we are drawing information using what is quite an old reporting tool. We intend in the next year to upgrade it when we will have greater and quicker access to some of our data. At the same time, we are making progress in seeking approval around the single large national and financial procurement system. We will spend the next year, once we get approval, going through the procurement process which is obviously necessary for an investment of this scale. Projects of this nature need to be approved by the Office of the Government Chief Information Officer. If they are large enough, as this one is, one requires what is called a peer review by an appointed panel. We had the business case meeting with it last week and would say it was quite positive. We are hopeful of receiving approval in the next while from what is, in effect, the Department of Public Expenditure and Reform to actually go to tender for the new national system. We are already working with the Office of Government Procurement on the preliminary stages. As I said, the tendering process, unfortunately, will take most of a year to complete.

At the same time - this is the third piece - we are seeking to do the following. We have a number of quite old legacy systems, particularly from the five former health boards across the western seaboard, the south and south east. Our intent in the next couple of years, using our existing frameworks, is to upgrade these systems to make them safe and at least have a single platform. That will take us about two years to complete, until the end of 2017 or early 2018. We will then move, subject to necessary approval and the allocation of funding, to a single national financial system. This will take in the order of five years to complete. I think the Secretary General mentioned a period of five to eight years. We hope to be in and out in around five years and will do so in less time, if we can. What we are trying to demonstrate is that we will see improvements in the next year when we improve the reporting system. We will see greater safety in stabilising the existing five legal systems along the western seaboard and in the southern part of the country. At the same time we hope that by the end of next year we will have completed the procurement process and selected the overall platform to be used to enable us to drive on to a single integrated national financial system. It is a painful process; it has been difficult in the past few years, but our sense now is that we are very well connected with colleagues in the Department of Health and the Department of Public Expenditure and Reform and that there is a governance process stretching to all three. I am satisfied that we will get approval and move forward.

May I ask Mr. Mulvany about his team?

Mr. Stephen Mulvany

Yes.

Is it being managed internally?

Mr. Stephen Mulvany

It is being managed internally, but, obviously, we will be using and have used external support. It is being managed by a member of my team, Mr. Paddy McDonald. There is also a significant input by our head of ICT and our procurement people who are led by Mr. Swords. There is also external support. Obviously, governance involves colleagues from the Department of Health, one of whom is present, Mr. Greg Dempsey.

Mr. Stephen Mulvany

The overall reform board which is chaired by the director general incudes the Secretary General-----

How many people in Mr. Mulvany's internal departmental team are working on this process? What is the skillset to deliver this service?

Mr. Stephen Mulvany

Currently.

Mr. Stephen Mulvany

We have assigned six general managers.

Mr. Stephen Mulvany

They are all senior accountants and have been assigned to the various key work streams on the finance side.

Mr. Mulvany has said they are senior accountants. Are they qualified accountants?

Mr. Stephen Mulvany

They are all qualified accountants.

Mr. Stephen Mulvany

Whenever I make reference to accountants, they are qualified.

Yes. I asked just to have clarity.

Mr. Stephen Mulvany

We also have an assistant national director on the procurement side who is engaged in identifying the procurement division's requirements. We are building out these teams. Our sense is-----

There are seven people working on the project. That is how many I have counted so far.

Mr. Stephen Mulvany

We have seven at senior level.

Mr. Stephen Mulvany

We will need to add more staff as we move through the approval process - through procurement and implementation. At its height, by the time we are stabilising our existing systems, we will have, as my colleague Mr. Paddy McDonald can confirm, at least 30 or 40 people internally on the finance side.

Mr. Paddy McDonald

At least.

Mr. Stephen Mulvany

Obviously, there is a funding issue which we are also pursuing as this is a significant project. As I said, while we will have our own people involved, we will also be taking the best advice available from external support.

I have a question for the Department of Public Expenditure and Reform. Would it not be more appropriate to look at outsourcing that piece of work to have the skillsets needed to make the actual-----

Mr. Stephen Mulvany

Just to be clear, there are parts which will involve work such as configuring systems and technical pieces. We will outsource a large part of that work. We will also seek some technical accounting and change management support. Fundamentally, our accountants are very good and understand our business well.

I am not concerned about their being good but their lack of numbers.

Mr. Stephen Mulvany

We hear that, but the sense is that one cannot undertake a project of this scale by simply outsourcing all of it, as one would be doomed to fail and it would cost much more. We have to have some of our best people involved in the project and, where we can, try to backfill.

Does the HSE have a budgetary issue in relation to the number of staff required to make this happen?

Mr. Stephen Mulvany

We have been assured by the reform board which includes members from the Department of Public Expenditure and Reform that the necessary funding, subject to OGCIO approval, will be made available. This is seen as a priority project.

May I ask a question about the data management of patient files?

Mr. Tony O'Brien

I shall respond to the Deputy's question. Her basic point is absolutely correct. When it comes to health records, we are effectively operating an industrial age system in a digital age.

Mr. Tony O'Brien

As a result of the Government's policy decision on e-health, we have appointed our first chief information officer, Mr. Richard Corbridge, who I am very pleased to be able to steal from the National Health Service. He is leading on a range of projects which include the roll-out of the individual health identifier which is now governed by legislation. Much of the preparatory work has been done. There is a process in place to check its robustness before it goes live.

The national children's hospital will be the exemplar project. It has been designed as a paperless hospital. We will be testing all of the relevant systems we would wish to use on a national basis. We are also identifying a number of major information systems. For example, our laboratory information system has completed the procurement system.

Mr. Stephen Mulvany

The contract has been signed.

Mr. Tony O'Brien

Our NIMIS system, the national integrated medical imaging system, is being rolled out nationally and will be complete by 2019 or thereabouts.

Mr. Stephen Mulvany

I think earlier.

Mr. Tony O'Brien

Before then.

Mr. Stephen Mulvany

There are only a very small number of hospitals not included in the medical imaging system.

Mr. Tony O'Brien

A number of other systems such as patient administration systems in hospitals are being upgraded incrementally, but, unfortunately, this takes time and a very significant investment. For a long period the available resources for investment in ICT were well below international standards for the health system.

Mr. Tony O'Brien

We saw a significant increase last year and expect this to be sustained into the coming year. What we are focusing on is not big bang projects but individual modular projects which can be joined in order that over time we will move progressively to a much more digitalised health care environment where one will not see those very thick files.

I look forward to it. What is the timescale involved?

Mr. Tony O'Brien

I think we are looking at completion by 2025 based on the investment requirement which is not just cash. Clearly, what we do not want to do is digitalise existing processes. What we need to do is move to new processes. The new national children's hospital will be the test-bed.

Could it be done faster with greater investment? I personally think it is the most important part of the health service if we want to support nurses, doctors and, ultimately, patients.

Mr. Tony O'Brien

I agree that it would be desirable to do it faster, but experience elsewhere suggests trying to do it in a shorter timeframe than ten years, even with unlimited resources, is risky. Incremental modular development and deployment is considered to be the best way to go.

Has the HSE matched it with an appropriate culture of change management?

Mr. Tony O'Brien

Yes, that has to be done. Each project such as the LIMS or the NIMIS has been part of a significant change management process for implementation on a site by site basis.

Will the HSE manage the change management process or outsource it?

Mr. Tony O'Brien

We have a system reform group which is seeking to engage in what I call air traffic control for all of our change management process.

That is significantly supported by external expertise, that is, people with significant industrial expertise in change processes and project management which is one of the key strengths that we need. Obviously, we are making changes on a ship that is still at sea.

I appreciate it is complex but I am glad to hear it. We all will benefit from that in the long term. Going back to less exciting matters perhaps, I want to talk about the section 39 agencies. We are still hearing that they are not being funded. They are still having to deliver staff increments, based on various legislation around that, but their budgets are not matching it.

Mr. Tony O'Brien

The entire health system is not funded for its health increments.

I appreciate that.

Mr. Tony O'Brien

In other words, the public sector-wide policy, not just for health, is that the cost of increments must be met from within and we do not have a supplemental budget, as it were, with which we could provide additional resources to either a statutory or voluntary part of the health system. That is a common issue for everyone involved in publicly-funded service.

Is it fair that we have section 39 agencies which are trying to provide a service that is covered by employment law which means that they have to give increments, which their budgets do not allow for, and yet we are asking them to provide increased services for those with disability? It is really tough and, ultimately, it is the patients who are suffering.

Mr. Tony O'Brien

It is probably not fair but it is no more unfair for the voluntary sector than for the statutory sector, if I can put it that way. If we were funded in line with increments or, as we tend to call them, pay cost pressures, obviously, we would be in a position to fund them accordingly but there is no part of the public service that is funded on that basis.

There are significant problems in this regard because such agencies cannot sustain their staff. The majority of those working in these services are not high earners and the increments are a percentage of their earnings. I am hearing about a lot of issues from parents of children with disability or adults with disability. There was supposed to be greater integration of services, such as administration, that could support the delivery of the services and take out some of the cost. I wonder how that is progressing.

Mr. Stephen Mulvany

On the general point, we should reiterate that section 39 agencies and their staff are not staff of the HSE-----

I am aware of that.

Mr. Stephen Mulvany

-----and their staff, unlike those of the section 38 agencies which tend to be but are not always the larger agencies, are not considered to be public servants. As the director general has said, we do not receive funding for staff increments, albeit it is an additional cost we have to pay out every year in respect of our own staff and the section 38 staff. That does not mean we do not seek that funding. Every year we certainly do, but we do not get that funding.

There is significant work - a paper has been submitted - ongoing in the social care division under the umbrella of implementing the value for money report which is seeking to bring greater transparency and comparability between the resource going into the disability side, particularly intellectual disabilities, and the quality and volume of services that is being delivered. Despite the challenges of the implementation, as the director general said, of very necessary recommendations from various HIQA inspections, we are still progressing that. That process of service improvement is in some cases enabling us to mitigate those costs of having to resource what is coming out of those HIQA inspections, even though we are not resourced for what is coming out of them.

I assume the vision for change in the disability sector, where the users would be able to choose where they spend their money, will have an effect as well.

Mr. Stephen Mulvany

A Vision for Change is on the mental health side-----

Mr. Stephen Mulvany

-----but there is policy developmental work, I understand, under way in the Department, around personalising supports for individuals. It is not an area without its own complexities and difficult international experiences as to what happens in some cases, but it certainly is, I understand, on the policy table at the moment.

My last question is about the budget in the home help area, particularly in Cork. I am getting parochial now. We are constantly being told that there is no budget to increase home help hours. I am not saying home help hours have been decreased because they have not been but the demand is increasing. It is a concern on the ground. As we all know, the home help service does vital work. It keeps people out of hospital for longer and keeps them in their own homes. I wonder would it be possible for people to get a certain number of home help hours and then be able to pay - the HSE not an agency - towards a certain number of home hours. The user availing of home help from the HSE would prefer to have the same person or persons coming in - there might be three home helps coming in to a particular house - and ask for an extra five hours but pay incrementally so much towards it, depending on the amount that was needed.

Mr. Stephen Mulvany

The HSE would fully accept the fact that, even if the budget for home help stays exactly the same, as the population grows, effectively, the jam is being spread thinner and, therefore, from the point of view of the individual patient, his or her capacity to access that service is diminishing. The reality is it has not been possible to invest what would be needed over the past ten years or so in home help and we accept that it is absolutely an essential part of the service for many reasons. It is not that we do not seek that resource. It is that resource is not available.

I appreciate that. Obviously, we have all been under budgetary constraints due to the economy, etc. Looking at it from an innovative point of view, this is a problem that will increase as ever more people are ageing and they need support in their homes. A lot of people would be happy to contribute. While they might get a certain amount of hours supported by the HSE or by the taxpayer, they would be happy to pay a contribution towards a certain amount of hours and then maybe a higher contribution if there was more needed.

Mr. Stephen Mulvany

There is certain merit in that. It is something that has happened in the past, and we have to be careful that we do not get into arrangements where individuals are, in effect, being charged or voluntary contributions are being sought which, from the perspective of the individual and his or her family, may not appear to be voluntary. There are plenty of reputable external providers and third party providers of home care services which individuals and families can access. We just have to be careful that there is a level of clarity and separation, so that it is not confused with our service and that the individuals are not losing out. Definitely, we can provide a certain amount.

I appreciate that and I know that such agencies are available. My concern, obviously, is that they are three or four times more expensive and people cannot afford them. From the point of view of continuity of service for the elderly person concerned, he or she might have, for example, an hour's home help. The elderly person might have two or three different individuals providing that who are being paid for by the HSE and might like to increase that by an hour a day with the same people providing the home help of those two or three in the pool rather than going externally to an agency, which has no continuous service and where one could have a different person in every day.

Mr. Tony O'Brien

The Deputy's point has merit. The problem for us would be that even if it were considered desirable for us to allow supplementary purchase of our own services, there would be no legal basis for us to levy the charge.

That is a legislative issue.

Mr. Tony O'Brien

I suspect it would be. I think that our levying of any such charge would be unlawful and open to challenge. The Deputy suggested private providers might be of a quantum of three or four times what it costs us to provide but it is not of that order. It is of a lower order of magnitude.

I thank the officials.

Deputies Dowds and Sean Fleming and I have some questions to ask but because Mr. O'Brien has been here since 10.30 a.m., I suggest there be a break until 2 p.m. or so for a cup of tea-----

Mr. Tony O'Brien

That is a kind gesture.

-----and then we will resume for possibly an hour. Is that agreed? Agreed.

Sitting suspended at 1.49 p.m. and resumed at 2.14 p.m.

We will resume in public session.

I will conclude by putting a statement on the record in respect of the conversation earlier regarding Mr. O'Brien attending conferences abroad and so on. In regard to the suggestion that he should not be doing so, I take a different view. It is important that Mr. O'Brien, officials of the HSE and various Departments attend conferences abroad to hear and learn about what is going on in the rest of the world in the context of changes that might be introduced here. However, I suggest to Mr. O'Brien that a policy be put in place to provide that payment for attendance at such conferences be made by the health service and that there is a need to ensure clarity around all the issues arising in that regard. As I said, it is important that Mr. O'Brien and his officials attend such conferences in order to learn about what is happening in other countries from the point of view of discovering what might be implemented in the health service here.

I thank Mr. O'Brien and his officials for attending. I wish to make two or three points. In April, Mr. O'Brien outlined his serious concerns regarding the operation of St. Vincent's University Hospital. Is he in a position to comment on whether those concerns have been addressed or is this an ongoing issue?

Mr. Tony O'Brien

St. Vincent's Healthcare Group is co-operating with a forensic audit - commissioned by the HSE internal audit division but being carried out by an external firm of auditors - into the relationships between the private and public parts of the campus. That audit is near completion. Obviously, it is significant that the hospital is co-operating with that process. I welcome that and I look forward to receiving the report. It would be premature for me to say any more on the matter until that report has been completed.

When is the report expected to be completed?

Mr. Tony O'Brien

I expect that the auditors will complete their work in the next few weeks.

When will the report be published?

Mr. Tony O'Brien

When I have had an opportunity to read and consider the report - and provided there is nothing in it that needs to be redacted - it can be provided to the committee at an early stage. The report could, perhaps, come into the public domain via that route.

The public will, I am sure, be interested in its findings. Is Mr. O'Brien in a position to comment on whether the HSE is investigating any other section 38 agencies?

Mr. Tony O'Brien

There are some outstanding issues being pursued - again, on a co-operative basis - with one or two hospitals. I do not think it would be particularly helpful for me to name them at this point. On the outstanding or nearing completion investigations in relation to the original section 38 audit which relates to remuneration, as the committee will be aware we sought policy guidance in this regard from other relevant Departments. That process was only concluded in the early part of September, with a number of decisions relating to settling the salaries of various posts in section 38 agencies for new entrants, which issue has recently been in the public domain. We are also currently working our way through a process of considering the terms and conditions individual post holders - whose salaries were the subject of those audits and that were outside of the norms at that time - to see if they could benefit from red-circling regularisation. The kind of conditions to which I refer include, for example, whether the arrangements were made prior to the passage of the FEMPI legislation in 2010, whether the allowance was subject to the FEMPI reductions and whether the relevant duties are still being performed, etc. We are now, on a case-by-case basis establishing that all the criteria are met before red-circling is granted.

Is Mr. O'Brien in a position to say whether he is satisfied with the overall compliance of section 38 agencies in terms of public sector pay policy?

Mr. Tony O'Brien

What I can say is that the landscape is vastly different from what it was when we carried out the first audit and that there has been very substantial change in this area. We have also put in place a new compliance process.

Does the phrase "substantial change" mean that these agencies are moving towards lining up with public pay policy?

Mr. Tony O'Brien

Yes. The final part of the process, which is a technical exercise, will satisfy the criteria set down for red-circling of various posts.

What does "red-circling" mean?

Mr. Tony O'Brien

It means that where certain conditions are met, the post holder in question will be authorised to retain the level of pay granted to him or her under a contract of employment only for as long as they hold that post. A number of conditions must be met.

Presumably, that is because of legal obligations.

Mr. Tony O'Brien

Yes.

On the issue of payment to suppliers of drugs, I note from the report that there was an increase in spend from €315 million to €468 million between 2013 and 2014.

Can the HSE explain that? In replying to me, can the deputation refer to the progress of the HSE in terms of trying to reduce the spend on drugs? It is also a Government aim to reduce the spend on drugs, given that we are charged a great deal more than many of our associate countries in the European Union.

Mr. Tony O'Brien

I will ask Mr. Hennessy to respond to both parts, the high-technology part and the more general point.

Mr. John Hennessy

The increase is down to two things. First, it is a question of volume. The volume of drugs and medicines in the high-technology area has increased. In addition, as new drugs and products have come on-stream they have attracted high prices. The committee will see from the report that the increases relate entirely to product increases. The dispensing fee portion for pharmacies has remained static throughout the entire period.

Is that because those drugs have only come on the market or is it because we have a little more flexibility now in terms of spend on health and other areas?

Mr. John Hennessy

I am unsure it is related to flexibility. We have seen examples in the past 12 months of new products coming on the market at very high prices. All of these were in the high-technology area. There is a strong element of the pharmaceutical sector extracting a high price for new products as they are developed.

The second part of the Deputy's question related to reductions in cost. Significant reductions have been achieved. We have had three successful agreements with the Irish Pharmaceutical Healthcare Association, IPHA, and the manufacturers. Since 2006, a total of €1.5 billion in accumulated savings have been achieved. A current agreement is still running, pending the conclusion of a successor agreement.

The big success story has been in the area of reference pricing. This was the beneficiary of new legislation in 2013. Most people are seeing the evidence in their routine prescriptions.

Can Mr. Hennessy give me examples of the drugs for which we have seen significant decreases?

Mr. John Hennessy

The big reductions have been in the more commonly prescribed drugs and medicines for blood pressure and cholesterol such as statins, etc. Most people have seen their monthly prescription charges reduced to a quarter of what they were only two or three years ago. The Exchequer is getting the benefit under the GMS and drugs payment schemes. Moreover, patients outside of those schemes are getting the benefit in their pockets as well.

Does Mr. Hennessy foresee work to reduce further the cost of other drugs as well?

Mr. John Hennessy

I do. This is an expanding area. The reference price drugs, the more commonly prescribed drugs which I have referred to, are being revisited on an annual basis to bring down the price even further. The objective is to bring Ireland into line with the lowest-cost countries throughout the European Union. That process is continuing.

How long will that take?

Mr. John Hennessy

We had some extensive discussions on the matter earlier this year with the Joint Oireachtas Committee on Health and Children, a sister committee to this committee. Representatives of the pharmaceutical sector were before that committee and complained bitterly at the time at the reductions the sector has experienced. For me, that is a sign of success on our side, in one respect. We are operating within the average basket in respect of our counterparts in the EU at the moment. Under the next agreement we will examine the matter again to see what further reductions can be achieved.

Why have we been so slow to get to this stage? By comparison with other countries we have been very slow to go down this track.

Mr. John Hennessy

There are two reasons. First, we came late to the process.

Mr. John Hennessy

For example, the United Kingdom and Spain had been further ahead by comparison with us. I do not have a good reason for that, but we certainly-----

Is that simply lethargy in a bureaucracy?

Mr. John Hennessy

I am unsure about that.

Mr. Tony O'Brien

We have only had the legislative basis for reference pricing since 2013, and we have been pursuing it avidly since then. We are already into our third round of reference pricing.

Mr. O'Brien is effectively saying that beforehand, the Government did not put the pressure on to do anything about it. Is that correct?

Mr. John Hennessy

Interchangeability is the key, in the sense of the ability to switch to generic products versus branded products. The legislation appeared in 2013 to enable that process and since then the process has accelerated significantly. The overall figure took us from approximately 20% to 30% of generic usage in Ireland to upwards of 80% or 90%, especially for high-volume products.

Another area where progress will be found relates to high-technology medicines, the point under discussion today. The implementation of the Comptroller and Auditor General's report will help us to secure some price reductions in that area. However, that is the branded area, which is more difficult.

I have a general question. What effort has been made in hospitals to prevent waste of supplies and equipment and so on? When I discuss this with nurses working in hospitals, they regularly refer to packages being opened but only one or two of the contents being used, while the rest are effectively thrown out in the end. I am unsure to what extent that is a major problem but it strikes me from the comments I have heard that there is considerable waste in that regard. Can anything be done to improve that situation?

Mr. John Swords

The answer is "Yes". There is wastage in hospitals. We have been addressing this in recent years. At the national distribution centre we have introduce point-of-use management. The idea is that procurement people manage at the point of use, not the clinicians. Clinicians are busy trying to get back to their patients and so on and we have taken that workload away from them. We have introduced Kanban, a point-of-use management system. This involves the management of stock at the point of use and it reduces the wastage. In other words, we introduce materials requirement planning into the ward and there is assessment of the stock required at ward level on an ongoing basis rather than on a weekly or fortnightly basis. Even if a ward was to reduce or change its function in some way, we can amend the arrangements to bring in the required stock. This is being received well by clinicians. We have been able to measure it in Tullamore. The nurses there gave us the facts. Between four and six hours per week per ward of clinical time was transferred back to front-line activity, and that is only in respect of the time of clinicians. The actual reduction of inventory that we have seen ranges between 30% and 45%. That is where we get our savings from. This is monitored on a daily basis with clinicians and active management. We are bringing that forward.

We reckon there are approximately 600 locations where point-of-use management can be introduced throughout the HSE. At this stage, 50% of that target is already completed. As we roll the national distribution centre operation into full implementation we will be taking care of the other 300 locations.

Is there statistical evidence of improvement?

Mr. John Swords

Yes, absolutely. We have the statistical evidence on the reduction of inventory in the first instance. There is a culture change as well because people are habitual by nature. Work is organised in three shifts and there may have been three locations of stockholding. We have reduced this to one, particularly in theatre, which is one of the high-spend areas. We know that 7% is the industrial norm and we are meeting that at a minimum. This is significant given the stockholding arrangements of any major hospital.

There is also the question of obsolete stock, which is where Deputy Dowds may be referencing or going ahead to. On average, this is 2% or 3% throughout the industry.

That is removed because one does not have obsolete stock as one does the rotation. All the clinician has to do in the instance of the Kanban on the point of use is to turn the barcode, as one sees in supermarkets. One often sees "out of stock" or whatever it might be. We come along and we wand it. In particular with the NDC, and at this point in time in particular to Tullamore, we wand it, it goes directly onto the system, the requisition is created, the picking list is created, it is put onto voice, it is right down through the system, it is returned to the hospital and the efficiencies, even on the warehouse floor, are 20% extra productivity because of the introduction of the technology that we brought into place.

My concern in asking this question is to have as much money available for front-line health services as possible. No matter how wealthy this country becomes we will never have enough money for health, so it is important that it is used wisely and to best effect for patients.

Mr. John Swords

Absolutely, and that is best use of resources.

Mr. John Hennessy

Can I mention another matter? The medicines management programme was the second part of that process of trying to continue to get the further reductions in price that Professor Michael Barry leads out on. That is a structured programme of education and guidance for prescribers, particularly general practitioners, in regard to preferred products and preferred prescribing. That process is ongoing as well.

Mr. O'Brien, I wish to raise something that came to the committee in correspondence. There are a number of issues. It was written to us in March 2014 but because of the committee's workload, it was not really aired. I have asked that a copy be sent to you.

Mr. Tony O'Brien

Yes, I received it yesterday.

I do not expect you to have the response since you only received it yesterday, but I wish to highlight the fact that the Carers Association and a parents group for children with disabilities have asked the committee to investigate what they believe to be the insufficient funding and poor management of existing resources for vital therapies and services for children with disabilities. They point to the inconsistencies and discretionary budget allocations across the different HSE regions. As a result of that, they suffer from a poor consistency in the delivery of services. In fact, in a border constituency such as Carlow-Kilkenny with its Laois border at Graiguecullen beside Carlow, there are often turf disputes over how services are delivered on the Laois side and on the Carlow side, depending on where one lives. Deputy Sean Fleming has encountered this as well.

I am an expert on this.

Regardless of the efforts that are made through the HSE, the answer is always, "Yes, you can get that service in the other administrative area [which might be in the Carlow side] but there will be a funding issue". That is despite the fact that the funding issue has already been addressed by virtue of the fact that the patient or client is receiving the services within the HSE area but across the border. These issues appear to be easy to resolve but they have been around for as long as I have been dealing with them. Will you kindly address that in the context of the letter you received?

The other fact the groups point to is the gaps in early assessment and the waiting times of more than one year for vital services such as speech and language therapy, occupational therapy, physiotherapy and psychology. These are placing children with disabilities at risk of regression and denying them the chance to reach their full potential. The groups go on to point to the figures they recently obtained from the HSE. There are 1,940 children waiting in excess of one year for speech and language assessment. A further 2,983 have already been assessed as requiring the service but they are on the waiting list for at least a year without receiving the treatment. In addition, 2,090 children are waiting at least 12 months for an OT service, which is essential to assist them in accomplishing everyday tasks such as eating, dressing or writing, and 7,301 people, including children, are waiting for more than one year to receive physiotherapy. Eleven local health areas remain without an early intervention team.

They are drawing attention to this and have asked the Committee of Public Accounts to get from the HSE, in a clear, legible format, the total allocated budget in each of the areas of speech and language therapy, occupational therapy, physiotherapy and psychology, a breakdown by each of the four HSE areas for children with disabilities for each year from January 2011 up to now and to deal with the actual spend, that is, what the budget was, what was actually spent and a breakdown within the areas. You should be able to get that for us.

They include in their submission a letter from a parent, which explains it quite well. They talk about the services that are available for children aged 16 to 18. Amanda is a seven year old girl with Down's syndrome. She has been diagnosed with moderate intellectual disability, moderate visual impairment and she has an ongoing cardiac condition. She has been under the services of St. Catherine's Association in Wicklow since her birth. However, she was under the care of the HSE in a pilot programme at the time the letter was written. At that time there was no speech and language therapy and no occupational therapy being offered. When she had initial contact with the multi-disciplinary team, it said that there would be one therapy session per term. The day the parent attended to have that explained to her, without the child, it was considered to be one of the therapy sessions for that year. The parent has another child of four years of age, typically developed with slight problems of pronunciation and so forth. As that child was in a different age group she got eight weeks of one-to-one treatment. However, the child that required it most got none.

That case, without highlighting any more of it, spells out the dilemma in which that family and the groups find themselves. As it involves services, cost of services and so forth, I ask, on their behalf, that the time would be taken by somebody to analyse what is said in the submission, what is being delivered on the ground and to give the figures associated with each and every request in it. That is not unreasonable. I could table a string of parliamentary questions but that is not what is required here. Unfortunately for the groups concerned, we did not get the opportunity to advise them of this meeting or the fact that we were raising it here, but I ask you to deal with it.

Mr. Tony O'Brien

We will be happy to do that. I appreciate the fact that you shared a copy of it with me yesterday. I had an opportunity to read it, but not to engage with it meaningfully at this stage. We will certainly carry out the analysis requested there and get back to you with it.

Thank you. My other question is for Mr. Mulvany. You spoke about the next year, which I presume is 2016, and the upgrade and building intelligence tools in terms of the IT structures, the single financial system, the business case and so forth. Will that happen in the course of 2016?

Mr. Stephen Mulvany

In the course of 2016 we will, first, upgrade our business intelligence system, the reporting system that drags data from the systems we currently have. Second, we will seek to start work on one of our old five legacy systems, probably in the west to try and stabilise that because they are very old. Third, we will go through the procurement process for the long-term new national financial system, which we are obliged to do to determine the software platform for that. It is those three.

You will be going through the process. You will not be going to procurement. When will this peer review take place?

Mr. Stephen Mulvany

The peer review business case meeting took place last week so if we get the necessary approvals, they will appear. We will communicate with the Office of the Government Chief Information Officer. We would hope that in November, but it is a matter for the Office of the Government Chief Information Officer, we will get approval to go to procurement. We will spend some time going to procurement but our sense is that we will have gone through the procurement process and finished it by about the end of next year, for the main national system.

Presumably, putting it in place then is five years onwards from 2017.

Mr. Stephen Mulvany

I would hope it would not be another five years on top of that one year. We are hoping to get the whole lot done. The Secretary General mentioned a time period of five to eight years so, overall, it is at least a five year period but it will be done as quickly as possible.

What I am asking is when the clock starts ticking on the five years. Is it from 2017 or some time in 2016?

Mr. Stephen Mulvany

I would hope that the clock starts ticking now. The reason there is a five to eight years period until we go to procurement is because we cannot determine what the software platform will be.

Mr. Stephen Mulvany

Depending on which one is selected through the process-----

So it is a guesstimate as to the five years-----

Mr. Stephen Mulvany

It is a guesstimate.

-----but that is reasonable.

The North Meath Communities Development Association has been writing to the committee for quite some time. It relates to a particular project. I believe it went to arbitration in 2004. The arbitration ended in 2008 and there was an award in terms of that arbitration. The arbitration process, as I understand it, is fairly clear. There is only a one day outing on this. A decision is reached. The legislation does not allow for any second guessing of the decision of the arbitrator on that day, therefore, the arbitrator reached the decision and then the Health Service Executive, HSE, entered into correspondence with the arbitrator and asked for clarification. I have read the results of the process of arbitration, and it was fairly clear, yet the HSE is still in dispute with the North Meath Communities Development Association.

Mr. Tony O'Brien

The facts as I understand them, based on the briefing note we shared with the committee in recent days, is that we are in compliance with the arbitrator's decision. I understand that the counter party, the North Meath Communities Development Association, takes a different view but for our part, and obviously I did not know much about this until the query was raised, it appears that we are in full compliance with the arbitrator's decision.

I read the decision and it is fairly clear that the HSE is in compliance with what was said after the decision was made but the decision, according to legislation, which was awarded on 17 September 2008, is expressed to be a final award. If Mr. O'Brien reads the decision of the arbitrator and that final award, that is it, not the clarification that he received. The legislation refers to that very fact that once he or she has made the final award, there is no going back on it but yet the HSE chooses to use, through legal process, this exchange of correspondence, which has now led to the fact that the original intent of the final award, in terms of the arbitration, can be ignored.

Mr. Tony O'Brien

I believe the clarification the Chairman refers to was requested from the arbitrator-----

Exactly.

Mr. Tony O'Brien

-----in order that the meaning was clear and not open to interpretation. Again, I am advised that the HSE has acted in accordance with that clarification.

The clarification Mr. O'Brien received on 12 January 2009 was followed by a letter on 15 January 2009, which deals with the matter again. I ask Mr. O'Brien to look at this, and look at the correspondence, if he has not done so already-----

Mr. Tony O'Brien

I will be happy to do that.

-----because it is an issue I intend to revisit. I will set out the position for members because it is a matter this local group were anxious to sort out and it is clear from what was being done that the clarification sought, and the withdrawal of that three days later by the person writing the letter, differs in ways from the decision of the day, and the legislation states that the decision of the day stands. I ask Mr. O'Brien to examine the circumstances of this again so that we can perhaps have a discussion about it in more detail at a later date.

Mr. Tony O'Brien

Yes. Given that I am not as familiar with the legislation as the Chairman, I will certainly do that.

I am not familiar with that legislation.

Mr. Tony O'Brien

I think the Chairman is slightly more familiar with it than I.

I just had a barrister point it out to me. I am quoting from the information I have received. If Mr. O'Brien would not mind doing that I would be grateful, and at some stage we will come back to it.

Mr. Tony O'Brien

Is that information the Chairman is at liberty to share?

It is. It is here, so we can pass it on to Mr. O'Brien.

Mr. Tony O'Brien

I thank the Chairman.

Mr. O'Brien should know that it is not by way of confrontation. It is to see if we can resolve an issue around an organisation that delivered fantastic services to the local community and is anxious to work with the HSE and get over this particular problem-----

Mr. Tony O'Brien

Sure.

-----which is a problem for Mr. O'Brien and the clients because the service is not being delivered, and a problem for them because their project has come to an end.

Mr. Tony O'Brien

I am happy to look at it in that spirit.

I thank Mr. O'Brien.

The response times to the Committee of Public Accounts is an issue that was raised earlier and I raise it again now because Mr. O'Brien will be coming back to us on a number of issues arising from this meeting. I ask Mr. O'Brien to look at that because in April of this year we raised a number of issues and only late last night we received the response to some of those. Mr. O'Brien might see if those timeframes could be tightened up.

Mr. Tony O'Brien

Certainly.

To go to the small and medium enterprises, SMEs, and the €9 million that is in dispute here, the Comptroller and Auditor General has drawn attention to it in the context of the 2013-2014 report. Is this €9 million compensation being asked for by a group of suppliers because they were paid late?

Mr. Stephen Mulvany

No, it is not. This is compensation which was believed to be due to suppliers in respect of the period from March 2013 to the end of 2014, so it is part of the overall prompt payments legislation. As the Comptroller and Auditor General's report states, we had taken advice on that which, as far as we are concerned, indicated that we were complying with legislation by not automatically paying that compensation payment to the supplier. The Comptroller and Auditor General made us aware of the views of the Attorney General. Obviously, we do not have the Attorney General's advice, nor would it necessarily be appropriate that we would or any questions the Attorney General was asked, but based on the engagement with the Comptroller and Auditor General we provided for that €9 million in our accounts. However, since then we have been reviewing the legal position very carefully. We have asked our legal service department to go through all the legislation back to the original prompt payments legislation, and all of the EU directive legislation, and that advice confirms to us that we are legally compliant. The legislation, in our view, confers upon the supplier an entitlement to obtain both the interest and the compensation. It does not differentiate. Unlike the earlier prompt payments legislation, this legislation is different. In reality, we automatically pay the interest. We do not wait for suppliers to seek it. We automatically pay it, which may well be beyond the legal requirement, but we do that and do not intent to change doing that. We accept the principle of seeking to avoid cash liquidity to the small and medium enterprise sector in particular, and the principle of complying with the legislation.

However, our difficulty with our current systems concerns the notion of transferring €9 million effectively to private suppliers who have an entitlement to seek it but who have not sought it. To us, that is difficult. Having carried out the legal review, which was completed recently, we have shared that with our line Department, which is the Department of Health, and we are also engaging with the Department of Jobs, Enterprise and Innovation, which owns this piece of legislation.

To be clear about this, the legislation states they would be entitled to compensation for late payment, but they have to ask for it.

Mr. Stephen Mulvany

Our interpretation is as the Chairman has set out.

What is the view of the Department of Health on this?

Mr. Greg Dempsey

We received the advice that the HSE developed internally and we are considering it. There is certainly some merit to the argument being made. The fact that the-----

Which argument?

Mr. Greg Dempsey

That the compensation is automatically payable.

By the HSE?

Mr. Greg Dempsey

Yes. The argument on the accrual having been made while suppliers have not actually requested it is compelling as well. We are considering it and we will get back to the HSE.

For the moment, it is a figure in the accounts. The money does not have to be paid out because it has not been demanded. It will just sit there while the legal position is sought. Will the same thing occur in 2015?

Mr. Stephen Mulvany

This is our interpretation. We obviously need to get the relevant line Departments to agree, or otherwise. If they agree with our interpretation, there will not be a 2015 or 2016 issue. We are aware that the Department of Jobs, Enterprise and Innovation is reviewing the current regulations. We would say, as I think it is in the paper, that we pay in approximately 30 days, on average. That means, however, that some suppliers do not get it. However, we pay the interest automatically. That interest is at a rate of 8.05%, which, for most businesses based on the June Central Bank report, exceeds the top level of overdraft being paid. Therefore, we are paying that.

How much will be allowed for in the 2015 accounts in terms of setting a figure aside?

Mr. Stephen Mulvany

That will depend on the outcome of the discussions with the Department of Health and the Department of Jobs, Enterprise and Innovation. Obviously, we will have to engage with the Comptroller and Auditor General.

No. It will depend for the moment on the HSE's interpretation of the Comptroller and Auditor General's interpretation while it waits for the interpretation of the Department of Health. Therefore, some sort of figure will have to be put in place for 2015. Is that not correct? Then it will be prepared for-----

Mr. Stephen Mulvany

I do not know now what the value would be. We know what the value would be if it were payable. How much would be required, if anything, to be accrued is dependent on whether we get acceptance from our line Department that our interpretation of the legislation is accurate.

But there is no figure?

Mr. Stephen Mulvany

I know that if our interpretation is wrong and the money is simply payable on demand automatically, the figure is roughly €5.5 million per year every year, given our current processing time.

At the moment, there is €9 million on the books that may or may not have to be paid out.

Mr. Stephen Mulvany

About a year and a half-----

So, in 2015, probably €5.5 million may be payable.

Mr. Stephen Mulvany

If everything else stayed the same, it would be about €5.5 million.

Is that not something that the Attorney General can sort out, bearing in mind that the HSE is one arm of the State and the Office of the Comptroller and Auditor General and the advice it gets comprise another? Is there not a sensible way of finding a single-----

Mr. Stephen Mulvany

That is why we are engaging with both Departments. I have no doubt those Departments will, where necessary, engage with the Attorney General.

How long does Mr. Dempsey believe it will take?

Mr. Greg Dempsey

The Department's lawyers are looking at the submission from the HSE. I guess that before we go to the Office of the Attorney General, we would have to form our own view on whether there is real merit in the HSE's position. If we considered that there was real merit, then we would go to the Office of the Attorney General while at the same time checking the position of the Department of Jobs, Enterprise and Innovation. In terms of timing, we hope to do that in the next three weeks.

So a decision on the Department's position is pretty imminent, and may be made before Christmas.

Mr. Greg Dempsey

Yes. That is the time limit we are working on.

I have a question in the same vein. Again, it concerns payment from hospitals. It is something I came across and I believe it is unfair, and that is why I am raising it here. I received correspondence in relation to an issue to do with the payment for a bed and breakfast, which is a service that is widely used by hospitals when consultants visit and need to be kept. A lady came to me because she was not paid. The reply from the hospital, St. Luke's, was on 6 May 2015. The lady issued a letter of response clarifying all the points raised by the hospital in relation to the payment on this account. I asked a parliamentary question and followed up with letters on 14 July, 20 August and 22 September. None of those letters has been replied to by the hospital. What I find mean about it is that not only was the bed and breakfast in question not paid when it raised the question of the outstanding invoice based on the belief that it was properly booked because the person in question was familiar with how it is booked and has worked closely with the HSE, the business went in the direction outlined. Therefore, the bed and breakfast lady was penalised twice for raising the query. On top of that, everyone heads to a solicitor. Owing to what is involved here and the facts, which are so clear — I will give the letter and details to the officials — this kind of issue, while it concerns a hospital, the HSE and a consultant, needs to be sorted out more easily.

Mr. Stephen Mulvany

We will look into that one.

What is the cost of the hospital trusts? Where do they stand now, and what are the set-up costs associated with them?

Mr. Tony O'Brien

Obviously the trust is a potential future state. At the moment, the trusts comprise groups. One will be familiar with the broad construct of the groups, I imagine. At the moment, the only additional cost relates to the group management team in place. In other words, there is a group chief executive, group director of nursing, group clinical director and group finance officer. There is also a human resources element. Those posts have all been sanctioned by the Department of Public Expenditure and Reform. We can provide the Chairman with the breakdown of the additional costs related to them. The intention is that, over time, those will be netted off by reductions in other posts within the hospital groups. It is a transitional cost, as it were. There is no particular additional cost but one hospital group embarked on something of a rebranding exercise. Others have not done so and we do not intend that they should, beyond minor adjustments to letterheads as they are renewed in the ordinary course. Therefore, the only additional cost of hospital groups should be the transitional cost of bearing an additional layer of management while the old layer is delayered, as it were. Over time, the intention of the policy is that the rationalisation of resources within hospital groups will provide for both better clinical quality and better use of resources and, therefore, more effective use of resources.

No major costs have been incurred.

Mr. Tony O'Brien

No.

No substantial costs?

Mr. Tony O'Brien

No substantial costs.

When those costs come into play, they will relate to a particular position.

Mr. Tony O'Brien

Yes. Before we went down this road, we engaged some consultants just around the design of management teams and so on. That has been absorbed but that was more than a year ago. However, there are no substantial costs beyond those. I refer to salary costs. In so far as there are boards and chairman in some cases, the positions are currently unremunerated.

In the context of the discussion about consultants we had earlier, how does the HSE monitor consultants, doctors and others in the system who do not clock in? I presume that when a nurse or employee of a hospital or HSE service arrives at work, he or she clocks in, and clocks out on leaving. How does the HSE know what time is spent where in the case of doctors and consultants? Is there a method of logging all of that?

Mr. Tony O'Brien

The primary responsibility for the supervision of consultant work lies with the clinical director.

Each consultant, as part of his or her contract, has what is known as a job plan, which specifies the amount of time he or she will spend in outpatient clinics, in theatre, in transit between locations, on ward rounds and so on. Given the role of the clinical directors, they are in a position to monitor that. By and large, we do not have a problem with consultants doing less than their hours. By and large, they work up to and beyond their contracted hours. There are from time to time individual instances and clinical directors are empowered to deal with that.

The level of the clinical directors is where these hours are all policed and monitored.

Mr. Tony O'Brien

Obviously, the general manager or chief executive of the hospital would have a role as well but the primary supervision of the work of consultant clinicians is delegated to clinical directors.

Can I ask about the budget? You are here as an Accounting Officer.

Mr. Tony O'Brien

For the last time, Chairman.

Yes. What happens next year? What is going to happen? Is it the Accounting Officer for the Department of Health who will deal with all this? Will you be before us as part of that?

Mr. Tony O'Brien

Yes. The legislation that disestablished the HSE Vote and incorporated it within the departmental Vote for this year and beyond established the Secretary General of the Department of Health as the Accounting Officer for the health Vote. This means there will not be a separate appropriation account for the HSE next year. There will be an annual financial statement, AFS, as the Comptroller and Auditor General has said.

The legislation, however, provides that from this year forward, I am an accountable officer as distinct from an Accounting Officer. It specifically provides that part of my function is to attend, and answer questions before, this committee and other Oireachtas committees when called on to do so. We will continue to have the pleasure of each other's company in that role. Typically, I would be here with the Accounting Officer, being the Secretary General of the Department of Health.

I have an interview process myself in the next few months. I am not quite sure where that might lead. We cannot predict that but I will miss Mr. O'Brien if I am not here.

Mr. Tony O'Brien

Likewise.

In terms of the budget for this year, is it now that you start to prepare for the Supplementary Estimates? I understand you have to have your overrun before all of that happens but these Estimates begin in December, is that correct? Deputy Fleming will be more familiar with it from taking it in the Dáil Chamber. What happens now? We were told by the Department of Health that you were €350 million over budget at that time.

Mr. Tony O'Brien

The truth is that there has not been a month this year - I think I am right in saying this - when we have not been, to some extent, over budget. January might have been an exception. We are engaged in a constant performance dialogue with the Department around our best estimate - in fact, we give a range of our best and worst estimates of what the end of year position might be. This is discussed with officials, Ministers and in committees, such as the Cabinet committee on health. At a certain point in time, we will have to reach a joint view as to where we think it will land. That obviously involves colleagues from the Department of Public Expenditure and Reform as well, who have responsibility for the Supplementary Estimates in a global sense. We are not yet ready to call that. There are actions which we are taking to contain the extent of that and there are parameters we are working to on the basis of shared understanding and knowledge of what performance is likely to be.

You have no idea of that, though.

Mr. Tony O'Brien

I have an idea and obviously there have been figures floated in the public domain before. I think it has been widely speculated that it is in the order of €600 million. My job is to manage it down, not to suggest figures to our own system that give a licence to spend, if you understand what I mean. I have been engaged lately in a very firm process designed to ensure that the end of year requirement is minimised to the greatest extent possible, consistent with the safe delivery of health services.

I have two other questions. One concerns note 5.1 on allowances and overtime payments. The highest on-call payment was €334,215. What does that mean? What is it for?

Mr. Stephen Mulvany

I am trying to locate the analysis that we have here. Apologies, I will just be one second.

I refer to the maximum individual payment. Is that for one person, then?

Mr. Stephen Mulvany

The highest on-call payment and the highest individual payment, if I am correct, is all for one individual. It is one consultant surgeon in one of our hospitals. It is due to what are, in fairness, exceptional circumstances. It was a four-member consultant surgeon team which at one stage in 2014 had reduced to a one-member consultant team. That one member was trying to cover for the rest and because it was surgery, there were particular additional payments in respect of the need to keep what we call the four-week urgent colonoscopy lists up to date. This is a well-managed hospital and this was a truly exceptional requirement.

Does that mean that one person would have got paid their normal payments and then on top of that they would have received €334,000?

Mr. Stephen Mulvany

The €334,000 is an on-call payment so it is actually part of their contractual payments but it is not normal for a consultant to do that level of on-call. Equally, it is not normal for a consultant to have to try to cover what was a four-man team alone. It raises a number of issues, clearly, but the national director of acute hospitals has actually engaged with both the group and the individual hospital. There is a fair amount of back-up information and it looks to me like a truly exception situation.

Is that resolved now?

Mr. Stephen Mulvany

Yes, I understand that from January 2015, the team has come back up to more normal levels. The issues have abated significantly.

There is a figure there for a maximum other payment.

Mr. Stephen Mulvany

I am just trying to check. I believe that is a payment to the same individual.

What is it?

Mr. Stephen Mulvany

That is a payment to the same individual.

What would a normal payment be for a consultant?

Mr. Stephen Mulvany

In terms of normal salary, that consultant's basic salary for the year was €155,000. Then he would have on-call payments. In the previous year, his on-call payment was about €26,000.

No. I just want to make sure I am right here. In one year, that consultant would have received a basic payment of €155,000.

Mr. Stephen Mulvany

Yes.

Is that consultant employed full-time in the public system?

Mr. Stephen Mulvany

Yes, and has been for 16 years.

Then in that same year, that same consultant would have got €334,215 and €246,774 on top of that?

Mr. Stephen Mulvany

Yes, Chairman. The €334,215 was on-call, which is being available largely for emergency work. That hospital has a 24-7 emergency department. It has to have a surgeon on call and he was the only surgeon on call. Normally, a one in three or four rota would be considered to be onerous, for which there are additional payments. He was effectively, for a period, actually doing a one in one on-call rota which is relatively unheard of in modern times.

The balance of the other payment - the largest part of it - was related to what we would call his planned work - in other words, the endoscopies. Again, we have a strict requirement that urgent colonoscopies, often related to the detection of cancers, must be kept within a four-week time limit. The hospital is satisfied that despite the truly exceptional nature of the scale of the payment, it was essential to ensure the hospital kept as close as possible to its target.

That is a payment of €735,989.

Mr. Stephen Mulvany

Yes, Chairman.

Did he or she go to bed at all then? What is the outturn like now for that person?

Mr. Stephen Mulvany

I do not know but I understand it has returned to more normal levels. I can certainly check.

According to the figures, the highest overtime payment was €144,000.

Mr. Stephen Mulvany

That was for a senior registrar in the southern part of the country. It is someone who has been with us for about 15 years doing paediatric on-call between two hospitals. Again, paediatric senior registrars are one of our challenging grades.

The figure relates to one person. Is that the case?

Mr. Stephen Mulvany

It is one person getting overtime payments.

The maximum allowance paid was €110,000. Was this paid to a different person?

Mr. Stephen Mulvany

It is a different person, a registrar whose basic salary would be €60,000. He acted for a period in the former Dublin-mid-Leinster area as a consultant psychiatrist and the allowance brought him close to what was the normal salary for a psychiatrist at the time. His total remuneration was €174,000, which is in line with what a consultant psychiatrist would get paid.

Has the HSE taken steps to address all of these issues or the issues that caused this to happen?

Mr. Stephen Mulvany

To be honest, in the case involving a consultant psychiatrist I do not know what sub-specialty in psychiatry was involved. This continues to be one of our most challenging areas in which to maintain services, keep consultants in post and get good quality consultants. I could not guarantee that there are not other registrars who are acting as consultants and getting the appropriate acting allowance, which is very significant. Obviously, it brings them to the consultant salary scale, which is the role they are actually performing.

I read a newspaper report which referred to the use of private detectives in the area of staffing issues.

Mr. Stephen Mulvany

I am not familiar with that report.

Mr. Tony O'Brien

I think the Chairman is referring to a report about an individual whose absence records gave rise to the requirement to investigate the basis for that. It was quite an exceptional basis. One human resources function in one part of the country used the services of a private detective in order to gain evidence as to the appropriateness or otherwise of the person being on sick leave.

Private detectives are not generally used.

Mr. Tony O'Brien

They are not generally used, no.

What was the cost of that?

Mr. Tony O'Brien

We will have to come back to the Chairman with that cost.

I return to a point made by Deputy Deasy and a question I asked earlier about an ongoing case. Will Mr. O'Brien find out the structure of the reporting systems at that time for foster homes, which is the issue we are dealing with? Will he be able to inform the committee in writing about how the reporting system was structured, how many individuals were involved in the relevant section and how it was managed?

Mr. Tony O'Brien

Yes.

Will Mr. O'Brien inform the committee generally if the then health board was aware of the issue and, if so, how many people in the relevant section were aware of it? That is my concern. I will not labour the point but having read the reports into what occurred, I was shocked. It is hard to credit that this could have occurred, notwithstanding which organisation was involved or how poor it was in terms of manpower and so forth, without someone knowing what was happening. Will the HSE interview the individuals who were involved at that time in the section which had responsibility for foster homes?

Mr. Tony O'Brien

I confirm that I will arrange for that to occur.

Thank you very much.

Having asked some general questions, I will ask a few specific questions on the appropriation accounts. The introduction on page 2 states that the Health Service Executive (Financial Matters) Act 2014 provided for an amendment to the Valuation Act 2001 to exempt the HSE from the payment of local authority rates on lands and buildings occupied by the HSE. What was the rates bill paid by the HSE to local authorities before this amendment was made?

Mr. Stephen Mulvany

My colleague will respond to that question.

Mr. Paddy McDonald

We were exempt under the 2001 Act.

Mr. Paddy McDonald

We were not paying property rates.

The document states that the Act passed in 2014 provided for an amendment to the Valuation Act to exempt the HSE from the payment of local authority rates. Was that always the case?

Mr. Tony O'Brien

I think the purpose of the note is simply to reference the new basis upon which we are exempt.

There has been no change.

Mr. Tony O'Brien

There is no change.

The document did not read that way but that is okay.

Page 39 refers to the recovery of costs of health services provided under regulations of the European Union. The HSE recovered €220 million in 2013 and €172 million in 2014, a reduction in the year of €48 million. I understand this is primarily related to people from the United Kingdom who are resident here and would be entitled to free medical and hospital care if they were living in the UK. Under EU rules, they are then entitled to avail of free care if they are living in Ireland. I have tabled a number of parliamentary questions on this topic and I am on record as having raised this issue previously. There is an arrangement in place between the Irish and UK authorities, whereby the UK authorities will pay a sum to Ireland based on the number of UK citizens living here. I understand the figure is net and may be based on a figure of approximately 40,000 people. According to a reply I received to a parliamentary question, new negotiations were to take place because the calculation used was based on an old figure. I do not believe the negotiations have been finalised. Both sides probably require help from the Central Statistics Office or other bodies to work out the correct figure and ascertain whether we are receiving what is due to us.

This issue was brought to my attention by a man who visited my office and informed me that, having lived in England, he was entitled to free hospital care here and was not required to pay for outpatient appointments, accommodation, overnight stays or accident and emergency charges. I wondered how this could be the case. He informed me that the British Government pays Ireland for this and that hospital care was free of charge for him. I was surprised to learn that 40,000 people or more are entitled to completely free hospital care in the public service, whereas Irish people must pay for it. I ask the witnesses to talk us through the figures. Is it correct that English people in Ireland have free hospital care whereas Irish people must pay charges? Is my understanding of the position correct?

Mr. Greg Dempsey

As I am not an expert, I will confirm what I tell the Deputy afterwards if that is okay. I will deal with the issues in reverse order. My understanding is that people from the EU, specifically people from the UK who are based here now, are entitled to the same level of public health care as an Irish citizen would be. The person the Deputy met probably meant that, albeit that he was from England, he was getting free care here. He may not have expected that but the reality is that he would get exactly the same as an Irish citizen and we would be reimbursed then from the UK. That is my understanding.

I do not get that. Will Mr. Dempsey go through it again? An Irish citizen must pay accident and emergency charges but the man I met does not have to do so. I understood the point he was making to be that he was entitled to free medical care in England because the National Health Service does not charge at the point of entry. Having moved to Ireland, he was entitled to the same level of service in Ireland under the EU cross-border directive - I will return to that - as he would be entitled to in England. Rather than paying for health services here and claiming back his costs, as people are required to do under the cross-border directive, the UK authorities pay the Irish authorities.

Mr. Tony O'Brien

I can help. It is not to do with whether a person is English or Irish but whether he or she has been resident in England for a sufficient period to have paid national insurance contributions, which give persons in England the equivalent of medical card holder status. If, therefore, the person is still resident there or a pensioner here, he or she will be treated as though he or she was a medical card holder, which means the person is exempt from the same charges as medical card holders are exempt from.

Then there is a global reimbursement arrangement with the UK Department of Health.

I thank Mr. O'Brien; that helps my understanding. How does that happen? When a person arrives in an accident and emergency unit, does the HSE send out a bill, only for that person to tell it to send it on to the NHS? How is this covered? Do such people have a card?

Mr. Tony O'Brien

If they have transferred their residency here after a life in the United Kingdom, either having emigrated there from here originally or having moved here, no doubt for the weather, then we will give them a medical card.

Such people actually get the medical card?

Mr. Tony O'Brien

Yes.

Even though they might be wealthy? It is because they would be entitled to free medical care under the NHS in England; is that it?

Mr. Tony O'Brien

Exactly.

Mr. John Hennessy

It is not a medical card under Irish legislation but is one provided under European Union regulations.

What is that card? I have never seen one.

Mr. John Hennessy

It looks the same as an ordinary medical card.

It looks like one but is not one.

Mr. John Hennessy

It is coded in the Primary Care Reimbursement Service, PCRS, as chargeable under EU regulations, rather than Irish legislation.

Very well. One learns something new every day. In respect of the figure, I note we are down €48 million. Who is keeping track? I am worried that we could be losing out.

Mr. Greg Dempsey

The Department of Health keeps track of this and negotiates the final settlement with the other EU countries and in particular with Britain. I am aware of some work being done in recent months with the UK authorities to finalise a final figure, because there were payment on account arrangements in place. As I am not absolutely sure they are final yet, if it is all right, I will respond later to the committee.

I will be satisfied if Mr. Dempsey sends a note.

There are one or two other small points. This will be an issue for Mr. Barry O'Brien in particular, because I refer to it in my opening comments. The second paragraph on page 46 states:

The HSE is currently involved in a legal dispute with a number of drugs importing companies with respect to the implementation of cost savings and other initiatives outlined as part of a framework agreement between the Irish Pharmaceutical Healthcare Association (IPHA), the Department of Health, and the HSE, which came into effect on 1 November 2012. The outcome from the dispute process based on the current stage of legal proceedings remains uncertain and therefore difficult to quantify any potential liability which may arise.

This leads me on to a question I mentioned in my opening comment to the effect that negotiations between what was the HSE and the IPHA on a new drugs contract were stopped or did not happen. They were proceeding, and many people thought they would be concluded in recent weeks, but that is not happening. I understand from the HSE that the Department of Public Expenditure and Reform is directly involved in this regard, and rightly so. Consequently, I wish to ask the representative of that Department why these formal negotiations have not commenced, because I understand the contract is up around now.

Mr. Barry O'Brien

The policy for the actual negotiations is a matter for the Department of Health. That Department is leading on the policy element of the negotiations. It is an approach that involves the two Departments and the HSE and we are in the process of pulling together all the data and the information needed with the intention of commencing negotiations early in the new year.

I must revert to this point. The Department of Public Expenditure and Reform was aware the contract was expiring at a particular time. Why did it wait until the expiration of the contract or thereabouts before starting to assemble data to help negotiate the next contract? As the Department knew this, why had it not collected the information it is now collecting six months ago? I mean, why did somebody not do it? I do not know who. The Department of Public Expenditure and Reform is more involved, through the Office of Government Procurement or whatever, but what appears different to me this time is that this Department is now involved and may not have been involved to such an extent for the previous inquiry agreement. I ask Mr. Barry O'Brien to explain to me the Department of Public Expenditure and Reform's involvement in this process. While he will state that policy matters are the responsibility of the Department of Health, his Department probably must be satisfied before negotiations commence. What is the Department of Public Expenditure and Reform doing?

Mr. Barry O'Brien

We are helping, particularly with the procurement elements and the data elements. Obviously, we have the Office of Government Procurement, which has a particular expertise, and, given the size of the drugs bill involved in these negotiations, obviously pulling on board that expertise is highly beneficial in terms of the negotiation. As for the issue of when this process started, we have been pulling together the material for the guts of six months, and given that it is a huge effort to get there with all the parties involved, we hope to be able to commence negotiations in January.

If the Chairman will bear with me for a minute, the drugs bill is one of the largest bills paid by the taxpayer. What kind of data could the Department possibly be assembling that were not held by the Department of Health or the HSE? Is the Department of Public Expenditure and Reform coming up with data they never had? Is the Department simply going through the same steps, and has the establishment of the Office of Government Procurement delayed the process of the taxpayer possibly getting a better rate? Has the Department slowed down the process through its involvement? From the comments of Mr. Barry O'Brien, it sounds as though it has. The Department is now collecting data, but nothing is happening.

Mr. Barry O'Brien

The issue is making sure we have all the data in one place. I do not think we have slowed down the process.

Where was it in more than one place up to now?

Mr. Barry O'Brien

Previously, one had drugs across numerous parts of the system. For example, one had drugs in both the PCRS and the hospital system. The information is not held in a single repository, and consequently, it is a question of going out to all those constituent parts and making sure the system is acting in a joined-up manner in order that when we are buying drugs, we are paying the cheapest prices possible right across the system. What we are doing at present is getting complete visibility on that.

Essentially, Mr. Barry O'Brien is stating that the people who signed this agreement the last time did not have an overall picture of what they were signing. That is the implication. Mr. O'Brien is telling me his Department is getting bits from here and there and how an overall picture is needed. By implication, he is stating that the people who signed the last agreement did not have an overall picture of what they signed. I shudder to think of the cost, which I know was more than €1 billion. This is what Mr. O'Brien is saying to me.

Mr. Barry O'Brien

I do not know what happened last time in terms of either the agreement or the negotiations.

Mr. O'Brien stated that his Department was obliged to collect the data in order to consolidate it all into one overall picture, which was not-----

Mr. Barry O'Brien

We have been working with the Department of Health and the HSE to make sure we have as complete a picture as possible.

Which was not there previously.

Mr. Barry O'Brien

Well, I do not know what was there before.

Mr. O'Brien must know. I do not like beating around the bush in this regard. If this information was there previously, the Department would not need to be doing this exercise now. If the Department is now obliged to do this, it must not have been available previously. Mr. O'Brien should give it to members straight. If the information was there previously, why is the Department doing this now?

Mr. Barry O'Brien

I did not see it like that. I have not seen the information put together like that.

Right, and it is helpful if the Department is putting it together. Consequently, the involvement of the Department and the aforementioned office should yield a benefit, ultimately, but it probably is leading to a delay in the commencement and the negotiations while it is engaged in this task that had not been done in this manner previously.

I revert to the extract I read out from the report. I seek information about these legal disputes the HSE has had with a number of these drug-importing companies in respect of the last agreement, from which it did not get the savings it expected. Who can respond to me about that question? Is this a relevant issue? There is no point in having an agreement and thinking one will make savings only to read this paragraph at the end of the agreement's term stating that there is a legal dispute and the savings were never achieved.

Mr. Tony O'Brien

These are two different things. The current or outgoing agreement has performed to expectation. All the savings that were envisaged for that agreement were produced, the only variance being that it kicked in six months or so later than was originally intended. It was meant to kick in either in 2012 or 2013 but did not do so until the beginning of the subsequent year. It has saved €400 million; in other words, we would have spent €400 million more for the same drugs without that agreement. Consequently, it would not be fair to state that it has not performed. Obviously, what is at stake now is that we are seeking to put in place a successor - and, incidentally, that agreement continues until the successor agreement is negotiated. What is important now is to put in place a successor agreement that delivers even more. That is what is-----

Explain the relevance of the aforementioned paragraph, if everything was so hunky-dory. What is that paragraph doing there?

Mr. Tony O'Brien

That is not related to the IPHA agreement. The comment is related to individual issues concerning individual purchasing of drugs. This comment is here under the contingent liabilities section simply because, in accordance with normal accounting standards, at the point in time to which this set of accounts relates, those things had not crystallised. However, it is not related to the IPHA agreement in that sense.

Mr. Stephen Mulvany

I do not have to hand the specific detail, but our colleagues in the PCRS take a very robust approach on behalf of the taxpayer with individual suppliers to make sure we get best value. It will be something of that nature and, as the director general stated, it is not a general problem with the IPHA agreement per se.

Very well. I seek a brief comment. IPHA is the Irish pharmaceutical representative association.

I think we had this discussion here previously. The Association of Pharmaceutical Manufacturers of Ireland is another body. Some products are in patent while others are out of patent. A third group is generic. In respect of which group is the HSE negotiating with the IPHA? Are they the patented ones, the out-of-patent ones, the generics or both?

Mr. John Hennessy

Traditionally, we have negotiated agreements with both. The agreements that are in place cover the IPHA and the manufacturers. Usually the manufacturers of the generic products. Our intention would be to negotiate successful agreements with both. As Mr. O'Brien has pointed out, that process of negotiation-----

Is the commencement of both negotiations stalled?

Mr. John Hennessy

The existing agreements continue until the successor agreements kick in.

What about suppliers who are not part of the IPHA? Many of us were lobbied during the year about treatment for particular people, for example, blood treatment and people having to have many of blood transfusions. While we are having this negotiation with the IPHA, how many other pharmaceutical drug suppliers are supplying the HSE on a company-by-company basis that is not covered by this agreement?

Mr. John Hennessy

The Deputy is correct. There are a number of companies in the branded area not represented by the IPHA.

Could the HSE send us a list?

Mr. John Hennessy

They have been in contact with us to put us on notice that they are also there and wish to be consulted as part of the next round of agreements to emerge in the current negotiating process. We are taking those submissions on board as well and will be in touch with them in due course.

Does the HSE have to negotiate with them on a company-by-company basis because they are not part of the IPHA?

Mr. John Hennessy

They are not represented by the IPHA.

Who negotiates with them? Do they negotiate with the HSE on a one-to-one basis?

Mr. John Hennessy

Presumably, yes.

My apologies to the Chairman but this is almost the biggest bill the taxpayer has to pay. The IPHA is a federation for some of the suppliers. It comes in and talks to the HSE. Would the HSE not be better off talking to all the companies on a one-to-one basis because it would strike a better deal? If there are 20 companies, the HSE can separate them and work one off against the other as opposed to them all coming together as part of the one federation and agreeing not to step on each other's toes and to send in somebody who is not working for any of the companies. I have said here previously that we are setting prices that the taxpayer will pay without any direct contact with the people from whom we are buying. I will cite an example I used previously. It is like the Minister wanting to deal with the banks about an issue and talking to the Irish Bankers' Federation instead of the banks. The HSE is talking to a little association that is put between it and the companies. Does Mr. Hennessy get the point? Yet the HSE is dealing with some companies on a one-to-one basis.

Mr. John Hennessy

That may well be the case. I could not agree more with the Deputy. It would be preferable if we were dealing with one organisation.

Tell them that. Who is writing the cheque?

Mr. John Hennessy

I am afraid that this is not something that we control. If some companies decide that they do not wish to represented by the IPHA, that is not a matter we can control.

Mr. Tony O'Brien

It is fair to say that the ongoing discussions on our side on a tripartite basis involving the Department of Public Expenditure and Reform, the Office of Government Procurement, the Department of Health and the HSE are precisely about the appropriate negotiating strategy to maximise value. Against that, we have had some instances on individual drugs where we have had very fruitful discussions with individual suppliers and others that have not been not very fruitful. The Deputy referenced at least one of those in his preliminary remarks. It is not always the case that negotiating with an intermediary is disadvantageous or that negotiating directly is advantageous.

There is one little issue that has been touched on.

What are the credit terms in terms of the suppliers?

Mr. Tony O'Brien

Is that the credit terms with drug manufacturers?

Mr. Tony O'Brien

All those items are essentially paid through PCRS on our behalf. PCRS is prompt payment compliant so we take it that they are paying within 30 days. Some of the manufacturers would also be supplying individual hospitals. We know from the Comptroller and Auditor General's report that some of the hospitals are not fully 30-day compliant. Typically, it would be 30 days.

Is there no special arrangement with drug supply companies for earlier payments?

Mr. Stephen Mulvany

We would have to check the specifics of that. It may vary depending on the contract agreed.

Who would know their credit terms?

Mr. Stephen Mulvany

Our financial shared services section could tell us that very quickly.

Mr. Tony O'Brien

There has been one instance recently relating to a particular drug in the hepatitis C space where we had what is known as an advance purchase programme where we committed to a certain level of prescribing in return for an extremely favourable price.

That is the point I am coming to. If that kind of arrangement with the suppliers exists for ten, 20 or 30 days, is there any arrangement where if the HSE pays in the way described by Mr. O'Brien, it might get a better deal?

Mr. Stephen Mulvany

We have the capacity on our systems and where it is favourable, we can, and do, pay companies in seven or 14 days.

Will the HSE let me know what is involved here?

Mr. Stephen Mulvany

We can talk about that.

Mr. Seamus McCarthy

Under the prompt payments legislation, there is an implied credit period of 30 days if one is not specified in the contract. If one is specified in the contract, be it ten, 20 or 50 days, that takes precedence and it is only after this that any prompt payment interest would kick in.

In respect of the drug issue, is the €2.7 million worth of drugs that went out of date a cost to the HSE?

Mr. Tony O'Brien

Yes, it is effectively a write-off of our stock. It amounts to about one half of one percent of the high-tech drugs on hand. While no amount of write-off is desirable, it is a relatively low rate of write-off.

Do those high-tech drugs have a short shelf life?

Mr. Tony O'Brien

Yes, they do.

What would it be?

Mr. John Hennessy

A shelf life of one week can arise. There are some products that would have extremely short shelf lives-----

As little as that.

Mr. John Hennessy

-----and very strict refrigeration requirements as well around the cold chain. If that is broken, the product is no longer usable.

Mr. Seamus McCarthy

Could I make a comment on that? It is a point I have made in the report. Due to the fact that the stock take is only at the end of year, that is the amount of stock on hand that is out of date at the end of the year. If stuff is expiring on a weekly basis, that is not counted at all. That pharmacists should make a return where they are scrapping stock throughout the year is one of the recommendations I made so that there is a full estimate of what the loss is.

So that is not done?

Mr. John Hennessy

Arrangements are being put in place to do it to comply with the recommendations in this report.

Let us just say that one pharmacy has a particular item that is going out of date. Does it check with other pharmacies about whether they might have a demand for that particular product?

Mr. John Hennessy

The current regulations under which pharmacists operate do not permit exchange within the pharmacy sector. We try to encourage pharmacists to return the product to the supplier and let it be the co-ordinator for alternative use. Sometimes that proves difficult with very short shelf-----

Because of the shelf life.

Mr. John Hennessy

Certainly.

When the HSE says that it uses a just-in-time system, what does it mean by that? Is it an internal courier system? Is it a delivery system that is tightly controlled by the drugs companies or the HSE?

Mr. John Swords

Distribution to the pharmacies is done by the distributors themselves as drug companies. It is not done by us. It is done through companies like United Drug. They deliver to the pharmacies directly.

Would it not be an improvement if there was some regulation between pharmacies for the use of these drugs because we are getting a snapshot. Does that €2.7 million at the end of the year cover a period of one month or two months?

Mr. Seamus McCarthy

It is actually the high-tech drugs on 31 December in the pharmacies.

How would one estimate then what it would be in a year?

Mr. Seamus McCarthy

One would need to make a log of everything that is scrapped and that goes out of date.

Has the HSE any idea?

Mr. Tony O'Brien

It would not be safe to give the Chairman an estimate because we do not have the system recommended by the Comptroller and Auditor General.

The HSE has no record.

Mr. John Hennessy

One of the recommendations in the report is the development of an electronic purchasing and stock control system.

Yes, I saw that.

Mr. John Hennessy

There is a project under way to implement that at the moment. That should give us the capacity to do that calculation and reporting.

It must be a significant figure each year, based on the €2.7 million figure.

Mr. Tony O'Brien

It probably is. The option of putting in place an intermediate distribution system is complicated by the very short shelf life of some of the products and the requirement for a continuous cold chain. Any time taken to send products to a central point for onward distribution would eat into the shelf life. Typically, and this is where the "just in time" aspect of the matter arises, most patients who are in receipt of high-tech drugs are doing so for a course of treatment, or even sometimes for continuous treatment. That means there is a capacity to plan. The variability comes in with the human factor. I refer to circumstances in which, without the knowledge of the supply system, an individual patient might make a last-minute decision to discontinue with the medication, or may be hospitalised and therefore unavailable to have it in the community, or may make the decision to change pharmacy. The cold chain implications which typically arise for all of these products mean that the option of transferring material between different pharmacies would be extremely complex and probably unsafe, even if it were allowed by regulation.

I have two final questions on this topic. I notice that the witnesses keep referring to negotiating a "framework". They use that phrase when they are talking about the negotiations. Who negotiates the price? Is it the medicines board? Who actually decides that the price for a given product or tablet is a certain amount?

Mr. Tony O'Brien

We are talking about-----

Who decides on the actual prices of the actual medicines that people get on the shelves of their pharmacies?

Mr. Tony O'Brien

If we are talking medicines, I will ask Mr. Hennessy to respond.

Mr. John Hennessy

I suppose this can arise in two situations. Regarding the prices of existing products that are interchangeable under the reference pricing arrangements, our own section within the Primary Care Reimbursement Service would analyse the best prices that are available internationally and enter into negotiations with the companies and suppliers on that basis. Ultimately, the price is set by the Primary Care Reimbursement Service. The reference price is established. Sometimes, there are disputes with the companies in that regard. In fact, quite frequently-----

Who is the medicines board, or the Health Products Regulatory Authority? Who are they?

Mr. Tony O'Brien

The HPRA, which was formerly known as the Irish Medicines Board, is the regulator. In effect, it licenses products or the manufacture of products-----

Does it have a role in relation to price?

Mr. Tony O'Brien

No. It determines whether there is molecular interchangeability.

Mr. Tony O'Brien

That, therefore, has an impact on whether we can apply reference pricing.

Mr. Tony O'Brien

It does not get into the pricing side.

I have a final short question. When we were talking about the debt of private health insurance companies, it was suggested that quite a bit of the figure of €290 million could be attributed to the failure of consultants to sign off.

Mr. Tony O'Brien

Yes.

I picked up during the conversation that this meant the consultants who have not signed off have not received their own fees.

Mr. Tony O'Brien

Yes.

Does that not alert the HSE to a problem? That they will not sign the forms to get their fees - one would think this means they have income due to them - suggests to me that they think they should not be signing those forms. How can the HSE include what it is due from the hospitals as income if consultants are willing to forgo the fees that the HSE believes are due to them as part of the locked-in claim on the basis that the two go together? I suggest that the consultant cannot get his fee without the HSE getting its payment and vice versa. By how much would the consultants be out of pocket if that €290 million was not paid? If they have come to the conclusion that they do not even want to claim this money, I wonder how much of it is really due.

Mr. Tony O'Brien

None of the €290 million-----

That is extra.

Mr. Tony O'Brien

-----is due to consultants. Individual consultants could have a whole variety of reasons for not signing forms, such as their lack of prioritisation or their other workload at the time. Perhaps they are treating it as a savings scheme. Perhaps they are deferring income into another tax year.

There could be tax reasons.

Mr. Tony O'Brien

I do not believe they are not signing the forms because they do not believe the actual fees are due. By delaying their signing of the forms, they are not forgoing the fee.

They are just delaying it.

Mr. Tony O'Brien

They are forgoing cash flow.

Okay. I have a final question. Have any of those people retired?

Maybe they-----

Mr. Tony O'Brien

It is a high-class problem, is it not?

Have any of those people retired? Are they all still in the HSE's employment? That is what I am getting at. Have any of those people retired?

Mr. Stephen Mulvany

Some individuals have retired as in the normal course of events-----

Is it the case that those individuals have not signed off?

Mr. Stephen Mulvany

-----but the vast bulk of them are still on our-----

How in God's-----

Mr. Stephen Mulvany

We would have to check the individual details.

Can the officials do that? I would be very curious to know. The HSE's chances of collecting money from people who have since retired-----

Mr. Stephen Mulvany

On that basis, we will proceed to the insurers.

I call Deputy Deasy.

The Chairman raised speech and language issues earlier. Many people who are on the speech and language therapists' staff panel recently received an e-mail informing them that the existing panels would no longer be used to fill speech and language therapy staff vacancies and that all the panels involved were expiring. How did that come about? Do individuals who might have been on the panel for some period of time gain credit for having been on that panel? Is it thrown open for new applications now that the panel has expired?

Mr. John Hennessy

I do not have the specific detail on that one. Traditionally, panels would be established for a year. They would then expire and new competitions would be established.

That is fine, but what about the people who were on that panel and might have expected to get a placement or at least an offer at some point? Do they have to reapply? Is it thrown wide open again?

Mr. John Hennessy

They would usually have to reapply. I will check the situation in relation to speech and language therapy to see if anything unusual applies to it.

Mr. John Hennessy

Generally speaking, a competition is held; a panel is established, probably for a year; and any vacancies arising during that year are filled from the panel before the process starts again. If that approach were not adopted, we would have no means of attracting newly qualified people into our competitions.

Could Mr. Hennessy send me a note on that?

Mr. John Hennessy

Yes, I would be happy to do so.

Two people who were on that panel have contacted me to say they were surprised to see it expire and are wondering what the situation is. It would be helpful if the matter could be explained from the HSE's standpoint.

Mr. Tony O'Brien

Does the Deputy know whether it was a national panel or a local panel? Were the inquiries from his own area rather than from a diverse area?

I think it was a local panel.

Mr. Tony O'Brien

I thank the Deputy because that helps us to narrow it down.

I think it was. I will be brief in asking my final question. Something that I should have asked Mr. O'Brien earlier has been niggling at me since I left. It might bring clarity to the issue I raised earlier. I refer to my opinion that there is a potential conflict with regard to conferences. Was the conference in question the only one attended by Mr. O'Brien that was paid for by a private company while he was acting as the head of the HSE?

Mr. Tony O'Brien

Yes.

That was the only one.

Mr. Tony O'Brien

Yes, it was actually the first conference outside Ireland that I attended as head of the HSE.

Fine. I think it is helpful to clarify that. Is attendance at such conferences something that occurs on a widespread basis in the higher echelons of the HSE organisation? Is it commonplace that people in the HSE would be catered for at conferences by private companies? Is it something extremely rare? Is it frowned upon? Is it commonplace?

Mr. Tony O'Brien

When the Deputy asked the question earlier, he referenced the "fancy pens" and so on that he sees in doctors' surgeries. Following a self-regulated change in the ethics of that industry, it has moved away from that kind of thing.

I know there have been changes there.

Mr. Tony O'Brien

They have moved away from golf outings, etc. They have tended to move in the direction of educational conferences with international speakers and so on. Looking across the whole spectrum of doctors and nurses, etc., it is likely to be the case that rather than being treated to-----

I am not really talking about the doctors and the nurses. I am talking about HSE employees.

Mr. Tony O'Brien

They are HSE employees too. At the conference I attended in Madrid, there would have been a large contingent of people in attendance whose work is related to that area of-----

I know that, but I am talking about HSE employees. There are six people from the HSE here today. How many of them have attended some of these educational conferences, or conferences by another name, down through the years? I refer to events paid for by private companies.

Mr. Stephen Mulvany

None in my case.

Mr. John Swords

Our foreign travel is approved. There is an approval process for business travel. If I wish to go somewhere - to a conference or otherwise - I have to apply for permission.

That is not what I asked, in fairness. How many such trips have the witnesses gone on? How many of those trips would have been paid for by private companies?

Mr. John Swords

It has not happened with me.

Okay. Anybody? Nobody. Mr. Mulvany?

Mr. Stephen Mulvany

No. I have already answered. No.

We probably should have asked it earlier. It clarifies the issue.

Mr. Tony O'Brien

I would not say it was the one and only occasion on which I was invited. I receive invitations to speak at hundreds of conferences, most of which I decline. However, I accepted this one. We already discussed it. The issue is whether I should have allowed the company to pay for the travel. I will reflect on the question. I cannot undo what was done. My decision to allow it to pay was motivated solely by the fact that it would save the organisation from paying.

It was best that I asked the question rather than leaving matters hanging.

Do the personnel changes in the HSE dramatically affect the direction of strategy within the HSE? When somebody in a key position moves and there is a shift in personnel, do they all take up the strategy that was agreed with the same direction?

Mr. Tony O'Brien

Given that the strategy is collectively agreed and our corporate strategy is submitted to and approved by the Minister, it does not change with personnel changes. There can be differences of emphasis and style. The most notable example is the position of national director of acute hospitals, which has been through three sets of hands in the past two years.

This is part of what I am referring to.

Mr. Tony O'Brien

This level of change is not desirable. Unfortunately, it is a fact of life in any organisational context. The current national director, Mr. Liam Woods, who is known well to the committee, is pursuing the corporate strategy on acute hospitals. While he is bringing his own style and sense of rigour to the role, it does not fundamentally change the strategy. The thrust of our strategy on hospitals is governed by Government policy on the creation of the hospital groups.

With this type of personnel churn, must all the posts be advertised again or are they filled internally?

Mr. Tony O'Brien

If a post arises for a short term, I will most likely redeploy it. I make different sets of decisions. For example, when the post of chief financial officer became vacant, I elected to redeploy an existing national director, Mr. Stephen Mulvany, who was the then national director of mental health, into the role because I felt it would benefit from his strengths. The resulting vacancy for the national director of mental health will soon be advertised in an open competition. Ms Laverne McGuinness, who sometimes appears here, is moving on after 20 years with the health service, having been head-hunted by the private sector. We wish her well. Her successor will be appointed on the basis of an open competition. One cannot become a national director except by means of an open competition. It is sometimes limited to the health family, as was the case when the directorate was established and the sanction limited recruitment to people who were already employed in one of the health agencies. As individual posts become vacant, I can and do, on occasion, exercise my discretion to fill them by redeployment from among my top team, and then fill the resulting vacancy by open competition.

Yesterday, a young man spoke on a local radio station and complained that his father was recovering in a public ward at St. Luke's General Hospital and that the patient next to him was smoking continuously. Although I thought it was unusual and perhaps inaccurate, it is correct.

Mr. Tony O'Brien

It is a complete breach of policy if it is occurring and we will investigate it. I had not heard it. Was it on KCLR?

It is difficult to get it resolved. It was on local radio and the individual concerned gave his name and said it was happening. I thought it highly unusual in this day and age and it should be queried, at the very least.

Mr. Tony O'Brien

We do not even permit vaping on public health grounds.

Yes, I see it outside the hospital doors.

Mr. Tony O'Brien

It is an extraordinary occurrence which will have to be investigated.

I thank the witnesses for attending. It has been a long day and I appreciate it.

The witnesses withdrew.
The committee adjourned at 3.55 p.m. until 10 a.m. on Thursday, 5 November 2015.