In his final appearance at the Dáil Public Accounts Committee (PAC) as HSE chief executive before his forthcoming retirement, Bernard Gloster, made clear his frustrations at oversight and governance arrangements in parts of the health service.
There were too many agencies and organisations, he suggested, with some operating with a misplaced understanding of their independence given their almost total reliance on the exchequer for funding.
The immediate backdrop to the HSE chief’s comments were moves to have 16 voluntary hospitals – including some of the largest institutions in the country – introduce a new Integrated Financial Management System (IFMS). Already close to €200 million has been spent on this system, which has been introduced in facilities run directly by the HSE.
At the PAC hearing on October 16th Fine Gael TD Joe Neville questioned why the system had not been installed in the voluntary hospitals.
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“Is any pushback being received from them on this?” he asked.
“Yes”, replied Gloster, lifting a veil on a row that has been under way between voluntary hospitals and the HSE since the summer and which in the last fortnight has seen Ministers become directly involved.
Gloster told the committee that through their collective association, “these hospitals have expressed to me the view that they require a separate legal agreement with us for the introduction of the IFMS”.
“We firmly hold the view that that is not the case,” said Gloster.
The voluntary hospitals recognise there has to be a national financial management system but want changes to reflect they operate under a different legal regime to HSE institutions in that they come under company law and charity legislation.
They believe that any agreement on participating in the IFMS would have to ensure financial control can remain with the voluntary hospital board so directors can fulfil their legal duties and auditors carry out independent reviews.
The voluntary hospitals have sought assurances, for example, that boards could not have spending decisions vetoed by the HSE or that they would not have to seek approval for making payments.
The association representing the voluntary hospitals argued the proposed centralisation of financial decision-making and centralised processing of data “would gravely compromise a board’s capacity to discharge its fundamental statutory and fiduciary duties to its organisation”.
It told Gloster in a letter in September that the IFMS appeared “to envisage a loss of control by boards over various processes that are central to the management of a voluntary hospital”.
The Government, however, has fully backed Gloster’s stance.
In the last fortnight or so Minister for Health Jennifer Carroll MacNeill and the Minister for Public Expenditure Jack Chambers have both told the voluntary hospitals that the Government wants this new system introduced.
MacNeill said it was the position of the Cabinet Committee on Health comprising the Taoiseach, Tánaiste, Minister for Finance and Minister for Public Expenditure “that deployment of the IFMS be implemented in all publicly-funded hospitals, including voluntary hospitals, as a matter of urgency”.
Essentially there is a dispute over who, in reality, runs some of the largest public hospitals in the country.
A legacy from an era when religious congregations and charitable groups rather than the State provided many of the country’s health and social services, the governance of Ireland’s public hospital structure is complex to say the least.
The State, through the HSE, runs a network of its own hospitals, mainly large regional centres such as in Cork, Galway, Limerick, Sligo and Waterford as well as Connolly in Blanchardstown in Dublin.
However, many of the largest institutions in the State are run by their own boards of management. In some hospitals the Minister for Health appoints directors but in others this is not the case.
But in all instances the exchequer pays the salaries of the staff who are considered to be State employees enjoying public service terms and conditions including pensions. The State also funds virtually all running costs and capital investment.
Overall, these voluntary hospitals are known technically as Section 38 organisations and between them they receive about €5 billion annually in exchequer funding.
Outside of these, another 1,400 or so bodies provide services under HSE grants. Personnel in such operations are not considered public servants. Between them these agencies – known technically as Section 39 bodies – receive about €2 billion in funding.
Voluntary hospitals and other health agencies receive their funding on foot of service agreements with the HSE covering what they will provide for the money.
However, the PAC heard there were problems with this system. Sometimes the agreements are not signed until well into the year and, on occasion, are accompanied by side letters from the hospitals qualifying some of the provisions of the accord.
Comptroller and Auditor General Seamus McCarthy said in 2024, the HSE provided funding of €7.7 billion to voluntary hospitals and other health agencies.
However, he said that by the end of the year only about three-quarters of this funding “was covered by a completed bilateral agreement of the appropriate type”.
“This percentage has been falling in recent years. Furthermore, within the group of grant recipients that had signed agreements, the audit noted a number of instances where the grant-aided bodies had issued side letters to the HSE disclaiming aspects of the agreements, such as budget targets or projected levels of activity. In my opinion, such side letters undermine the validity of the funding agreement process and the executive’s capacity to hold grant-aided bodies to account for performance of the agreed terms.”
Gloster said it was “quite frankly a bit ridiculous not to have an agreement about a year until late in the year”.
However, the HSE chief maintained the only real leverage his organisation had was the threat of withholding or curtailing their funding.
But the reality was the HSE could not do this as pulling funding would leave patients without services.
The absence of a modern centralised financial information system has been a key issue for health service management for many years.
The voluntary hospitals maintain that as far back as 2020 they raised concerns over governance, operational and commercial issues regarding the implementation of IFMS.
They maintain in December 2021 the HSE said in correspondence that following the design of the new financial management system, a key objective would be to progress the development of a legal framework to govern the relationship between it and voluntary organisations. The letter said the HSE would be in touch early in 2022 to initiate a detailed consultation process on a draft legal framework.
The hospitals maintain that this never happened and until this year the focus of the HSE was on putting in place the IFMS in its own facilities.
On June 11th this year at a meeting with the association, the HSE raised the issue of deploying the IFMS.
The HSE maintained its service-level agreement would provide a framework for the introduction of the new ICT system into the voluntary hospitals.
In July the association wrote to senior HSE management and said it recognised revised text in the service-level agreements included an express commitment from voluntary hospitals to implement and use the national ICT system.
The voluntary hospital sector said while the revision of the service agreement appeared to meet some of its concerns, it did not address all of them.
At the end of July, Gloster replied saying he did not accept the arguments put forward and that he had raised his concerns about the hospitals’ stance with Carroll MacNeill.
He said the Minister and the HSE had serious concerns about the position being adopted.
“To be clear, the HSE will not enter into or accept the need for further or separate agreements, legal or otherwise. All of our necessary requirements are set out in the service agreements”, he said.
On September 15th the association told Gloster that “from a governance perspective IFMS has the potential to impact on the autonomy of the voluntary hospitals and on the ability of the voluntary hospitals to comply with their legal obligations”.
The association argued that the IFMS meant the single overall owner of finance and procurement services on behalf of the health service would be the chief financial officer of the HSE.
“Matters such as financial control, timely access to information, approval processes and accountability for decisions are not merely operational but go to the core of directors’ statutory responsibilities,” it said.
The day after the PAC hearing, MacNeill told voluntary hospitals that as “a guardian of the health system on behalf of the people of Ireland, I expect that measures to ensure alignment of financial reporting, including deployment of the IFMS where this has not already happened, to be enthusiastically implemented without delay”.
Three days later on October 20th, Chambers sent a letter to MacNeill which was copied to voluntary hospitals.
“Given the State’s significant investment to date in IFMS, it is crucial that it is fully implemented across the sector by the HSE in order to maximise the financial control benefits of the system particularly in the context of the ongoing significant investment in all of our hospitals.”
Carroll MacNeill told The Irish Times that she was trying to secure a growth in the health budget to fund new and additional services for patients but it was harder when there was not full visibility on expenditure that would be provided under the new financial system.
