Health system regulation—a system ‘as-a-whole’ perspective: what can be learnt from the Australian aged care experiences

Introduction

From a policy perspective the health system should be effective, efficient and equitable (1). Achieving these goals necessitates a set of regulatory rules that keeps its stakeholders focused on the task of delivering high quality care that is safe and responsive to the needs and aspirations of its users.

The health system operates as a complex adaptive system at and across all levels of organisation. Regulation acts as a focus for the system, influencing behaviours as members adapt to changing rules, which can lead to both improvements and unintended consequences. While regulators are often seen as fault-finders, the public expects more—they expect regulation to not only identify and prevent rule violations but also drive performance improvement. Therefore, regulatory reform must adopt a systemic approach, considering how regulations in one area affect others and impact the system as-a-whole.

This analysis adopts a systems and complexity thinking approach to explore the interconnected and interdependent dimensions of regulation. It firstly traces the historical shifts in organisational thinking and the slow regulatory responses, followed by a portrayal of the nature of organisations as socially constructed complex adaptive systems. It then highlights the pivotal role of governance and accountability, illustrating the repercussions of failure to adapt governance and accountability frameworks exemplified within the Australian nursing home sector. And finally, the paper suggests how a system-as-whole approaches to governance and accountability reforms may promote improvements in behaviours and quality outcomes and are illustrated in the context of the Australian nursing home system. The example aims to allude to principles and should not be seen as a prescriptive guideline—every organisation is unique and needs to find its own best solution.

Changing perspectives on organisations and regulation

There has been a notable shift in organisational focus from production outputs to a value-based outcomes philosophy, reflecting a broader change in the values that society attributes to its organizations and institutions (2,3) (Table 1). Ideally, the regulatory focus should have evolved in tandem with these changes; however, regulators in various jurisdictions have been slow to adapt and keep pace with the continuous renewal of organisations.

The failure to adapt to a values-based outcomes focus on regulation has had significant negative consequences in the service delivery sector, particularly in the health and aged care sector. While regulatory intervention may be necessary when breaches of pre-set rules are detected, the primary purpose should be firstly to serve the public interest to receive safe high-quality services, and secondly to enhance the performance of a regulated entity to help it meet its commitments.

The differences between a narrow ‘instrumental’ rules-based approach and an outcomes-focused public interest approach are evident in the context of ‘falls and major injuries’ (4) (Table 2) within the Australian Aged Care Quality and Safety Commission’s regulatory framework (5). While the preamble acknowledges that not all falls are preventable and interventions can mitigate falls risks, the reporting requirements focus ‘instrumentally’ on falls and injury frequencies rather than the ‘quality improvement’ actions taken to explore and manage the circumstances leading to a fall. The difference reflects, what Sumpter calls, the distinction between a statistical and complexity thinking mind frame (6). Although falls often result from advancing frailty, greater consideration must be given to the interdependencies with other factors like physical and emotional health issues, underlying infections, polypharmacy, physical falls hazards etc.

Organisations are socially constructed complex adaptive systems

Organisations are established to pursue a particular purpose and thus are ‘socially constructed’ complex adaptive systems. Effective, well-performing organisations are horizontally and vertically integrated, operating seamlessly based on four key principles—adherence to their clearly defined purpose, maintaining a focus on no more than 5 specific goals at any time, understanding their core values, and adherence to a handful of ‘simple rules’ or organisational operating principles that govern interactions with internal and external stakeholders (1).

From a structural standpoint, complex adaptive organisations are functionally layered (Figure 1). From a dynamic standpoint, higher functional levels must provide the necessary information to keep lower levels focused on the organisation’s purpose and its current priority goals. However, to provide effective instructions in a highly dynamic organisation, lower levels must freely provide feedback that enables organisational leadership to adapt their information and resource flows (7). Additionally, the leadership within a complex adaptive organisation must consider its operating environment consistent with both its internal and external regulatory settings.

Figure 1 The interdependencies between context, structure and function of an organisation system. The complex adaptive nature of the health system is illustrated through the health vortex metaphor. The system, like a vortex, requires the maintenance of a focal point from which the system emerges up leading to distinguishable but otherwise seamlessly integrated functional layers of organisation. The role of the top-level is the provision of information/resources that maintains the organisation’s membership ‘to do the work that needs to be done’. Each functional layer has unique roles and responsibilities that need to be monitored for their ‘system as-a-whole’ contributions [for more details see (1)]. Green bubbles show accountability indicators, red bubbles show governance indicators. GP, general practitioner (family physician in the American literature).

Responsive regulation and self-enforced regulation—a complex adaptive perspective

Responsive regulation and self-enforced regulation are two approaches to regulation that can be viewed through a complex adaptive lens. The intricate nature of the nursing home system necessitates adaptive regulation and accountability frameworks across all levels of organization. Therefore, the design of these frameworks must carefully consider their interdependent effects across the system ‘as-a-whole’—how does a requirement for one functional level support or hinder the work to be done at other functional levels (8). While embedding systemic thinking into regulatory design is imperative, it is not without risk. Although clarity avoids the need for interpretation (they must not be construed as being instructions), overly narrow regulation risks of being framed based on ideologies (e.g., restraints can never be justified) or personal beliefs/values (e.g., prioritising longevity overriding quality of life). Designing good regulation requires the input of all affected stakeholders to guarantee transparency and acceptability.

Regulatory philosophy shapes the governance and accountability frames

Governance and accountability frames reflect the perspectives of the system ‘as-a-whole’. Its primary purpose is to safeguard the public from potential harm stemming from organisations’ outputs, while also shielding each organisation from internal failures. Hence, well-designed governance and accountability frameworks (as a global frame) will not only mitigate risks but also ‘add value’ to each organisation (the local translation).

Governance operates as an oversight framework, while accountability serves as an answerability framework (Figure 2). These frameworks are not mutually exclusive; rather, the key distinction lies in the question of ‘to whom’, and ‘for what’? Governance primarily follows a process-oriented path, focusing on outputs to ensure and/or enhance compliance, whereas accountability follows a value-oriented path, examining outcomes that matter to ensure quality and safety. Such ‘value-chain governance’ approach, put into the context of value-based nursing home care can be described as: ‘the relationship among buyers (e.g., residents), sellers (e.g., operators), service providers (e.g., medical & care providers) & regulatory institutions, that operate within or influence the range of activities required to bring a product (e.g., quality of life) or service (e.g., requisite level of care) from inception to its end use’ (9).

Figure 2 Mental frames shape governance and accountability, and thereby shape how organisations operate. While regulations establish rules, policies, and oversight mechanisms to ensure an organization’s quality, safety, and effectiveness, their impacts are assessed through governance and accountability frameworks. Although these frameworks are interdependent and interrelated, they have important distinctive differences. The figure highlights the key philosophical differences, main proponents, and primary implementation approaches for each framework.

The differences between governance and accountability are succinctly captured by Peter Drucker’s distinction between ‘Doing things right’ and ‘Doing the right thing’ (10). Governance is reactive, focused on controlling variability trusting in protocols and procedures; accountability is proactive emphasising the elimination of hazards and continuous learning and improvement, trusting in people.

Regulatory thinking should focus on adding value

Regulation should be seen and experienced as adding value, rather than a constant threat. This necessitates a clear articulation of regulatory purpose (for the system ‘as-a-whole’), how regulatory adherence is assessed, and how observations are used to facilitate improvement (at the individual organisation/organisational level).

Regulators must recognise that their actions reverberate throughout the system ‘as-a-whole’, and that they are themselves part of a nested complex adaptive system. Therefore, regulators must firstly understand the system interdependencies within the individual organisations they are asked to regulate, and more importantly, how their actions impact the behaviours of those being regulated. Key considerations in relation to the regulation of nursing homes include:

• Inputs—does the system have the necessary physical infrastructure, necessary staff numbers with the required skills mix, necessary equipment, and other essential resources, and in particular, are they available under peak demand?
• Outputs—are issues such as the number of complaints, waiting times to attend to residents’ calls, adherence to treatment protocols for common conditions and safety of equipment use been addressed?
• Outcomes—are there measurable improvements in e.g., the number of falls, the number of medication errors, the number of infections, the number of avoidable hospital admissions and unexplained staff absenteeism?
• Value produced—are residents being settled? Do residents engage in social activities? Are staff liked by residents, and do relatives express appreciation of the care provided by staff?

Regulating public interest/common good organisations

While sanctions may be necessary in certain circumstances, they should always be considered as an option of last resort (11). Sometimes, the mere threat of regulatory action may be sufficient to achieve desired results (11). Nonetheless, it is essential for all stakeholders to have an unequivocal understanding of the ‘whats and whys’ of sanctionable practices.

Public interest regulation should prioritise safety and quality, which arise from the interdependent behaviours of the system. Critical questions to consider include how and why certain practices are regulated. When designing regulatory oversight, it is crucial to determine which aspects are best assessed quantitatively and which require qualitative or observational measures (12). Table 3 outlines potential measures that align with the purpose of residential aged care.

Failing to have a complex adaptive regulatory system for a complex adaptive organisation—the Australian aged care system as an example

The regulation of the aged care system in Australia has failed its users in a shameful way. The Royal Commission into Aged Care Quality and Safety succinctly summed it up in a single world—neglect (13). Neglect emerged as the ultimate outcome of the systemic failings in governance and accountability, which were assumed to be guaranteed by regulation.

In response to this damning assessment, a newly appointed regulator imposed increased documentation in ‘near real time’ on instrumental care delivery processes: frequencies of patient medication use, weight loss, skin integrity, falls and any physical altercations between residents or residents and staff. Such decontextualised numbers, which do not account for residents’ unique circumstances, are measures that do not ‘really’ matter (2,14).

However, this regulatory change has created significant ‘un-thought’ of consequences that in fact are likely to perpetuate neglect. Staff now have even less time to attend to the needs of residents, and it has increased proprietors’ fears of failing regulatory protocols and thus the risk of losing their operating licences. The ‘un-thought’ of consequence of more prescriptive documentation has affected staff morale and job satisfaction, resulting in increased staff turnover, experienced staff leaving the sector, and the inability to recruit new staff to the sector (15).

Coercive vs. enforcement powers

Ideally the regulator should not possess conflicting powers, such as licencing operators based on certain rules and subsequently being able to investigate and prosecute. When both functions are held by the same authority as is the case in the Australian nursing home system, it causes confusion amongst proprietors and staff. During regulatory visits to a nursing home, staff does wonder whether the regulator is exercising coercive powers (monitoring care delivery), or enforcement powers (investigating with a view to prosecute).

In Australia, regulators generally prioritise the use of coercive powers over enforcement powers (16). This approach is intended to safeguard and protect common law privileges, such as the right to address alleged negligence. To ensure clarity and avoid confusion, it is recommended that distinct functions be carried out separately by different regulatory officials, preferably from separate entities. When coercive and enforcement powers are carried out concurrently, the organisation invariably will become uncertain about regulatory priorities, resulting in sub-standard or even catastrophic outcomes.

Assuring accountability that matters

True accountability that matters arises from observing how a person is cared for (14). When care is provided well, staff have discharged their responsibilities, rendering the currently imposed ‘objective measures’ meaningless. On the other hand, if staff are observed to fail in providing appropriate care, it is essential to assess the underlying reasons. These are invariably systemic in nature, with the most common interacting factors being understaffing, lack of staff skills, and lack of clinical leadership.

Interdependencies within a regulatory framework should be the focus. Three key questions are:

• Is the purpose clear—do we understand what matters?
• Are the criteria clear—which input, outputs and outcomes reflect the value we want to achieve?
• Are the regulatory means clear to system actors—is there a widely accepted codes of practice?

By focusing on these questions, regulators can ensure that their regulatory systems are designed to promote high-quality care and address the root causes of any failings. Complex adaptive regulation, taking into account the need for contextually needed adaptation, is regulation that best can reduce though never prevent all failings. This approach prioritizes the well-being of residents and supports staff in fulfilling their responsibilities effectively.

The need to measure what matters

Accountability for the care and well-being of nursing home residents must focus on ‘what matters’ (14). When staff are diverted from the prime focus on resident outcomes, failure will become inevitable. As Einstein famously said: “Not everything that can be counted, counts, and not everything that counts can be counted.” Many bureaucratic measures tend to focus on surrogate features (such as increasing process documentation) and are largely meaningless when evaluated against the system’s purpose: to protect the health and well-being of the recipients of aged care services.

It appears that the regulator is preoccupied with bureaucratic processes. The emphasis on counting and ticking checklists does not align with the necessary focus on meeting residents’ care needs. Quantitative measures, such as documented daily care minutes for aged care residents, often take precedence. However, this approach also devalues professional judgement which is crucial for determining ‘what matters’ to meet this resident’s needs under the prevailing contextual constraints.

Most treatments ‘can be measured easily’ based on looking at their ‘hard’ outcomes (typically complications, morbidity, or mortality). Yet, the causes of these outcomes may not be as easily measured, they are often not even identifiable nor amenable to remediation in which case they are meaningless. Meanwhile, many valuable qualitative measures are criticised as ‘being subjective’. This dissonance arises from a failure to understand and appreciate the complex dynamics of health, and their often rapidly emerging health care needs (17,18).

The way forward

Rethinking the role of health system policy makers and health system regulators must begin with recognising organisations as socially constructed, complex adaptive systems that are functionally layered. The outputs of a horizontally and vertically integrated organisation arise from the interconnected and interdependent dynamics across the system ‘as-a-whole’. Equally health system policy makers and regulators must also embrace a values-based outcomes philosophy, as this is in the public’s best interest. To be meaningful and to add value to an organisation, governance and accountability frameworks must focus on the policy, practice and operational approaches taken by an organisation in the pursuit of its purpose.

Regulatory redesign must prioritise ‘value outcomes’ that reflect patient and community care needs, desired care experiences, and safety. When regulators act predictably, proportionately and with intention, they will be seen as ‘adding value’, rather than being a constant threat that inhibits the system’s seamless horizontally and vertically integrated operations. In this way, regulation will fulfill its purpose: protecting health system users from potential harm.

Conclusions

Regulating health systems ‘as-a-whole’ necessitates the nuanced understanding of organisations as complex adaptive systems. Health care policy and regulation significantly shape care delivery and, consequently, the well-being of individuals and communities. Effective regulation requires collaboration among stakeholders, balancing diverse perspectives and demands. Governance and accountability frameworks, as regulatory enforcement instruments, must align with the system ‘as-a-whole’ purpose to ensure quality, safety, and effectiveness. Hence, regulators need to comprehend the interdependencies within nested organisations and the impact of their actions on behaviours. Regulation should be seen as adding value rather than being a threat, necessitating a clear articulation of regulatory purposes. Value adding approaches primarily focus on facilitating improvements by observing care delivery rather than merely checking prescribed process documentation.

Acknowledgments

Funding: The research topic was funded by The Royal Academy of Engineering as part of their Safer Complex Systems Initiative (grant No. CFCS1B100001).

Footnote

Peer Review File: Available at https://jhmhp.amegroups.com/article/view/10.21037/jhmhp-24-64/prf

Conflicts of Interest: Both authors have completed the ICMJE uniform disclosure form (available at https://jhmhp.amegroups.com/article/view/10.21037/jhmhp-24-64/coif). J.P.S. received book royalties from Springer. The other author has no conflicts of interest to declare.

Ethical Statement: The authors are accountable for all aspects of the work in ensuring that questions related to the accuracy or integrity of any part of the work are appropriately investigated and resolved.

Open Access Statement: This is an Open Access article distributed in accordance with the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License (CC BY-NC-ND 4.0), which permits the non-commercial replication and distribution of the article with the strict proviso that no changes or edits are made and the original work is properly cited (including links to both the formal publication through the relevant DOI and the license). See: https://creativecommons.org/licenses/by-nc-nd/4.0/.

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