Minutes of a meeting of the Board of the Accident Compensation Corporation held at
the ACC Board Room, Level 11, PwC Tower, 188 Quay Street, Auckland on Thursday, 28
February 2019 at 9.00 am.
Present
Dame Paula Rebstock
Chair
Ms Anita Mazzoleni
Member
Mr James Mil er
Member
Ms Kristy McDonald ONZM QC Member
Mr David May
Member
Ms Leona Murphy
Member
Dr Tracey Batten
Member
Mr John Brabazon
Member
In attendance
Mr Scott Pickering
Chief Executive
Mr Mike Tully
Chief Operating Officer
Mr Peter Fletcher
Chief Technology & Transformation Officer
Ms Deborah Roche
Chief Governance Officer
Mr Herwig Raubal
Chief Actuarial and Risk Officer
Mr John Healy
Chief Financial Officer
9(2)(a)
Head of Provider Service Delivery
Item 5.4
Ms Gabrielle O’Connor
Head of Client Service Delivery
Items 3.1 – 4.1
9(2)(a)
Head of Health and Safety Systems
Item 6.1
9(2)(a)
Head of Customer Insights and Experience
Item 5.2
9(2)(a)
Head of Operations Services
Items 5.2 – 5.3
9(2)(a)
Manager Corporate Secretariat
9(2)(a)
Senior Associate Company Secretary
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Procedural Business
Apologies
There were no apologies.
Board only session
Chief Executive’s Report
Mr Pickering discussed the following topics with the Board:
• Annual “State of the Nation” address to the Board focusing on priorities for the CE and Executive
in calendar year 2019.
• Rehabilitation review update.
• Select Committee update.
• Cabinet ICIP presentation update.
Operational Reporting
ICIP Reporting
Mr Fletcher summarised the report, focusing on the following points:
• It had been another good month of progress in ICIP.
• For the Analytics project, performance testing at volume had started through the platform, and
the initial results had exceeded expectations. In response to Board queries, Mr Fletcher
explained that—
o a fully functioning platform would be in place by June 2019.
o there would be continuing investment in Analytics, but getting the working platform would be
significant.
o Management was happy with the testing of the information that came through the platform.
o there were no significant business processes the platform could not handle, but as data was
progressively added, issues may develop—however, nothing that would block the path to
benefits.
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o the remediation work covered three areas (Eos 8.8, Client Payments 1 (CP1), and Next
Generation Case Management (Next Gen)), and it was still relevant.
• Eos 8.8 was on track for go live in March 2019. The dress rehearsal had uncovered some minor
defects that were being worked through. The Executive go live decision would be on 5 March
2019. The Board would be briefed before the final go live decision on the weekend (9-10
March). In response to Board queries, Mr Fletcher explained that—
o the worst that could happen would be to progress to the point where the go live could not be
rolled back, and on Monday, 11 March, there was no working claims management platform.
However, there were many checks and balances to ensure that that would not happen.
o the final go live decision would likely be on Sunday, 10 March 2019. The Board emphasised
that it would not take any undue risk, and that its approach would be risk-averse. The Board
requested a conference call to be set up before go live, for Management to talk through the
‘go/no go’ decision with the Board. There was zero tolerance for clients not getting paid and
the Board was wil ing to accept a delay to ensure clients would continue to get paid.
o nothing that had occurred in testing was elevating his level of concern. There were about 28
severity three and four defects to be resolved. Further testing would be completed to ensure
no remediation would be needed because of the fixes. Mr Fletcher confirmed that the
majority of the assumptions Management had made were true, and he noted that many of
the people working on the project had also worked on the Eos 8.1 upgrade a few years ago
that hadn’t gone well, and that their experience was being used for the Eos 8.8 upgrade.
o the Eos 8.8 launch would not be the end of MFP and Pathway. Instead, this would take the
Eos platform to its latest release, remove some customisation, and put some useful
products in place, like the Claim on a Page programme and a calendar that showed future-
dated tasks. Pathway would continue operating until at least 2021.
o as part of the go/no go decision, the project would be locked down, tested, and a
recommendation made to the Board. There would be time to back it al out if needed.
However, after midday Sunday, 10 March, systems were being updated and it would be
difficult to then go back.
o Mr Fletcher’s team had been working closely with Ms O’Connor’s team on the business
continuity plan for Eos 8.8 and the contingencies that might happen at go live and later.
Mr Tully added that there was a plan in place to handle events if Eos 8.8 went down. It
would be highly unlikely that the whole system would go down.
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• CP1 would go live in May 2019, with tranche 1 of CP2 going live in November 2019, and at least
one other tranche of CP2 in March 2020. Pathway would continue until after that, but each time
a release occurred, the operating risk of Pathway would have been significantly reduced. In
response to Board queries, Mr Fletcher explained that—
o CP2 would have testing with the sprints, unlike CP1 where leaving performance testing to
the end had created a risk of finding issues late in the piece. However, Management was
not unhappy with the CP1 testing. Comparison testing of payments would occur between
Pathway and the Eos platform. There would be the opportunity to roll back to the Pathway
system if needed.
o a Treasury Gateway Review had just been completed for CP1, and it reached the same
conclusions as Management: timeframes were tight and there were risks, but there was no
indication that go live could not be achieved by 6 May. Treasury had no ‘do now’ actions for
ACC for CP1. In a separate Gateway Review for the overall portfolio, there were around
seven recommendations, around four of which were ‘do now’ actions, and ACC was already
working on three of the ‘do now’ actions. Nothing unexpected had come out of the reviews.
• Most of the Next Gen detail would be covered in Agenda Item 4.1. The issues that had been
raised in the IQA review were being actively addressed by Management. Management would
have liked to have been further progressed, but Mr Fletcher fully supported the proposal in front
of the Board today. In response to Board queries, Mr Fletcher explained that—
o it would be better if the November 2019 release had more certainty. The August 2019
release was locked in for delivery, Management had high confidence, and everything was
well understood. For November, the detail stil needed to be worked through. Essentially,
the August release would bring a better experience than that available now in Launch Pad.
Rollout would be in a contained area, allowing ACC to manage any issues, implement the
model, and learn. The November release would build on that and further improve the
experience, and would have checks and usability tests included in the process to ensure it
worked for staff and customers.
• The Health Sector Strategy (HSS) would be discussed in more detail at the April 2019 Board
workshop. The Board noted that it was critical for ACC to realise the benefits of the Proofs of
Concept (POCs) done in the HSS. The Board also noted, given the issues that Claims Front
End Establishment had had, and Mr Fletcher’s acknowledgment (at the meeting of the Risk
Assurance and Audit Committee the previous day) of a lack of process mapping behind that,
there was an opportunity to do detailed process mapping in the HSS.
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• While there was a lot of work stil to do in ICIP, it was also important to uplift the systems
changes in the Investments Team. The Board agreed with Mr Fletcher’s suggestion to include a
brief update in the monthly ICIP report on progress being made in the Investments area.
RESOLVED: The ACC Board resolved to:
Note the ICIP Report.
Performance Report
(a)
Claims Costs
Mr Healy summarised the key points of the Claims Costs Report, focusing on:
• The increase in claims costs year-on-year, which would be picked up in the budget paper under
Agenda Item 5.5.
• Claims in the motor vehicle account (MVA) were
c.32,000 out of a total of
c.2 million claims. The
automated lodgement system understated the MVA claims by a few hundred claims. The root
cause of the problem was an automated system trying to pick up what was previously classified
manually. A team was working on automating the process better. In response to Board a query
regarding the margin of error in the automated key word capture, Mr Tully explained that, when
the work was all manual, the margin of error by staff was higher than with the new technology.
• Regarding injury prevention (IP), better accuracy and consistency in picking up some attributes
of claims was being persued. For example, some claims attributed to rugby league should have
been attributed to rugby union. The Analytics platform would automate this currently manual
process.
The Board discussed the 22% decrease in death and serious injury crashes in Auckland that had
been achieved this year following the Police having re-establishing its previous degree of
enforcement activity, amongst other actions. The Board proposed that ACC challenge itself in the
new budget on how much it could achieve by working with its partners. Ms Roche explained that
part of the issue had been that agencies defined ‘serious injury’ differently. The Board queried
whether definitions were obscuring the data. In any event, the Auckland statistics highlighted the
significant achievements that could be made through IP, and working with other agencies.
Management would also look at the findings of the NZTA review into its certification processes for
warrant of fitness issuers.
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The Board discussed the extent to which ACC could influence claims costs drivers, and the extent
to which medical professionals and physiotherapists may game the system. Management did not
believe there was a systemic problem. It was an issue of outliers.
(b)
Operational and Financial Performance Report
Mr Healy highlighted key parts of the report:
• Review performance continued to trend positively.
• Privacy and Health & Safety were also trending positively.
• On rehabilitation performance, Management was obtaining an external perspective and a
benchmark against best practice.
• In response to Board queries—
o Mr Healy explained that the key driver of worsening performance was the volume of claims,
which had increased by 60%. Meanwhile, the number of employees had remained static.
Mr Tully added that actions were in place to stabilise performance and not let it deteriorate
further, but it did not make sense to bring more staff on board now.
o Mr Healy agreed that the volume increases would be reviewed for the budget, and there
would be more of a focus on cross-checking broader areas like the economic cycle, case
mix, etc.
o Mr Tully would bring to the Board, in the near future, benchmarking rehabilitation data from
Victoria’s Transport Accident Commission and from the British Columbia scheme. That
would provide comparative information for ACC. Mr Tully explained that those projects
would be unlikely to be factored into the budget for this year.
o Ms Roche explained that the Head of Privacy had followed up with the teams and locations
that had seen a spike in Level 1 privacy breaches in January 2019, and that he was
comfortable with the actions being taken.
RESOLVED: The ACC Board resolved to:
(a)
Note the Claims Cost Report.
(b)
Note the Operational and Financial Performance Report.
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Board Papers
Next Generation Case Management Approach and Financial Update
Mr Tully introduced the update, covering:
• A recap on how ACC had arrived at the decision it was asking the Board to make at this
meeting.
• The consultation that would be undertaken with the Minister, ACC leaders, and then all staff.
• The major elements that were now identified as BAU activity that previously were part of Next
Gen. These were leadership bootcamps, telephony, and personal injury claim type. Several
options were being evaluated to move away from the highly customised ACC45 form.
In response to Board queries, Mr Tully explained that the Executive and leadership teams were all
in favour of the approach; no one was highlighting areas of risk outside those already highlighted
to the Board; and there were no risks he was losing sleep over. 9(2)(a)
indicated that PwC
was supportive that ACC was ready to scale Next Gen. He explained that the plan underway was
progressing well and the transition did not have too many major risks. Mr Fletcher reported that
9(2)(a)
, who was unable to attend the meeting, had text messaged him affirmatively.
The Board commended the quality of the paper, noting it answered the Board’s questions and
explained the cost differences. However, the Board challenged the improvement in weekly
compensation (WC) days paid by 1.25 days, in the benefits section of the paper. Mr Tully
explained that Management wanted to under-promise and over-deliver, and that Management was
progressing toward higher targets. Mr Healy added that the total benefit was the same as in the
original case. Attributing benefits to any one piece of work was difficult and Management was
committed to achieving a 5.5-day improvement through ICIP as a whole. Management agreed to
add a recommendation addressing this issue.
In response to further Board queries—
• Ms Champness confirmed that Management had thought about how the Option 2 approach
would impact staff, the team environment, and motivation. By doing the consultation all at once
and early, people whose jobs were affected would have more options and would also have
priority for other roles that opened up across ACC. Management would be taking a regular
pulse of impacted areas and would share that information with the Board.
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link to page 8
• Mr Tully agreed to ensure that items that were no longer part of Next Gen were also removed
from the original business case comparator, to allow the Board to see a like-for-like comparison.
• Mr Tully explained that clinical pathways would mostly be addressed through the HSS.
Ms O’Connor explained that the intention was to integrate with the HSS work so there could be
a shared view of care with the provider, client, and ACC, all available on MyACC.
• Ms O’Connor explained that Hutt Valley would see the largest percentage change in location, as
many of the functions in the Hutt Valley would be brought into the Wellington hub.
Ms Champness explained that the messaging focused on how the change was supporting
ACC customers—it was not about efficiency gains for ACC.
The Board asked for additional reporting on Next Gen for the next six to nine months.
RESOLVED: The ACC Board resolved to:
a)
Note the updated cost and benefits for Options 1 and 2.
b)
Note the total project cost of $73.3 mil ion (excluding contingency funding of $8 mil ion)
exceeds ICIP baseline for NGCM of $54.3 mil ion (excluding contingency funding of
$7 mil ion) as approved in June 2018. The additional $20 mil ion (including contingency)
required wil be funded by overall forecasted underspend within ICIP.
1
c)
Note that Option 2 costs $2.6 mil ion more than Option 1 due to some repeat roll out
activities and support of manual workarounds.
d)
Note that the overall ICIP cost of $669 mil ion wil remain unchanged.
e)
Note that the benefits profile for Option 2 is consistent with the business case, and
commits to contributing $431 mil ion (cumulative) by 2030 to the ICIP.
f)
Note that the Option 2 of the NGCM project wil generate a Net Present Value of $176.8
mil ion over the 13-year period to 2029/30 at a discount rate of 7%, compared to $188.8
mil ion in the business case.
g)
Note the recommendation from Management remains with rolling out with Option 2.
h)
Note the proposed Option 2 approach for staff consultation in Phase Three starting from
18 March 2019.
i)
Note the proposed external engagement approach that wil be executed alongside of the
Phase Three consultation.
1 The numbers in this resolution were adjusted at the Board’s request, after Management discussed the relevant figures with
Board Members after the meeting.
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j)
Approve the revised budget of $73.3 mil ion and authorise the Chief Executive or his
delegate to approve its drawdown as required.
k)
Approve the revised contingency funding of $8 mil ion (set at 20% in response to the
IQA finding) from within the overall Integrated Change Investment Portfolio (ICIP), held
by the Board.
l)
Approve the transition into roll out beginning with the Phase Three consultation.
m)
Note that NGCM is a key part of delivering the wider ICIP change that has a committed
weekly compensation reduction target of 5.5 days by 2023/24.
n)
Note that the attribution of the overall benefit is difficult to assign to any single project,
but that Management is committed to delivering the overall target.
o)
Note that Management wil continue to update the outlook of the weekly compensation
days paid as NGCM progresses.
Board Papers
Future Dunedin and Hamilton Hub Workplace Locations
Mr Healy introduced the paper, explaining that some of the items reflected in the updated paper
were to ensure competitive tension in the process, through ACC engaging with two parties for each
location. Negotiations would result in a preferred party for each site.
In response to Board queries, Mr Healy explained that the development risk and cost and time
exposures would be addressed in the negotiations with the parties. Management’s negotiations
with the parties would bear the Investment Team’s potential interest in mind. Mr Healy agreed to
seek an option for another floor in the developments, to allow ACC to expand in the future.
RESOLVED: The ACC Board resolved to:
(a)
Note that Dunedin and Hamilton are primary hubs in ACC’s long-term property strategy and
therefore decisions on future property development for these sites are of strategic
significance.
(b)
Note that ACC proposes entering into development agreements which wil result in long
term leases and likely initiate the building of single sites by the landlords for each of the
Dunedin and Hamilton hubs, and consolidation of existing sites into the single sites. ACC is
not expected to be the sole tenant and is likely to occupy a third of the space or less in the
current proposals.
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(c)
Note the estimated timelines for both developments, with a projected completion date for
both Dunedin and Hamilton of late 2021.
(d)
Note that existing lease arrangements at ACC’s Hamilton and Dunedin sites provide a
unique opportunity to consider new development options and that another similar
opportunity is unlikely to arise for at least another six years.
(e)
Note the preference for a single new-build site option at both Dunedin and Hamilton over
existing, multi-site options due to overall higher perceived benefits.
(f)
Note the proposed new-build developments would reflect an NBS (New Building Standard)
rating of at least 100% and that they would meet appropriate environmental standards.
(g)
Note two of the proposed development partners for Dunedin and Hamilton (Ngāi Tahu and
Tainui Group) provide an opportunity to partner with Māori, to explore further mutual
opportunities and to deepen ACC’s engagement with the local communities, consistent with
ACC’s Whāia Te Tika strategy.
(h)
Note the estimated present value cost over 10 years, comprising mainly lease and fit-out
costs are as follows:
i. Dunedin CBD (Ngāi Tahu) new build option estimate is $37 mil ion
ii. Dunedin CBD (Logic Group) new build option estimate is $34 mil ion
iii. Hamilton fringe CBD (Tainui Group) new build option estimate is $35 mil ion
iv. Hamilton fringe CBD (Focus on Property) new build option estimate is $35 mil ion
(i)
Note the estimated present value cost over 10 years for the four proposed new-build
development options are estimated to be up to 1/3 higher than the existing development
expansion options.
(j)
Note that cost estimations are Management’s best estimates but are stil subject to
commercial negotiations and therefore subject to change.
(k)
Note that, as is common with new builds, there is an element of planning and development
risk.
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(l)
Note that, two proposals wil be taken through to the next negotiation stage in both
Hamilton and Dunedin. This is wil ensure continued commercial leverage.
(m)
Approve Management proceeding with four single, new-build site options into the next
negotiation stage with preferred development partners as follows:
i. Dunedin CBD new build option with Ngāi Tahu as the development partner
ii. Dunedin CBD new build option with Logic Group as the development partner
iii. Hamilton fringe CBD new build option with Tainui Group as the development partner
iv. Hamilton fringe CBD new build option with Focus on Property as the development
partner
(n)
Note the residual risks related to the selection process and the planned mitigation actions
(o)
Note that upon completion of the negotiations with the four development partners, a
preferred option for each site wil be presented for progression to final approval.
Customer Feedback and Issues Resolution
Mr Pickering introduced 9(2)(a)
, and explained that the paper outlined ACC’s progress in the
ability for customers to raise complaints. Complaints had grown because ACC had opened more
channels for customers to express their views. Mr Pickering received customer insights every day.
Incorporating feedback loops was a response to the 2014 review by the Office of the Auditor-
General (OAG) into customer complaints. ACC had also built a superb resolution team based in
Hamilton. The information presented to the Board at this meeting was the baseline, and
Management was seeking feedback from the Board. Mr Pickering acknowledged the recent
Australian reviews in the financial sectors, and he proposed that ACC aim to be a leader in this
area.
9(2)(a)
provided a handout on how customer feedback resolution would work. By providing
more channels for customers to provide feedback, ACC had received more feedback—both
negative and positive. Heartbeat was the most significant channel ACC had implemented. It was
close to real-time, running 24-hours behind. Heartbeat was being used in Launch Pad.
The Board suggested that, where ACC’s obligation is to report publicly on complaints, ACC should
report on both positive and negative feedback. The Board cautioned against overreading the
Page 11 of 30
significance of the data, as most feedback is from a self-selecting group who would have had
extreme experiences, positive or negative. 9(2)(a)
agreed and explained that Heartbeat was
achieving a 17% response rate, while best practice was around 10% - 15%.
In response to a Board query, 9(2)(a)
explained that the resolution team was centralised and
trained and was led by an experienced negotiator and complaints resolution specialist. The Board
commented that this was a huge area of legal and reputational risk to ACC and that negotiation
and complaints resolution were not the only skil s resolution team members needed. There was a
real potential for information to take too long to get to the Board. The OAG recommendation
around ‘providing senior leadership, the Board, and the public with information on how the
organisation has learned from complaints to make service improvements’ had not been met and
needed to be addressed. The Board needed intelligence on the systemic issues that were
happening in the complaints area, with a risk-based lens applied to those issues.
The Board asked for more information on—
• the complaints with long tails, and how resolution could take over 100 days, the trends over time,
and how lessons were shared across all sites; and
• insight into the customers, including the date of the complaint, the person’s identity, and a brief
summary of the issue.
The Board suggested that ACC needed to improve at identifying the very bad cases. The key was
about how to elevate that information to the Board so it could understand what was going on.
In response to a Board query, 9(2)(a)
explained that 9(2)(a)
would be best placed to
provide feedback on how ACC could improve its Māori engagement.
The Board suggested that reporting could include:
• trends—both the themes and the totals
• external benchmarks and an internal ACC benchmark
• what ‘good’ looked like.
In response to a Board query, Mr Tully explained that Heartbeat was being looked at to replace
Gallup for Next Gen reporting to the Board.
RESOLVED: The ACC Board resolved to:
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(a)
Note: Since ACC has increased the accessibility and visibility of its feedback/complaints
channels, the number of recorded complaints has increased.
(b)
Note: The enhanced system in place to identify and respond to customer dissatisfaction,
resolve complaints and manage any reputational impacts of customer issues.
(c)
Note: Provide feedback on the actions being taken to increase the visibility of customer
feedback and complaints information to the Board. (Appendix 1: Draft Complaints Board
Report)
(d)
Note: The progress made towards addressing the recommendations from the 2014 OAG
review into ACC’s handling of customer complaints.
Reviewer Services and Dispute Resolution
9(2)(a)
introduced the paper and explained that he was aware of the high level of public interest
in reviews. Teams across ACC were ensuring the process was robust. The plan was to take all
seven shortlisted providers to the next stage, and the Board would be updated on the outcome in
April 2019.
In response to Board queries, 9(2)(a)
explained that—
• he had high confidence that the new approach would alleviate the historic problems. The
planned system would have an anonymised scheduling tool where the Panel members put up
times when they could conduct the review hearing. The Panel of providers would provide
competition in the system.
• Management had not yet considered putting the customer’s voice into the selection process to
ensure that customers felt there was a choice and that the person providing the review was
independent of ACC. The Board asked for that to be included, noting that this issue had arisen
at ACC’s Select Committee financial hearing.
• some of the providers who had scored low in the initial round were better performers than the
application process had indicated, and they would be included in the next round of the process.
• the proposed 4.39% increase to FairWay was robust and was based on the lack of increase over
the past three years. Mr Healy reported that he was comfortable with the increase.
• because FairWay had diversified its business, removing some ACC reviews from FairWay would
not have as big an impact on FairWay as it might otherwise have done.
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The Board expressed appreciation for 9(2)(a)
work, and acknowledged him as one of the
Board’s go-to people and as a very good leader with an outstanding team.
ACTION: Management to report back on the next stage of dispute resolutions contracts.
RESOLVED: The ACC Board resolved to:
In relation to the FairWay Contract:
(a)
Note that the FairWay Resolution Limited (FairWay) Dispute Resolution Services contract
(FairWay Contract) expires on 30 June 2019 and ACC wil not be exercising its two-year
renewal option.
(b)
Note that the FairWay Contract may need to be extended if FairWay is not included in the
new panel of providers as part of implementing a new Reviewer Services and Dispute
Resolution solution (New Services Panel), solely to allow for existing claims as at 30 June
2019 to be completed.
(c)
Note that ACC’s Corporate Delegations require the Board to approve all contract variations
where the Whole of Life Costs (WoLC) exceed $30 mil ion.
(d)
Delegate authority to the Chief Executive to approve a variation to extend the FairWay
Contract, should this be necessary to allow for existing claims to be completed.
(e)
Note that FairWay has a contractual right to request, and has requested, an annual price
adjustment based on the increase to New Zealand’s Labour Cost Index.
(f)
Approve a price increase of 4.39% to the FairWay Contract fee schedule, to be effective
from 1 July 2018.
(g)
Delegate authority to the Chief Executive to approve the variation to the FairWay Contract
(Appendix A).
(h)
Note that the increase, together with an anticipated volume increase of 3.9% for FY18/19,
has a cost impact of up to $1.2 mil ion, resulting in WoLC of $64.6 mil ion for the FairWay
Contract.
In relation to the New Services Panel:
(i)
Note that ACC has issued a Request for Proposals for Reviewer Services and Dispute
Resolution.
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(j)
Note the procurement process complies with both ACC Procurement Policy and the
Government Rules of Sourcing.
(k)
Note that Board approval to shortlist providers for the New Services Panel is required by
ACC’s Corporate Delegations as the WoLC for the New Services Panel are $184.9 million.
(l)
Approve the following shortlist of providers for the New Services Panel:
i. CODR Limited
ii. Clayton Associates T/A Talk Meet Resolve
iii. FairWay Resolution Limited
iv. Gresson Dorman
v. Mediation Aotearoa Limited
vi. Meredith Connell
vii. New Zealand Dispute Resolution Centre
(m)
Note that shortlisted providers wil undergo a further evaluation before a preferred panel of
providers is selected.
(n)
Note that Board approval to select the providers for the New Services Panel is required by
ACC’s Corporate Delegations as the WoLC exceed $30 million.
Contracts
(a)
Artificial Limbs
9(2)(a)
summarised the paper. In response to a Board query, 9(2)(a)
agreed that it had taken a
long time to replace this contract and the new process was more sensible.
RESOLVED: The ACC Board resolved to:
(a)
Note that the current contract for Artificial Limb Services has been in place since 2003, was
last reviewed in 2009, and has no end date.
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(b)
Note that feedback from stakeholders indicates that the current contract for Artificial Limb
Services is limited to the fitting and provision of a prosthetic device and misses’
opportunities to address the wider needs of clients.
(c)
Approve a new Artificial Limb Service contract commencing 1 August 2019 for an initial
five-year term with two rights of renewal of three years and two years (5+3+2).
(d)
Delegate authority to the Head of Provider Service Delivery to approve the
Recommendation to Select and subsequent contract award, after the open tender process.
(e)
Note that the Whole of Life Cost (WoLC) of the service including renewals is $132.1 million
and that ACC’s Corporate Delegations section B3.1 require the Board to approve
Recommendations to Select for contracts with WoLC of over $30 million.
(f)
Note that new Artificial Limb Service contract is expected to cost 1.1% ($116,000) more per
annum than the current contract, but wil deliver better client outcomes than the current
contract.
(g)
Note the proposed new Artificial Limb Service contract has no material impact on the
Outstanding Claims Liability, Levies or the Non-Earners’ appropriation.
(h)
Note that the proposed tender process is compliant with the Government Rules of Sourcing
and ACC’s Procurement Policy.
(b)
Escalated Care Pathways Update
9(2)(a)
took the Board through a presentation which he handed out in hard copy: it showed that
for shoulder, knee, and spine treatments, by the end of 12 months, 20% of people have not
returned to work. The cost of surgery was growing faster than inflation and had a 12.7x multiplier
for the OCL. There was an unsustainable increase in demand. For the anterior cruciate ligament
(ACL) POC, the outcomes-based purchasing approach had reduced return to work times by
four weeks and had halved the standard deviation. Two years into the POC there was a 30% lower
level of same site re-injury.
In response to Board queries, 9(2)(a)
explained that—
• two thirds of the South Island was covered by the ACL POC outcomes based purchasing.
However, instead of covering the whole country, it was better to expand to include knees,
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shoulders, and spines. While the ACL POC was successful, it represented only 1,800 of the
28,500 orthopaedic procedures ACC purchased every year.
• fully outcomes based purchasing would be achieved by 2023. ACC would run a parallel system
in the meantime by paying fees for services for the other procedures. ACC was purchasing
ACLs on an outcomes basis in the South Island from providers involved in the POC. In the
North Island, ACC paid fees for services.
• Providers stil needed to come together on a consortium basis, and open up the services to a
wider range of procedures. If ACC focused solely on the ACLs only 1,800 of 28,500 procedures
would be covered. The time and resource would be better put into widening the procedures.
The Board commented on needing to find ways to accelerate this, noting that practice wil change
significantly over the proposed four-year timeframe. 9(2)(a)
explained that the approach allowed
for scaling up and for building the evidence base as quickly as possible.
The Board asked that, for the April ICIP workshop, Management be prepared to answer the
Board’s question: What would you need to do to accelerate?
The Board discussed issues with provider IT systems, and whether it would be possible for ACC to
facilitate shared IT platforms. 9(2)(a)
cautioned that, with the plethora of systems, ACC needed to
ensure it added value and not confusion. The Board asked that this issue be included in the April
workshop.
RESOLVED: The ACC Board resolved to:
(a)
Note that movement to value based purchasing in health care is a core component of the
Health Services Strategy, that requires changes in approach by both funders and providers.
(b)
Note that the Anterior Cruciate Ligament Proof of Concept undertaken in 2017-18
demonstrated significant gains to clients and ACC from value based purchasing, which can
be extrapolated to other injury types.
(c)
Note that following an Expression of Interest process, ACC has been undertaking a co-
design procurement process with six providers for the development of value based
pathways of care for knee, shoulder and spinal injuries.
(d)
Note that the co-design process culminated in a Request for Proposal (RFP) issued to
those six providers, seeking their submission of a final pathway design and commercial
proposition.
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(e)
Note that the costs and commercial models proposed through the RFP process indicate
that the provider sector has not yet shifted its thinking to fully accommodate outcomes
based models.
(f)
Note that ACC wil engage further with providers at the conclusion of the RFP evaluation.
(g)
Note that approval to proceed to the contracting stage wil be sought from the Board, as
WoLC wil be in excess of $30m, later in the year.
Budget 2019/20
Mr Healy briefed the Board on the paper, focusing on the following:
• As CFO, Mr Healy had a heightened interest and concern in the cost and revenue trends.
• Mr Healy would provide to the Board a regular view of the impact of the figures from the different
parts of ACC on the levy projections, Account by Account, forecasting for future levy increases.
• For claims costs, while there were drivers that ACC had less control over, more could be done
with IP and using analytics better to ensure ACC’s money was wisely spent. Opportunities
included looking, on a real-time basis, at the trends behind the significant volume growth in
new WC claims, and understanding what was driving them and what actions could be taken. For
example, two thirds of the volume increase was from the Earners’ Account, with a large
proportion of it from males aged 15 to 54, engaging in activities outside of work. The IP team
could look at that cohort and see what ACC could do to influence the trend.
The Board discussed the paper and suggested that, for the new budget figures, Mr Healy look
across all the issues, including the economic cycle, case mix etc. Mr Healy would bring those
elements to the Board’s March budget discussion, acknowledging that the budget is set at a
certain time and that it quickly becomes dated. For that reason, he was looking at doing rolling
forecasting for the Board.
The Board queried the projected claims costs increases. Mr Healy explained that he was looking
for efficiencies. He explained that the bottom line balance can move significantly due to interest
rate changes and so on, but the underlying liability would continue to grow because the Scheme
was not yet mature. Other factors like legislation change, pay equity, and WC continuance rates
fed into underlying growth. Regarding solvency and the OCL, investment returns were expected to
be lower than in the past. Mr Healy concurred with the Board that the future would be more difficult
for the Scheme, as there was more upwards cost pressure, a growing population of age and
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complexity, lower investment returns, and levy recommendations that the government had not
approved.
In response to a Board query regarding sensitive claims volume growth, Mr Tully suggested that it
may just have begun to settle. However, the cross-government work on sexual abuse was likely to
result in it climbing again.
The Board cautioned Mr Healy to not project the growth too low in the new budget; to be realistic.
The Board asked for transparency about ICIP costs and benefits. In relation to solvency and levies,
ACC had told quite a good story about some of the efficiency gains we were finding, and that
needed to continue.
RESOLVED: The ACC Board resolved to:
(a)
Note the context for the draft Budget 2019/20.
Quarterly Enterprise Risk and Compliance Report
Mr Raubal reported on:
• The reset to the style of the report.
• The risk profile, which had deteriorated across the organisation. Customer outcomes and
people risk was driving this.
• There was slower progress on treatments, and questions about scope and what would change
the risk profile, and questions about where activity was being directed, since there was no
material improvement to the risk profile despite the treatments undertaken.
• Under the risk headings—
o
Strategy risk, the most important issue related to how to use the customer voice in all
decision making. Some treatments against customer outcomes were not tracking.
o
Finance risk, regarding the solvency position, the levied accounts were on target, so
solvency was not a problem
per se. But the risk was that the current levy rates were not on
target, so trajectory
was a problem.
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o
Change risk, use of the BRAF framework was a positive step forward and the Executive
was receiving weekly updates. EY’s findings regarding agile versus waterfall were
somewhat laboured. The root issue was around early warning systems and the First Line
oversight by PMO. A developing theme was the risk relating to scope deferral, as projects
are given a fixed time and budget, which are managed through scope changes. There was
not enough transparency round that.
The Board discussed how to interpret the Dashboard of 14 enterprise risks in the report. Mr Raubal
accepted there was a question as to whether there was consistency in the reporting and he would
consider that further. As part of the annual business planning, the risk profile would be reset. The
Board asked that Mr Raubal define what was meant by ‘trending’ for the Dashboard.
The Board commented on 12 out of 14 enterprise risks being rated High. Mr Raubal responded
that Management felt that the organisation’s risk was High.
The Board congratulated Mr Raubal for the quality of the report.
RESOLVED: The ACC Board resolved to:
(a)
Note this report, the update of aggregate risk exposures and analysis regarding underlying
risk issues.
(b)
Consider the revised report template and provide feedback.
Review of Board Policies
The Chair of the Board Governance and Remuneration Committee reported on the discussion of
the Board Policies at the Committee’s meeting the previous day. She noted that the Corporate
Secretariat had provided for the Board marked up copies of the Gifts and Hospitality Policy and the
Travel and Reimbursement Policy, showing the changes that the Committee had requested. The
Board requested further minor changes to those two policies.
RESOLVED: The ACC Board resolved, subject to the further changes agreed by the Board, to:
(a)
Note that the Board Governance Manual sets out structures, responsibilities, policies, and
processes of ACC, providing Board Members, Board Committee Members, subsidiary
company directors and ACC employees with an easy reference source and overview of
ACC’s governance policies and obligations.
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(b)
Note the policies within the Governance Manual’s Policy Annexure (Board policies) reflect
good governance practice and are largely consistent with ACC’s own corporate policies.
(c)
Note that the Governance Manual is kept up to date by the Corporate Secretariat and is
available to the Board in the Resource Centre.
(d)
Note that the Board policies were considered by the Board Governance and Remuneration
Committee at the Committee’s February 2019 meeting.
(e)
Note that the Board policies were last reviewed by the Board in 2016.
(f)
Agree that the Board policies be reviewed at least every two years.
(g)
Note that only minor or semantic changes, or no changes, are proposed for the following
Board policies:
i. Code of Conduct
ii. Self-Evaluation Policy
iii. Complaints Policy
iv. Communications Policy
v. Training and Development Policy
vi. Visit to ACC Offices Policy
(h)
Approve the Board policies listed in Recommendation g), including any amendments as
marked up in those policies.
(i)
Approve the amended Board Induction Policy, which has been rewritten to reflect a
renewed Board induction pack.
(j)
Approve the new Board Technology: IT Equipment, Smartphones, and Document
Management and Access Policy, which closely reflects ACC’s staff IT policy.
(k)
Note that the Board Gifts and Hospitality Policy and Travel and Reimbursement Policy
(Board Expenses Policies) have been amended to clarify roles and responsibilities for
approving Board, and Board Member, expenditure.
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(l)
Note that alcohol expenditure is sensitive expenditure and the Board Expenses Policies
follow the standards and principles set out by the Office of the Auditor-General (i.e. have a
justifiable business purpose, preserve impartiality, be made with integrity, be moderate and
conservative, be transparent, and be appropriate in all respects).
(m)
Approve the amended (as marked up)—
i. Gifts and Hospitality Policy; and
ii. Travel and Reimbursement Policy
(n)
Note the Delegation of Authority to the Chief Executive, a copy of which is in Appendix 11,
was approved by the Board by resolution under section 73 of the Crown Entities Act 2004
on 1 December 2016, and no amendments are proposed to it.
Performance Reports
Health, Safety and Wellbeing Report
Ms Champness highlighted two issues: as a result of Management actions, the Lost Time Injury
Frequency Rate had hit target for the first time this year. Secondly, at its previous meeting the
Board had asked for more visibility on incidents and trends. This was provided in Appendix 2 to the
paper.
In respect of the incident reported in Appendix 1 of the paper (vehicle driven in between doors of
New Plymouth Branch foyer), the Board queried whether a hardened steel chain would be instal ed
on the bollards outside the office, as hardened steel could not be cut through with bolt-cutters.
9(2)(a)
would check. In response to a Board query as to whether every office had bollard
protection, Ms Champness reported that every office had a form of protection. 9(2)(a)
added
that it was part of the site design and sometimes protections were put in place by the landlord, but
needed to be checked regularly. The Board queried how the New Plymouth response plan would
be rol ed out to all sites. 9(2)(a)
explained that all response plans were being reworked to
ensure response roles could be taken up by people on site at the time of an incident.
The Board congratulated the Talent team for a very good report.
RESOLVED: The ACC Board resolved to:
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(a)
Note actions underway to mature our safety system, demonstrate safety leadership and
strengthen our safety culture.
(b)
Note there were no notifiable events in January 2019.
(c)
Note the health and safety performance indicators.
Legal Report and Policy Update
(a)
Legal Report
Ms Roche briefed the Board on developments with the ‘ordinary consequence’ appeal to the Court
of Appeal. Management was not anticipating a fixture in the first half of this year. This timing may
be useful, as the OCL impact would be available by then.
RESOLVED: The ACC Board resolved to:
(a)
Note the High Court has granted ACC leave to appeal to the Court of Appeal against the
High Court decision on the meaning of ‘ordinary consequence’ in the Treatment Injury Test
Case.
(b)
Note an internal ACC Working Group is monitoring and analysing treatment injury claims
for cover to assess the impact of the new High Court guidance on the meaning of ‘ordinary
consequence’ of treatment.
(c)
Note that—
i. the Human Rights Review Tribunal declared the Social Security Act requirement for an
income-tested benefit to be abated at 100% of weekly compensation unlawfully
discriminates against the benefit recipient on the grounds of employment status; and
ii. ACC is working through the potential operational and policy implications of that decision.
(d)
Note a number of District Court Appeals due to be heard in the week beginning 25
February 2019 wil likely attract media attention.
(b)
Policy Update
Ms Roche presented the Report. She reminded the Board that when the legislative modernisation
programme had slowed down in 2018, four areas of technical changes had been moved into the
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Regulatory Systems Bil . ACC would be reporting to the Minister in the next couple of weeks on the
next suite of these changes. The Board had already seen these.
In relation to the proposed change to the IP criteria, to relate benefits to the broader Scheme, the
Board queried the possible risks of such a change, and whether there was not already enough
flexibility in the statutory wording. The Board asked that Ms Roche provide examples in March’s
Board Policy Update of what ACC wanted to do under the current IP requirements but could not.
In relation to the Future AC Amendment Bil proposals in the paper, the Board queried the proposal
to remove the TimeOut cover product and suggested that it may be better to make people more
aware of it rather than remove it. With the way the future of work was likely to go, this product may
have a greater uptake if more people knew about it. Ms Roche would remove it from the paper to
the Minister and come back to the Board on it for the March meeting.
Ms Roche reported that, over the next few months, there would be several matters where the
Minister controlled the timeframe for ACC’s responses, which may well fall outside of the Board
meeting cycle. She asked to have delegated Board Members to consider ACC’s responses. The
Board Chair asked that all proposals be circulated to the whole Board. Ms Roche could request
delegated Board Members when timing was an issue. The Board agreed to delegate authority to
the Board Chair to select certain Board Members, as needed, for undertaking reviews of ACC’s
responses.
RESOLVED: The ACC Board resolved to:
(a)
Note the current areas of policy activity.
(b)
Note ACC and MBIE intend to provide advice to the Minister over the next month on the
following legislative change proposals:
i. Technical policy changes for inclusion in an omnibus Regulatory Systems Bil , to support
customer experience, efficient service delivery, and effective interaction with other
agencies.
ii. Improving the flexibility and effectiveness of injury prevention settings, to support ACC’s
injury prevention strategy.
iii. Ensuring consistency and certainty in the treatment of injuries that are consequent on
another covered injury.
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iv. Extending work-related cover to volunteers, including a definition of a volunteer that wil
establish clear boundaries for cover.
v. Cover for work-related gradual process, disease or infection, where we wil advise that
the current legislative settings are appropriate.
vi. Removing the TimeOut cover product, which is rarely used and administratively
burdensome to maintain.
(c)
Note ACC’s advice on the legislative change proposals wil be consistent with the direction
previously agreed by the Board.
(d)
Note ACC wil provide the Board with copies of Ministerial briefings on legislative proposals
for information, via the weekly report.
(e)
Delegate to the Board Chair the authority to select one or more Board Members to
consider and authorise the release of policy papers requiring a fast turnaround.
Committee Updates
Investment Committee
The Chair of the Investment Committee outlined the matters that had been considered at the
meeting the previous day, including:
• Mr Brabazon would join the Investment Committee—the Board resolved to appoint
Mr Brabazon to the Investment Committee, effective immediately.
• Performance over January had reversed the losses from December 2018.
• The property strategy had been considered in light of the Stafford case—it was clear that good
title is paramount in property investments. Management had provided a very good paper on
that. The possibility of a co-investment in the Dunedin and Hamilton property developments
was considered.
• Cyber security and rogue trading had been considered. The Committee discussed obtaining the
resources needed to fix the issues.
Page 25 of 30
• A governance review of Investments was being undertaken by the Committee Chair. At present
the review was at the information gathering stage.
The Board discussed the importance of the governance review and the risks around retaining key
investments staff.
Risk Assurance and Audit Committee
The Chair of the Risk Assurance and Audit Committee (RAAC) outlined the matters that had been
considered at the meeting the previous day, including:
• For the PBE reporting, the two outstanding audit findings had been discussed. RAAC had made
a commitment on behalf of the Board to have the issue regarding use of manual spreadsheets
by the Investments team resolved by Year End.
• The Risk Management Report had identified that risks had increased in several areas. RAAC
had discussed whether some mitigation actions could be more effective.
• Eight IA reports had been considered, two in relation to ICIP. As the Chair of the Investment
Committee had mentioned, findings in relation to cyber security and rogue trading indicated that
some internal controls were not consistent with best practice, and this needed to be dealt with
by 30 June 2019.
• The findings regarding IP had been surprising, in that there was no benefit attribution at
initiative level, only at programme level, and there was poor risk management.
• The findings on Workplace Incentives were of greater concern regarding poor governance in
decision making, and differing views between the Customer team and Operations team. The
Board had noted high administration costs when the Workplace Incentives had come to the
Board.
• For Health and Safety there was a programme for obtaining a full picture of third-party
providers.
• Case Management and Complaints, dealt with in the OAG reports, had been brought to the
Assurance team which had assessed them for meeting the OAG’s findings as well as the
Board’s own requirements.
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• There had been five reports on ICIP: CP1 was amber because performance testing was only
occurring at the last sprint; two Next Gen reports were red, but it appeared that the findings had
been addressed in the paper for consideration at this Board meeting, except in respect of the
EY recommendation that rollout be broken down into further steps to reduce risk.
• Regarding Analytics, the benefits realisation plan was incomplete, but this was already known.
• The Portfolio Assurance (PA) report identified that the costs of Analytics do not take account of
the wider impacts on BAU. At the April workshop, the Board would need transparent information
on what has been taken out of projects and put into BAU. The PA report also highlighted that,
when doing scope changes, planning for the transition to BAU needed to be undertaken.
The Board suggested having a post implementation review of the IP initiative of Mates & Dates, as
there had been questions regarding whether the right groups had been targeted and whether there
was payback on the programme.
The Board discussed the relatively low percentage of ACC’s overall budget being spent on IP. The
Board Chair provided historical background to the level of IP spend, and the previous position of
having a 12-month ROI horizon. This culture was being turned around, and now investments were
being made even though it was not always possible to obtain strong evidence. With sensitive
claims having such strong growth it was very important to undertake IP around sexual violence.
The Board discussed the robustness of the ROI figures for IP, noting that there had been two
Assurance Reports and audit reviews that had all concluded the figures were robust. The problem
was that reporting did not go down to the initiative level.
The Board discussed the ‘WhaleOil’ blog comments that had been made about Mates & Dates.
The Board noted that Ms Powell had been asked to report back to the Board on it.
ACTIONS: Management to—
• Undertake an Assurance Review of Mates & Dates for RAAC consideration.
• Report to the Board on the WhaleOil comments about Mates & Dates.
Governance and Remuneration Committee
The Chair of the Governance and Remuneration Committee (REM Committee) outlined the
matters that had been considered at the meeting, including:
Page 27 of 30
• Dr Batten would join the REM Committee—the Board resolved to appoint Dr Batten to the
REM Committee, effective immediately.
• The reduction in the staff Net Promoter Score had actions in place to deal with it; diversity and
inclusion initiatives had some good work being done.
• The remuneration approach for 2019. The Committee had provided feedback, and
Ms Champness would come back to the Committee with further information at the April 2019
meeting. This would include further information on use of the KornFerrry Al Orgs50 line.
• A mid-year increase to good performers in the 11-15 bands was endorsed. However, given the
pressures now on the Scheme’s solvency, care had to be taken with new initiatives.
• A proposed way forward for bargaining with the PSA.
• The Board’s policies had been reviewed and a few changes suggested by the Committee (as
had been discussed by the Board at this meeting).
• The appointment of 9(2)(a)
as Chair of SecureFuture, an ACC investee company,
was endorsed. The Committee had asked that external advice be sought for the Committee
regarding health and safety risks resulting from that appointment and asked.
ACTION: Corporate Secretariat to obtain external legal advice on health and safety issues
resulting from the appointment of ACC’s nominee director as Chairman of SecureFuture.
Board Administration
Minutes
(a)
Minutes of Meeting held on 24 January 2019
APPROVED:
the ACC Board approved the minutes of the meeting held on 24 January 2019.
(b)
Minutes of Meeting held on 20 December 2018
APPROVED:
the ACC Board approved the minutes of the meeting held on 20 December 2018.
Schedule of Matters Arising
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The Board noted that there were quite a few Pending items on the list of Matters Arising. The
Board discussed the item on how the Board could monitor complaints (BRD. 18.11.5.1). The Board
Chair explained the background for the benefit of the new Board Members. The Board discussed
the importance of the Complaints paper from Management in the Board papers. The Board noted
that the end of the Complaints paper referred to the OAG recommendations about regular
reporting to the Board, and yet it was not addressed in the paper.
The Board discussed past incidents where an ACC staff member had been kil ed and where a
Work & Income staff member had been kil ed. The Board discussed the importance of ACC’s
Remote Claims Unit (RCU), and whether at least one Board Member should do a site visit to the
RCU to be satisfied that it was a safe environment for staff.
The Board
noted the Schedule of Matters Arising.
Confirmation of Decisions Made Out of Cycle
RESOLVED: the ACC Board resolved to:
Note that no decisions were made out-of-cycle for the period 14 December 2018 to 17 January
2019 or 18 January 2019 to 19 February 2019.
Annual Work Programme
The Board Chair suggested that the Board carefully go through the Annual Work Programme at
the next Board meeting.
NOTED: The ACC Board
noted the annual work programme.
General Business
The Board resolved to appoint Mr Mil er as Temporary Deputy Chairperson, in accordance with
clause 5(2) of Schedule 5 of the Crown Entities Act 2004, until further notice.
Confirmation of Next Meeting
To be held at the ACC Boardroom, Level 11, PwC Tower, 188 Quay Street, Auckland on Thursday
21 March 2019 at 9.00 am.
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Closure
The meeting closed at 4.15 pm.
Approved
Chair ………………………………………………………….
Date ………………………………
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Document Outline
