Minutes of a meeting of the Board of the Accident Compensation Corporation held at
ACC Boardroom, Level 11, PwC Tower, 188 Quay Street, Auckland on Thursday,
29 August 2019 at 9.00 am.
Present
Dame Paula Rebstock
Chair
(until 2.15 pm)
Mr James Mil er
Temporary Deputy Chair
Ms Anita Mazzoleni
Member
Ms Kristy McDonald QC
Member
(until 4.00 pm)
Mr David May
Member
Dr Tracey Batten
Member
Mr John Brabazon
Member
In attendance
Mr Scott Pickering
Chief Executive
Mr Peter Fletcher
Chief Technology & Transformation Officer
Mr Mike Tully
Chief Operating Officer
Ms Deborah Roche
Chief Governance Officer
Mr Herwig Raubal**
Chief Actuarial and Risk Officer
Mr John Healy
Chief Financial Officer
Ms Emma Powell
Chief Customer Officer
Ms Sharon Champness
Chief Talent Officer
9(2)(a)
LEK Consulting
Item 4.1
9(2)(a)
LEK Consulting
Item 4.1
9(2)(a)
LEK Consulting
Item 4.1
9(2)(a)
Head of Workplace Safety and Levies
Item 6.5
9(2)(a)
Head of Procurement
Item 6.7
Ms Gabrielle O’Connor**
Head of Client Service Delivery
Item 4.1
9(2)(a)
Head of Provider Service Delivery
Item 6.1, 6.2, 7.2(b)
9(2)(a)
Acting General Counsel and Company
Secretary
Items 6.1 & 7.2
9(2)(a)
Executive Advisor
Items 5.1 – 5.4
9(2)(a)
Manager Corporate Secretariat
9(2)(a)
Senior Associate Company Secretary
** Attended via telephone / videoconference
Page 1 of 24
Procedural Business
Apologies
There were no apologies received for the meeting.
Register of Members’ Conflicts of Interest Arising
CONFIRMED: The Board reviewed the Register of Members’ Conflicts of Interest Arising and
confirmed that it was not aware of any other matters (including matters reported to, and decisions
made by, the Board at this Meeting) which would require disclosure.
Committee Updates
Investment Committee
Mr Mil er updated the Board on the key matters from the Board Investment Committee (BIC)
meeting of 28 August 2019, focusing on the following:
• The Investment Governance Review undertaken by PwC. The Board had not yet received or
accepted the Review.
• The
Feltex case, which could be the subject of media attention.
• Other papers considered by the BIC included Strategic Asset Al ocation constraints, and
various quarterly reports. Regarding movements in the Strategic Asset Al ocation constraints,
Management would continue to be conservative.
Risk Assurance and Audit Committee
Ms Mazzoleni updated the Board on the key matters from the Risk Assurance and Audit
Committee (RAAC) meeting of 28 August 2019, focusing on the following:
• The Annual Report had been recommended by the RAAC, subject to the matters set out in the
Audit Report. The RAAC recommended that the Board Chair and the Temporary Deputy Chair
sign the letter of representation to the auditors.
Page 2 of 24
• The Audit Report had recommended a ‘Very Good’ on the statement of service performance
and maintained ‘Very Good’ for the management control environment. The ‘Good’ result for the
financial control environment would likely be upgraded to ‘Very Good’ next year.
• The Risk Mitigation Report had indicated there was a lot happening in key projects, including
Next Generation Case Management (NGCM) and the Health Services Strategy (HSS). A
forthcoming risk reset would bring ACC up to best practice risk management.
• The Risk Culture Survey, which had been completed by KPMG.
• Internal Assurance findings in respect of business continuity planning, the cyber security policy,
and Whāia Te Tika. Various ICIP reports had also been considered. There would be an interim
PIR for completed projects.
The Board discussed the ‘adjusted profit’ concept and its introduction into the Annual Report in the
current difficult investment environment (which would continue to be a problem for next year’s
Annual Report as well), and how to explain what ACC can and cannot control.
In response to a Board query regarding whether the auditors review the models that are
fundamental to Board decisions, the RAAC Chair explained that both Taylor Fry and the auditors
review the assumptions for the OCL and there was a particular focus from the auditors on public
equity valuation assumptions. The two big items for the auditors’ work plan were the OCL and
asset valuations.
The Board acknowledged Ms Mazzoleni’s work to achieve the ‘Very Good’ result, and the
leadership that Mr Mil er had shown on the Investment Governance Review.
Board Only Session
During the Board only session, the Board considered matters relating to the establishment of the
ACC Board HSS Advisory Committee, and to the Board membership of the RAAC.
RESOLVED: The ACC Board resolved to:
(a)
Note that the Board had approved the Terms of Reference for the ACC Board HSS Advisory
Committee by written resolution on 14 August 2019.
(b)
Appoint Dr Tracey Batten as Chair of the ACC Board HSS Advisory Committee, effective
1 September 2019.
(c)
Appoint the following Board Members to the ACC Board HSS Advisory Committee, effective
1 September 2019:
Page 3 of 24
• Dame Paula Rebstock
• Ms Kristy Mc Donald ONZM QC
• Ms Anita Mazzoleni
(d)
Appoint the following external Members to the ACC Board HSS Advisory Committee,
effective 1 September 2019:
• NASODr Matire Harwood
• Dr Api Talemaitoga
• Dr Lloyd McCann
• Professor Kathryn McPherson.
RESOLVED: The ACC Board resolved to
appoint Mr Brabazon to the RAAC, effective
1 September 2019.
Chief Executive’s Report
Items raised by Mr Pickering were:
• feedback on Branch visits following NGCM rollout
• pre-briefing on HSS and ECP papers
• pre-briefing on proposed new Hamilton and Dunedin sites
• pre-briefing on LEK review.
Presentation
Rehabilitation Performance Review
Mr Tully introduced Messrs 9(2)(a) , 9(2)(a) and 9(2)(a)
of LEK. 9(2)(a)
introduced the
presentation and took the Board through the Executive Summary of the report. The Board
discussed the presentation, including the following points:
• How ACC compared with Australia, where there had been a significant lengthening of duration
in claims with workers’ compensation, driven by mental injury claims—Mr Tully explained that
Australian mental injury coverage was different from New Zealand’s, however it was
Page 4 of 24
understood that if there are mental issues alongside physical, the rehabilitation for the physical
injury takes much longer. GPs were the link that would identify whether there were mental
issues affecting the physical. 9(2)(a)
explained that ACC lacked data on claimants
presenting with a mental il ness. However, mental health was being elevated globally, and
intervening early in psychosocial issues increased the likelihood of correct outcomes. The
Board asked that LEK pick this up in the report.
• Whether ACC’s introduction in 2013 of the Service Needs Assessment (SNA) had pushed
entitled claimants onto ACC support, even if they had no need for support and whether this had
created a shift of focus from need to entitlement.
• Whether client outcomes had improved under the SNA process—9(2)(a)
explained that
customer satisfaction had increased, but LEK had not looked at medical outcomes. Mr Tully
explained that claimants were receiving treatment more quickly. The Board suggested that it
would be good if it could be shown that ACC had improved outcomes for its clients.
• Although the 70-day rehabilitation rate had not improved, the volume of claims was significantly
greater. The question was whether to manage growth in claims or frontline capacity.
• During times of high employment, people were happier taking time off work. When workers
were insecure with their job, they go back to work as early as possible. Regardless of the
employment rates, the self-employed and older people took the least time off work due to the
need to keep the business running, and job-insecurity, respectively.
• Whether LEK should review sensitive claims data separately—9(2)(a)
explained that while
sensitive claims were growing quickly, they represented a small proportion of total claims and,
alone, were not driving the volume. However, given the impact of sensitive claims on the OCL
strain, the Board suggested that it was worth reviewing the information in different ways.
• Whether DHB clients were being pushed onto ACC—9(2)(a)
explained that the data did not
suggest this.
• Whether there was a clear solution to the volume growth—9(2)(a)
explained that, while it
was more the external environment than ACC, or client or provider behaviour, that was the
main driver, there were stil some internal issues. The ups and downs of the economic cycle
would always be the main driver.
• How ACC could improve its forecasting—9(2)(a)
explained that there was an amplification
effect correlated to GDP, but workforce growth and attitude to taking time off work also
impacted. Mr Healy explained that there was a time lag when there was a shift in the economy.
Page 5 of 24
The outlook now was softening; it was a question of how quickly it would happen. The Board
asked that, when ACC set its budget, the correlations be unpacked.
• The need for ACC to improve its data collection.
• Whether ACC needed different staff KPIs—9(2)(a)
explained that LEK proposed a more
holistic approach to measurement than simply rehabilitation rates.
• The way the system incentivised people into making ACC claims.
The Board queried the implications of the report. 9(2)(a)
explained that ACC needed to carefully
monitor anticipated changes, particularly to the economy and job security, and plan ahead for
them. ACC should also consider its approach to WC exit points.
Operational Reporting
5.1 (a) ICIP Reporting
Board discussion focused on the following:
• Whether the reset of WC days paid in the Service Agreement had been agreed at the Budget
discussion—Mr Fletcher confirmed that it had.
• Whether the request to the ECA in August for ICIP funding for High Tech Imaging (HTI) had
been approved—Mr Fletcher confirmed it had and that HTI was back on green in terms of
approvals.
• Mr Fletcher would include Mr Brabazon in the next NGCM teleconference.
RESOLVED: The ACC Board resolved to:
(a)
Note the ICIP July 2019 Monthly Update.
(b)
Note the good progress that had been made in delivery of ICIP.
(c)
Note the Investments Technology Issues Report.
5.1 (b) Quarterly Business Review Update
Mr Tully briefed the Board on Management’s Quarterly Business Review (QBR) process,
highlighting the following:
Page 6 of 24
• The QBR was for staff to talk to the Executive about the areas ACC needed to focus on.
• At the last QBR the focus was on benefits tracking:
o For business customers, 53.2% of interactions with ACC were now digital; there had been
47% growth in the digital user base.
o For providers, spinal cord injury clients were receiving the right treatment in the right way,
with a 55% improvement in services. This represented a c.$1.5 mil ion gain for the Scheme.
This had been achieved through working with DHBs, ambulance and the contracting.
Mr Pickering noted that 70% of businesses in New Zealand are interacting through digital—ACC
had made investments in digital services and now New Zealand was responding. The Board
suggested that this be reflected in the Annual Report.
Mr Pickering invited interested Board Members to attend the QBR sessions.
5.1 (c) Operational and Financial Performance including claims cost
Mr Healy presented the report. In response to a Board query, Mr Healy explained that the high
claims costs for July were mainly due to there being one more working day in July than budgeted;
the impact of the additional day was $20 mil ion.
In response to a Board query as to whether Mr Healy’s budgeting process was setting
unreasonable expectations, Mr Healy explained the difficulties presented by the impact of external
influences. The Board suggested doing more work for next year based on the LEK input.
With sensitive claims costs increasing 25% faster than anticipated, the Board asked that
Management do more work to understand the drivers. Mr Healy explained the long lag between
the injury and the claim, making it difficult to forecast. The Board suggested that the Annual Report
explain this. The Board noted the underreporting of sexual violence.
RESOLVED: The ACC Board resolved to:
(a)
Note the Claims Cost performance
(b)
Note the Operational and Financial Performance
Page 7 of 24
5.1 (d) Q4 Customer Dissatisfaction and Escalated Complaints Report
The Board congratulated Ms Powell on the quality of the Report. Ms Powell explained that the
team sought the Board’s input as to whether the Severity Index was about right for now. The Board
confirmed it was, and that it should stay in place for three or four quarters before any change.
The Board noted the high correlation of complaints to poor customer service and asked that the
Report flesh out responses to those complaints. Ms Powell explained that NGCM initiatives
included development of capability frameworks, so the statistics should reduce.
The Board asked to be involved in supporting, by allocating capital, the resolution of systems
problems, such as IT problems resulting in mixed up bookings.
The Board asked, in relation to the statistics regarding the timeliness to close out complaints, to
have the range for the outliers included in the report. For example, if a complaint took six months
to resolve, the Board should know that. The Board queried Management’s timeframe to see
dissatisfaction rates coming down and to what target level.
ACTION: Management to include in the next Quarterly Complaints Report the range of days taken
to close out complaints outside of SLA, timeframe and target level for reduced dissatisfaction with
responses to complaints, and the number of complaints that sit below the sub-threshold of severity.
RESOLVED: The ACC Board resolved to:
(a)
Note the key insight themes, contributing factors, and actions being taken by the
organisation contained within the Quarter 4 Customer Dissatisfaction and Complaints report.
In particular, the increase in complaints escalated to the Customer Resolutions team in
Quarter 4.
(b)
Note that there were 13 Severity two and two Severity three customer complaint cases
(including those escalated to the Customer Resolutions team and those dealt with by the
Issues Management and Media teams) during Quarter 4, and that management has taken
the appropriate actions (outlined in Appendix 2, Board Dossier of Complaints and Issues –
Quarter 4) to address them.
(c)
Note the progress ACC continues to make to build its full complaints system, and the
addition of issues escalated to Issues Management and Media teams now analysed against
the severity model and reported on.
Page 8 of 24
(d)
Note the work underway to develop analytical detection of individuals who pose a high
likelihood of escalating a complaint, prompting timely alerts to the Chief Operations Officer
and Head of Client Service Delivery to initiate a proactive service recovery response.
Board Papers
(a) Health Sector Strategy Reset
Mr Tully Introduced Messrs 9(2)(a) and 9(2)(a)
from PwC, the lead delivery partner. Mr Tully
highlighted the following from the presentation on the HSS:
• Costs have been growing across ACC.
• Under the test and learn approach there were four core projects—ECP, HTI, non-acute rehab,
and integrated homecare.
• The recommendations of several HSS reviews—the ICIP target of $75 mil ion in benefits from
the HSS should be achieved, however, there was wider potential value across the health
sector. If a targeted approach was not taken, ACC was unlikely to achieve those wider
benefits. IQAs had identified that the HSS should be lifted to the whole of ACC.
• The delivery plan over the next two years and the milestones to 2021. The immediate focus
was to establish an overarching strategy, including for data across the wider health sector.
• The governance structure and progress made. A capability lift across the organisation was
required.
The Board discussed the extent to which, in order to move to the commissioning for outcomes
framework, capability needed to be developed. It was important not to underestimate how far was
needed to go to bring the strategy to fruition. Mr9(2)(a) explained the phases of work PwC had
undertaken to identify the current levels of capability in the organisation.
The Board queried the timing of progress, and whether some easy wins were achievable such as
proofs of concept (POCs) or case studies to show providers that something would be good for their
business. Mr Tully explained that the four core projects were part of that and were achieving good
results. But bigger programmes of work like Escalated Care Pathways (ECP) could send a signal
to the wider health sector about commissioning for outcomes.
The Board expressed agreement with the wider strategy but indicated concern that ACC not slow
down while building capability. Mr Pickering explained that operationalising ECP would be a
Page 9 of 24
significant uplift to the market, and ACC was exploiting the current POCs. Mr Pickering confirmed
that ECP would be rolled out by the end of December.
The Board discussed the figures and questioned how ECP was to be paid for. Mr Fletcher
explained that the remaining ICIP spend was tracking well under the total amount set aside. The
Board noted that the HSS’s allocated budget was $30 mil ion and asked Management to be very
clear about where the money was to come from.
Mr Dyer confirmed to the Board that the HSS reset was needed. The HSS had not had a great
deal of funding or attention. Much ground work had been laid to get the sector ready, and now was
the time to capitalise on that and move forward with the HSS.
RESOLVED: The ACC Board resolved to:
(a)
Note the update on the Health Sector Strategy.
(b)
Endorse the reset approach, subject to being satisfied on the financials.
(c)
Note that a detailed delivery plan, covering the work programme for the first half of 2020, wil
be presented to the Board in November 2019.
6.1 (b) Escalated Care Pathways – Phase 2 Expansion Funding Approval
Mr Tully introduced the paper: ECP would make a real difference by providing coordinated care
from the beginning of the patient’s journey. ACC was partnering with six consortia across the
pathways of complex musculoskeletal injuries. Mr Tully explained the financial implications and
noted that there would be a stage gate at 18 months to evaluate progress, before moving on to the
second stage contracts.
The Board requested a break-down of the benefits of the $42 mil ion spend. 9(2)(a)
explained that
more would be paid upfront for shorter, more intense, multidisciplinary intervention, resulting in a
shorter time that a person is off sick. The ACL POC was seeing the re-injury rate dropping from
30% to 4% after 18 months. This was a significant difference and a promising trend.
The Board requested confirmation of the funding costs. 9(2)(a)
confirmed the OPEX increase was
$42 mil ion more than the current budget. The Board noted that this would require approval and
suggested circulating a paper to clarify the funding from ICIP, the funding from OPEX, and in which
year the benefits accrued.
Page 10 of 24
The Board queried the lack of risk-sharing with providers in the proposal. 9(2)(a)
explained that
research showed that there should be no risk-sharing in year 1, comparables in year 2, and
introduction of risk-sharing in year 3 and beyond. If risk-sharing was brought in now it would likely
introduce a new perverse incentive to prefer treating ‘well’ patients with likely good outcomes.
9(2)(a)
confirmed the approach outlined by 9(2)(a)
as being best practice.
In response to a Board query regarding the contracts, 9(2)(a)
explained that the contracts with
individual providers would cover the partnership arrangements, the service schedule of
deliverables, and the measures for monitoring outcomes.
The Board sought satisfaction that ACC would meet its contracting requirements, and clarification
of where the funding was coming from.
In response to a Board query regarding legal assurance, Ms Roche noted that the implications of
ACC’s statutory responsibilities regarding the making of cover decisions were stil being worked
through. In response to a Board comment on Privacy Impact Assessments, Ms Roche agreed that
there were other issues, including what ACC would delegate to the consortia in the contracts in
respect of ACC’s functions relating to the Privacy Act, and what would be retained by ACC. This
was all part of the ongoing legal review.
RESOLVED: The ACC Board resolved to:
(a)
Note that at its October 2018 meeting, the Board approved a new Elective Surgery
contract for a 5-year term (3+2), with the expectation that purchasing for outcomes
models would be in place by the end of this period.
(b)
Note that, at the February 2019 Board meeting, ACC updated the Board on progress with
co-design and procurement of a new outcomes model for delivering coordinated
integrated care to people with musculoskeletal injuries, namely the Escalated Care
Pathways (ECP).
(c)
Note that ECP is an innovative project that requires a significant shift in provider business
models and care delivery, and in how ACC supports the sector. A four-year test and learn
phase is planned to build capability and develop baseline measures that wil inform a
future scaled-up service.
(d)
Note that a full business case for ECP can be found in the Resources section of Board
Books.
(e)
Note that the total whole-of-life contract size of the six partnerships is expected to be
$432.6 mil ion over four years. This is $162.7 mil ion above what we would expect to pay
under the existing Vocational Rehabilitation, Elective Services and Physiotherapy
Page 11 of 24
contracts. This comprises: $139.6 mil ion in health services improvement and early
interventions, $16.7 mil ion in provider project costs and $6.4 mil ion in ACC project costs.
(f)
Note that, while up-front costs are higher, the projected lifetime costs for the ECP clients
are estimated to be $97.3 mil ion lower than baseline, resulting in an NPV of $39.0 mil ion
for the project. The estimated benefits are projected to peak in 2023 and thereafter tail off
– the majority are not assumed to recur into the future.
(g)
Note that targeted outcomes include a weekly compensation days reduction, with an
average reduction of 30 days –based upon early ACL proof of concept results – compared
with an overall ICIP weekly compensation target reduction of 5.5 days and current
enterprise performance of 3.6 days increase.
(h)
Note that such an innovative model has not operated at scale nor for an extended period
and therefore carries some significant uncertainty in respect of the targeted outcomes.
For this reason, a Stop/Go evaluation and decision point has been included after the first
18 months of the contract. An evaluation and further business case wil be presented to
the Board seeking approval to continue with the remainder of the four-year contract.
(i)
Note that operation of this value-based commissioning model beyond the four-year
contract period wil require further evaluation and consideration once we have more
insight into its performance.
(j)
Accept the assessment of risk as acceptable, noting that the key risks have been
considered and that robust contract management, effective performance management
and a staged approach provide mitigation.
(k)
Note the proposed funding (to be clarified by Management) for stage 2: $55.5 mil ion,
comprising $42 mil ion in health services improvement and early interventions, $9.5 mil ion
relating to provider project costs, and $4 mil ion in ACC project costs.
(l)
Delegate to the Chair of RAAC and the Chair of the Board HSS Advisory Committee the
sign off of the satisfactory clarification of the funding for stage 2 of the $55 mil ion.
(m)
Delegate signing authority for ECP contracts to Mike Tully, Chief Operating Officer.
(n)
Note that signing of the contracts is subject to sign-off by the General Counsel and
completion of any outstanding actions from the Privacy Impact Assessment.
(o)
Note that the ECP contracts comply with the Government Rules of Sourcing.
Extension to the Impairment Assessment Contract
Mr Tully presented the paper.
RESOLVED: The ACC Board resolved to:
Page 12 of 24
(a)
Note that Impairment Assessments are required under the Accident Compensation Act
2001 to determine clients’ eligibility for lump sum compensation or an independence
allowance.
(b)
Note that the current Impairment Assessment Services (IAS) contract wil expire on
30 November 2019, and is proposed to be extended for up to nine years (including two
two-year rights of renewal).
(c)
Note the Whole of Life Cost (WoLC) of the proposed extension, including the renewal
periods, from 1 December 2016 to 30 November 2028 is estimated at $79.16 million.
(d)
Note that, as the WoLC is greater than $30 mil ion, under ACC’s Corporate Delegations
the Board is required to approve this extension.
(e)
Note that the proposed extension would have no material impact on the OCL or Levies.
(f)
Approve an extension to the IAS contract for a maximum term of nine years (an initial
term of five years from 1 December 2019 to 30 November 2024, plus two further rights of
renewal, each of two years, to 30 November 2028 (5+2+2).
(g)
Note the proposed extension is compliant with the Government Rules of Sourcing and
ACC Procurement Policy.
Hamilton and Dunedin Accommodation – Preferred Suppliers
Mr Healy introduced an updated paper which he tabled at the meeting. Mr Healy’s briefing included
the following:
• Management was ready to proceed to negotiations with two preferred suppliers: Tainui Group
Holdings (Tainui) for Hamilton and Ngāi Tahu Property (Ngāi Tahu) for Dunedin. Tainui had
responded in line with the acceptable criteria, but there was further negotiation required with
Ngāi Tahu.
• There were some risks to be noted, including getting a lease extension on existing sites.
• 9(2)(j)
.
Board discussion focused on the following:
• 9(2)(j)
• The appropriate lease term.
Page 13 of 24
• Regarding future risk, whether climate change issues had been considered in respect of rising
sea levels. Mr Healy would look into this for the two sites.
• Building an option into the contract to give the Investments Team a first right to purchase (and
whether that should relate to the building or the lease) on completion. If this could not be
negotiated, then the Investments Team should have first right of refusal on any sale.
Mr Pickering requested the Board’s guidance if neither of those was acceptable to the suppliers.
• What Management’s plans were regarding co-location with a medical centre or rehabilitation
facilities. Mr Pickering explained that this would be discussed at a later stage in the
negotiations, and that for now Management was seeking guidance on the terms on which to
base the initial negotiations with the preferred suppliers.
• The need to be disciplined in the negotiations: on-time, on-budget and on-spec were the most
important non-negotiable terms. Management needed to be hardnosed about those terms.
Dunedin needed to be given the go-ahead as soon as possible, given the potential impacts of
the new hospital build there. To protect ACC there had to be LDs that crystallised if the
developer missed key dates.
• Mr Mil er and Mr Brabazon would form a sub-committee of the Board to assist Management to
deal with negotiation issues quickly.
• Whether an option should be included in the contracts for taking additional space in the
buildings in later years. Mr Pickering indicated that he would seek guidance from the Board on
the approach to take with the suppliers on this, and on the other proposed negotiation points, if
the suppliers disagreed.
RESOLVED: The ACC Board resolved to:
(a)
Note that ACC has completed a Stage 1 Request for Proposal (RFP) to the four
shortlisted suppliers for Hamilton and Dunedin accommodation to select preferred
suppliers.
(b)
Note that the RFP process was endorsed by an external probity advisor that it is
compliant with the Government Rules of Sourcing.
(c)
Approve progression to enter into final negotiations with preferred suppliers with the
intention of entering into Development Agreements with:
i. Tainui Group Holdings for the supply of a new-build leased accommodation solution
in Hamilton.
Page 14 of 24
ii. Ngāi Tahu Property for the supply of a new-build leased accommodation solution in
Dunedin, noting the key commercial risks around Ngāi Tahu Property’s proposal.
(d)
Delegate authority to Mr Mil er and Mr Brabazon to assist Management with all
negotiation decisions.
(e)
Approve delegation to the Chief Financial Officer to negotiate, in consultation with Mr
Mil er and Mr Brabazon, an appropriate market-aligned position before advising Ngāi
Tahu Property that they are the preferred supplier for Dunedin. If suitable commercial
terms are not able to be agreed, then the Chief Financial Officer wil engage with a
selected Board Member, or Members (as the Board Chair determines), to agree options to
address the concerns.
(f)
Note the risks associated with the selection process.
Annual Report 2019
Mr Healy introduced the Annual Report, noting that Management was aiming for a media release
in late September. Board discussion focused on the following:
• The RAAC had already reviewed the financial statements and service performance report, and
had provided to Mr Healy some suggestions on the notes to the financial statements.
• Any Board suggestions for the notes to the accounts should be sent to Mr Healy, who would
obtain further RAAC sign-off for any changes to the notes.
• Whether the statement from the Board should commence with the CEO’s achievements and the
matters he could control, as occurred in normal company reports, rather than commencing with
the falling interest rates and the possibility that levies could be raised. Mr Beattie noted that
these were unusual times, and that ACC’s deficit was extremely significant. He suggested that
the Annual Report identify this upfront and note the external economic factors beyond ACC’s
control and that other insurance companies around the world were facing this. Expectations
should also be set for a large deficit next year. Mr Beattie explained the strategy to saturate the
communications throughout the Annual Report to explain the context of the result.
• The basis of the investment report should be the excellent headline number. It should also tell
the story of why the investment reserves were needed. Mr Beattie noted that the media release
would include Q & As which would answer these types of questions.
• The RAAC Chair reiterated the importance of focusing on the result. The Annual Report should
identify the subsequent event: there was already a $4.9 bil ion deficit as a result of the further
interest rate drop post balance date (which was also impacting other entities); then it should say
Page 15 of 24
what this might mean for the levies, describing this as options; then explain why the OCL was
so large; then explain the purpose the OCL served.
• An explanation should be given in the Annual Report on why the reduction in interest rates had
caused the bad result: the expectation of future investment earnings was lower, and everyone is
impacted by this.
• The timing of the Annual Report was crucial so that it would be released prior to the Crown
accounts. Mr Beattie highlighted the importance of pre-conditioning ahead of the release.
RESOLVED: The ACC Board resolved to:
(a)
Provide any further detailed feedback on the draft AR19 to the Chief Financial Officer,
John Healy no later than 5.00pm Monday 2 September 2019.
(b)
Approve the release of this draft AR19 (including Financial Statements) to Treasury,
Ministry of Business, Innovation and Employment (MBIE), the Minister’s Office and EY.
(c)
Delegate authority to the Board Chair, the Temporary Deputy Chair and the RAAC Chair
for final approval of the AR19 post adjustments of any Board feedback, subject to
completion of the outstanding matters listed in the EY Audit Closeout Report.
(d)
Note the proposed timeline for AR19 (section 6).
(e)
Note that the RAAC had recommended to the Board approval of the audit report.
Update on Accredited Employers Programme Redesign
9(2)(a)
introduced the paper, noting the following:
• The paper presented issues with the Accredited Employers Programme (AEP), aligned to six
key issues the Minister was concerned about.
• The problem was the significant decay in the durable return to work rate in the programme,
while ACC’s return to work rate had improved over this period (although ACC’s was stil not at
the level achieved under the AEP).
Ms Powell and 9(2)(a)
confirmed to the RAAC Chair that all the adverse internal assurance
findings had been resolved. 9(2)(a)
noted that there were stil some challenges transitioning
out of Transformation into continuous delivery. A follow up would be brought to the RAAC in
November 2019.
Page 16 of 24
9(2)(a)
confirmed to the Board that Management and WorkSafe were working together to
achieve the goal of moving employers towards continuous improvement. However, the data
collected by AEP did not provide insight into individual performance and relied on an annual
research evaluation. This limited the conversations with WorkSafe about the key issues for
employers.
In response to a Board query, 9(2)(a)
explained that there were two problems: decaying
experience for workers in the AEP, and the data currently col ected made it difficult to provide
assurance about how the programme was performing.
The Board noted that AEP did not feature in company Board discussions the way WorkSafe does,
and that Boards do not have visibility of AEP and of how employers can achieve a better levy
outcome.
Ms Powell reported that Management was engaging with the Minister in the next few weeks to
discuss at a high level the options provided to the Board.
ACTION: Management to follow up on the Economic Incentives Review internal assurance
findings regarding AEP.
RESOLVED: The ACC Board resolved to:
(a)
Note that the Ministry of Business, Innovation and Employment (MBIE) completed a
review of the Accredited Employers Programme (Programme) in 2018, and made six
recommendations, which the Minister asked ACC to address jointly with MBIE.
(b)
Note that, although data held is insufficiently comprehensive, and its quality is
inconsistent, we know that the Programme in its current state:
i. delivers declining return to work outcomes and low worker satisfaction, particularly when
the claim is managed by a third party administrator (TPA), but it stil delivers better return
to work outcomes and lower compensation costs than for non-Programme claims
ii. does not adequately incentivise businesses to continuously improve performance, and
iii. has operational inefficiencies.
(c)
Agree to us continuing to explore (internally and with our external customers and other
stakeholders) a high-level redesign of the Programme
that wil address Programme issues
identified by us and recommendations made by MBIE.
Page 17 of 24
(d)
Note that we wil update you further in October and seek your decision on proposed high
level redesign, costing and implementation options in November, and your final decision
on redesign, costing and implementation by February 2020 (in advance of May 2020
consultation).
Enterprise Risk and Compliance Report
Mr Raubal introduced the Report, focusing on the following:
• Overall the risk exposure had reduced, driven by improved treatment plan activity. Several risks
were rated higher than need be and would be re-rated to reasonable levels.
• Strategic risk remained high, primarily due to the HSS’s part in benefits delivery.
• An emerging risk was how ACC responds to the Government’s wellbeing agenda.
• Change risk was going surprisingly well. However, the main financial benefits were lagging.
• The risk refresh had been discussed at RAAC. The risks were too consolidated currently and
were rated higher than necessary. Risk owners were having difficulty linking treatment plans to
reducing the risk profile. Only high and extreme risks would be reported to the Board.
The Board asked Mr Raubal to consider the impact of the Zero Carbon Bil . Mr Raubal would
include this in the next quarter’s report and cover off the Investments side of the business too.
The Board queried the ‘ordinary consequence’ exposure. Mr Raubal noted it was covered in the
Legal Report and explained that the range was highly dependent on two key assumptions: firstly,
that there would be limited impact of the decision on prior claims, and secondly that claimant
behaviour would not change significantly. Mr Raubal could not provide the potential broader range,
as there was no way to predict a change in claimant behaviour. He would keep the two
assumptions under close watch.
RESOLVED: The ACC Board resolved to:
Note the Enterprise Risk and Compliance Report
.
PwC Master Service Extension and new PwC Statement of Work
Mr Pickering reported that he was comfortable that the expense was relative to the size of the
contract, and he noted that the contract included a performance component. In response to a
Page 18 of 24
Board query as to why only two of the renewal periods were being exercised now, Mr Pickering
explained that this was to maintain commercial tension, and that with the work programme moving
into continuous delivery, different skil s may be required.
RESOLVED: The ACC Board resolved to:
(a)
Note that in 2016 PricewaterhouseCoopers (PwC) was selected as ACC’s transformation
partner, to deliver key strategic and advisory services for the Integrated Change
Investment Portfolio (ICIP).
Master Services Agreement
(b)
Note that ACC has a Master Services Agreement (MSA) with PwC that sets out the terms
of PwC’s services as transformation partner for the period from August 2016 to August
2019.
(c)
Note that ACC wishes to exercise two of the MSA’s three available one-year ‘renewal
periods’, to extend the MSA to 9 August 2021.
(d)
Note that there is a nil cost value impact for the MSA extension, the cost impact wil fall
under the new SoW for FY2019/20.
(e)
Note that under the Corporate Delegation Framework, Board approval is required for this
MSA extension.
(f)
Approve the exercise of two of the MSA’s three available one-year ‘renewal periods’, to
extend the MSA to 9 August 2021.
Statement of Work
(g)
Note that the ACC projects assisted by PwC are defined in the SoW which covers Next
Generation Case Management (NGCM), Client Payments (CP), Health Services Strategy
(HSS), Engagement Platforms and Enablement Services.
(h)
Note that the execution of the SoW for FY2019/20 plus an estimation of PwC spend for
FY2020/21 wil enable PwC resources to be deployed up to a maximum Whole of Life
Cost of $94 mil ion.
(i)
Note that under the Corporate Delegations Framework, Board approval of the SoW is
required.
(j)
Note the SoW complies with both ACC Procurement Policy and the Government Rules of
Sourcing.
(k)
Note that the MSA extension and new SoW have no impact on the OCL or levies.
(l)
Approve the execution of the SoW for FY2019/20.
Page 19 of 24
(m)
Delegate signing of the Statement of Work and the MSA extension letter to the Chief
Executive.
Performance Reports
Health, Safety and Wellbeing Report
The Board took the Health, Safety and Wellbeing Report as read, noting the good outcome on
SafePlus.
RESOLVED: The ACC Board resolved to:
(a)
Note progress toward becoming a leader in heath, safety and wellbeing.
(b)
Note there was one notifiable events in July 2019.
(c)
Note the health, safety and wellbeing performance indicators.
Legal Report and Policy Update
a)
Legal Report – LEGALLY PRIVILEGED
The BIC Chair noted the high quality and usefulness of the Torchlight update and noted that it
would be considered by the BIC. He referred to the
Feltex case that had been discussed at the BIC
meeting the previous day. The Board queried the appropriateness of being involved in
Feltex.
The BIC Chair suggested that the BIC consider the level of delegated authority that triggers the
decision to enter into investments litigation, along with questions around the costs and benefits of
litigation, applying the model litigant policy, risk and return, and reputational issues. The Board
suggested the BIC consider the trigger point at which the decision should be escalated to the
Board or to the BIC. The Board queried whether the BIC was receiving the right level of legal input
at the right point in any decision to become involved in, or to continue with, investments litigation.
RESOLVED: The ACC Board resolved to:
(a)
Note that the ACC projects assisted by PwC are defined in the SoW which covers Next
Generation Case Management (NGCM), Client Payments (CP), Health Services Strategy
(HSS), Engagement Platforms and Enablement Services.
(b)
Note ACC ran a very successful workshop for its external counsel in July 2019.
Page 20 of 24
(c)
Note the
Stafford judicial review proceeding has recently increased in complexity as the
plaintiff has joined seven new Crown entity/State owned enterprise respondents who own
land in the Nelson area and seeks interim orders prohibiting the disposal of that land
pending the outcome of the proceeding.
(d)
Note in relation to current significant litigation in the Court of Appeal and High Court:
i. the
Ng test case on the meaning of ‘ordinary consequence’ of treatment is set down for
hearing on 20 February 2020;
ii. the
Larkin/Hoare case was heard in the High Court on 15 August 2019 and judgment
was reserved;
iii. ACC has filed its application for leave to appeal in the
Calver case.
(e)
Note the summary and debrief of the Torchlight litigation.
b)
Policy Update
The Board sought an explanation of recommendation (h), as it appeared to have the Board
approving funding from a Vote Labour Market appropriation. 9(2)(a)
and Ms Roche explained the
funding that had been set aside in Votes Labour and Health for St John ambulance, and its being
contingent on the outcome of an independent review of the service. Most of ACC’s cost came
through the Non-Earners’ Account (NEA). Management was seeking approval from the Board to
spend the NEA component. The recommendation would be amended to reflect this.
Dr Batten and Mr May indicated their availability to review for approval of the advice in Papers One
and Two in recommendation (g).
RESOLVED: The ACC Board resolved to:
Funding and future direction of ambulance services
(a)
Note that ACC continues to work with the Ministry of Health and the National Ambulance
Sector Office (NASO) on a suite of four Cabinet papers relating to air and road ambulance
services:
i. Paper One: a report back in September 2019 on the first stage of procurement for the
emergency air ambulance service, and approval to begin design on the second
procurement round;
Page 21 of 24
ii. Paper Two: a report on the outcome of the review of St John’s financial position and
service delivery, and approval for a release of stabilisation funding, due in September or
October 2019;
iii. Papers Three and Four: advice about options for the future direction of ambulance
services, with initial advice due to Ministers by December 2019, and final advice co-
ordinated with the Health and Disability System Review in 2020.
Paper One: Reconfiguration of the National Air Ambulance Service
(b)
Note that a number of technical issues for this paper are being finalised by NASO, and
Management expects the paper wil be ready for consideration shortly after the Board
meeting.
Paper Two: Stabilisation funding for Road Ambulance Services
(c)
Note that the existing cost to ACC of the emergency road ambulance contract is $378m,
between 2017/18 and 2020/21.
(d)
Note that Cabinet previously agreed to reserve, in Budget 2019, $21 mil ion from Vote
Health and Vote Labour Market for the stabilisation of road ambulance services over
2019/20 and 2020/21.
(e)
Note that ACC’s contribution to road ambulance stabilisation funding, if approved, is
expected to be up to $8 mil ion from Vote Labour Market appropriation and up to
$4.1 mil ion from levied Accounts over 2019/20 and 2020/21, to be released in three
payments, with the final quantum of any release of funding in the three tranches being
subject to the findings of the report on the independent review of St John and subsequent
work.
(f)
Note that providing the stabilisation funding would have a negligible impact on the
outstanding claims liability and levies.
Delegated approval for Papers One and Two, including release of stabilisation funding
(g)
Delegate authority to the Board Chair and one or two other Board Members, as
determined by the Board Chair, to approve the advice in Papers One and Two.
(h)
Delegate authority to the Board Chair and one or two other Board members, as
determined by the Board Chair, to approve additional spend of up to $8 mil ion from the
Non-Earners’ Account (NEA), contingent on ACC receiving an appropriation of that
amount for the NEA, and if so, up to $4.1 mil ion from levied Accounts over 2019/20 and
2020/21 for road ambulance services.
(i)
Note that the release of each tranche of stabilisation funding wil coincide with the
approval of Cabinet Papers Two, Three and Four.
Page 22 of 24
Other updates
(j)
Note that
Cabinet has approved technical policy changes to the Accident Compensation
Act 2001, to be progressed through the omnibus Regulatory Systems Amendment Bil
(No 3).
(k)
Note that ACC is working to develop further suitable topics for consideration in the next
omnibus Regulatory Systems Amendment Bil (No 4).
(l)
Note that MBIE wil seek Cabinet approval to undertake a public consultation process in
late 2019 on options to increase review costs paid under the Accident Compensation
(Review Costs and Appeals) Regulations 2002.
Board Administration
Minutes of Meeting held on 25 July 2019
APPROVED:
the ACC Board approved the minutes of the meeting held on 25 July 2019, subject to
the following changes:
• Amend the third bullet point in 2.1: “Ms Champness would consult Mr May and Mr Brabazon
to would look at the recommendations for the team for the current year.”
• Amend 6.6 recommendation (e) to add that no fair value certificate is required under ACC
legislation.
Schedule of Matters Arising
The Board
noted the Schedule of Matters Arising.
Confirmation of Decisions Made Out of Cycle
RESOLVED: the ACC Board resolved to:
Confirm the one decision made out of cycle for the period of 18 July 2019 to 21 August 2019 as
recorded in the attached Board decision Register.
Annual Work Programme
NOTED: The ACC Board
noted the annual work programme.
Page 23 of 24
General Business
There was no General Business.
Confirmation of Next Meeting
To be held at the Dunedin Public Art Gallery, 31 The Octagon, Dunedin on Thursday, 26 September
2019 at 8.30 am.
Closure
The meeting closed at 4.50 pm.
Approved
Chair ………………………………………………………….
Date ………………………………
Page 24 of 24
Document Outline
