Executive Summary

This report details the findings of mpconsulting in relation to the review of the ongoing efficiency and effectiveness of the regulatory framework for hearing services, as requested by the Department of Health and Ageing.

The review focused on examining the legislative, contractual and quasi- regulatory documents that comprise the hearing services regulatory scheme. The documents were assessed against the principles of good regulation to determine if there were any areas for improvement.

In particular, consideration was given to:

• whether the scheme is achieving its objectives and the regulatory framework is supporting the achievement of these objectives
  
• whether the regulatory requirements are clear, matched to risk, appropriately outcomes focused and conducive to consistent and transparent decision making
  
• whether the regulation includes examples of any inconsistencies, overlapping regulation, redundancies or excessive regulatory coverage

• whether the regulatory scheme achieves the policy objectives in an efficient and effective manner that minimises direct and indirect costs to government, clients of the scheme and industry.

A more detailed description of the assessment criteria is included in Chapter 4.

As a result of the assessment (and limited consultation with stakeholders) mpconsulting has found that:

• while a number of improvements to the scheme will take effect from 1 July 2012, there is significant further scope for improvements to the hearing services regulatory scheme

• particular areas of concern are:

– the unnecessarily complex nature of the scheme which relies on 10 different regulatory documents – contracts, deeds, legislation and quasi-regulatory documents
– the lack of clarity regarding the risk that the regulation is attempting to mitigate. There are numerous examples where regulation is applied and it is not clear what the risk is that the regulation is attempting to mitigate or whether the cost of complying with, and administering the regulation, is warranted given the risk.

For example, all service providers are required to undergo a process of accreditation by the OHS before being offered a contract to provide services.

The accreditation process involves, among other things, assessment of the provider’s financial affairs and staff suitability. However, it is not clear what risk this process is intended to mitigate or how the process usefully supplements the pre-contractual warranties the provider is required to commit to when they enter the contract. Further, many of the accreditation requirements are not followed up or re-checked once the provider commences providing services so it is difficult to determine their value in the first instance. This example is described in more detail in Chapter 5.

– the scheme includes numerous examples of overlapping, redundant and excessive regulation.

For example, there are over 100 ongoing obligations (i.e. conditions) imposed on service providers along with 30 discrete prohibitions. These obligations and prohibitions are spread over 10 different regulatory documents and most of them can be amended ‘from time to time’. The obligations are variously described as conditions, standards, requirements, terms of the contract, terms of the Deed, and outcomes. mpconsulting considers that it would be quite a challenge for all 215 service providers and 1660 practitioners to fully understand all of their ongoing obligations and the consequences of non-compliance with these obligations.

The limitations of the scheme are discussed in more detail in Chapter 5.

By reforming the scheme, it is likely that the policy objectives could continue to be achieved while:

• improving clarity

• reducing costs to clients, service providers, device suppliers and government
• ensuring the regulation meets principles of good practice regulation.

mpconsulting considers that before significant structural reform is undertaken (to achieve the desired efficiencies) the following further work should be considered:

• First - undertake consultation on: the issues identified in this report in order to validate (or otherwise) the observations made; and the risks that stakeholders consider must be managed through the regulatory scheme.

As the review was undertaken within short timeframes and only involved limited consultation with stakeholders, it is possible that other areas for attention may be identified through further consultation.

• Second – document all of the processes and conditions that exist in the different regulatory documents. For each process or condition, clearly describe:

– what harm (or risk) the process or condition is designed to address
– in relation to processes:

o identify what pre-market assessment processes are critical for managing risk and what processes can be eliminated with reliance instead on post market audit and monitoring
o identify those post market processes that require notification to, or approval by, OHS and those that could be eliminated without significantly increasing risk
o identify the most streamlined way to implement necessary processes (minimising reliance on manual processes)
– in relation to conditions (i.e. ongoing obligations/prohibitions)

o consider the necessity of each of the obligations – eliminate overlapping, duplicating and redundant obligations
o if a condition is necessary to manage risk, consider whether it can be described as an outcome or whether it needs to be described as a prescriptive requirement in order to have the necessary level of regulatory certainty

– in relation to each process and obligation, consider what enforcement options best match the processes and conditions (again, the focus should be on eliminating unnecessary provisions).

• Third – in parallel with the above, review the schedule of service items and schedule of fees with a view to simplifying the claiming criteria and ensuring that the fees are appropriate.
  
• Fourth – undertake consultation on the documentation described above and ensure that there is a common understanding regarding the purpose of all processes and obligations.
  

Once this preliminary work has been undertaken, government will be better placed to determine the most appropriate reform options. Four options have been identified in this report:

• Option A – Retention of the status quo. This is not recommended as it does not improve the system or address any of the deficiencies detailed in this report.

• Option B – The existing regulation could continue to be revised and improved within the existing framework. Following completion of the policy development work detailed above:
  
  – all instruments relating to vouchers, eligibility and participants could be consolidated into one document. This means that, other than the Act, there would be one main document that describes the relationship between the Commonwealth and the client
  – all instruments describing the obligations of the service provider could be consolidated into two documents – the contract and the Rules of Conduct.
  – if the Deed were retained (which it may not need to be), this could be amended such that it only describes the relationship between the Commonwealth and the device supplier. It would not include any conditions that relate to the service provider.

This approach builds on the work that has been undertaken by OHS and stakeholders over the past 12 months. The main disadvantage of Option B is that it does not address the more structural and fundamental problems in the system.

• Option C – Fundamentally reform the structure of the scheme. This option would involve repealing the Hearing Services Administration Act 1997[</em>] and related delegated legislation. In order to enable payments to be made to service providers (and describe eligibility requirements), there would need to be a foundation in legislation but this could be achieved simply through the National Health Act 1953. The details of the scheme could then either be set out in: one piece of delegated legislation (made under the [<em>]National Health Act 1953); or a contract with service providers (and if necessary, with device suppliers).
  
  This option is resource intensive and time consuming to implement but is likely to deliver greater cost savings in the longer term.

• Option D - Mainstreaming hearing services such that they form part of the Medicare Benefits Schedule.
  
  This option represents a radical change and significant further work would be required to determine the viability of this option.

These options are discussed in more detail in Chapter 7.