Governments and key institutions need to radically review how they engage with these firms or risk the healthcare system.
In last month’s public inquiry by the NSW government into the Use and Management of Consulting Services, inquiry chair Abigail Boyd asked a very simple question of acting PwC CEO Kristin Stubbins.
The question neatly laid bare the size and nature of the problem we face in Australia’s healthcare consulting ecosystem.
Why are roughly 660 consultants with PwC – an “infestation”, Boyd said – sitting on up to 900 public boards across the country?
Boyd then pressed Stubbins into quite a tight corner.
“It seems like the perfect business model to me,” she said.
“[It works by], first of all, redesigning a health structure – which I know PwC had had quite a hand in – to devolve it into this board structure, to then put consultants onto boards, who are then critical in terms of giving work to other consultants while on those boards, building that relationship and then having a steady flow of income once they go back to their practices.”
It appears highly unusual, Boyd continued, that PwC would allow so many staff members to sit on public boards without an ulterior motive, especially given that board work tends to involve hours-long meetings during workdays.
Stubbins’ reply was astounding (and revealing).
She vehemently denied that there was an underlying business strategy at PwC that encouraged employees to seek out board work in order to generate new clients.
“I am devoted to serving the community,” she said. “I’ve been recognised for that, and I do many things to contribute my time. I sought to take an unpaid position as a board member because I thought I could do some good with my financial expertise for the taxpayers of NSW.”
The large number of PwC consultants on public boards were simply individuals who were passionate about delivering community service working for a company that had the same passion, she suggested.
“We believe that that’s aligned with the PwC purpose,” she said.
At this point of the proceedings it wasn’t at all clear if Stubbins actually believed the line she was pushing.
Had she and her colleagues really lost themselves so deeply in their business model and culture that they genuinely believed they were serving the community?
It didn’t feel likely. But strong and wayward company cultures can do strange things to groups of people over time.
In any case, if Stubbins thought she’d gotten away with her explanation, she can’t have thought it for long.
Boyd homed in on one of Stubbins’ own supposed community service roles on the board of South Eastern Sydney Local Hospital District.
She asked, if developing business leads wasn’t part of the reason so many PwC consultants haunted so many public boards, how did she view PwC winning a significant contract with SESLHD after she had served on its board for some time?
Stubbins reacted by saying that as soon as it was apparent that PwC had won an SESLHD contract she stood down to avoid any conflict.
Many people might ask: wouldn’t that be a bit too late to avoid the conflict, or even the optics of potential conflict?
In any case, minutes of the SESLHD board meetings suggest that Stubbins didn’t actually stop going to board meetings after she resigned.
PwC won the contract with SESLHD in May of 2015 but the board minutes of August that year record Stubbins as being an advisor at that meeting.
When questioned as to why Stubbins was still hanging around after the PwC contract was in play, SESLHD board chair Michael Still leapt to Stubbins’ defence.
“There were different pieces of work [that PwC undertook], and each of those pieces of work were whole unto themselves and we did not expect … further work to be necessary,” Still told the inquiry.
“Therefore, [the board] didn’t see it as necessary that [Ms Stubbins] leaves the board entirely [until] it became clear that there was a much piece of bigger piece of work to do … and she was the first to raise that.”
That the chair of a major NSW LHD saw fit to defend Stubbins seemed to go directly to the very problem Boyd was worried about: the relationship between an obvious potential supplier and an organisation being compromised to the point where even the chair of the board was defending the business model of a conflicted board member.
Whether he was or not, Still’s defence of Stubbins made it look like he and the entire SESLHD board were captives of the PwC business model Boyd was worried about, and had no idea they were.
Of course Stubbins, who has had a long career at PwC in its health services division, would almost certainly have proved a very valuable board member who would have, from time to time, added significant value to board thinking. So you can understand why Still wanted to defend the value of Stubbins on the board.
But that’s not the issue at hand.
The issue is, why was she actually there in the first place, and who is her real master when push comes to shove on making big decisions when potential conflict might be in play: PwC or the SESLHD?
It’s PwC who pays her and it’s PwC where most of her working life, past and future, lies.
If it came down to a decision of what was better for SESLHD or PwC and the stakes were high, it wouldn’t matter if Stubbins, as she maintains, could maintain neutrality and do only what was best for the SESLHD board.
She is entirely conflicted.
Whether the PwC contract was influenced or not by Stubbins’ presence on the board doesn’t matter either. She was on the board and they won the contract.
It simply does not work from a governance perspective.
Stubbins and PwC of course are not an isolated case.
There are the other 660 PwC consultants on 900 public boards who are doing what Stubbins is doing (helping either the community or PwC, you decide).
Then there are all the other consultants from all the other big consulting firms using largely the same tactic. Some aren’t quite so overt as PwC, but most have variations of the same theme going on in terms of networking with the right people in government, or indeed once working in the places that are being targeted for contracts by these groups.
If you start multiplying all this activity out by the big four accounting consulting firms plus the big three strategy firms, and then outwards a little more for some of the specialist groups, the maths on how systemically corrupted our healthcare consulting ecosystem might be starts to become mind-boggling.
I’m obliged to say here, as I note many of the major daily newspapers have to say in most of the stories they are running on similar topics to do with consulting firms over the past few weeks, that Stubbins has done nothing legally wrong.
Which means that if governments don’t react to what is going on and introduce some legislation or regulation to alter the dynamic, the situation very likely won’t change.
Not revealed in the NSW inquiry, but in this publication a few weeks back now, was Stubbins’ and PwC’s involvement in a joint venture with Sydney University in 2017, whereby the DoHAC awarded the groups $30m in funding to start their own private company to develop a digital mental health platform.
That story has now hit the major daily press and it’s getting stranger by the day.
One problem that is becoming increasingly apparent is that key figures in these “loose” deals keep maintaining that they have done nothing wrong, a bit like Stubbins in the NSW inquiry.
That there was no competition for the grant at the centre of this story now has a lot of people riled up, but a more important question surely is, how does the federal government knowingly hand over $30m to a global consulting behemoth to start its own commercial venture (with Sydney University), which, if it had been successful in the manner that had originally been planned, would have delivered windfall profits to PwC without necessarily delivering any return to the government or Australians?
What sort of relationships were in play between PwC, other key influencers in the deal, such as the national mental health commissioner of the day, Professor Ian Hickie (who also became a shareholder of the company), and key government personnel, including, it looks like, past prime ministers and ministers of health.
Stubbins was the founding chair of the company that was formed, InnoWell.
She only resigned the position days before the NSW inquiry into consultants.
While Stubbins was chair of InnoWell, PwC spruiked the company on its own website to its corporate customers as part of its broad-ranging promotion of its consulting expertise in digital mental health, and at one point suggested to some of its clients they might want to invest in the company.
At no point in any of that promotion did PwC see fit to alert in any of its articles that it was a 45% (now 32%) shareholder in InnoWell. When pressed on this point a PwC spokesperson said to TMR “we probably should have” but that it’s publicly available information if you want to check shareholdings on ASIC, so PwC was doing nothing wrong.
I think this person might have meant they were doing nothing illegal.
Nearly three years after PwC had won this grant and one year after an academic review of InnoWell revealed that none of its completed trials had provided evidence that the mental health platform worked, PwC was contracted by DoHAC to write a scoping paper for digital mental health.
The consulting business model, as the NSW inquiry chair Boyd suspected, is about developing multiple connected networks where you can do business from all points of the compass. In this case PwC was getting money from the government to build its own private company and taking money to develop strategy, in which its own private company featured … of course.
In PwC’s government paper on digital mental health InnoWell was referred to twice as an example of a useful digital health platform, but PwC did not note anywhere that they owned nearly half of the company (although DoHAC should have known that because it gave them the money).
The paper was used by DoHAC to publish its own positioning paper on digital mental health and in that paper no mention was made of PwC’s involvement in developing the paper.
PwC subsequently was contracted by the Victorian government to help it write its digital mental health strategy.
Today InnoWell and the original PwC/Sydney University grant are the subject of a separate inquiry initiated by federal Health Minister Mark Butler.
Commenting on the affair, Transparency International Australia’s chief executive, Clancy Moore, told the Guardian this week that “this $30m grant is another example of how personal friendships, politics and networks can influence public policy and the use of valuable public money”.
Public money is one thing, but influencing public policy is another altogether.
How are we to be sure that our strategy for digital mental health is sound if PwC had a giant stake in a company building a particular type of digital mental health platform?
As things turned out, an independent academic review could not find any evidence the platform worked.
Yet PwC was pushing it through all their government work and directly to all their clients.
The dynamic Moore is describing is of course not one that has only applied to PwC.
PwC’s business model is largely the same model that all the major consultants are running on. That is not to say that all the major consultants have been acting as badly as PwC.
But there are plenty of examples in healthcare of the sort of non-transparent goings-on in deal making – sometimes very big deal making – and clouded relationships that should make people wonder.
The problem is that with all the headlines on PwC and now other big consulting groups being exposed for less scrupulous dealings as well, public trust in the current consulting business model is rapidly disappearing.
That means the government needs to act regardless or the consulting system will break down under the weight of suspicion and mistrust.
Already there are major projects where a lot of people aren’t comfortable with the possibility of the sort of relationships that Moore is referring to above.
Is it okay, for instance, that Accenture wins the major contract to deliver a version of the My Health Record project in New Zealand, and then the person appointed to head up the delivery project by the New Zealand government is the past Health Industry CEO and lead on growth markets for Accenture in Australia and New Zealand?
Is it okay that some of our most senior public servants serving in health departments across the country arrived from roles from consulting firms that did work for those departments, and often depart back to those roles or ones with other consultants?
Is it okay to have so many people working for consultants on so many public boards of healthcare companies, and of key healthcare policy influencing institutions, such as the Australian Institute of Digital Health, or a digital health CRC?
Now that trust in these very loose arrangements is rapidly disappearing, there need to be new and well defined rules of engagement, from which these consultants can operate with their clients moving forward.
Speaking to the Senate inquiry into consulting in the public service last week, former KPMG partner Brendan Lyon said that the big four consulting firms were unregulated “pseudo-corporations” whose partnership model creates a very dangerous situation in which there is no real legal recourse around how their individuals operate.
He called for a “royal commission to examine the role, structure and regulation of the accounting profession and to identify any systemic economic risks”; and introduce “a range of measures designed to improve transparency, increase penalties”.
Such a royal commission would not cover the gamut of larger strategy-based consultants that have major contracts with governments, private institutions, key not-for-profits, such as PHNs, and even some of our leading medical colleges.
In healthcare and other sectors the review and new regulation would need to be spread much wider somehow.
It is very important to note here that the vast majority of major and minor consulting firms in healthcare are purveyors of invaluable IP and services which government health departments, agencies and other key healthcare organisations across the country often need in order to move forward effectively.
Like it or not the consulting model of skimming across the top of multiple organisations and collecting invaluable IP as they go to use at the next client (at a significant price) is an important contributor to how we develop strategy and policy and execute major projects.
If we cut away at the sector too quickly or harshly we risk disturbing a lot of very important and well run projects and ultimately endanger key aspects of our ability to build a better healthcare system moving forward.
As much as most of us love to hate consultants, they are usually very good at what they do.
But we can’t stand back and let the current loose and at times clearly corrupted business models of these organisations stand any longer.
The healthcare consulting ecosystem needs to be thoroughly reviewed and in some manner newly regulated so we can all trust what is going on.
Without such a review and regulation how we will ever be able to trust that we aren’t somehow compromising the future of our healthcare system by operating a system in which there is so much potential and actual incidence of conflict?
