This audit focuses on the NBA’s role in managing the nations blood supply, bearing in mind the NBA’s legislative responsibilities, national policy objectives and ongoing blood sector reforms.
Australia's blood supply
1. A reliable supply of blood and blood products is an integral component of Australia’s medical support system, critical in the treatment and support of people with a range of clinical conditions.1 Recipients of blood and blood products include cancer patients, victims of traumatic accidents, people undergoing surgery, and those with blood disorders such as haemophilia, to state just a few.
2. Australia is fortunate in having a largely self-sufficient blood supply. By arrangements with Australian governments, the national supply of blood is primarily attained through a long-established system of voluntary, unpaid blood donations collected from individual donors by the Australian Red Cross Blood Service (ARCBS), a division of the not-for-profit Australian Red Cross Society (ARCS).2 Blood products are provided free to patients requiring treatment, through Approved Health Providers (AHPs).
3. In 2009–10, around half a million Australians made some one million blood donations through ARCBS collection centres. These donations constitute Australia’s fresh blood supply and are used to produce the majority of our blood products.3 To meet growing demand in terms of quantity, high quality and state-of-the-art blood products, the blood supply is also supplemented with imported plasma-derived and recombinant (synthetic) blood products.
Managing rising cost and demand
4. The administration and coordination of Australia’s blood supply (including the collection, testing, processing and distribution of fresh blood and blood products) is funded under a joint arrangement between the Australian Government, which contributes 63 per cent of the total blood budget, and the states and territories, which collectively contribute 37 per cent of funding.
5. Over the last two decades, government expenditure for blood products and services has steadily risen (Figure 1). In part, this is attributed to higher demand for blood and blood products, resulting from the growth and ageing of Australia’s population and the increased use of blood products for new clinical treatments. The introduction of additional quality measures to ensure continuing blood product and service safety can also add to costs.
6. These factors contribute to pressure on governments and the blood sector (including AHPs and product and service providers) to manage Australia’s blood supply more efficiently, demonstrate value for money and measure progress against defined policy objectives, without compromising the quality and safety of the nation’s blood products and services.
Source: NBA, Department of Health and Ageing, and the Stephen Review 2001
7. In responding to these challenges, a focus of Australian governments in recent years has been to strengthen national coordination of the blood sector, particularly by streamlining the purchasing of products to assure the affordability and reliability of supply. A major review of the blood banking and plasma sector in 2001 led to several recommendations for blood sector reform, including the establishment of a central coordinating agency—subsequently founded as the National Blood Authority (NBA).4
8. This audit focuses on the NBA’s role in managing the nation’s blood supply, bearing in mind the NBA’s legislative responsibilities, national policy objectives and ongoing blood sector reforms.
National coordination arrangement
The National Blood Authority
10. Since its establishment, the NBA has been responsible for the planning and coordination of the national blood supply, including the centralised purchase of blood and blood services, on behalf of the Australian, state and territory governments. In 2010–11 the agency’s total estimated budget was $1.2 billion.7
11. Under the Health and Ageing portfolio’s Outcomes and Programs structure, the NBA has one Outcome:
12. In pursuing this Outcome, the NBA is required to operate in accordance with:
- the NBA Act, which defines the NBA’s functions; and
- blood sector policy principles as conveyed through a National Blood Agreement,9 an agreement endorsed by the Australian, state and territory governments.
13. Consistent with these requirements, as the national coordinating agency, the NBA defines its role as:
Source: NBA Corporate Plan 2006–09, p. 2. Governance arrangements
14. Governance of the NBA and the blood sector is multifaceted. The NBA itself is headed by a General Manager who is responsible for the day-to-day management of the NBA and reports to the Minister for Health and Ageing. As required by the NBA Act, the Minister has established a NBA Board, which functions as an advisory board to the General Manager. In addition to these arrangements, the NBA’s operations are overseen by a Jurisdictional Blood Committee (the JBC) comprised of state, territory and Australian government representatives (Figure 2).10
15. The approval of major national blood policy and high-level oversight of the NBA and the blood sector are responsibilities of the Health Ministers, represented through the Australian Health Ministers’ Conference (AHMC). The JBC reports to the AHMC through two sub-committees, the Australian Health Ministers’ Advisory Council (AHMAC) and the Clinical, Technical and Ethical Principal Committee (CTEPC). The JBC is the NBA’s main conduit for government endorsement of blood supply planning and budgets, policy development and referral of significant blood-related issues to AHMAC and AHMC.
Note: AHMC (Australian Health Ministers’ Conference), AHMAC (Australian Health Ministers’ Advisory Council), CTEPC (Clinical, Technical and Ethical Principal Committee), JBC (Jurisdictional Blood Committee), and NBA (National Blood Authority).
Contractual arrangements for Australia's blood supply
16. To ensure a sufficient and affordable blood supply, a major function assigned to the NBA through its Act is the purchase of blood products and services on behalf of the Commonwealth, states and territories. As the central purchasing agency, the NBA establishes contracts with suitable providers to meet the needs of patients, within the resources and policy parameters set by Australian governments (Figure 3).
17. In 2009–10 the NBA had 14 contracts for the supply of blood or blood products, with expenditure totalling $879 million.11Of this amount:
- $456 million (around 50 per cent) was for the nationwide provision of fresh blood products and services by the ARCBS under a Deed of Agreement (the Deed); and
- $215 million provided imported plasma-derived and recombinant products, through several NBA–commercial provider contracts (a government contingency measure intended to supplement supply where demand for specific products exceeds domestic production capacity or where specialised products are required); and
- $182 million was for the provision of fractionated products produced by CSL from domestic plasma.
18. The audit objective was to assess whether the NBA’s governance and contractual arrangements are effective in securing a national supply of blood products and services. To achieve this, the ANAO examined the NBA’s performance against three high-level criteria, which focused on: governance and administrative systems to support the supply of blood products and services; contract management practices; and performance monitoring.
19. Particular attention was given to the NBA’s management of the Deed of Agreement with the ARCS, a not-for-profit organisation and provider of fresh blood products and services (through the ARCBS) in Australia. Procurement activities were also examined through a contract with Baxter Healthcare Limited, a commercial provider of blood products. The audit included stakeholder consultation in three states.
20. Regulatory matters involving the Therapeutic Goods Administration (TGA), and contracts with CSL or other blood product providers were not included in the audit.
21. Consistent with the Audior-General Act 1997, the ANAO provided the proposed report to the NBA and DoHA, and relevant extracts of the proposed report to the TGA, ARCBS and Baxter Healthcare Pty. Limited, giving them the opportunity to respond to the report within 28 days.
22. In 2001, a review of the blood sector (the Stephen Review) identified inefficiencies in the sector, including a lack of coordination and national focus, and rising costs of blood products and services—which had tripled between 1991 and 2001.12 The establishment of the National Blood Authority (NBA) in 2003 was part of government reforms to improve blood sector efficiency and ensure a safe, secure, adequate and affordable blood supply into the future.13
23. As the national coordination agency, the NBA is required to provide access to safe and affordable blood products through its management of the national supply arrangements. This includes the centralised purchasing of blood products and services, and development of national mechanisms to monitor and address Australia’s increasing blood supply expenditure and trends in blood product use.
24. To this end, the NBA has established organisational structures, and processes, which largely allow the agency to carry out its governance responsibilities. Consistent with the National Blood Authority Act 2003 and the National Blood Agreement 14 , the NBA has assumed a central role in the national coordination of the blood supply through annual supply planning activities and contracting to purchase blood products and services. The NBA has also advanced (to varying degrees) a range of activities to improve the efficiency and effectiveness of the blood sector. These include measures to establish much needed data systems, promote appropriate use of products and reviews of various aspects of blood sector business—in particular, an extensive administrative review of the Australian Red Cross Blood Service (ARCBS).
25. Through these governance and contractual arrangements, the NBA has been largely effective in securing the national supply of blood and blood products. However, the NBA is not well positioned to monitor or address the trend in rising blood supply costs. The agency’s ability to assess the overall cost-effectiveness of the blood program was affected by insufficient national data and a lack of mechanisms to determine the uptake and impact of initiatives to improve the blood sector.
26. In keeping with the governments’ policy directions, and in the interest of ensuring the sustainability and affordability of the blood supply in the longer term, the NBA should strengthen the following areas of planning and program management:
- Strategic priorities: better defining the NBA’s strategic directions and longer-term priorities (including for cost-efficiency), and communicating these to key stakeholders, would assist the blood sector in aligning its own planning and coordination with government priorities.
- Contract management: reinforcing the Deed of Agreement between the NBA and the Australian Red Cross Society, particularly by incorporating service standards, specifications for key deliverables, a more representative set of performance indicators against key elements of the Deed, and mechanisms for client feedback, would provide a clearer basis on which to manage fresh blood supply arrangements.
- Program effectiveness: establishing national systems, data specifications and evaluation strategies to measure the impact of blood safety measures and initiatives to promote the appropriate use of blood products on patient outcomes and blood sector efficiency. This would strengthen the NBA’s reporting of the overall efficiency and effectiveness of the blood supply program.
27. The ANAO has made five recommendations to strengthen the NBA’s administration of the blood supply program. These recommendations emphasise the importance of clear priority setting, stakeholder engagement, and sound contract management in defining and measuring program effectiveness. The recommendations encourage further blood sector efficiency, and are not intended to reduce the supply or quality of blood or blood services to patients in need, as a means of cost containment.
Governance arrangements (Chapter 2)
28. The NBA was established as part of a coordinated national approach to policy setting, governance and management of the Australian blood sector, which was intended to secure access to safe and affordable blood services and products into the future. The NBA’s governance arrangements are defined through the NBA Act and the National Blood Agreement. In addition, the NBA is expected to meet requirements defined in the Financial Management and Accountability (FMA) Act.
29. Since its establishment in 2003, the NBA has implemented organisational structures and operational frameworks that meet its specific legislative functions and broader government expectations. Its approach to conveying strategic priorities, however, is limited. There would be benefit in the NBA ensuring that its Corporate Plan is kept up to date and either enhancing the plan, or using another suitable vehicle, to develop and clearly convey to external stakeholders the NBA’s medium to longer term priorities and activities, and how these link to broader government priorities. It would also be useful for such planning to identify mechanisms to measure the outcomes and effectiveness of government strategies, including recommendations from blood sector reviews and initiatives to improve blood sector safety and performance.
30. The NBA operates within a multijurisdictional environment with a governance hierarchy consisting of several levels of governing committees. This structure presents particular administrative complexities and, at times, can slow the progress and timely endorsement of significant policies, initiatives and key procedural documents. While acknowledging that review and modification of blood sector governance arrangements has occurred since the NBA’s establishment, there would be benefit in NBA’s governing committees working with the NBA to more clearly delineate its roles and responsibilities, particularly the extent of involvement that the NBA should have in blood sector policy development and broader stakeholder engagement. Action in this area should help to improve the timeliness of progressing key work through the committees.
31. A key role for the NBA has been to facilitate and coordinate the implementation of a substantial change program in Australia’s blood sector. The NBA has implemented a range of communication mechanisms across the many aspects of its business. Implementation of a more encompassing communication strategy with a broader-reaching approach to stakeholder consultation, would complement existing activities and enable the NBA to better inform the blood sector of longer-term planned activities. This would also facilitate feedback on the uptake, impact, costs and benefits associated with the governments’ blood sector reforms.
Coordinating the blood supply (Chapter 3)
32. A particular role of the NBA has been to facilitate the central coordination of the purchase of blood products and services. This approach was intended to provide greater efficiency in funding the blood supply and improve monitoring of the costs of blood services and products. It also promised to provide Australian governments insight into supply and wastage issues and to promote nationally consistent best practice in the use of blood products—matters which all contribute to the effectiveness and efficiency of the blood system.
33. To meet its legislative and national policy obligations, the NBA, as the central coordinating body, has established contracts to secure a sufficient blood supply consisting of a range of fresh blood, plasma-derived and recombinant products.15 Processes are also in place for annual planning for the blood supply, including appropriate procedures for estimating the coming year’s needs and budget and developing a National Supply Plan and Budget (NSPB).
34. These processes were generally successful, though at times more complicated than desired due to difficulties in coordinating around several different jurisdictional budget processes. The NSPB is reviewed mid-year, and supply estimates have generally met the specified targets. Given the substantial budget for each year’s blood supply, there would be benefit in the NBA, JBC and the Department of Health and Ageing further streamlining the planning and coordination procedures to ensure timely endorsement of the NSPB by Ministers.
35. National policy recognises that Australia’s blood supply needs to be affordable and the blood sector efficient. Significant rises in blood supply expenditure over the last decade are a risk to future affordability for governments. Published trends show a continuing rise in the costs of blood services and products, with total blood expenditure from 2003–04 to 2009–10 increasing by an average of 11.4 per cent per annum.
36. Fresh blood expenditure grew from $243 million to $456 million over the seven years to 2009–10, the NBA attributing the greatest proportions of this to price increases and the implementation of blood safety measures. While the reasons for rising safety costs were largely apparent, greater insight into the causes of increasing fresh blood product costs could assist the NBA, Australian governments and the broader sector to focus on cost saving and value for money strategies. To date, the impact of efficiency measures and strategies to enhance appropriate use or minimise wastage of blood products, and their influence on value for money or the cost-effectiveness of the blood supply, have not been measurable due to the lack of data and information available.
37. The NBA and ARCBS have invested considerable time and resources in reviewing the efficiency of the blood sector and implementing activities to improve many areas of ARCBS business, promote appropriate use of blood products and improve blood inventory, to list but a few. There is scope for the NBA, with the JBC and the Department of Health and Ageing (DoHA), to more fully consider data sets and evaluation strategies to gauge the broader cost implications of quality and safety measures, the cost-benefits of patient outcomes and any consequent savings.
The Deed of Agreement between the NBA and ARCS (Chapter 4)
38. The Deed of Agreement (the Deed) between the NBA and the ARCS documents the basis of arrangements for the supply of fresh blood, blood products and services by the ARCBS (the operational arm of the ARCS). This contractual arrangement constitutes almost half of the national blood supply budget each year, and is the most substantial of the NBA’s contracts.
39. Negotiations towards the first Deed were lengthy; a 2006–09 Deed was signed some three years after the NBA’s establishment. This was indicative of the complexities of the blood sector and the early relationship between the NBA and the ARCBS, which reflected two very different cultures working within a complex blood sector—the ARCBS, which had existed in various forms for over 70 years, and the NBA, a recently established government body with an agenda that included blood sector efficiency reforms. Within this environment, the NBA and ARCBS established a Deed (subsequently extended to 2011), which provided an adequate rather than ideal basis for the national blood supply arrangements, due to inconsistent detail in its specifications for deliverables and a lack of service level standards.
40. As with other government service contracts, the arrangement with the ARCBS needs to demonstrate value for money: a concept that is not straight-forward considering that the ARCBS is the sole provider of fresh blood to governments, and that estimating the value of health outcomes is intrinsically difficult. In line with government policy for efficiency and affordability of the blood supply, the 2006–09 Deed reflects a broad-sweeping change agenda, with a series of reviews and options for improving the efficiency of the blood supply—initiatives such as output-based funding to help contain expenditure, a national inventory system to monitor and forecast supply needs, and new testing measures to improve the safety of blood products.
41. While progress has been made in a number of key areas, the volume of activities to be undertaken through the 2006–09 Deed was ambitious and the priorities unclear. Furthermore, the early relationship between the NBA and ARCBS was not sufficiently mature to facilitate timely implementation of such a substantial change agenda. There would be benefit in taking a more strategic approach to managing the blood supply, including a thorough analysis of governments’ and the blood sector’s risks and needs, to inform the prioritisation of key activities for progression within agreed timelines.
42. The negotiations towards a new Deed provide both organisations with the opportunity to evaluate past experiences and use lessons learned to develop a stronger, mutually focused relationship. Useful improvements to the Deed would include:
- the inclusion of clearer specifications, roles and responsibilities for each key ARCBS function under the Deed;
- development of a more representative set of Key Performance Indicators (KPIs) and targets to measure qualitative as well as quantitative aspects of the contract deliverables. This is particularly important for areas of blood donor management and blood collection, testing, inventory and Transfusion Medicine Services; and
- establishing clear processes to engage with stakeholders, and measure and report client satisfaction.
Commercial contract management (Chapter 5)
43. Although Australia is largely self-sufficient in fresh blood products, government policy allows the NBA to import blood products where Australia does not manufacture a particular product or where domestic production can not meet demand, as is the case for Intravenous Immunoglobulin (IVIg).
44. The NBA has established contracts with 10 commercial suppliers for a range of blood products (defined blood products) to meet Australia’s needs. The ANAO examined the NBA’s approach to procurement and contract management through the Baxter Healthcare Pty. Ltd. (Baxter) contract.
45. The NBA has taken appropriate steps to secure a contract with Baxter for the range of defined blood products required by the Australian governments. The procurement processes were conducted according to the Commonwealth Procurement Guidelines (CPGs).
46. Overall, the arrangements with Baxter have been effectively administered by the NBA, providing the required contract deliverables. There are, however, opportunities for the NBA to strengthen its contractual relationship with Baxter and future suppliers, for example, by:
- implementing risk plans, and monitoring and reporting against these;
- including a more structured dispute resolution process in contracts;
- planning and consulting about upcoming procurements earlier; and
- consulting external stakeholders more regularly and extensively.
Monitoring performance (Chapter 6)
47. The reporting of progress and performance in accordance with the Government’s outcomes and programs framework is an important mechanism by which public sector agencies can provide transparency and accountability of their operations to the Parliament and the public. Agencies are required to report the effectiveness of their program delivery against a set of KPIs which are aligned to an outcome, program activities and deliverables.
48. The NBA’s 2010–11 Portfolio Budget Statement demonstrates an outcomes and programs structure which meets the outcome and program framework requirements. It also aligns with the primary policy objectives of the National Blood Agreement and the roles and responsibilities specified in the NBA Act. The agency’s performance indicators and deliverables for Program 1.1: National Blood Agreement Management align with its Major Activities:
- secure the supply of blood and blood products;
- risk management and sector performance improvement; and
- appropriate patient blood management and safe use of blood and blood products.
49. For all three Major Activities, the NBA identifies a key performance target as obtaining a ‘high level of satisfaction’ from its most significant client—the Jurisdictional Blood Committee (JBC).16 Over time, the NBA has reported a high level of satisfaction from the JBC, however, when considering program or agency effectiveness, it would be useful for the NBA to seek the perspectives of a broader range of stakeholders, particularly as their perceptions and actions could impact on the success of blood program activities and broader outcomes.
50. The NBA assesses its program efficiency through various analyses of cost data. However, demonstrating and ensuring value for money in its blood supply functions requires additional information on the quality of the services and the impact of government measures to improve the use of blood products and reduce wastage over time. The transparency of NBA and ARCBS operations contributes to government and stakeholders’ confidence in these organisations, which is important given the altruistic nature of Australia’s blood donation/transfusion system. The establishment of national systems and data sets should help to improve blood sector transparency and better inform the NBA’s performance monitoring, supply planning and value for money across the range of NBA’s functional responsibilities. Notwithstanding this, information on the quality of blood services and the impact of government initiatives for blood sector improvements would be strengthened by the NBA:
- establishing mechanisms to help it assess the impact of new blood safety measures on patient outcomes and blood sector efficiencies; and
- implementing an evaluation strategy to determine the impact of its Clinical Practice Guidelines.
51. Responses to the audit were received from the NBA, DoHA and Baxter Pty. Limited.
The National Blood Authority
52. The NBA provided the following response to the audit.
The National Blood Authority (NBA) welcomes the findings of the audit that the NBA has established organisational structures and processes which allow us to carry out our governance responsibilities, play an effective central role in the national coordinationof the blood supply and advance the efficiency and effectiveness of the sector. The audit has provided a good summary of the complex policy, historical context and multi-jurisdictional environment in which the NBA operates and the challenges that these bring to a small agency.
The NBA agrees to the five recommendations. Work to implement recommendations 3, 4 and 5 has progressed during the audit and remains an ongoing focus.
The Department of Health and Ageing
Managing the supply of blood and blood products is a complex area particularly given the diversity of stakeholders and the shared funding arrangements between the Commonwealth and states/territories. The Department notes that there are a number of recommendations for which the NBA does not have sole responsibility and depend on co-operation of the states/territories and the public/private health sectors.
53. The response from Baxter Healthcare Pty. Limited, which comments on specific aspects of the audit report, is included in Appendix 1.
 Late in the audit, ‘ARCS’ and ‘ARCBS’ changed to the ‘Red Cross’ and the ‘Blood Service’ respectively. However, for simplicity, the use of ARCS and ARCBS have been retained throughout this report.
 Under Government contractual arrangements, the ARCBS is the single provider of plasma to CSL Limited for the manufacture of plasma-derived products for use in Australia.
 Sir Ninian Stephen, 2001 (the Stephen Review).Review of the Australian blood banking and plasma products sector
 The NBA is an FMA Act agency and part of the Health and Ageing portfolio.
 Health and Ageing Portfolio Budget Statement 2010–11, p. 694.
 ibid., p. 691. The NBA’s total estimated budget includes: ordinary annual services under Appropriation Bill (No. 1), consisting of Departmental Appropriation ($5.61 million) and Administered resources for Outcome 1 ($5.75 million); and $1.217 billion total special account for blood services and products.
 National Blood Authority Australia, Annual Report 2009–10, p. 28; and Health and Ageing Portfolio Budget Statements 2010–11, , p. 693.
 National Blood Agreement 2002.
 The NBA also provides the secretariat for the JBC.
 op. cit. NBA Annual Report 2009–10, pp. 45, 57–58; and Health and Ageing Portfolio Budget Statement 2010–11, p.713.
 op. cit., The Stephen Review, 2001.
 National Blood Agreement, 2002; and The role of the NBA, NBA Board inaugural Chair Richard Smallwood, 2003 [downloaded from the NBA website 22 March 2011].
 The Australian, state and territory governments are signatories to a National Blood Agreement, which sets out national blood policy objectives and roles, including the governance arrangements for the NBA.
 The NBA Act defines the NBA’s functions. The National Blood Agreement defines the blood policy objectives within which the NBA operates, and roles and responsibilities of the parties to the Agreement.
 The JBC represents the Australian, state and territory governments’ positions on blood policy, demand, supply planning, funding and product distribution.