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National Health Act, 2003 (Act No. 61 of 2003)


National Health Insurance Policy towards Universal Health Coverage

Chapter 6 : Reorganisation of the Health Care System and Services under NHI

6.2 Improving Leadership and Governance

6.2.4 Role, functions, management and governance of Central Hospitals


165. Central hospitals are a platform for conducting research, the training of health workers as well as being centres of excellence for innovation nationally, continentally and globally. They are a national resource and irrespective of the province in which they are located, must provide health services to the entire population.


166. Central hospitals will be reformed to be semi-autonomous. Full decentralisation of their management functions and responsibilities will be prioritised to ensure their effective functioning and sustainability. This will also contribute to improved quality of care, responsiveness to patient needs, hospital effectiveness and affordability of healthcare. Their management will have full delegations and decision making powers including control over financial management, human resource management, infrastructure and technology, as well as planning and decision making. Central hospitals will contract directly with the NHI Fund.


167. Central hospitals will be required to establish cost centres. These cost centres will be responsible for managing meaningful units of business activities (Functional Business Units) and the related cost drivers at the level where the operations/activities are directed and controlled. Through this system, greater levels of responsibility and accountability will be afforded to departmental heads within the central hospital. The role played by Heads of Academic Departments in central hospitals will therefore be significantly enhanced.


168. The Functional Business Units (FBUs) will be disaggregated into smaller units with the lowest cost centre level being a ward or out-patient clinic. Cost centre management will include: Implementation of International Classification of Diseases 10th editionh (ICD-10), the use of Diagnosis Related Groupers (DRGs)67 to determine costing and case-mix, cost accounting, statistics, practice management, budgeting, forecasting and expenditure control. Within the central hospitals, work is currently underway to pilot the implementation of the Diagnosis-Related Groupers (DRGs) in the ten central hospitals. In addition, phase 2 of the implementation of the International Classification of Diseases-version 10 (ICD10) coding system is taking place in all the central hospitals.


169. In line with regulations on management and governance of hospitals, central hospitals will be governed by appropriately constituted Boards. The composition, role and function of the Boards will be amended in line with the objectives of the NHI, including ensuring that they have greater oversight responsibilities. These boards will have a delegated oversight responsibility of all the functions of the hospital and represent the interest of the users of the facility and affected stakeholders.


170. All these reforms will necessitate central hospitals becoming a competence of the national sphere of government which will require new governance structures. This is important as all tertiary health services and the facilities in which they are delivered form a pivotal component of a unified national health system. This organisational change will also ensure that the expertise within these institutions benefits the entire health system.



h There are different versions of ICD starting from the 1st to the 10th edition (hence ICD-10). As part of NHI, South Africa will implement the 10th edition.