BEATING THE "BOONDOGGLE": An Alternative to the Consolidation of Licensing Boards

Public agencies have struggled in recent years with diminishing resources as citizens grow less willing to pay the increasing costs of public services. Managers faced with declining resources have three options: find new sources of revenues, improve productivity, or reduce programs. Increasing revenue is never a popular option for public managers or, especially, elected officials. Reducing programs is not acceptable when the programs involved are critical to the health and safety of citizens such as agencies which perform regulatory and licensing functions. Therefore, public managers, driven by legislative initiatives, have traditionally sought to improve productivity.

Health licensing and regulatory agencies are in a unique position. Resources are usually not a problem as licensed constituencies are willing to provide revenue necessary to maintain professional standards. However, legislators faced with competing public needs and scarce resources view license fees as a source of revenue for other programs. Thus, regulatory agencies may find themselves in the same productivity squeeze as agencies without their financial resources.

This quest for increased productivity in a climate of shrinking resources has led managers primarily to two strategies: downsizing of organizations with the requirement that employees "do more with less" or consolidation of agencies of similar function. Downsizing, the process of reducing costs, programs and employees, is a topic for another study, one which I previously undertook. Consolidation, while it might be perceived as a method of downsizing, does not necessarily result in consumption of fewer resources. However, consolidation has been the strategy of choice for government entities at all levels. At least 31 state governments have chosen to centralize and consolidate licensing functions.

Outcomes of Consolidation

Perceived benefits of consolidations may include coordination of overall policy; reduced costs through economies of scale and elimination of service duplications; standardization of functions; and centralized public access to services. "Increased efficiency, continuity and consistency" were cited as benefits by a representative of the Michigan Department of Consumer and Industry Services which consolidated 16 health licensing agencies in 1977. A neutral, unbiased approach to investigations and disciplinary actions were cited as the major benefit of consolidation by representatives of umbrella organizations in New York and California.

A study by Elisabeth Graddy and Michael B. Nichol of the University of Southern California noted that organizational theorists have long argued that centralized organizations have an efficiency advantage over decentralized ones due to economies of scale and enhanced staff expertise. "Scale economies accrue in centralized agencies when the large number of licensees reduce the per unit costs of maintenance activities such as license renewal, notification, and process monitoring. Enhanced expertise can derive from the ability of centralized agencies to attract well-trained staff and to allow greater job specialization."

However, there are also perceived negative outcomes of consolidation. Members of the various licensed professions have historically opposed consolidation. Such opposition is based on a desire to maintain independence and accountability of the individual boards as well as a desire to avoid the negatives perceived to be inherent in a large "bureaucracy" including increased response time for services and decreased quality of service due to lack of expertise in specific professions.

There is also a perception that independent licensing boards are more likely to take disciplinary action against licensees and are therefore more beneficial for consumers. This was supported by Graddy and Nichol who in their study of centralized and non-centralized entities regulating physicians and nurses concluded that "administrative centralization has a significant negative impact on total disciplinary actions. Contrary to our expectations, as boards become less independent, disciplinary actions decrease. This suggests that overall administration centralization is not only ineffective at improving consumer-oriented performance, it is actually counter-productive." Graddy and Nichol suggested this might be due to a decrease in resources for centralized agencies. "We assumed that centralized agencies have more per licensee resources than individual boards because of cost savings from scale economies. It may be, however, that centralization does not yield any scale economies or centralized agencies may actually receive lower funding than the aggregated budgets of the individual boards they replace due to legislative anticipation of increased efficiency."

It is possible that the higher rates of disciplinary action in independent boards could be due to the greater effectiveness of specific expertise in the profession. Investigators are specialists in one field rather than generalists who work cases for all professions, as reported by the centralized agencies surveyed.

There is also evidence to support the suggestion that centralization may not achieve the expected economies of scale. Experience in a number of states has shown that the creation of "super agencies" failed to meet the desired objectives of improved consumer service and decreased costs. A 1994 article in Professional Licensing Report stated "The state of Oregon went from an independent structure to a centralized agency approach and is now returning to independent boards because of problems with lower levels of service being provided to consumers under the centralized regulatory agency. New York is another example of centralized organization which is not working. Consumers constantly complain that they are not dealt with either effectively or efficiently when they call the central agency."

In an April 1994 report, the California Senate Subcommittee on Efficiency and Effectiveness in State Boards and Commissions noted: "Florida consolidated its licensing boards in 1979 under a centralized agency called the Florida Department of Professional Regulation. . . In 1979, when the department was established, the appropriation was a little over $5 million. In 1980, the second year of operation, the appropriation to the department was approximately $13 million, a 150% increase in one year. Texas, which has merged or eliminated particular boards, but maintained their independent status, has had better success. If a comparison was made of 1991 appropriations of all licensing agencies of Texas with that of Florida, it cost Florida $15 million more to regulate the same occupations and professions as Texas."

An experienced public administrator who had worked with consolidated programs in several states observed, "These huge super agencies can be a real boondoggle. They are created to save money and improve services for citizens, but too often the opposite happens."

An Alternative to Consolidation

The State of Texas, seeking to avoid the creation of a new bureaucracy while achieving the efficiency and effectiveness goals of consolidation, created a unique entity in 1993 called the Health Professions Council. The idea was conceived by the Texas Sunset Commission following its review of the health care licensing boards in 1992. The Commission’s staff report noted that repeated efforts over the past 40 years to consolidate these boards under one umbrella agency had received only lukewarm support. The report noted that a proposal in 1991 by the Texas Performance Review to consolidate all licensing functions in the Texas Department of Licensing and Regulation (TDLR) was not adopted by the Texas Legislature. The Commission report noted that "In the past, the same scenario has developed when a consolidation proposal is suggested: determination of which boards would be combined; organization of opposition by licensee associations; and defeat of the proposal." The staff report concluded that "the number of times that the issue of a centralized board has been proposed and rejected in Texas may give an indication that the state is either not in favor of this approach or the combined efforts of the licensee groups are powerful enough to prevent the adoption of the approach." Concluding that efforts to consolidate were not productive, the Sunset staff turned to determining whether the identified benefits of consolidation might be achieved by other means. Following a lengthy and thorough review of the licensing boards, the Sunset Commission proposed that the Legislature create the Health Professions Council.

Operations of the Health Professions Council

The Legislature created the Council in 1993 with a membership of 13 agencies which currently represent 27 professional licensing boards or registries. The Council’s purpose is to coordinate administrative and regulatory efforts without sacrificing the quality, independence and accountability of individual boards. Operating with a budget of only $70,000, the Council employs a staff of two persons to carry out administrative functions and coordinate the work of eleven committees composed of staff from member agencies. The Council was cited as an innovation by the Pew Health Professions Commission in its December 1995 report Reforming Health Care Workforce Regulation.

In the last three years, the Council has been successful in creating a number of shared initiatives which save money and promote improved quality and consistency for member agencies. Two years ago, the member agencies collocated to one state office building which has facilitated sharing of resources. Some agencies actually share space such as reception rooms and break rooms and the Council manages shared meeting space including a large board room and six smaller conference rooms. Other major efforts include:

• Creation and operation of a statewide toll-free complaint system for public complaints against any licensed health professional. This one-stop complaint system provides easy access for consumers, many of whom are unsure of which agency to contact. This shared system also significantly lowers costs for member agencies to provide a toll-free consumer line.
• Development of shared manuals including a Board Member Training Manual, Risk Management Manual, Disaster Recovery Plan, and policy and procedure statements on various topics. These statements and manuals are designed to save staff time and assure consistency.
• Coordinated Staff Training. The Council proves training an on-going schedule of varied programs for member agencies, most of whom are too small to provide staff development programs.
• A document management center, operated by a private vendor, provides copying services reducing costs, freeing agency staff for other duties and providing improved copy quality.
• Shared legislative tracking of bills during legislative session and shared information regarding effects of proposed legislation.
• Development of backup payroll support among member agencies to assist small agencies through times of staff absence or turnover.
• Joint employee assistance program providing reduced costs for larger agencies and services previously unavailable to smaller agencies.
• Sharing of a staff attorney position by two agencies, the Texas Board of Veterinary Medical Examiners and the Texas Optometry Board.
• A number of smaller initiatives including joint posting of job opening information, shared courier service for daily deposit of funds to the State Treasury, sharing of legal libraries and resources and ongoing commendation and support among staff in work areas such as information systems and accounting.

Participation in the Council has also created a new atmosphere of cooperation among member agencies who may now engage in cooperative rule-making where they might previously have settled issues through the administrative law system at great cost to both agencies.

Efforts are currently underway to greatly expand the sharing of administrative support services. An outgoing mail center is being planned to centralize mail functions, saving postage, equipment rental and staff time. A work group has been organized to assist agencies in producing their Annual Financial Report. Completion of the report is an onerous task for small agencies many of whom must contract at great cost with outside consultants to prepare it.

Agencies are being invited to consider voluntary participation in a sharing of Human Resources and Payroll functions. In a pilot project, the Board of Nurse Examiners will provide all payroll related services for the Board of Medical Examiners. The Medical Board will provide leave accounting and some accounts payable for the Nurse Board. The Council is considering a goal to have all human resources, personnel and payroll related functions performed by only one or two of the member agencies by the end of fiscal year 1998. In addition, the Human Resources director for the Board of Nurse Examiners is providing personnel training seminars for all agencies.

A number of other proposals are currently under consideration which would establish a system where one or two agencies would perform certain accounting or administrative functions for the entire Council group. Different agencies would undertake to perform different services for the group. Specific functions under consideration include the following: purchase vouchers payable, travel vouchers, interagency transfer vouchers, and purchasing of equipment, furniture and supplies. It is also proposed that the state property accounting function be shared, including inventory and disposal of surplus property. This would facilitate additional sharing of equipment as well. It is also proposed that the existing informal groups that provide support in the areas of information services and accounting be formalized to provide services to the smaller agencies.

Benefits of Cooperative Projects

The on-going and proposed cooperative projects of the Health Professions Council provide the desired outcomes of centralization without the demonstrated negative effects. There is improved coordination of overall policy as agencies engage in cooperative rulemaking. Public access to services has been improved greatly through the joint toll-free phone system. As the proposed administrative sharing projects are enacted, there will be greater standardization of functions and elimination of duplications. Staff expertise will be enhanced as staff are freed from performing a great variety of duties and allowed to specialize in performing fewer functions. Smaller agencies will be able to draw on the expertise of specialized staff in larger agencies. Any economies of scale available through consolidation will be available through the cooperative sharing of administrative functions. It is expected that there will ultimately be a reduction of staff or a redistribution to other functions.

Suggestions for Future Study

It is possible that the model of cooperative sharing among small agencies might be adopted by other small agencies. Although Council agencies are similar in function, the benefits of this system could be achieved by any group of small agencies seeking to increase efficiency and effectiveness.

COPYRIGHT 2000. Rights to copy and distribute this publication are hereby granted to members of the Council on Licensure, Enforcement and Regulation (CLEAR), providing credit is given to CLEAR and copies are not distributed for profit.