The Dunedin Hospital project on life support
Saturday, 28 September 2024
A National Government would build the hospital that Dunedin needs, the party’s then health spokesperson, Dr Shane Reti, promised in July last year.
On Thursday, the now Health Minister stood beside Infrastructure Minister Chris Bishop to detail why the city might not get the hospital it wants.
Spiralling costs has meant that the original 2017 cost estimation of $1.2-$1.4b could approach $3b, the ministers said, prompting a radical rethink of the project.
The long-awaited and much needed facility has been the subject of three election campaigns in the Deep South, and likely a fourth, with thousands expected to voice their displeasure about the latest update in a protest on Saturday.
That march is due to begin at noon in the shadow of the current Dunedin Hospital, which is beset with asbestos issues and leaks, before heading-up George St to the Octagon.
Organisers had been anticipating a march of up to 10,000 people, but that was prior to the shock announcement by Bishop and Reti.
The announcement was made an office across from the hospital site, nestled between the city’s one way roading system.
The two senior ministers said the project now faced two options: revise the current project specification and scope, or carry out a staged development of the old hospital site.
This was the recommendation of a report from Robert Rust, which was commissioned earlier this year.
That 72-page report noted that the proposed outpatient building, which will feature outpatient services, clinic rooms, day surgery facilities and planned radiology, was in a “relatively settled commercial state until completion”.
That facility was expected to open in 2026.
But as for the much larger proposed inpatient building, which is on the site once occupied by the former Cadbury factory, “our view is that there is too much risk and uncertainty in the current ‘hybrid’ cost estimates,” the report noted.
The inpatient building, which already has piles in place ready for construction, would host the emergency department, the intensive care unit (ICU), operating theatres, inpatient wards and other services, including a dedicated primary birthing unit.
It was expected to open in 2029.
While Bishop maintained that, “The people of Dunedin are going to get a hospital”, what final form that hospital took was yet to be determined.
The Rust Report noted that the new hospital was “currently the largest vertical infrastructure project in New Zealand”.
Uncertainty over that project included insufficient money - estimated at an additional $400m - that had been set aside for the likes of car parking, a pathology lab ($45m), and the refurbishment/demolition of the current hospital ($325m).
“It is noted that these costs are indicative only and that Health NZ has indicated it will continue to investigate options to reduce these costs and investigate alternative funding sources,” the report noted.
But while those costs were indicative only, a $290m budget upgrade request earlier this year resulted in the Government taking a microscope to the project.
“We said ‘hang on a minute, let’s do an independent review here’,” Bishop said of the decision behind the review.
That budget request, coupled with a contractor’s cost, estimate being several hundred million dollars more than anticipated “prompted us to do further thinking about it”.
“We are being upfront and transparent as possible.”
Bishop reiterated that “the people of Dunedin are going to get a new hospital, they are going to have a very large investment, even at $1.88b, leave aside the $3b … that is a significant investment in Dunedin and the wider region”.
“That is the blunt truth, that there are trade-offs to spending. There is no free magic money tree.
“Three billion dollars would make it one of the most expensive hospitals ever built in the Southern Hemisphere, and we have to be upfront and frank with the public that there are trade-offs. It is not economically, socially or politically sustainable to spend $3b in one hospital when it comes at the expense of other hospitals in other regions.”
A $3b hospital in Dunedin would effectively strip money from the likes of Whangarei, Nelson, Hawke’s Bay, Palmerston North and Tauranga, he said.
But Labour Health spokesperson, Ayesha Verrall, questioned that framing of the $3b figure in Parliament.
“This is a manufactured crisis about the cost of this hospital,” Verrall said.
“Where did this figure come from? If we admitted Chris Bishop to the gastroenterology department at Dunedin Hospital we might be able to get a scope and find out where that $3b figure came from.”
The section of the Rust Report which deals with costs included a graph projecting a cost of $3b, but it was largely redacted.
“Generally speaking, the more advanced a project is through design, procurement, consenting and construction, the more certain project budgets become, which in turn affords a higher level of confidence in those budget,” the report noted.
The inpatient building had some costs “on the path” to becoming fixed prices, with the report noting the volatile period for the construction sector since Covid.
Furthermore, the build was also hampered by “location and environmental constraints”, which were putting significant strain on a relatively small market like Dunedin.
Reti, like other health ministers before him, visited the site back in June, and reiterated that the Government was looking for “value for money”.
While the Government was committed to the current plans for the hospital, “we are always looking for efficiencies”.
“We are looking for value in everything we build.”
But that value had come at a cost for the people of Otago and Southland, with Dunedin Mayor Jules Radich saying locals would be “incensed” by the decision.
On Saturday, he and thousands of others were expected to voice their opinion when they take to the streets.
All Dunedin buses running between 10am and 3pm on Saturday will be free, thanks to the Otago Regional Council, to help people get to and from the march.
The protest is expected to cause traffic disruption in the CBD.
Key moments in the Dunedin Hospital project
2015 The Ministry of Health appoints the Southern Partnership Group to lead the redevelopment of the hospital.
June 2017 An indicative business case short lists two options: a new hospital on a new greenfield site, and a new hospital on the Wakari site. Cost estimated between $1.2 - $1.4b.
May 2018 Government announces that the new hospital would be built on the old Cadbury site
Dec 2018 The Government announces the hospital would now be built in two stages, with the outpatient and day surgery building fast tracked to be finished more
than three years earlier than anticipated.
May 2019 The 2019 Budget approves a total budget of $1.4b for the project.
Aug 2020 The Government approves in principle the detailed business case, agreeing on a preferred design that included two separate buildings.
Apr 2021 Budget increased to $1.47b
Dec 2022 Budget increased to $1.58b.
Apr 2023 Budget increased to $1.59b.
Nov 2023 First piles driven for Inpatients building.
April 2024 Independent review by Robert Rust commissioned.
May 2024 Government approves an additional $290m to be held under contingency for the project, with budget increased to $1.88b.