Dr Shane Reti to replace Te Whatu Ora Health New Zealand Board with commissioner after agency heading for $1.4b deficit
Monday, 22 July 2024
Te Whatu Ora Heath New Zealand’s board will be replaced with a commissioner.
Health Minister Dr Shane Reti says this is due to serious concerns around overspending.
Te Whatu Ora Heath New Zealand is facing an estimated deficit of $1.4 billion by the end of 2024/25.
Health Minister Dr Shane Reti will replace Te Whatu Ora Heath New Zealand’s board with a commissioner “in response to serious concerns around oversight, overspend and a significant deterioration in financial outlook” which he claims was leading to a $1.4 billion deficit.
But Labour has rejected its assessment and claimed the government has not put enough of its budget towards health to account for population growth, and inflation.
“This is a somewhat brazen and desperate attempt to pin responsibility for this government's decisions on the last government. This year's budget didn't contain enough funding for health. The consequences of that are now becoming evident,” leader Chris Hipkins said.
Reti said between 2500 and 3000 “back office” staff could lose their roles as he looks to cut down on what he described as $130 million-worth of overspend a month. He also put the overspending down to “outsourced personnel”.
He appointed Professor Lester Levy, the recently appointed Chair of Health NZ, as Commissioner for a 12-month term and said this was the strongest ministerial intervention he could make.
He said Health NZ first reported a deteriorating financial position in March, “despite earlier repeated assurances by the organisation that it was on target to make savings in 2023/24”.
“In the months since, the situation has worsened. Health NZ is currently overspending at the rate of approximately $130 million a month.”
He put the “financial challenges” down to the previous government’s “botched health reforms” which replaced the district health board system with a centralised agency.
“The issues at Health NZ stem from the previous government’s mismanaged health reforms, which resulted in an overly centralised operating model, limited oversight of financial and non-financial performance, and fragmented administrative data systems which were unable to identify risks until it was too late,” he said.
Levy must find an extra $1.4 billion in savings in the embattled agency, which is struggling under the weight of chronic illnesses, and delays to surgeries and first specialist appointments.
“Operational responsibility for the turnaround plan will sit with the Commissioner, however I have made it clear that it should focus on cost efficiencies in areas such as any back-office bureaucracy which has blown out, particularly in middle management, as a result of the previous government’s damaging reforms.
“As one example between March 2018 and March 2024, back-office staff numbers which formerly sat at district health board level grew by around 2,500.
“As a Government, we’ve made it clear that our first and foremost priority in health is improving the delivery and quality of frontline services. We have already invested very significantly in health, with$16.68 billion announced in the Budget to support frontline healthcare services.
“As Minister, I am not confident I would have adequate oversight of that spend if the existing Board structure at Health NZ were to remain in place.
“Today’s move to appoint a Commissioner is one of several steps our Government has been forced to take over the past eight months due to concerns about the governance of Health NZ and resulting performance issues, including health workforce and hospital wait times.
“Previously, I have appointed a Crown Observer, a new Chair and a Board member with financial expertise. Through those measures we have been able to identify long-standing issues with the existing governance and operating model.
“Lester Levy has assured me there will be no adverse impacts on the delivery of care in implementing a turnaround plan – rather, he and Health NZ will be seeking to bring the frontline closer to decision-making.
“Following today’s announcement, the Ministry of Health will continue its monitoring role and play a key part in reporting on the Commissioner’s performance in lifting Health NZ’s financial position, both to me and to New Zealanders.
“Today’s announcement is in no way a reflection on the work of frontline staff in our hospitals and health care facilities. As always, I thank them for their professionalism and want to reassure them that we are taking these steps to secure a better future for health in New Zealand.”