More than $3.2b hospital projects under review

Thursday, 26 September 2024

Mayor of Dunedin Jules Radich and city councillors with a new rally song protesting over possible cuts to the hospital project.

Shadows loom over more than $3.2 billion worth of hospital and mental health infrastructure projects as Health NZ – Te Whatu Ora faces a major cost-cutting exercise.

The figure is made up of 20 projects on the agency’s books which are rated red – meaning final decisions are yet to made over their future. A further 21 are rated amber and the remaining 29 green.

Health NZ won’t say exactly what the red-rated projects are, saying active discussions are underway. But clues lie in May documents from the agency’s chief infrastructure officer, Jeremy Holman to ministers, obtained under the Official Information Act.

The known sum of these projects is at least $3.1b, more than half of which includes the $1.88b new Dunedin hospital project.

While the agency’s commissioner has given assurances Dunedin Hospital will be built, there are mounting calls for certainty over the future of the entirety of Health NZ’s portfolio.

“What on earth is happening and how far are the cuts going to go,” Labour’s health infrastructure spokesperson Tracey McLellan said.

“Not only do communities potentially miss out on things that absolutely need to be done – they’re not nice to have – but the cost is going up. The cost of doing nothing goes up,” McLellan said.

Tracey McLellan, Labour’s spokesperson for health infrastructure, says costs go up the longer delays drag on.

Health NZ’s Commissioner Lester Levy was urged to speed up decision making for the Dunedin project at the health select committee last week.

“People want clarity, and every week there’s a delay, it’s costing the equivalent of a small house,” said Labour MP Ingrid Leary, whose Taieri electorate includes Dunedin South.

Levy replied: “The Dunedin Hospital will be built but right at the moment there are issues to resolve around affordability.

“I did say that everything was up for review, and it has to be when the organisation is in the position that it is.”

Health Commissioner Professor Lester Levy at health select committee at Parliament last week.

The official documents were handed to the health, infrastructure, finance and mental health ministers after they learned Health NZ was headed for a deficit of $1.4b by the end of next June.

They are heavily redacted but include red-ratings for major undertakings such as redevelopments at Whangārei and Taranaki hospitals, as well as smaller projects such as a radiology upgrades in Hawke’s Bay and community mental health projects.

In the documents, Holman warned that the agency had been “forced into a reactive mode” which meant addressing risks without lifting capacity.

“The current in-flight portfolio only provides a 4% expansion of capacity,” he wrote.

He warned ministers this was ”inherently more dangerous“ than a planned approach when it came to maintenance.

In this picture taken earlier this month, the new Dunedin Hospital now has its facade on.

But he told The Post there were no plans to change this, outside of health and safety requirements.

“Reactive maintenance (‘run to fail’) is a legitimate maintenance strategy for non-critical assets that do not directly support critical clinical function [and] will continue to be a part of our maintenance approach…”

His statement to The Post spoke heavily of “optimising” resources including maintaining and improving existing assets.

“A key priority is to improve access to public health services through the more efficient delivery of health infrastructure – doing things smarter…” Holman said.

Levy said the same thing last week, telling the select committee the Health NZ agency may be able to expand from within its existing 86 sites.

“Sometimes it could be a relatively small investment that could give you a relatively big upside.”

But Dunedin mayor Jules Radich said the community wants the hospital they have been promised. He will lead a community rally this Saturday to send a message to decision-makers.

“Government has made a promise to build it and build it right, so we are looking to head off any cuts.”

Mayor of Dunedin Jules Radich (front) and City Councillors are adding their singing voices to the Hospital Cuts Hurt campaign by unveiling a new rally song for the people of the South.

He expected thousands to attend his rally and has even reworked a song made famous in Highlanders matches.

The agency was still reviewing its capital work programme and confirming budgets, Holman said.

“Projects that are in construction and underway are continuing. Projects that are seeking funding or a significant commitment – such as entering into construction contracts – will then be reviewed and advice provided to the Health NZ commissioner.”

It’s understood Levy will be finalising decisions over the next few months.

The Health Minister’s office referred questions to Infrastructure Minister Chris Bishop’s office, who referred most questions back to Health NZ.

Bishop said innovative solutions will be needed to ensure hospitals can serve our growing population.

Government was considering different ways to fund and finance health infrastructure, including investigating build and lease-back arrangements for new hospitals – something that was in its coalition agreement with ACT.

“Improving hospital infrastructure is fundamental to delivering improved access to healthcare services, and it’s vital we investigate a range of models to determine the most efficient and effective ways of doing so.”

Clarification: The cost of the new Dunedin Hospital in this story has been updated to account for the extra $290m in cost pressure funding that was agreed by Cabinet in March.