Government replaces Health NZ board with commissioner, claims DHB merger ‘botched’

Monday, 22 July 2024

The Government has disbanded Health New Zealand’s board and signalled jobs are on the line, as the crown entity overspends by $130 million a month.

Prime Minister Christopher Luxon and Health Minister Dr Shane Reti announced a commissioner was being appointed to oversee the national health agency, declaring a loss of confidence in its governance and blaming the overspend on a “botched” merger of the District Health Boards (DHBs) begun under Labour.

“The previous Government simply took the old DHBs and sought to smash them into one organisation by adding massive layers of management over the top,” Luxon said.

“Frankly, it was appalling implementation from a government with a pattern of mismanagement and non-delivery.”

But Labour pointed the finger back at the Government for a financial problem which has only emerged in recent months. Labour leader Chris Hipkins said the Government had failed to sufficiently fund Health NZ in its May Budget, and Luxon’s spin was “desperate”.

“This year's Budget didn't contain enough funding for health, the consequences of that are now becoming evident … The situation in health has all emerged under this Government's watch.”

Reti has appointed Professor Lester Levy as commissioner of Health NZ, having already appointed him chair of the troubled board in May. Levy, a medical doctor, is a professor of digital health leadership at the Auckland University of Technology.

His appointment came after Reti appointed a Crown observer to Health NZ in December, the resignation of the previous board chair Dame Karen Poutasi in April, and in recent weeks the resignation of board members Naomi Ferguson, Jeff Lowe and former National MP Amy Adams.

“It's become apparent that core parts of the health reforms had lead to governance issues that Health New Zealand far worse than we first thought,” Reti said.

“No-one has been adequately watching, and no-one has been adequately monitoring the Government's single biggest crown entity.”

Reti said the overspending was due to an increase in so-called “back office” staff and outsourced staff, at the same time as full time staff had increased, but the reason for this “eludes me”.

The move to appoint a commissioner, which Reti described as the “strongest intervention” he could take as minister, concentrates the Government’s authority over Health NZ. Reti’s letter of appointment to Levy can be read in full below.

Levy has been tasked with a “turnaround plan” to eliminate the $1.4 billion expected annual deficit and to reduce the 14 “layers” of management between frontline health staff and the Health NZ executive down to six layers.

Reti said Health NZ would also be “regionalised”, or internally divided into four regions to make better decisions about spending and the delivery of care.

But Hipkins said this regional structure, and the reducing the duplication and layers of management were already part of the reforms the past Government had “in train”.

“All of that work was already underway. So what they're talking about now is a desperate attempt to try and smear the last Government.”

At stake are some 2500 to 3000 back office jobs within Health NZ. Reti said it was “uncertain” how many jobs might go in the cost-cutting drive.

Neither Luxon nor Reti would express confidence in Health NZ chief executive Margie Apa and her executive team, saying it was for them to have confidence in Levy, who was in charge of the executive team.

“In our conversations [with Levy], we've been saying we need this organisation to deliver the clinical outcomes that we've talked about … We need this organisation to be able to manage its financial performance from the budget that has been given.

“I just want to remind you this is a budget that has almost $30 billion a year associated with it, and we spent another $16.7 billion in the most recent budget round, of new money coming in over the next four years.”

But the new spending wasn’t enough, Labour Party health spokesperson Dr Ayesha Verrall said, as the Government had chosen to ignore advice that its estimate for health spending required - taking in New Zealand’s growing population and inflation - was inadequate.