New details on the huge deficit facing New Zealand hospitals have been revealed in a document dump by health authorities this afternoon.
More than 450 pages of financial reports have been released — mostly monthly financial reports from Health New Zealand.
Overspending had dropped from $163m in July to $149m in August.
The papers showed April was a turnaround month, where Health NZ went from expecting a big surplus to a $1.4 billion deficit that the government has promised to handle impacting the front line.
The papers reveal a panicked tone.
“We are intensely focused on managing this situation,” one report said.
But Health NZ was warning of “fundamental deficiencies” in its systems that made cost controls difficult.
The newly-released papers show that a March monthly report had Health NZ still forecasting a surplus of half a billion dollars. March was when Health Minister Shane Reti has said he found out for the first time massive overspending that would incur a $1.4b deficit by mid-2025.
The board was swiftly sacked and Dr Lester Levy was appointed a commissioner.
Stat holiday costs over Christmas and later holidays added significant costs.
The reports said there were three main drivers of the deficit, including such one-off costs, an unfunded pay equity payment that did not come through by July of more than $400m, and writing off of Covid stocks.
Official Information Act papers previously reported by RNZ showed Treasury and the ministry were aware in early 2024 that they did not have visibility of just what was going on, even to the extent that HNZ’s information for Budget 2024 was inadequate, with the ministry pleading with it on 2 February to get vital data to it by a 15 February cut-off.
The papers stated: “The underlying expenditure run rate in April has deteriorated dramatically, circa $100m per month, due to additional hours being paid for largely additional nursing FTE although vacancies in all staff categories have reduced.”
One impact has been infrastructure capital spend. This has been much less, at only about half the $1.5 billion budgeted.
Levy said it was “not mismanagement” by Health New Zealand, and did not want to be drawn on the Prime Minister Christopher Luxon in July questioning the agency’s financial literacy.
He did “not want to criticise anyone”, Levy said. “I’m not personally going to go there.”
The papers show by mid-2023 that Health NZ was well aware it was recruiting nurses “over budget”, yet the big blowout in April 2024 appeared to come as a surprise.
Chief executive Margie Apa said one complication was that staff did not leave at the expected rate — that turnover was low.
Levy stuck on Tuesday afternoon by his earlier assertion that back-office bloat was a key cause of HNZ’s woes, although the monthly reports repeatedly stated: “Management and admin personnel are below budget due to reform savings initiatives and holding vacancies.”
They show 800 fewer backoffice staff by August 2023 compared to the year before.
Asked how many more backoffice jobs would go from now, Levy said “we don’t have answers” to that yet.
The haemorrhaging of cash at the agency is said to be moderating.
Apa said they were aiming to get “much better at cashflow forecasting” — this, over two years since Te Whatu Ora was set up, and about four years since a transition team of consultants began designing it.
A year ago, HNZ was saying it would meet regularly “with our monitors … to ensure that our monthly performance reporting products are appropriately informative”.
Apa promised they would be “testing assumptions every day”, and in much more detail.
Back-and-forth
The documents contain a letter Reti wrote to Levy in July while he was still chairperson of the board, setting out his dissatisfaction with Health New Zealand’s performance and raising the option to sack the board.
“While the financial performance itself is a cause for major concern, I am further dissatisfied that this did not materialise in reporting until March of this year, and indeed that previously the board had assured me that Health NZ was on track to break even,” Reti wrote.
The board was dismissed ten days later, and Levy was appointed commissioner.
There is also a back-and-forth between the board and ministers in the documents.
A letter from Finance Minister Nicola Willis to Reti in March raised concerns that the board was not across the detail of its finances.
In response, then-chairperson Dame Karen Poutasi said Willis’ allegations were “unfair and incomplete.” At the time, Health New Zealand was still forecasting a surplus.
rnz.co.nz
