This article first appeared on the New Zealand Herald website.
The board of Health New Zealand is being replaced with a commissioner following “serious concerns around oversight, overspend and a significant deterioration in financial outlook”.
Health Minister Shane Reti described the directive as the “strongest ministerial intervention available” under the Pae Ora Act and not a decision he had taken lightly – “however the magnitude of the issue requires such action”.
Reti told today’s post-cabinet press conference Professor Lester Levy, the recently appointed chair of Health NZ, would be appointed commissioner for a 12-month term.
“Health NZ first reported a deteriorating financial position to me in March 2024, despite earlier repeated assurances by the organisation that it was on target to make savings in 2023/24,” Reti said.
“In the months since, the situation has worsened. Health NZ is currently overspending at the rate of approximately $130 million a month.”
Reti claimed the issues at Health NZ had stemmed from the previous government’s “botched” and “mismanaged” health reforms that had 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.”
Enormous deficit projected
He said “without urgent action” the situation would lead to an “estimated deficit of $1.4 billion by the end of 2024/25 – despite this Government’s record investment in health of $16.68b in this year’s Budget.”
Reti said the coalition government had invested billions of dollars to support frontline healthcare services but he was “not confident” he would “have adequate oversight” of that spend if the existing board structure at Health NZ were to remain in place.
Levy would be tasked with implementing a turnaround plan with a savings objective of approximately $1.4b “to ensure financial balance, and actions to strengthen governance and management”.
“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.
Back-office staff numbers rising
“As one example between March 2018 and March 2024, back-office staff numbers, which formerly sat at district health board level, grew by around 2500.
“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.”
He said today’s announcement was in “no way” a reflection of the work of frontline staff in hospitals and healthcare facilities.
“I thank them for their professionalism and want to reassure them that we are taking these said delivery of better public services, particularly healthcare, was one of his government’s top priorities.
However, people were waiting too long – and targets had been set to address that.
Part of delivering on the targets was robust management - but the current Health NZ board was facing major challenges.
“The problems at Health NZ while complex are obvious.
“Frankly it was an appalling implementation,” Luxon said ats today’s post-cabinet press conference, referring to the actions taken by the previous government following the consolidation of the previous DHBs.
It resulted in an “overly centralised” system that was disconnected from the frontline staff, he said.
A ‘management’ problem
It was not a funding issue, Luxon said.
But those failures now required an “urgent and significant” intervention, he said.
A commissioner would be put in place to streamline back office management, establish a single point of accountability and reduce the space between the front and back lines.
Luxon said it was not a funding problem but a management problem.
Reti said Health NZ had not been able to deliver on the services New Zealanders expect.
Core parts of the health reforms had led to governance issues that were worse than first thought, he said.
Combination of overspends
“No one has been adequately watching ... or monitoring” the Crown entity, he said.
“We need to take decisive action now.”
Today’s move was a very “significant step”, he said.
Asked what the entity was overspending on, Reti said it was a combination of things including out-sourced and back-office staff.
Reti said he had faith in the commissioner but he said it was not for him to “have faith” in the chief executive.
He said it was for the commissioner to appoint his executive team - in response to a question about having faith in that executive team.
On cultural aspects within the entity, such as karakia, Reti said Levy would take advice from the Houhora Māori Committee.
- NZ Herald