Questions are raised over fundamental work not done by the health transition unit. David Williams reports.
It will take until next year’s Budget for the public to discover how the overhauled health sector will be funded, despite more than $30 million being spent on a “transition unit” within the Prime Minister’s own department.
That’s left health industry insiders and watchers worried about the time and energy required to establish the new system, while, at the same time, it’s struggling with workforce issues, Covid-induced backlogs, and creaking infrastructure.
Health Minister Andrew Little announced major reforms in April 2021, scrapping district health boards and replacing them with Health NZ/Te Whatu Ora and the Māori Health Authority, and creating a new public health authority.
DHB funding was based on population, but from that all-in pot the boards had to set aside depreciation, to replace buildings and equipment, and pay what amounted to a tax on assets, known as a capital charge.
These financial constraints were, in part, responsible for DHBs running huge “deficits” – critics say that was shorthand for “underfunding”.
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At that 2021 announcement, Little said a single, national health service, which would take three years to bed in, would end the postcode lottery for treatment, and do away with unnecessary duplication and bureaucracy.
The Health and Disability System Review Transition Unit, within the Department of Prime Minister and Cabinet (DPMC), was established in August 2020.
The following month, then-minister Chris Hipkins announced former director-general of health Stephen McKernan, head of consultancy EY’s government and public sector practice, would lead the unit.
Hipkins said it would “carry out the detailed policy and design work for the changes we believe are necessary to improve our health and disability services and ensure they are sustainable for years to come”.
Chris Gianos, DPMC’s head of operations and risk in the strategy, governance and engagement arm, confirmed the transition unit was disestablished on September 20 last year – and, in response to an Official Information Act request, provided costs.
“The total expenditure for the unit from Vote Prime Minister and Cabinet for the three financial years of its existence was $29,379,000 (GST exclusive). I note that a portion of the expenditure included in the 2022/2023 financial year is unaudited until the completion of the department’s audit for the year.”
The highest-paid external consultancy over the unit’s three-year existence was McKernan’s firm, Ernst & Young, which received $11.9 million, excluding GST, expenses and all-of-government fees. The second-highest paid firm was Inside Executive Recruitment at $1.1 million.
With the unit dissolved, its remaining responsibilities passed to “health system entities”, Gianos says.
What was achieved for $30-million-plus?
Last month, Newsroom asked the Ministry of Health if a new funding model has been decided.
“No – decisions on the future funding model for the health system are expected to be made in due course as part of Budget 2024,” Maree Roberts, the deputy director-general of strategy, policy and legislation said.
How about funding for primary care – the likes of general practitioners, pharmacists, and physios?
“The future funding model for primary care, including the future of the current capitation approach, is yet to be determined,” Roberts said, adding decisions will be made “alongside” Budget 2024.
This uncertainty appalls Canterbury health researcher Dr Michael Gousmett, an adjunct fellow at University of Canterbury. “That just leaves the whole thing wide-open for another polytech-type debacle.”
Health commentator Ian Powell wonders what taxpayers, who paid for the health transition unit, got for their money.
“The short answer is that we don’t know, other than it seems very little,” the former executive director of the Association of Salaried Medical Specialists says.
“From the standpoint of the people who are now running Te Whatu Ora, I think they have every right to be aggrieved about quite a lot of the groundwork that should have been done is not done, and is now left for them to do.”
A health industry insider says: “This should have been figured out in advance.”
Newsroom asked McKernan and EY for comment but they deferred to the Department of Prime Minister and Cabinet.
“The Health Transition Unit led the design and early implementation of health system reforms, including developing overarching funding settings,” Clare Ward, DPMC’s executive director of strategy, governance and engagement, said in emailed comments.
“The detailed design and implementation of the reforms, including the design of detailed funding models, is the responsibility of the health system entities.
“Full implementation of the reforms will take a number of years.”
We approached Andrew Little’s office, but it was the news dead zone leading up to Christmas. The office of duty minister Priyanca Radhakrishnan deferred to the health ministry.
Asked about DHB deficits, Roberts, the deputy director-general, said additional funding was made available in the last Budget – $550 million in 2021/22. “This was part of a broader increase in funding to address historical and future cost pressures, worth an additional $1.3 billion in 2021/22.”
At the same time, $488 million extra, over four years, was set aside for primary healthcare – “to support development of the locality approach, comprehensive primary care teams, and other initiatives”.
In answer to Parliamentary questions from Dr Shane Reti, the National Party’s health spokesman, Little confirmed EY had no current contracts in the health reforms. Meanwhile, consultancy rival KPMG has secured a contract worth more than $500,000 “to programme manage and direct the executions of agreed health reform transformation projects”.
The architects of the reforms had been “kicked out”, Reti said on Twitter, with KPMG “brought in to fix the mess”. “More evidence of the health reforms shambles,” he huffed.
Ward, of DPMC, said blandly: “The health system agencies are employing staff and contracting entities to support them in their role.”
“I cannot conceive of a more irresponsible decision from a health leadership to make.” – Ian Powell
At the 2021 health reform announcement, Little said hospitals and specialists were stretched because people were becoming seriously unwell by not getting the care they needed, when they needed it. The new system would focus on treating people before they got sick, he said.
“The reforms will also ensure the system is able to cope with the effects of an ageing population, and respond more quickly to public health crises like the Covid-19 pandemic.”
But just as the new system is being built, the ground is shifting under the feet of the new health agencies.
More severe strains of Covid-19, already prevalent overseas, threaten to create a new wave of cases.
Yet many doctors’ clinics have closed their books to new patients – surely a blow for a system geared towards treating people in the community before they get sick enough to land in hospital.
A report commissioned by the Health Transition Unit, released quietly in November, suggested more equitably-funded GP care would require hundreds of millions of dollars extra.
There’s a global shortage of health workers so, in the absence of producing enough trained professionals domestically, New Zealand is competing for talent internationally, as well as fighting to retain existing staff.
Overseas pay and conditions are proving too tempting for many, New Zealand Nurses Organisation (NZNO) boss Kerri Nuku says.
“I was speaking to a nurse today, who is coming back from a short stint that she did in Australia, and is really keen to go back.”
Some nurses can earn about A$80 an hour, and double that for a call-back – pulling an extra shift because of short-staffing.
“You just can’t compete,” Nuku says. “She took a photo just today of six other nurses in her area; all Kiwis. No intention of coming back.”
To be fair, the Government has made some progress.
Nurses employed at DHBs accepted an offer in 2018, described by Prime Minister Jacinda Ardern as “the biggest pay increase nurses have seen in a decade”. She talked, at the time, about having to “rebuild our public health system”.
A pay parity package, worth more than $200 million, was announced in November, but it didn’t cover GP staff, including nurses.
Just before Christmas, the Employment Relations Authority made an interim order on nurses’ pay equity, allowing the Government to make back-pay on an already agreed deal. Little warned: “The ongoing litigation will take a long time to resolve.”
Another issue that’s taking a long time to resolve is the new model for funding health.
“That’s a concern for us,” Nuku says, “especially when we’re looking at how do we best respond to the postcode issue? How do we address those if we don’t have a funding formula that’s going to be responsive to the needs of those vulnerable communities?
“So it was quite concerning to read about the level of all the unfinished business that’s still required.”
NZNO supported the reforms, seeing it as an opportunity to make real change, Nuku says, yet the sector’s still in limbo. It’s another factor knocking the confidence of her members.
“What we’ve had is a crisis after crisis in terms of our response to Covid. We haven’t seen the response in terms of growing an immediate workforce to respond, and now we’re competing with international markets around workforce.”
Health commentator Powell says the decision to scrap DHBs was taken late in the reforms, leaving a huge vacuum.
“We’ve had delays in addressing the pressures on the system for about five years. But we’re now looking to have another two or three years in which Te Whatu Ora is trying to work out some key issues that’s going to further distract it from addressing the pressures on the system.”
The reforms have been pushed through during a global pandemic, after years of unaddressed workforce shortages. Says Powell: “I cannot conceive of a more irresponsible decision from a health leadership to make, and that’s clearly political.”
