DHB more than $11m in the red

The region’s health board has declared a financial shortfall of more than $11 million, due to what has been described by its chief executive as ‘‘chronic underfunding’’.

January’s half-year result showed the Nelson Marlborough District Health Board was $1.3m in deficit. By the end of June, that had blown out to $10.8m. The board had planned for a surplus for the year of $501,000.

At a meeting yesterday, chief executive Peter Bramley said there was ‘‘no question’’ that DHBs were under ‘‘significant financial pressure’’.

‘‘I would describe it as a chronic underfunding, and actually we are having to make decisions everywhere about how we try and deliver the best services we can with limited resources.’’

He said the ‘‘big pressure points’’ in the board’s budget were national contracts, including pharmaceutical funding and wage settlements. ‘‘That’s a significant driver of the overspend in 2018/19, and it is a pressure point going into 2019/20.’’

In the year ending June, workforce costs totalled $202.3m, which was $4.4m more than planned, while payments to external providers cost $127.3m, which was $3.2m over budget.

Unexpected operating costs included $3.1m in multi-employer collective agreement (MECA)related costs, $1.2m in Holidays Act compliance, and $1.1m in other one-off cost implications.

Board member Gerald Hope said that when the May report came through with a number of adverse impacts, it was a ‘‘significant bombshell’’. Pharmac advised that the spend on drugs would be $2.5m higher at the end of the financial year than the board had budgeted for.

There were also additional air ambulance costs for the year, which totalled more than $1m. Hope said that at one stage, the board had the option to make savings on air ambulance services, but it was unable to go down a path of competitive tendering and was forced to take a national contract.

‘‘If we are going to run a DHB, we need to have a bit of autonomy about how we set our budgets up and where we can make savings.

‘‘We were one of the exemplars in New Zealand for financial prudence, and we were tracking well . . . suddenly, it’s been completely reversed.’’

Board member Stephen Vallance said that if the board was not going to be reimbursed for staffing and knowing the pharmaceutical spend was likely to increase to cover new drugs, it would remain a struggle to balance the budget.