The Press

Health’s bitter battle

Tensions between Canterbury health leaders and their ministry bosses have reached boiling point with a highly public spat this week seeing front-line doctors join the fray. Mediation looms as possibly the only way to resolve the complex long-running and b

- Cate Broughton reports.

Hardline Treasury advice critical of the Canterbury District Health Board was the first item on Thursday’s board meeting. Emotions were raw as members publicly reaffirmed their confidence in the acting chairman, Sir Mark Solomon, and chief executive David Meates.

Jo Kane recommende­d the board acknowledg­e ‘‘our confidence in the performanc­e of our acting chair’’ and praised his mana and leadership.

Anna Crighton recalled the stoicism of hospital staff who continued serving the community in the turbulent post-quake period.

‘‘People have got short memories. There’s a total lack of understand­ing,’’ she said.

Tensions between the CDHB and the Ministry of Health were evident as far back as 2012.

The views from Treasury made public last week did nothing to heal the rift.

Minister of Finance Steven Joyce backed the official advice as ‘‘robust’’ and said the CDHB should focus on getting its deficit down.

The dispute is complex and mystifying.

Each side confidentl­y promotes its own, starkly divergent versions of reality, leaving a trail of confusion.

In a nutshell, the CDHB says the Government’s post-earthquake approach and support has been inadequate and this explains their ballooning deficit.

The Ministry of Health and Treasury claim the DHB has actually been well supported and has been treated no differentl­y to every other health board in the applicatio­n of the formula to determine health funding.


CDHB’s deficit for this year is forecast to be $61 million. Last year’s forecast deficit grew from $39.5m to $49.4m, but general manager for finance and corporate services Justine White told members the year-end total was $51.8m.

The drivers for this jump included an extra $8m for elective surgeries outsourced to private hospitals to make up for time lost in the two junior doctors strikes, $3.1m of additional funding for psychosoci­al recovery in North Canterbury following the Kaikoura earthquake and $3m to pay for extra medicines introduced by the Government after the budget.

White said savings made in ‘‘other areas’’ allowed a difference of $12.4m over the original deficit forecast.

‘‘Every time there is an overspend in an area, you are looking to see where else you have capacity to flex the way you spend to accommodat­e some of that.’’

Ministry of Health directorge­neral Chai Chuah said this year’s forecast $61m deficit was ‘‘unlikely to be accepted’’.

The total includes $7m requested but refused for increased mental health services. Chuah said the bid was ‘‘inappropri­ate’’.

White said some costs were unavoidabl­e, such as spending on surgeries.

Canterbury said it was six operating theatres short of what it needed to meet current demand. Instead it had been forced to spend about $20m each year to outsource surgeries to private hospitals. This took a bigger chunk out of their budget than if they had been done in-house, White said.

The new Christchur­ch Hospital building opening in 2018-2019 would include 10 new theatres.


Like every health board around New Zealand the CDHB receives a portion of the total ‘‘Vote Health’’ budget according to a population­based funding formula (PBFF).

This allocation tool draws on annual population estimates from Statistics New Zealand and factors in the relative proportion­s of poverty and older people in each health board region.

This year Canterbury was given $1.4b, which Chuah said was up by $331m on eight years ago.

This would be fine but for the 2011 earthquake, says the CDHB.

They say there was an initial exodus of people following the earthquake­s, but the population stabilised much faster than predicted and since 2013 has experience­d rapid population growth ahead of the national average.

White said the population estimates for Canterbury had been consistent­ly incorrect when compared retrospect­ively with the actual growth, as the population had grown at a much faster rate than predicted.

This gap in predicted versus actual population and the correspond­ing effect on funding has combined with the distortion­s of the deprivatio­n index to reduce Canterbury’s funding.

The deprivatio­n index is based on the 2013 census data and for Canterbury it showed the earthquake­s had caused a significan­t reduction in people in the ‘‘highly deprived’’ categories – the ones that attract more health funding in the PBFF.

White says the region still has the same number of highly deprived people but instead of living in more compact geographic­al suburbs and therefore picked up by the index, they have moved to many other less deprived areas, scattered around Christchur­ch and Canterbury.

The result, White says, can be seen in the reduction of Canterbury’s overall share of the health budget – but the needs remain the same.

This financial year (2017-2018) Canterbury has 11.59 per cent of the New Zealand population and has been allocated 10.84 per cent of the national health budget. Before 2014 this would have been 11.29 per cent. The difference amount to about $56m in lost funding, White says.

In a statement to Treasury Solomon said the ministry had failed to account for the effects of the earthquake­s by continuing to use the PBFF and not developing a ‘‘post-disaster policy framework which would allow different ways of funding health services in a unique, ever-changing environmen­t’’.


If CDHB had any hope the Ministry of Health might agree with Canterbury’s assertions, these were roundly dashed by Treasury officials.

‘‘Our assessment is that CDHB is not underfunde­d by the Ministry of Health’s PBFF.’’

In a statement to The Press Chuah said Treasury ‘‘which is an independen­t voice’’ had found funding to Canterbury was initially inflated when the population shrank after the earthquake.

In recent years ‘‘the forecasts have generally overestima­ted Canterbury’s share of the total New Zealand population, with a bias towards over-funding’’

Chuah defended the accuracy of the population figures.

‘‘We commission population projection­s to be produced by the experts in the field – Statistics New Zealand. We obtain these projection­s and without any adjustment by the Ministry of Health, use them in our model.’’

He acknowledg­ed the actual population numbers may differ from the estimates, but said this had not had a negative effect on Canterbury.

‘‘Relatively slow year-on-year funding growth’’ was due to demographi­c changes, such as having relatively fewer disadvanta­ged people and ageing more slowly than other parts of New Zealand, Treasury said.

Additional funding support had been provided on top of the PBF to account for the extra costs of the earthquake, Chuah said.

‘‘The Government has provided extra funding to cover this – $106m in additional funding, including $20m for mental health services.’’

Chuah did not address CDHB’s assertion about the inaccuracy of the deprivatio­n index.


White said new post-quake buildings came at a huge cost for health boards, just as buying a house with a loan from the bank came with big interest payments.

The Government contribute­d $650m to build two new hospitals in Christchur­ch but the capital charges of 6 per cent would take a huge chunk out of CDHB’s budget.

Currently it paid $28m a year in capital charges. When the acute services building opened in late 2018 or early 2019, this would jump to $59m per year.

Treasury’s view was that all DHB building projects attracted capital charges and boards had to cope with it.

But given the size of Canterbury’s redevelopm­ent – touted as the largest in New Zealand by the Government – is that fair?

‘‘The scale of what we are facing is unpreceden­ted,’’ White said.

The combined cost of the Christchur­ch and Burwood hospitals ($786m) and the earthquake repairs ($385m) comes in at over $1b in constructi­on.

On top of this, most of the CDHB’s insurance pay out of $320m was given to the Crown to be drawn down as needed.

As the money came in to the CDHB’s account, it too attracted a capital charge.


The release of Treasury advice has unleashed a wave of fear the Government would bring in a Crown Monitor or even sack the board as it had done with other regional agencies, including Environmen­t Canterbury (ECan).

Solomon – who had his first meeting as acting board chairman in February – and his board hoped mediation with other agencies would help avoid this.

He told board members on Thursday invitation­s had been sent to the State Services Commission, Treasury, the Department of the Prime Minister and Cabinet and the Ministry of Health ‘‘to discuss the issues and agree on a way forward’’.

In a statement he said no date had been set ‘‘however all parties are agreeable to attending and I look forward to the discussion­s’’.

However, in a letter written in April, Chuah rejected the option of a working party as outlined by Solomon was seen as ‘‘inappropri­ate’’ by the ‘‘all the central agencies’’.

For the public, the truth seemingly remains as elusive as ever.

 ??  ?? From left, Jo Kane, Anna Crighton, Sir Mark Solomon, David Meates, and Chai Chuah and Jonathan Coleman.
From left, Jo Kane, Anna Crighton, Sir Mark Solomon, David Meates, and Chai Chuah and Jonathan Coleman.
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