The Bay of Plenty District Health Board's deficit has increased 36 per cent in one year to $23.7 million.
But the chief executive believes there is potential for the board to have a "small surplus" in the next three years.
Bay of Plenty DHB budgeted for a $10.5m deficit for the 2019-2020 financial year and as at the end of May 2020 was forecasting a deficit of $24m, when the year to date deficit was $18m.
However, the unaudited results for the year have come out at $23,676,000 which is an "unfavourable" $13.2m against the budgeted deficit.
Bay of Plenty DHB corporate services general manager Owen Wallace told the board in a meeting on Wednesday, the deficit consisted of an operating deficit of $15.9m, plus the impact of Covid-19 and the Whakaari/White Island eruptions contributed $7.8m to the deficit.
"Remembering that events like Covid and Whakaari are not part of our annual plan or budget ... the operational deficit at $15.9m is, obviously, $5.4m off."
Last financial year the DHB had a deficit of $17.37m.
Wallace later told the Bay of Plenty Times the pandemic had cost a total of $15.1m which was partially offset by Covid-related revenue of $7.5m - the difference being a deficit impact for the DHB of $7.6m for the year.
Interim chief executive Simon Everitt said although he was disappointed with the result, it had been an "extraordinary year" across the health system.
"[Covid-19 and Whakaari/White Island] have been exceptional events and ones which were not anticipated.
"We are a large organisation which manages a significant volume of patients every day and despite these major events we've been able to maintain our business-as-usual services across the health system."
In the DHB's annual plan it states that despite increasing revenue streams and improvements in operational performance, the financial position had deteriorated over recent years.
"The burden of chronic disease arising from a growing and ageing population is being felt in significant cost growth in cancer and cardiology service costs in particular, as new technologies and medications enable people to live with chronic disease for longer," the report stated.
In light of this, Everitt told the Bay of Plenty Times the board was growing its services to match the demand.
"You can't do that without incurring additional costs.
"Whilst we do our best to live within the parameters provided by the Government and we're always looking for savings and efficiencies and different ways of providing services, we also need to make challenging decisions."
When asked if the deficit was the best achievable result, Everitt reiterated "it has been an exceptional year with some extraordinary events".
"That said, we've got a different future emerging from a financial perspective following a recent government announcement to increase our annual funding for the 2020-2021 year," he said.
The DHB will be getting additional baseline funding which Everitt described as a catch-up on previous years where funding for the "accelerated population growth" was not recognised.
Because of this, he said it was "unlikely" the board would be able to resolve its deficit "in one hit" for the next financial year.
"Moving forward, however, we believe we will be able to pull ourselves out of deficit, and potentially into a small surplus, in the two years after that."
According to the 2020 Budget, the Treasury is expecting DHB deficits of $1 billion a year, for the next four years.
In fact, the Budget said: "There is a significant risk that DHBs' deficits may be higher than what has been included in the fiscal forecasts, which would adversely impact the Government's operating balance and net core Crown debt."
Health Minister Chris Hipkins said he had made it clear to DHB chairs that they must have a "credible plan" to return to financial sustainability.
"The Government doesn't accept that DHB deficits are inevitable.
"We acknowledge the challenges DHBs face including the cumulative effects of nine years of underfunding which will take time to unwind and a series of costly events including the ongoing Covid-19 response."
However, he said the Government had increased DHB funding "considerably" including this year's Budget uplift of $3.9b for the next four years.
Work to determine the extent of DHBs' Holidays Act liabilities, including those of Bay of Plenty DHB was still going on, Hipkins said.
Bay of Plenty National MP Todd Muller told the Bay of Plenty Times that money from the Government was absorbed in working groups and more process, not in more surgery.
"[It is an] enormous deficit, particularly bearing in mind only a quarter of it is Covid related.
"The Government will spout that it's throwing more money at the problem, but where is the on the ground improvement in local services, how many more elective surgeries are being performed, where's our Papamoa 24-hour accident and emergency centre?"
The audit is being finalised. Bay of Plenty DHB has not received any deficit support from the Government in this financial year and the budget for 2020-2021 is currently with the minister for approval.