Briefing to Health Minister Dr Shane Reti reveals dire state of hospitals and cost blowouts

Health Minister Dr Shane Reti faces a headache over health infrastructure. Photo / Michael Cunningham

A briefing to Health Minister Dr Shane Reti obtained by the Herald outlines the alarming state of hospitals, “highly reactive” maintenance, and poor planning hampering new builds. Updates are provided for major work across New Zealand, including in Dunedin, Tauranga and Whangarei. Reti says infrastructure funding is a situation he’s “walked into” and “why we’re all not going to get our wish list in this coming Budget”- a claim rejected by Labour, which says the Government could afford it if it didn’t cut taxes. Nicholas Jones reports.

A lack of spending on hospitals and health facilities has left one-third of buildings “beyond design life”, putting vital services at risk.

An infrastructure briefing to Health Minister Dr Shane Reti obtained by the Herald also reveals the cost of some new projects has blown out partly because of poor planning.

Reti received the December 2023 document from Health New Zealand - Te Whatu Ora officials soon after becoming health minister.

He was informed of 76 building projects under way with a cost of more than $10 million each, and more than 1000 smaller projects.

“Health infrastructure projects have been affected by cost escalation across the construction sector, in some cases exacerbated by poor initial planning and scoping of work,” the document warned.

An estimate of “cost pressures across the portfolio” was included, but this was redacted.

Health NZ manages more than 1200 buildings on 86 campuses, with a replacement value of about $38 billion. Much of that portfolio is in very poor shape, the briefing makes clear.

“Sustained underinvestment in health infrastructure has created an ageing infrastructure. With an average age of 45 years, over one-third of health buildings are beyond design life.”

Old hospital buildings could fail - health officials

A “deep-dive” report provided with the briefing said buildings “are at risk of failure”.

“Many facilities are not suitable for modern provision of care, compromising the effectiveness of care.

“Investigation of site-wide [horizontal] infrastructure at 36 campuses identified 82 very high-priority risks that alone would cost between $140-373m to mitigate,” the document outlined.

“Health infrastructure has been forced into a reactive mode - addressing and attempting to manage current risks without lifting the capacity or functionality to support needed health services.”

Maintenance is “highly reactive”, with 85 per cent in response to failures as opposed to planned or preventative work.

“The constraints on maintenance and remediation funding under the previous system has meant that the condition of the already ageing estate has further degraded over time.

“Most of the investment to date has been on extending the life of, or the upgrading of, current facilities.”

More work is needed to fully understand the state of facilities and buildings, officials told the minister.

For example, currently 48 buildings are earthquake prone, and many more wouldn’t function in the event of a major earthquake.

Nearly 140 buildings used for important services hadn’t been assessed at the time of the briefing.

The Cabinet has asked Health NZ to provide a capital investment plan and national asset management strategy.

The briefing gave an update on the mental health infrastructure programme, established by the previous government with $910m in funding to upgrade mental health facilities.

An aerial view of a concept design for the new Dunedin hospital currently under construction.

Dunedin and regional hospital cost pressures

Another major project is the new Dunedin hospital, which will have 410 beds and 26 operating theatres and is expected to be completed by 2029, “subject to additional funding being made available to cover known cost pressures”.

A current estimated total cost for the project was given, but redacted. Some costs, such as those covering parking and refurbishing of existing building,s haven’t been factored in to date.

“To keep [the new Dunedin hospital] on programme with the current scope and estimated budget, a decision as to additional funding needs to be made in a timely fashion to avoid delays,” the briefing states.

Ahead of the election, National pledged $30m to roll back proposed cuts to the project, but details of funding and capacity specifications are yet to be confirmed - Reti told the Herald, “This is a large and complex project on which I continue to receive advice.”

Regional hospital developments include Whangārei Hospital. Funding isn’t sufficient to cover the full cost, the briefing said. An energy centre, acute assessment unit and space for car parking weren’t included in initial budgeting.

Regarding building work at Tauranga Hospital, the document states that “earthquake-prone building notices expire in 2035, which is creating a challenging timeline for delivery and there are capacity constraints”.

Reti and Ayesha Verrall react

The previous Labour-led government released a stocktake of health infrastructure in June 2020, with the fix-it bill estimated at $14b over a decade.

Then-Health Minister David Clark criticised the previous National government for not spending enough (a claim National rejected) and said Labour had begun the repair job by providing billions more over repeat budgets ($6.6b in Crown capital injections from 2018/19 to 2022/23).

Reti told the Herald the state of some health infrastructure was a concern, but he was confident the problems weren’t affecting patient and staff safety.

Infrastructure funding “is just another example of the fiscal cliffs we’ve walked into”, he said, and “more context as to why we’re all not going to get our wish list in this coming Budget.”

“The previous government over-promised in many areas of health, without the funding to deliver on those future project while still maintaining essential services.”

That was rejected by Labour’s health spokeswoman Dr Ayesha Verrall.

“Health infrastructure needs investment each year so that facilities like hospitals are modern and fit for purpose into the future,” she said.

“It is incorrect to say there are fiscal cliffs. National could afford this investment if they didn’t cut tax. The coalition Government has the wrong priorities and New Zealanders will unfairly pay the price.”

The current Government will consider different funding models to build hospitals, and the Act-National coalition deal includes a commitment to investigate build and lease-back arrangements.

This week, Infrastructure Minister Chris Bishop told a conference a 30-year national infrastructure plan and an accompanying agency will be established, as well as a new consenting framework.

Nicholas Jones is an investigative reporter at the Herald. He won the Best Individual Investigation and Best Social Issues Reporter categories at the 2023 Voyager Media Awards.