District health boards deficits are forecast to haemorrhage out to a total of $200 million in the 2009-10 financial year.

The increased deficit, from $43m in 2007-08 , was driven by their inability to control increasing costs as revenue reduces, the Crown Health Financing Agency (CHFA) told Parliament's health select committee today.

The CHFA, or the "banker for DHBs", said 15 out of 21 DHBs were operating in deficit, two more than in June 2008.

Seven DHBs were considered "at risk", which meant they needed remedial action to justify continued CHFA funding.

The at-risk DHBs were Tairawhiti (East Coast), Hawke's Bay, Whanganui, Capital & Coast, West Coast, Otago and Southland, which were generally operating at deficits and had no cash .

The situation had become apparent in the last 12 to 18 months and there was a marked variation in DHBs' performance over the last year.

Paying staff was the biggest single cost, representing more than one third of total costs to DHBs, said CHFA chairman John Anderson.

Staff costs were driven by multi-employee collective agreements, staff shortages increasing overtime costs and locum costs and inflexible workforce arrangements.

The crown's ability to increase operational spending was constrained by the growth of the economy and over the last few years DHB costs had exceeded that rate, said CHFA chief executive Graeme Bell.

And there was variability across the sector in how well financial discipline was applied at the local level, he said.

In many cases DHBs were reliant on key people to focus on financial performance and that was something that could be looked at in any review.

Committee chairman, National's Paul Hutchison, asked Ministry of Health director-general Stephen McKernan whether it was responsible for the blow out.

Mr McKernan said the deficit blow out could be compounded by problems at one or two DHBs.

It was up to DHB boards to control their costs, and who they employed was their domain, he said.

"We acknowledge its a concern and the ministry will work with DHBs to do whatever needs to be done and reduce the deficits."

- NZPA