The Deputy Auditor-General is to launch an investigation into Waikato District Health Board's procurement of HealthTap, the information technology company that powers its virtual health app SmartHealth.

In an announcement today, Greg Schollum, said auditors from the Office of the Auditor-General raised concerns with the procurement in mid-2015, when they conducted an audit this year.

The $15 million purchase of services from the American-based company was largely driven by former DHB chief Dr Nigel Murray and former board chairman Bob Simcock, who both resigned following an investigation into Murray's irregular expenses, which totalled $218,000 over three years.

The State Services Commission, which is investigating Murray's spending, asked the Auditor-General to delve into the procurement, which the Herald previously revealed was signed off by the board in one month in July 2015.


The inquiry will examine:

• Waikato District Health Board's procurement of information technology services from HealthTap to deliver the District Health Board's Smart Health service;

• Waikato District Health Board's management of the contract entered into with HealthTap; and

• any other related matters that the Deputy Auditor-General considers it desirable to report on.

Waikato DHB interim chief executive Derek Wright welcomed the inquiry.

"Audit NZ had already identified that there were some issues with our procurement process for our online health service from HealthTap so we welcome this review and will give them any assistance they require. It's important that we learn lessons from how we did things in the past."

Waikato DHB acting chairwoman Sally Webb said the board was already undertaking its own review of the HealthTap service, following a two-year trial, to determine whether it is the right product for the DHB's virtual health strategy.

"We welcome any scrutiny of our processes and if it identifies areas we can improve in future we will do so."


The Audit NZ review of the procurement, revealed on December 1, was damning.

Auditors said the procurement raised a number of concerns including that:

• It should have been conducted through an open tendering process and that the US$10m trial was an amount well over any threshold for open tendering;

• The business case was written for a virtual care solution and not specifically for the purchase of HealthTap;

• DHB staff planned to report value for money at the conclusion of the trial [in May next year] but auditors believe the board cannot demonstrate that;

• There did not appear to be much market inquiry as to what else was available;

• A two-year trial with a single provider could now cause issues of fairness with any proposed tendering and future procurement.

There were also concerns by auditors over how potential conflicts of interest had been handled.

Until then Waikato DHB kept the cost of HealthTap, which together with the cost to launch SmartHealth totalled $18.8m, a closely guarded secret, citing commercial sensitivity and contract negotiations as reasons.

The Office of the Auditor-General said it could not comment further while the inquiry was under way.

It expected to publish a report once the inquiry was complete.

The SSC investigation is due early in the New Year and the Serious Fraud Office continues to make preliminary inquiries into the case.