Health NZ Commissioner Lester Levy overruled CEO Margie Apa on proposed reduction of nurses

New documents show then Health New Zealand Te Whatu Ora chairman Lester Levy overruled chief executive Margie Apa after she told the Health Minister nurses had to be let go to help fix the entity’s budget blowout.

A briefing from Apa to Health Minister Dr Shane Reti on June 7, released as part of a Health NZ document dump this week, discusses measures to help the entity on to “sustainable financial footing” after it recorded a near-$1 billion deficit in the year to June and was staring down the barrel of a near-$1.8b deficit in the current financial year if changes weren’t made.

Apa warned “substantial increases” in nurses employed by Health NZ in the 2023/24 financial year meant “little to no growth is affordable for 2024/25 and in some areas reductions will be needed”.

The suggestion Health NZ would cut down its nurse workforce conflicted with the priorities set by Commissioner Lester Levy, who had promised to protect the “front line” from cuts.

Speaking to the Herald after the document release, Levy said he first articulated his priorities concerning the front line’s protection from spending cuts on June 14 and June 23 as then board chairman and claimed Apa had changed her mind.

“I’ve got a different point of view at that point in time,” he said.

“[Apa’s] now agreed to the way we’re moving it forward.”

Health NZ Commissioner Lester Levy wants to cut spending by $2b by June. Photo / Mark Mitchell

Levy claimed Apa was “aligned very well” with his directive, despite her earlier position. He admitted not decreasing the record pool of nurses “adds a degree of difficulty” to Health NZ’s cost-cutting targets.

Asked why she provided that advice to Reti, Apa said in a statement the document reflected options at a point in time but “Health NZ has moved on and we continue to recruit for our clinical workforce”.

Record nurse growth had been one of the factors contributing to Health NZ’s monthly overspends that was currently about $140 million over budget.

Health NZ’s performance report for the quarter to June released last week said the organisation was almost 4400 staff over budget at a cost of $406m. Nurses hired in 2023/24 exceeded the number in any year in the past eight years in what was a hiring drive Health NZ admitted it lost control of.

Levy, alongside Deputy Commissioner Roger Jarrold, had set a goal of Health NZ breaking even by June and aimed to cut $2b to help do so.

Levy said reducing headcount was one of several areas in which he would look for savings, but it would be confined to back-office staff or “non-clinical frontline staff” as Levy described it.

“Our aim is really to take most of the cost out that doesn’t affect the clinical front line,” he said.

“It doesn’t mean there won’t be changes there, some services might change, but the amount of money that we spend on the clinical front line, that is what we’re looking to protect.”

He couldn’t provide a figure for the targeted reduction, citing the redundancy processes currently in play.

However, Levy said he could see no circumstance that would prompt redundancy being offered to clinical staff like nurses and doctors, but he couldn’t guarantee it wouldn’t happen.

“If [the headcount reduction] is sufficient for us to meet our overall [cost-cutting] programme, then that is good and if it’s insufficient, then we might have to extend the programme or look somewhere else.”

Labour health spokeswoman Dr Ayesha Verrall has been critical of the Government's approach to Health NZ's finances. Photo / Jed Bradley

Labour and health-related unions had regularly questioned Levy’s commitment to protect the front line, claiming the cost-cutting programme had led to hiring freezes that restricted care provision – a claim Levy denied.

Levy told the Herald his protection of the front line concerned spending, accepting there could be staffing changes based on need.

“Just imagine some service changed... and you didn’t need a certain number of people, those people may no longer be required but the amount that was spent on the front line will continue to be spent.”

However, Levy again accepted this position could change.

“In the end, this may not be possible, but it is an absolute priority and I actually think we can make that work.”

Other areas in line for cuts were Health NZ’s projects. Levy questioned whether the roughly 1600 projects being worked on were worth continuing.

“I don’t see any organisation that can capably deliver that many projects and programmes and we’re looking to rationalise the projects and programmes that we have in order to ensure they are fully focused on supporting the most important objective here, which is reducing waiting times.”

While he wouldn’t speculate on how many projects would be cut, Levy gave the example of an IT project that was administration-focused.

“Unless it’s absolutely critical, we don’t need that because we need to get the money to the front line.”

Levy also sought to cut spending on products purchased by Health NZ, arguing lowering inflation and lessening Covid-19 impacts meant costs should come down.

He wouldn’t reveal an estimated spending reduction, given negotiations were ongoing.

Adam Pearse is a political reporter in the NZ Herald Press Gallery team, based at Parliament. He has worked for NZME since 2018, covering sport and health for the Northern Advocate in Whangārei before moving to the Herald in Auckland, covering Covid-19 and crime.