Budget blowout: Lakes DHB deficit reaches almost $15m

Lakes District Health Board has finished the financial year almost $15 million in debt.

Its chief executive says the organisation has not looked to reduce services, but is planning to improve systems and processes to contain costs.

The latest district health board (DHB) financial reports for the year ended June, released this week, showed Lakes DHB's deficit grew by almost $7m in a single month.

And its year-end result for 2018/19 was more than $9m over budget in total.

Nationwide, DHBs are now more than $1 billion in the red – $700m higher than the expected deficit, as forecast in May's Budget.

The National Party and the Government have continued to play the blame game this week as to who is responsible for that.

Lakes DHB was one of nine DHBs around the country that were deemed by the Ministry of Health to be "on target" at year-end – in that they achieved a result close to or better than budget, but only when one-off costs were excluded.

DHBs took a huge hit from one-off costs in 2018/19, mainly due to an error in payroll records.

Health officials have found that $550m to $650m is owed to DHB staff around the country to comply with the Holidays Act.

That issue cost Lakes DHB almost $7m. The resident doctor strikes and National Oracle Solution (NOS) impairment both cost the DHB more than $1m. That's more than $9m in total one-off costs.

The DHB had initially planned for a $5m deficit in 2018/19.

Asked how long it would take Lakes DHB to wipe its almost $15m deficit, and whether it had a target for achieving that, chief executive Nick Saville-Wood said: "There are a number of factors being considered regarding the elements making up the $15m which have not been agreed as yet so the DHB cannot answer this question at this point in time."

He said the DHB was making sure it ran all operations as efficiently as possible and was working together with all health providers to ensure patients and whānau were seen in the most appropriate environment.

"We have not looked to reduce services."

Saville-Wood said the DHB was planning to improve systems and processes to contain costs, "but we do have to prioritise capital and operating expenditure prudently to ensure we meet our budget targets."

Across all 20 DHBs, there was more than $665m in total one-off costs reported in 2018/19 – about $590m for Holidays Act compliance provision, more than $32m for resident doctor strike impact, and more than $43m for NOS impairment.

Rotorua MP Todd McClay said, in his view, the DHB debt was "without doubt" having an impact on local constituents.

"The number who have been in touch with my office because of delays, or not having their operations, has increased," the National Party MP said.

"The doctors and nurses are working very, very hard. It's the Government that are letting these people down and they need to fully fund Rotorua Hospital."

National's health spokesman Michael Woodhouse this week said the DHB deficit blowout was "entirely foreseeable" and that Minister of Health David Clark should have taken steps to avoid it.

He said Clark had let deficits balloon to record highs because the Government had neither provided the funding they claimed they would, nor set expectations for continued fiscal discipline.

Woodhouse also said the Government had been in power for two years and needed to take responsibility.

However, both Finance Minister Grant Robertson and Clark this week defended the deficit blowout by pointing the finger at the previous National government.

"We have had years of under-investment in our health system and that builds up over time," Robertson said.

He said the Government planned to spend even more on health to reduce the deficit. In May's Budget, the Government allocated almost $20b to health.

Clark expects it to take up to two years for DHBs to review and rectify the Holidays Act pay issue, which he has called an "historic issue".

He said more than 100,000 health workers, both current and former staff, have been "short-changed over many years".

Outside what was owed to workers by DHBs, Clark said the underlying deficit was $415m.

"Four DHBs (Canterbury, Waikato, Counties Manukau and Southern) account for most of the underlying deficit – $268 million in total, that's 65 per cent," he said.

Meanwhile, Ashok Shankar, an organiser at the Public Service Association (PSA) union, said the holiday pay errors mainly affected members who work irregular hours, such as shift work and being on call.

"Fatigue and stress are already big problems for these workers, so payroll problems are the last thing they need on their minds."

Shankar said the union was working constructively with the DHBs in the Bay of Plenty and around New Zealand to ensure the issues were resolved as soon as possible, "and we encourage any DHB employee with concerns to contact their union delegate".