‘DHBs are hospital boards in all but name – and they need a re-set’

Published in The New Zealand Herald, 8th January 2020

Impressions from a newly elected member of the Auckland District Health Board (ADHB).

ADHB is big “business”: turnover of $2.2 billion and 11,000 staff; the third largest enterprise in New Zealand (just under one per cent of GDP). Aside from serving the Auckland isthmus, it also provides specialist services to other DHBs for difficult and complex cases. 

But ADHB has one big problem – it is operating at a substantial “loss”; in other words, it has many more expenditure commitments than revenue. This is a new phenomenon. Over the last decade ADHB has broken even practically every year. But these last two years are different.

Why? One important factor is that the arrival of a new government broke a “drought”: staff got pay raises, new staff were hired, staffing ratios have been eased, capital charges have been offset, properties and assets have been revalued (higher depreciation charges), the cost-price gap for services Auckland supplies to other DHBs is starkly apparent, migration-driven population growth continues, and public expectations have risen.

Auckland is by no means the worst affected. The initial deficit across all 20 DHBs is just over half a billion, 2.5% of the health budget. That may not sound a lot, but is the highest for nearly 20 years, and other public services are not allowed to run such deficits without central government intervention (look at the recent experience of the polytechnic sector).

One way in which DHBs have tried to deal with this deficit has been to raid the budgets of non-hospital services. This takes about $100 million off the initial deficit, but it is unjust, unsustainable, and terribly short-sighted. After all, who is going to prevent young children taking up valuable hospital dental services, who has a chance of limiting use of emergency departments and preventable hospitalisations, who could better manage sick and older people with multiple illnesses, disabilities, and medications over the long term? You guessed it – the services in the community that supply 90% of usual care under normal circumstances, much of it at the family doctor.

Apart from staring down the government of the day to come up with a lot new money, there are other options that are constructive, practical, and probably overdue. As Winston Churchill once said: “never let a good crisis go to waste”!  

The “sleeping giant” of primary, community and social care needs to be given a seat at the table and empowered to do its vital job properly. From my observation after just one meeting, the non-hospital sector is practically invisible; in essence, DHBs are hospital boards in all but name, and we need to draw on international best practice to empower and coordinate the non-hospital sector to do its cost-effective work, particularly with allied health professionals.

Secondly, with hospital productivity clearly on the decline, there is much more that could be done to reconfigure hospital services in a more cost-effective direction – such as moving much more elective surgery to day stay. A similar argument might be made for moving more outpatient visits to family doctors and skilling family doctors in areas where they can make a difference (for example, skin care). In the same vein, each hospital department should be asked to conduct efficiency and effectiveness audits, using international benchmarks where possible, and coming up with solutions, many of which will come from existing staff themselves who often know where the obstacles to efficient work practices lie.

Finally, the costs of outsourcing should be reduced, PHARMAC or some other central procurement agency could assist with getting better and more standard deals on equipment, time-consuming paper-based administrative systems are shockingly-overdue for replacement by modern IT-based systems, and there needs to be close attention to the roles of different staff to ensure that we are not applying personnel to jobs for which they may be “over-qualified” and not professionally challenged (the so-called Role Delineation Model has not been updated for practically a decade).

The sector’s half billion deficit might look like a “threat”, but actually it is an opportunity. Let’s do it!

Peter Davis

Elected member

Auckland District Health Board

Published in The New Zealand Herald, 8th January 2020

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