Published in The Post, 4 April 2025

While recent health headlines have featured the departures of personnel at the upper levels of Health New Zealand (HNZ), the publication at the time of a management review compiled by Deloitte usefully fills out a fuller and more informative picture that is worth revisiting.

Yes, as Deloitte shows, HNZ’s financials lurched from forecasting a half billion surplus to a billion-dollar deficit in a matter of months. But the report also shows that the organisation and its key personnel were in an unprecedented, if not impossible, position. This was an organisation under extreme pressure without the necessary tools to deal with it, exacerbated by a huge disconnect between the information available at the centre and what was going on operationally in the field.

Out of a number of extenuating circumstances: the huge financial flows of one-off payments and write-offs  associated with pay equity, Covid-19, and holiday pay; the multiplicity of legacy IT, financial and payroll system across many organisations; an incoming government determined to cut costs in the public sector, including health; and a turnaround in nursing recruitment which led to substantial staff overpayment where before there had been highly concerning shortages.

This was in marked contrast to my experience as an elected member on the Auckland District Health Board (DHB) just three years ago, where I witnessed a more-than-competently managed organisation – the largest in Auckland – that was able to deal with almost anything thrown at it, including a once-in-a-century pandemic, and seemed in its professionalism to be emblematic of the wider health sector. We were fortunate to enjoy a number of advantages:

• Organisationally we had manageable scale, an institutional history of nearly 20 years, and a proven top-level leadership team.
• We had a full suite of managerially and clinically relevant data at our fingertips. Indeed, Deloitte point to our final annual plan as exemplary of what is required in the sector.
• We were comfortably at some distance from the turbulent politics of Wellington and knew our patch in a way they never could.
• We did not have to deal with a huge pay equity settlement, the wash-up of funding reconciliation from Covid-19, and a government determined to make savings in the public sector. In fact, we experienced budgetary growth in real terms.
• We did not have to find savings from a so-called “back office”. Indeed, far from it, we were desperately trying to deal with major IT shortcomings inherited from a previous era of finding “back office” savings to fund frontline clinical services.
• We were able to balance our budget at every meeting, in part by setting aside the massive demands of holiday pay remediation, in part by not fully implementing the new nursing workforce ratio structure, and in part relying on unfilled staff vacancies.

The Deloitte report touches on many of these issues, although in accounting and managerial language. While the report does not explicitly say so, it seems that implementing a single, centralised organisation at pace was a mistake. The report states that “moving to a single system stripped away management and governance … and the ability to course correct and respond locally”. It suggests a “hybrid governance structure”. Under such a structure one would retain strategic, national policy decisions and accountabilities at the centre, but operational decisions would be devolved to a more local level.

From this key insight flowed almost everything else of concern, such as: loss of capability and experience; complicated information flows and systems; issues of delayed response in dealing with problem areas (with a lag time of two months in reporting to senior management, Board and monitoring agencies); and the need for a unifying financial platform and digital tools and data analytics across the organisation (rather than relying on manual processes).

It is said that one should never let a crisis go to waste. This is such an occasion. From this experience key changes can be made that will set up the health system for the future.

• Match and benchmark health expenditure to comparable countries.
• Regionalisation. Key decision points should be at the regional level (like the four regional health authorities, 1993-1997), with leaders forming an executive committee.
• An increasingly unified, comprehensive and federated IT infrastructure that will supersede and modernise the existing multiplicity of dated legacy systems.
• Reinstate and update the budgeting, planning and reporting resource and financial systems that existed and worked so well in the best of the District Health Boards.
• Reconnect staffing and rostering decisions with production and financial plans, taking into account clinical requirements. Nursing has been the major issue here.
• An ethos of continuous quality and productivity improvement. In my time on the ADHB I only twice remember the reporting of programmes of this kind. This is not good enough.

It should be noted that the focus in this particular “crisis” has been on the hospital sector since this is where the pain points are, public distress, and majority of the financial base of the health system. We also need to look constructively at public health and primary and community health care which can reduce hospitalisation and manage our increasing burden of chronic disease.

Peter Davis is Emeritus Professor of Population Health and Social Science at the University of Auckland and was an elected member on the former Auckland District Health Board.

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