The financial cuts promoted by Lester Levy are proven to be wrong:
Just this week we had this article in the Press https://www.stuff.co.nz/national/health/123633262/drastic-savings-plan-proposed-for-canterbury-health-board-now-in-doubt reporting that CDHB Board, having hammered the old executive and telling them it was possible to save $90m per annum, the compromise $56m saving has proven not to be realistic. This figure was promoted by the Crown Monitor, Lester Levy, and repeated by MOH and Treasury.
Then most of the Executive team resigned on the back of this pressure. Is the Board now going to apologise to these maligned people?
Let us review what has happened in the past few months to remove the spin the CDHB Board is now promoting and let’s analyse the facts. Firstly the 4% saving being promoted by the acting, acting CEO is in fact $70m. If they can’t make a $56m cut work how will they achieve $70m, without impacting staff or services of course. So now they have to save $70m without a plan. And somehow that’s better……
It is worth noting that the approved savings plan was NOT the “Meates’ plan”, nor was it the “Executives Plan”. It was the Boards plan! The Chair (Sir John Hansen), Chair of QFARC (Barry Bragg), Crown Monitor (Lester Levy) and the MOH wanted the Executive to deliver close to $100m of savings during the 2020/21 financial year. EY had advised the Board that CDHB had between 300-500 too many nurses at Christchurch Hospital!!
It remains frustrating that the Board have still refused to release a copy of the final EY report as requested under an OIA. The fact that an accounting practice can pretend that it is knowledgeable on how to arrive an safe nursing numbers is staggering.
As has been widely published, the Executive were really clear that to achieve savings of that level would result in major cuts to services, significant reductions in FTE’s and harm being done to the community. In response to the direction from the Chair, Crown Monitor and MOH, the Executive came back with a $56m savings plan with a proposal to minimize service cuts, delay FTE appointments for the new Christchurch Hospital Hagley and re-forecast the impacts of COVID on patient demand. The Executive were challenged that this still did not go far enough. The Executive were clear that it would be irresponsible to pursue anything more.
This is why 7 of the 11 Executive leaders from one of the largest organizations in NZ, an Executive who had managed more crisis than any other organization in NZ (earthquakes, fires, floods, terror attacks, failed facilities – remember outpatients); an Executive who had overseen one of the largest building and repair programmes undertaken in NZ; an Executive that had overseen what is internationally recognized as one of the most integrated health systems in the world, LEFT.
What the article again has highlighted is a spectacular failure of governance and the MOH; juxtaposed with an incredibly competent Executive leadership team that was not prepared to do the wrong thing. That takes courage and leadership – but what a price we have paid in Canterbury.
It is interesting that the acting, acting CEO, Andrew Brandt, has said that he did not see the plan as credible. It isn’t when you get rid of the team who have a long track record of delivering on every one of their commitments. What was NOT credible was the demand for the Executive to deliver $100m of savings from the Board / Crown Monitor and MOH. This is what made it untenable for the Executive to remain.
What is NOT credible is Dr Brandt’s focus on achieving 4% savings across all departments – for those of us that have been around long enough this is approach has never delivered on long term sustainable solutions in any industry. I learnt that early in my life as an accountant, and was reminded many times at CCC, of the error of this technique. Good units, who are often performing well and responsibly, are the ones which achieve the savings often at a great cost to the organization. Wasteful units resist the challenge and often remain as they were.
It is a budgeting technique of a desperate manager.
What the DHB is facing is the reality of the impacts of the three-year delay in the delivery of Christchurch Hospital Hagley. The impacts of capital charge / depreciation (including on insurance). Faster than planned population growth; and the long-term impacts of the earthquakes on the health and wellbeing of the Canterbury community.
Every external review undertaken on the DHB has reached the same conclusions.
The comments from Sarah Dalton, Executive Director of the Association of Salaried Medical Specialists are very telling
“The whole new narrative is ‘we have to redo the sums, we have to look at the books, we may not do any of those things’ … they’re not interested in that list any more.
“Our understanding is that the savings plan was produced at the direction of the board, so this new decision to revise the plan – also supported by the board – doesn’t really make sense,” she said.
It does again raise the questions as to:
- What happened with the MOH commissioned pathway to breakeven where MOH / EY and DHB had agreed a 4-year pathway to breakeven pre-Interest, capital charge and depreciation that recognized the unique circumstances that faced Canterbury?
- What happened to the agreed MOH commissioned detailed business case for the Tower 3 and tower 4 developments that was approved by the previous Board?
- Why were all of these on track until November 2019. What changed??
A review of history How the Chair responded to the initial MOH attacks on CDHB:
It is a good time to review history and consider this forthright response by Sir Mark Solomon to the underhand tactics of MOH which has led to where we are today. When we consider the first part of this article on how the MOH led a campaign to remove the Executive of CDHB. Then they worked to replace the Chair. After reading this nobody would be surprised that MOH did not want Mark back in the Chair.
Here was a notice released to the media on behalf of Ta Mark Solomon…
In response to the information released by The Treasury this week, please attribute comments below to Sir Mark Solomon, Acting Board Chair, Canterbury DHB (this was in 2017)
First off, let me be absolutely clear, there is complete commitment from Canterbury DHB management and the Board to continue to reduce our expenditure growth and bring the DHB back to financial sustainability. However, this is simply not achievable until after the new hospital is up and running.
Canterbury DHB was on track to report a budget surplus in 2010/11 pre-quake.
Post-quakes the Health Ministry did not have a post-disaster policy framework which would allow different ways of funding health services in a unique, ever-changing environment.
While population growth dipped immediately after the 2011 quakes, it has rapidly risen, exceeding Statistics NZ prediction series for the past four years. (Refer to Appendix 1: Statistics NZ Population predictions.)
Canterbury DHB has consistently sought a longer-term funding track, but this has not been forthcoming, hence the piece-meal [and seemingly uncoordinated approach] for additional funding to meet unanticipated needs such as the North Canterbury Quakes and extreme growth in Mental Health Demand.
Our position is not whether further reduction in expenditure can be achieved without disruption to patient care – it’s a debate about when a further reduction can be achieved.
I agree with the factual statements in the Treasury document.
As identified in Figure 6. Canterbury DHB’s share of the nation’s per capita funding has declined, year on year for the last three years. Treasury have identified that Canterbury’s total PBFF funding increased by 20.4 percent, compared to a national increase of 24.5%. I am happy to debate with the central agencies the appropriateness of that decline but it is interesting to note that the size of the Canterbury DHB deficit almost exactly matches the gap between its current share of funding and pre-quake share of funding.
It’s also worth noting that if Canterbury had received the national average funding increase then the Government wouldn’t have needed to deficit-fund the DHB.
As identified in Figures 8 to 14 Canterbury’s performance compares favourably with other DHBs and is as good, better or in the case of aged care, rapidly improving. All of these improvements contribute to the long-term sustainability of Canterbury DHB. For example, the improvement in aged care admissions has contributed a bottom-line financial gain in excess of $15 million per annum. These outcomes are as a result of deliberate strategies implemented by our senior management and clinical teams, which makes the claim that the management and clinical teams are not paying attention to financial sustainability hard to understand.
Canterbury is one of the few hospital systems in the world that has been able to reduce occupied bed days, this is supported by Treasury Figures 11 to 13. We can also provide more effective measures of system activity that illustrate actual reductions in occupied bed days that are the equivalent of two to three wards of a hospital [that we don’t need to resource]. This reduction in bed days does not only reduce operational expenditure it has also meant less capital expenditure as fewer beds have needed to be built a saving to the Government of $100 million plus on 2010 bed projections. Again, these improvements have been as a result of deliberate strategies to improve the quality of healthcare and address the clinical and financial sustainability of Canterbury DHB.
In the medium-term Canterbury has plans to reduce the rate of its expenditure increase, which we wish to discuss with the central agencies (Pages 46 & 47 of the Treasury document.) However, while the disruption of the rebuild continues and the DHB remains constrained by its physical environment, in particular the lack of operating theatres, there is only so much that can be achieved in the short-term. In reality no health system can break even when it is commissioning a large and complex hospital build and no other DHB in New Zealand has ever been able to. Our position is not whether further reduction in expenditure can be achieved without disruption to patient care it’s a debate about when a further reduction can be achieved.
The release of these documents under the Official Information Act, without the courtesy of advance notice under agreed government protocols, and the fact they contain opinions that could possibly have been withheld under the Act, only serves to further undermine my confidence that Canterbury DHB is getting a fair hearing.
FACT: There is a growing gap between Canterbury’s share of NZ’s population and its share of health funding