A clash at Canterbury DHB over big spending cuts demanded by the Government has sparked an emergency board meeting. David Williams reports

A showdown between Canterbury District Health Board’s senior management and board looms today, after the Health Ministry and Crown monitor Lester Levy pressured the DHB to make drastic spending cuts.

The board is holding an emergency meeting today, behind closed doors, to discuss “staffing numbers”, according to the meeting’s agenda. It has been preceded by a meeting of the quality, finance, audit and risk committee.

The Press reported last night two of the DHB’s 11-strong senior management team have resigned. Chief people officer Michael Frampton resigned in July, The Press reported, and Carolyn Gullery, the planning, funding and decision support executive director, announced she was leaving on Monday. Gullery’s resignation was met with tears, Newsroom has been told.

“Clearly the rest of the sector doesn’t think they’re useless,” our source says. “It is an absolute meltdown of governance.”

It’s understood more senior managers are considering their positions.

Any fallout will likely be far-reaching, considering the DHB is the South Island’s biggest employer, receiving $1.95 billion in funding last year, and employing more than 10,000 people.

The meeting comes at a crucial time in the health sector – amidst a global pandemic and after the release of Heather Simpson’s review of the health and disability system.

Canterbury DHB’s projected deficit for the 2019-20 financial year is the biggest in the country, at $170 million. More than $50 million in savings would have to be found if the draft annual plan, which is yet to be made public, is confirmed.

Newsroom has been told cuts of that magnitude might mean cutting 200 administrative and clerical staff, and a hiring freeze. Also, the number of nursing graduates employed under the nursing entry to practice programme, NETP, might be reduced to a third of the previous level. Last year, 183 nurses were employed under the programme, with 197 in 2018.

Such “draconian cuts” would put “quite major constraints” on the province’s health services, a health source says.

But cutting $50 million from its budget isn’t enough for the Government. The Health Ministry and Crown monitor Lester Levy want “to essentially double those reductions – which is huge”, Newsroom has been told. Senior management are understood to think that level of cuts are unpalatable, and deserving of a drastic response.

“This is the point at which management have said, ‘We think we can give you $50 million in savings, and that’s ugly and we don’t really want to do it, but if forced to we will. But we are not going to give you double that savings. That’s just not going to happen on our watch’.

“It’s getting quite ugly.”

Reaching boiling point

The Health Ministry and Canterbury’s DHB have been at each other’s throats, quite publicly, over the years, particularly during the tenure of former director-general Chai Chuah. After the appointment of Ashley Bloomfield, it was hoped a reconciliation group, led by former ACC boss Garry Wilson, would sooth tensions.

But it seems they’ve now reached boiling point. (The DHB was asked to provide comment by midday.)

In June, then Minister of Health David Clark wrote to the board, headed by Sir John Hansen, to say he and the Finance Minister had decided not to approve its annual plan, pointing to its books. “Current DHB financial performance is not sustainable, despite Government providing significant funding growth to DHBs in the past two Budgets.”

Newsroom has been told Levy, a former chair of Auckland Transport, is extremely critical of the DHB’s management. He thinks they’re not innovative enough, and if they knew what they were doing they’d be able to get greater savings than they think they can.

“It’s easy to say that, at a high level,” our source says. “That’s where it’s getting quite nasty.”

As with many DHBs, much of the deficit is made up of non-operational costs like capital charges and depreciation. Costs related to the Covid-19 pandemic have topped $24 million.

Calling an emergency meeting, and immediately excluding the public, is a “signal of governance not knowing what the hell it’s doing”, our source says.

The DHB isn’t alone in having significant deficits. The sector-wide deficit for the 2019 financial year was $1.081 billion.

But Canterbury’s budgets have been marred by issues relating to the 2010 and 2011 earthquakes, including insurance negotiations and a large capital works programme.

The emergency meeting was scheduled to start at 12.30pm.

Late in the afternoon, the ministry provided emailed comments from Michelle Arrowsmith, the deputy director general of DHB performance support and infrastructure. The statement ignored Newsroom’s questions about the size of the deficit reduction demanded by the ministry and Levy, and whether the Crown monitor wanted to respond to comments he had been extremely critical of the DHB’s management.

“All DHBs are expected to improve both their financial performance and service delivery for 2020/21,” Arrowsmith says. “The ministry is currently in discussions with Canterbury DHB on their 2020/21 annual plan, and further improvement is expected. These discussions and all relationship interactions with the CDHB Board, executive and staff remain constructive and professional.”

After today’s emergency meeting, Hansen confirmed to staff the resignation of Meates, who has been chief executive since 2009.

* This story has been updated with comments from the ministry and news of Meates’ resignation.

David Williams is Newsroom's environment editor, South Island correspondent and investigative writer.

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