The tiny unit tasked with re-shaping the country’s health system is dominated by consultants.
Heather Simpson’s review of the health and disability sector, released last June, called for a structural reset, including reducing the number of district health boards (DHBs), and creating two new agencies: Health NZ and a Māori Health Authority.
Three months later, then-Health Minister Chris Hipkins announced the appointment of former director general of health Stephen McKernan, who works for consultancy EY, to lead the Government’s response to the review.
Little has been heard about it since – until yesterday, actually, when the new Minister, Andrew Little, told the Health Select Committee a paper outlining the Government’s response would go to Cabinet this month. “I’m not in a position to go into detail about what that is starting to look like, except that the decisions we will take will focus on the nationwide health structure from which health service delivery will operate from.”
The Department of Prime Minister and Cabinet (DPMC) – which is shouldering the transition unit’s costs, set initially at $5 million – has revealed that as of December 18 the unit contained 25 people, 15 of whom are consultants and 11 of whom work for EY, including McKernan. External costs had reached $1.3 million, at that time.
Catherine Delore, the department’s director of strategic communications and engagement, points out some EY staff are part-time, so the consultancy is providing the equivalent of 7.8 full-time workers. “They come in and out to reflect the particular skillsets needed at different stages as the work progresses.”
She didn’t answer Newsroom’s questions – originally sent to McKernan – about whether it was McKernan who appointed his 10 colleagues, and whether the appointments were strictly necessary when their roles could presumably have been filled from the public sector.
Our Official Information Act request was made on December 18. DPMC provided the answer on Tuesday. Last month, the department said a 20-working-day extension was required “because of the consultations needed to make a decision”.
McKernan, who reports directly to DPMC chief executive Brook Barrington said in the OIA response his team comprises specialists with specific and expert knowledge, particularly of the health sector.
The unit has been tasked with producing an implementation plan for the reform programme. “The priorities for the first phase (the response phase) focus heavily on the policy work programme, such as commencing design of a high-level operating model for the sector, providing advice on entity establishment, legislation, developing the implementation plan for the reform, and working through Budget implications.”
Changes will reduce fragmentation in the health sector, strengthen leadership and accountability, and improve equity of access and “outcomes for all New Zealanders”, McKernan said.
“Where’s the transparency around how those people were procured and for what reason?” – Robin Gauld
There’s a mixed response to the unit’s composition.
Professor Robin Gauld, director of the University of Otago’s Centre for Health Systems and Technology, co-wrote a paper in 2017 about external consultancies in the health sector.
In some ways he’s not surprised consultants have been brought in to drive national health reforms, which is “depressing”.
“You really could easily draw the conclusion that one consultant has been brought in from EY who’s then turned around and hired a group of team members; put them on the payroll,” he says. “Where’s the transparency around how those people were procured and for what reason?”
He also asks why people aren’t being directly employed as civil servants. The Government should have invested in building in-house capacity for managing reforms or change within healthcare, he says.
“The sector is big enough to warrant creating some kind of improvement and evaluation and reform-type unit. If you were looking at $5 million a year to create such a unit in-house, I think it would be a good investment. Instead the money is largely going out the door to consultancies and part-timers on secondment.”
The situation of public sector workers jumping ship to consultancies, probably doubling their income (and costs to the Government for their use), is a long-standing issue, Gauld says. “It’s a public scandal. New Zealand’s not unique in this – other governments contract out services like this, but I just don’t think that it’s appropriate, actually.”
Newsroom asked Minister Little if he was concerned about the proportion of consultants being used for a key piece of Government policy, and if that was something that needs to change.
This was his emailed response: “There is a clear and urgent need for change in our health system. Money being spent on the transition unit is providing essential input to government decision making in order to ensure all New Zealanders have good quality care. There is always a cost to change and we have met that cost separately to the health system.”
(National’s health spokesman, Dr Shane Reti, told Newsroom in January: “We would not spend $5 million on an experiment to reduce DHBs, which commentators agree will likely fail.”)
Tim Tenbensel, an Associate Professor of Health Systems at University of Auckland is more relaxed than Gauld. He says it’s reasonable for the unit to be located within DPMC, as it’s difficult for a government agency to restructure its own backyard. External input was always going to be needed, in Tenbensel’s view.
(By Newsroom’s count, there are seven people in the unit from the Health Ministry, including team leader Simon Medcalf, principal advisor Mhairi McHugh, and senior advisor Bernard Te Paa.)
“There’s not a lot of expertise sitting around just waiting to be asked,” Tenbensel says. “That’s why consultancy companies, I think, are in the frame.”
The key question is the expertise of the unit’s people.
“I don’t think this is a matter of, ‘Oh, the big corporate consultancy firms have got all the answers here, let’s go to them’,” Tenbensel says. “To do a lot of work quickly you want [to work with] people you know.”
“One of the major problems we would have is if we took years to implement this thing.” – Peter Davis
Use of consultancies has sparked concern overseas.
Last week, it was reported Australia’s federal government spent $A850 million on new contracts with ‘big four’ consultancy firms since the Covid-19 outbreak started, despite warnings it’s undermining the public service.
In 2014, the British Medical Journal reported the NHS’s spending on management consultants had more than doubled in four years, to £640 million a year.
Gauld’s 2017 paper, co-written with Erin Penno, a lecturer in public health at the University of Otago, found DHBs spent between $10 million and $60 million a year on external consultancies. That must be a huge concern considering the deficits being run up by the health boards.
(Last month, health commentator Ian Powell, the former executive director of the Association of Salaried Medical Specialists, singled out EY for a “hatchet job” on Canterbury’s DHB.)
External consultants can be valuable, Gauld’s paper said. “However, given the large amounts being spent by New Zealand’s DHBs, and assuming such expenditure is similar in other health systems, we believe there should be considerably higher accountability for expenditure along with demonstration of value for money.”
The alternative, the paper suggested, was to pool the money and create an independent institution, or to build in-house capacity. At least Gauld’s being consistent.
About 9 percent of this country’s gross domestic product is spent on health and disability services, making it one of the country’s largest industries. We sit mid-table among OECD countries for health spending, just ahead of Australia and behind the United Kingdom.
Sociologist Peter Davis is an Emeritus Professor at the University of Auckland, and an elected Auckland DHB member. He’s also the husband of ex-Prime Minister Helen Clark, whose former chief of staff, Simpson, led the health and disability review.
While using consultants highlights the hollowing out of public services – he mentions the Health Ministry used to have its own research unit – Davis says as long as reliable people are calling the shots on overall policy, framework and implementation, he’s okay with leaving the “technical bits” to EY.
Davis says EY’s reports to Auckland DHB are straight down the line. He also describes Martin Hefford – the Tū Ora Compass Health chief executive and transition unit’s deputy director – as a “very good person”.
With a restructuring it’s sensible to involve people who are outside the present system, Davis says; people who aren’t conflicted or wedded to one point of view, with a broad perspective and wealth of experience. Also, plenty of capable people would be consumed with the Covid-19 crisis.
“I’m not sure who else they could turn to, frankly,” he says, while adding it would be reassuring if an academic was appointed to basically peer review what’s being suggested.
Pace is also an issue, Davis says. To get something done quickly can require pulling a whole lot of people together over a short period. “One of the major problems we would have is if we took years to implement this thing.”
The last time Davis was an elected member was in 1980s, when the country had hospital boards. “We’re so far away from the rather hopeless system we had then,” he says. “It still needs another change but we’re certainly not in the bad straits we were in the 1980s with a system that was just stumbling along.”
Leeway for transition unit
Our health system is under “serious stress”, Simpson’s final report said.
The most recent overview of this country’s health policy by OECD highlighted concerning health inequities, in which people – particularly those in lower socio-economic categories, Māori and Pasifika – had unmet needs. They were denied treatment in the public system, and couldn’t afford to pay for it privately.
The Government expects to make announcements next month on the substance of the proposed health reforms, the implementation plan suggested by McKernan’s transition unit.
Tenbensel, the University of Auckland Associate Professor, says the Simpson review wasn’t prescriptive. “It gives the transition unit in DPMC, I think, a lot of leeway. And they will tackle questions that the Simpson review couldn’t or wouldn’t or didn’t, or just didn’t have the expertise to.”
What’s he referring to? Organisational design issues, he says – how the different organisations will interact.
Reducing the number of DHBs won’t solve those issues, he says. The Simpson report didn’t provide a lot of clues to how the Ministry of Health, and suggested entities Health NZ and Māori Health Authority might fit together. It’s not exactly a blank slate for the transition unit, Tenbensel says, “but it’s got a lot of scope”.
It doesn’t matter how you design a national health system, most of what’s done happens at a local level, he says. “So the big question’s how are you going to set up something that creates the best conditions for people, locally?”