Leaked document reveals millions of dollars of cuts at Te Whatu Ora

Updated: Public hospitals have been tasked with saving a total of $105 million by July.

Te Whatu Ora released the figure to RNZ on Friday afternoon following a series of leaks, including to Newsroom.

On Wednesday, Newsroom reported a leaked document showed the Canterbury/Waitaha arm of health agency Te Whatu Ora was scurrying to save $13.3 million by July.

The “financial sustainability target”, which was “allocated” to Waitaha, was consistent with what’s happening in other districts, said Sarah Dalton, executive director of the Association of Salaried Medical Specialists.

Other, smaller districts had been asked to make cuts in the low millions, she said.

The full list, published by RNZ, shows Canterbury’s savings figure was the second-highest in the country behind Auckland, which has to save $15.5m.

An added twist is consultant firm PwC has been brought in to oversee the cuts at Waitaha – at a time the Government is slashing public sector spending on consultants and contractors by $400 million.

On Wednesday, Te Whatu Ora/Health New Zealand did not confirm the quantum of savings required across all districts, or the size of PwC’s contract.

While thousands of public sector jobs are being cut as part of the Government’s savings drive, Health Minister Dr Shane Reti says Te Whatu Ora isn’t subject to that directive.

“What Health NZ is doing is finding ways to reduce spending by making day-to-day operational practices as efficient as possible so they can re-invest in the frontline. These are operational decisions made by Health NZ, not the Government.”

That may be the case, but the leaked document asked leaders to tell their teams “the Government is asking the public sector to make efficiencies to manage significant cost pressures” and Health NZ was “operating in the same context”. The agency needed to ensure it was “as efficient as possible”.

Reti says: “I have been assured that managing clinical risk and sustaining services is always Health NZ’s top priority. None of these cost-saving measures will impact the level of care patients receive.”

That doesn’t wash with Dalton who says the cuts will “totally” affect the health system’s frontline – which is already in disarray because of “massive junior doctor gaps”.

“While we’re still in a system that’s underfunded, this pressure to make cuts is borderline immoral.”

Junior doctors are threatening to strike next month after their pay negotiations stalled.

The Te Whatu Ora document was leaked to Canterbury health researcher Dr Michael Gousmett, who has long tracked the former district health board’s (DHB) “deficits” – critics call it underfunding – and accounting charges such as capital charges and depreciation.

“I was bloody horrified,” he says. “Here they are saying ‘we’re getting rid of consultants’, and they’ve got PwC on the case again.”

It’s not just a question of where the savings are going to come from, Gousmett says.

“We’re talking April to June – flipping heck, how on earth are they going to possibly do that?”

An anonymous note attached to the document said concerns had been raised with PwC that clinicians weren’t able to deliver more services for the same money, or the same services with less.

The document, dated this month, is headed: ‘Waitaha performance improvement & financial sustainability – hospitals and specialist services.’

Short-term savings of $13.3m were to be found before June 30 – but “continued performance improvement” was also needed. Nationally, it was hoped efficiencies could be found in supply chain and procurement expenses.

“What really gets me is clinicians are out there, absolutely slaving their guts out to hold services together, a number of which are effectively imploded already, and they have this nonsense flying around.”

Sarah Dalton, Association of Salaried Medical Specialists

“Focus areas” for savings, according to the document, included “prosthetic cost reviews”, doing away with “unnecessary procedures and tests”, and the use of artificial intelligence and advanced analytics.

“Optimising” resources such as hospital beds, operating rooms, and outpatient clinics would “minimise idle time and maximise productivity”, while a similar exercise with staff would result in “improved productivity and reduced cost”.

Clinical leaders were provided with “key messages” for staff.

At a high level, “tough economic headwinds are likely to be with us for some time”, they were told.

While the agency did a great job navigating Covid-19 “we are starting to return to a steadier state”.

“Real progress” had been made on workforce shortages so, where vacancies had been filled “we need to reduce our use of agency” staff. Meanwhile, healthcare assistants, who plugged nursing gaps, would be redeployed.

High supply costs would be lowered by reducing waste and better managing clinical supply stock.

The leaked document said a steering group had been established, guided by PwC associate director Luke Gillespie, and management consultant Prue Beams.

The group held a three-hour workshop with the Waitaha leadership team at which 71 cost saving ideas were brainstormed, “36 of which have potential efficiency impacts”.

That sounds like rubbish to Dalton, of ASMS.

“I don’t know what the public make of it, but what really gets me is clinicians are out there, absolutely slaving their guts out to hold services together, a number of which are effectively imploded already, and they have this nonsense flying around.”

It was hard to get reliable workforce data, Dalton says, while productive conversations were yet to occur about workforce gaps, the provision of staff, and workforce planning.

“On top of that, we’ve got new builds and renovations that have been in the works for years that then can’t properly open, either due to staffing pressures or cost pressures or a change of political priorities.”

This past week, RNZ reported a clampdown on overtime and backlogs of annual leave amongst a swathe of cost-cutting measures.

The Waitaha document mentioned those in a list of national directives. Other money-saving measures were reducing the use of outsourced personnel, stopping or delaying non-critical projects, using agency nurses “as an exception only”, and delivering planned care “within budgets”.

Only national directors were able to approve recruitment of administration and management positions.

Gousmett, the health researcher who’s also an adjunct professor at University of Canterbury, says of Te Whatu Ora: “They talk about efficiencies but they don’t talk about being effective – there’s a huge difference between the two. You can be bloody efficient but doing the wrong thing.”

Te Whatu Ora/Health NZ’s national director of hospital and specialist services Fionnagh Dougan says PwC was contracted nationally to provide temporary support “around best operational practice and delivering efficiencies where possible”.

“This includes providing additional capacity in the local finance function at Waitaha while its restructure is underway.”

Dougan says clinicians and managers in Waitaha were working on “financial sustainability initiatives to ensure money is spent where it’s most needed”.

“There have been no cuts to budgets.

“We expect local managers to use their judgement to make decisions in their own settings. All Health NZ areas are being asked to do the same.

“Managing clinical risk and ensuring patient safety remain our top priority, and resources are not being taken away from delivering frontline services.”

Dalton, of ASMS, says Waitaha is probably the second-largest health district in the country, after Auckland, so the demand for savings will be hefty compared with smaller districts.

“It just feels like one more thing in the endless cycle of things that Waitaha has been battling for a number of years.”

Executive exodus

Rewinding to 2020, relentless demands for cost-cutting at the old Canterbury DHB led to the exodus of seven of the 11-strong executive team, including the then chief executive David Meates, who was later an unsuccessful mayoral candidate.

Carolyn Gullery, the former planning, funding and decision support executive director, told Newsroom at the time: “If you’re asking for the impossible, which is to strip more than $90 million out without dropping any services and without dropping any staff, you’re kidding.”

Minutes from a DHB meeting in July 2020 detailed how costs associated with its $525 million acute services building, for depreciation and a capital charge (a Government levy on capital investments), had increased by $46m.

Sue Nightingale, the departing chief medical officer, said at the same meeting: “If you sack us all, which does look like the agenda, as you are trying to make us do something impossible, these problems will not go away.”

Meates, the former chief executive, says he hadn’t seen the leaked Waitaha document before Newsroom sent it to him.

The document appears to have been written by a consultancy firm, he says, and it takes a simplified approach to a complex system. He’s adamant the measures suggested won’t deliver sustainable savings, especially with centralised decision-making and approvals.

What’s proposed could, Meates believes, lead to increased costs, fewer patients getting treatment, longer stays for patients, and a lower quality of care.

The same approach was taken decades ago – “they didn’t work then”. He says it is disturbing the leaked document makes no reference to quality of patient care and outcomes.

The situation at Waitaha today reminds Meates of comments made in the wake of failures at Mid Staffordshire Hospitals in the United Kingdom’s National Health Service. Hundreds of people are thought to have died as a result of poor care between 2005 and 2009.

The scandal was investigated by international patient safety expert Professor Don Berwick, of the United States, whose 2013 report concluded: “Above all, it failed to tackle an insidious negative culture involving a tolerance of poor standards and a disengagement from managerial and leadership responsibilities. This failure was in part the consequence of allowing a focus on reaching national access targets, achieving financial balance and seeking foundation trust status to be at the cost of delivering acceptable standards of care.”

Says Meates: “This was a review that impacted on health care systems throughout the western world, including New Zealand. It is interesting to see whether we have learnt any lessons.”

Dalton, of ASMS, says this country’s health system will be hard to fix.

“It’s not a three-year prospect. Sometimes the amounts of money that are going to stack up in the service of fixing health are going to look scary but if we actually have any kind of a commitment to a functioning public health service we’re going to have to front that.”

• This story has been updated with comment from Te Whatu Ora/Health NZ