Hospitals Ordered to Cut $510 Million Amid $538 Million Budget Surplus

Key Takeaways

• Health NZ has been asked to find $510 million in "efficiency savings" from its operational budget, despite having $538 million in unspent salary funds from the previous year.
• The underspend was due to unfilled vacancies, slower than expected Holidays Act remediation, and unsettled collective contract disputes with senior doctors and nurses.
• The Association of Salaried Medical Specialists and the Nurses’ Organisation are still without a settlement, with the union criticizing the use of outsourced personnel and consultancy firms.
• Health NZ claims that "performance efficiencies" do not impact on the funding available for settlement, but the union argues that scarce health dollars are being spent in the wrong places.
• Labour’s health spokesperson Dr Ayesha Verrall has criticized the government’s approach, saying that cutting resources for already stretched services will not help patients.

Introduction to the Issue

Health NZ has been tasked with finding $510 million in "efficiency savings" from its operational budget, a move that has been met with frustration from health workers. The request comes despite the fact that $538 million earmarked for salaries went unspent last year, due to a combination of factors including unfilled vacancies, slower than expected Holidays Act remediation, and unsettled collective contract disputes with senior doctors and nurses. The Association of Salaried Medical Specialists, which has been locked in a pay dispute for over a year, has criticized the decision, arguing that scarce health dollars are being spent in the wrong places.

The Impact of Efficiency Savings

The union’s executive director, Sarah Dalton, has expressed concern that the efficiency savings will have a negative impact on patient care. She argues that the use of outsourced personnel and consultancy firms is diverting funds away from salaried staff, who are essential to providing high-quality care. Furthermore, Dalton notes that cuts to "back office" functions are making it harder for clinical staff to do their jobs, citing the example of a restructuring in the Data and Digital department that resulted in 200 fewer staff than needed. The union is calling for a more transparent and accountable approach to health funding, one that prioritizes the needs of patients and staff.

The Government’s Response

Health Minister Simeon Brown has defended the efficiency targets, arguing that they will free up cash to meet government health targets without reducing clinical staff. However, Labour’s health spokesperson Dr Ayesha Verrall has criticized the approach, saying that cutting resources for already stretched services will not help patients. Verrall argues that the government’s denial of a hiring freeze is at odds with the experiences of frontline workers, who are struggling to recruit to roles in their departments. The Nurses’ Organisation, which represents around 60,000 nurses, midwives, and healthcare assistants, is also going into the new year without a settlement, highlighting the need for a more sustainable and equitable approach to health funding.

The Funding Conundrum

A briefing to the minister in April revealed that each 1 percent increase for senior doctors would cost between $20 million and $30 million, while each additional 1 percent increase for nurses would cost taxpayers more than $100 million. Health NZ has stated that the funding available to settle collective agreements has not changed, and that "performance efficiencies" do not impact on the funding available for settlement. However, the union remains skeptical, arguing that the use of outsourced personnel and consultancy firms is diverting funds away from salaried staff. The agency has also claimed to be actively recruiting to reduce its reliance on outsourced personnel, with an increase of approximately 750 full-time clinical workers in the most recent financial year.

Conclusion and Recommendations

In conclusion, the request for Health NZ to find $510 million in "efficiency savings" has sparked controversy and criticism from health workers and opposition parties. The use of outsourced personnel and consultancy firms, combined with cuts to "back office" functions, has raised concerns about the impact on patient care and the sustainability of the health system. To address these concerns, the government should prioritize a more transparent and accountable approach to health funding, one that prioritizes the needs of patients and staff. This could involve increasing funding for collective agreements, reducing reliance on outsourced personnel, and investing in "back office" functions to support clinical staff. By taking a more sustainable and equitable approach to health funding, the government can ensure that the health system is able to provide high-quality care to all New Zealanders.