DHBs struggle under $200m efficiency plan

DHBs such as Capital & Coast are fighting to make substantial efficiency savings. Photo: Lynn Greiveson

New Zealand’s population is booming and our health services are racing to keep up. With “efficiency expectations” at new highs, are DHBs getting too close to the bone when finding fat to trim?

Health services are fighting to save more than $200 million as the financial year nears an end, cutting costs through staff vacancies and service reviews.

The figures have led to warnings that staff are crumbling under the pressure of maintaining services at a level acceptable to the public.

Details of the DHB efficiency targets for the 2016/17 year are revealed in Official Information Act requests made by the Labour Party.

They show planned efficiencies of $205.2m, a number likely at the low end as three DHBs – Canterbury, Tairawhiti, and West Coast - did not provide figures.

This is up from about $140m the previous year.

Auckland District Health Board is dealing with the highest expected saving of $42.2m, with Waikato DHB close behind at $34m and Capital & Coast DHB $32.7m.

Labour health spokesman David Clark said DHBs were being asked to do more with less.

The system was under stain, staff sick leave was up and DHBs were scrambling to meet targets and avoid funding penalties.

“Some efficiencies can be expected, but the extent of the cuts mean more service reductions are the result.”

But Health Minister Jonathan Coleman fired back, saying under the National government DHB per person funding had risen by 21 percent and arguing Labour had also required efficiencies when in power.

“Claims that health funding has been cut are totally wrong.

“This year New Zealand is forecast to spend 6.26 percent of GDP on health. Under Labour, the percentage of the economy spent on health was under six percent.”

Where do the efficiencies come from?

The documents reveal each DHB is looking to find their savings in different areas.

Auckland District Health Board’s $42m goal is largely to be met by an $11m reduction in “resource management”.

Another $10m will be found from “directorate efficiencies” and “service model/standardisation”, while more than $3m could be reduced by “using the hospital wisely”.

Unfortunately, when asked to explain the details the Auckland DHB was unable to provide comment before our deadline.

In the Wellington region, Capital & Coast DHB aims to slash $33m through changes in clinical practice, improved management and increased revenue.

More than $5m is to be saved through “service reviews”.

CCDHB spokesman Chas Te Runa said that efficiency expectations were about “getting the most out of every dollar”.

Service reviews were a standard practice that included re-tendering contracts, or changing the delivery of services, to get the same or better services for a cheaper price, he said.

An example was the integration of laboratory services, which had improved test times and resulted in almost $5m in savings.

Revenues increased from measures such as improved information capturing that led to better reimbursement for ACC work, and an increase in funding from other DHBs as they referred patients for treatment, he said.

Several DHBs are also looking to fill the financial gap through staffing measures.

In Waikato, the DHB plans to slash personnel costs by the equivalent of 222 full-time equivalent (FTE) positions.

This would come from a mixture of time lags between vacancies being filled, better rostering, a reduction in overtime, and reducing leave owed to staff by making them take time off. It would not involve a reduction in staff positions.

Hawke’s Bay DHB and Waitemata DHB are also looking to personnel savings, with the former making 42 full-time-equivalent reductions.

Hawke’s Bay DHB corporate services executive director Tim Evans said it had been more difficult to deliver the savings target this year because of the Havelock North campylobacter outbreak and staff strikes.

Any money generated by efficiencies was always reinvested in health services or infrastructure.

In the past seven years, an operating surplus had been invested in infrastructure including a low-risk maternity birthing unit, a new mental health building, and a new operating theatre.

The planned FTE reduction had not occurred; instead numbers had increased by 33 after new investments, income, and efficiency savings were considered, he said.

What impact do efficiencies have?

A standard response from unions representing medical staff is that the cost-cutting is worse than ever and placing those who work in hospitals under great stress.

While reducing the number of FTEs did not necessarily mean less staff, it put existing workers under pressure as they picked up the slack while replacements were sought or leave enforced.

Association of Salaried Medical Specialists director Ian Powell said surveys indicated about 50 percent of DHB doctors experienced some form of burnout.

Another showed that in four years’ time it was estimated that 25 percent of senior doctors would no longer be working at a DHB.

This was partly due to an aging workforce, but also because doctors could find better conditions working as locums or overseas.

There was no doubt the health system was under tighter financial pressure than ever, he said.

New Zealand Nurses Association industrial advisor Lesley Harry agreed, saying the funding situation was the worst she had seen in her 25 years in the industry.

Members were complaining about the efficiency drive daily and thought the delays in appointing new staff, or deciding not to replace old, were often unnecessary, she said.

Staff were burning out, or leaving the profession entirely, after dealing with increased workloads.

“We know some DHBs are aware of the stress our members are dealing with but there just seems to be an absolute failure in addressing the issue.”

Recently the Labour party has been using every opportunity to ram home its view that, in real terms, about $1.7 billion has been stripped out of the health budget in the past six years.

Clark deflected questions about whether the health system was any worse now than when Labour was last in power, saying he wasn’t sure as he was not an MP then.

But if successful in the upcoming election, priorities would be to clear the backlog of elective surgeries and properly fund mental health.

“The Government has a choice around that, it can choose to fund public services or choose tax cuts for wealthy New Zealanders.”

Coleman, however, argued that was simply not true, saying that during the past eight years’ health funding had kept up with demographic pressure and inflation.

The DHB efficiencies came from forecast increases, not cuts, and were determined by the agencies themselves.

“In regard to DHBs, they are required to make efficiencies of around one percent.

“Any efficiencies made are then re-invested into health services. It’s worth noting that under the Labour government, there was an automatic .5 percent efficiency adjustor, so this is nothing new.”

2016/17 efficiency targets

Auckland - $42.2m

Bay of Plenty - $2.6m

Canterbury – Not provided

Capital & Coast - $32.7m

Counties Manukau - $12m

Hawke’s Bay - $13m

Hutt Valley - $5.3m

Lakes - $3.7m

MidCentral - $6.5m

Nelson-Marlborough - $5.4m

Northland - $10m

South Canterbury - $1.6m

Southern - $6.8m

Tairawhiti – Not provided

Taranaki - $5.2m

Waikato - $34.1m

Wairarapa – $0.8m

Waitemata - $21.7m

Whanganui - $1.7m

West Coast – not provided

TOTAL - $205.2m