'Turnaround' job: Health NZ board sacked, commissioner appointed

The Government has sacked the Health New Zealand board, replacing it with a commissioner due to concerns over oversight, overspend and a "significant deterioration in financial outlook".

“The previous Government’s botched health reforms have created significant financial challenges at Health NZ that, without urgent action, will lead to an estimated deficit of $1.4 billion by the end of 2024/25 – despite this Government’s record investment in health of $16.68 billion in this year’s Budget,” Health Minister Dr Shane Reti said.

“Health NZ first reported a deteriorating financial position to me in March 2024, despite earlier repeated assurances by the organisation that it was on target to make savings in 2023/24.

“In the months since, the situation has worsened. Health NZ is currently overspending at the rate of approximately $130 million a month."

Reti said that prompted the Government's appointment of Professor Lester Levy as the organisation's commissioner, with a one-year tenure.

Levy was recently appointed as the organisation's chairperson.

Reti said the move was the strongest ministerial intervention available under the Pae Ora Act and "not a decision I have taken lightly".

"However the magnitude of the issue requires such action.

“The issues at Health NZ stem from the previous Government’s mismanaged health reforms, which resulted in an overly centralised operating model, limited oversight of financial and non-financial performance, and fragmented administrative data systems which were unable to identify risks until it was too late."

Speaking to media, Labour Party health spokesperson Dr Ayesha Verrall hit back at claims she and the previous government were to blame for any possible blowouts.

"A diverse and balanced board that included three clinicians is now focused just on cost-cutting - that'll be corrosive for morale, as is the lie that there's no hiring freeze."

Additionally, she accused the Government of "spin" over the commissioner appointment.

"The Government underfunded the health system in the Budget, and so now they're trying to make an excuse for why they are going to have to cut costs," she said.

"It does look like this is political spin that we get to this point after several months of the Government being aware of the problem, I'm also surprised that they didn't choose to disclose this in the Budget - if it's such a big fiscal risk."

In his announcement, Reti said Lester Levy was tasked with implementing a "turnaround plan" with a savings objective of about $1.4 billion, aimed at ensuring financial balance.

He had also been asked to take action to strengthen governance and management.

“Operational responsibility for the turnaround plan will sit with the commissioner, however I have made it clear that it should focus on cost efficiencies in areas such as any back-office bureaucracy which has blown out, particularly in middle management, as a result of the previous Government’s damaging reforms."

He said one example was that between March 2018 and March 2024, back-office staff numbers, which formerly sat at district health board level, grew by around 2500.

“As a Government, we’ve made it clear that our first and foremost priority in health is improving the delivery and quality of frontline services. We have already invested very significantly in health, with $16.68 billion announced in the Budget to support frontline healthcare services.

“As minister, I am not confident I would have adequate oversight of that spend if the existing board structure at Health NZ were to remain in place.

“Today’s move to appoint a Commissioner is one of several steps our Government has been forced to take over the past eight months due to concerns about the governance of Health NZ and resulting performance issues, including health workforce and hospital wait times.

“Previously, I have appointed a Crown Observer, a new Chair and a Board member with financial expertise. Through those measures we have been able to identify long-standing issues with the existing governance and operating model."

Reti said Levy had assured him there would be no adverse impacts on the delivery of care in implementing a turnaround plan.

"Rather, he and Health NZ will be seeking to bring the frontline closer to decision-making.

“Following today’s announcement, the Ministry of Health will continue its monitoring role and play a key part in reporting on the Commissioner’s performance in lifting Health NZ’s financial position, both to me and to New Zealanders."

Reti said the announcement was not a reflection on the work of frontline staff.