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The axe fell on the Southern District Health Board this week, its board members and chairman dismissed because of the organisation's financial troubles, and replaced by a commissioner, Dunedin legal consultant Kathy Grant. Health reporter Eileen Goodwin looks at how things got to this point.
It was not ''higher politics'' that occupied the minds of most health workers, declared incoming chief executive Carole Heatly in her first Dunedin media interview, but more prosaic concerns such as the roof leaking.
The ironically prescient remark from the former English National Health Service boss was not a reference to the leaking clinical services building at Dunedin Hospital that would become a major headache.
And yet Ms Heatly will now be as aware as her predecessor Brian Rousseau of just how inseparable ''higher politics'' can be from trying to provide hospital infrastructure in Dunedin.
Leaks in the clinical services building have become symbolic of the board's financial Catch-22.
It's stuck paying to fix leaks and other repairs on the run-down building, while the Government holds out on the up to $300 million capital for a new building, until the board gets its books in shape.
With no visible political support for cutting services, board members and senior management were said to have become extremely sensitive to the public resistance to cuts.
The board clearly needed to make major changes if it was to remove its deficit, but got tied up in small-ball savings, such as hiking the cost of staff meals in its cafes, before the ham-fisted attempt this year to cut 5% from rural hospitals and some other providers.
By that stage the situation had spiralled out of control.
A document leaked in April revealed a projected deficit of up to $42 million in 2015-16, and Nelson Marlborough DHB chief executive Chris Fleming had been sent in to advise.
Coming after years of obsessive focus on finance, the situation raised questions about the rigour of basic financial analysis and forecasting.
The finance department has lost some of its most experienced staff, which was identified as a risk by Audit New Zealand in its last yearly audit report.
The loss of talented staff was because of uncertainty over a scheme pushed by the unpopular cost-cutting unit Health Benefits Ltd, which wanted to centralise finance teams in Auckland.
The plan has been discarded, and HBL itself is being quietly wound up this month by the Government.
• The month before Ms Heatly's November 2011 interview, an extraordinary submission by Mr Rousseau had been made public.
Before leaving for a high-flying health job in Australia, Mr Rousseau laid bare the ''soul-destroying'' nature of being in ''cost-cutting mode'' for more than a decade, amid inadequate infrastructure.
At the time, the board quickly distanced itself from its erstwhile chief executive, but the problems outlined in Mr Rousseau's four-year-old submission were real, and remain largely unresolved.
''The impact on staff morale and management's ability to meet the needs of the staff and the community they serve has been significant and the never-ending nature of it soul-destroying.
''The sustained inability to reinvest in buildings and clinical equipment has been flagged as a major difficulty in board papers made available to the ministry and in numerous communications and annual plans,'' Mr Rousseau's submission said.
The catalyst for the submission was a high-level Ministry of Health review of Dunedin Hospital, in which officials swooped on Dunedin, conducting interviews in the community and the hospital, before releasing a damning report.
Much of it focused on low staff morale and poor management at Dunedin Hospital, but one of the main criticisms was the handling of the merger between the Otago and Southland boards.
The boards amalgamated the previous year to form Southern District Health Board, but largely in name only, the report said.
Just how successful the merger has been in the years since is a moot point, but it probably helped prop up some services.
Initially, progress was slow getting departments to work together.
That it appears to be working reasonably well is testament to clinicians and administrators in both centres, given the lack of funding to smooth logistical challenges.
Whether it saved any money - $500,000 annual direct savings were promised - is also a moot point.
Mr Rousseau's determination to extract more funding for Otago and Southland was revealed in papers also made available in October 2011.
It is now a well-versed complaint: the South is not adequately funded under the head-count funding system for its 62,356sq km land area, twice the size of Belgium.
Its plight is exacerbated by Dunedin's historic legacy as home to one of the country's two undergraduate medical schools.
The city's sub-specialties support teaching and serve a vast area, from which the distance to Christchurch could be problematic.
In an email made public in October 2011, Mr Rousseau told then National Health Board director Chai Chuah: ''Maybe it is time to lift the lid on the [population-based funding] formula! I am not sure what is so secretive about it anyway . . . ''
Mr Rousseau also got off-side by appointing two European neurosurgeons in the middle of a row over whether Dunedin would keep neurosurgery.
The line in the sand helped kick-start the successful 2010 campaign, in which the board joined the public to save the service.
Such provincial activism was viewed dimly in Wellington, and has not been a visible feature of Ms Heatly's tenure.
Ms Heatly brought a slicker style of leadership; glossy corporate-style posters and other marketing material appeared, while media access to senior health managers and information was severely curtailed.
Monthly meetings were run with a narrow interpretation of what could be discussed openly, under the tight control of chairman Joe Butterfield, a Timaru accountant with a long history in health governance and a brusque manner.
Mr Butterfield was appointed in 2010 by then health minister Tony Ryall, who dumped the more mild-mannered Errol Millar.
Ms Heatly took an aggressive line on identifying savings, with the help of expensive consultants.
But those hoping Ms Heatly's lack of ties in her new country meant she would be ruthless have been disappointed. She has largely taken a cautious approach to deficit reduction.
Expectations had been high.
In 2012, an unnamed person told the Otago Daily Times there would be ''blood on the carpet'' under her watch.
It was not easy to interview people on the record for this report, and Dr Jim Reid, the board's primary care adviser, said the situation was such that an interview arranged with the ODT would not be appropriate.
However, he was happy to make a few comments, going into bat for Ms Heatly, whose leadership has been seen in some quarters as disengaged and hands-off.
Dr Reid insists she deserves credit for trying to save ''what we've got here in the South''.
''She is and has been tremendous in trying to do her absolute utmost to preserve services.''
He sympathised with specialists' concern over funding.
''I can really understand how doctors feel because they really want to do their best for their patients, and of course, they can't.
''If we want to give more money to orthopaedics, who do we take it away from?
"Do we take it away from paediatrics?
''Do we take it way from mental health?
''We want to give more money to primary care. Who do we take it away from?''
The 5% cut that got the board in strife in some rural areas was necessary to preserve services, he says.
The anger in Central Otago over the proposed cut to Dunstan Hospital's funding may have been a factor in prompting Health Minister Jonathan Coleman to sack the board, because it brought pressure to bear on National's Otago and Southland MPs.
While the board said the 5% cut applied to its own services as well, targeting the rural hospitals could be construed as cutting from community-based providers to keep its own hospital arm afloat.
It was a confusing episode, because a few months earlier, the board's strategic plan talked up a bigger role for rural hospitals in the future of southern healthcare.
Another area of seemingly misdirected strategy is health service planning in Queenstown.
Citing its financial situation, the board last year walked away from upgrading the resort's hospital, after almost three years of planning the ''health campus'' recommended in a high-level Ministry of Health report.
The resort's hospital is now likely to be put into the community's hands in a trust.
• Publicity last year over the leaking clinical services building in Dunedin forced an undertaking from Mr Ryall that Cabinet would consider a business case for the rebuild in 2015.
That will not happen, and in reality the $1.75 million cost of the urgent repair work to fix the leaks is just another factor in a series of delays in the rebuild timetable. Planning the construction of a major hospital can be a politically charged affair with competing agendas.
Debate in the South is yet to ignite, but there is discord - within the region and externally - over Dunedin's future as a tertiary level centre.
A rural medicine model built on the concept of general practice and general specialists is touted by some as the realistic future for an isolated, low population area.
But the Dunedin School of Medicine warned the board last year of ''blindly following'' now-discarded overseas trends of centralising specialist services.
The medical school view was an appendix of the University of Otago division of health sciences' submission on the board's strategic plan.
When the submission was released this year, health sciences pro-vice-chancellor Prof Peter Crampton distanced the division from the medical school's concerns.
The concerns were dismissed as medical school ''patch protection'' by one senior board figure, who would not be named, but it raises questions about the philosophy and intellectual rigour guiding health planning.
An impulse in New Zealand to copy overseas ideas frustrates Dr Ganesh Nana, chief economist at Business and Economic Research Ltd (Berl) in Wellington.
''My worst frustration is that we are forever looking for overseas models or overseas examples and trying to transport them and impose them in New Zealand.
''We are a peculiar country with a lot of peculiar characteristics.''
Taking a narrow cost-accounting approach to addressing southern health services could threaten past achievements, Dr Nana says.
''To me it just doesn't seem right to waste the investment that previous generations have done, in for example, building up the medical school in Otago, and the ancillary skills and capability that has come from that.
''Surely there must be another way of ensuring that we get the best out of what's left in Dunedin for the benefit of New Zealand.''
Debate is needed about the merits of centralisation and the potential downside, before it's too late to change tack, and it's not discussion we are good at having.
''We're not prepared to confront the difficult choices that we have. If we continue to go down the route of centralising everything, then there are going to be many regions, not just Dunedin, that will lose a lot of capacity and skills that have been built up there in the past.''
Another who feels the big picture is lost in health decision-making is former Otago and Southern board member Peter Barron, who says the ''classic demonstration'' was the recent hospital food outsourcing decision.
''If the Government and the SDHB were to stop and see the funding of health services through a whole of government lens at a macro-economic and social level, then there would be a rapid realisation that so-called contract savings to the SDHB are outweighed by many multiples of additional costs both regionally and nationally.''
Mr Barron believes the board is still suffering from the bitter legacy of the 1990s, when market-driven health management was at its zenith.
It's one of the reasons the clinical services building is in such poor shape, he believes.
''One of the other key factors that disadvantaged the Otago DHB [later the Southern DHB] was the `hospital pass' that it received from the Crown Health Enterprise with Dunedin Hospital.
''The CHE had achieved its need to deliver a surplus/profit by simply deferring essential maintenance and capital expenditure and this failure has continued to impact on the SDHB deficit.''
Dunedin health IT entrepreneur Prof Murray Tilyard, whose expertise is in general practice, is more sanguine than others about the prospect of losing some specialty services, saying the medical school does not need them to produce high quality graduates.
''We do not teach them neurosurgery nor cardiac surgery ... that sort of teaching occurs if they go into advanced training in those areas.
''I personally see no threat to the [medical school] from any foreseeable changes to Dunedin Hospital, as our training involves not only Dunedin Hospital, but Invercargill, the rural hospitals and general practices around the southern region.''
Prof Tilyard says there was unhappiness when paediatric oncology was centralised in Christchurch, but the system now worked well.
''We were left with one expert, as were a number of other centres.
''So after due consultation a proposal was put forward to consolidate South Island services in Christchurch.
''We now have and have had for a long time a world-class service, which is sustainable in relation to staffing and one that meets the needs of the patients and their families.''
Prof Tilyard says it comes down to ''clinical sustainability'', and whether there is the elective work to sustain more than two specialists, because otherwise the on-call responsibility becomes onerous.
The board has not identified specialties it said were at risk of unsustainability in the strategic plan which sparked alarm in the medical school.
The plan said some specialty services in both Dunedin and Southland found it hard to maintain sufficient activity and staffing levels for clinical viability.
''This includes some core secondary services as well as the more complex, highly specialised services,'' the plan said.
Details are sparse about what will be a controversial process.
In February the ODT was told it was too soon for specific information about specialty reviews and there has been no discernible action since.
In February the newspaper was given a list of just three Dunedin Hospital specialties staffed by two specialists, including cardiothoracic surgery, and was asked not to publish the other two, one of which was a mainstream specialty.
What is less than clear is how many specialties have a genuine clinical sustainability problem - lack of patients - and how many are under pressure solely because of the board's money woes.
The Ministry of Health declined interview requests for this story.
Back to the future
By Shane Gilchrist
A rural generalist hospital model might hark back to the ''good old days, the way we used to do things'', yet it could also be the way of the future, Dunstan Hospital clinical director Dr Rob Visser says.
''Dunstan has a successful generalist model. The doctors here have led the way in the development of rural hospital medicine as a training pathway.''
The 'Dunstan model' attracted interest from other healthcare providers.
It involves doctors working at the ''top of their scope'' to keep patients out of city hospitals.
''I think the value in the rural generalist model is that it allows you to deliver a wide range of care - and up to a reasonably high level - in an area that doesn't have the population to sustain specialist services.
''We try to do as much as possible locally, with good oversight from Dunedin,'' Dr Visser says.
Other examples are cardiology and oncology.
Dunstan has developed a sub-specialist skill-set that allows doctors to look after patients with more complex conditions; the methodology extends to outpatient tests and investigations.
At the recent public meeting in Wanaka called in response to threatened health service cuts, Dr Visser reportedly drew applause for suggesting cuts to Dunedin Hospital emergency department and specialist services.
However, Dr Visser is not advocating for a dramatic reduction in the number of specialists at Dunedin Hospital.
Rather, he'd like to see more efficient use of specialists.
''For example, rather than having all patients with respiratory problems being looked after by respiratory specialists, you'd potentially get a much better use of those specialists if the majority of the simpler cases were managed by a generalist group of doctors, with the complicated cases then going to specialists.
''Now, that's a very finely balanced and complex process and one that the SHDB needs to look at closely.''
Dr Visser believes the vast majority of rural hospital patients can be managed by generalist doctors possessing a broad range of experience and knowledge, although he acknowledges such doctors rely heavily on the collegial support of specialists.
''We can't know everything. And our patients - and us - need that specialist input or advice. The better that relationship is, the better and more efficient rural medicine becomes.
''The specialists in the main hospital are available most of the time and we do ring them directly.
''That relationship has developed because of a stable workforce at Dunstan. You couldn't develop that if you had a workforce that was constantly changing.
''We have senior medical staff who have been here more than 20 years and they have been key in developing that relationship. You can't develop the rural hospital model without those links.''
By Bruce Munro
A commissioner was vital to getting Hawkes Bay District Health Board (HBDHB) back on its feet, its chief executive says.
Dr Kevin Snee became chief executive of the North Island health board in late 2009, halfway through Sir John Anderson's time as commissoner of the troubled organisation.
This week, Dr Snee said Sir John was able to give the district health board stability at a time when it was needed, so it could make significant change.
''Sir John's vast business and financial experience helped the organisation recover,'' Dr Snee said.
A long-running row between HBDHB board members and management led to then-health minister David Cunliffe sacking the board, in February 2008, and appointing Sir John as commissioner.
At the time, Mr Cunliffe described the board as a nest of vipers.
Following a change of government, new health minister Tony Ryall reinstated the board members.
Shortly afterwards, in February 2009, then-chief executive Chris Clarke resigned.
Several months later, Dr Snee became chief executive.
Dr Snee said Sir John initially appointed three deputy commissioners' who formed the governance board.
They were Brian Roche, at the time a partner at PricewaterhouseCoopers, senior doctor Ian Brown and Ngati Kahungunu chairman Ngahiwi Tomoana.
They gave ''strong financial, clinical and local leadership'', Dr Snee said.
When the board members were reinstated, they formed an advisory board.
''When I arrived, the governance board and the advisory group were in place,'' Dr Snee said.
''That constructive relationship was very helpful to me in turning the organisation around.
''The governance board was able to bring fresh eyes and extensive financial knowledge that helped the board make progress.''
Hawkes Bay District Health Board has operated in surplus for the past four years.
Dr Snee hopes it will do so again at the end of this financial year.
The mysteries of health funding
By Eileen Goodwin
The health funding formula is so secretive it just might be a ''national scandal'', says University of Otago health policy authority Prof Robin Gauld.
''You could argue it,'' he says.
It's a big call for the mild-mannered academic, but it's backed by his University of Otago research in 2012 showing unexplained disparities between regions.
But the biggest concern for Prof Gauld and his fellow researchers was the Ministry of Health's caginess about releasing information to show how each region's money is worked out.
In the end, researchers concluded they didn't have enough information to explain the workings.
It means it can't be examined and debated, a situation that would be intolerable in a democracy like the United Kingdom, he says.
Most of the billions of dollars are distributed by head count, disadvantaging areas like the South.
And then there are the disparities in what's dished out to recognise boards with large rural regions, and places with more older people.
Southern receives much less per patient to recognise its rural aspect, and its proportion of older people, than South Canterbury DHB, and no-one knows why.
Prof Gauld reckons the South's size and complexity is not recognised.
One example: Specialists and senior managers can spend all day travelling for clinics and meetings in Invercargill or Queenstown, at considerable time and expense.
In the UK, anyone with inclination can find out how each region's funding is devised.
''If you have the time and energy, you can track back and see what they've done, and how they've done it.''
He believes the transparency is partly because the UK's national daily newspaper market gives prominence to stories about health politics and budgets.
In New Zealand, not so much. Prof Gauld does not hold out much hope of anything solid coming from the funding formula review under way in Wellington, saying it's an in-house, routine review.
He is calling for an external review with input from overseas experts.
Unfortunately, the one independent academic on the panel, Prof Toni Ashton of the University of Auckland, had had to pull out for personal reasons. The rest are government employees.
So why isn't Prof Gauld part of the review?
''If you're having an in-house review, you don't really want dangerous people around the table.
''Their capacity to take a thorough look at the formula is, I would say, restricted.''
Overall, health funding as a share of New Zealand's gross domestic product is falling, meaning that as a country, we are devoting less money to health.
Council of Trade Union figures show it rose as a proportion of GDP from 2001 to 2011, when it reached, 6.75%, but has fallen since.
In 2015-16, it is 6.24%.
• Distributes $11.3 billion this year (75% of health funding).
• Distributed on a head count, with allowances for age, gender, ethnicity, deprivation, rural and historical factors.
• The largest adjuster (1.5%) is for unmet need, increasing the funding for Maori and Pacific populations and areas with the deprivation.
• The rural adjuster to cover the cost of serving large rural populations accounts for 1.2% of the funding.