The Otago District Health Board is likely to have finished last financial year within its planned $9.3 million deficit, contrary to forecasts which suggested the shortfall could blow out to almost $13 million.
Any pleasure at the better-than-expected result, which goes before the board at its monthly meeting today, is likely to be tempered by issues over upgrading of substandard facilities and a letter from Health Minister Tony Ryall warning of funding limits for the 2010-11 year.
Mr Ryall has already told the board its planned deficit for this financial year at $9.7 million was too high and it must be reduced to $7 million.
The board's annual plan for this year has yet to be approved.
In a letter sent to all boards, Mr Ryall advised money under the future funding track (FFT), which ensures boards' funding is adjusted to allow for overall wage and price increases, could be about 2% next financial year, compared with 3.1% this year.
Mr Ryall said it was essential boards worked to deliver more from what they have "and that this important task is permanent".
He warned that the "efficiency adjustor", pioneered by the previous government, whereby a part of the FFT is withheld and only released if boards reach a certain standard of efficiency, would be reinstated next year.
Chief executive Brian Rousseau, in his report, said the board was being asked to carry out more elective surgery this year; 717 more discharges than the 6105 it had last year.
Mr Rousseau said several options were being considered on how this could be achieved, including increasing theatre throughput and sending the work out to other providers.
Regional chief financial officer Robert Mackway-Jones, in his report to the board, indicated that when final reconciliation was completed of money paid between boards for treating each other's patients, it was likely the board would be within its budget for last financial year.
Results, before that was taken into account, showed the end of year result was less than $300,000 above budget.
End-of-year adjustments to employee entitlements and wage accrual reversals had improved the result by about $2.6 million, he said.
Mr Mackway-Jones listed eight key financial issues including the ongoing capital expenditure pressures and the large list of replacement equipment which would be required in the next three years.
The master site project, which would revamp substandard facilities at Dunedin Hospital and shift some services to Wakari Hospital, was also on Mr Mackway-Jones' list.
The board was still awaiting a decision on the $23.6 million first stage of the project.
The Ministry of Health has been concerned about the board's ability to pay capital charges and building depreciation out of its operating expenditure.
Mr Mackway-Jones said it would boost the deficit.
Vacancy levels and the issue of " service coverage versus affordability" were also raised by Mr Mackway-Jones.
Mental health services had incurred a deficit of $3.9 million last year and a shortfall of $2.7 million was being budgeted for this year.
The board is yet to comment officially on a Deloitte report, commissioned by the Ministry of Health, which was critical of the way the board had been allocating its funding for mental health.
