Deficit worse than predicted

The Southern District Health Board’s deficit is creeping up again, to more than double what was budgeted.

However, the board anticipates reimbursement of lost revenue from the Ministry of Health will soon improve its position.

The board was told this week that a $1.2 million deficit for the month of October meant that its year-to-date deficit was now $11.6 million, having budgeted to be $5.3 million in the red at the same stage.

A number of factors have contributed to the worse-than-predicted performance, most notably the cost of the Covid-19 response — a budget without Covid costs included was $4.8 million worse than budgeted.

Also the board, which in previous years was instructed by the Ministry of Health not to, now has to factor in increased Holidays Act compliance costs.

Added to the pressures on the board’s balance sheet, it now also has to account for accelerated depreciation on Dunedin Hospital’s buildings, which are due to be replaced by a new hospital in the next few years.

Pharmac revenue was down on that expected and the board was also $3 million short on expected revenue from planned care unable to be delivered due to the Alert Level 4 lockdown.

The ministry is expected to reimburse all DHBs for lost revenue over that period, although to what amount remains undecided.

"Although we are adverse to budget some of that will be corrected next month," board corporate services executive director Nigel Trainor said.

"However it won’t all be corrected, and we will be sitting at a negative variance of about $2.6 million at the end of this month . . . we are travelling relatively well."

In 2019 one-off costs caused the SDHB's deficit to blow out to $85.8 million, almost four times over budget.

The most recent DHB financial report on the Ministry of Health website, for June 2021, said that just before the end of that financial year the SDHB had recorded a $19.3 million deficit, excluding Holidays Act costs, compared to a budgeted $10.9 budget to that date.

Mr Trainor said issues which concerned him in the board’s finances included a shortfall between the budget for outsourced surgery and expected demand and the cost of clinical supplies.

Security, energy and maintenance costs were also increasing, and the board also faced significant increases in payments for software licences, he said.

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