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Losing $1 million for not doing enough surgery did not affect patients at the beleaguered Southern District Health Board, deputy commissioner Richard Thomson says.
It just made the deficit bigger by $1 million, he said.
The board worked hard to hit the Ministry of Health target but fell short by a small margin.
''We purchased additional outsourced surgery to try to make target but still just missed.
''The $1 million we did not get as a result of missing target did not affect the outcome for surgery, as we had invested to make the target, even though we missed, and the result impacted the revenue, rather than the surgery.
''Our deficit would have been a million better had we hit target as we would have got a million more revenue,'' Mr Thomson said.
The deficit was $21.8 million.
Dunedin woman Belinda Smith Lyttle (60) missed out on hip surgery last year, despite her surgeon saying she needed it. She paid nearly $25,000 to have the operation privately.
The osteoarthritis and spinal scoliosis sufferer said she would defer her retirement for a few years in order to afford the operation.
Last year, a Dunedin Hospital surgeon told her she met the criteria, but then the board wrote to her turning her down.
The letter said: ''The specialist has recommended that you would benefit from this surgery, however your current condition falls below the level of need at which we are able to offer you surgical treatment at this time.''
Ms Smith Lyttle had been in a great deal of pain and was walking with a stick.
Asked about criticism of the target system, commissioner Kathy Grant said the board had no choice but to operate under that framework.
''Any individual is entitled to have a view as to the rules of engagement, but these are the present rules of engagement ... under which we are presently operating,'' Mrs Grant said.
The Ministry of Health critical projects director Michael Hundleby said the board would have received the revenue if it met the target.
He said it was not a financial penalty, but meant the board missed out on revenue.
Meanwhile, Private Surgical Hospitals Association president Ian England issued a statement saying private hospitals were ''well placed'' to meet public sector demand for surgery.
''No matter what the Ministry of Health says, there is a significant unmet demand for surgery in New Zealand and private surgical hospitals around the country are well placed to meet it. Dunedin is not the only hospital with this problem. Most DHBs will be under similar capacity shortage pressures.
''Government has two choices. Either build more theatres and bed capacity at huge taxpayer expense, or use existing facilities in the private sector at a much reduced cost,'' Mr England said.