The Otago District Health Board has been assigned an "at risk" credit rating for the second year running by the national health funding body, the Crown Health Financing Agency.
In a September letter which will be tabled at the Otago board meeting today, agency chairman John Anderson said his board remained concerned about the health board's financial position.
It had assigned it a C credit rating, the agency's bottom category, noting the board's deficit last year and "next year's challenging" district annual plan forecast, which relied on achieving a specified efficiency plan.
Although there were no current plans to withdraw lending support, the agency emphasised its need to be satisfied with the board's progress towards financial sustainability.
In February, it will review the board's progress.
It is the second year the agency has assigned ratings and the Otago and Southland boards are among seven of the 21 which attracted a C rating.
West Coast District Health Board is the only other South Island board with a C rating.
The Crown Health Financing Agency is expected to assist boards to achieve and maintain financial sustainability.
It lends money to boards for capital investment, assists with the disposal and acquisition of property and provides a range of financial services.
It also provides advice to government ministers about the boards' performance.
The financial report to go before the Otago board today shows that at the end of October, the board had a deficit of $3.1 million, $800,000 better than the budget.
The board expects to end the year with a deficit of about $7 million.
In its district annual plan summary for this year the board estimated financial efficiencies should reduce spending by $6.3 million this year, $2.4 million next year and a further $1 million in 2011-12.
One of the major concerns for the board in recent years has been how to fund major capital works to upgrade substandard facilities, including the intensive care unit, the neonatal intensive care unit, the paediatric ward and the acute mental health ward.
An issue in this regard is that the capital charge imposed by the lending agency (similar to an interest charge on a standard loan) could push the board further into deficit.
Health Minister Tony Ryall indicated last month a decision on the funding of the major works could be expected before the end of the year, but there has been no announcement yet.
The board's general capital budget to replace equipment is also under pressure, with the expected cost of the list of items for the next three years well in excess of the anticipated available budget.
Among other ongoing financial concerns for the board are its capacity to perform the extra elective surgery required by the Government; its continued over-funding under the population-based funding system; and funding which is not expected to increase as in past years.
