SDHB expecting to blow budget deficit

Southern District Health Board chief executive Chris Fleming. Photo: Gerard O'Brien
Southern District Health Board chief executive Chris Fleming. Photo: Gerard O'Brien
Financial issues continue to beset the Southern District Health Board, which has had to submit new forecasts to the Ministry of Health after rising clinical costs and Covid-19 expenditure mean it is likely to exceed its budgeted deficit.

The SDHB had planned to record a $10.9million deficit this year, and was tracking at or close to budget for the first few months of the financial year.

However, projections were now for a $15.7million deficit, and the ministry had been advised accordingly, chief executive Chris Fleming told the board last week.

"I am expecting to see another deterioration, if not this month then next month, due to accelerated depreciation."

The depreciation cost was not a cash expense but an accounting loss as the board started writing down the value of the new Dunedin hospital — factoring depreciation into accounts is something it is required to do.

That building depreciation policy has been a factor in some individual high DHB deficits in recent years, such as in Canterbury.

Board revenue had actually been strong so far this year, $10.7million better than predicted.

However, expenses have topped that figure by a margin.

Payments to other health providers have exceeded budget by $6.6million so far, $3.7million of which has been to pay for Covid-19 testing in the community.

The board’s attempt to clear the surgical backlog caused by the Covid-19 Alert Level 4 lockdown has also driven the poor financial result, there being an extra $1.6million on outsourced surgery and $3.7million on clinical supplies.

"Breaking the result down, however, the net Covid-related costs were actually positive for both the month and year to date due to the accounting treatment of ventilator and other related equipment the ministry procured to support Covid, which was then donated to the DHBs," Mr Fleming said.

Last year, the SDHB recorded a deficit of $85.8million, a sum boosted heftily by $41million on one-off costs such as compliance with the Holidays Act.

Mr Fleming warned the board that the financial results did not include any further unbudgeted impact from the Holidays Act.

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