As at December 31, the SDHB's year-to-date deficit was $25.9million - $8.3million more than budgeted.
Following the SDHB's annual review appearance before Parliament's health select committee earlier this month, MPs asked a range of follow-up questions which included a request for further information about why the board's budget had blown out, and whether it was still forecasting a return to surplus in four years' time.
In its written response, the SDHB ducked the latter question, saying it was taking a range of actions to address its deficit.
"Southern is committed to a pathway of sustainability, however the ability to return to surplus is significantly challenged on the basis of current expenditure pressures, particularly in the pharmaceuticals area."
Despite that commitment, the SDHB foreshadowed that depreciation and capital charges associated with the imminent building of the new Dunedin Hospital would see it run deficits for an extended period of time.
"The reality is that as a district health board we are unable to sustain the impact of depreciation and capital charge for a $1.4billion redevelopment within existing and anticipated funding streams," the SDHB said.
"We have flagged our concerns with the Ministry of Health and are awaiting guidance and advice as to how this situation will be addressed."
Health Minister David Clark said he still had confidence in SDHB commissioner Kathy Grant.
"Absolutely, the commissioners have done a good job in very difficult circumstances and they have mapped out a path to sustainability."
The Ministry of Health and SDHB were working together to meet the significant financial challenges which faced the organisation, Dr Clark said.
Planning was also going on for the transition from the commissioner team to a newly elected board, soon to take over after the local body elections.
"We are looking closely at making sure there is continuity from the current commissioner team to the new board and looking at suitable government appointments," Dr Clark said.
"I think the map set out by the commissioners will be very useful for the new board going forward and I hope they can advance the recovery of Southern DHB."
Further issues posing a risk to the SDHB's budget projections included reaching safe staffing level requirements, maintaining the old hospital until the new buildings were open, addressing demand driven by population growth in Queenstown and Central Otago, and ongoing industrial action.
As well as increasing operational costs, calculations of additional government funding needed to settle employment contracts excluded providers of health and disability services to the SDHB.
The SDHB said the main drivers of its unfavourable budget deficit were pharmaceuticals ($3.6million over budget), elective surgery revenues (down $1.3million), and medical staffing costs being $2.4million over budget.
It was working with the ministry and an external third party to set up a new database to track pharmaceutical use, was working with oncologists to ensure cancer drug prescribing was following best practice, and was creating a new pharmacy adviser role.
"We have sought Ministry of Health confirmation that Pharmac are effectively managing hospital pharmaceuticals at a national level.
"To date it appears that all DHBs are facing significant pharmaceutical cost pressure and it is questionable as to whether the $34.8million of savings removed from DHB budgets [Southern DHB's share is $2.3million] has been achieved."
National Health spokesman Michael Woodhouse said DHBs were being asked to deliver business which, in his view, they knew they would be unable to achieve.
"Given that, it is no surprise that they are over budget ... the annual planning process is a complete nonsense because they are told what to do, whether they can achieve it or not.
"They are required to produce a plan which gets them back to surplus four years ahead, they never do, they recalibrate and start again, and they are continually chasing their tails.
"That is not a good way to run a billion-dollar organisation."
