Labour Health Sector Restructuring Credulity [2]

So in the first part of this series we had a look at the history of change in the health system in NZ. The biggest and most important innovation of the past 40 years has been the trend to decentralisation, which was first done in the mid-1980s with Area Health Boards, and latterly with District Health Boards. This has been the standout trend of the period, and this makes the abolition of decentralised provision that the government is proposing look distinctly odd and archaic. The really important issue to be considered here is that a centralised bureaucracy favours the political interests of the Government, rather than the people it is supposed to be serving. Decentralising service provision is the way to get services that are actually in tune with local needs. This is why we have local elected councils to administer our cities, and why we have elected school boards to administer our primary/secondary education. Pulling the health system back into a centralised bureaucracy was done just one previous time in the past 40 years and for only 10 of them, and it was done to impose top-down control of expenditure and a particularly ideological operational model that created huge divisions and disparities in actual provision. The big issue with the health system is that it has such a major impact on people’s day to day lives, and so the running of it is far too important to be put in the hands of unaccountable faceless bureaucrats in Wellington.

For the purpose of this discussion let’s come up to date with what has occurred in the history of the system since 2009, which is where things left off last time as the research paper we quoted ended about that point in time. There were only a few changes made during the Key National government, but one of the key impacts which has been alleged is that public funding of the health system failed to keep up to previous levels or adjust to specific circumstances. This became extremely apparent in Canterbury after the 2010/2011 earthquakes, when the CDHB found itself marooned over the need for increased mental health services and facilities reconstruction demands without additional funding coming from Wellington. This in turn led to a very adverse relationship between the DHB (one of the country’s largest) and the Ministry of Health. It got so bad towards the end of the Key/English government’s term that the Director General of Health told the board they should sack the senior management of the DHB.

To get to where we are now, Ian Powell has informative commentary on his blog Otaihanga Second Opinion. He writes that after the election of the Labour/NZ First coalition in 2017, the incoming Health Minister David Clark appointed a facilitator to reconcile past differences between MOH and CDHB, the situation referred to above. This resulted in a report to Minister Clark in April 2018 outlining “the way forward”. In June 2018 the interim Director General of Health (who had stepped in after National’s DGH had resigned) Stephen McKernan and the CDHB chair put out a joint statement acknowledging the past acrimony and the need to move on. Ernst and Young Consultants were commissioned to carry out two reviews of the functioning/management of CDHB. Things seemed to be going well and looking up for CDHB. However for unexplained political reasons there was a U-turn in Government policy late in 2019, and the relationship between the Ministry and CDHB became adversarial again. There were personnel changes in Wellington: Ashley Bloomfield was appointed the new Director General of Health, and Stephen McKernan subsequently departed to become a private consultant working for Ernst & Young. Minister Clark appointed a Crown Monitor (Lester Levy) to the CDHB board and appointed a new chairman, Sir John Hansen. This followed the local government elections in 2019 with a new board elected by the people of Christchurch. Another EY report, this time with McKernan’s input as senior partner, completely reversed the positions taken in earlier reports. As we all know, this led ultimately to the resignation of seven senior management staff and cost cutting measures being implemented. It is difficult from here to know what the issue is that led to the change in policy, but one inference is that the Ministry expected the DHB to meet the cost blowout caused by the delay in completing the new block. The only option to the DHB would then be to slash services, this has been what has obviously been the outcome that has had to be implemented.

Dr Powell brings into question the fact that Ernst & Young now have a former director general / DHB CEO Stephen McKernan leading all the health sector reviews, including the current process underway. EY have become the lead consultants in the restructuring programme announced by the new minister, Andrew Little. Hence they are benefiting significantly from the engagement – receiving over $2 million by the end of February this year. Powell questions the report that EY produced in 2020 leading to the rejection of CDHB’s plan by the Minister, suggesting that it contained many dubious figures.

In order to more fully appreciate whether the Health Minister’s restructure has signficant merit (or otherwise) it would be appropriate to take a look at what is being proposed by this restructuring. Part 3 will go into that in more depth.