Canterbury health board to land in deep financial trouble – because of its new buildings

A stage two financial review into the Canterbury district health board on New Zealand's South Island points to future financial challenges if no changes are made.

The review, by PricewaterhouseCoopers, looked closely at the impact of close to $1 billion of new hospital facilities on Canterbury DHB's future financial performance. It found depreciation and capital charges for new facilities are significant causes of growing deficits.

The aftermath of a series of major earthquakes in the region, including one in February 2011 that killed 185 people and injured thousands, put significant strain on infrastructure and created the need for new hospitals.

The PwC report "helps to provide clarity," Health Minister Jonathan Coleman said. The board needs to take steps to ensure it's in a better financial position by 2018 when the new major hospital facilities open, he said.

PwC forecasts if no changes are made, the Canterbury board will face deficits of $38.5 million in 2016/17 rising to $46 million in 2021.

The review recommends a mix of solutions to help the board improve its financial sustainability. This includes tighter financial management of key operating costs, reducing the depreciation rate, leasing rather than owning some of their facilities, and reviewing their future facilities building plan.

Dr Coleman noted that the deficits are nearly completely non-cash deficits and while they do need to be solved over time, they don't affect the DHB's operational activities in the short to medium term.

"Moving the Board to a more sustainable financial position needs to be the key priority for the new board," Dr Coleman said.

The government has supported Canterbury DHB since the earthquakes through providing an additional $86 million to help meet the costs of earthquake recovery, as well as $76 million in temporary relief from capital charge payments on funds held by the Crown.

An extra $20 million is also being provided as part of a package of initiatives to boost mental health services in Canterbury. It is also delivering close to $1 billion of new hospital facilities.

Canterbury DHB's annual budget is $1.4 billion – an increase of $331 million over the past eight years.

The DHB's seven elected members were returned in this year's local body election in October, with the balance made up by four government appointees, including chair Murray Cleverley and his deputy Mark Solomon.

(BusinessDesk)