Cost saving directives a challenge for MidCentral DHB

Government directives to speed up spending cuts are presenting challenges which the MidCentral District Health Board is finding difficult to achieve, a Parliamentary health select committee heard today.

Appearing with the Whanganui District Health Board, MidCentral representatives said 2008/2009 was the first time in eight years the board was unable to achieve budget.

"This was largely due to rising cost structures within our hospital division," said chairman Phil Sunderland.

Plans were in place to reduce costs, including reducing staff on a significant level, but those reductions were taking longer to achieve than expected.

Mr Sunderland said the board expected to still be running a "small deficit" in the 2010/2011 year, with break-even expected the following year.

In terms of hitting service delivery targets the board was achieving well, Mr Sunderland said.

Addressing questions from Labour MP Ian Lees-Galloway about Health Minister Tony Ryall expressing concern over the budget situation, Mr Sunderland admitted the pressure was on to reduce costs over and above what was being achieved, and Mr Ryall had made it clear he wanted the board to be back to a budgeted position, rather than a forecast position, by the end of this financial year, and a break-even position by the end of the next financial year.

He said a recovery plan was being "negotiated" with the National Health Board.

Mr Sunderland wouldn't comment on whether he thought the minister's expectations were realistic, as discussions were still taking place on how to achieve savings.

"We have put a plan before him which we think is a reasonable plan, and we are waiting for him to identify his expectations in relation to that plan."

National MP Michael Woodhouse pointed out the board had a funding increase of nearly 6 percent in the 2008/2009 year, yet still ran a deficit, and was told all the extra money went towards delivering more services.

Chief executive Murray Georgel said under questioning from Labour MP Ruth Dyson that the board had had an indication it would get $11 million extra in the coming budget, compared to $26m the previous year.

She asked Whanganui DHB representatives what indications the board had had in terms of money expected in the budget, but chief executive Julie Patterson said she was reluctant to discuss it considering the budget was still being finalised.

The Whanganui DHB reported that it last year ran a budget deficit of $9.9m, compared to the $9.8m forecast. It was also running a "financial recovery plan".

Board representatives were questioned about a possible merger with MidCentral, an issue which has been discussed by health heads and sparked anger from some Wanganui locals, but chief executive Kate Joblin said only steps were continually being taken to widen collaborations with MidCentral. Those steps were beneficial for both DHBs, she said.

"Whether we actually get married or not, I don't know."