Health New Zealand Board Replaced by Commissioner Amid Financial Crisis

Health NZ first reported a worsening financial position to Dr. Reti in March 2024, despite earlier assurances from the organization that it was on target to make savings in 2023/24.

In response to serious concerns around oversight, overspending, and a significant deterioration in financial outlook, the Board of Health New Zealand will be replaced with a Commissioner, Health Minister Dr. Shane Reti announced today.

“The previous government’s botched health reforms have created significant financial challenges at Health NZ that, without urgent action, will lead to an estimated deficit of $1.4 billion by the end of 2024/25 – despite this Government’s record investment in health of $16.68 billion in this year’s Budget,” Dr. Reti stated.

Health NZ first reported a worsening financial position to Dr. Reti in March 2024, despite earlier assurances from the organization that it was on target to make savings in 2023/24. Since then, the situation has deteriorated, with Health NZ currently overspending at a rate of approximately $130 million a month.

“That’s why today I am announcing the appointment of Professor Lester Levy, the recently appointed Chair of Health NZ, as Commissioner for a 12-month term. This is the strongest ministerial intervention available under the Pae Ora Act and not a decision I have taken lightly, however, the magnitude of the issue requires such action,” Dr. Reti explained.

According to Dr. Reti, the financial troubles at Health NZ stem from the previous government’s mismanaged health reforms. These resulted in an overly centralized operating model, limited oversight of financial and non-financial performance, and fragmented administrative data systems which failed to identify risks until it was too late.

Professor Levy has been tasked with implementing a turnaround plan with a savings objective of approximately $1.4 billion to ensure financial balance and to strengthen governance and management.

“Operational responsibility for the turnaround plan will sit with the Commissioner. However, I have made it clear that it should focus on cost efficiencies, particularly in back-office bureaucracy which has blown out, especially in middle management, as a result of the previous government’s damaging reforms,” Dr. Reti emphasized.

Between March 2018 and March 2024, back-office staff numbers, which formerly sat at district health board level, grew by around 2,500.

“As a Government, we’ve made it clear that our first and foremost priority in health is improving the delivery and quality of frontline services. We have already invested very significantly in health, with $16.68 billion announced in the Budget to support frontline healthcare services,” said Dr. Reti.

Dr. Reti expressed his lack of confidence in the existing Board structure at Health NZ, stating that adequate oversight of the spending would not be possible if the structure remained in place.

“Today’s move to appoint a Commissioner is one of several steps our Government has been forced to take over the past eight months due to concerns about the governance of Health NZ and resulting performance issues, including health workforce and hospital wait times,” Dr. Reti said.

Previously, Dr. Reti had appointed a Crown Observer, a new Chair, and a Board member with financial expertise. These measures helped identify long-standing issues with the existing governance and operating model.

Professor Levy assured Dr. Reti that there would be no adverse impacts on the delivery of care in implementing the turnaround plan. Rather, he and Health NZ will seek to bring the frontline closer to decision-making.

Following today’s announcement, the Ministry of Health will continue its monitoring role and play a key part in reporting on the Commissioner’s performance in improving Health NZ’s financial position, both to Dr. Reti and to New Zealanders.

“Today’s announcement is in no way a reflection on the work of frontline staff in our hospitals and healthcare facilities. As always, I thank them for their professionalism and want to reassure them that we are taking these steps to secure a better future for health in New Zealand,” concluded Dr. Reti.