New Zealand ’s spending on health is growing faster than our economy, and faster than it is in many other countries – but will the government’s new plan for change really deliver more for less? Highly unlikely

Health Minister Tony Ryall’s rhetoric has been extremely seductive: let’s shrink the back-office to put more resources on the frontline, where the patients meet the doctors.

In opposition, he mounted a relentless attack on the deficiencies of the Labour-led coalition’s health reforms. Remember Ryall on the campaign trial last year.

“Labour’s record is about longer hospital waiting lists, out of control bureaucracy, and a chronic shortage of doctors and nurses… Labour has doubled the health budget but is getting less for it… Patients are waiting longer for surgery and needlessly dying on hospital waiting lists… Heart and cancer patients are being sent to Australia … New Zealanders haven’t forgotten that Labour culled 30,000 patients off hospital waiting lists…”

Since one of the basic elements of Labour’s reform programme was the re-establishment of the ineffective governance superstructure of elected District Health Boards (DHBs), it seemed strange that this was the one element of the “out of control bureaucracy” that would survive under National’s reforms. The rationale for their reserved status was that the health sector would be dangerously distracted by another major restructuring.

Nevertheless, as Minister of Health, Ryall has won respect for his quick command of the portfolio. He was one of the major achievers in John Key’s 100 days of action. He quickly delivered the challenge to the health sector stakeholders. The Ministry of Health and DHBs were instructed to halt the growth of bureaucracy. He won cabinet approval to sustain the growth of health spending at $750 million a year for the next three years. And he demanded change.

In January, Ryall announced a ministerial inquiry to advise him on improving the quality and performance of the public health system. It was led by Murray Horn, former secretary to the Treasury and managing director of the ANZ Bank – the only financial boffin of the inquiry team.

The other seven were experienced health sector personnel – a physician, a nurse, a general practitioner, a public health organization CEO, a DHB chief executive and a chief medical officer, and the current director-general of health.

Now, with the release of that committee's report yesterday, we learn that National will sponsor a major restructuring, and the widely unpopular health boards will survive, albeit in a significantly changed form that only serves to highlight their obsolescence.

The Horn-led health review fleshes out Ryall’s rhetoric but fails to provide concrete evidence that its recommendations will deliver his promise: better healthcare from a slimmed-down back-office and a stronger frontline.

In rough terms, it recommends:

• Keep the 21 District Health Boards – but strip out duplicated “backroom” service functions;
• Establish a new Crown entity to supply those backroom services to the DHBs;
• Expand the Crown Funding Agency to plan and fund nationwide health services, and monitor DHB and provider performance;
• Expand the role of Pharmac and the National Health Committee to manage the adoption of new medical technology and clinical procedures; and
• Shrink the Ministry of Health to focus on its public health policy and regulation work.

Its recommendations will deliver one more central public health organization, expand the role of three other central public health organizations, and reduce the capacity of district health boards to tailor services to local health requirements. How that shifts resources and decision-making to the frontline escapes me.

The Horn report talks of eliminating the duplication of effort that sees the 21 district health boards maintaining the same “backroom” service operations 21 times over.

It says the DHBs are significant purchasers of goods and services with annual non-payroll expenditure of about $2 billion per annum – but adds “a reasonable proportion of that will not be amenable to savings” without quantifying these untouchables. It goes on to admit that “the potential gains of collective procurement are hard to estimate with any certainty.”

Without any substantiation, the review team then asserts that “collective purchasing that generates volume leverage on price should be able to deliver a 10% saving, so if only half of all DHB non-payroll spending could be purchased nationally then that would generate savings in the order of $100 million, realised over a number of years.” That’s very convincing.

The review glosses over how its recommendations would address a significant area of potential savings – a reduction in hospital-induced injury and illness, otherwise known as preventable adverse events, estimated to cost more than $590 million a year.

The scale of the problem is well-defined – but not the process change to solve it.

Notions of more “clinical leadership” by doctors and nurses are promoted, but there is no explicit description of the manner in which this will be injected into the governance of the public health sector, or even the manner in which the adverse event monitoring of the expanded Crown Funding Agency would be translated into changes of practice in hospital wards.

The most telling line in the ministerial inquiry report is the following piece of equivocation:

“While our recommendations will make the current framework work better, we are not able to say if they will be sufficient to meet the huge challenges in front of us.”

The most damning line in the report is that the review team recommends a further review in three years’ time.