Te Whatu Ora has inherited the legacy of a seriously deficient approach to major capital works, with specific reference to public hospitals. The net effect is fiscal irresponsibility due to hospital rebuilds struggling with the capacity to meet existing healthcare demand, and ill-equipped to cope with future demand.
While it was appropriate to have both local (DHB) and central government involvement in the decision-making process, the former reduced too quickly and the latter needed to be streamlined. Earlier this year, Counties Manukau DHB reported that its planned essential major capital works might take up to 15 years.
The largest ‘completed’ major capital works project over the past decade was Canterbury DHB’s acute services block (Waipapa). The business case was approved by cabinet in 2012 with construction to be completed in 2016 but it was not opened until December 2020. There is much for HNZ to learn from this negative experience.
READ MORE:
* How Te Whatu Ora can succeed: Put patients first
* How Te Whatu Ora can succeed: Overcome a structural weakness
The first step in the process was that the DHB developed a business case to be considered by government. This was a rigorous exercise involving extensive engagement, including high levels of clinical leadership. CDHB’s understanding of the health of their defined populations has been critical to estimating future healthcare needs and demands. Strong clinical engagement ensured that the proposed facility would be fit-for-purpose both at the time and for the foreseeable future.
The business case was presented to the Ministry of Health and Capital Investment Committee (located within Treasury, the latter provides the final recommendation to cabinet) before the devastating February 2011 earthquake in Christchurch. The earthquake added to the exigency of the business case.
It was then signed off by cabinet in 2012 with construction scheduled for completion in 2016. Within the business case was the provision for another case (a second stage) to be completed by 2016, and its construction completed by December 2020. This was because of the then-shared recognition that the acute services block would be out of capacity by 2020. There was also a provision for a 4 percent per annum funding increase until 2016, but this never eventuated.
Much of the success of this outcome was due to the alignment of leadership cultures between CDHB and then Director-General of Health Kevin Woods. Woods had previously been a central player in the development of clinically developed and led networks in Scotland’s health system. The engagement culture behind this successful initiative was similar to CDHB’s engagement culture in the development of its health pathways between community and hospital, and in its incentivisation of innovation within Christchurch Hospital. Woods recognised the quality of CDHB’s work in the business case and grasped the seriousness of the earthquake devastation.
While Woods had a good grasp of the issues, he was one of the few senior ministry officials who did. Following his departure there was a significant change in the health ministry’s leadership culture, making it increasingly more top-down and bureaucratic. This contributed to a failure to appreciate the ongoing vulnerability of health services provided by CDHB. Centralised bureaucratic processes led to timelines continually being pushed out and relationships inevitably deteriorated. Construction was project-managed by the health ministry, leading to Waipapa not being opened until December 2020.
This meant 12 operating theatres, which were supposed to be up and running in 2016, were not. The result was the requirement for CDHB to use 10 operating theatres in the private sector each day (Monday to Friday) just to maintain surgical capacity. This had a big negative impact on CDHB’s financial position.
As an indication of the deteriorating relationship, at one point the Ministry, and Capital Investment Committee, determined that they would not fit out two wards of the new facility (ie, a loss of 64 beds). CDHB fought back and eventually succeeded in reinstating the fit-out. CDHB was also forced to ‘cold shell’ 12 intensive care unit beds, which is now being retrofitted as part of the pandemic response for additional ICU capacity.
The ‘second stage’ business case involved a proposal to build a third tower while Waipapa was being built. The total cost of this would have been around $77 million (including $1 million on contractor fees). But this was declined by the Ministry, and CIC, on the basis of the additional $1 million contractor fees. This third tower has now been approved and is to be built at a cost of more than $200 million.
As a consequence of decisions taken centrally (and at odds with the Cabinet-approved business case), Canterbury now faces massive capacity issues for the foreseeable future, and continued ongoing use of the private sector for expensive additional capacity. At its opening, Waipapa was already lacking the capacity to meet its acute patient demand!
The underlying difficulty, as the Waipapa experience confirms, is that the relevant expertise and experience for planning and developing business cases for major capital works resided much more with DHBs than central government. But leverage rested more with those with less expertise and experience.
Prior to the Pae Ora Act, overcoming this difficulty depended on a leadership culture in central government that aligned with the engagement culture that was behind the development of the business case. For most of Christchurch’s acute services block planning and construction, particularly at the point of project management, this was not the case. While the circumstances of Canterbury were unique (earthquake devastation), other DHBs involved in subsequent business case development faced the same difficulty.
Te Whatu Ora needs to focus on a significant change to the culture and practice of handling major capital works. While national oversight is required, the centralised part of the process needs to be streamlined. This is to ensure that strong clinical, demographic and environmental local engagement becomes the basis for decision-making, and that rebuilds meet not just current but also estimated future healthcare needs.
Funding major capital works also needs addressing by HNZ. To date, the practice has been that the DHB was required to pay an inequitable capital charge on its major capital works, funding both during construction and after it was completed (reducing through depreciation).
The cost of the capital charge had to be paid out of the DHB’s operational funding which was based on the Population Based Funding formula. However, the formula was not designed to address major capital works. Consequently it became a significant factor in the deficits of those DHBs undertaking major capital works. This was most evident in Canterbury DHB due to the protracted impact of earthquake devastation and construction delays while under Health Ministry project-management.
The basic problem is the contrast between a DHB’s approach to major capital works and central government’s approach. A DHB’s focus was on healthcare services need, to be provided based on their understanding of current and future demand.
But when central government assumes the greater role, there is a shift to being building-focused and contractor-led. Contractors have little or no understanding of impacts on health service delivery, and the outcome is new buildings that are, in fact, designed to be ‘old’. This approach prevents the level of innovation in design needed to meet future health needs.
Te Whatu Ora should also ensure that operational funding of public hospitals should not be compromised by major capital works. Universal health systems are based on sharing the costs of risk. This should be recognised in the funding of hospital rebuilds.
Medicines
Medicines are vital in the healthcare of New Zealanders. They are chemicals or compounds used to cure, halt, manage, or prevent disease. Medicines also help in the diagnosis of illnesses, and ease symptoms. Advances in medicines have enabled doctors and other health professionals to cure or manage many diseases, and save lives. The more this is able to be done, the more cost-effective the health system becomes.
Early diagnosis and early treatment is the optimal outcome for a quality and cost-effective healthcare system. In New Zealand, poor access to new and innovative medicines (in comparison to OECD countries) for acute conditions has led to an unnecessary proliferation of chronic illnesses which are a significant cost burden.
The supply of medicines is not the responsibility of Te Whatu Ora, but its ability to ensure accessible, quality healthcare for all New Zealanders depends on it. Consequently, it should support seeing medicine supply through an investment lens. This means sufficiently funding Pharmac in purchasing medicines, ensuring Pharmac decision-making is science-based, and includes new, innovative treatments, and also sufficiently resourcing MedSafe to process regulatory authorisation of new medicines in a timely manner.
There is a further issue that should become the responsibility of HNZ – rare disorders (including diseases). An oversight in our health system is the failure to have an official definition of what is rare, because we have no policy or programmes which are specific to this category of disorders. It is unfair to penalise those with the misfortune to have a rare disorder from their right to healthcare because treatment is expensive.
However, the most useful indicator can be found in the European Union policy which defines a disease or disorder as rare when it affects less than one person in every 2000. Common examples are cystic fibrosis, muscular dystrophy, spina bifida, and haemophilia. While individually rare, collectively they affect up to 6 percent of the whole population, based on surveys and reports from the United States and the EU.
The majority of these patients do not receive a timely diagnosis, their rare condition is disabling and makes a number of everyday activities difficult, they are high utilisers of healthcare services, and many are hospitalised (one-in-three are in hospital for an average of 13 days, and one-in-17 are in an intensive care unit for an average of seven days).
These patients are currently a disproportionately high cost to the health system. Access to approved medicines can significantly improve their quality of life, and significantly reduce their current cost to the health system. Unfortunately, the focus of Pharmac, presumably due to funding constraints, is on conditions that are not rare. But a fundamental principle of universal health systems is risk-pooling. This should form part of Health New Zealand’s advocacy to Government.
Generalism and sub-specialism in specialist medicine
Specialist training varies greatly between countries, from very generalist to highly sub-specialist. Much of this has to do with the nature of their health systems, and the extent to which their economies are developed.
But even within developed economies there are major differences. In Europe (and increasingly the United Kingdom), for example, hospital specialist training sub-specialises much earlier than in New Zealand. This means that the more sub-specialised who are recruited to New Zealand can’t always do all the procedures and treatments that their relevant colleagues do here as part of normal clinical practice. Conversely it can make New Zealand-trained specialists attractive for recruitment overseas.
However, even within the relatively generalist specialist training in New Zealand, it has been argued that the medical workforce has become too sub-specialised, relative to the needs of patients and their health system. Significantly, this is an issue that is being raised and discussed within the professional medical colleges.
The benefits of a gradual shift of emphasis back towards more generalism need to be clinically led, for the risk of making harmful errors. This is not within the ambit of Te Whatu Ora. But it is something that could encourage dialogue and discussion with the colleges.
Summary
There are many other areas the writers could have included in this article which are worthy of future debate. However, our initial emphasis is to provoke genuine and constructive debate on how to achieve the best possible healthcare and wellbeing for New Zealanders, given the significant shift from a more localised to a more centralised healthcare system. As noted at the outset, this is not the system we would have adopted.
But, with the Pae Ora (Healthy Futures) Act now in place, and implementation led by the newly formed Health New Zealand: Te Whatu Ora, it is critical the best parts of the old DHB system do not become the baby thrown out with the bathwater. Te Whatu Ora has the ability to adopt the best of the old system as policy initiatives, and to do so would give us confidence that the lessons of the past are not forgotten.
We firmly believe patient-centred care must be the central pillar of Aotearoa New Zealand’s health system. Those responsible for providing this care, the health workforce, should be empowered to deliver quality healthcare, and innovate as necessary to ensure constant improvement as treatments, techniques, and technology advances.
Depending on the approach it takes, Te Whatu Ora can enable or hinder. It must take all reasonable steps to understand and address the needs of the population, especially the needs of defined local populations. Achieving healthcare that is equitable, comprehensive, available, accessible and cost-effective depends on it.
This article is the third part of a paper written by Powell and Roy. The first two parts can be found here:
How Te Whatu Ora can succeed: Put patients first
How Te Whatu Ora can succeed: Overcome a structural weakness
