Heather Roy's Diary - Health Spending

Since Labour came to power in 1999 there has been a 40% expansion in health spending. Few of us would complain that government now spends one in five taxpayer dollars on healthcare, were it not for the distressing fact that patients and people working at the "front line" can see little change.

Most acute hospital wards retain an atmosphere of desperate activity, waiting lists have become a joke and there are numerous vacancies nationwide for doctors, nurses and other health professionals. So what has become of the extra billions? Many people have asked this question and it would seem that the Ministry of Health's Director-General, Stephen McKernan, is also asking how the money is spent.

Mr McKernan is a recent appointment to the position and comes with a reputation as a cost cutter. I do not anticipate that the health budget will be cut but I suspect that the Health Minister, Pete Hodgson, hopes to see some cost containment and an increase in productivity.

As Director General, Mr McKernan is also Chief Executive of the Ministry of Health, and recently took the unusual step of instigating, then publicly discussing, an internal report which reviewed the Ministry's own activities. The findings will come as no surprise to long time Ministry watchers. The reviewers found that the organisation is averse to risk, slow to make decisions, has no long term strategy and the various departments don't talk to each other. Canterbury DHB Chief Executive (and former senior Ministry of Health official) Gordon Davies agrees, saying that individual directorates tended to operate as fiefdoms. The report is not publicly available and no further comments have been made so I suspect that there has been some effort to avoid unkind comments about Annette King's tenure as Minister of Health.

But the key issue is how things can be done better.

Just because health services are funded by the government does not mean they have to be provided by government. Contracts should be contested and awarded on the basis of who can provide the best quality treatment for the best price in the best time. A transparent process is essential for a healthy outcome.

I have long championed Plunketline, who lost their government funding on 1 July last year. Plunketline, a previously independent operation, was forced to merge with Healthline in July 2004. The contract was then re-tendered in December 2005 and Plunket was required to re-apply. To their great surprise, Plunket lost out to an American company called McKesson - the reason given being that too many calls were going unanswered.

The process of the tender itself - carried out behind closed doors with no transparency - seemed to be in question, and the State Services Commission was asked to investigate. Plunket has since committed to maintaining an independent and privately-funded Plunketline, continuing its 12-year record as a respected and trusted service for tens of thousands of New Zealand families.

Figures I released in December show that the new provider has failed to meet its targets, while Plunketline maintains its share of the calls concerned with the under 6's. McKesson's Well Child service is missing the target of answering 80% of calls within 20 seconds, with average waiting times blowing out to between 74 and 243 seconds. With this record, it's no surprise that between 10% and 21% of callers to Healthline and the Well Child service are giving up before the phone is answered, and it's little wonder that more than four out of five parents choose to call Plunketline instead.

In October 2006 the tender process was opened for the provision of services for Healthline. There appears to have been no media announcement, merely a notice on the Government Electronic Tenders Service website inviting tenders by December 19. Strangely, questions to the Minister of Health reveal that the contract provided for two one year roll overs of the contract, which the Ministry has not exercised. My understanding is that there are two contenders for the Healthline services, with the contract winner due to be announced on February 16.

This contract, given the messy handling of the Plunketline tendering process, will be Stephen McKernan's first test of true resolve. His comments from the recent review that "if there are things that don't add any value, then we won't do them" will be tested - and those in the health sector will be watching to see that this process is both transparent and fair. Accountability, in the face of a review that was damning of the Ministry, will be monitored as an indication of future direction.

Stephen McKernan has made a good start, with the courage to call for a report when he knew that the outcome would be unfavourable. Institutional problems have hampered the Ministry of Health for far too long. For the sake of our health system, let's hope that he follows up with the tough decisions to change the culture, then injects innovation and flexible thinking into the equation. That really would be a shot in the arm for Kiwi healthcare.

ENDS

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