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Higher Govt. Funding Reduces Hospital Deficits

Public Health Financial Statistics - June 1999 quarter
Higher Government Funding Reduces Public Hospital Deficits

Statistics New Zealand figures show Hospital and Health Service (HHS) providers recorded a $16.1 million operating deficit in the June 1999 quarter. In the year to June 1999 HHS providers recorded a deficit of $38.7 million, compared to a $176.0 million deficit in the year to June 1998 and a $72.2 million deficit for the year ended March 1999.

Operating position for the 12 months to June 1999

Provisional results for the June 1999 year showed a deficit of $38.7 million. However, this is an improvement of $137.3 million on the deficit recorded for the June 1998 year. In the year to June 1999 Government revenue was $2,997.7 million, $260.8 million or 9.5 per cent higher than in the year to June 1998. The cost of providing services has increased at a slower rate. In the twelve months to June 1999 the cost of providing services was $3,290.5 million; $110.2 million or 3.5 per cent higher than in the 12 months to June 1998.

The improvement in financial performance was primarily a result of increased government funding. In the year to June 1999, the government increased funding to reduce the elective services backlog, and provide additional resources for mental health services and child health care initiatives. Government also provided additional resources, effective from 1 October 1998, to fund the cost of the removal of asset testing for older people in long-stay residential public hospital care.

Increasing debt and declining equity levels

Total debt owed by the HHS providers rose by $67.9 million between June 1998 and June 1999. At the same time, taxpayers' equity has fallen by $19.5 million to reach $889.2 million. As a result the debt-to-equity ratio has risen from 1.43 in June 1998 to 1.54 in June 1999. The ratio is a general indicator of long-term solvency.

Total debt at the end of June 1999 consisted of current liabilities ($753.8 million), long-term loans ($553.2 million) and other term liabilities ($59 million). Increases in current liabilities, up $50.1 million, and long-term loans, up $22.0 million, were partially offset by a $4.2 million decrease in other term liabilities.

Capital expenditure

The book value of fixed assets reached $1,733.8 million at the end of June 1999, up from the $1,710.2 million a year earlier. The debt-to-fixed asset ratio was 0.79 in the June 1999 quarter, up on the 0.76 in the June 1998 quarter. During the June 1999 year $225.5 million in fixed assets were acquired by HHS providers, while $22.0 million were disposed of.

Result for the June 1999 quarter

Operating income in the June 1999 quarter was $848.7 million, up $68.7 million from the same quarter a year earlier. Over the same period the cost of providing services increased by $35.2 million, or 4.2 per cent, to reach $864.8 million. The increase in operating income was primarily the result of an $87.7 million increase in government funding. In the June 1999 quarter government funding represented 92.3 per cent of operating revenue. Eighteen HHS providers recorded improvements in their financial position in the June 1999 quarter when compared to the June 1998 quarter.

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