King talks to DHB chairs about ways to work with funding

Health Minister Annette King has commended District Health Board chairs for many aspects of DHB performance in their first year of operation, but has told them it is “imperative” to ensure that “unprecedentedly high levels of funding” work effectively for the health sector.

At a conference of DHB Chairs in Wellington this week, Ms King signaled a new phase in the work of DHBs. “I want us to move on from the base we have established. The change will not be structural or financial, but will be behavioural.

“More than one out of every five tax dollars is now spent on health. Compared to other sectors we are a well-resourced sector. This makes it imperative to make what we’ve got work for us.”

Ms King said the key was to continue to be innovative about effectively managing DHB funding, and announced a series of practices that will be introduced from the beginning of 2003. “I expect these changes to result in boards working within their allocations, and getting maximum value from their spending”.

Planned changes include:

A national approach to prioritising capital expenditure. From next year, all significant capital projects will be considered alongside each other so that the best regional and national mix of health facilities is assured over time. Early payments to good performers for certain periods of the year. Waikato and South Canterbury DHBs, for example, will benefit from this approach. By receiving funding at the start of the month, not the end, they will have more flexibility and reduced interest payments (which can equate to millions of dollars over a six month period). Revising the way changes to health services are explored and approved. DHBs will have more flexibility and responsibility for adjusting the type or location of services to best meet community needs. Boards must meet national service coverage expectations and follow good process, such as consultation with clinicians. Using remaining money from the Health Funding Package announced in this year’s Budget to smooth the introduction to Population Based Funding.

“I’ll use that remaining money to move us towards Population Based Funding shares, in a way that gets most of you closer to a break-even point, so that you are working from a more credible funding base,” Ms King said.

In exchange, she expected DHBs to meet the requirement to operate within cost paths outlined in their District Annual Plans, and to enter collaborative arrangements to manage funding pressures such as referred services.

A revised monitoring framework will be introduced which has clear actions, tight timeframes for intervention and action, and very clear consequences. Any DHB with a deficit will have an action path negotiated with them that is accompanied by clear consequences.

Ms King noted that despite smoothing of the transition towards Population Based Funding, some large deficits would not be restored to break even. “I will work with DHBs in this category on a strategy that moves you along a clear track back to zero”.

The Minister commended DHB Chairs for their commitment to PHOs and for collaborative projects like the Pharmac Hospital Purchase Project, which will bring an estimated $10 million in savings over three years.

“I am also pleased with the latest figures on DHB expenditure, for the first quarter of the year, which are due to be released by Statistics NZ shortly. The figures show DHB spending is tracking better than forecast, a trend I expect to see continue throughout the year.”

Ms King said she planned to meet each chair individually in the New Year to discuss their plans to make operational changes work, and to discuss action they would take to ensure spending remained on a path to improvement.

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