Auditor-General's overview

Health sector: Results of the 2011/12 audits.

This is the second year that I am publishing a separate report on audit results for the health sector. This report accompanies my reports on the education and transport sectors, which sit alongside the Crown research institutes, central government, and local government reports.

The performance of the public health system – in particular, the district health boards (DHBs) – is important to us all. Good health is important for us personally and collectively, as a contributor to the social and economic well-being of New Zealand. The health sector is the largest area of central government spending on public services. Ensuring clinical and financial sustainability to meet our current and future health needs is an ongoing challenge for the whole sector.

My previous reporting on the health sector has focused on the results for DHBs. This year, I have broadened this report to include audit results and commentary on other public sector health entities, including shared service agencies working with DHBs, the Ministry of Health, and Crown entities such as the Pharmaceutical Management Agency (Pharmac) and the New Zealand Blood Service.

My auditors found that most DHBs and other health sector entities have sound management control environments and financial information systems. I am also pleased to see continued improvement in service performance reporting. In particular, I note Canterbury DHB and the New Zealand Blood Service, whose service performance reporting we assessed as "very good". Reporting comprehensive and clear performance enables an entity to show what it has achieved, including progress towards improving health outcomes. It also enables the Government and the public to assess value for money.

Last year, I reported that DHBs needed to improve their reporting on efforts to reduce disparities for Māori. My Office intends to follow up on this work and review the DHBs' 2012/13 reporting.

The Canterbury earthquakes continue to have a significant effect, particularly on Canterbury DHB but also more widely in the sector (for example, with insurance costs and the nature of insurance cover, and higher earthquake-strengthening requirements for buildings). Rebuilding Canterbury, including Canterbury DHB, is a priority for the Government.

Clinical and financial sustainability are a focus for the whole sector, which is working to reduce DHB deficits and achieve service and operational efficiencies. DHBs are increasingly operating collaboratively between districts (for example, shared management structures and people), regionally (for example, service and capital planning), and nationally (for example, shared information and management systems).

Health Benefits Limited is leading work aimed at saving DHBs $700 million over five years through initiatives that reduce administrative, support, and procurement costs for DHBs. The associated work programme will mean significant change for the sector and ongoing risk, including risks to the maintenance of service delivery and the delivery of planned savings and efficiencies. I will continue to watch that the reporting of savings is transparent and reflects actual savings.

My Office is working on an approach to financial analysis across the public sector, to assess sector trends and variances and better understand the ability of public entities to respond to potential financial risks. We have analysed the DHBs using this approach. I include our initial findings in this report and welcome discussion on the approach and how to develop it further.

During the past 18 months, I have had a particular focus on visiting health sector entities, including most DHBs. Highlights included the new Ko Awatea education and innovation centre in Counties Manukau DHB and the Wairoa Integrated Family Health Service, which is developing a new model of care to meet the health needs of the Wairoa rural community. These two centres have the potential to make a real difference.

Our ongoing and future work

This year, the theme for my Office's work programme is Our future needs – is the public sector ready? The focus is on how public entities prioritise work, develop necessary capabilities and skills, and use information to identify and address future needs. We are reviewing the state of asset management throughout the public sector, including DHB assets.

My Office is also looking at how DHB capital investment aligns with regional service planning, how effectively the public service (health and other sectors) is working towards preventing and reducing child obesity, and how effectively government departments are preparing and planning for the ageing population.

The pace and scale of change in the health sector is increasing through regional collaboration and national initiatives to increase efficiency, save costs, and improve health services and outcomes. I expect there to be full and transparent reporting of performance throughout the health sector, and am considering what further work my Office might carry out on the effectiveness of some of these initiatives.

Signature - LP

Lyn Provost
Controller and Auditor-General

10 April 2013

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