Auditor-General's overview
The performance of the public health system, particularly the performance of district health boards (DHBs), is important to all New Zealanders. Our collective good health is part of the social and economic well-being of New Zealand.
In 2012/13, the government spending on health (through Vote Health) was nearly $14 billion – 18% of the Government's total expenditure of $78.6 billion.
The health sector continues to focus on improving its financial performance, including reducing the deficits of DHBs. My Office has analysed financial data from the past seven years to better understand the financial health of public sector entities, and in this report I discuss what that analysis tells us about DHBs.
This report also describes the results of our 2012/13 audits of entities in the health sector and our recent performance audit work to assess the effectiveness of particular aspects of the public health system – in particular, regional services planning. The health and well-being of older people has also been a focus of work for my Office in recent years and I summarise this work and our findings. The work has included identifying where better government data about older people is needed.
Public accountability and decision-makers need good performance information
Collectively, DHBs spend about $5.7 billion a year on services from third parties, such as primary health organisations and other non-governmental organisations.
In 2012/13, my auditors found that DHBs had limited controls over the performance information reported to them by third parties. For example, DHBs did not check the reported information to ensure that it was reliable. Without adequate evidence to support the reporting, the auditor's opinion on each DHB's third-party performance information was necessarily qualified. The audit of the Ministry of Health was also affected by this issue.
Good quality and reliable performance information is important for decision-makers and for public accountability. I recommended that entities in the sector work together to identify a cost-effective approach to addressing this problem with third-party performance information. There is unlikely to be an easy or quick solution, but the Ministry of Health has taken responsibility to lead the response.
DHBs continue to work more collaboratively, regionally and nationally, to increase their efficiency (such as cutting administrative costs and improving the delivery of health services). I published a report on regional services planning in November 2013, which looked at the progress that regional services planning had made since 2011. Overall, I found not as much progress as expected, although there were some signs of success. My recommendations included the need to improve the quality of data for planning and reporting. Good information is important in enabling decision-makers to ensure that services are effective and efficient.
There has been improved and clearer reporting by Health Benefits Limited of savings for DHBs. I encourage them all to continue improving this reporting, including ensuring that the reporting is supported by good systems and documentation.
Also, there have been improvements in the 2012/13 reporting by DHBs on reducing Māori health disparities. This is important information for all of us and I encourage DHBs to report more information about the extent of disparities in their population and the progress in reducing those disparities.
DHBs manage assets worth more than $5 billion. They have made limited progress in asset management planning, with more than half still needing to update or improve their plans. I am aware that some delays are because of pending regional and national plans, and it is important that DHBs manage associated risks in the meantime. I intend to carry out work in 2014/15 to gain more information about their asset management practices.
Ongoing change and the importance of effective governance
The health sector continues to undergo significant change, such as new health technologies and information technology systems, and changes to how services are delivered.
The implementation (led by Health Benefits Limited) of the national Finance, Procurement and Supply Chain (FPSC) shared service and system for DHBs will mean significant change and associated risks for each DHB and for the sector. The risks include, particularly during the transition period, the loss of key staff capability and a breakdown in internal controls and systems, or in the management control environment. Effective project and risk management through the transition is critical.
My auditors found that most DHBs still need to improve their information technology security (such as password controls) and that many did not have business continuity and disaster recovery plans. Business continuity and disaster recovery plans are essential to ensure that critical health services and systems are working in the event of a disaster. DHBs have responded well in recent events (such as the Canterbury earthquakes), but I am aware that some are waiting for regional systems or the FPSC before making improvements to their plans. It is important that DHBs assess and manage risks in the meantime.
It is also important that there is effective governance in place, with central oversight of major projects and oversight by DHBs as the FPSC is rolled out. In a shared services environment, roles and responsibilities must be clear. It is also critical that shared services agencies undergoing significant expansion, such as healthAlliance N.Z. Limited, ensure that they have the capacity and capability to maintain existing services as well as delivering new ones.
Major infrastructure projects, such as the redevelopment of hospitals in Canterbury, also need effective governance arrangements. The Canterbury DHB hospitals redevelopment is expected to cost more than $650 million and is the largest ever health-related building project in New Zealand.
There continues to be considerable change in the health sector as it works to ensure clinical and financial sustainability to meet the current and future needs of New Zealanders. In my view, good reliable performance information and effective governance of change are critical enablers for success.
Lyn Provost
Controller and Auditor-General
19 May 2014