Ian Powell: Continuing Scandal over Tunnel Vision Public Hospital Rebuilding

Ian Powell: Continuing Scandal over Tunnel Vision Public Hospital Rebuilding

When Jacinda Ardern unexpectedly became the Labour Party leader shortly before the 2017 general election, she promised to lead a government of transformation. After nearly three years occupying the Treasury benches, health professionals working in public hospitals have been keenly waiting for transformational progress, including in the capacity and quality of hospital buildings where a major paradigm shift is essential.

At last, with the Government’s budget delivered in May, there appeared to be a light at the end of the tunnel with significant funding increases for district health boards (DHBs) whose responsibilities include public hospitals. Unfortunately, the Government’s treatment of Canterbury DHB’s (CDHB) business case for rebuilding Christchurch Hospital resulting from earthquake devastation, makes this light more like an accelerating train coming in the opposite direction.

Perennial folly of hospital rebuilds

There has been a perennial problem with hospital rebuilds with financially irresponsible short-term thinking. The predominance of this thinking has led to new facilities built to last for only around 20 years before further rebuilding is required. A feature of this short-sightedness has been deliberate disregarding of estimates of future necessary bed capacity based on consideration of factors such as the health needs of a growing and ageing population. In other words, DHBs are forced to build new not fit for purpose hospital buildings with insufficient capacity including beds.

In 2016 a new outpatient facility was opened at Canterbury DHB’s (CDHB) Burwood Hospital as part of a wider $215 million rebuild. CDHB under pressure from the Ministry of Health was forced to accept seriously inadequate working space for hospital specialist’s non-patient contact duties. These duties are essential including follow-up clinical investigations and diagnosis, discussions by phone with colleagues over patient conditions, research and patient notes. All require concentration and many privacy.

Driven by Health Ministry pressure, the new facility was not allowed to provide sufficient suitable space for these important activities. Instead unsuitable open plan arrangements were imposed. A published survey of affected specialists in 2018 revealed serious concerns over loss of productivity, privacy over patient records and conditions, noise, temperature control, lighting, and adequacy of physical and storage space.

The most recent example is the new acute services block in Christchurch at a cost of over $480 million. Its opening has been frustratingly delayed several times but hopefully will happen later this year. CDHB has acknowledged that the new building will not increase overall patient capacity (ie, code for confirming that the new building will commence with a shortage of beds). What this means is that much sooner than should have been the case, new hospital buildings will be required to meet the demands of patient care. This means increased financial cost to the DHB and taxpayer.

This is not simply a Canterbury issue. Canterbury is where the rubber of short-sighted decision-making hit the road first because of its earthquakes. This pressure is already being detected in other large hospital rebuilds, especially Dunedin but also Nelson and Whangarei. Furthermore, pressures on hospitals have been made worse by buildings that are not old but poorly built and made worse by successive years of underfunding since 2009 leading to a rundown of building maintenance. This has been especially the case in Auckland.

Central government decision-making

The critical player in decision-making on major capital works is the Capital Investment Committee (CIC) established in 2011. It provides advice to the Ministers of Health and Finance on the prioritisation and allocation of funding for capital investment and health infrastructure. The CIC is housed in and resourced by the Ministry of Health.

Until the 2017 general election senior Ministry staff had a more direct and in-your-face relationship with DHBs over major rebuilds. It played the role of an aggressive enforcer which had a big part to play in the tense relationship between the Ministry and several DHBs (mythology asserts that this was a Ministry-CDHB problem, but the reality is that the tension was much wider than with one DHB). This distracting tension diminished the transparency of the CIC’s role. Since then Ministry-DHB relationships have become more collaborative. This has had the unintended effect of making the CIC’s role more transparent although only slightly and from a very low base.

The CIC reviews business cases from DHBs and then makes recommendations to the Ministers. An important distinction is that its role is not confined to approving funding applications. It advises government on whether a DHB capital works proposal proceeds regardless of whether crown funding is requested. The CIC deliberates even where all the funding would come from a DHB’s own reserves.

DHB capital works initiatives must be deliberated on by the CIC if any of the following factors apply:

  • Capital expenditure of at least $10 million (a ridiculously low threshold).
  • Investments that require equity funding from government.
  • Strategic investments that substantially affect DHB performance.
  • Investments identified as high risks in DHB annual plans.

Within this scope there are criteria for the CIC to adhere to when considering DHB business cases. They are policy congruence, health gain, equity, affordability, sustainability, cost effectiveness (value for money), and risk.

The factors that determine whether CIC considers a business case are restrictive while the criteria are so broad that they could be interpreted in many different ways depending on personal views or the paradigm the committee is expected to operate within.

The membership of this important ministerial appointed body is:

  • Evan Davies (Managing Director, Property, Todd Holdings and former Managing Director, Sky City).
  • Paul Carpinter (contractor in public policy and management and former Treasury principal adviser).
  • Jan Dawson (Board Director, Westpac).
  • Murray Milner (Managing Director, Milner Consulting, former IT Board Chair and Telecom).
  • Sally Webb (former Chair of Bay of Plenty DHB).
  • Des Gorman (Professor of Medicine, Auckland Medical School, and occupational health specialist).
  • Margaret Wilsher (Chief Medical Officer, Auckland DHB and specialist physician)

These are capable people but collectively their backgrounds are narrow. The composition is shaped by the highly restricted process that encourages short-sighted decision-making.

Canterbury myth

There is a myth that all or most of the capital works funding for DHBs has been going to Canterbury. This has certainly been the health sector chattering in Wellington and around the country. But the facts say something else.

In response to an enquiry under the Official Information Act, Canterbury DHB spent $712,444,000 on capital works over the last 10 years. That’s big money by any stretch of the imagination and reinforces the gossip. But let’s drill down a little further. Only a little over $58 million came from central government. The remaining around $650 million largely came from earthquake insurance (over $128 million) and reserves (depreciation – over $500 million).

Depressing Canterbury tale

In response to the earthquake devastation CDHB has had to make a number of business cases for approval to proceed with major capital works building. Burwood Hospital and the new acute services building close to Christchurch Hospital were the earlier cases, but such was the extent of the devastation that further buildings were necessary.

In November 2019 CDHB submitted a business case for a new building (Tower 3) and related work at Christchurch Hospital and the design work for a further building (Tower 4). The total cost of this business case was $435 million. The business case was developed in cooperation with the Ministry of Health. Cost drivers included the capacity assessed as necessary for meeting the current and anticipated future needs of the DHB’s population along with ensuring compliance with increased earthquake compliance requirements.

This was not building hospitals for the sake of building them. Through clinically led health pathways between community and hospital care, more than any other DHB, CDHB has succeeded in constraining the demand pressure for acute hospital admissions. There was also significant engagement with hospital specialists and other health professionals in the development of the business case based on anticipated current and future clinical and population needs.

The business case was considered and rejected by the CIC which has to juggle priorities within a tight budget. Instead CDHB was required to submit a new case capped at $150 million. The political appointees on the CDHB Board would have preferred to only receive one new business case proposal consistent with the CIC’s dictate. But, in a demonstration of courage, after consulting with its senior clinical staff, senior management proposed five ranked business case options.

The Board chose to ignore the more clinically robust options although it is worth noting that two elected members opposed this decision.  Instead it adopted the cheapest option ($154 million), ranked fifth by involved clinical staff, and resubmitted it to the CIC. The CIC recommended it to the Ministers of Health and Finance who took it to cabinet where it was approved. The scheduled completion date is 2024-25. As with the clinically recommended earlier $435 million proposal, this business case involved total government funding because CDHB’s previous natural disaster generated building costs completely absorbed its over $500 million reserves.

The net result is one tower with fewer wards and a massive loss of bed capacity (over 100 short). The outcome is a perpetuation of the band aid approach by governments to new hospital buildings which fall short of clinical standards and become more expensive in the longer term because of the need to replace or rebuild again earlier.

Paradigm change

The paradigm of funding public hospital rebuilds requires a major fundamental change much more than just significantly increasing the $10 million threshold for CIC coverage. It is a scandal that we spend so much on new hospital buildings that fall short of meeting current, let alone future, patient need and require health professionals to work in unsuitable facilities which limit productivity. New hospital buildings should not need replacement or major additions as early as they are now.

The new paradigm should put patient needs and their hospital journey at the centre of the decision-making process. This includes the right of patients to be diagnosed and treatment by staff who have good safe working conditions. The focus must shift to the long term. The system has good epidemiological expertise to help with this. It is not enough for the development of business cases to be clinically led by health professionals.

The criteria for deliberating on business cases must be based on the principle that it makes good clinical sense for both the moment and the future. Further, the composition of the Capital Investment Committee needs to be changed to achieve this outcome.

New Zealand public hospital rebuilds lost momentum from the late 2000s until recently. Factors such as natural disasters, poor design and construction, building for the short-term, and delayed maintenance because of funding constraints have meant that much needs to be spent if patients are to have accessible quality care and health professionals are to have safe productive working conditions. That’s the bad news for government. The good news that in light of the severe economic consequences of Covid-19, hospital building construction is job rich. There could not be a better way to give this high priority in the allocation of the Finance Minister’s $20 billion put aside for addressing these severe consequences.

It is generally accepted that what makes good clinical sense usually if not always makes good financial sense. What does not make good clinical sense is guaranteed not to make good financial sense.

Ian Powell was formerly the Executive Director of the Association of Salaried Medical Specialists for over 30 years until December last year.  He is now a health commentator based in Otaihanga on the Kapiti Coast.

This article can be republished under a Creative Commons CC BY-ND 4.0  license. Attributions should include a link to the Democracy Project.  


Photo: Erkan Utu