Ian Powell: Centralised authoritarian culture behind Canterbury health crisis

Ian Powell: Centralised authoritarian culture behind Canterbury health crisis

It might seem like just another complicated local management tussle, but the current turmoil in the Canterbury District Health Board reflects some significant changes in health policy. Health commentator Ian Powell says the management of our hospitals and care systems is heading down a “centralist authoritarian path” that will have major ramifications for the quality of patient services.


If the sudden dramatic resignation of David Meates, the respected Chief Executive of Canterbury District Health Board (CDHB), is simply seen as an individual refusing to accept political pressure to, in effect, reduce the accessibility and quality of patient services and for the extra stress this would put on an exhaustive health workforce, then important lessons and implications will be missed.

There is much more than this and the resignations of other key players in his executive leadership team. At the heart of the narrative are the responsibilities of DHBs, the implications of and responses to the 2010 earthquake, and leadership culture including engagement with health professionals. In the context of the Simpson report on the review of the health and disability system it raises the concern about a growing centralised authoritarian leadership culture.

DHB responsibilities

Universal public health systems characteristically have an internal tension which, in the right systems and leadership culture, can be a positive driver of innovative changes. This is the tension between which health services are developed locally and what which are developed nationally.

Depending on the culture, tension can be either a positive or negative dynamic. If the culture is more relational (that is, recognising the importance of relationships between the various structures and organisations in the system along with the value of empowering the health professional workforce) then the tension is positive. If, on the other hand, it is more contractual and managerial then the tension is negative. Relational is low transactional cost; contractual and managerial are high transaction cost).

DHBs are statutory authorities created by the New Zealand Public Health and Disability Act 2000. They are responsible for community and hospital care for the population of a defined geographical area. The statutory capacity for the integration of community and hospital care for a defined population such as Canterbury is a strength of New Zealand’s health system.

2010 earthquake responses

Prior to the devastating earthquake of 2010, CDHB had been developing a relational leadership culture which increased under Chief Executive Gordon Davies (2005-08) and further strengthened under his successor David Meates. This was most evident in the development of clinician-led pathways between community and hospital but also within the hospitals.

The relational culture was a direction of travel rather than a destination reached. It remains work in progress and the Meates’ leadership team is open to some justified criticisms where health professional engagement has fallen short.

But this relational culture led to significant service delivery and financial improvements and did mean that the Canterbury health system was better placed to cope with the earthquake than those of the other DHBs.

Ryall’s error

Unfortunately, the response of National’s Health Minister Tony Ryall to the devastation became the seed of subsequent conflict between CDHB and the Ministry of Health under the National-led government.

DHBs’ operational costs are funded by what is known as the Population Based Funding formula (PBF). PBF is a sensible system formula on census population data and qualified by factors such as deprivation, ethnicity and rurality. But PBF is designed for DHBs in a ‘steady state’. It is not designed to cope with natural disasters` (not only did CDHB have to cope with the 2010 earthquake based in Christchurch but it also had the subsequent Kaikoura earthquake and extensive hills’ fires).

Anticipating the seriousness of the situation CDHB took the initiative and commissioned a report from Martin Jenkins consultants on an appropriate funding system to cope with the earthquake devastation. Martin Jenkins advised that the PBF was not suitable for this extraordinary situation. Instead they recommended that PBF should apply only to the other 19 DHBs who were in ‘steady state’. Instead, given its exceptional circumstances, Canterbury should be funded through a special arrangement designed to address its special circumstances

CDHB agreed with this recommendation but it was rejected by Ryall. His response was to simply rely on the PBF plus debt management. But, as anticipated, PBF simply couldn’t cope. Its application negatively affected CDHB’s operational funding because it couldn’t keep up with changing population patterns due to the disaster. Then there was also the sustained mental health crisis that arose out of the devastation. Again PBF was not designed for funding these resource needs.

Neither was PBF designed to meet the massive rebuilding costs that the earthquake generated. While not initially so, due largely to the favourable impact of the relational leadership culture on CDHB’s finances, increasing annual deficits compounded pressures.

Ryall should have realised that PBF was more appropriate to the other 19 DHBs in a ‘steady state’ situation and separated out Canterbury for a special funding arrangement recognising the immediate physical damage, a workforce having to work in poor conditions (akin to a bomb site for some), massive rebuilding costs, and flow-on health risks (especially mental health).

Constant state of conflict

This leadership failure set the scene for a constant state of conflict between CDHB and government over the approach to major capital works. It began with short-term and ideological thinking that led Ryall to promote a Public Private Partnership (PPP) for the rebuild of Christchurch Hospital. This would have severely increased the operational costs to CDHB in order to meet the needs of private partners’ profit maximisation which would have also detrimentally affected hospital design and capacity.

Meates and his leadership team, supported by clinical leaders, were successful in persuading government to back off from the PPP but it was a time delaying distraction and had relationship consequences that would cost him dearly.

The conflict continued at just about every stage of the ongoing rebuild even though government funding was a relatively small component. The Ministry pressured CDHB to accept a new outpatient facility at Burwood and the Hagley acute services block that were not fit for purpose either in terms of working conditions or bed capacity. At the government end Meates and his team were seen as obstructive and too much influenced by hospital specialists in particular.

Running alongside this festering sore was another. Linked to his short-sighted populist call for reducing administration costs, Ryall reconfigured a crown entity called Health Benefits Ltd (HBL – previously responsible for distributing monies to general practices) into taking responsibility for reducing, through rationalisation, non-clinical support services to DHBs. While there were some limited gains, overall HBL was a failure because it was top-down imposed (DHBs were required to report to HBL) and arbitrary in its approach with many errors and much destabilisation arising as a result.

Underpinning HBL’s approach was contractualism which it sought to require the DHBs to follow through a regional DHBs shared services agency (Health Alliance) based in the four northern DHBs. But this high transaction cost approach came into conflict with Canterbury’s low transaction cost relational approach. It led to strong public statements of concern about HBL’s approach from senior doctors employed by CDHB.

This relational approach led to an effective networking approach developed by the South Island DHBs called the Southern Alliance. This became a point of tension with the government, Health Ministry and HBL. Although it was a South Island initiative Meates was the highest profile chief executive and Canterbury the biggest of the five DHBs involved.

Role of Board Chairs and Crown Monitor

The National-led Government’s attempt to deal with these situations was to appoint new board chairs who were to bring the Meates leadership into line. One of them had to resign because of conflict of interest concerns, while his two successors adopted an independent empirical and respectful approach and could accept the robustness of CDHB’s relational approach.

There were hopes that the Labour-led Government and new Health Minister David Clark would lead to de-escalation, and for a while this appeared to be the case. Certainly, with a new Director-General of Health, relations with the Ministry improved. But there were signs that a change of government was making little difference. Following the Board elections last year a new Board Chair was appointed (John Hansen) who was more responsive to political direction than his two predecessors.

Further, Lester Levy (a favourite of National Party governments) was appointed by Health Minister David Clark as a crown monitor to CDHB. Crown monitors are government appointments to DHBs in serious difficulty (usually financial but sometimes dysfunctional). They are not formal Board members but are able to fully participate and report directly to the Minister and Director-General of Health; their ‘eyes and ears’).

Previously, the former government had appointed him at different times as chair of the three Auckland DHBs.  His performance was considered controversial. It had also led to the resignations of all three chief executives. Whereas the Meates leadership approach was more relational, Levy was firmly in the contractual camp. The signs were now ominous for the future of David Meates.

Christchurch Hospital rebuild business case debacle

Conflict intensified with CDHB’s business case for the rebuild of the main Christchurch Hospital. Over the previous decade CDHB had spent over $712 million on major capital works. But only a little over $58 million came from government. Over $500 million came from CDHB’s own reserves (a remarkable fiscal achievement) and over $128 million from earthquake insurance.

However, by 2019, CDHB’s reserves were exhausted. In November 2019 CDHB submitted a business case to the Government’s Capital Investment Committee (CIC) at a total cost of $435 million. There was significant clinical input into the business case. 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 risk requirements. However, it was rejected, and instead CDHB was required to submit a new case capped at $150 million.

After further discussion between Meates’ executive leadership team and clinical leaders they took the courageous but career-risking approach of presenting five options for the Board to consider recommending back to the CIC. But only one of the options came close to the CIC’s instruction forcing the Board to make a call.

By now CDHB had a less independent and weaker Board. It is an understatement to say that Chair Hansen was unhappy that the Meates leadership team had forced the Board to make a choice. He and his fellow political Board appointees would have preferred to receive only one new business case proposal consistent with the CIC’s dictate.

The Board chose to ignore the more clinically robust options.  Instead it adopted the cheapest option, ranked fifth by involved clinical staff, and the one consistent with the CIC’s position. It was a demoralising slap in the face to the health professionals involved in the development of the business case options. They now saw that their own Board was in opposition to both them and the executive management team and instead following the line from central government. They were used to battles with ‘Wellington’ but were also used to Boards more supportive of the population they were responsible for.

Rubber hits the road: annual plan and deficit

By now the relationship between the Board members supporting the Chair (along with Crown Monitor Levy) and the executive leadership team was becoming increasingly difficult. The latter were finding the environment at times vindictive. They included people of considerable talent. The deteriorating relationship served to encourage those with alternative employment options to become more receptive to them.

In this context the rubber hit the road with the requirement for all DHBs to submit an annual plan for the 2020-21 financial year. These plans require approval by the Health Minister including any deficit level. For the previous financial year (year ended 30 June 2020) CDHB’s deficit was $175 million. CDHB had budgeted for a $180 million deficit although unusually this had not been signed off by Minister Clark (another indication of the tension between Government and CDHB.

For the current financial year (2020-21) the executive leadership team recommended a deficit of $145 million. This deficit included a savings plan of $56 million recognising estimated increased costs on the previous financial year due to increased capital charges and depreciation costs arising out of the new buildings (including the yet to be opened acute services block). As part of the absurdity CDHB was also required to pay a capital charge to government of $9 million for insurance repairs (ie, being required to pay government a capital charge on something that was not government funded).

In spite of all of this, the recommended plan included a pathway for breaking even (ie, no deficit) after around 30 months. However, the response was hard-line. The Ministry (predictably supported by Levy) rejected the recommendation and instead required that the deficit level be set at $90 million (ie, double the savings). The details of the Ministry’s savings are unclear but appear based on naive assumptions including not cutting services (absurd given the requirement to save over $100 million) and restricting staff salary increases (for specialists at a level less than their automatic annual step progression).

The next step is for the Board to consider its position at a meeting on 20 August. Should it support its executive leadership team or bow to the Ministry? It has options but, based on the Board’s rejection of expert clinical advice in the recent business case debacle and what they knew of the position of at least the Chair and other political appointees on the Board, in contrast with past years the executive management team concluded bowing was the likely outcome.

Then throw in the team’s increasingly unpleasant work environment. This has contributed to some team members being incentivised to take up other attractive employment options. To date, four have resigned in addition to the chief executive.

Behind the CDHB deficit

CDHB’s deficit is not due to an inability to cope with its normal operational expenses. In fact, it has successfully constrained some of these costs by, through clinical leadership, bending the curve of increased acute patient demand. Nationally this increased acute demand (higher than the rate of population growth) has been a significant factor in the deficits of all DHBs but proportionately less so in Canterbury.

Instead, CDHB’s deficit is due to a massive structural problem that goes back to the failure of Health Minister Tony Ryall to follow the expert advice not to use the same funding system used for ‘steady state’ DHBs. It was compounded not only by subsequent natural disasters but more so by a developing conflicting leadership culture from the Health Ministry that led to significant delays in major capital works which CDHB bore the cost for.

New leadership culture and the Simpson report

The Canterbury experience has negative lessons for all other DHBs and our whole health system which will affect the quality of decision-making and the capacity to provide good patient-centred care. Although successful and well-engrained in CDHB the future of its relational approach is under threat. Its potential to expand is unlikely to be realised and its existing level vulnerable to a strengthened managerialism and contractualism coming from the top of the DHB.

The leadership culture behind the demise of the relational focus leadership of CDHB is centralist authoritarian. It provides a clear message to other chief executives – do as you are told even if it conflicts with your DHB’s responsibilities for its defined population. Managerialism and contractualism are the biggest obstacle to improving performance in DHBs; centralist authoritarian worsens this situation.

The Heather Simpson report on the health and disability system proposes centralising decision-making by dismantling the current DHBs and replacing them with fewer mega DHBs that will be under the direct control of a new national bureaucracy set up for this purpose.

The Canterbury experience where, under the Labour-led Government, the objective that had been unsuccessfully sought under its National led predecessor was achieved, suggests that the Simpson report should be looked at through an ominous rather than just sceptical eye.

The Simpson report is written by liberal technocrats for a government led by liberal technocrats. The upside of liberal technocrats is that they respect science and empiricism (invaluable for responding to pandemics). The downside is that they lack peripheral vision and have a form of elitism that can inadvertently take a health system down a more centralist authoritarian path.



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, editor of the blog ‘Otaihanga Second Opinion’, and 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.