Beds, operating theatres and possibly even entire wards could be dropped from the design of the new Dunedin Hospital's inpatient building as the Ministry of Health desperately tries to keep the project close to budget.

Several sources have told the Otago Daily Times that some weeks ago the ministry, faced with rapidly escalating construction costs, decided to press ahead with the outpatient building, now under construction, as planned.

However, it ordered a review of the entire inpatient building, during which even minor details have been reconsidered as to whether they are essential.

The ODT reported in July that the design of the hospital was being reviewed, and at the time Health Minister Andrew Little said that reducing the size, scale or services to be provided in the planned new hospital was not being contemplated.

However, one source told the ODT that cost-cutting proposals included dropping more than 50 beds from a hospital complex at present planned to contain 421 beds overall, and also that some of the 16-21 planned operating theatres could be scrapped, or only partly built.

Several services in the existing hospital had already been taken out of the new hospital during the planning process, and others that had made that cut were now additionally being reconsidered.

Health Minister Andrew Little. Photo / Mark Mitchell

Another said medical staff - some of whom it is understood was appraised of the proposals a fortnight ago - were gravely concerned the inpatient building, which was already likely to be smaller than what they had hoped for, could shrink yet further.

It is understood many of the proposed cost-cutting measures have been vigorously opposed by clinicians, meaning no final decisions about the final shape and scale of the building have been taken.

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However, it seems likely the hospital signed off by the Cabinet based on extensive planning documents will not be the hospital that will eventually be built.

Little said yesterday every major building project in the hospital system had been asked to look carefully at its costs.

"That is because in the current climate we expect cost escalation,'' he said.

"In relation to the new Dunedin hospital, I have received no advice about proposed changes to the scope or scale of that project."

National Dunedin list MP Michael Woodhouse said it was outrageous that reducing beds or services in the new hospital was even being considered, and the Government should build the people of Otago and Southland what it had promised them it would.

"I am deeply worried but not surprised that once again Treasury officials are going to get their way, and if this Labour Government agrees to this then they are going to massively let down the people of the south,'' he said.

Michael Woodhouse.

"We know what we need. It has been clearly articulated through the indicative design, the business case and the detailed business case, and for them to suggest that beds could be taken out of that hospital in the face of a growing and ageing population is absolutely outrageous.''

The budget for the new hospital was increased to $1.47 billion some months ago, and Little acknowledged it might need to be increased again due to inflationary pressure and the spiralling cost of building supplies — factors that were not present when what was originally a $1.2b budget was set.

A slide shown at a healthcare conference a week ago said the budget was now $1.7b, a figure Little did not comment on yesterday.

Woodhouse, a former hospital administrator, said he accepted construction costs had risen substantially, but detailed planning work had established what size the hospital needed to be and what services should be in it, and for it to still be fit for purpose in the future it needed to be built as envisaged.

"If they had any care for the people of the south, the Labour Government would tell Treasury to pipe down, fund the hospital properly, and get on with it.''

This is not the first time planners have tried to reduce the proposed size of the new Dunedin Hospital: in 2020 both the Ministry of Health and the Southern District Health Board pushed for a single hospital building, rather than the planned two, to be built as a cost-saving measure, a proposal rejected by then Health Minister Dr David Clark and Finance Minister Grant Robertson.

- Mike Houlahan, ODT