Newly-released documents shed new light on the leadup to the Government’s dramatic intervention in Health NZ.

The briefings and financial reports, released this afternoon, showed that Te Whatu Ora - Health NZ insisted it was on track to meet its 2023/24 budget and provide more than half a billion dollars in savings up until March this year, before a sudden deterioration in its financial position.

It also showed that the board strongly rejected allegations from Government that it was not on top of its finances, and confirmed that the main driver of its financial position was an overspend on nurses.

In July, Health Minister Shane Reti appointed a commissioner, Professor Lester Levy, to replace Health NZ’s remaining board members, citing financial mismanagement and poor performance.

The just-released briefings show that Health NZ’s monthly financial updates continued to project a surplus until March.

The same month, Finance Minister Nicola Willis wrote a letter questioning whether the board had adequate oversight of its finances and expressing concern about whether it would hit its savings target.

She cited a Treasury meeting with HNZ after which Treasury officials said “the board did not seem across the detail of this issue”.

Board chair Dr Karen Poutasi reacted strongly to Willis’ letter, saying it was an “unfair” and “incomplete view of our position”.

“With respect, this is strongly denied to the extent that our board has remarked on reading the letter, that that doesn’t in any way reflect the meeting they were at.”

The following month, Health NZ first began reporting that its financial position was much worse than previously reported.

A financial update by acting chief executive Dale Bramley said the projected surplus of $583m had been downgraded to a “best case scenario” of $317m. By June, officials were projecting a surplus of just $1m - but only if pay equity funding was received, which it wasn’t.

Instead, officials projected a $1.4b deficit at the end of the 2024/25 financial year. That deficit has now been revised to $1.76b, after further losses in July and August after Levy took over.

Officials outlined a $2b cost-cutting target for the 2024/24 year - described as a “stretch target”.

A major cost-cutting drive included a pause on recruitment. While Health NZ leaders maintained that no frontline clinical jobs would be impacted, the briefings show that officials warned that such a pause could “inadvertently close off recruitment to clinically necessary roles”.

They further warned that it could “unintentionally create workforce shortages in other parts of the frontline or in key enabling parts of the organisation”.

Nursing overspend

The internal briefings also underlined the impact of a huge growth in nursing recruitment on Health NZ’s finances.

A briefing in April said this was costing the organisation $100m a month in new wages and additional hours, and was the main risk to Health NZ’s budget.

A further briefing in late June said Health NZ was now restricting nursing recruitment to “clinical risk areas” and areas covered by the Government’s national health targets.

Health NZ’s financial situation came to a head on July 11, when Reti penned a strongly-worded letter to Levy as the then-Health NZ chairman, outlining his “serious dissatisfaction” with the entity’s performance, threatening the “potential dismissal of all members of the board”.

Health Minister Dr Shane Reti addresses media at Ormiston Hospital, Auckland. Photo / Sylvie Whinray

“As you know, I have become increasingly concerned with the financial performance of Health NZ, and the unexpected and persistent overspend occurring in the hospital system since March this year.

“While the financial performance itself is a cause for major concern, I am further dissatisfied that this did not materialise in reporting until March of this year, and indeed that previously the Board had assured me that Health NZ was on track to break-even.”

He gave the board until the following day to respond, promising he wouldn’t go public with his concerns until board members had had their say.

Four days later, the Herald reported the resignations of board members Dr Jeff Lowe, a respected Wellington GP, and Naomi Ferguson, a former Inland Revenue chief executive, more than a year before their terms were set to conclude.

The following week, Reti announced the board - now only consisting of two members - would be dissolved and replaced by Levy as a Commissioner.

- NZ Herald