The health sector needs significant investment, but where is that money going to come from? In our series analysing Budget 2018, Grant Thornton’s Pam Newlove says the government needs to look to the private sector.

How revolutionary do voters want the new government to be? It’s a question that must be considered, as the government approaches the delivery of their first budget. While it has a demonstrable appetite for change across a number of areas, its ability to afford the level of change desired is open to question. If healthcare services are left behind, the people of New Zealand will be worse off. To ensure that doesn’t happen, the government must embrace the best practices and skills of the private sector, which will be required to meet the coming changes.

Significant challenges remain for the wider delivery of health services in New Zealand, and the new government has very different priorities to its predecessor. Balancing their priorities against the backdrop of significant capital investment requirements and continually rising demand for services will be a major challenge for the government. This is not to second guess the government’s priorities, but to acknowledge that they all come at a cost, and there needs to be a genuine sense check as to whether we can afford those things while still getting the basics right.

If not, it could be the very people who voted Labour in who suffer the most from substandard healthcare delivery. Those on lower incomes are more likely to need the services of the health system. OECD data shows a strong health system improves the wider quality of life in society, and correspondingly, increases productivity in the wider economy.

The government’s promises also include health spending, particularly in health infrastructure and nurses’ pay. Nurses certainly deserve a pay rise, though it is difficult to see where the government will be able to find the money to meet their full expectations. To underline that, Treasury has identified $14 billion dollars’ worth of infrastructure upgrades that need to be made, but as Health Minister David Clark admitted recently on Q+A, so far only $10 billion has been earmarked.

Much has been made of the mould in the walls at Middlemore Hospital. Much of our public health infrastructure needs a major upgrade in the next 10 years, not just at Middlemore Hospital. The magnitude of the complexities and risks around health infrastructure means that governments could easily take on more risk than they can handle, if they aren’t careful.

Partnerships with the private sector, where there is skill, expertise, and importantly capital, could accelerate the process of rebuilding and repairing the network of health infrastructure across New Zealand. Hospitals aren’t currently being considered as candidates for public-private partnerships, which is acceptable so long as the government can put aside sufficient financial resources to deliver both infrastructure and services, while also putting aside sufficient capital reserves for the future. But that will require compromises.

Service delivery is another area that could benefit from private sector expertise; there have been proven successes in the areas of cardiac services and orthopaedic surgery in the Auckland region where private expertise has been used. To not consider using PPPs, even in targeted areas, would indicate a preference for ideology over outcome, so one would hope the government would at least give the option due consideration.

Successful public private partnerships are fundamentally more about improving outcomes and managing risk, than saving money, though that can be a benefit as well. Health is a sector in which huge changes are coming. Advancing technologies, an ageing population, and ageing infrastructure, all present both challenges and opportunities if the government is ready to look to the future. There is even new thinking around where health services are delivered. In the future, and increasing number of services will be delivered away from the traditional hospital setting. This could be a further driver for re-thinking the nature of capital investment needed.

Even at a governance level, the Health Minister should be directing District Health Boards to apply private sector practices. There have long been perceptions that DHBs are overly influenced by political appointments rather than appointing the best people and practices to drive efficiency in what are very large, and very complex businesses. They have fundamental commercial imperatives, in that every dollar must be accounted for. There must correspondingly be more rigorous oversight and accountability around performance – the country can’t afford any more debacles like the Waikato DHB’s failed SmartHealth app, which has cost the organisation millions without any tangible benefits.

The government must be future focused, as the health needs of today will not be those of twenty years from now. The significant and expensive capacity building and innovation needed must begin soon, if New Zealand’s health system is going to keep up with international standards. Embracing the best of the private sector will ensure that the people who need a strong public health system the most don’t get left behind.

For further enquiries, please contact:

Pam Newlove
Partner, Business Advisory Services 
Grant Thornton New Zealand 
T +64 9 922 1279
E pam.newlove@nz.gt.com