Health NZ is aiming to get the deficit down to $200m by the end of the 2025-26 financial year. Photo: RNZ
Health NZ (HNZ) has reduced its deficit by hundreds of millions of dollars more than expected, but says more savings are needed to rein it in further.
The deficit for the recently-ended financial year was expected to be $1.1 billion, about $650m less than last year's forecast.
Health NZ's new statement of performance expectations for 2025-26 says there will be a "particular focus on improving internal productivity and ongoing tight control of costs".
It would be "making better use of the overall capacity of the hospital and specialist services... as well as building partnerships with private hospitals", said the 55-page statement.
The agency had been losing more than $140m every month late last year, before changes were made.
The new aim was to get the deficit down to $200m by the end of the 2025-26 financial year.
The government has put Lester Levy at the head of a newly reconstituted HNZ board, after saying he had delivered as commissioner on improving finances and services.
Any new spending would be "tightly aligned to priorities", said the statement. It was signed off by Levy at the end of June, in one of his final acts as commissioner, a role created after the board was sacked amid budget blow-out and recriminations in mid-2024.
The statement sets out what HNZ will do this year to deliver on its 2024-28 goals.
"For this financial year, and the next, we will continue to implement a work programme that focuses on bringing our pathway back to budget, bedding in our regional structures and bringing in new ways of working," said the statement.
Among the three key risks was delivering "healthcare outcomes whilst also delivering fiscal efficiencies".
Another was workforce relations, capacity and personnel cost pressure.
Handling the risks would require stabilising teams, bedding in an operating model focused on local delivery, "with clear decision-rights and accountabilities".
It would also require "deepening partnerships with private sector providers where this presents good value".
Most of the 2024-25 deficit was due to a $1.4 billion deficit in hospital and specialist services for that period.
That was attributed to lower than budgeted appropriation revenue, "investments made to improve access to planned care" - contracting with private hospitals is being overhauled - and other cost pressures, such as gas prices going up.
There were also surpluses in other areas, including $270m in primary and community care services.
The statement showed the cost of outsourcing personnel is expected to drop from $430m last year to $260m, while outsourced service costs are forecast to rise by 25 percent to a billion dollars.
One wildcard around personnel costs this year is paying back current and former staff for breaches of the Holidays Act over several years, which is expected to total about $1.5 billion. So far $522m has been paid back to 70,000 current staff.
The rest - to some current staff, balance of interim payments and to all former staff registered with Health NZ - is expected to be all paid out by mid-2026.
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