We need to spend billions replacing old hospitals – so who should pay? – Stuff

Aaron Hockly is Fund Manager of NZX-listed Vital Healthcare Property Trust

OPINION: On July 1, the new body replacing the District Health Boards (DHBs), Health New Zealand, will become one of the countrys largest property managers.

New Zealand has 83 public hospitals; a 2020 Ministry of Health report put the replacement value of the assets managed by the 20 DHBs at $24 billion.

The same report noted many main hospital campus buildings, some of which date back to World War II and even earlier, were at the end of their useful life.

READ MORE:* Health centres providing new investment opportunities * Maze-like, outdated IT systems at DHBs flagged in national reviews* Litany of flaws found in Christchurch hospital buildings

Also in 2020, the Heather Simpson-led report into the health and disability sector estimated that $14 billion would need to be spent on health infrastructure investment over the following decade. This figure did not include repairs, maintenance, and ICT (another area where outdated and inadequate systems are commonplace, as demonstrated by the 2021 ransomware attack on the Waikato District Health Board).

Two months ago, a report from the New Zealand Infrastructure Commission, Te Waihanga concluded the Simpson reports estimate, which was based on 2018 figures, was out of date. The review suggests the Crown will need to stump up some $20 billion over the next 10 years in order to address the current infrastructure deficit.

Years of under-investment in hospitals and other public health facilities across New Zealand mean that many are no longer fit for purpose, making it difficult to introduce the new models of care that Government intends, said Blake Lepper, GM Infrastructure Delivery at Te Waihanga.

Stuff

Vital Healthcare fund manager Aaron Hockly

This weeks Budget set aside $1.3 billion to fund priority health infrastructure projects over the next five years. That is on top of the $586 million allocated in last years Budget to just two projects: the redevelopment of Whangrei hospital and the construction of a new mental health unit at Canterburys Hillmorton.

Given the many calls on the health vote, from medicines to mental health, it is surely worth questioning whether large capital projects are best funded by the government, or whether there is a better way.

The government and its agencies have been bold in outlining the challenges faced by the healthcare sector, including the need to improve the quality of capital funding decisions, asset management and long-term investment outcomes.

Agree or disagree with it, the decision to replace 20 DHBs with two national agencies is a bold move. However, when it comes to managing healthcare infrastructure, governments approach has been to modify the status quo.

The Capital Investment Committee will continue to advise the Ministers of Health and Finance on the prioritisation and allocation of funding for capital investment and health infrastructure. Current committee members are extremely able and well-qualified for their role; however, the committee is established by the Minister of Health, can be terminated by the Minister of Health, and consists of such members as the Minister determines.

The Cabinet Paper setting out the proposed reforms asserted, somewhat optimistically, that the integration of hospitals into Health NZ will enable improved planning, supply chain, procurement and asset management and that a national service planning view should drive capital savings and a more robust consideration of the trade-offs between operational and capital investment.

That more robust consideration will not be brought about simply by structural change. It requires specialist expertise something the Simpson report recommended should be developed by the Health Investment Unit, which will become part of Health NZ.

That specialist expertise already exists in the New Zealand private sector.

The dual public-private system is well entrenched in New Zealand healthcare, but greater use could be made of private sector expertise to procuring, developing, owning and managing healthcare infrastructure.

A lack of access to staff and capital means DHBs have long relied heavily on the private sector to provide services such as diagnostic imaging and surgical procedures. That is widely accepted as a fact of life and as an economically effective way to provide better services to more patients and to meet urgent needs.

Surely it makes even more sense to involve specialists in non-core business activities like property ownership and management. Involving partners from the private sector in developing and maintaining property infrastructure would ensure a clear separation between capital management and operational management and improve the outcomes in both areas, benefiting healthcare professionals, patients and taxpayers.

Aaron Hockly is Fund Manager of NZX-listed Vital Healthcare Property Trust, a specialist landlord of healthcare real estate in New Zealand and Australia.

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We need to spend billions replacing old hospitals - so who should pay? - Stuff