Hon Tony Ryall
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Date sent to Minister:
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HC07-16-2
DISTRICT HEALTH BOARD (DHB) SECTOR FINANCIAL PERFORMANCE FOR THE
TWO-MONTH PERIOD ENDED 31 AUGUST 2009
Purpose and Background
1.
This report presents an overview of the financial performance of the District Health Board
(DHB) sector for the two-month period ended 31 August 2009 based on data provided by the
DHBs in monthly financial templates.
2.
The report highlights where the sector or an individual DHB reports a significant variance
against plan or against comparable performance within the sector.
3.
Interpretation of the data provided by the DHBs enables identification of areas of financial
pressure and risk as well as best practice within the DHB sector.
4.
All twenty-one DHBs have approved District Annual Plans (DAP) for the 2009/10 financial
year.
5.
Tables and appendices included in the report have been compiled from rounded data and
may not necessarily cross add.
6.
This overview is to be read in conjunction with the attached report detailing the impact of
individual DHB financial performance on the sector (refer Enclosure) and supporting
schedules.
7.
Once this report has been signed by the Minister of Health, the report will be posted on the
Ministry of Health (the Ministry) website. The website address for the report will be
http://www.moh.govt.nz/dhbfp and filed under DHB Performance Reports.
8.
The Health Report is copied to the Department of Prime Minister and Cabinet, Deputy
Commissioner of the State Services Commission, Director-General of Health, Deputy
Director-General Corporate Services, the Treasury (State Sector Performance Branch),
Crown Health Financing Agency, DHB Chairs and DHB Chief Executives.
1
DHB Sector Unaudited Financial Performance
9.
Consolidated Statement of Financial Performance for the two-month period ended 31
August 2009
Actual
$ '000
TOTAL REVENUE
Operating Costs
Personnel Costs
Outsourced Services
Clinical Supplies
Infrastructure/Other Supplies
Subtotal
Payments to Providers
Personal Health
Mental Health
Public Health
Disability Support Services
Maori Health
Subtotal
TOTAL EXPENSES
NET RESULT
Average FTEs YTD
Avg Annual Cost Per FTE ($) **
Year to Date
Phased Plan
Variance
$ '000
Full Year
% Variance *
$ '000
Plan
$ '000
2,057,595
2,059,598
(2,004)
(0.1%)
12,326,534
747,309
69,601
182,715
205,249
1,204,874
754,162
59,576
178,331
207,150
1,199,219
6,853
(10,024)
(4,384)
1,901
(5,654)
0.9%
(16.8%)
(2.5%)
0.9%
(0.5%)
4,513,800
353,936
1,056,920
1,239,093
7,163,749
597,331
68,219
4,438
193,669
6,911
870,568
601,944
73,166
3,712
191,410
9,096
879,328
4,613
4,947
(726)
(2,259)
2,185
8,760
0.8%
6.8%
(19.6%)
(1.2%)
24.0%
1.0%
3,617,366
442,977
22,263
1,140,985
54,744
5,278,335
2,075,441
(17,847)
2,078,547
(18,949)
3,106
1,102
0.1%
5.8%
12,442,084
(115,550)
55,254
81,150
55,623
81,351
369
200
0.7%
0.2%
55,875
81,457
Note:
* The % column shows the year to date variance as a percentage of phased plan.
** The cost per FTE is calculated by annualising YTD Personnel Costs divided by the average YTD FTEs .
10.
As noted in the table above, the DHB sector unaudited financial performance for the twomonth period ended 31 August 2009 resulted in a sector deficit of $17.8M that was $1.1M
favourable to plan. A sector deficit of $5.7M was reported for the month of August 2009
against a planned deficit of $2.4M.
11.
Total revenue for the period was $2.0M (0.1%) unfavourable to plan.
12.
Expenditure in Personnel costs was $6.9M favourable to plan (0.9%). Average accrued
Year to Date (YTD) Full Time Equivalent (FTE) personnel as at 31 August 2009 was 0.7%
below plan, with the average consolidated cost per FTE 0.2% below plan. The below plan
FTEs were predominantly driven by medical and allied health FTEs being 510 and 226 below
plan respectively, offset against nursing FTEs being 354 above plan (refer Enclosure,
paragraph eight to eleven).
13.
Outsourced Services reflect an unfavourable variance to plan of $10.0M (16.8%). The
majority of this unfavourable variance ($7.0M) was attributable to outsourced medical staff
(Medical, Nursing, Allied Health and Support Personnel) which is indicative of the difficulties
facing the sector in recruiting and retaining permanent staff. Outsourced management costs
(personnel and contracted services) were unfavourable by $1.1M whilst outsourced clinical
services were $1.9M unfavourable to plan
Recommendations
2
The Ministry recommends that you:
(a)
note the report on DHB sector financial performance for the two-period
ended 31 August 2009 resulted in a net deficit of $17.8M that was $1.1M
favourable to plan.
Yes/No
(b)
note that all 21 DHBs have approved DAPs for the 2009/10 year.
Yes/No
(c)
refer this report to the Minister of Finance for his information.
Yes/No
Anthony Hill
Deputy Director-General
Sector Accountability & Funding
MINISTER’S SIGNATURE:
DATE:
Ministry Contact 1:
Name:
John Hazeldine
Ministry Contact 2:
Name:
Bridget Hesketh
Ministry Contact 3:
Name:
Bill Peterson
Phone:
(04) 496 2396
Phone:
(04) 496 2409
Phone:
Cell:
027 271 3218
Cell:
021 802 416
(04) 4962445
3
ENCLOSURE: INDIVIDUAL DHB FINANCIAL PERFORMANCE IMPACTING ON THE
SECTOR FOR THE TWO-MONTH PERIOD ENDED 31 AUGUST 2009
District Health Board (DHB) Unaudited Net Results (refer schedule one)
14.
The DHB sector financial performance for the two-month ended 31 August 2009 resulted in
a sector deficit of $17.8M that was $1.1M favourable to plan.
15.
The following DHBs reported significant year to date consolidated variances to plan.

Bay of Plenty DHB reported a deficit of $3.5M that was $2.3M unfavourable to plan.
This variance was driven by clinical expenditure overspend which is tracking in line
with the high level of acutes currently being experienced. Nursing personnel cost was
also of concern to the DHB. An unfavourable income variance was due to inaccuracy
in planned phasing around electives;

Waitemata DHB reported a deficit of $2.9M that was $1.3M unfavourable to plan. This
variance was due primarily to clinical supplies and clinical personnel budget overruns.
The DHB attributes this to timing of expenditure in relation to plan, some anticipated
savings not being realised, staff mix variations and a demand driven component;

Northland DHB reported a surplus of $0.4M that was $1.0M unfavourable to plan. This
unfavourable variance was due primarily to clinical supplies and medical personnel
budget overruns. The DHB attributes this to unusual junior doctor rotations resulting in
higher than anticipated locum use and imprecise phasing of planned clinical supplies
expenditure;

Canterbury DHB reported a surplus of $0.2M that was $3.6M favourable to plan. This
favourable variance was mainly driven by a revamp of the plan resulting from a line by
line review in order to deliver results per the District Annual Plan (DAP) expectations or
even better at year end. For the period ended August 2009, the DHB has achieved
higher savings than in plan. A change in the mix of services (eg. higher number of
cases with lower complexities was delivered due to the Influenza A (H1N1) Swine Flu
pandemic) also resulted in lower personnel and treatment expenditure. These costs
are likely to increase as the DHB commences its complex cases and elective volumes.
Some complex cases had to be outsourced for which the expenditure will be reported
in September;

Lakes DHB reported a surplus of $2.2M that was $2.0M favourable to plan. This
favourable variance was mainly due to devolved revenue received that is being held for
multiple fixed-term contracts yet to be implemented.
DHB Funder Arm Revenue Allocation (refer schedule two)
16.
Total revenue was unfavourable to plan by $3.8M (0.2%). Payments made by the Funder
arm to the DHB’s own Provider were $7.4M (0.7%) unfavourable to plan, while payments to
other providers were $8.8M (1.0%) favourable to plan.
17.
Whilst total payments to other providers were marginally unfavourable to plan the following
DHBs reported significant year to date variances to plan.

Lakes DHB reported a favourable to plan variance (6.3%) which was mainly due to the
yet to be implemented fixed term contracts (as mentioned above in paragraph two);

Counties Manukau DHB reported a favourable to plan variance (5.9%). The DHB
reports that this is mainly due to timing of revenue in the phased plan and is expected
to reverse over time;

Tairawhiti DHB reported an unfavourable to plan variance (8.4%) which was mainly
due to additional rest home and hospital level residential care costs and
medical/surgical costs.
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18.
Of the $7.4M unfavourable to plan payments made by the Funder arm to the DHB’s own
Provider, $4.9M of the variance was contributed to by Waikato DHB as a result of its
Provider arm performing 1300 additional procedures year to date (YTD). The funding of this
performance level will be capped once predetermined volumes are reached. There is no
material shift in deliverable volumes of services within Waikato DHB’s Non-Government
Organisations (NGO).
DHB Provider Arm Results (refer schedule three)
19.
Net results range from West Coast DHB with the highest deficit at 22.4% of revenue to
Waikato DHB with the highest surplus at 5.0% of revenue. In dollar terms Capital & Coast
DHB reports the highest deficit at $9.2M ($1.2M unfavourable to plan) and Waikato DHB the
highest surplus at $5.7M.
20.
Personnel expenditure, outsourced services expenditure and clinical supplies expenditure as
a percentage of revenue for the two-month period ended 31 August 2009 follow a similar
pattern to that reported for the period ended 31 August 2008.
Average Year to Date (YTD) Consolidated Accrued Full Time Equivalents (FTE) (refer
schedule four)
21.
The YTD average accrued Full Time Equivalents (FTE) for the sector were below plan (369
FTEs). This was predominantly driven by medical and allied health FTEs being 510 and 226
below plan respectively, highlighting the difficulties facing the sector in the recruitment and
retention of permanent staff in these areas and DHB planning based on near full
employment. This was offset against nursing FTEs being 354 above plan.

Canterbury DHB reported FTEs 182 (2.6%) below plan predominantly in nursing and
medical personnel. The DHB stated that part of the variance reflects unfilled positions
whilst others reflect the DHBs ability to set new establishment numbers resulting from
the line by line review;

Waitemata DHB reported FTEs 172 (3.2%) below plan predominantly in medical and
allied health personnel driven by recruitment difficulties;

Counties Manukau DHB reported FTEs 93 (1.8%) below plan predominantly in medical
(refer 9 below) and management/administration personnel (vacancies being held
open), offset against above plan nursing personnel (refer 10 below);

Capital and Coast DHB reported FTEs 167 (4.1%) above plan predominantly in the
areas of nursing (refer 10 below) and management/administration personnel driven by
the inclusion of HIQ Ltd staff and adjustments to sick leave accruals.
22.
Three of the twenty-one DHB (Auckland DHB, Counties Manukau DHB and Waitemata
DHB) contributed to 53.7% of the below plan medical personnel FTEs. This is driven by
recruitment difficulties.
23.
Three of the twenty-one DHBs (Bay of Plenty DHB, Capital & Coast DHB and Counties
Manukau DHB) contributed to 69.2% of the above plan nursing FTEs. This was driven by
higher than planned activity and adjustments to the sick leave accruals.
24.
The difficulties in recruitment and retention have driven the unfavourable to plan outsourced
costs as shown in the following personnel categories.

Medical personnel FTEs were 510 (6.8%) below plan while medical personnel costs
were $3.8M favourable to plan and outsourced medical personnel costs were $4.9M
unfavourable to plan;

Nursing personnel costs at $4.1M unfavourable to plan (both personnel and
outsourced costs) were contributed to by nursing FTEs 354 (1.5%) above plan;
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
Allied health personnel FTEs were 226 (2.0%) below plan while allied health personnel
costs were $2.1M favourable to plan and outsourced allied health personnel costs
were $0.1M unfavourable to plan. This is indicating a general lack of allied health
personnel at present;

Management/administration personnel FTEs were 49 (0.5%) below plan while
management/administration personnel costs were $3.3M favourable to plan and
outsourced management/administration personnel costs were $1.1M unfavourable to
plan. A Ministerial CAP is in place on the number of management/administration FTEs
for each DHB.
Annualised Average Consolidated Cost per FTEs (refer schedule five)
25.
The consolidated cost per FTE was 0.2% greater than the planned cost. A major contributor
to this unfavourable variance continues to be the higher rates being paid for Medical FTE.
The majority of DHBs report total average compensation per FTE within $4,000 of plan.

Capital and Coast DHB reported a variance that was $5,000 less than plan. The
variance was driven by personnel mix and changes to accruals.
DHB Balance Sheet (refer schedule six)
26.
Net cash held by the sector at 30 June 2009 was $288.9M, with debtors of $540.8M and
creditors of $836.9M. This indicates that if all the debtors and cash were utilised to pay
creditors, the sector would be left with a $7.2M cash shortfall.
27.
Working capital for most DHBs was negative and at a sector level was $902.5M. Only Lakes
DHB, Taranaki DHB and Northland DHB have material positive working capital and they
have all started or are about to invest heavily in major capital projects.
28.
The position reflected by the Balance Sheet at the end of a month will always show the worst
working capital position for DHBs as the sector receives one twelfth of its annual funding on
the fourth day of each month. The Current Ratio is also strongly influenced by the level of
the current provision for employee entitlements. The removal of the provision for employee
entitlements gives a Current Ratio for the sector of 0.92:1 which is marginally below the
norm of 1:1.
Capital Expenditure (refer schedule seven)
29.
The capital expenditure for the sector was below plan by $26.3M. This variance was
reflective of DHB’s lack of accurate phasing of planned capital expenditure and delays in
commencing projects.
30.
Bay of Plenty DHB reported total capital expenditure that was $10.3M behind plan. This
underspend was due to the phased timing of the Service and Campus Redevelopment
project.
31.
Six DHBs are currently undertaking major capital works – Bay of Plenty DHB, Counties
Manukau DHB, Hutt Valley DHB, Lakes DHB, Nelson Marlborough DHB and Waikato DHB.
Outstanding Capital Charges (refer schedule eight)
32.
Overdue charges as identified in schedule nine have been discussed with the DHBs.
Taranaki DHB is only part paying due to no additional funding having been received for
capital charge on 2007/08 revaluations. Auckland DHB has now devalued its 2007/08
revaluation therefore the outstanding capital charge will be eliminated during the capital
charge wash-up process in November 2009.
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Implications for Reducing Inequalities
33.
There are no implications identified in this report for reducing inequalities.
7