Getting Out Of The Current Health System Mess

Saturday, 8 March 2025, 4:45 pm
Opinion: Ian Powell

The above heading is the abbreviated heading of a presentation I gave to a virtual health summit organised by the Mayor of Whakatane Professor Victor Luca on 26 February.

The summit was an excellent and timely initiative for which Mayor Luca deserves special recognition. It also demonstrates the important role of local government in healthcare access and provision.

There was an impressive range of other speakers including:

• Professor Steve Keen, Head of School of Economics, History and Politics at London’s Kingston University, on how obsession with reducing government financial liabilities destroys its nonfinancial assets;
  Professor Robin Gauld – Executive Dean, Bond Business School, Australia on Why we need National health insurance if we are serious about equity;
• Professor Peter Crampton. Public Health, Otago University on adequate funding of primary and community healthcare being essential for health equity; and
• Terry Taylor, specialist medical laboratory scientist, Dunedin Hospital Laboratory on Where to from here? The diagnostic pathology conundrum facing our health system.

My focus is on how can New Zealand’s health system get out of the serious mess it now finds itself in. This quagmire is a consequence of poor political and health system leadership, particularly since the mid-2010s.

And now for my presentation (plus photos and images):

Getting out of the current health system mess, first through culture and function and then form and structure

After providing some brief historical context, I then focus first on the importance of developing the right culture and functions. I then discuss the form and structural changes that would better enable this culture and its functions. This includes the role of local government. I conclude with a brief comment about the importance of hope and its dependence on strategy.

However, before going further I have two observations that sit behind much of this presentation. The first is the expression “If you don’t take the temperature, you won’t find the fever” by Samuel Sheen (a pen name for an eminent American psychiatrist).

The second is a description expressed to me several years ago by an anaesthetist who graphically described her then chief executive as “All fart and no shit.”

Historical Context

New Zealand’s universal health system arose out of the Social Security Act 1938, over a decade before the formation of the National Health Service in the United Kingdom.

It began with hospital boards running public hospitals leaving the then Department of Health responsible for primary care and population health. Hospital boards lasted for 45 years before being incrementally replaced, from 1983, by area health boards which also included population health responsibility. It was also expected that over time they would become involved in primary care.

In 1993 area health boards were replaced by crown health enterprises running public hospitals. They were required to function in a competitive internal market.

In 2001 cooperation returned with the formation of district health boards responsible for hospital, primary and population healthcare for their geographically defined populations. Integration of community and hospital care was a central feature. DHBs continued until their replacement with Te Whatu Ora (Health New Zealand – HNZ) on 1 July 2022.

Principle of Subsidiarity

From 1938 to 2022, despite the structural changes, the health system had been underpinned by a basic but profound principle called subsidiarity. Reduced to its critical essence it means that things should be done locally except when they are best done centrally. It is the same principle that underpins the relationship between central and local government in many countries, including New Zealand.

This principle recognised that because healthcare is overwhelmingly provided locally, largely through general practices and local public hospitals, a significant level of decision-making should reside at this level.

DHBs continued for over two decades. Much of their first decade was characterised by a relatively ‘hands off’ role by central government. In relative terms funding was on the right side of the ledger with a particular emphasis on primary care in order to increase patient access.

The rest of their lifespan was characterised by increasing central government control with a changing leadership culture to reinforce this, along with relative underfunding.

Simpson Review

When Labour became the government in 2017 (in coalition with New Zealand First and the Greens) it inherited a health system in crisis compounded by severe workforce shortages that had begun with hospital specialists but extended across all the health professional groups.

Among the most critical factors behind this inherited crisis were the following:

• overall health demand was rising from the early to mid-2010s;
• acute (should not be deferred) patient demand was increasing at a higher rate than population growth (this was behind hospitals reporting 100% occupancy and bed blocking as well as the prime common factor behind rising DHB deficits from the mid-2000s);
• the combination of increasing population, ageing, and increasing poverty-related illness; and
• an absence of specific workforce recruitment and retention strategies.

Setting up the review of the health and disability system led by Heather Simpson was a good move but it became a pretext for not addressing these inherited pressures. Her review affirmed (among many other things) that:

• although reduced in number, DHBs would remain critical statutory bodies;
• there was a serious lack of national cohesion in the health system; and
• the Health Ministry’s funding and planning responsibilities should be transferred to a new national bureaucracy, Health New Zealand, sitting above the DHBs.

From Simpson to system overturn

The Labour Party went into the 2020 general election campaign committed to implementing the principles of the Simpson Review. Continuing with DHBs was one such principle.

But this radically changed with the announcement of a massive overturn of the health system by new minister Andrew Little in April 2021 to take effect within 15 months. This was also undertaken in the midst of the pandemic; a recipe for failure.

The announcement included:

• abandoning the principle of subsidiarity that had underpinned our health system since 1938 with the disestablishment of the DHBs;
• radically changing the role of the recommended Health New Zealand by requiring it to also assume operational responsibility for local healthcare delivery previously undertaken by the DHBs; and
• replacing Simpson’s emphasis on cohesion with a de facto ‘command and control’ culture delivered by structural change.

This did not mean that prior to 2022 New Zealand had a decentralised health system. With the both overt and covert powers of health ministers and central government, it was one of the more centralised universal health systems internationally, including the National Health Service in the UK. However, the restructuring meant the removal of the level of decision-making where it was most needed (locally) and its transfer ‘upstairs’.

By the time of the change in government following the October 2023 election, the health system was in a much deeper and thicker mess than in 2017. In particular:

• many more hospitals were reporting 100% occupancy. In 2022 this occurred more than 600 times (a rough daily average of two hospitals);
• severe workforce shortages continued and became entrenched;
• overcrowding  in emergency departments had worsened;
• a command-and-control culture (vertical managerialism} prevailed;
• there was a significant loss of operational experience in how the health system works, particularly public hospitals which, because of the extra complexity and acuity they have to deal with, is where most things can go wrong and cost more; and
• Health New Zealand was operationally dysfunctional with continuing internal restructuring, disempowerment at the workplace level, and confused accountabilities. The gap between it and its health professional workforce was much greater than between the latter and the former DHBs.

Health system today

Regrettably the neglect of the health system has continued under the current government which has simplistically reduced its diagnosis to:

• the biggest crisis is Health New Zealand not keeping to budget;
• the cause of this crisis is bloated bureaucracy (so-called  back office functions); and
• Commissioner Lester Levy will find the solutions.

There are two main problems with this diagnosis:

1. Keeping to budget means cutting spending in order to achieve $1.4 billion savings in the current financial year. The government argues that this won’t negatively affect both the clinical frontline and patient care. However, it fails to recognise the centrality of the integrated relationship between so-called’ back office functions and the clinical frontline. And there is no legitimate argument that the clinical frontline and patient care have not been negatively affected.
2. The priority issue facing the health system is reducing long hospital waiting times for planned diagnosis and treatment. But this isn’t the priority issue. Instead it is the increasing volume of acute hospital admissions and the increasing complexity of patients’ conditions. That drives hospital bed-blocking, which in turn drives emergency department overcrowding and increased waiting times for planned care.

Culture and function

The crux of the problem confronting Aotearoa’s health system today is the failure to recognise the need to reconciling two health system complexities – the complexity of healthcare provision and the complexity of healthcare structures.

The more these complexities are aligned, the better the health system performs and the better for patients and the health workforce. The less they are aligned, the more the counterfactual.

Culture

The culture transformation is to first incorporate the abandoned principle of subsidiarity into the new structure. This would involve recognition that decision-making processes should be closer to where healthcare is overwhelmingly provided – in communities and local 24/7 hospitals. That is where the more robust and sustainable decisions are able to be made.

Linked to subsidiarity is empowerment of health professionals across hospitals and communities. This intellectual capital is where the mastery of complexity and the introduction of sustainable innovation through continuous quality improvement is located. Health system complexity means continuous change. Today’s silos were yesterday’s innovation. Enable the use of complexity expertise in diagnosis and treatment for complex systems improvement.

A third component of overriding cultural transformation should be recognition of the significance of the external social determinants of health which, more than anything else, drive health demand and cost. While these determinants are more effectively dealt with through legislation and government policies, particularly in the case of healthcare access, the health system can play a mitigating role.

Functions

This culture shift can then trigger off a series of ‘functions’ beginning with patient-centred care which is about treating patients with dignity and respect and involving them in all decisions about their health. Patient-centred care is usually seen in the context of good clinical practice in the diagnosis and treatment of individual patients.

However, it should also be elevated to the level of a health system function. That is, ensuring that there are the right workforce and technological capacities and capabilities to deliver patient-centred care for all. It is linked to the right of patients to timely access to quality healthcare.

Another needed function is strengthening the integration of healthcare between care in communities and care in hospitals. This includes health pathways between communities and hospitals as first developed in Canterbury DHB. The success of these pathways was because they were clinically led and developed. If they hadn’t been they would have been reduced to rationing tools.

This integration function should also include developing local integrated care systems, including polyclinics providing community and non-acute hospital care. We need a shift from the divide between community and hospital care by recognising the value of structures that blend both within the constraint of what makes good clinical sense.

This leads on to the function of distributed clinical leadership. Formal clinical leadership positions are important but they are a small part of a much wider form of system leadership. That is, empowered clinical leadership is distributed among the whole of the health professional workforce so that their potential for systems improvement has enough oxygen to be realised.

DHBs had a statutory responsibility for the health of their geographically defined populations. The Simpson Review proposed strengthening this through the establishment of community based localities. With the abolition of DHBs and the subsequent diminishment and then forgetting of localities, there is now a vacuum.

It is important therefore to enhance the role of local government in healthcare access. Local government can’t replace the former responsibility of DHBs, particularly in provision. But it can provide advocacy and voice. We are already seeing this. Examples are councils in Dunedin, Selwyn and Kāpiti where I live.

Functions such as patient-centred care, empowerment and distributed clinical leadership can’t be achieved until the current severe health professional workforce shortages crisis is addressed. The health system is plagued by widespread shortages across almost all the occupational groups, each with their own distinct labour markets. Workforce development and wellbeing should be a function with specific targeted strategies developed as a consequence.

Form and Structure Adaptation

It is at this point, not before, that form and structure should come into play. They are what you wrap around culture and functions in order to better enable them and to align the complexities of healthcare provision and structures.

The last thing the health system needs is a major restructuring. The health workforce and the public have gone through enough. But by transforming the leadership culture there is the potential for reversing the downwards slide of the health system towards further decline.

This begins with returning to some of the key features of the Simpson review that were abandoned by the former government. This includes a cultural shift from ‘command-and-control’ to cohesion. It means being consistent with, but taking further, the direction that former health minister Shane Reti was hoping to go.

When the final report of the Simpson Review was released in 2020 I was skeptical of some aspects. I considered that it lacked sufficient explanation to justify some recommendations such as localities, reduced number of DHBs, and dividing the health ministry in two to create HNZ.

In respect of the third recommendation, my view was that the problem was the leadership culture of the ministry. The focus should have been on resolving that problem rather than creating a new bureaucracy.

But this is 2025, not 2020. Getting ahead requires recognising the structures we now have rather than what we used to have. Neither the health workforce nor the public deserve to be put through another destablising system overturn.

So it is a question therefore of incorporating the above mentioned culture transformation and functions into the existing structure by adaptation, not restructuring.

The four regions of Health New Zealand, which now have their own deputy chief executives, should be empowered to have similar levels of decision-making authority as had the former DHBs. Local government could also have a positive role in giving voice to community needs at this regional level.

This would mean transferring much of the responsibilities to the regional level. The national leadership of HNZ should be consequentially downsized to providing national cohesion and certain functions that are best conducted at a national rather than regional level.

The immediate benefit would be more in improving collaboration between public hospitals. With the right systems culture and functions, significant clinical and fiscal gains can be made here.

However, in my view, more gains can be made in in the relationship between primary and other community based healthcare, on the one hand, and local 24/7 acute hospitals on the other. The success of the former Canterbury DHB’s clinically developed and led health pathways is testimony to this, including bending the curve of increasing acute hospital admissions.

But there would be a need for an appropriate level of decision-making at this local or district level to give it meaningful effect. Perhaps localities as originally envisaged by the Simpson Review (but without consequential disestablishment of primary care organisations which have proven to be the structural glue holding primary together today). Perhaps also based on, or linked to, local government at this level.

No matter how high the level of despair is within and about the health system, we need hope. But as American linguist and public intellectual Noam Chomsky once said: if you don’t have hope, you can’t have a strategy. My hope is that what I have just outlined provides a basis for such a strategy.

© Scoop Media

Ian Powell

Otaihanga Second Opinion is a regular health systems blog in New Zealand.

Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Association of Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.

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