To the Chair of the CCDHB in response to the Issues Paper on Funding for the Newtown Union Health Service, dated 24 July 2012.

From Professor Don Matheson

Massey University

102 Adelaide Rd

Newtown, Wellington.

03/10/12

Dear Virginia,

I attended your Board meeting last month in support of the United Community Action Network and presented an overview of my concerns that the Board has lost its focus on equity and fairness for the most vulnerable people under its care. My concerns have since been reinforced on reading the recently released information relating to the Newtown Union Health Services.

This letter explores the issues raised in the communication between the C&C DHB and the NUHS in the winter of 2012. In response to concerns raised by Drs Gray and Coppell, the DHB produced a paper entitled: Funding for Newtown Union Health Services. (Public Excluded), Dated 24 July 2012, prepared by Alison Hannah, Senior Manager Primary Care and HHS Services.

A lost opportunity, a dishonoured relationship.

The paper on a number of occasions alludes to, but does not expand on, (1see para 3.1.1, 4.3.1, 4.4.1,) the unique relationship between NUHS and the Board over the last 25 years, and the innovation that this relationship has given rise to in the areas of mental health care, refugee care, management of chronic illness and maternity care. There has arguably been a closer integration of Hospital and Community services in the NUHS model than in any other service in the country – a direction the current system is supposedly trying to emulate.

However this rich relationship, and the value it has and continues to deliver to the New Zealand health sector, is not acknowledged by the Board. Instead, the Board’s funding decision tells NUHS to stop being an innovator and behave like all other practices in the

1

1 1. Hannah A. Funding for Newtown Union Health Services. Wellington Captial and Coast District Health Board 2012 24 July 2012.

region. This is a lost opportunity for NUHS, the Board, and particularly the people of Newtown.

The Strategic Decisions of the Board are disadvantaging Primary Health Care.

(Para 2.2.)

This quote raises the following questions:

Why was the “primary care community” targeted for “savings”, when DHB funding increased every year for the last three years?

The Board has decided to decrease expenditure on Primary Care. As can be seen in Table 1, which is taken from the Board’s Statement of Intent released in December 2011, over the period 2010 to 2014 the Board intends increasing “Governance” by a massive 18%, growing the hospital expenditure by 5.6% but decreasing primary health care funding (funder arm) by 1.5%. In effect you are moving resources from primary care to fund the hospital, at the same time increasing you’re spending on “the back room”. I am keen to see the rationale for this cost shift as it appears inconsistent with the government’s intention of moving services to “the frontline”.

Table 1: The DHB intended expenditure 2010 to 20142

Expenditure category

182 8/11 167 7/12 154 10/13 143 11/14 Percentage Increase

DHB provider arm

583.3m 590.7m 602.5m 616.2m Plus 5.6

Funder Arm 252.2 249.1 253.3 250.7 Minus 1.5Services for other DHBs

64.6m 65.1m 64.1m 64.8m No change

Governance Arm

7.8m 9.0m 9.0m 9.2m Plus 18 % percent

Total 907.9m 913.9m 928.9m 940.9m Plus 3.6%

Were savings being made across the DHB, or were they concentrated in one part of the DHB?

2

2 C&C DHB (2011) Statement of Intent 2011 -2014. Reviewed at: http://www.ccdhb.org.nz/aboutus/Documents/SOI_2011.pdf

The answer is clear that cuts are concentrated on the Primary Care Sector. The deficit the Board is facing however is not coming from the Primary Care Sector. It is mainly coming from the hospital sector:

Table 2

Hospital Deficit:

2009 2010 2011Hospital deficit 64.2m 46.5m 31.2mPercent of Total deficit

97% 98% 99%

In fact the DHB has increased its expenditure on Hospital services by nearly 10% from 2009 to 2011 (see table 3.)

Since 2009, there has been a 9.6 % increase in expenditure in the hospital sector, while the primary care “community” in the last 2 years has faced a 6 percent reduction.

This indicates a failure on your part to manage the pressures inside the DHB, and a failure to support “frontline services”. The primary care sector is being used to cross subsidise the hospital.

Table 3: Expenditure by year3 according to the annual reports:

2009 2010 2011 Percentage increase: 2009 -2011

Hospital 540766 575356 592837 Plus 9.6%Primary health and community

212781 199881 Minus 6%

Total Exp 831101 888929 917999 Plus 10.5%

How were the savings designed to have “the least impact on high needs populations”?

The paper released by the Board says the savings would have least impact on high needs populations. Unfortunately no information has been provided to indicate how this was decided, or how the high need populations were identified, or what analysis has been done to ensure there were no adverse impacts of the funding cuts.

3

3 C&C DHB Annual Reports 2009, 2010, 2011. Reviewed at: http://www.ccdhb.org.nz/news/publications.htm

These expenditure shifts do not present the whole funding picture for the Board. Shifting money from the Board’s primary care sector to its hospital sector is not a true “saving”. It shifts cost from the DHB on to the community, who then pay more for ‘out of pocket’ expenditure. For some in the community, these costs can be absorbed. For those on low incomes, particularly those with chronic conditions, it means they are less likely to access services, and are effectively denied access to appropriate health care4.

Board Paper Disingenuous

The discussion section of the Board’s paper is not a dispassionate discussion of the issues and does not present any findings, recommendations or conclusions on which the Board has based its decision. It makes a number of comments, some of which are disingenuous, that fail to address the core concerns of Drs Gray and Coppell, that low income people in Newtown will be impacted by the Board’s decision.

(Para 3.1.2)

“The decline in enrolees continues” the DHB paper says. This is a very misleading statement. In fact the graph presented shows the population increasing from 5629 to 6539 over the period, with fluctuations in between.

4

4 You may be interested in the recent Commonwealth Fund survey of sicker adult New Zealanders demonstrated that 18% did not seeker help from a doctor because of cost concerns. Commonwealth Fund (2011) International Health Policy Survey of Sicker Adults in Eleven Countries. Retrieved from: http://www.commonwealthfund.org/Events/2012/International-Health-Policy-Survey.aspx

(Para 3.1.3)

The paragraph and graph above present’s ethnicity data. However unlike the previous section, it fails to comment on the profound differences between the NUHS populations and those of interim and other access practices. In fact the graph demonstrates the unique ethnic diversity, with 38% of the population of Africa/ Asian or Middle Eastern ethnic origin. Of course no other practice in Wellington has this ethnic mix, nor would you expect to see it reflected in a national funding formula.

(Para 3.2.2)

5

Here the paper accurately identifies the reason why NUHS has a funding problem. However this reason is not referred to later in the paper. In fact in 4.1.1 below, the paper ignores the case it had built up showing the high ethnic and other needs of the population, and implies primary health care funding should be spread evenly across providers according to a formula that does respond to the unique features of the service.

Para 4.1.1

This statement implies that the problem is NUHS received “disproportionate” funding compared to other practices. The issue or fairness across practices should not be confused with the issue of fairness in relation to the needs of the population being served. As the paper itself argues, the measures used in the funding formulas fail to adequately fund niche services such as NUHS. The experience of the NUHS medical staff, backed by the observations of visiting clinical staff from the hospital, all point to an extremely high level of illness in this population, which is not reflected in the funding formula. To adequately explore the gap between health need and funding for services, the Board would need to consider co-morbidity of the different populations. Co-morbidity drives service demand and subsequent costs of service provision.

The implication is that geographical deprivation quintiles, Maori and Pacific ethnicity, do not describe accurately the level of need. As noted above, 38% of NUHS population is neither Maori nor Pacific, many of whom do not live in high deprivation areas, but they do have a high level of need. I would hope the role of a Board is not to blindly follow the National Funding Formula’s but to respond to the unique needs of the populations it services.

6

Para 3.2.3

The argument that there are practices whose needs are greater than NUHS but who receive less funding, is very revealing of your Board’s approach. Firstly, the inadequacy of the formulas has already been discussed above. Secondly, the overall funding of a practice with 60 to 90% (XXXXX and NUHS) of high needs clients is structurally different from one with less than 30% in this category. The funding issue for the practice is not the overall “numbers” but the percent of high needs clients on the register. The ability to cross subsidise, including ‘optimal’ use of insurance cover etc, enables a practice to “carry” high need clients, provided they make up a minority of the practice population. No cross subsidisation opportunities are there for practices where the majority of their clients are in the “high need category”.

The logical consequences of this approach by the Board would be that:

1) Practices with high levels of need would be advised to increase the mix of clients so they have a more economically viable “spread” to fit with the funding formula. In fact

7

this is already beginning to happen in the NUHS service which has responded to the funding cuts by increasing user charges, which, over time, will change the mix of patients to a more “viable” mix, at the expense of access for those on the lowest incomes.

2) The Board should be addressing the funding needs of practice XXXXX which has 93% of its clients as high need. The fact that it has identified a practice with greater needs than NUHS is not an argument to reduce NUHS funding, but to address the funding needs of the practice concerned.

The fact that the paper does not explore these options raises the question as to the basis upon which these decisions are being made. Is the Board interested in reducing the impact on those with high need, or only interested in putting up an argument to attack NUHS funding?

(4.2) After hours and Emergency:

The section 4.2 describes increasing use of referred emergency service requirements by NUHS clients as a result of the cuts the Board has made since July 2011. In the last year, 87 extra people NUHS were seen in the ED, as opposed to the previous 12 months. The Afterhours services is dealing with more than double the number of NUHS clients as it was in 2009/10. This is likely to be a direct result of the Board’s funding cuts in the 2011 year.

In other words, this section supports the arguments put forward by Gray and Coppell – the cuts to NUHS are impacting negatively on other Board services. The extent of this impact is likely to be even greater on obstetric services (and their cost to the Board) as discussed below.

Disintegrating Maternal and Child Health?

Obstetrics care discussion in section 4.4 suggests the Board takes no responsibility for this section of the population. It on the one hand acknowledges the role NUHS is playing, and then describes it as a funding “anomaly”. It makes no mention of the increased costs CCDHB will now bear as it is forced to take responsibility for these high need group of women.

NUHS had developed an integrated maternal and child health service to address a high need group. Sadly the Board failed to recognise this. The replacement of the Newtown Obstetric service, that developed a comprehensive approach to meeting the needs of these women as part of integrated service provision, is unlikely to be adequately replaced by a hospital based service. The obstetric outcomes for the Board’s neediest women should be monitored closely to see who will pay the real cost of addressing this “anomaly”.

8

Para 4.4.3

Although the paper has no “conclusions” its final remark is particularly insensitive to the realities of managing small providers:

So a 7.8% reduction in funding is “modest” in the Board’s view? This is an ill judged comment coming from an organisation that is unable to manage its own deficit within an annually increasing funding allocation (the Board has a 3.4% deficit, and its funding has increased by 10.5% over the last three years).

In conclusion, the Board paper released in an effort to “justify” its reduced funding of NUHS services fails to establish any clear rationale for doing so. In addition, it reveals a more fundamental strategic error by the Board where you have decided to reduce your Primary Care investment in your efforts to address the hospital deficit, and that the NUHS service suffers collateral damage as a result of this strategic decision. The absence of any analysis of the impact of these decisions on the region’s most vulnerable population is particularly concerning.

As the Board’s response has been inadequate, I am now asking for further information under the Official Information Act 1982 so that I can better understand your thinking and decision making:

Questions 1. Please provide comparable figures tracking expenditure by the DHB from 2007 to

20012 in the following categories:

Total DHB expenditure.

• Hospital Expenditure

• Other Community Services (DSS, MHS, Dental)

9

• Referred services

• Primary Health

• Governance

2. Please provide a detailed rationale, including the expenditure by item, for the 18% increase in expenditure on Board “Governance” as described in your Statement of Intent.

3. Please provide the policy documents, strategic papers, issues papers, prioritisation frameworks presented to the Board, the CEO or the Executive team where the background or justification was made to the decisions to increase hospital expenditure and decrease primary health expenditure. This relates to any of the years 2009 to 2012. Please include all policy papers presented which discussed funding options and prioritisation, including those that were not subsequently adopted as Board policy.

4. Please provide the policy documents, strategic papers or issues papers, presented to the Board, the CEO or the Executive team where the background or justification or consideration or analysis was undertaken on the impact of funding changes in primary health on high need populations. This relates to any of the years 2009 to 2012. It includes all papers presented which discussed funding options for primary care, including those that were not subsequently adopted as Board policy. This request includes any modelling that was undertaken of the likely impact of different expenditure scenarios. It includes (but is not restricted to) the documents leading up to the 2011/12 agreed savings plan, documents supporting the Board’s decision to reduce the level of “Improving Access” funding, the “in depth service review” and “Value for Money Assessment” referred to in the issues paper of 24th July 2012.

I look forward to your response in 20 working days, and a continuing dialogue with the Board on these important issues.

Don Matheson.

10