After pointing the finger at senior leadership over Health NZ's finances, Prime Minister Christopher Luxon says everything is on the table when it comes to those managers' jobs.
It will be up to the Commissioner Lester Levy to make those decisions.
Luxon had stood alongside Health Minister Shane Reti a week earlier to announce the Commissioner's appointment to replace the board of the nationwide health body, with Levy - the chair - moving into the role.
The pair had warned of serious concerns around oversight, overspend and a significant deterioration in financial outlook, saying Health NZ was overspending by $130 million a month and on track for a $1.4b deficit by the end of the year.
He had also claimed there was a bloated bureaucracy, with 14 layers of management between the chief executive and the patient - though Reti's office has been unable to substantiate this.
Luxon this week said he had got that information from the Minister. He said there had been a lack of financial control at Health NZ and "no great understanding or literacy around cash flow analysis whatsoever".
PM Christopher Luxon with Health Minister Shane Reti. Photo: RNZ / Calvin Samuel
The government had dealt with difficult information as a result, he said, and that's why they installed Levy as commissioner - to make sure it was a high performing organisation with every dollar working hard.
"The board not being aware and not being financial literate... and not being able to get a financial picture in itself is a real big problem."
Willis referred to a letter she had sent to Reti on 19 March, "where we were starting to get information through that there were real financial problems at Health NZ whereby the forecasts they had given for what their performance would be were not being met".
The letter highlighted concerns from Willis about the organisation's financial position, and productivity in hospitals.
"This letter is to record in writing my concern about two aspects of performance at Health New Zealand and propose a way forward," it said.
In it, Willis noted adjustments made after auditing of Health NZ's books revealed a shortfall in the surplus expected for the 2023/24 financial year compared to the $650m that had been expected.
"I understand that Health New Zealand is currently forecasting a surplus of only $507m. I am informed that this is due to a range of one-off or unanticipated (at least by Health New Zealand in its budgeting) costs which the Ministry considers that Health New Zealand should have managed within baselines."
The surplus came in part from a one-off accounting delay where writeoffs were included in the 23/24 year instead of the previous year, which meant last year was technically a deficit.
"Therefore, were it not for the one-off surplus my understanding is that Health New Zealand would be forecasting an operating deficit of around $150m less than the ministry's expectation for 2023/24. This is of concern, particularly with relation to how it will impact Health New Zealand's opening financial position for the 2024/25 financial year."
Her concerns about hospital and specialist productivity said only one measure - patient caseweights per clinical and support FTE - had been provided for only one part of the system, but it showed accelerating declines in recent years.
"This is concerning because any feasible funding track for Health New Zealand requires the entity to achieve modest productivity growth each year to offset the cost of increasing technology and patient expectations."
Willis said Treasury raised the matter with Health NZ's board on 23 February "and again, got a sense that the Board was not engaged with the detail of the issue".
"I am especially concerned that as far as my officials can tell the Board had not, for some months at least, been receiving any information that would allow it to monitor the productivity of the most expensive part of its business - and had not asked for this information."
She also noted Health NZ had not reported delivery data via its monthly reporting "to monitoring officials and, we understand, to the Board," since August 2023.
Willis on Monday said in her view the board had not even known what questions to ask to get the right information, and it only became clear over time how bad the problems were.
"Only by our officials pushing very very hard, did the full picture emerge."
Luxon said the government had used the levers it could and brought in the commissioner.
"There's been a lack of financial control and there's actually been no great understanding or literacy around cash flow analysis whatsoever, to even get an understanding of cash flow from the system has been incredibly difficult.
"The board not being aware or not being financially literate as to what was going on and the situation that they were in, and not being able to get a financial picture in itself as a real big problem."
He said both he and Willis had met with the commissioner and would continue to do so on a regular basis, but he expected changes.
"A management team with focus and with clarity will do different things with the same dollar than a previous one, and so we're expecting the commissioner - and that's why we've given him a very clear letter of expectations - to say 'protect the frontline services, but make this for goodness sake, a high performing organisation'."
Asked if heads would roll, he said those were decisions for the commissioner, but "well, everything's on the table because I want a high performing organisation ... when an organisation's not working, better to make the tough call and make the intervention".
"I'm saying it's an underperforming organisation, I've changed the bit that I can change. I've stepped it up from just replacing a chair and a board to actually putting a commissioner in with some deputy commissioners, and they have the power and the ability to be incredibly nimble, incredibly agile, to fix things fast."
Luxon could not give a specific timing on when Health NZ might have the capability to provide financial information on a monthly basis as the previous DHBs did.
Willis defended her Budget's spending on the health system, saying the amount of funding provided was consistent with the advice received for "what would be needed to meet their cost pressures"
"In fact, Treasury advised me that we could give them a lower amount of cost pressure funding... we opted to stick to the commitment that was in our fiscal plan".
She did not directly answer whether Health NZ had sought more than the amount provided to it.
PM 'expressing so little confidence in one of his ministers' - Hipkins
Labour leader Chris Hipkins says Luxon threw Reti under the bus "rather brazenly".
"I think it was the prime minister himself who introduced the concept of 14 layers of management... I think it's pretty phenomenal actually that we see a prime minister expressing so little confidence in one of his ministers only a week after appearing beside him on the stage."
Hipkins said he would be "astounded" if Reti had not been getting financial reports, and it would be a major issue of Reti's competence if he was not.
"He's been the Minister of Health for eight months and is he seriously trying to tell the country that he hasn't been getting monthly reports on the health system's financial health or otherwise?"
He said the health minister and finance minister had previously had monthly meetings to go through Health NZ's finances under his government.
"I understand that Nicola Willis cancelled those meetings when she became the minister of finance, perhaps she should be asking herself whether that was the right decision."
However, Willis' letter showed those meetings were continuing - at least as recently as March.
Dargaville staff shortages
Asked about Dargaville Hospital not being fully staffed, Luxon said they were making "good progress" on staffing and it was about delivering the right staff into the right regions which the government was "fine tuning".
"This is a healthcare system that spends almost $30b in a year ... we know there's always more for us to do in the healthcare space but I just say to you I think we're taking action pretty quickly."
Given it was unable to be staffed with a doctor overnight, Luxon said whether it remained open was an operational decision for the hospital to make, but he expected Reti to make sure it was a safe operating practice through Health NZ, and "if it's not I expect him to take action".
Hipkins said it was an "absolutely appalling answer, the reality is we've got to make sure we're fully staffing our health system".
It was always challenging to fully staff the health system if it had been underfunded, Hipkins said, and it was clear from Willis' response that Health NZ had received less in the Budget than it had asked for.