Health NZ is struggling with a $2b IOU to staff, a deficit of $1.76b, and has just announced fresh staff cuts, but also spent $72m on contractors and consultants. Photo: RNZ
Health NZ spend $72 million on single IT project
Health New Zealand spent $72 million on contractors and consultants for a single IT project, in the lead-up to moving to get rid of over 1000 positions for IT employees.
One recruitment company alone, Robert Walters, was paid $17m in the last two years on the project. Robert Walters declined to comment.
The big spending on the outside hires is set to continue into next year, though Health NZ said it expected more staff to be taken on, too.
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Its plan for cost cutting by shedding hundreds of staff was expected to save just on $13m a year, according to Te Whatu Ora Health NZ's consultation document released on Wednesday.
The axe hovers over whole teams of the staff, at the same time that at least two projects are looking to extend contractors' contracts.
The cost-cutting plan had also sparked fears a groundbreaking new AI app, that could almost double the rate at which mental health patients were assessed, was in jeopardy.
"It's one of the most innovative things we've seen come out of Health New Zealand since it was formed, so that would be extremely disappointing ... for this ... to be shut down," said senior doctors' union conference delegate and psychiatrist Carin Conaghan.
An Official Information Act request unearthed the $72m spend on contractors and consultants for RNZ, on the eve of the release of the cost-cutting proposal, which aims at saving Te Whatu Ora $100m a year, under government orders to make big savings, to put the brakes on a threatened $1.7 billion deficit by next July.
The big spend went on $37m for consultants and $35m for contractors, from mid-2022 to September this year, to work on the Health Sector Agreements and Payments Programme (HSAAP).
The HSAAP project has been in strife and delayed, and had its budget increased from $116m to $140m.
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It was meant to be about finished by now but was currently delivering at four percent capability - processing just $400m of the $13 billion of annual billing it needs to handle. This could grow to $4 billion by next June, HNZ told RNZ.
"The project was forced to look in June at setting a new baseline, because it was "behind where it should be".
"The rating on this Programme should be RED," the June HNZ report quoted a Treasury review, adding it was on a positive track, despite "the difficulties uncovered in recent months".
Half of the critical IT hardware in New Zealand hospitals is out of date, experts have warned. Photo: 123RF
HNZ withheld from RNZ what rates it pays the outside hires on commercial grounds.
It also refused to say how many people had been in contracts for more than six months, stating this was too much work to figure out.
Contractors will retain a role at Health NZ under its plan issued on Wednesday to axe IT employees.
It envisaged a "flexible resourcing model with a mix of HNZ staff and contracted resources provided or trusted partners", the consultation document said.
It revealed that rising staff costs, including growth in contractors, was the "primary" reason for an operating deficit that stuck stubbornly above $140m a month through to October.
The document mentioned contractors a single time.
HSAAP has extended the contracts of some contractors, sources close to the project say.
In addition, this is also happening at another massive IT project, the slowgoing one to pay back staff for Holidays Act arrears.
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In it, five out of 14 health districts have sought approval to extend contractors' hires, an update report showed. Northland, Wellington and Whanganui all faced a looming crisis if contracts were not extended, a project update showed.
"High immediate project risk - finalising the project budget," Northland's report said.
"If this is not concluded in early November there is a project resource risk, as the contractual agreements for 70 percent of the team are due to terminate on 30 November 2024."
Wellington's said: "If contractors' contracts are not extended past December there will be no resourcing in place to complete the programme of work for next year, for all three regions [Hutt and Wairarapa, too]."
Whanganui and Canterbury's said something similar.
Waikato was using contractors to backfill permanent staff seconded to the payback project. "If these backfill resources contracts are not extended, the project will lose key resources."
'Benefits outweigh the cost'
HNZ defended its use of contractors and consultants.
"Health NZ engages consultancies only when the benefits clearly outweigh the costs," manager Mark Woodard said, in the OIA response on the HSAAP project.
Photo: Supplied/ Waikato Hospital
The consultants paid the most on the project were: Deloitte (almost $10m), Infosys and Circini (about $7m each).
The next highest paid contractor after Robert Walters was Presto Resourcing ($4m). Many contractors were recruitment agencies that provided backfill of permanent roles, a spreadsheet indicated.
Woodard said Covid and restructuring in the health ministry had complicated the start of the project, and staff did not have the expertise, knowledge or capacity to cope.
It "has been driven by necessity, to manage this complex and large-scale initiative, without overburdening existing resources".
The project would likely take on more permanent employees next year, he added.
HNZ did not say how this related to the mass cost cutting across its IT department.
AI app fears
Within one small corner of data and digital, a tiny team had been working on the Tuhi AI app.
A senior doctors' union conference delegate and senior psychiatrist Alain Marcuse of Wellington said the trials indicated Tuhi could almost double how many patients a psychiatrist could see in a day to about eight.
"It's one of the most promising technologies coming up", he said.
Carin Conaghan said lots of doctors were excited by it, and her team had hoped live trials would start soon and Tuhi would be rolled out next year, but this was now in doubt.
"Releasing clinical capacity and patient safety has yet to be fully determined, but I think the initial trials show that it's absolutely there," Conaghan said. "It's groundbreaking."
They believed Tuhi had cost only $100,000 to date to develop.
Asked if the Tuhi development team was slated for disestablishment, Te Whatu Ora said only that: "Tuhi is currently being tested, with a formal evaluation underway to assess the app's efficiency and effectiveness. Decisions on the future of the programme won't be made until the evaluation is complete."
It needed no special hardware, and being locally developed, was culturally sensitive and did not run into data jurisdiction problems, the union delegates noted.
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