27 Aug 2018

Ministry rejects need for inquiry into hospital building spend

10:13 am on 27 August 2018

The Health Ministry is rejecting any need for an inquiry into how Middlemore Hospital built a multi-million-dollar meetings' centre when it needs more operating theatres.

Middlemore Hospital

Photo: RNZ / Claire Eastham-Farrelly

That's despite the ministry saying it appeared the construction of the Ko Awatea One centre, which opened in 2011, broke the rules around getting its approval.

Despite an ongoing ministry audit into spending on the related Ko Awatea Two lecture theatre at Middlemore, which also breached the government's spending rules.

Middlemore invested campus space and more than $20 million in the two Ko Awatea blocks, as part of a strategy to shift the healthcare focus away from the stretched hospital and into the community.

Its IT strategy around this shift was also unsuccessful, resulting in an $8.6mi write-off.

In emails released to RNZ under the Official Information Act, the Counties Manukau District Health Board told the ministry it would not be doing an inquiry into Ko Awatea One.

"We do not have the resources or the time to launch an investigation into this.

"We leave it in your hands to decide if you wish to investigate it or not," then acting chief executive of Counties Manukau District Health Board, Gloria Johnson, told top ministry manager Michael Hundelby in May.

This came within days of Dr Johnson learning for the first time that Ko Awatea One had broken the spending threshold of $10 million.

Dr Johnson did not tell Mr Hundleby in the email that it was her own senior manager who said this; instead, she said it was RNZ that believed this was the case.

Government rules require DHBs to get regional, ministry and minister approval for projects worth more than $10 million.

Previously released documents showed Ko Awatea Two actually cost $12 million, but managers deliberately left off key costs to make it appear it was under the $10 million threshold.

Mr Hundleby replied that the ministry would consider if it needed to look further into Ko Awatea One's construction.

"It appears though it would be another example of non-compliance with the $10 million threshold," he emailed her in May.

The health board received no further advice or correspondence on this from the ministry, said Dr Johnson in an OIA response.

She noted the hospital's own facilities management unit was not involved in the approvals and building works process at Ko Awatea One.

"We are not aware of any recent investigations, or other DHB documents that have fully assessed project cost allocations.

"We are not able to confirm whether at the time this project followed the expected national approval processes or not."

The ministry has also rejected the need for an inquiry.

Its chief legal advisor Phil Knipe told RNZ in a statement that the ministry agreed with the position the health board had taken, that the approval processes around Ko Awatea One were "many years ago" and reviewing them was "not a priority for us".

It agreed that such a review could be "substantial" but serve "no clear current purpose or benefit", he said.

The present audit covers the period 2013-2016 and it looks into how Ko Awatea Two was approved and paid for; and how the hospital raised the capital by selling core medical equipment for $9.9 million then leasing it back.

Dr Johnson has called that "a very bad deal".

She was not acting chief executive at the time; that was Geraint Martin, who is now chief executive of Te Papa.

The ministry said it would most likely release the audit in September.