A damning report by the Auditor-General has found Waikato District Health Board bosses flouted their own procurement rules in contracting a California-based IT company to create a virtual doctor tool.
HealthTap, an online platform and mobile app, was dumped after a two-year trial and a cost blow-out of $10 million.
The report, presented to Parliament today after a 15-month investigation, has found there was no proper business plan, formal market testing nor any competitive tendering process.
HealthTap was the pet project of then chief executive Nigel Murray who resigned in October 2017 mid-way through an investigation into his wrongful expenditure.
A probe by the State Services Commission found Dr Murray racked up more than $120,000 on "unjustified" travel and accommodation during his tenure, some of which has since been refunded.
Board chairman at the time Bob Simcock told the Office of the Auditor-General he had travelled to the United States in late 2014 and met with the head of HealthTap.
On his return, he briefed the board and also asked Dr Murray to "have a look at HealthTap" to see whether it would work for Waikato DHB.
Dr Murray said there was "a great sense of urgency" at board level at the time about the growing population, poor access to health services, and Waikato DHB's struggling financial performance.
He said he was employed by the board to make "radical changes" at Waikato DHB and saw virtual care as one of the tools to achieve this.
The Auditor-General's report has found a business case was eventually prepared, but only after negotiations had taken place and a draft contract with HealthTap drawn up.
The initial contract required the DHB to pay about $16 million in licence fees over two years.
It was axed following a review commissioned by the board, which found the overall cost to the DHB had been $26 million dollars.
The Ernst and Young report found a total of 10,031 patient profiles - 2.3 percent of the Waikato population - were registered with HealthTap between 1 December 2015 and 6 March 2018.
Of the 3125 clinicians who registered, only 50 percent activated their account and 80 percent did not complete the online training.
At the time, the DHB said the platform had been introduced too quickly and without proper collaboration with staff, and that the community, its staff, and the organisation were not ready for this change.
It stated its intention of continuing to invest in virtual care "on a basis to be determined".
Controller and Auditor-Generall John Ryan said the DHB's lax procurement process "fell well below the standards expected of a public organisation".
"The sense we got is of a plan written after the fact, largely to justify a decision that had already been made."
The problem was not simply the DHB had failed to "follow the rules".
"It is about the apparent disregard shown for the principles underlying those rules - namely, the importance of fair practice, sound decision-making, and being able to show value for money when making procurement decisions."
The Auditor-General's major findings include:
- DHB ignored own procurement rules: no formal identification of business needs, no risk analysis, and no identification of internal or external stakeholders, no market analysis.
- A business case was prepared only after negotiations had taken place and a draft contract with HealthTap drawn up. Advice from the DHB's own procurement and legal teams was added late.
- The DHB failed to consult with other DHBs, primary health organisations, clinicians, or the National Health IT Board.
- The board failed to give appropriate oversight of the project.