Government denies interest in health public-private partnerships, despite references in documents

Government ministers deny they are looking at public-private partnerships to pay for health infrastructure projects.

Internal documents from national health agency Te Whatu Ora show in January it was aiming to consider "lessons" from the partnerships, or so-called PPPs, , from a wide range of projects of size and complexity.

Government policy since 2018 has banned the PPP approach in health, education and prisons.

It gives a much greater role to private funding, building and operating of state assets.

Health Minister Ayesha Verrall yesterday said work was going on into alternative financing arrangements, with a report due back in July, but not PPP.

"The July advice will not include reference to Public Private Partnerships (PPPs)," she said on Wednesday

Late on Wednesday Te Whatu Ora told RNZ that the joint ministers' request for information on alternative funding "told Health not to explore Public Private Partnership arrangements for core health services".

The PPP advice it was working on was for non-core health infrastructure :such as car-parks and community health hubs, both of which are well suited to commercial funding rather than using Crown funding".

Some hospitals had done PPPs like this on an ad-hoc basis - "A consistent approach / specific guidance was sought for Health NZ".

Minutes from a capital infrastructure committee meeting in January show the advisory work was being carried out by private consultancy Ernst & Young Global (EY), because Te Whatu Ora lacked the capability to do it.

Former Te Whatu Ora chairperson Rob Campbell said similar work was also going on last year, before the agency took over.

"This was done by an outside consultant and was widely known in the capital markets," Campbell told RNZ yesterday.

"The work was not disclosed to the board until I asked for it."

Te Whatu Ora papers state the committee wanted "to ensure that lessons from other Public-Private partnerships are considered".

National used PPPs for schools and prisons.

EY was paid millions and its contractors were central to the transition work on Te Whatu Ora up until last July. Despite a $30m spend all up, the transition unit did not come up with a new funding model for health, and one was not expected to be unveiled till next year, Newsroom reported.

Cabinet had this month noted that a report on funding was due to go to ministers in July, Verrall said.

It was "not a priority as the focus should be on Te Whatu Ora establishing and sharpening up the capability for its core functions", she added.

The Cabinet expected recommendations on "the management of capital funding through the multi-year budget allocation, the capital charge mechanism, and the use of alternative financial arrangements".

However, the minutes showed Te Whatu Ora had already received some of that work from EY.

It said: "The consultations and recommendations that EY has reached were not unexpected".

It did not detail these.

Campbell said that in addition to the work last year, he understood there was "further work proceeding on this topic, possibly by a different consultant".

"I do not know the current status."

He was sacked by the minister as chair earlier this month for making comments deemed politically partial.

Dunedin blowout options

The health budget is under intense and growing pressure, with individual projects such one mental health unit blowing out by 70 percent.

Another blowout, of $200m in the $1.5b Dunedin Hospital rebuild, last year prompted ministers to ask "for advice on alternate financing options because there is no funding to allocate to the project", the January minutes show.

But the committee advised against doing this at Dunedin.

Instead, officials cut back on beds and imaging equipment to save about $90m.

The minutes from January 2023, under the heading 'Alternative financing arrangements', say "management reported that it has been responding to requests from Ministers to consider a framework for alternate funding arrangements".

"EY has been providing services because Te Whatu Ora does not have the internal capability to consider the issues."

No Cabinet guidance

It noted "we had yet to receive guidance from Cabinet; therefore, it is unclear if alternate funding models are something Te Whatu Ora can reasonably peruse".

This was superseded by Cabinet this month, according to Verrall.

The committee had asked EY to provide information that set out "an appropriate rationale for how best to use different sources of capital going forward".

"The internal capacity and capability to support this work within Te Whatu Ora remains unclear," the minutes added.

Campbell told RNZ the agency he led up until early March was not up to it.

"I do not think that Te Whatu Ora currently has the capabilities to assess the options internally," he said.

"More importantly, there is not the capability to properly frame the issues.

"There are much more pressing issues about governance and management of existing infrastructure projects and the best way of prioritising and designing the future projects."

EY is one of the big four consultancies that National has said is doing far too much work for the government. It played a central role in the transition to Te Whatu Ora.

Campbell, in an earlier column, suggested the hospital-building part of Te Whatu Ora should be split off from the part that runs hospitals.

Health commentator, and former senior doctor union head, Ian Powell, agreed. He told RNZ on Tuesday such a split was needed.