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GUEST BLOG: Ian Powell – More than an egg running down your face; it’s all the yolk of a poultry farm

What do a Treasury Investor Confidence Review (ICR) and a poultry farm have in common? Nothing really apart from an exceptional climatic event – the central government’s bureaucratic coup against the management of the Canterbury District Health Board (CDHB) in 2020.

The circumstances of this coup have been covered extensively in my three 2021 Democracy Project published articles. business consultants commissioned for ax work (February 9); very bureaucratic coup Part 1 (April 15) and very bureaucratic coup Part 2 (May 19).

Behind the coup: the clash of leadership cultures

Since 2011, there had been a growing chasm in relations between the Department of Health and the CDHB management team led by then chief executive David Meates. Until the end of 2019, the Meates team was also supported by its board of directors (thereafter it was increasingly undermined).

It started with the response to the devastation of the 2010-2011 earthquake, including large-scale reconstruction and maintaining the provision of services such as mental health. This was compounded by the government’s failure to recognize that the normal DHB funding formula was ill-suited to natural disasters, a proposed public-private partnership, serious delays in reconstruction (managed by the ministry but costly for the CDHB, including the abnormal capital charge) and attempts to limit the ability to provide services in the planned new facilities.

The hit was against the development of David Meates’ culture of engaging leadership

But more decisive has been the growing rift in leadership culture between the top-down ministry and the CDHB. Particularly since the mid-2000s, CDHB had developed a strong, committed relationship with its professional health staff. The more senior management engaged with its health care professionals, the better informed they were in their advocacy with the ministry.

The more Meates and his team became involved in frontline clinical expertise, the more ascendant CDHB’s leadership became. The more this happened, the more it came into conflict with the top-down leadership of the ministry. Inevitably, tensions rose and relations deteriorated due to the above issues (much of CDHB’s working relationship with the Ministry at lower levels, however, has been constructive throughout).

The CDHB was not an example when it came to manpower commitment, but that is where it was following. Moreover, it was way ahead of other DHBs. Had other DHBs experienced the devastation of the Canterbury earthquake, they would have been equally heroic.

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However, the strength of engagement between the hospital and primary care in Canterbury was such that I doubt that (with the exception of the West Coast) their local healthcare systems would have been so resilient.

Execution of the coup

There were attempts to undermine and then remove David Meates in particular, but he and his team pushed on because they had the support of their board, especially its chairmen. The central government’s resolve remained but shifted to an attack on the financial management of Meates’ team.

First, Lester Levy was appointed Crown Comptroller by Health Minister David Clark in June 2019. Levy had previously served as chairman at overlapping times of Auckland’s three DHBs, leading to the departure of the three general managers). Second, in December 2019, Clark appointed a “reliable” board chairman (John Hansen).

John Hansen, a “reliable chairman of the board

Finally, the department demanded that the CDHB accept a review of financial management by Ernst & Young (EY) consultants led by senior partner Stephen McKernan. Unsurprisingly, the review turned out to be “axe work”. The Meates team was attacked for misusing nurse staffing data to hypocritically claim CDHB was overloaded with nurses!

In hindsight, it’s also not surprising that McKernan now leads the government’s transition unit to implement its healthcare restructuring.

Stephen McKernan, EY Senior Partner

Egg yolk on faces

EY disagreed with independent reviews of CDHB’s financial management, including annually by Audit NZ. However, it was not an environment conducive to impartiality or objectivity. Determined, combined and coordinated pressure from the ministry, Hansen, Levy and EY meant the inevitable departure of Meates and his team in 2020.

The reputation of those responsible for this financial mismanagement has been left in tatters following the good health given to CDHB in the Audit NZ report for the year ended 30 June 2020 (published 2021).

Lester Levy: Audit NZ let an egg run down his face

Despite all the efforts made by Levy in particular to influence the evaluation of the exam, the egg was left to run down his face, as reported in my article published by the Democracy Project (September 24, 2021) Egg yolk runs down the face.

Investor Confidence Review

Now an even more devastating review has been published (July 2021) whose authors are no less than the Treasury icr-results-analysis-jul21.pdf New rationale for Canterbury DHB financial management under David Meates

So what is a Treasury Investor Confidence Review? It is a Cabinet approval process to assess the investment performance of state agencies. This involves assessing the level of confidence that “stakeholders” should place in an agency’s ability to manage its assets and investments well. The Cabinet had set itself the goal that all “Investment Intensive Agencies” achieve at least a “B” rating over time.

The objectives of an ICR are twofold:

  1. Reinforce the primary objective of the governments investment system which is to maximize value for New Zealanders.
  2. Provide an incentive mechanism that rewards good investment management and proactively fills gaps.

An even more devastating review

There have been two rounds of ICR assessments over three-year periods of “investment-intensive agencies”, including eight large district health boards (Northland, Waitemata, Auckland, Manukau Counties , Waikato, Capital & Coast, Canterbury and Southern).

The first round was from 2015 to 2017 and the second from 2018 to 2020. There were 25 agencies covered in both rounds but, for various reasons, only 23 in each round; Southern DHB was not included in the first round and Northland DHB was not included in the second round (i.e. seven DHBs each round).

Treasury review clears allegations of financial mismanagement

The Treasury considers Round 2 ICR ratings to be more robust and therefore more reliable than Round 1. Therefore, in order to maintain the same ICR score between rounds, agencies (including DHBs) should have made improvements to several elements. compared to what existed at the time of the Round 1 evaluation.

The ‘A’ to ‘E’ ratings and percentages are used by the Treasury to assess and compare the 23 agencies in 2015-17 and 2018-20.

If CDHB’s financial management was as bad as claimed by the Department of Health led by Chief Health Officer Ashley Bloomfield, by Crown Comptroller Lester Levy, by EY led by senior partner Stephen McKernan and his Politically appointed CDHB President John Hansen, it was expected that he would be rated ‘D’ or ‘E’ and with a percentage well below 50%.

Damn, did those bureaucratic putschists get it so wrong. CDHB under David Meates was the top performing DHB in 2018-20. Along with Waitemata, Auckland and Manukau counties, Canterbury was rated ‘B’ but had the highest percentage (75%).

Furthermore, in line with Treasury expectations, Canterbury have also improved on their 2015-17 first round score; still a ‘B’ but going from 66% to 75%.

Talk about mud in the eyes of these putschists! But there is more. Government agencies monitored included the Ministry of Health. In the first round (15-17) her performance was mediocre with a “C” grade but in the second (18-20) she collapsed to a very poor “D”.

The percentage drop highlights the magnitude of this performance disaster dropping from 62% to 40%. This was contrary to the Treasury’s expectations of improved performance. Additionally, only one of the other 20 agencies was rated as low as ‘D’ (Southern DHB).

“Oops”: Ashley Bloomfield

What makes the situation even more embarrassing for the Director General of Health is that under his leadership, investor confidence in his ministry has fallen far below what it was under his predecessor, the much-criticized Chai Shhh.

Manukau Counties DHB also provides an interesting aside. When Lester Levy was named chairman of this DHB, he attacked the financial leadership of its managing director Geraint Martin (and his team).

It was the same tactic he employed afterwards and predictably against David Meates at Canterbury. But, under Martin’s stewardship, Counties Manukau was the highest rated DHB in 2015-17, receiving an ‘A’. Subsequently, his grade dropped to a still respectable “B.” Note the pattern!

Poultry farm yellow

This credibility debacle also raises serious issues of political leadership. While Annette King, as a former health minister and Labor health spokesperson, positively assessed Canterbury’s leadership under Meates, these coup leaders managed to win over three successive Labor ministers of Health (Clark, Hipkins and Little) to the contrary. The former have now seriously tarnished the judgment and reputation of the latter.

Audit NZ’s assessment of CDHB’s finances under David Meates has left the bureaucratic leaders of the coup with egg yolk running down their faces. Now the confidence of Treasury investors let their faces drown in a whole free-range poultry farm of egg yolk.

If these four coup leaders were tried the same way they tried David Meates and his management team, all four would be summarily fired. Words like geese and gander come to mind. So make several expletive supplements!

Ian Powell was executive director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years until December 2019. He is now a health systems commentator , labor market and political living in the small river estuary community of Otaihanga (the place by the tide). First published at Second opinion of Otaihanga