Auditor-General faults Health Benefits Ltd. for poor management

Concerns had been leaking out about some DHBs' lack of support for HBL schemes. Photo / Supplied

The National Government's flagship health sector efficiency agency has been faulted by the Auditor-General for its poor management and inadequate communication with district health boards.

Health Benefits Ltd (HBL) was created in 2010 by then-health minister Tony Ryall. He set it the task of saving $700 million in five years from July 2011 by using DHBs' bulk-buying power, changing their food and linen services and crunching together their back-office functions.

His successor Jonathan Coleman scrapped HBL in June, replacing it with a DHB-owned company, Health Partnerships Ltd.

Concerns had been leaking out about some DHBs' lack of support for HBL schemes.

Auditor-General Lyn Provost was asked to investigate HBL by Labour's health spokeswoman Annette King.

Ms King says the Provost report confirms HBL, Mr Ryall's "legacy project", was a "shambles" and "only managed to make savings of $71 million".

"The Government has under-funded health in four out of the last six budgets, because it was relying on HBL to do the job it was supposed to do. Instead it's become a burden on our district health boards and an albatross around the neck of the health system."

Ms Provost's report says HBL's finance, procurement and supply chain savings scheme was ambitious, complex and risky. Weak governance and management contributed to an over-optimistic assessment of it and the agency did not successfully communicate with DHBs. However, changes were made last year which improved links with the health sector.

Ms Provost's report says that from 2010 to June last year, HBL's operating costs were $49 million.

It reported total gross savings of $301.8 million over the same four-year period which arose from schemes run by HBL, DHBs and the Ministry of Business, Innovation and Employment.

"This included $54.1 million of savings from HBL's first year of operations in 2010/11, which preceded the five-year period identified ... for achieving the savings target of $700 million."

The report says $71 million of the savings during the four years were "directly attributable to HBL". The agency also contributed to procurement savings achieved by the ministry's all-of-government initiatives and by healthAlliance Ltd totalling $73.6 million.

Dr Coleman welcomed the report, which he said "confirms that valuable savings have been made, as well as supporting my decision to advance the savings cases under a new vehicle".

"The report also confirms that along with the DHBs, HBL helped save over $300 million by reducing finance procurement and supply chain costs.

"Apart from these savings, a range of other benefits resulted from HBL's work, such as improvements to DHBs' data integrity and the sharing of good practice in administrative and support services."