Cost-cutting organisation getting the flick

Health Minister Jonathan Coleman.

The Government has revealed plans to wind down the controversial cost-cutting organisation Health Benefits Limited and make district health boards responsible for finding more than $600 million in savings.

The government-owned organisation was set up in 2010 to find $700 million in savings within five years by reducing duplication and administration.

Health Minister Jonathan Coleman said earlier this month that HBL had made $300 million in savings since it was introduced.

He said business cases had been developed for the DHBs' procurement, laundry, food and IT services, and Government wanted to move to the implementation stage.

The minister confirmed this morning that DHBs would lead the implementation phase, and HBL would be gradually wound down.

"It is important to maintain momentum on implementing these business cases to ensure savings are freed up from the back office and re-invested into frontline health services," Dr Coleman said in a statement.

The 20 DHBs were expected to find savings of $620 million in the next four years by reducing back-office functions.

Consultation with DHBs had found that their preference was for healthAlliance to take over the implementation process.

The healthAlliance organisation was a shared-services vehicle owned by three Auckland DHBs.

Dr Coleman said he had asked the Acting Director-General of Health to establish an interim governance group to work through the next steps, which would include a due diligence process.

A final proposal would be taken to Cabinet, and a handover was expected to take place by mid-2015.

Unions and DHBs have long questioned the value of HBL, expressing concern about potential job cuts and doubting whether real savings were being made.

Leaked documents obtained by the Labour Party earlier this year showed DHBs' chief financial officers had little confidence in the organisation.

In a report published last year, the Auditor-General urged the Crown company to be more transparent with its reporting about savings.