Oamaru Hospital: Transfer to Health NZ

For 25 years Waitaki District Council have owned Waitaki District Health Services Limited (WDHSL) which owns and operates the Oamaru Hospital.  

Waitaki District Council took over ownership of the Oamaru Hospital in 1999 to prevent hospital closure at that time.  Since then services and operations have been delivered at the hospital under a funding contract between WDHSL and Health New Zealand | Te Whatu Ora, and its predecessors including the Southern District Health Board.

Whilst WDSHL has had significant increases in funding from Health NZ over the last two years the cost and demand for health services is increasing rapidly and a national shortage of clinical staff, including doctors and nurses, is making it more difficult to deliver services in an affordable way as a stand-alone hospital.

The unique financial and clinical challenges facing WDHSL has resulted in Health NZ advising that they would not be renewing their contract with WDHSL from 1 July 2024. Council were informed of this on 26 March 2024, and agreed that WDHSL should enter into negotiations with Health NZ over a transfer of services and staff.

Why no consultation?

The agreements between WDHSL and Health New Zealand |Te Whatu Ora were reached last weekend, after just under two months of negotiations. The agreements were approved by the board of WDHSL on Monday evening, and presented to Council in a report filed at 11pm on Monday night for Tuesday 28 May’s Council meeting.

Due to the transfer of staff involved in the agreements, the deadline for approving the agreements was Wednesday 29 May to meet the legal notification timeframes for employment changes.

Council had intended on consulting with the community had the agreements been reached with at least nine days before the deadline. It had prepared a consultation document and an engagement plan which would have been approved by Councillors. However, it was not possible due to negotiations concluding so close to the deadline.

What happens to Council’s loan to WDHSL?

An important objective for the Council was ensuring the Ratepayer was no worse off from whatever was negotiated. This means that the loan gets repaid to the Council. This will not happen in one go but instead, payments will be spread out over a number of years and repaid from the income WDHSL receives from leasing the hospital buildings to Health NZ. A commercial interest rate will be paid by WDHSL so that the cost of borrowing are fully met. 

What are the conditions on the agreements?

Conditions relate to staffing and some administrative issues could not be entirely concluded before the deadline for reaching an agreement. However, Health NZ and WDHSL, and Waitaki District Council, are all intent on ensuring the seamless transfer of staff and services to ensure uninterrupted service at the Oamaru Hospital.

Will the hospital be closing?

No. Council has secured assurances from Health NZ that the hospital will continue to be open and providing services into the future. 

What would have happened if this agreement had not been approved?

As the agenda report from Tuesday’s meeting shows, failure to reach an agreement would have meant there would be significant disruptions to the delivery of health services and the operation of Ōamaru Hospital. 

Funding to WDHSL comes to an end on 30 June 2024, and Health NZ had notified that it will not renew the contract. Therefore, without a contract WDHSL will not be able to provide hospital services after 30 June. Health NZ would need to look at other ways to provide health services to the Waitaki community, potentially from its other sites elsewhere. 

What other options did Council consider?

Following the Council’s approval to enter negotiations on Thursday 26 March 2024, a report by Pricewaterhouse Coopers was undertaken to assess potential options for the Oamaru Hospital. It is attached to Tuesday’s agenda, titled “Health Services in the Waitaki Future Options for the Provision of Healthcare 2024”.

It determined that any alternative options would require a funding contract with Health NZ. Health NZ were not renewing the funding contract with WDHSL and so there were no other alternative options immediately available. However, there may be other options in the future which will take some time to develop. Health NZ has committed to working with Waitaki District Council and engaging the community in looking at the future options for health that meet local need and improve health outcomes. 

At the March 26th 2024 meeting Council commissioned an independent report into potential options for the Oamaru Hospital by Pricewaterhouse Cooper (PwC). This report, “Health Services in the Waitaki Future Options for the Provision of Healthcare 2024” outlined that the only sustainable options for the Oamaru Hospital were conditional on a funding contract with Health NZ. 

However it was already established that Health NZ would not be renewing its funding contract.

From the beginning, Council has asserted that it would take action to ensure that the Waitaki District retained a hospital, and health services. It also wanted to ensure that staff were treated fairly through this process. Staff were always informed of developments ahead of the wider community.

A key part of the proposed change in service delivery negotiations to date, was the assurance that all hospital staff that had been so committed to meeting the needs of the community over the years were recognised and supported. Whilst the Council does not have a direct role in transferring staff between WDHSL and Health NZ, we are confident that this will be achieved as HNZ has committed to offering all staff who currently work for WDHSL ongoing employment with Health NZ.

Ensuring the ratepayer is no worse off after 25 years of supporting the hospital, has also been a key issue for Council. While Health NZ will be taking over operation, services, staff, and some assets – the land itself is owned by Council, and the buildings by WDHSL. It is proposed that WDHSL will operate for as long as it needs to as a building owner and will be able to meet all of its financial obligations, including those to Council in the form of a loan, and without needing rate payer support.

On April 9, Health NZ Chief Executive Margie Apa sent a letter to Mayor Kircher outlining Health NZ’s commitment to a transition with minimal disruption, including staff transfer to Health NZ and ‘service transition being seamless for the community.’ She also confirmed that there is no plan to close Oamaru Hospital or withdraw any current services.

On May 27, as an agreement was reached between Health NZ and WDHSL, a second letter was sent acknowledging the work Waitaki District Council had done over the past 25 years to ensure Oamaru Hospital could deliver services. This also affirmed that the transfer of services to Health NZ ‘will provide the people of Waitaki District with the confidence of continued access to healthcare at Oamaru Hospital, and ensure continuity of employment for frontline and support staff.’

Negotiations got underway on 27 March 2024. Any potential transfer would require notifying staff at least a month in advance, with a deadline set for 29 May 2024. 

It was hoped that agreements could be reached with enough time for Waitaki District Council to consult with the community over a seven-day period.

However, agreement between Health NZ and WDHSL was reached over the weekend of May 25/26. The WDHSL Board met in the evening of Monday 27 May and recommended the agreements to Council as shareholder for approval on Tuesday 28 May. The Agenda Report below was filed at 11pm on Monday 27 May.

The proposed consultation document the community would have received contained the same three options that Councillors considered at the Tuesday 28 May full council meeting.

• Option 1 – Transfer the hospital services to Health NZ and partner with Health NZ on Health Futures (Recommended)

• Option 2 – Transfer the hospital services to Health NZ and have limited involvement in Health Futures 

• Option 3 – Do not progress the proposal from Waitaki District Health Services Limited

Each option came with an assessment.

The preferred option is Option 1 – Transfer the hospital services to Health NZ and partner with Health NZ on Health Futures

• Support the transfer of the hospital management and services to Health NZ | Te Whatu Ora by 1 July 2024 to ensure the continuity of funding and services by Health NZ. This option will end WDHSL’s role as a health service provider at the Ōamaru Hospital. However, Council will remain involved in health on behalf of the community and committed to working with Health NZ on the Te Waka Hauora o Waitaki Health Futures Project for the Waitaki district, to ensure that health services meet community needs and that there are improvements to health service access and provision.

This would mean a seamless transition on 1 July 2024 for those using hospital services.

Option 2 – Transfer the hospital services to Health NZ and have limited involvement in Health Futures

• Support the transfer of the hospital management and services to Health NZ Te Whatu Ora by 1 July 2024 to ensure continuity of funding and services by Health NZ. Option 2 will end WDHSL’s role as a health service provider at the Ōamaru Hospital. It would also mean Council will have a limited future role in the Te Waka Hauora o Waitaki Health Futures project for the Waitaki district and there will be less opportunity for community views to be heard in reshaping health services.

This would mean a seamless transition beyond 1 July 2024 for those using hospital services.

Option 3 – Do not progress the proposal from Waitaki District Health Services Limited

• If Council declines to approve the sale and lease agreements as the owner of WDHSL, there would be significant disruptions to the delivery of health services and the operation of Ōamaru Hospital. Funding would end on 30 June 2024, and it is likely that WDHSL would not be able to provide hospital services while an acceptable outcome is sought. Health NZ would need to look to provide health services to the Waitaki community from its existing sites elsewhere.

Option 3 could also result in WDHSL being unable to meet its financial commitments to Council and others beyond 30 June 2024.