The acute case for new hospitals

All of us need good hospitals near us so that when accidents happen or we get sick, we can access both acute and planned healthcare provided by well-trained doctors and nurses working in modern facilities.

A number of our hospitals are aging and require significant maintenance, and in some cases need to be replaced by new facilities.

Over recent years there has been a limited amount of capital available to build new hospitals, particularly with the rebuild of Christchurch hospitals at a cost of well over $640 million.

At present the process for deciding about new hospitals starts with District Health Boards (DHBs) which evaluate and plan for future services and how to provide those. They seek support from neighbouring DHBs who endeavour to agree regional priorities. Political influences are at play here too. The Ministry of Health and government make final decisions on spending depending on available funds.

Once built DHBs have to pay for those hospitals by means of a capital charge, which is a charge on their budget amounting to millions of dollars to pay for the use of public money from the Health Budget to build the hospital, and depreciation, which often amounts to large sums of money set aside for future building replacement.

These two charges place an unfair burden on DHBs who build new hospitals, evidenced by current problems at the Canterbury DHB, which is facing a $54m funding deficit.

What we need is a better way of national long-term planning for hospitals around the country. Instead of a system that results in individual DHBs having less funding available  for health services, a national solution is required that takes the burden off DHBs.

One proposal is to place the ownership of all DHB acute hospitals into a central Crown entity with appropriate governance and management skills. The entity would receive capital funding for new hospitals, and bear the costs of the capital charge (can we do away with capital charges? – schools don’t pay them) and depreciation. It would be responsible for long term planning for our hospitals, for ensuring we have the right hospitals in the right place, replacing hospitals when getting old, and building new hospitals in locations where population growth indicates future need.

Local DHBs will still have some flexibility and will be actively engaged in the process with local boards providing needs assessment and service plans to inform regional and national planning. Significant decisions will still need Ministerial and government sign-off on national priorities informed by more robust processes than at present.

Communities should expect to find that their needs are more fairly considered in a national context; taxpayers could expect better allocation of capital for new hospitals; and DHB budgets will be smoothed without the current impact of capital charges and depreciation causing uneven spending. And most importantly communities will have facilities that are fit for purpose.

Professor Gregor Coster is Professor of health policy and Dean of the Faculty of Health. This article was originally published on