What major health sector reform means for Southern Cross

As New Zealand’s new public health system beds in soon, no one will be watching more closely than Southern Cross private healthcare boss Greg Gent.

Far from being the domain of solely the well-heeled and the well-insured, Southern Cross private hospitals can at any time be half-full of patients paid for out of the public purse, from district health board overflows and ACC cases.

“There’s a perception our private hospitals are elite – and certainly insured and self-paid people use them – but the government, through those two forums, accounts for about half our volumes,” says Gent. He is the chair of Southern Cross Healthcare, the hospital side of the national charitable trust, and until recently was also chair of the insurance side, the Southern Cross Medical Care Society.

“We’re joined at the hip,” he says, also revealing that intensive care units at Auckland Southern Cross hospitals have at times handled the public system’s overflow of severe Covid cases.

It was the not-for-profit organisation’s Christchurch hospital that stepped up when that city’s public hospital was hit in the 2011 earthquake.

“It’s just what we do,” says Gent, whose low profile at Southern Cross over the past nine years is an echo of both the organisation’s culture, and his personal governance philosophy that when a chair is on show a lot, there’s something wrong with the business.

So, what’s coming for public health from July 1?

The Ministry of Health’s overarching role will narrow to a focus on policy, strategy and regulation. A new body, Health NZ, will replace the 20 DHBs and take over planning and commissioning of services to remove duplication and provide national planning. A new Māori Health Authority will work alongside Health NZ, aiming to achieve equitable health outcomes for Māori and to directly commission tailored health services. A new public health agency will be created within the ministry.

“Broadly, Southern Cross supports it,” says Gent, a former deputy chair of dairy heavyweight Fonterra, former chair of rural insurer FMG and on the Northland DHB board from 2010 to 2015.

“Some really obvious things should be done at national level, the most obvious being IT. Replicating that 20 times is expensive and makes no sense.

“New Zealand doesn’t have a single electronic health [history] record. There isn’t a repository a clinician can go to to find out what a patient has had done to them over the past 20 years or whatever. Most countries have moved to an electronic record … and we have yet to do it.”

Gent says the health system also needs to have “some honest conversations” with New Zealanders.

One that is long-overdue is about accepting “way more centralisation”.

“We need a damn good discussion around what should be local and what should be centralised.”

People need to understand that the “sophistication” of healthcare is changing and that it requires centres of excellence, he says.

“The reality is for sophisticated health interventions, you’re way better to be in a big centre where that intervention is done regularly – by a surgeon or clinician who does that work every day, not once a month.

“The other factor is surgeons typically like to live in desirable areas, they earn well, they want to send their kids to a good school or university. Getting good surgeons to go to some places is difficult. Over time people have to accept way more centralisation.”

Examples of centralisation “which no one’s complained about” are the National Burns Centre which operates four regional specialised services, and the National Spinal Centre in Christchurch, he says.

“The challenge is the public wants a hospital next door.

“A lot of things are not best done in the hospital next door. A lot of cancer treatments are getting into that realm. But maternity is something that needs to be done next door.”

As a Northland dairy farmer who “lives very, very rurally”, Gent is the last one to say we shouldn’t have local hospitals – “but we need to define what they do”.

“If I had something very serious, I’d want to go to Auckland.”

Also, general surgeons are hard to find these days.

“Look at orthopedics – now there are surgeons who only do wrists, or knees, or hips. In the old days a surgeon would have a crack at everything.”

As a national health provider and a charitable trust whose deed dictates that it operate for the benefit of all New Zealanders (not compelled by private equity, shareholders or dividends), Southern Cross has a “huge” interest in the reforms, Gent says.

He’s particularly keen for the new regime to reach “the segment of the population the system doesn’t work for”.

“I saw that in my Northland DHB days and I live amongst it. We have chosen rightly or wrongly to define that segment by race. Where I live there is a section of the population which interacts with the system. There’s also a section intimidated by it and the delivery methods.

“Certainly the Māori statistics are bad, but instead of using the term ‘Māori’, we should use the term ‘a demographic of New Zealand’, who have issues of access [to healthcare].”

“There are Māori who navigate the current health system just fine. But there are also non-Māori who in my mind have issues of access.”

How does he define “access”?

“In the most simple terms, going to the doctor when you should – not one year later.”

The issue can be potential expense, or fear, Gent says.

“In my Northland DHB days we had a 15 per cent rate of ‘Did Not Attend’. They were booked in for surgery but did not turn up. We would put on taxis and all sorts of support but there is a group of society who frankly are frightened. Yes, Māori are dominant in that group – but it’s not only Māori.

“We’ve got to get a better delivery model for that layer of society.”

Gent puts some caveats on support for the new health structure. “Structure follows strategy and I can’t clearly see yet what the strategy is.

“It will have to have a bit of local focus, for example in Northland and Tairāwhiti for all the reasons I’ve talked about, and the central model is going to have to be quite agile and adaptable.”

While the ministry will still drive some aspects, the new Health NZ board “will need a fair bit of autonomy to get on and do their job”, he says, noting that under the present system the DHBs’ authority level is “quite capped”.

It’s common to hear staff on the public hospital front lines complain that there are too many well-paid paper pushers, too many managers warming seats when nurses and doctors are desperate for more resources.

What’s to stop a repeat situation at the new entities?

“The new [Health NZ] board is going to need massive discipline,” says Gent.

“They need key measures from the start. They need to measure what they’ve got when they start and make sure in five years they haven’t doubled that.

“My message would be, measure the overhead in it – not the people on the ground actually doing it, but the people administering it higher up. Understand exactly what the business is – strip the Covid out. I think that’s got to be their test for all times in the future.

“It’s got to be more efficient. Having been through the Fonterra merger – that was 20,000 people, this will be 80,000, four times the size – I know inefficiencies of scale can happen. You need a benchmark to make sure it doesn’t, because bureaucracies build and bureaucracies in health don’t deliver.”

As one of the first directors of Fonterra, the product of a 2001 dairy industry mega-merger, Gent knows the new board has some hard work ahead.

“I’ve not seen many mergers that don’t go through a dip before they get to a better phase. But the health system can’t afford to take too much of a dip – it’s already in one.

“I hope people are there for the right reason because it will be quite a big onerous job, and for the two new chief executives.”

Gent believes Southern Cross’ work can only grow under the new regime. “Covid has put waiting lists back years – literally. And when Covid started we had massive waiting lists.”

Also growing is Southern Cross membership.

Far from prompting people to close their wallets, Gent says the fast-rising cost of living and uncertain times have propelled people towards health insurance. “They’re fearful of not getting in the public system.”

On the cost of health insurance, and the unhappy irony that when many older members most need coverage, they can’t afford the premiums and have to fall back on an overburdened public system, Gent can offer only limited comfort.

“For every dollar we get in premiums, we pay out 90c in claims. We run a tight ship – we’re not getting fat and lazy on your premiums.

“We price on age risk. Any insurance company has to price on risk or they’d go broke. Above 65 years the risk goes up exponentially.”

Gent recalls that when he joined the board on the insurance side, premium inflation was well ahead of the CPI. That wasn’t sustainable and now the rates are pretty much in line, he says.

“The inflation now is simply in the [cost of] procedures. So many more things are covered now, for example some cancer treatments. A lot of cancers now are [treated as] chronic disease with ongoing treatment for life.

“The inflation in our premiums is now demand driven. That’s a massive challenge for the DHBs and more and more of the tax dollar is going to go on health.

“The only way through it is to develop a healthier population. The New Zealand health system is very much ‘at the bottom of the cliff’.”

Tackling issues like obesity, diabetes and mental health resilience is “top of the cliff” stuff, he says, and Southern Cross increasingly has an eye to creating value in healthcare with programmes and initiatives outside its hospitals.

“As New Zealanders we have to do way more – such as teaching people what a good diet looks like. When we went into the first lockdown, my wife had to teach some of our farm staff how to cook a meal. That is a reality for a chunk of our society.”

Gent doesn’t think compulsory health insurance is an answer to the growing national health cost burden.

But he is frustrated that there is no tax deductibility for those who are insured.

“People who pay health insurance keep out of the public system but there’s no recognition of that. That is the injustice, the inequity.

“People who go private for a procedure means someone else can get in the public system. A lot of countries have tax deductibility. It’s very simple.

“We’ve had a few goes [with governments] over the years without success.

“That would be a great incentive to get people out of the public system.”

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