Former Health Minister Andrew Little’s lament this week that reform shouldn’t be this hard underlines how little he knew about the ill-starred task he was taking on. As a merger it was of gargantuan scale for New Zealand, and overly complex in world terms. Merging 20 separate organisations with 80,000 odd staff in one big bang restructure was courageous, as they say. Or more aptly, ridiculous.

The observation is often made that it was beyond silly to embark on this merger during a pandemic. That is true but it overlooks the key point, which is it shouldn’t have happened at all.

As I observed in this column three years ago, the new entity is four times the size of Fonterra, our largest company. Fonterra itself was the product of consolidation of the dairy sector from tens of constituent organisations which took place progressively over decades. Even then the end result took a couple of decades to shake down.

I don’t claim to be a merger specialist. I did consolidate about eight or 10 radio companies over seven years in the 1990s but that was minuscule compared with what has been taken on here. Nevertheless, the experience taught me the challenges of merging cultures and systems and the importance of taking people with you. It highlighted how vigilant you had to be to stop bureaucracy and empire-building in the new organisation spiralling out of control and snuffing out initiative and innovation on the front line.

All the feedback from within Health NZ is that empire-building is indeed rife and the internal politics have been fierce, not just within the organisation but between the new agency and the Ministry of Health. The ministry seems bereft at having lost control of the Frankenstein it helped create. And we all know about the revolving door in the Health NZ boardroom.

For an alternative view: Health sector reform shouldn’t be this hard – Andrew Little

At the frontline, it’s at best seen as a rearrangement of the management deckchairs with no discernible improvements. More often it has been an imposition of senseless change on already busy health professionals. Hundreds of millions of dollars are being spent on just discussing new IT systems and new infrastructure entities and none of it will make a blind bit of difference to actual health services.

So now we have a commissioner. And not just a commissioner, but Lester Levy, who has a long and largely successful history running large hospitals in Auckland. He says he will make the best of things with the cards he has been dealt, which says quite a lot when you think about it. It also says a lot that the only possible way to make this thing work is to tap the leading hospital manager of his generation to be the tsar of it. A structure that can’t be run by mere mortals is a bad structure.

One place where Levy will struggle is slimming down the 14 layers of management between the chief executive and the frontline. These layers are simply the product of the monolith the previous Government created. If you have a centrally run bureaucracy of 80,000 people all accountable to one chief executive, and work on the management principle that managers shouldn’t have more than around seven or eight direct reports, you are going to end up with 14 layers or more pretty quickly.

So where to from here? I’d suggest three key changes which would help right the ship and get the focus back where it should be, on actual patients and clinical care, without tipping the whole thing up again.

First, we need to flatten the structure, eliminate the layers of bureaucracy and bring the management back close to the frontline. That means a chief executive for each hospital. Someone who can walk the wards, speak with the doctors and nurses, see what’s happening, and respond as required. Each hospital or group of hospitals should have a small board of directors, to support the chief executive. Structurally, over time, the hospitals could be run as trusts, owned by the Government but reporting to their local community.

Secondly, we should separate the health funding decisions from the operating decisions to get a better balance between primary care and hospital care. A big mistake was made when responsibility for allocating funding shifted from government agencies to the hospital-dominated district health boards. Naturally, they favoured giving more money to hospitals, and comparatively less to primary health care, which means more people are delayed in their health care to the point where they need hospitalisation. Hospitals then need more money so there is less for primary care, and the doomed funding loop continues.

This bias toward hospital care has been perpetuated in the set-up of Health NZ, to the point where people can’t get a GP appointment for a month or more, so when they get sick they naturally go to overstretched (and expensive) accident and emergency rooms, in hospitals.

We should slim Health NZ into a comparatively tiny health funding organisation with no ownership responsibilities, like the Tertiary Education Commission in the tertiary sector. Health NZ could then buy services from the hospitals, the GPs and other practitioners, much as the ACC does for injury and accidents. That would be a far better system with much greater accountability for performance.

Finally, we need to train a lot more doctors more cost-effectively, and that means breaking the fat and happy university duopoly that is Auckland and Otago Medical Schools. This has been overdue for some time and not achieving it while I was Tertiary Minister is one of the regrets of my political career.

Contrary to the myth-making of some journalists, I say this having had no involvement in the lobbying of Waikato University for its medical school. I don’t care where it is built but we should have a third and be thinking about our fourth. As things stand we are sending dozens and dozens of our kids every year to Sydney and Melbourne to be trained as doctors, from where many won’t return. Only by flooding the country with a lot more doctors will we ever break the back of this compounding problem of health care which, with a rapidly ageing population, represents the biggest fiscal risk this country faces in the next 50 years. Much bigger than superannuation.

Oh, there is one more thing. We should quietly bin any further reviews which suggest that the solution to any sector’s problems is a grand merger of all the operating entities. It clearly hasn’t worked for polytechs or the health sector. God forbid we try it anywhere else.