Health NZ ousts Chief Financial Officer after big deficits

Te Whatu Ora is believed to be paying nearly $1 million more in senior executive salaries since Dr Lester Levy was parachuted in to cut costs. And now, the attempt to quietly excise the CFO has turned septic.

Last year, Rosalie Hughes was named ‘CFO of the Year’ at New Zealand’s big business awards. This year, after Government criticism of mounting deficits at Health NZ, she has been sidelined. 

Newsroom can reveal that Chief Executive Fepulea’i Margie Apa announced Hughes’ exit to Te Whatu Ora’s executive leadership team, along with two other top executives, as Dr Lester Levy was parachuted in as Commissioner of the agency.

It seems her position became untenable when the Prime Minister and Health Minister criticised Te Whatu Ora’s financial reporting. But the attempt to quietly excise her from the role has turned septic, and she remains on the payroll nearly six weeks later.

New appointments

That means, with the appointment of four new deputy Chief Executives for an estimated $1.5m-plus, and an interim Chief Financial Officer standing in as well as Hughes, Chief Executive Margie Apa’s leadership squad has swollen from 16 to 18.

In addition, Levy has appointed three deputy Commissioners, whose roles are hybrid governance and management – effectively a whole new tier of management, though Te Whatu Ora rejects that language.

Newsroom approached both Levy and Hughes with questions, but both declined to respond. Levy said: “We are not able to make comments as we do not comment on individual employment matters.”

On sacking the board and appointing former chair Levy as Commissioner in July, Health Minister Dr Shane Reti said Te Whatu Ora was weighed down by “14 layers” of middle management and heading for a $1.4 billion deficit. But in the six weeks since, it appears to have only got worse.

Rapid fall

It is a rapid fall for Hughes, who previously was Chief Financial Officer for Waitematā district health board, then Auckland, then Hutt Valley and Capital & Coast. Former colleagues, spoken to by Newsroom, respected her work.

“Health New Zealand has a critically important role to play in delivering better health services for New Zealanders. As Commissioner, Professor Levy faces a massive task. I have a clear expectation that the Chief Executive and the Commissioner will together be looking across the agency to ensure strong governance and operational management is in place.” Dr Shane Reti, Minister of Health.

Last year, under her previous name Rosalie Percival, she won New Zealand’s CFO of the Year award. The judges acknowledged her quiet and calm approach to what had been the biggest merger in New Zealand’s history. They said they were inspired by her passion and compassion for her team and the New Zealanders they served.

At the time, Apa publicly congratulated her: “The merger of 29 entities to form Te Whatu Ora was and is a mammoth task that we would not be where we are, were it not for our finance team under Rosalie’s leadership,” Apa said.

“Their work gives us the confidence to make the shifts – including improved decision making – so we can reprioritise and support more front-line delivery of care to New Zealanders.”

Now, Hughes is all but gone. Officially, she has been off working on “special projects” for 12 weeks. Nearly 70 staff, many in the finance team, have been required to sign non-disclosure agreements about the handling of the deficit. Apa told RNZ that the NDAs were for staff involved in addressing recent financial pressures and dealing with Budget-sensitive information.

Staff Review

Last month, Newsroom revealed an internal briefing to about 90 staff, who were told the full-time-equivalent positions of about 470 Specialists and 1491 Nurses would be reviewed. There were also 338 Allied Health employees, and 2193 Management, Admin and Support Staff. In total, 4492 FTEs.

Levy said this was wrong and expressed his “very deep disappointment” in Apa for allowing it to go ahead. “Is this reluctance, is this resistance, is this sabotage?”

Since then, numerous well-placed sources have claimed the presentation was not a mistake, and the cuts were indeed a management plan, albeit a politically unpalatable one.

Last night, Reti told Newsroom that Health NZ was moving through a period of organisational change.

“I would observe that the three Deputy Commissioners have replaced six previous board appointments,” he said.

“Health New Zealand has a critically important role to play in delivering better health services for New Zealanders. As Commissioner, Professor Levy faces a massive task.

“I have a clear expectation that the Chief Executive and the Commissioner will together be looking across the agency to ensure strong governance and operational management is in place.”

With regard to Hughes’ position, Reti said it would be “wholly inappropriate” for him to comment on individual employment matters.

But former chair Rob Campbell acknowledged Hughes’ work. “Her big advantage when appointed was that she had much better understanding of the myriad ramshackle existing systems and the resultant weakness of some financial data,” he told Newsroom.

“Her biggest task was to extract order from what was, from a national point of view, chaos. She and her team were making okay progress on that while I was there. There was not much support from other executives who were less focused on financial results or even reality.”

Health commentator Ian Powell, the former head of the Association of Salaried Medical Specialists, said he knew Hughes. She was the most experienced Chief Financial Officer of all the district health boards, and was now being made a “scapegoat”.

“She had a strong reputation at the DHBs where she worked. Margie Apa would have known her, and she came into the job well-regarded.

“It forms a pattern of Lester Levy when he comes into a new organisation. First of all, he diagnoses a crisis of financial mismanagement. And secondly, people get scapegoated. And I think that Rosalie is a casualty of that.”

Push back

Resigned former board members have pushed back at Reti’s allegations of mismanagement and “financial illiteracy” around the board table.

Dr Curtis Walker, a board member whose terms ended on July 1, told NZ Doctor that he first learned of overspending at Te Whatu Ora in March. He agreed with Apa that a big factor in the overspending was being over-budget on the number of nurses employed, and a court-ordered, back-dated pay equity settlement.

In anticipation of those costs, he said, Te Whatu Ora had underspent its budget over the summer. “Deliberately, we were keeping money back so we could invest in new things like free community radiology,” he said. “So we were saving back-office dollars in the hundreds of millions of dollars to put back into the front line and to pay front-line staff as much as we possibly could.”

In response to Newsroom questions, Health NZ Communications Head Catherine Delore denied the group of Commissioners’ managerial responsibilities constituted an “additional layer” of management.

“There remains a governance body,” she said. “Professor Levy and the three deputy Commissioners he has appointed replace the former board – and there remains an executive leadership team, led by the Chief Executive.”

(It should be noted that the board that was ‘sacked’ by Reti had only two remaining members after prior resignations; Levy is now a Commissioner, and Roger Jarrold is one of three Deputy Commissioners.)

Delore continued: “The reset of Health NZ, the largest organisation in the country, is significant and complex. It requires people with the relevant skills and experience to deliver on that task.

“As with any change, there is transition involved as that happens. We are at a particular point in that process, and the current shape and structure does not reflect where we will eventually land.”

Health NZ was committed to “optimising” its size and structure, but that would take time, she said.

“The reset is about faster and easier access to healthcare for New Zealanders and Health NZ living within its budget. That is exactly what the focus is on.”

Asked for confirmation that Hughes is leaving Te Whatu Ora, she said: “Rosalie is still in the CFO position. When she has taken leave recently, as per usual process we have had someone acting in the role.”

Jonathan Milne is the Managing Editor of Newsroom Pro. The above article and images which appeared in the Newsroom have been reproduced under a Special Agreement.