GUEST BLOG: Ian Powell – Scandal or temptation in the health restructuring transition unit?

Although linked words, ‘scandal’ and ‘scandalous’ are not the same. Scandal is a noun for an incident or event that disgraces or damages the reputation of the persons or organisations involved. Scandalous is an adjective derived from scandal. Scandals are caused by scandalous behaviour that is wrong or immoral behaviour.

Although scandalous behaviour can lead to a scandal, it does not necessarily mean that it will. Meanwhile ‘temptation’ is another word that can come into play.

So how would one describe a situation where a government health restructuring unit headed by a senior partner of a private business consultancy spent over $13.5m on business consultants within less than two financial years, of which nearly 80% (over $10.5m) went to the senior partner’s own consultancy?

The growing penetration and influence of EY business consultancy (previously known as Ernst & Young) in Aotearoa New Zealand’s health system is an increasing concern among those working in and close to the system. It is a growing subject of corridor conversation.

Increasing perceptions of conflict of interest

This concern is more so with increasing perceptions of conflict of interest with EY’s influence in the Government’s Transition Unit. Based in the Prime Minister’s department, the unit is responsible for the transition to the restructured health system on 1 July. EY senior partner Stephen McKernan is its director.

I raised the failure of the transition unit to have an effective transition plan in an earlier post of Otaihanga Second Opinion (12 May): Transition unit without a transition plan.

A further post (22 May) discussed EY’s increasing paid work in the district health boards (DHBs): A nicer little earner.

I had thought that this would have been my last post on EY’s highly profitable earnings from New Zealand’s underfunded health system. But talk about a gift that keeps on giving?

The vigilant Dr Reti

The opposition National Party is fortunate to have such a vigilant health spokesperson in Dr Shane Reti (also a general practitioner and former elected DHB board member). Dr Reti is doing what Green and backbench Labour MPs should be doing; drilling down to interrogate the wisdom of health spending.

 

Reti asked the following written parliamentary question to Minister of Health Andrew Little: Which consulting firms, if any, have advised the health sector restructuring Transition Unit and how much have each been paid?

On 20 May he received the reply. On reading my 22 May ‘nice little earner’ blog post, he forwarded me the response. My first reaction was wow, my second reaction was double-wow, leaving my third reaction to be somewhat more Anglo-Saxon. Dr Reti kindly consented to me publishing the data provided.

The data provided covers up to 20 months; up to the first 10 months of the financial year ended 30 June 2021 and the first 10 months of the financial year ending on 30 June 2022. Over this period 15 business consultancies were engaged.

Below is the table which forms the key part of the response to Dr Reti’s question:

Consulting Firm	FY 2021 $000	FY 2022 $000
Arkus Communications Limited	38	293
Deloitte	–	64
Ernst & Young Limited	4,330	6,403
Finora Management Limited	274	182
Kahui Tautoko Consulting	23	155
Korn Ferry	–	7
Mischewski Consulting Limited	1	45
NZ Institute of Economic Research	131	95
PAAS Partners Limited	4	14
Sapere Research Group	167	406
Senate Communications Limited	228	19
Shea Pita & Associates	21	54
Sonia Wansbrough & Associates	–	297
Sue Suckling Holdings Limited	171	139
Te Amokura Consultants Limited	50	6

In summary, what this data reveals is that in the first 20 months of the transition unit $13,617,000 was paid to consulting firms (a notional average of $907,800 per firm). Of this total, $10,733,000 (79%) was paid to EY. This data speaks for itself; there is little more that can be said.

As an aside, Shea Pita & Associates earned $75,000 over the 20 months. Its Principal is Sharon Shea who, in late 2021, was appointed co-chair of the Maori Health Authority and until early this year was Chair of Bay of Plenty DHB. Interestingly her company’s website is just one page and is described as “in development”: In development?

Perhaps Oscar Wilde has the answer

Is this scandalous behaviour? It certainly appears so although it is certain to be lawful. Is it a scandal? Arguably yes, at least in my opinion.

 

But perhaps Irish playwright, poet and biting satirist Oscar has the answer. If he wanted to read something sensational while travelling by train he would read his diary (at least that’s what Wilde claimed).

In February 1892, he enjoyed his first major success as a playwright with the production of his Victorian-era comedy of manners, Lady Windermere’s Fan (back in the day it was called Lady Windermere’s Fan: A Play about a Good Woman). When it opened at St. James’s Theatre in London it ran to packed houses through to the end of July.

One of the most famous lines in  this play was “I can resist everything except temptation.” Perhaps this is what the data on the monies paid to business consultancies engaged by the Government’s transition reveals?

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Otaihanga Second Opinion