Central Adelaide Local Health Network’s financial problems were first flagged in 2012

Financial problems plaguing the SA Health agency running the Royal Adelaide Hospital were first detected in a 2012 probe into its finances, a forensic accounting report says.

• $112m in health spending wasn’t properly approved
• Auditors paid $220k for 10 weeks of work
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Financial problems plaguing the SA Health agency running the Royal Adelaide Hospital were first detected in a 2012 probe into its finances, a forensic accounting report says.

The Advertiser can reveal consultants KordaMentha say a “systemic breakdown and lack of respect for financial controls” in the Central Adelaide Local Health Network was diagnosed and not acted on in reports in both 2012 and 2015.

KordaMentha’s report, which Health Minister Stephen Wade says will be released at the end of the month, details shortfalls including a “lack of accountability or consequences for poor performances”, “poor controls over recruitment and engagement of staff” and a “lack contractor and consultant engagement strategy”.

The problems were identified in a 2012 “budget performance and remediation review” by big-four accountancy firm Deloitte, with most still unresolved in 2015 when an internal audit was conducted, an excerpt from KordaMentha’s report says.
“Critically, based on our own observations these issues are still impacting CALHN in 2018,” the report says.

“While there are many examples, perhaps the starkest was the complete absence of medical coding (part of the billing process) over an extended period.

“Given the importance of medical coding to both future revenue allocation and activity management, it is extraordinary the decision was made to cease this most critical of activities.”

The report also found CALHN’s key financial staff had been given inadequate training and budgets were “not trusted” and “not even considered in day-to-day management decisions”.

It comes days after The Advertiser revealed KordaMentha had uncovered $112 million in payments without proper approvals in CALHN.

Mr Wade has seized on the latest excerpt to blame the former Labor government for not acting to fix the “appalling” state of CALHN’s budget in 2012.

“Labor handed over the brand new $2.4 billion hospital, 17 months late and more than $600m over budget knowing that the lack of respect for its budget would condemn the hospital to ongoing financial instability,” he said.

The excerpt also hints towards tough pay negotiations with doctors and nurses in the future, diagnosing a lack of “robust governance process” over enterprise bargaining negotiations and “perceived industrial relations barriers to implementation of savings strategies”.

Mr Wade said the RAH needed to “refocus and rein in”.

“Families know how to live within their budgets and so must our hospitals,” he said.

“It will take years of sustained effort to turn around the culture and practices that developed at the hospital under Labor over 16 years.”

KordaMentha has a contract, which has ballooned out to more than $2 million, to try to rein in CALHN’s budget blowout of about $300 million.

Labor health spokesman Chris Picton said patient care decisions needed to be made by doctors, not bean counters.

“South Australian patients deserve the world’s best treatment, not liquidators imposing austerity cuts,” he said.

“No one has seen this report. No one can assess the truth of anything Stephen Wade says about a secret report.

Rather than have to take their word for it, the Liberals should release the liquidators report so that doctors, nurses and patients can see what cuts they are proposing.”

Nine companies have responded to SA Health’s call for expressions of interest to supply CALHN’s planned “Restructuring and Financial Turnaround Implementation Services” which could include moves to reduce patients’ length of stay in hospital.

However, the public will not know what is in the plan until a private operator is awarded the contract.