Consultants bill grows to $23.2m as extra taxpayer funds allocated to fixing RAH and Central Adelaide Local Health Network

South Australians footed an additional $2.2 million bill to fix the dysfunctional Central Adelaide Local Health Network — with costs including $45,000 for meals and an extra $28,000 on taxis.

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Taxpayers footed $2.2 million of costs in addition to $21 million awarded to KordaMentha to fix the dysfunctional Central Adelaide Local Health Network and Royal Adelaide Hospital.

Costs included a third of a million dollars on airfares, accommodation, food and sundries for staff of financial recovery experts KordaMentha while they were investigating.

Health and Wellbeing Minister Stephen Wade said the network was “bleeding money” and finances had to be turned around.

“Anyone who has read the KordaMentha diagnostic report and recovery plan would understand that decisive action must be taken,” he said.

“The Marshall Liberal Government inherited a financial and organisational mess from the former Labor Government.

“CALHN was bleeding money as a legacy of the former Labor government, with a cost overrun of more than $300 million.

“Under Labor, our central hospital network was bleeding up to $5 million a week — that’s $5 million above budget every week just on inefficiencies.”

CALHN covers the Royal Adelaide Hospital, Queen Elizabeth Hospital and a variety of statewide services such as SA Medical Imaging and SA Pathology.

Melbourne-based KordaMentha were called in by the Government in August 2018 to recommend reforms.

While in Adelaide, KordaMentha staff ran up $110,379 in accommodation and $44,537 in meals as well as spending $149,663 on airfares and $28,247 on taxis.

With sundries, the bill for ancillary costs came to $336,611.

Associated with the recovery process, SA Health contracted legal services totalling $1.4 million — mostly with eastern states’ firm Arnold Bloch Liebler but also with Adelaide’s EMA Legal.

In parallel with the KordaMentha work, health industry logistics adviser Checkley Group was engaged to help improve patient flow at the RAH.

Checkley Group was paid $402,190 for its work.

KordaMentha’s diagnostic review in September warned of a looming cost blowout this financial year unless drastic action was taken.

“In the absence of meaningful intervention that delivers a financial and operational turnaround, we forecast that the CALHN entity will incur a deficit in the order of $421 million (a $303 million unfavourable variance to budget) in 2018-19,” partner Chris Martin wrote.

“The lack of continuity and capability in executive management over many years has created an administrative and operational void which has been filled (partly of necessity) by stakeholder interference.”

In February, fellow partner Mark Mentha told Parliament’s Budget and Finance Committee the situation was dire.

“In my 40 years of experience, this would be the most broken organisation I have ever witnessed, both financially and culturally,” said Mr Mentha who has worked on cases such as Arrium, Gunns and Ansett.

Contracts with KordaMentha were awarded in several tranches:

$792,000 for the initial diagnostic review and financial recovery plan.

$990,000 for assisting CALHN prepare for the recovery plan.

$220,000 for business services and advice.

$100,000 to investigate purchasing practices of clinicians.

$18.9 million for a one-year project from November 2018 to oversee the recovery plan being implemented.

The major contract establishes key performance indicators around service delivery and efficiency, staff, culture and governance, and finance, cost and revenue management.

The Government has said clinicians retain control on decisions about individual patient’s health.

“KordaMentha and their contractors are integral partners in the turnaround,” Mr Wade said. “They are working well with the CALHN chief executive and the new CALHN board.”