SA Health brings in advisers KordaMentha to tackle $250 million debt from new RAH
SA HEALTH has called in a private advisory firm in a bid to rein in a $250 million budget deficit blamed on the new Royal Adelaide Hospital.
SA HEALTH has called in a private advisory firm in a bid to rein in a $250 million budget deficit blamed on the new Royal Adelaide Hospital.
The Central Adelaide Local Health Network (CALHN) which runs the RAH, The Queen Elizabeth Hospital and various other agencies, has called in KordaMentha as it struggles with the ballooning blowout in its $1.39 billion annual budget.
The blowout was revealed by The Advertiser in April when it was put at $240 million.
CALHN chief executive Jenny Richter said the department has been working to try to deal with the deficit.
“We acknowledge that a budget deficit close to $250 million is unacceptable and our network faces a significant challenge to become financially viable,” Ms Richter said.
“To build on this work and guide us through the process we have engaged renown advisory firm KordaMentha, the same team that helped turn around the Whyalla steelworks.
“KordaMentha has extensive experience in leading organisations out of financial turmoil and into sustainability.”
Health Minister Stephen Wade has blamed the $2.4 billion RAH for the blowout and accused Opposition Leader Peter Malinauskas of concealing the situation in the run up to the March State Election when Mr Malinauskas was Health Minister.
“The Royal Adelaide Hospital was $600 million over budget, 17 months overdue and is now haemorrhaging money on a daily basis,” Mr Wade told The Advertiser when the blowout was first revealed.
“The State Government understands that unmet savings, inefficiencies, additional moving costs and the dislocation of services due to poor long-term planning have contributed to the budget blowout.”
Treasurer Rob Lucas said the Government was committed to getting the Royal Adelaide Hospital back on track.
“A year after the new $2.4 billion hospital opened, it is not functioning well and a budget deficit of close to quarter of a billion dollars last financial year is unacceptable,” he said.
“While other hospitals are operating close to national hospital cost benchmarks, the Central Adelaide Local Health Network is much more expensive.
“Compared with other hospitals, the Royal Adelaide Hospital and the Queen Elizabeth Hospital are sucking in more resources to deliver similar quality services.
“Money needed to cover the budget blowout of CALHN is not available to fund other health services throughout the State.”
Opposition health spokesman Chris Picton has accused the State Government of talking down the health system, saying the new RAH was a landmark improvement delivering more beds, more operating theatres and modern facilities for patients and clinicians.
The appointment of KordaMentha follows changes at the top in CALHN.
Businessman Raymond Spencer has been named as chairman of the new board of CALHN, senior health administrator Michael Reid as deputy chair, while Lesley Dwyer takes over as chief executive when Ms Richter retires in November.
“All three will bring a strong mix of health management expertise and financial management skills to support CALHN management to improve care in a sustainable way,” Ms Richter said.
“This is a time of great change but also great opportunity for our network which requires involvement from all our staff. Staff and clinicians will be key to delivering positive change.”
The previous Labor government’s Mid-Year Budget Review, released last December, allocated $467.4 million over four years for additional hospital services, “including to support the transition to the new Royal Adelaide Hospital”.
It is understood that Spotless — the company responsible for facility management services — has been losing money on its RAH operations.
Spotless last November officially identified its contract with RAH operator Celsus as “underperforming” and said it was expected there would be no earnings from the project in the 2018 financial year.
The public-private partnership contract, signed in May 2011 between the then Labor government and SA Health Partnership (now Celsus), involved the design, build, finance and maintenance of the 800-bed RAH, as well as provision of non-clinical services over 35-years, at a cost of around $1 million per day.
THE CENTRAL ADELAIDE LOCAL HEALTH NETWORK (CALHN) INCLUDES
Royal Adelaide Hospital
Hampstead Rehabilitation Hospital
The Queen Elizabeth Hospital
GP Plus Health Care Centres
Breastscreen SA
Prison Health Services
SA Dental Services
SA Pathology
SA Imaging
SA Pharmacy
SA Biomedical Engineering
Sterilisation
Clinical and Corporate Support Services
Planning and Performance Directorate
Sub-acute and mental health services