Minutes of health budget meeting show HSE reluctance to act on cost-cutting measures

The Department of Health and the HSE resisted “meaningful” actions to reduce overspending in the health service due to their potential impact on patients, newly released minutes show.

At a series of budget oversight meetings, the Department of Public Expenditure (DPER) stressed the importance of “broader, more specific and meaningful measures” to mitigate overruns in hospital spending, according to the minutes.

However, both the Department of Health and the HSE expressed reluctance to implement broader measures with specific targets for cost savings, according to minutes of the Health Budget Oversight Group.

“Both believe that such measures would have a significant negative impact on ‘patient-facing activity’ and may impact certain hospital sites more than others,” the minutes for July 25th record.

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Their stance prompted DPER officials to note that “if all activity is categorised as patient-facing, this could essentially lead to weak incentives for effective expenditure management across the system”.

The minutes provide an insight into the disagreements during the summer between DPER on the one hand, and the Department of Health and the HSE on the other, about spending overruns in the health service. These continued up to budget day earlier this month, when health was given about €1.3 billion less than Minister for Health Stephen Donnelly sought. The HSE says it doesn’t have enough money to fund services this year or next, and a supplementary budget of at least €1.1 billion is expected by year’s end.

Minister for Public Expenditure Paschal Donohoe had “strong concerns” on the control of spending in the health service, minutes of the oversight group from June 6th record. “It is difficult to understand how expenditure has run so far above profile. It noted that it was still awaiting a detailed narrative on the drivers of the overrun [price and volume] or a plan to control and curtail these costs.”

DPER asked at the July meeting about “significant rises” in non-pay costs and asked why this was significantly higher than inflation in hospitals. It raised a “sudden rise” in pension costs, high spending on overseas recruitment and above expected recruitment of managers and administrators. It also asked for a detailed note on payments to high earners that were “inconsistent” with Government pay policy.

The HSE suggested the reason for increased pension costs was a rise in retirements after the Covid-19 pandemic.

The department and the HSE said they intended to transfer some elements of Covid-19 spending, such as funding for private hospital beds, into core funding (which is recurrent), but DPER cautioned that required prior sanction and presentation of a business case.

The meeting also noted that the HSE had a “low volume” of centralised procurement arrangements, when such arrangements were Government policy. Centralised buying can result in cost-savings.

The HSE responded by saying hospitals were getting better at using centralised arrangements. It suggested the low update observed by the Office of Government Procurement may be due to “poor visibility” of the use of centralised arrangements.

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