A new-look, scaled back National Oracle Solution, to replace core management software in the public health sector, will service as few as ten of NZ's 20 District Health Boards.
A business case for new program, the Health Finance, Procurement and Information Management System (FPIM), has been endorsed by all 20 DHBs and approved by Cabinet, the Ministry of Health announced late on Friday.
Since inception in 2012, the National Oracle Solution software has been implemented in just four of NZ's 20 DHBs: Bay of Plenty, Canterbury, Waikato, and West Coast at a cost now said to be over $100 million.
The FPIM program will develop the IT infrastructure to support these four DHBs and seven others that will also move to the new system.
The seven other DHBs are: Auckland, Counties Manukau, Northland, Waitemata, Taranaki, Southern and South Canterbury.
FPIM has two primary objectives, the ministry said. The first is to address risks from end of life systems in at least ten district health boards.
The second is to realise the procurement benefits of national drug and medical equipment buyer Pharmac as well as savings through other national procurement initiatives.
Pharmac will also provide data to support DHBs to realise further procurement benefits outside of nationally negotiated contracts.
In parallel with the reduced rollout, a national catalogue of products and services, common chart of accounts, national data standards and data repository are being developed to support procurement benefits.
These elements of FPIM will be used by all 20 DHBs, regardless of the financial management and procurement system they use.
The ministry has established the FPIM governance board to provide governance oversight of the programme and service.
The FPIM governance board has representatives from the Ministry, DHBs, Pharmac and independents with relevant governance experience.
Government company NZ Health Partnerships Ltd was building and managing the NOS, which was intended to deliver a large number of business activities including receivables, debt collection, payables, general ledger, project and assets accounting, requisitions and purchasing, inventory management, replenishment, supply chain, national catalogue, contract management and financial and management reporting.
In addition, a National Technology Solution (NTS) was to be delivered s the technical infrastructure base to support the NOS system, which was heavily criticised by Audit NZ and in other reviews.
The budget for the project was originally set at $88 million.
As reported in December, a series of DHBs have now booked impairments on their NOS investments.
NZ Health Partnerships led work to write down and impair the value of work to date on the NOS, a decision which then flowed down to the DHBs, which also booked their share of the impairments.
NZ Health Partnerships also noted at the time that it also had contracts for the provision of infrastructure-as-a-service (IaaS) relating to the NTS programme, for which stop-cost contract penalties could result if the NTS was discontinued.
These costs would also be passed through to DHBs.
"In the unlikely event that there was a discontinuance of NTS and a requirement to stop the contract, for any resulting stop-cost penalties NZ Health Partnerships would have a contingent liability to the supplier, and an equal and corresponding contingent asset as a receivable from the DHBs," it said.
The status of the NTS under the new FPIM program is unclear.
Counties Manukau DHB, which required bailout funding to invest in building maintenance and infrastructure last year, recognised an impairment of $488,000 relating to pre-2015 spending on NOS capabilities that may not now be delivered.
"There has been a change to the target operating model which has meant that the costs incurred on change management should be fully impaired and supply chain should be partially impaired for those costs which related to these developments," the DHB's report stated.
Counties Manukau DHB (CMDHB) also recognised a contingent liability in relation to the NOS.
"There is also a level of risk and ambiguity regarding continuation of the National Technical Solution (NTS) of NOS," a note in its accounts explained.
"The eventual outcome will be influenced by the outcome of the revised business case and any subsequent contract negotiations to mitigate any penalties.
"For prudence, the worst case outcome has been estimated by New Zealand Health Partnerships Ltd (NZHPL) and CMDHB has noted its share of these costs as a contingent liability in the financial statements as at 30 June 2018."
“When we took office we were deeply concerned about the waste of taxpayer dollars between 2012 and 2017 when $90 million was spent with little to show for it," Minister of Health David Clark said of the project last year.
A report from Deloitte, he said, made it clear that the project was not set up to deliver its expected benefits for DHBs.
"This underlines that there was an urgent need for the Ministry to intervene when it did.”
In answer to questions raised in Parliament by opposition leader Simon Bridges about swelling DHB deficits this month, the PM chimed in the issue and cited a higher project cost.
"That member may wish to be cautious, given we’re having to deal with things like the National Oracle Solution, which cost more than $100 million over seven years and failed to deliver anticipated benefits," PM Jacinda Ardern said.