Police not called over possible $15m fraud

04:06, Feb 19 2014
Southern DHB Chair Joe Butterfield
HARSH QUESTIONING: "I can't decide whether it's fraud, I'm not competent to decide that, neither is my board or my staff," Southern DHB chairman Joe Butterfield said.

A health board has not gone to the police despite a possible fraud relating to a multi-million-dollar wrangle over public funds, a parliamentary committee has heard.

The Southern District Health Board has been locked in a battle with Independent Practitioner Association-controlled South Link Health over the funds - potentially as much as $15 million - since 2003.

Under harsh questioning from Green MP Kevin Hague today, Southern DHB Chair Joe Butterfield told Parliament's health select committee the DHB had not laid any complaints with police or the Serious Fraud Office, despite having received legal advice fraud may have occurred.

"The legal advice said there has to be the possibility that fraud may have occurred, but that would need to be investigated further before such a statement could be made," Butterfield said.

"I can't decide whether it's fraud, I'm not competent to decide that, neither is my board or my staff. We have referred it to investigators for a further opinion."

But he said those investigators were not the police or the Serious Fraud Office.


The dispute is centred on what was originally $6.5 million of public money, but had since blown out to about $15 million due to interest and penalties.

South Link holds contracts with DHBs aimed at controlling the cost of prescription medicine and laboratory testing.

Southern DHB manages the contract on behalf of all South Island health boards.

IPAs work by providing notional budgets and allowing any savings on the budgets to be used for additional patient services, provided both parties agreed.

Hague, a former West Coast DHB chief executive who was heavily involved with the dispute at the time, said there was no question that "GPs associated with South Link Health generated $6.2m of savings eligible for use for additional patient services".

It was also agreed by both parties that the Southern Regional Health Authority approved South Link's proposal to spend just under $1m of that money.

But at the heart of the dispute is the remaining $5.3m that South Link says it was given approval to spend, but the DHB said the proposal to spend it was clearly denied.

Mediation between the parties had long since stalled.

The auditor-general waded in in December last year, writing to Health Minister Tony Ryall, also recommending the DHB take its concerns to police.

Butterfield told the health committee he had been assured the money was safe - although there was also dispute over whether that was the $5.5m or the nearly $15m that included penalties and interest accrued over the years.

But Hague said there was evidence to suggest the money was spent knowingly without permission, and on items outside the scope of patient services.

"There is no question that South Link Health has spent a significant sum of this money, although in it's own books it still has a liability recorded on its balance sheet for most of the $15 million," he said.

"It is inexplicable as to why the DHB has not done this, we've heard very little in the way of straight answers today from Joe Butterfield and that leads me to believe that it's all the more important to dig further."

Hague has lodged Official Information requests with the DHB and Ministry of Health as well as the office of the auditor-general to extract all documents in relation to the issue.

He has also called on the auditor-general to investigate the actions of the minister and the ministry.

South Link Health managing director Murray Tilyard was unable to be reached for immediate comment.