Wrangle raises concerns of fraud

19:55, Feb 19 2014

The GP organisation involved in a multimillion-dollar wrangle over public health dollars in the south says it has done nothing wrong and the funds have already been spent on patient services.

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.

South Link is contracted to provide GPs. At dispute is whether South Link had permission to spend $5.3m in public funds that was saved on doctor contracts with DHBs.

It was revealed at a parliamentary health committee yesterday there were concerns over whether possible fraud had been committed as early as 2010, but mediation stalled and the matter was not referred to authorities.

The auditor-general also raised concern over possible fraud in a letter to Health Minister Tony Ryall in December last year. Since then, the Southern DHB has called in forensic accountants to investigate whether there is any cause to refer the matter to the Serious Fraud Office.

"Our aim is to recover the money on behalf of the public," chief executive Carole Heatly said.


Questions have been raised over why an investigation never took place in 2010 when legal advice provided to the Southern DHB said fraud may have occurred.

Its chairman Joe Butterfield said: "There has been advice to us that there may have been fraud and we are having that investigated.

"If we are advised there has been fraud, we will refer it to the SFO - but we do not know that there was, and anyone that suggests there has been fraud is way ahead of themselves."

Lawyer Frazer Barton, who is representing South Link, said there "can't be any question of fraud". "Why these allegations came up today, when the people making the allegations haven't seen the contracts, haven't seen the documents, haven't been part of the dialogue between us, it's a complete red herring."

Mr Barton said all the money in question had been spent despite Mr Butterfield telling the health committee he had been assured it was secure.

It was Green MP Kevin Hague who raised the issue at the committee hearing yesterday.

"I believe that the auditor-general had become aware of it and mentioned it in a letter to the DHB and minister, and said it was an outstanding issue that needed to be resolved."

Mr Hague, a former West Coast DHB chief executive who was heavily involved in the dispute in its early years, said South Link Health held a contract that enabled it to use savings it achieved on pharmaceutical and laboratory testing budgets to provide additional patient services - provided funders agreed.

Mr Hague said the DHB claimed the money was instead spent in other ways and without permission. There was no question "GPs associated with South Link Health generated $6.2m of savings eligible for use for additional patient services", he said.

But at the heart of the dispute is the remaining $5.3m South Link said it was given approval to spend but which the DHB said was clearly denied. That figure is now believed to have blown out to nearly $15m with interest and penalties accrued.

Mr Barton said: "South Link Health is clear that programmes had been agreed to by various contract managers representing the funder.

"South Link Health is also very clear that no money is owed by it to the Southern DHB, and this is borne out by all of the contract documents between South Link Health and the funder of the day."

But Mr Hague claimed there was evidence to suggest the money was spent knowingly without

permission, and on items outside the scope of patient services.

He said it was inexplicable as to why the DHB had not acted on concerns about fraud. "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."

Mr Ryall said he had been aware of the commercial dispute for a number of years but was only alerted to the possibility of fraud by the auditor-general last December.

"I've raised that with the chairman, and made it very clear to him that if there is sufficient evidence of fraud then they need to refer it to the Serious Fraud Office," he said.

"Of course we are concerned that the funds are under dispute because that's money that should be earmarked for public health services."

He said the DHB would want to make sure the threshold for fraud was met before it was referred to the Serious Fraud Office, rather than letting the SFO investigate itself.

Mr 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.

Southern Primary Health Organisation chief executive Ian Macara said he was aware of the situation but the PHO was not involved.

The Southland Times