Commissioning and contracting: indicative language for New Zealand’s public health system

Recently I received a revealing email from an experienced hospital specialist who had been at the Association of Salaried Medical Specialists (ASMS) annual conference (virtual). The member expressed pleasure that Minister of Health Andrew Little did not give a conference address “…as I find he just puts me to sleep.”

As an aside, it is unusual for a health minister not to address the ASMS annual conference. The only other health minister not to give an address over the past decade was Labour’s David Clark. Despite coming under firm criticism at times from delegates, former National health ministers Tony Ryall and Jonathan Coleman always fronted up. So did Labour health ministers in the 2000s.

“Like a centralised purchaser/provider split”

What the specialist focussed on was a “lengthy presentation” by Martin Hefford, Chief Executive of Health New Zealand’s establishment board. In the writer’s words:

He [Hefford] outlined the aims of the restructure and the 5 main aims etc which all seem aspirational without detail. I have now heard this presentation about 4 times. 

What was new was the repeated use of the words commissioning and contracting. Then he used the word monitoring quite a few times…

Health NZ Board and the Maori Health Board will oversee Commissioning/Contracting and Monitor and in this respect taking over some work currently done by the Ministry

It is all like a centralised purchaser /provider split. Who the providers will be yet to be sorted but the starting point will be rolling over the current system – including all current contracts.

The health system does need to improve (increased funding of the present structure may have helped with a stop to managerialism).

As it is I am not sure that what is proposed is not simply a repackaging of old ideas but centralised…

I recommended the whole venture should be delayed a year or so – not least as we are in the middle of a pandemic

But there are those who view the pandemic as the ultimate opportunity. The private sector will be lining up contract lawyers.

Contractualism versus relational

The emailer is right on the mark. Contracting is a term that was key to the language used in the 1990s when the health system had a competitive market experiment thrust upon it including requiring public hospitals to compete rather than cooperate with each other and the private sector.

Structurally the 1990s market was based on a purchaser-provider split. Relationships between different entities in the health system were required to be contractual rather than relational.

The description of Labour’s ‘health reforms being like a centralised purchaser-provider split arises out of the decision to abolish district health boards (DHBs) whose responsibilities include primary and community care will be picked up on numerous yet-to-be-defined ‘localities’.

The problem with contractualism is that if something is not in the contract it is not done. This is impractical in a system whose dynamics quickly change. Providing a universal public good has its own demand (cost) drivers, such as rising acute hospital admissions and external social determinants of health (for example, poor housing and low incomes) which can’t be controlled by market forces.

This system was a failure and abandoned following the election of the Labour-Alliance government in 1999.


Commissioning is a rarely used term in New Zealand and elsewhere in the United Kingdom. It was first used briefly in the 1990s in the National Health Service in the UK in an attempt to soften the attempt to ensure economic control of NHS hospitals by business orientated general practice organisations.

But it quickly disappeared until the market forces based controversial UK health legislation was adopted in 2012. It established ‘clinical commissioning groups’ with potentially powerful levers on what health services would be provided where and by whom.

But this legislation proved to be impractical for the provision of a public good. Consequently it is in the process of being repealed including the removal of clinical the commissioning groups.

In New Zealand commissioning has been a rarely used term. When Chai Chuah was Director-General of Health he established a deputy director position with the word in its title.

In fact, once ideology is taken away, it can reasonably be argued that district health boards (DHBs) commission health services through their role in funding and ensuring the provision of health services from community to hospital to geographically defined populations.

Widening leadership cultural tension

Since the establishment of DHBs in January 2001 there has been a widening tension between the two conflicting leadership cultures – contractual and relational. This intensified in the 2010s.

Contractualism was an embedded carry-over from the 1990s. Its focus was narrow and top-down seeing the relationship between health entities and providers primarily as a contractual one. The leadership culture of managerialism that has prevailed in many DHBs is a close cousin of contractualism.

Relational is about cooperative relationships between the different health providers. While recognising the statutory accountability of DHBs, it focusses on the non-contractual relationship between them and other health bodies in their districts.

To be effective relational also requires a high level of health professional engagement. The more DHBs engaged with health professionals the more they came into conflict with the top-down contractual decision-making of central government bodies such as the Health Ministry and Treasury over issues, for example, like hospital rebuilds.

Whereas contractualism is the companion of fragmentation, relational is the companion of integration, including between community and hospital healthcare. Contractualism generates high bureaucratic transaction costs; relational is about low bureaucratic transaction costs. They are chalk and cheese oppositional leadership cultures.

This widening tension was the underlying basis of the conflict between the Ministry of Health leadership (contractualism) and Canterbury DHB (relational) that led to the latter’s leadership meltdown in 2020. One of the most prominent ‘contractual’ leaders was Lester Levy who dominated the three Auckland DHBs for much of the 2010s.

Labour’s ‘health reforms’ leadership culture

Martin Hefford’s excited use of the words ‘contracting’ and ‘commissioning’ at the ASMS conference is a clear signal of the direction of the Labour government’s drive to further bureaucratically centralise Aotearoa’s public health system. It signals a further embedding of contractualism (and managerialism) into the leadership and functioning of the system and increasing fragmentation.

It also provides a cultural connection between the demotion of the relational leadership of Canterbury DHB and the direction of the Government’s ‘health reforms’. Driving the demotion of relational leadership in Canterbury was the leadership of the Health Ministry, Lester Levy, and Ernst & Young business consultants.

And now an Ernst & Young senior partner is heading up the Government’s Transition Unit responsible for implementing the health restructuring. Why am I not surprised!

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