The Health Minister says a government company set up to find savings across the health sector had run its course and had to be replaced.

Photo: RNZ / Alexander Robertson

Health Benefits Limited (HBL) was established in 2010 to find $700 million in administrative savings for reinvestment in health, but by the middle of last year it had only managed to make direct savings of $71 million.

The Auditor-General yesterday released a report saying the company had tried to run an ambitious and complex programme but its communication with district health boards (DHBs) was inadequate, and its own board lacked timely and accurate information.

It said the company had no overall project management.

Minister Jonathan Coleman said the report showed winding down the agency was the right decision.

He said there were flaws in the way HBL was set up and it did not have the power to enforce what it wanted to do.

"I think the issue in the end was, it was very difficult for them to drive those decisions through the DHBs. While they had the responsibility, they couldn't actually enforce any decisions they made, because it was up to the DHBs to act on those decisions."

He said a new group now owned by the district health boards was continuing to get public hospitals to make changes like getting food from the same supplier.

Dr Ruth Spearing, a clinician from the Canterbury DHB said HBL had not worked because it did not listen to DHBs.

"This was an ideological system that was being imposed, a one size fits all centralised solution without actually having an understanding of the issues which were facing the DHBs."

The Labour Party said the idea was doomed to fail from the start.

Labour health spokesperson Annette King said the criticisms had not come as a surprise, and the DHBs had been left to carry the cost of the crown company.

"They treated the DHBs like a one-way street, and there was little or no clinical buy-in, so if you handle things in that manner, then you probably are doomed for failure."

A spokesperson from the new cost-saving group, New Zealand Health Partnerships, said it had been talking to DHBs for the past three months about how they could work together.