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The Southern District Health Board has been bailed out by the taxpayer, but also received a stern warning from the Health Minister that it needs to rein in its costs.

The SDHB racked up a $21.4 million deficit in 2017-18 - against a budgeted $14 million loss. The previous year it recorded a $21.8 million deficit.

Last month it applied to the Government for $40.3 million "equity support", while also signalling its financial issues were far from over - the SDHB has forecast a $22.39 million deficit for 2018-19.

Health Minister David Clark’s letter to SDHB commissioner Kathy Grant said the equity injection was intended to maintain the organisation’s financial liquidity.

However, he also imposed new financial reporting rules for the SDHB, and ordered it to tighten up on spending.

"In granting this approval I remind the DHB of my expectation that it will manage within the allocated funding," Dr Clark said.

"I have asked the Ministry to implement some new measures for those DHBs requiring equity support.

"These measures are designed to provide me with some assurance that boards are actively managing cost growth."

Mrs Grant, who will shortly front Parliament’s health select committee to explain another large deficit, told the Otago Daily Times that she and her commissioner team had taken on board the Health Minister’s message.

"Absolutely, and I think we are committed to ensuring that the Southern DHB is run as efficiently as it can possibly be," she said.

"It is difficult, and I think that was pretty clear to us at the time that the commissioner team was appointed — if it was easy and straightforward, turning around the ship would have been achieved some years previously.

"An organisation the size of Southern is large, complex, and it is difficult to make those changes — but I am confident that we are making progress."

Southern is not alone among the country’s 21 district health boards, several of which posted deficits in the past financial year.

Spiralling medical equipment costs and the added cost of pay rises in new employment contracts for many health workers had affected all DHBs.

Asking for equity support was a consequence of Southern DHB having been in deficit for so long, Mrs Grant said.

"At some point you simply don’t have sufficient cash, so the request for deficit support is for the current financial year and the previous financial year — so in that sense we’ve actually done remarkably well in preserving the cash position for so long as we have," Mrs Grant said.

The commissioners had expected a better deficit figure for 2018-19 but the budget had been affected by revaluation of land and buildings, she said.

"That has a below the line impact, but does impact on our final result."

Dr Clark said he expected quarterly representations that cost increases had only been approved where unavoidable, with the first to be provided in early March.

"Should an urgent need for cash arise which cannot be met from the DHB’s banking arrangements the Ministry can arrange for an advance to be made from the DHB’s funding.

"I have asked the Ministry to work with your DHB to ensure that any such risks are identified early."

Mrs Grant said the SDHB would focus on delivering services, appropriate staffing, and appropriate facilities.