It comes as the government decides whether to retrofit the existing Dunedin Hospital, or pursue a scaled-down version of the original inpatients building at the former Cadbury’s site.
The government has set the budget for the project at $1.88 billion, and a decision is due shortly.
Meanwhile, work has stalled at the inpatients building site.
But briefing documents from HNZ to Treasury as part of HNZ’s 2024 Budget bid told the government building the hospital as planned was the option which had the least risk.
"Given the amount of planning that has gone into the design of the project (including a significant design reset in 2022 to address a $200 million cost escalation), continuing with the project as scoped would present the least risk in relation to programme and the timely delivery of improved health facilities in Dunedin."
It warned pursuing another redesign would require cutting services, while at the same time adding costs.
"Delaying the project will result in increased costs due to ongoing inflation.
"There will also be additional costs associated with redesign or seeking alternative funding, both of which may not yield any benefit at all and will take some time."
Further rescoping would require the removal of clinical capacity to remain within the current appropriation and therefore not deliver on the benefits and outcomes in the business case.
HNZ also noted the risks of retro-fitting the existing hospital.
"The business case outlined that it was more cost-effective to build a new Dunedin hospital rather than retaining and refurbishing the existing hospital.
"Additionally, a new facility will enable improved models of care, including improved telehealth facilities, and will enable more efficient delivery of health services."
The briefings also touched upon the large number of changes to the design since the project began, and the risks of continuing to make changes.
"The strategic case for the new Dunedin hospital focused on the condition of the existing clinical facilities as well as the projected unsustainable service demand associated with an increasing ageing population."
The case was reviewed and retested, the advice said.
"It was found that the scope and scale as presently designed for [the] new Dunedin hospital is justified to deliver improved health services in Dunedin and the wider southern district."
The briefing also warned the project had already undergone significant delays and "any further design retesting or seeking alternative funding would further delay project delivery and the subsequent delivery of improved health services".
The previous government initially set the budget for the project at $1.2b in 2017, but this ballooned to $1.59b by the time the National-led coalition assumed office late last year.
HNZ advice in February said this was unlikely to remain the final cost.
"Legacy decisions made in relation to site selection, building footprint and fast track programme for new Dunedin hospital, along with the contractor attractiveness and availability, market volatility, inflation and project delays have resulted in cost escalations."
In the May Budget, the government increased the funding of the project to $1.88b.
HNZ was not the only organisation to warn the government against scaling down the project.
The clinical transformation group — a panel of highly-regarded clinicians providing clinical advice for the new hospital — expressed concern about successive governments’ "value management" of the project and stressed any delay to the project would pose a big risk to the region’s health system.
A spokeswoman for Health Minister Dr Shane Reti declined to respond to specific questions about HNZ’s concerns, and instead pointed to the government-commissioned Rust Review of the project.
The Rust Review said the project as presently scoped and planned was "probably not achievable within the approved budget and there remains significant uncertainty as to the cost of the Inpatients Building", she noted.
