Health Waikato $72m cost shock

Health Waikato has been forced to reveal the true cost of its Shared Medical Systems (SMS) computer system - more than $72 million over the next five years - a figure vastly different to the impression the board gave the public last year of a $10.4 million cost.

Health Waikato has been forced to reveal the true cost of its Shared Medical Systems (SMS) computer system.

The project will cost more than $72 million over the next five years - a figure vastly different to the impression the board gave the public last year of a $10.4 million cost.

The $10.4 million only covers the capital expenditure for the system, while the rest of the $72 million cost includes operating costs, wages, depreciation, interest on loans, licence fees, communication and training.

The cost also includes a payment of up to $185,000 to former chief executive Garry Smith, who resigned in protest last October after the decision to buy SMS. It has been suggested in the The Waikato Times that this was "hush" money to keep him from talking about the decision. Smith resigned after his recommendation to the board that they choose Cerner as their IT partner was refused. At the time, Smith would only say his decision was "because of issues I feel strongly about", and he has since said that his position was untenable after disagreements with the board.

Group manager of audit and finance Ben Smit and deputy chairman Max Lamb have also since resigned.

The true cost of the IT system was made public after a ruling by Chief Ombudsman Sir Brian Elwood. The Waikato Times complained to the Ombudsman after reporter Francesca Mold made an official request for information last year asking to see the board's decision-making process, but was refused.

Documents obtained after the ruling show that SMS was the most expensive option considered by Health Waikato. Other options included upgrading the current facilities in partnership with Cerner at a cost of $56.3 million, the option preferred by Smith and medical staff, or keeping the current system at a cost of $41.6 million over five years.

Mold reports that the decision-making process involved an initial vote in favour of purchasing SMS in August 97, followed by a report from Smit recommending that SMS should not be implemented after all, and that a new plan should be developed that fitted in with Health Waikato's business plans. The documents show, she says, that Health Waikato chairman Jack Jenkins tried to stop Smit's report from being tabled.

Over the next year the board developed a system to weigh up the options available and Smith recommended on four occasions that Cerner be chosen. When the board refused to accept his recommendation, he resigned.

A month after Smith's departure, Health Waikato signed a deal with SMS.

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