Treasury calls affordability a 'major concern' for five regional hospital rebuilds
Treasury has called affordability a "major concern" for the government's plan to rebuild five regional hospitals. For now, its answer is to fund the work in smaller pieces.
The regional redevelopment programme covers Nelson, Whangārei, Tauranga, Palmerston North and Hawke's Bay hospitals. RNZ reported that Treasury's quarterly investment report for the period to March 2026 said the affordability problem was being handled "temporarily through rephasing and staging" the work, "to allow incremental funding approvals rather than full redevelopment commitments".
The concerns weren't only about money. "Beyond funding, the programmes lack clarity on how infrastructure, digital services, workforce development, and evolving care models will integrate to deliver health benefits, particularly in regional and community care settings," Treasury said, according to RNZ.
The same report showed Health NZ spent $1.18b on infrastructure in the nine months to March, against a forecast of $1.87b: an underspend of $690m. These are the latest Treasury figures RNZ obtained, and they don't show what has been spent since March.
Treasury said Health NZ blamed a mix of causes: decision delays, scope changes, optimistic original phasing, procurement and tendering taking longer than planned, vendor delivery and supply chain lead times, projects depending on one another, and resourcing constraints.
Health NZ wasn't the only agency behind on spending. RNZ reported that the Crown's overall capital underspend fell from $2.3b to $1.6b, and that NZTA, Kāinga Ora and Education also had large underspends, ranging from $140m to $400m. The March report also said the Iran war was disrupting supply chains and "agencies have not yet been able to quantify the potential impacts on the infrastructure portfolio".
RNZ asked Health NZ for several reports on how the regional programme was going. Health NZ refused, saying it needed to protect the confidentiality of advice affecting decisions still being made.
In September, Health Minister Simeon Brown was more upbeat. In a release published on Scoop, he said planning for the Hawke's Bay, Palmerston North and Tauranga redevelopments had reached an important milestone, and early concept images were released. The three hospitals make up Tranche 2 of the programme. Budget 2026 money is paying for design, site planning and preparatory works at all three while the business cases are refined.
Brown's release also said final scope, design and delivery decisions still need the relevant approvals. Design money has been committed. Money to build the full hospitals has not.
Each redevelopment is built around a future acute services building housing the emergency department, intensive care, maternity services and operating theatres, according to Brown's release.
Nelson's redevelopment has three stages, RNZ reported. Stage one costs $73m and isn't due to finish until 2031. By March it had spent a third of its budget.
The government has also changed how it oversees hospital building. RNZ reported that it dropped its idea of a separate health infrastructure entity. Instead, a law passed this year requires a dedicated expert infrastructure committee. The Health Ministry has put out a tender for a new independent assessment of hospital building, which will look at what caused past underspending. "This review is important for providing assurance on the work underway to meet the health needs of our growing and ageing population," the ministry told RNZ.
Money worries over these projects go back further. In 2022 the then Labour-led government approved $759m for stage one of Whangārei Hospital's redevelopment. Official Information Act documents reported by 1News in October 2024 showed the project was rated red, or "significant risk", in March 2024 because there wasn't enough money to finish it.
That year, then Health Minister Shane Reti said he was concerned that "badly needed" upgrades at Whangārei, Nelson, Hawke's Bay, Palmerston North and Tauranga could be put at risk if the new Dunedin hospital kept going over budget, 1News reported.
Whangārei emergency doctor Garry Payinda told 1News at the time that the hospital, built in the 1950s, was no longer fit for purpose. "We have a radiology department that, when it rains outside, it rains inside."