PUBLIC ACCOUNTS COMMITTEE - HEALTH SERVICE DEFICIT:THE HEALTH Service Executive is facing a potential financial deficit of €500 million this year if corrective action is not taken, its chief executive has confirmed.

Cathal Magee told the Dáil Public Accounts Committee yesterday that at the end of April, acute hospitals had a deficit of about €106 million.

He said a break-even plan could have a significant impact on services in the second half of the year.

At this stage, he noted, some of the assumptions on which the HSE’s service plan had been based were no longer valid.

Mr Magee said it had been projected that €124 million would be saved on drug costs this year.

He said a key component of this was to have been a new agreement with the pharmaceutical industry on price reductions. However, this had not yet come through.

At the same time, the HSE was approving new and innovative drugs for which it had no budgetary provision this year.

Mr Magee said there had been an expectation that an additional €145 million would be generated in income from private health insurance companies.

This included €75 million in new charges for private beds in public hospitals. However, this had not yet been delivered.

The HSE chief said plans to cut expenditure on agency staff by 50 per cent would not be realised. The HSE had incurred significant extra costs over and above the level anticipated in paying lump sums for staff who left the health services before the end of last February, Mr Magee told TDs.

He added that while anticipated savings had not yet materialised, activity levels in hospitals had increased. He said pay accounted for about 70 per cent of the budget in hospitals and up 90 per cent in sectors such as disability.

John Deasy (Fine Gael) said the off-the-record reaction of the HSE to its budgetary deficit was that it was going to have to close wards, beds and possibly hospitals.

Mr Magee said the HSE had been in discussion with the Department of Health and its own board for a number of months on the options for dealing with the run rates on costs and on how this should be addressed.

Mr Deasy said the Croke Park agreement, which protects pay rates for staff in the public service in return for co-operation with reform, was undermining national recovery efforts.

Mr Magee expressed happiness with changes and reforms secured under the agreement. He told the committee the financial systems in use in his organisation were “unfit for purpose”.

He said more than 50 different systems were in place.

He also confirmed there were 500 hospital consultants earning €200,000 or more from the public system.

The potential liability from all outstanding claims against the health service could run from €750 million to €800 million.

He added that the HSE was “exiting” the business of rehiring staff who had retired.

There were currently about 440 individuals or 218 full-time equivalents on the books who had previously retired from the organisation.

This situation would end by the early part of next year.

Mr Magee also indicated that the pensions of former staff who were working for agencies supplying services to the HSE were not being abated.