Nurses union warns people will die in downgrade of new Dunedin ...

Health Minister Shane Reti, right, and Infrastructure Minister Chris Bishop speaking to media on the cost blow-out for the Dunedin Hospital redevelopment. Photo: RNZ / Tess Brunton

Otago has an ageing population and a plan to downgrade Dunedin Hospital will likely end in more deaths, a union leader says.

Minister of Health Shane Reti and Minister of Infrastructure Chris Bishop announced on Thursday the planned redevelopment would either need to be reduced or done in stages.

A report commissioned by the government found the current plans could not be delivered within the current $1.88 billion budget. Bishop said it could cost up to $3 billion to build the new Dunedin Hospital as currently planned.

Nurses' Organisation national president Anne Daniels told Morning Report there had been "lot of pushback" on the $3b figure, with Labour health spokesperson Ayesha Verrall challenging the sum in Parliament on Thursday.

The people of Otago were not accepting the decision to downgrade the hospital, she said.

"We've been here before - we can push back and decisions can be changed."

The region had an ageing population, which meant patients were admitted to hospital with higher needs and stayed longer, she said.

A smaller hospital would only exacerbate an already difficult situation, she said.

"We're already heaving at the seams - we can't actually provide good, timely, safe care right now."

"If we're going to be forced to moved into a smaller facility, with less resource and fewer beds, that just means people are literally going to die waiting for care - and I lay that squarely at this government's table."

The existing hospital could not be renovated, she said.

Morning Report host Corin Dann asked if the redevelopment of Dunedin Hospital might come at the expense of other regional facilities in the South Island.

The government was using "divide and rule... a very good political ploy", she said.

She said regional MPs were "furious" they were being used as an excuse for Dunedin Hospital not to be built, she added.

Meanwhile, a former Labour health minister says he is "very concerned" about the signalled downgrade.

Pete Hodgson, ex-minister and MP for Dunedin North - as it was then known - told RNZ's Nights that was "sophistry" and "nonsense".

Hodgson was also the chair of the Southern Partnership Group, providing governance for the new Dunedin Hospital from 2017 until May of this year.

"The idea that we will, may build half a hospital... that we would build something that we know will be inadequate is bizarre," he said.

"This hospital has been subject to a good deal of cost analysis and value management, value engineering... over the years.

"You simply can't cut it back and have something that has clinical integrity."

While Hodgson agreed the cost had blown out, he said it was nowhere near the $3b figure given by Bishop.

"That is sophistry. That is nonsense. We're dealing with sophistry from ministers, trying to get the figure up to $3b so that the rest of the country can say 'that's outrageous'.

"[It] is nowhere near as serious as that. Nowhere near it."

The government was entitled to go back to the market and see whether it could bring the prices down, Hodgson added. He said the government was obliged to try to get the best value for money.

"The idea that you would build a hospital, not against what the market said the cost would be, but against some predetermined budget cap is bizarre. If you've got a budget with not enough beds or not enough theatres or not enough emergency department rooms, then the thing won't function very well.

"You'll end up with a discredited hospital, a discredited health system, and you'll end up with some future government trying to fix it at greater cost."

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