Jacques Lapointe said the Health Department has estimated that more than $600 million will be needed in the next decade for basic infrastructure needs just to maintain the health system.
Lapointe concluded in his fall report that if funding is kept at current levels, the province wouldn't be able to cover equipment and infrastructure repairs as well as replacement needs.
"Significant deficiencies in infrastructure and equipment often continue due to lack of funding," said Lapointe. "Decisions as to how the funding is allocated are inconsistent and are not necessarily based on logical considerations like usage."
His report said there is no provincial long-term capital planning for hospitals and the Health Department doesn't track the extent to which equipment and buildings are used.
Lapointe said there are also problems with the way the department prioritizes equipment replacement. He said scoring criteria is not shared with district health authorities and leads to variations in how the districts rank their own needs.
"As a result, districts might or might not receive funding for their top priorities. For example, one district this year received funding for its fourth and 10th ranked items, but for no others."
The report says that in one instance a health authority requested replacement of equipment that had been removed from service because of concerns over increased radiation levels. The request was turned down because it didn't score high enough in comparison to other requests.
Lapointe couldn't name the hospital or the piece of equipment in question, but said the request scored low because there was no specific instance of harm to patients or staff.
"So they have a system for scoring that doesn't take into account a major risk factor," he said.
But Health Minister David Wilson said safety is taken into account as the province evaluates requests from health authorities.
He said with limited capital funds for health — about $80 million for 2011-2012 — the department has to make decisions based on what's best provincewide.
"If there's a piece of equipment that's failing or needs replacing, then it's given a higher priority than something that is maybe just aging," said Wilson.
He admitted that keeping up with infrastructure and equipment needs would be "a challenge."
Meanwhile, Lapointe's report said the Health Department wasn't capitalizing on up front savings for operational costs such as energy efficiency.
He also raised concerns around controls to protect personal and health information contained in computers at the Capital Health District and the IWK Health Centre in Halifax.
Lapointe said system weaknesses unnecessarily increased the risk of inappropriate access by hospital employees and contract staff.
The report says there needs to be better monitoring of network activity and the encryption of sensitive data also needs to be addressed.
Progressive Conservative Leader Jamie Baillie said he was "very concerned" by what the auditor general found, saying there needs to be a reconsideration of provincial priorities.
"There is a lot of wasteful spending going on in our health system, but real cuts to important things like our IT privacy protections," said Baillie.