A report prepared for the Business Roundtable says the productivity of doctors, nurses and others who work in public hospitals has declined markedly in recent years.
The organisation describes the findings as serious and says the report backs earlier Treasury findings.
It says the average cost for hospital services rose 18% between 2001 - 2006, but overall staff productivity fell by 8%.
Business Roundtable executive director Roger Kerr says this was despite large increases in health spending.
He says the report backs 2005 Treasury findings of a fall in hospital efficiency at that time.
The report's author says a lack of accountability by 21 district health boards may play a role, but Labour says the report fails to appreciate that health is not a business.
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Minister for Health David Cunliffe says the fundamental weakness in the report is that it confuses efficiency with effectiveness.
Expenditure in the sector accounts for a fifth of Government spending.
Former Treasury Secretary Dr Graham Scott, who wrote the foreward to the report, says health funding has been increasing by about 8.5% a year.
The Association of Salaried Medical Specialists, which represents senior hospital doctors, says the report is weak.
Executive director Dr Ian Powell says the information has been manipulated to make an ideological point.
The National Party says the report contains nothing new and offers no solutions.
