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Laundry. In wet weather it is sometimes impossible to dry the towels sufficiently quickly to cope with the demand, although some 1,050 towels are in use. I would therefore suggest the desirability of erecting a drying-room in connection with the laundry. Sanatorium. The Sanatorium has had a busy season, but, though large numbers of applicants for entrance have been turned away, the building has rarely been full. This is because of the great disproportion between male and female applicants. Double the number of male beds available could always be filled, while the number of beds allotted to women is generally in excess of the demand. This is the opposite to the general experience of similar institutions in England. In September Miss Payne, the Matron of the Wellington Hospital, was appointed Matron of the Sanatorium, and two nurses were appointed under her instead of one as heretofore. As a consequence of these additions to the staff the patients obtain much more efficient nursing, and cases requiring massage and passive movements have been able to obtain the necessary treatment. A very large number of the Sanatorium patients have passed through the hands of the masseur and masseuse at the Aix Baths, to their great benefit. Electrical treatment is now being introduced into the Sanatorium to meet the special requirements of a large number of patients. Greater scientific precision is now attained in the treatment of Sanatorium patients by giving a prescription to each, clearly stating the bath to be taken, the temperature of the bath, time of immersion, nature of the douches, &c.; and the attendants have instructions to only give a bath according to the prescription. This system not only prevents the indiscriminate and often injurious bathing formerly indulged in by the patients, who were free to take any bath at any temperature and as frequently as they liked, but also enables the doctor to insure his treatment being carried out and the Department to record the number of baths given. It is hard to estimate the cost per head of patients at the Sanatorium ; but, estimating on the same basis as last year, and including under the head of salaries that of the late Besident Medical Officer up to the time of his departure, and that of- the House Surgeon for the months of February and March, but not of the Balneologist, whose functions are by no means confined to and therefore chargeable to the Sanatorium, it will be seen that the cost is a trifle less ; this in spite of the increased nursing staff and the increased wages paid to domestic servants. It is, however, hardly a fair comparison. The following are the figures for the past three years : Daily average cost of patients per head—l9ol, 4s. 2£d. ; 1902, 6s. 2£d. ; 1903, 6s. lfd. In February Dr. Kenny was transferred to Te Aroha, and Dr. Craig was appointed to the new post of House Surgeon and Assistant to the Balneologist. I cannot speak too highly of the way in which Dr. Craig has done his work, and his kindness and unremitting labours among the Maoris have resulted in a large increase both in the number of Natives applying for treatment and in the seriousness of the work attempted. Without the facilities offered by a regular hospital, several operations involving the use of anaesthetics have been successfully performed, and a vast amount of suffering alleviated. With only one doctor available as formerly, anaesthetics were practically impossible. In this connection I would draw attention to the fact that the Sanatorium is not a suitable building for its present needs, and that what is required is a small general hospital with a Maori ward and out-patient department, the present Sanatorium reserved for free or almost free patients, and a hydropathic establishment or spa for patients able and willing to pay in full for treatment. And here I would venture to point out that the free treatment of patients at the Sanatorium is not only an act of charity to deserving and necessitous persons, but a first-class advertisement of the Government baths. Every person that leaves the Sanatorium carries north, south, east, or west a living testimony to the efficacy or otherwise of the Botorua treatment, and the more thorough and scientific that treatment the more likely is that testimony to be favourable. The system of mixing paying and non-paying patients I consider very unsatisfactory, while the arrangements for seeing paying out-patients are altogether uncomfortable. There is no waitingroom provided, and patients paying half a guinea for a consultation have to wait their turn in a draughty passage huddled together with hospital out-patients. The balneological side should be kept absolutely distinct and apart from the medical and surgical side ; the two cannot be run together. Suggestions. To remedy this state of things, I would suggest one of two courses, — (1.) Conversion of the present Sanatorium buildings into assembly-rooms, museum, reading-rooms, &c, and erection of a new Sanatorium. Or, as I think preferable, (2.) (a.) of the present Sanatorium building for free patients, making minor structural alterations; (b.) Provision of a separate building for paying patients at higher fees than at present ; (c.) Construction of a small general hospital close at hand with a Maori ward ; (d.) Paying out-patients to be seen by the Balneologist at the new baths, instead of at the Sanatorium. For reasons of economy the same staff would do for both (a) and (c), and possibly for (b) also.