Showdown Time Over Hospital Laboratory Privatisations

Is the private tail wagging the public dog?

Developments
are coming to a head over those of Aotearoa New Zealand’s
public hospital laboratories which were privatised under
both Labour and National led governments. This was
foreshadowed in my recent column published by BusinessDesk:
How to fix the hospital laboratory fiasco.

In the column I
discussed the context in which several public hospital
laboratories were privatised beginning with the National
government of the 1990s, accelerated by the Labour-led
government into a floodgate in the mid to late 2000s, and
continuing with the National-led government in the
2010s.

I discussed the negative consequences of these
privatisations particularly given that hospital laboratories
directly affect around 70% of clinical decisions, including
100% of all cancer decisions.

These consequences include
fragmentation and neglect of workforce, facilities and
equipment. Increasingly they failed to be fit-for purpose
for meeting the diagnostic needs of public
hospitals.

Privatisation creates fundamental conflict
between not-for-profit hospital and for-profit
laboratory

At the core of this situation was a fundamental
conflict arising out of not-for-profit public hospitals
required to provide a universal accessible public good but
dependent on critical diagnosis from for-profit companies
vulnerable to investor whims.

After referring to the
heightened vulnerability of the increasing monopolisation of
the private laboratory companies (Asia Pacific Health Group
– APHG), I urged Health New Zealand (Te Whatu Ora) to
develop a national strategy for publicly run integrated
hospital laboratories.

Finally, I argued that Minister of
Health Dr Ayesha Verrall, in drawing upon her own experience
as an infectious diseases specialist who worked closely with
laboratories in infection control, to provide the political
leadership necessary to make this happen.

Developing
showdown: context
Now we have a showdown developing which
highlights the vulnerability of hospital laboratories when
privatisation is compounded by near monopoly control.

The
initial big winner of this privatisation was then Dunedin
based Southern Community Services. SCL was then take over by
Australian owned Healthscope although it continued to brand
itself as SCL.

By the mid-2010s Healthscope controlled the
hospital laboratories in the following six out of the 20
district health boards (DHBs) – Wairarapa, Hutt Valley,
Capital & Coast, Nelson Marlborough, South Canterbury and
Southern.

This privatisation included two of the five
tertiary laboratories (Wellington and Dunedin) responsible
for more complex hospital testing.

Other much smaller
private companies ran the hospital laboratories in another
five DHBs – Bay of Plenty, Lakes, Tairawhiti, Whanganui
and MidCentral. The remaining were DHB run and therefore not
driven by the need to maximise profitability.

In addition
to its hospital ‘empire’, Healthscope also controlled
the community laboratory testing (general practitioner
referrals) in 13 DHBs, including the entire South Island,
the three in Auckland, and the lower North Island.

The last privatisation was Healthscope’s takeover of
the three lower North Island hospital laboratories
(including Wellington Hospital). Healthscope sold its entire
New Zealand laboratory operation to an American company. The
sale was helped by the boost to its asset base as a result
of this privatisation.

Privatisation helped
Healthscope boost its asset base in order to sell to another
overseas buyer

Due to further changing investor priorities
there were more sales of the former Healthscope. The current
owner is now APHG which has recently rebranded itself as
Awanui.

Awanui is a private company of which 96% of its
shares are equally owned by the New Zealand Superannuation
Fund and Ontario Teachers’ Pension Fund. The remaining 4%
is held by a 28-iwi trust.

All it takes is a change of
investor priorities for much of our hospital laboratory
testing and most of our community testing to be thrown into
crisis. This is unless political and health system
leadership, in anticipation of this realisable risk, rises
to the occasion.

In other words, Aotearoa’s health
system’s laboratories which affect over 70% of all
clinical decisions and 100% of cancer treatments is highly
vulnerable to the whims of these investors.

The emerging
showdown
The privatised laboratory run by Awanui at
Nelson Hospital has become the focus of a pending
showdown.

Last week Awanui announced without advance
consultation or warning to its stunned laboratory staff that
it was planning to centralise their histology pathology
services to Christchurch. The announcement was in the form
of an intention masquerading as a proposal.

The story was
broken by Radio New Zealand’s investigative journalist
Phil Pennington on 12 May: Private monopoly cutting public
laboratory service.

Histology is the microscopic study of
tissues and cells. It is a subdivision of anatomical
pathology which is the study of organs and tissues to
determine the causes and effects of particular diseases.
Histology testing is critical for determining whether a
patient has cancer, the nature and seriousness of the
cancer, and what might be the best treatment for
it.

Awanui attempting to use influence over Health New
Zealand to slash hospital laboratories service
provision

Awanui’s justification for its intention to
slash laboratory service provision is two-fold. First, it
alleged that it was part of a wider policy from Health New
Zealand to centralise anatomical pathology services to large
centres. This was news to almost, if not all, pathology
leaders in the country.

No-one with relevant expertise and
experience was consulted over this intention or the alleged
policy – particularly pathologists, scientists and
technicians. Further putting the disrespectful ‘boot in’
was that the same professional groups in the Christchurch
laboratory were equally marginalised.

Second, Nelson’s
histology service has to be transferred to Christchurch
because its poor laboratory facilities and equipment. But
most of our hospital laboratories now have poor facilities
and equipment through underinvestment and investor profits
trumping everything else.

If this logic was applied across
the board we would not have any hospital laboratory
services in New Zealand.

Incidentally this is not the
first occasion that histological pathology has been
transferred away from a base hospital like Nelson. This has
been done before at both Timaru and Southland
Hospitals.

Then it was done ‘on the quiet’. Now those
working in laboratories have learnt from these experiences
making it more difficult to get away with no
transparency.

Contrary to Awanui’s claim, this Nelson
histology service slash (with more elsewhere signalled to
follow) is driven by dropping profit margins.

In this
context, the slash is due to the health system, including Te
Whatu Ora, being held to ransom by a private company which
believes that it is bigger than both the professions it
depends on for its profits and the health authority which
funds their profits.

The union representing laboratory
scientists and technicians is APEX. It was also blindsided
by the announcement. For good reason it has been sharply
critical of Awanui’s intention.

APEX representative
David Munro was clear about this when interviewed on Radio
New Zealand’s Morning Report (12 May): Union critical of
proposed laboratory workforce slash.

Private tail wagging
public dog!
So where does Health New Zealand fit in to
this planning service slash? Awanui’s claim that it was
following the entity’s policy and latter’s own publicly
expressed implied agreement suggest that it was
complicit.

It appears, however, that Awanui was naughty in
‘flexing the truth’.

Margie Apa, Chief Executive
Te Whatu Ora: her organisation which funds Awanui to run
privatised laboratories blindsided

Just like APEX,
pathologists, scientists and technicians, also blindsided
was Health New Zealand. Its public comments were more
designed to try to calm the bedlam beyond the scenes that
has been generated by the announcement. It even came as a
shock to its Chief Executive Margie Apa.

This was not the
cleverest of responses by Te Whatu Ora because it created
further workforce and public confusion. But it is
understandable from the perspective of a possum caught in
car headlines and apprehension over perceived Awanui power
in their relationship. Could the private tail wag the public
dog?

Ayesha Verrall’s options: firm leadership or
turning a Nelson’s eye
In my BusinessDesk column cited
above I called on Health Minister Ayesha Verrall to fix the
laboratory crisis by “reversing” the privatisation
crisis.

I concluded by stating that this would “…not
require Dr Verrall to make a tough decision; simply a firm
one. The question is whether she has sufficient presence of
mind to do so.”

Health Minister Verrall: can she
provide firm political leadership to reverse laboratory
privatisations?

Awanui’s misuse of its near monopoly
over laboratory testing and the risks this poses for the
ability of public hospitals to treat patients is brought to
the fore by its Nelson behaviour. It has created a showdown
over whether the private tail should continue to be allowed
to wag the public dog.

The Minister should require Te
Whatu Ora to first reverse Awanui’s intention and then to
inform the private companies running privatised hospital
laboratories that they will all return to public provision
on their various expiry dates.

Further, Te Whatu Ora
should be directed to ensure that this transition is smooth
including with the necessary workforce, facilities and
equipment investment.

If the Government is committed to
its objective of an integrated national health system then
this is a no-brainer. It doesn’t require courage; just
firmness. There is, of course, an alternative. It is called
turning the Nelson’s eye.

This is an idiom that means
turning a blind eye to something. When you turn a Nelson’s
eye to a problem, you deliberately choose to ignore it; you
may even attempt to convince yourself that the problem does
not really exist.

Is this really what Dr Verrall and
Health New Zealand want to happen? Putting patients at
greater risk would be both. Both should be much better than
allowing this that to
happen.

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