Conflict Of Interest And Aotearoa New Zealand’s Health System

Thursday, 13 July 2023, 7:07 pm
Opinion: Ian Powell

While thinking about conflict of interest in Aotearoa New Zealand’s health system I accidentally came across these words by American folk singer Woody Guthrie in his Pretty Boy Floyd song recorded in 1940:

Some will rob you with a six-gun,

And some with a fountain pen.

Conflict of interest has always been an issue simmering away in the health system, often perceived rather than substantive.

This simmering includes medical laboratories. They are significant for both patients and the health system because laboratories affect around 70% of all clinical decisions (and 100% of all cancer decisions).

In the mid-2000s conflict of interest reared its head in the controversial awarding of the community testing (general practitioner referrals)  contract for metro Auckland to the then Australian owned Healthscope (now Awanui).

There was also controversy over the process for privatising the Dunedin and Invercargill public hospital laboratories of the former Otago and Southland district health boards a little later than decade.

The conflict of interest was more ideological but it led to a non-remunerative (presumably) form of ‘insider trading’ intended to advantage the private bid (Southern Community Laboratories, subsequently Healthscope and now Awanui). It worked!

Now there is another conflict of interest affecting Health New Zealand (Te Whatu Ora) and the near monopoly Awanui which operates many public hospital laboratories and owns most community laboratories.

Big Pharma and UK health system

In the greater scheme of things conflict of interest is relatively insignificant in New Zealand compared to what is presently happening in the United Kingdom’s health system, known as the National Health Service (NHS).

This was exposed in a revealing in-depth article published in The Observer (linked to The Guardian) on 8 July: Big Pharma’s millions influencing healthcare in UK NHS.

Over the eight years from 2015 to 2022 annual drug company expenditure on healthcare organisations and individuals in the NHS almost doubled from just over £100 million to £200. This expenditure excluded research and development.

Interestingly it was an Otago University medical academic who had the final word in the article:

Professor Dee Mangin, a professor of general practice and family medicine at University of Otago, said the findings underlined the influence of the pharmaceutical industry over the supply chain – “from research to delivery of drugs”. “All drugs have side effects and this drives more sales,” she said. “It is naive to consider this is in the best interest of the NHS.”

EY and health restructuring transition unit

Nothing in New Zealand’s health system could ever match this situation even on a relative basis.

The most we have come to it, at least in my memory, is the role of EY (Ernest & Young) in the current Labour government’s health restructuring. This led to the Pae Ora Act 2022.

One of EY’s senior partners, Stephen McKernan, was appointed Director of the Transition Unit established to be responsible for implementing the restructuring. The controversy was the use and, more so, choice of business consultancies by the Unit.

I discussed this previously in an earlier post of Otaihanga Second Opinion (27 May 2022): Scandal or temptation in the health restructuring transition unit.

My focus was on data obtained under the Official Information Act and concluded:

In summary, what this data reveals is that in the first 20 months of the transition unit $13,617,000 was paid to consulting firms (a notional average of $907,800 per firm). Of this total, $10,733 (79%) was paid to EY. This data speaks for itself; there is little more that can be said.

There was nothing unlawful about this. McKernan’s senior partner status was there for all to see. But it is hard to see a more striking conflict of interest than this. I can’t recall a conflict of interest that was so ‘in your face’.

It also represented a substantial shifting of the goalposts on conflict of interest; unfortunately in the wrong direction. This goalpost shifting has implications for hospital laboratories.

Medical Specialists

In 1989 I became the first Executive Director of the Association of Medical Specialists. Predominately, but not completely, our members were employed by the entities running public hospitals.

In 1993 the then National government introduced an ill-fated market model to base the health system on. Public hospitals were required to compete both with each other and private hospitals for government funding. They were state-owned companies covered by the Commerce Act.

Over time this system began to peter out because of the negative downsides it created, including impracticality, and increasing public opposition. It became an electoral liability. On 1 January 2001 it was formally abolished.

The Public Health and Disability Services Act, which replaced it, was based on cooperation rather competition, primarily through the newly established district health boards.

But, in the mid-1990s, this competition driver had posed a predicament for medical specialists, many of whom (less than half) also to various degrees worked privately.

Much pressure was applied. I recall orthopaedic surgeons in one public hospital being pressured to bid privately for procedures which were scheduled to be performed in a neighbouring hospital. They refused but it was difficult.

Most specialists who also had private practice still worked 30 or more hours per week in the public system.  Most of them were strongly committed to their public hospital and did not want it undermined.

However, this competition-based system raised the issue of whether there was an inherent conflict of interest, including among senior hospital managers and board members.

I was then advocating collective contracts on behalf of the Association of Salaried Medical Specialists with each of the competing public hospitals.

In this context I successfully negotiated a clause beginning at Rotorua Hospital. It recognised both the right of specialists to private practice and the responsibility to address conflict of interest.

The Rotorua clause was a balance between the two and became a standard clause extended to most public hospitals in that decade.

It then formed part of the first national collective agreement covering the new district health boards. Today it sits in the national collective agreement for senior doctors and dentists employed by Health New Zealand (unchanged from what was first agreed at Rotorua Hospital):

Clause 46: Rights of Private Practice and Conflict of Interest

46.1  The employer recognises the right of employees to engage in private practice but not in such a way that would give rise to a conflict of interest.

46.2  Employees exercising this right shall not knowingly allow it to affect adversely the performance of their contractual obligations with the employer. On request the employee shall advise the employer of either their intention to commence private practice or that they are undertaking private practice work.

46.3  Before the employee does anything that might compete against the material interests of the employer, e.g. compete against the employer for contestable funding, the employee shall consult with the employer in an effort to avoid a conflict and reach agreement on the matter.

46.4  The parties accept that in the absence of their reaching an agreement in respect of any possible conflict of interest, legal remedies are available to them, including the option of termination of employment.

Rural after-hours telehealth service

Te Whatu Ora and Te Aka Whai Ora (Māori Health Authority) are working together seeking applicants to run a new after-hours telehealth service designed to take pressure off understaffed and stressed rural general practices. Now they are having to pause and review their process.

This is discussed in an interesting paywalled article by former Local Democracy Reporting journalist Steve Forbes. It was published by New Zealand Doctor (7 July): Potential conflicts of interest contributes to delays in rural after-hours telehealth scheme.

The problem is that some those involved in developing the scheme, following tenders being issued, subsequently became applicants. At worst this is at the lower end of conflict of interest.

New Zealand has a small population with a small health system and workforce, rural general practice is a small but critical part of it, and those involved in rural telehealth are small in number.

There is much inevitable intertwining. Conflict of interest here is non-venal and manageable. While the delay is understandably frustrating for overworked rural doctors, pausing and reviewing is the right decision.

Hospital laboratories

I have published much this year on the detrimental effects of the privatisation of public hospital laboratories with the most recent being in my previous Otaihanga Second Opinion post (6 July): Privatised hospital fiasco and profit driven fleecing continues. That post includes links to my earlier published material.      

I concluded that post with the following call on Minister of Health Dr Ayesha Verrall:

But there is another step to be taken. Dr Verrall needs to provide the necessary political leadership to ensure that these hospital laboratory privatisations are terminated at their next expiry dates.

It is straightforward; it is the right thing to do for the health system and for patients; and it’s fixable.

Just fix it Minister. It’s called leadership.

An ‘invisible’ but powerful ministerial committee

When I wrote these words I was unaware of an extraordinary conflict of interest involving an influential but virtually invisible organisation. This organisation is established under Section 87 of the Pae Ora Act which enables the Minister of Health to:

…establish any committee (a ministerial committee) that the Minister considers necessary or desirable for any purpose relating to this Act or its administration

…appoint any person to be a member or chairperson of the committee…

The powers of a ministerial committee include “…subject to any written directions that the Minister gives to the committee, regulate its procedure in any manner that the committee thinks fit.”

The ‘invisible’ but powerful organisation’s official title is ‘Ministerial Advisory Committee for Health Reform Implementation’. It is a statutory body with a statutory governance responsibility for Manatū Hauora (Ministry of Health), Te Whatu Ora, and Te Aka Whai Ora.

There appears to be to have been no media release announcing the establishment of the committee or its membership. Similarly there appears to be no information accessible online.

Inexplicably it is omitted from the official list of advisory groups to Minister of Health (29 June 2023): Missing from key ministerial health committees.

The best we have is a memorandum dated 10 November 2022 from its Chair to the chairs and chief executives of all three entities informing them of its role. This was to provide the Health Minister (Andrew Little) with:

…independent advice on the progress of the reforms, the delivery benefits and any associated risks over the first two years of the new system. The Committee is hosted by Manatū Hauora, but will report directly and is solely accountable to the Minister.

Specifically, this advice is to cover:

1. The three entities progress towards embedding functions and systems to realise the “reform objectives”.
2. Emerging risks, issues and mitigation strategies.
3. Requirements to achieve successful implementation of the reform agenda, in the intended vision, benefits and outcomes.
4. Prioritisation of resources and effort across the system on reform related activities.

On 21 March 2023 Health Minister Ayesha Verrall revealed a little more information on the barely visible mystery committee in response to a written parliamentary question from National’s health spokesperson Dr Shane Reti: Shane Reti quizzes Health Minister on ‘health reforms’ advisory committee.

Dr Verrall confirmed that the committee had been established in late September 2022. By 21 March it had met six times (a seventh meeting was scheduled two days later). It has a projected budget of $2.3 million over two years of which $360,869 had already been spent.

Who’s the Chair?

So who chairs this influential ministerial committee? Sue Suckling; who is she? Suckling is an experienced business director and commercial director. Much of this has been in the private sector.

However, it also includes being board chair of a private hospital (Boulcott) and, some years ago, chair of a previous ministerial governance board established to develop and implement a new ownership model for a DHBs national shared services crown entity.

Involvement with a private hospital is not enough to constitute a conflict of interest. Suckling’s own company was one of those engaged by the McKernan-led Transition Unit. In the Unit’s first 20 months, Sue Suckling Holdings Ltd was paid $310,000, well short of EY’s nearly $11 million. Again, not a conflict of interest.

A real conflict of interest

When I have previously described the behaviour of the monopolistic private laboratory company I have referred to it as Awanui. But this is its brand rather than legal name. Its registered company name is New Zealand Healthcare Investments Ltd.

The company’s Consolidated Financial Statements for 31 December 2022 reveal further information.

The nature of its business is to be “…holding company for various subsidiarity entities involved in providing pathology services. Its shareholders are the NZ Superannuation Fund (48%), Ontario Ltd (48%), Te Puia Tapapa Ltd (3.7%), and employee shares (0.3%).

The holding company has seven directors. One of them is Sue Suckling who was appointed on 23 August 2021.

A little over 12 months later she is then appointed chair of a powerful statutory ministerial committee that monitors Te Whatu Ora, the entity responsible for the funding and provision of laboratory services, both community and hospital.

While EY’s involvement in the Transition Unit significantly shifted the goalposts over conflict of interest in an uncomfortable direction, this does not excuse this latest extraordinary conflict. It is inconceivable that Sue Suckling did not declare this conflict prior to her appointment.

However, conflict of interest does not have to provide material benefit (substantive); it can be perception. It does not have to be deliberate; it can be inadvertent. It does not have to be blatant; it can be subtle. It does not be conscious; it can be subconscious.

It puts Health New Zealand in a difficult position over how it believes it should respond to the different aggressive behaviours of Awanui that I have previously published about. It would also be unsurprising if Awanui itself was not emboldened by Suckling’s new role.

If Health Minister Ayesha Verrall does not make the decision she needs to make to protect our vulnerable rundown hospital laboratories (ie, exit privatised contracts on expiry date), the affected workforce can’t be blamed for believing that the conflict of interest contributed.

 In this extraordinary situation the best outcome would be for Sue Suckling to immediately standdown from her role, at least while hospital laboratories remain privatised or a decision made to exit on their expiry dates.

So what might Woody Guthrie pen today about conflict of interest in Aotearoa’s health system? Perhaps:

Some will ‘rob’ your laboratories materially and in your face,

And some with an invisible statutory committee .

© Scoop Media

Ian Powell

Otaihanga Second Opinion is a regular health systems blog in New Zealand.

Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Association of Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.

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