Health Minister Must End Privatised Hospital Laboratory “Cash Cow”

Wednesday, 9 August 2023, 7:02 am
Opinion: Ian Powell

Medical scientist Elaine Booker has recently resigned her job at Southland Hospital’s laboratory. With the approval of then Labour Minister of Health Pete Hodgson, both the Dunedin and Southland hospital laboratories were privatised in 2007.

Privatising public hospital services then and now require ministerial approval. This was part of a wider authority for proposals for private providers to use hospital facilities.

Operation of the two hospital laboratories in Otago and Southland was taking over by Southern Community Laboratories. SCL was then one of a number of competing privately owned laboratory companies in New Zealand, largely focussed on community testing.

It was soon followed by a mini-flood of privatisations in hospital laboratories such as Nelson, Rotorua, Gisborne and Whanganui, before National took office after the 2008 election.

From competing private labs to virtual monopoly

Over the years private community laboratory ownership has become a virtual monopoly; an actual monopoly outside Waikato and Bay of Plenty.

Further, more hospital laboratory privatisations have occurred, the last involving Wellington and Hutt Hospitals approved by then Health Minister, National’s Jonathan Coleman.

In contrast, there had been no hospital privatisations during National’s Tony Ryall’s preceding six years as health minister.

Coleman’s successor, Labour’s David Clark, used his ministerial authority to prevent an attempt to privatise Taranaki’s hospital laboratory.

Concurrently the ownership of SCL has radically changed, including via the controversial Healthscope. The current owner is New Zealand Healthcare Investments Ltd which brands itself as Awanui (it also uses the SCL name for some branding).

In 2023 Awanui is a virtual monopoly. It owns most of the private community laboratories which test general practitioner referrals.

It also operates a sizeable number of hospital laboratories which test specialist referrals (mainly surgeons and physicians). In both community and hospital testing, Awanui’s prime driver is the rate of shareholder return.

Elaine Booker calls it as it is: “cash cow”

Elaine Booker not only resigned. She spoke out on why she resigned. Her speaking out has to be seen in terms of the predictable but, hopefully, unintended consequences of Hodgson’s fatal decision 16 years ago.

His decision has led to so much harm to a service that affects most clinical decision-making (all in the case of cancer treatment). Patients would not only be seriously harmed without the work of these laboratories; lives would be lost.

In a paywalled front page article (4 August) in the Otago Daily Times, Booker “blasted” Awanui for operating the privatised hospital laboratories as a “cash cow”: Awanui uses privatised laboratory as “cash cow”.

Critical of the profits Awanui was extracting, Booker warned of a consequence being “burned-out workers”. In her words:

All we are doing is making huge profits for greedy shareholders. We have become cash cows and not only us, but the patients are suffering.

Booker described the service to patients as “constantly downgraded”. Workers were exhausted – the result of “…long, late hours, staff shortages, poor equipment and a lack of management support.”

In vividly describing the “demanding work” she emphasised that:

I don’t want to be the first person to know that you’re dying of leukaemia…I don’t want to cut up babies and dispose of thumbs, when for a small pay cut I could make coffee.

She also pointed to the way forward; publicly owned and operated laboratories thereby allowing funding to be reinvested back into the health sector. Again in her words:

If I was the health minister, I would cancel every single private laboratory contract.

Recommended reading (but I would say that!)

This year I have published a total of five pieces on the hospital laboratory crisis in New Zealand’s health system beginning with a BusinessDesk column (29 March): How to fix New Zealand’s laboratory fiasco.

This column was followed by four blogs. The first three were:

1. 15 May: Showdown time over hospital laboratory privatisations; private tail wagging public dog?.
2. 16 June: Hospital laboratory workers win Nelson ‘battle but Health Minister needs to end private control ‘war’.
3. 6 July: Privatised hospital laboratory fiasco and profit fleecing continues.

Conflict of interest predicament

My final blog (13 July) raised an important conflict of interest issue involving Awanui and the governance of Health New Zealand (Te Whatu Ora), as well as the Ministry of Health and Māori Health Authority (Te Aka Whai Ora): Conflict of interest and hospital laboratories.

The chair of a new ministerial committee on the implementation of the ‘health reforms’ under the Pae Ora Act is Sue Suckling. She is also a director on the board of the company branding itself as Awanui.

The potential power of the committee rests with its oversight role of Te Whatu Ora whose responsibilities include hospital laboratories (along with funding community laboratories).

As well as her Awanui involvement, Suckling had an early involvement with Southern Community Laboratories when it was a much smaller player in laboratory testing than it is now following its expansion and ownership changes.

As a board director of the enterprising Oxford Clinic general practice she is believed to have had an influential role in SCL’s entry and then expansion into the private community laboratory market in Christchurch over the past decade at least.

Expansion influence was reportedly within the Pegasus Primary Care Organisation of which the Oxford Clinic was an important player. It has expanded to the point that it now controls the whole community testing market in Christchurch.

One of the points made in my blog on this issue was the secretive nature of Suckling’s committee. Little information was available online, including its membership.

This was quickly corrected: ‘Secrecy’ lifted on Ministerial Advisory Committee on Health Reform Implementation.

I’ll chalk this one up.

Time for common sense and firmness from Dr Verrall

The importance of the role of Minister of Health Dr Ayesha Verrall has been a constant but intensifying theme throughout my above published pieces on privatised hospital laboratories.

We are fortunate to have a health minister who knows hospital laboratories well. This comes from her previous life as an infectious diseases specialist.

These specialists work closely with laboratories and play an important safety and quality role in their functioning.

Verrall’s knowledge includes the harm privatisation of hospital laboratories have done and what is needed to turn it around. Her knowledge should also include their vulnerability to the whims and shareholder expectations of profit return levels.

There have been a number of ownership changes since SCL’s breakthrough in Otago and Southland under Pete Hodgson back in 2007. Each has been determined by shareholder rate of return investment expectations.

In its current acrimonious collective bargaining dispute with the APEX union, on behalf of scientists and technicians, Awanui is claiming ‘poverty’ (ie, reduced profits).

If Awanui was to pull out because its shareholders could get a better return elsewhere, disruption would be a high risk.

Knowing this, Ayesha Verrall needs to follow the advice of Elaine Booker (and me). To begin with end the contracts with the operators of the private hospital laboratories on their respective expiry dates and return them to public operation.

Remove profits as the driver of these laboratories. Where’s the comprehension challenge in this.

It does not require courage. It simply requires common sense and firmness. Failure to do this suggests weakness and a perception, real or otherwise, of entanglement with a conflict of interest involving an influential player.

© 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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