A background paper on the provision of community
laboratory services in the Auckland region released by Diagnostic Medlab.
These are their words, republished, not ours. Decide for yourself.
14 July 2006
The size of the undertaking
On any one day at 84 collection centres throughout the Auckland region,
300 trained phlebotomists (collectors) are taking blood, urine and other
samples from around 10,000 Aucklanders who have been sent to a local
collection centre by one of the region’s 2,000 general practitioners,
medical specialists or other health professionals.
At the same time, a fleet of 45 cars travel 10,000 kilometres every day
transporting the specimens back for testing at a central laboratory, as
well as calling on rest homes, private hospitals and homes to take
specimens from elderly and frail, and often ill people.
At the laboratory, a staff of 400 pathologists, senior scientists,
technologists and laboratory assistants process around 32,000 tests every
working day. The results of those tests are sent back to the community
health professionals within 2 to 24 hours, depending on their urgency.
Every day, the laboratory receives more than 75 telephone calls from
doctors and specialists to discuss in more detail the results of tests and
their implications for their patients. Every day, specialist
haematologists send out around 60 interpretive clinical letters, often
detailing specific health management plans for individual patients.
The results of the tests help Auckland’s community health professionals -
general practitioners, specialists and midwives - make the right diagnosis
or confirm their diagnosis, identify health problems before they become
life-threatening and play a critical role in getting people on the path
that leads to an improved quality of life.
This service for around 1.6 million people costs the New Zealand taxpayer
around $70 million each year. It is under threat.
The issue
The Auckland District Health Board, the Waitemata District Health Board
and the Counties Manukau District Health Board have completed a process
for the provision of community based laboratory services for the greater
Auckland region. Hospital services were not part of the request for
proposals (RFP) process. Responses were submitted on 10 April and since
then there has been a process of evaluation and clarification which has
now proceeded to negotiation.
There were two bids from two (preferred) providers under consideration.
The joint committee appraising the bids on behalf of the three DHBs have
selected as its first preferred provider a trans-Tasman consortium called
Labtests Auckland of which the major shareholder is Healthscope.
Healthscope is an Australian-based provider of clinical, veterinary and
environmental laboratory testing services. Currently, Healthscope operates
a small community laboratory service in Whangarei and some veterinary and
environmental testing services in Auckland. We have been told that
Labtests Auckland has no physical facilities in the city.
The current provider of community laboratory services, Diagnostic Medlab
Limited, missed out on the contract. Diagnostic Medlab is a wholly-owned
subsidiary of the Australian listed company, Sonic Healthcare. It has been
providing community laboratory services to the people of the greater
Auckland region for the past 70 years.
As well as providing community laboratory services for general
practitioners and medical specialists, under a contract with the Ministry
of Health, Diagnostic Medlab provides cervical screening services for the
Auckland region - that is around 30 percent of all cervical screening
tests in New Zealand.
Almost all of Diagnostic Medlab’s revenue - more than 90 percent - is
derived from the DHB contract. Without this contract, Diagnostic Medlab
will be forced to close. The Auckland region will lose a quality, high
performance and responsive community laboratory service, as well as a
number of highly skilled pathologists, scientists, phlebotomists,
technologists and laboratory staff.
The new provider
The new provider, a consortium comprising Healthscope (76.7%) and two
local based entities, will have as its chief executive Dr. Tony Bierre.
Healthscope is currently providing community laboratory services in
Whangarei while Labtests does not provide any services at present. It is
one thing to provide a service to a small provincial centre; providing a
comprehensive, quality service to a large metropolitan centre like the
Auckland region is a huge step up for any provider.
The current Diagnostic Medlab contract runs to July 2007. In less than 12
months, Healthscope will have to set up a laboratory, establish a
collection service, attract professional staff and establish professional
relationships with the region’s general practitioners, specialists,
midwives and other health professionals. Healthscope also has to reach the
appropriate professional accreditation standards.
We seriously doubt that Labtests Auckland, within less than 12 months,
will be able to reproduce the intellectual capital and tailored service
systems that it has taken Diagnostic Medlab and it’s predecessor
laboratories more than 70 years to refine.
In its first 12 months, we believe Healthscope might:
- Set up a laboratory for basic haematology and biochemistry testing.
- Use the hospital laboratories for some testing.
- Have some tests processed outside the Auckland region, possibly in their
laboratories in Australia and Malaysia, if they are unable to attract
sufficient staff locally.
- Employ some of the Diagnostic Medlab staff.
Before July 2007, Diagnostic Medlab professional staff will inevitably
start looking for other opportunities, either in other parts of New
Zealand or overseas. Some of our laboratory scientists may find work in
Crown Research Institutes and university research centres. Our
pathologists will be attracted to either Australia or the UK where there
are staff shortages, higher salaries and better job security.
We estimate we could lose up to 30 percent of our professional staff over
this period. If that were to be the case, we would be unable to continue
to provide the current community laboratory service to the people of the
Auckland region.
Why would the DHBs want to take the risk?
In awarding the contract to Healthscope, the DHBs are taking on
significant risks in three areas:
- A transitional service risk as Healthscope sets up temporary
arrangements to see the company through the first 12 to 24 months.
- A short term service risk as Diagnostic Medlab struggles to provide an
adequate service to the people of the Auckland region simply because, with
the contract lost, morale will be decimated and staff will inevitably
pursue other national or international opportunities.
- A long term service risk by awarding a marginally priced contract to a
company without a track record of service delivery within a large
metropolitan area in New Zealand.
Why would the DHBs want to take on the risk? The answer is money. We are
all aware that the country’s DHBs are under considerable political
pressure on two competing fronts - they have to provide more services, but
constrain their costs. Community laboratory services represent a
significant cost to the DHBs. The temptation to take the risk, to take the
gamble, is significant. And if they lose, they do not pay the price - that
is borne by those needing the service and their patients.
We know our contract price offer was competitive for the stated service
specifications and would suspect the viability of any contract based on a
significant lower price. Any other provider awarded the contract will have
to reproduce the systems and physical facilities currently in our
operation at our Ellerslie testing centre and would be unwise to assume
that our laboratory would be available to them as a going concern.
Our concerns
Our concerns are two fold:-
1. There has been a total lack of consultation with any referring
clinicians within the Auckland region. The Primary Health Organisation (PHO)
management knows nothing about these proposals.
2. A proven laboratory provider with a reputation for excellence will be
replaced by an untried one.
Diagnostic Medlab has been a benchmark for community laboratory standards
throughout NZ. It is both demoralising and destabilising for the Pathology
Industry if a laboratory as good as this can be replaced by an unproven
and untried new provider.
Pathology is not a commodity that can be determined simply by selecting
the lowest cost provider. It is not a contract like the supply of rubber
gloves or cleaning services. Community pathology is a high quality,
specialist medical practice undertaken by skilled people - pathologists
and scientific staff - with years of training. The professional
relationship between a community laboratory and their pathologists and
scientists with the region’s referring medical practitioners is critical
to the safe and efficient delivery of those services to the community.
Confidentiality and consultation
When we entered into the RFP process, we were bound by a confidentiality
clause. We were happy to support that clause because, naively perhaps, we
did not envisage a situation where the DHBs would put community laboratory
services at risk.
With the DHB’s selection of Labtests Auckland to provide community
laboratory services, we believe we have an obligation to our company, our
general practitioners and specialists and the people of Auckland to speak
out.
Also, we believe the confidentiality requirement has provided the DHBs
with an excuse not to consult with the general practitioner and specialist
community about their views of the existing service and the balance of
risk and benefits accruing from significant changes to that service.
No doubt the DHBs would argue that, because the service and standards
requirement of the contract have not changed, there was no requirement to
consult because there are no significant changes - only a change in
service provider.
We would disagree with that view. This background paper has detailed a
significant change carrying significant risk that will impact considerably
on general practitioners, specialists and their patients.
We believe, before the final decision is made, the DHBs must consult fully
with the region’s health professionals, patients and the community.
