KEY POINTS:
Kumeu GP William Ferguson was "panic-stricken" when he heard that community diagnostic services were to be taken over by start-up company LabTests Auckland. He believes the decision is irresponsible.
"Who are they kidding, saying this will happen in a seamless, painless transition? I think the service that Diagnostic Medlab has given us has, quite literally, been flawless. It's the only part of the health service that we [GPs] have never complained about."
Ferguson points out that the Diagnostic service has been built on years of trust, skill and experience, while LabTests has no experience in the stretched Auckland health service. As he says, it doesn't even have a lab yet.
He talks about how, when an elderly patient collapsed, the system kicked in fast. "Within half an hour someone came, took her blood and rushed the sample to the lab where a doctor saw that she was on the brink of bleeding out of every pore in her body."
By then it was after hours, Ferguson was out, and the pathologist handling the case went to "heroic lengths" to hunt him down and sort out the right emergency treatment. "Without that kind of service she would have been in North Shore Hospital with a stroke - and costing the taxpayer thousands of dollars."
I heard similar stories often while researching the service provided by pathologists, microbiologists and haematologists who work in the lab service.
And, says Ferguson, LabTests' assertion that it can undercut the current service by $15 million a year, subtract 12 pathologists and around half the region's community laboratory staff without lowering standards, "is blatantly dishonest".
"The thing is, no one can measure the downstream cost of all this."
As for the claim that it will increase efficiency and cut costs by eliminating collection labs in favour of GPs doing the job: "We already take any blood we need to take - old people, the very sick or drug addicts. But there's no space, time or staff to set up a collection system at our rooms.
"This is just another example of cost shifting which will now fall on the patients and GPs."
It was always going to be a bloodbath. The contract to provide community diagnostic services for the Auckland region is worth $560 million over eight years - which is big money, even for the health sector.
The upstanding, elegantly dressed, seriously wealthy doctors about to tear each other to pieces in court are former colleagues. They went to med school together, ran a company together.
Today, when you ask the handsome Paul Ockelford (56) of Diagnostic Medlab if he and his former partner Tony Bierre, now of LabTests Auckland, were ever friends, he smiles and squirms as he says, "colleagues".
Historically, the health system's laboratory services section was dominated by groups of pathologists like these who banded together to provide blood, urine and the other many tests GPs need to manage their patients' health.
But during the corporatisation of the health sector, most partnerships were sold to big business, so the current battle is between two Australian-owned companies, headed by local pathologists who sold their shareholdings for undisclosed millions.
The incumbent provider is Diagnostic Medlab (DML), run by Drs Arthur Morris and Ockelford and 100 per cent owned by Australasia's largest pathology provider, Sonic.
The newcomer is LabTests Auckland, a start-up company 77 per cent owned by Australia's second-largest provider, Healthscope and 16.67 per cent by Taupehi Holdings, aka Dr Tony Bierre, an Auckland pathologist with business ambitions.
Bierre's business partner and 5 per cent shareholder is Lee Mathias, a nurse and health entrepreneur who started the maternity service, Birthcare.
When all the elements - big business, medical politics, money and clinical reputations - meet in the High Court on February 12, the battle will be bitter. Documents released to the Herald reveal claims of conflict of interest and a flawed evaluation process.
Diagnostic Medlab's Adam Ross and Jack Hodder of Chapman Tripp's statement of claim alleges how DML was not told that the boards were contemplating a radically new style of community laboratory service.
Bierre also faces claims of conflict of interest (which he denies) for his part in ongoing informal discussions, and at least one high-level strategy meeting with Auckland Regional Health Board senior management.
He was also invited to contribute to discussions on laboratory strategy during the confidential part of an Auckland District Health Board meeting and at a high-level joint meeting of the three DHBs.
They also claim that Bierre "on numerous occasions denigrated DML [implying] that DML was making excessive profits on its contract with the ARDHBs" [the Auckland Region DHBs, which encompass Auckland, Waitemata and Counties Manukau health boards] - while claiming that Bierre's shareholding in LabTests will produce an after-tax profit of $900,000-$1 million annually.
Bierre, who bases his figures on a 12 per cent profit margin, contests this is an over-simplification.
Although LabTests' lawyer, Mark Gavin of Russell McVeagh, says the statement of claim contains "a number of untrue and defamatory allegations in relation to Bierre which are strenuously denied", they decided to make the papers available because of undeniable public interest.
On June 8 last year when the community laboratories contract was decided, LabTests' offer consisted of a bright idea from a pathologist with a new MBA, a grunty laptop, an empty building, the backing of Australia's second-biggest medical service companies - and a budget that cut annual costs of the service by $15 million a year.
Diagnostic Medlab, on the other hand, had a three-year-old $45 million plant, 750 staff, 84 collection centres, more than 30 pathologists, a sophisticated call centre, plus an after hours on-call service, millions of dollars worth of state-of-the-art computers and automated, smooth-as-silk blood and other analysers, and a 70-year history.
It also has a flawless reputation for collecting and analysing around 35,000 blood and other samples from 10,000 patients daily.
Morris and Ockelford have international reputations for their published research and work on site. "On occasion," says Biochemistry and Immunology clinical director, Dr Cam Kyle, "I'll go and admit a patient to hospital myself when I can't get hold of their GP."
But, to the amazement of DML, GPs, patients and hospitals alike, LabTests got the contract.
The backlash was huge. Ninety-two per cent of Auckland GPs said they wanted Diagnostic Medlab to continue; Auckland's hospital pathologists wrote to the Prime Minister and Health Minister calling for the contract to be revoked; 23 of Auckland's 37 private pathologists wrote a public letter saying they wouldn't work with Bierre, and some took the unusual step of marching down Queen St, waving placards; 120,000 citizens signed a petition calling for the ARDHBs to review their decision.
In August, a High Court case was filed by DML. Soon after, that action was joined by the Harbour Primary Health Organisation (PHO) representing interests of many GPs, specialists and PHOs. A key supporter of the intervener is Tom Marshall, chairman of Procare, which manages GP practices covering nearly half of Auckland.
Just before Christmas, a parliamentary health select committee reported it was "seriously concerned" at the risk being taken by the health boards.
"Some of us remain unconvinced that projected savings of $15 million a year will be achieved without cutting services."
How did this happen? Money. Garry R. Smith (54), chief executive of the Auckland District Health Board and leader of the community lab project for the ARDHBs, adamantly defends the decision. The money outweighs the risk, he says. They would have done it for a $5 million saving a year. "But this is $15 million - it couldn't be ignored."
Smith is clearly impressed at the idea of a gleaming new service on his watch. He blames the public unrest on "disinformation - not only the media but DML". He sniffs at the thought that DML still grows cultures in petri dishes.
A soft-spoken, easily irritated man, Smith fronts a tough organisation. His chairman is the stroppy Wayne Brown, who has fought Auckland's hospital doctors for years to force down health costs. And when the community diagnostic service budget moved from the Regional Health Authority to the country's health boards in 2000, Brown saw a chance to save money.
He was impressed with Bierre, who was elected to the Auckland District Health Board in December 2004. He liked the pathologist's innovative attitude to the possibility of public/private laboratory systems, his fondness for patients taking responsibility for their own health, open-book accounting and business nous.
Certainly Bierre sells well. With his dark hair, clear, greeny eyes, black pinstriped suit and polished black shoes, he looks younger than his 52 years. With his company's 5500sq m Carbine Rd premises far from finished, he snaps together his powerful laptop, Nokia phone, slideshow projector and connecting cables, to deliver LabTests' presentation with the confidence of a man who has answered all the questions, won the crowd.
His manner is frank. The business language rolls off his tongue. He stresses his main focus is the patients - especially the under-privileged, high-needs patients of South Auckland who, up till now, have suffered inferior service from those of the more affluent suburbs. The only sign of tension is the way his nostrils flare white at the edges.
Brown may not have been aware of his new board member's reputation. This is not the first time he has faced his colleagues in court. Other pathologists, who are either forbidden or too scared to talk on the record, say he is a difficult, litigious man, definitely not a team player and driven by revenge against his old colleagues. "This is a game of bluff and brinkmanship, and at stake is the public health service."
In 2002, after resigning his role as DML's clinical director and chairman then asking for his job back, he lost a case of constructive dismissal. As the Employment Relations Authority's R.A. Monaghan ruled, Bierre was "far from blameless" in the breakdown of the relationship between himself and his pathologist colleague, Mee Ling Yeong.
He had "no real insight into the role his own behaviour played in the deterioration"; he made unreasonable, destructive accusations against a new, South African colleague; he made constant complaints. Basically, opined Monaghan, "it seemed impossible to satisfy him".
In February 2003 Monaghan ordered Bierre to pay costs of $15,000 to his former partners. Bierre lodged an appeal and the matter was eventually settled out of court.
Once on the board, Bierre contributed eagerly in his area of expertise - diagnostic services. His MBA from Otago University had examined medical management, specifically the economics of community diagnostic services.
Now he offered to brainstorm with Andrew Coe, who was involved in the DHB's lab contracts, and by February 2005 was on the audit committee, regularly meeting the chairmen and executive of all three Boards, including chairpeople Wayne Brown, Kay McKelvie and Pat Sneddon, chief executives Garry Smith, Dwayne Crombie, and Stephen McKernan and Drs Bruce Gollop and Denis Jury.
A paper he co-wrote for his MBA on buying diagnostic services found its way into an ARDHB workshop. His ideas, he told The Listener, were part of a new philosophy of "lean thinking that came out of Toyota management".
Throughout his tenure on the board, given that his application for membership had, by law, set out his conflict of interest as a practising pathologist (and prospective employee or contractor), he tried to gain a laboratory contract - first for a small boutique lab, second as general manager for another Healthscope lab operation.
But until December he did not disclose his interest in being the provider for the major Auckland contract. He also kept up the pressure against his former colleagues and on July 6, 2005 unsuccessfully opposed the extension of DML's contract for a further two years.
In August, when the ARDHBs started a formal Request For Proposal process (called for tenders) for community laboratory services, Bierre again drew attention to his possible conflict of interest (which colleagues assumed related to the boutique lab idea), but was not asked to step down from the board.
He also attended a meeting specifically to put together the Board's RFP strategy and work out what they wanted from a provider.
In December, within a month of withdrawing from laboratory contract meetings, he was putting together his own proposal. Says Bierre, "I decided to roll my sleeves up and have a go at being a provider." After a discussion with Garry Smith he also applied for leave of absence from the board.
In July last year, LabTests was awarded the contract and three months later, in August, Bierre resigned from the Auckland District Health Board.
Throughout the Herald's research, Bierre is unusually pro-active. He calls twice to offer information and interviews. Bruce Northey, general counsel for the Auckland District Health Board, calls and emails his version of the board's position. I have a conference call with the Australian chiefs of LabTests' parent company, Health-scope, to put me right on an upcoming court case against its laboratory arm, Gribbles.
The allegation, that the company paid inflated rents to Hobart landlords in return for pathology referrals, has been circulating in Auckland for weeks. Say Drs Matthew Egan and Michael Coglin, "We're extremely confident we'll be vindicated".
Three weeks after our initial interview, Bierre invites me to inspect his new premises near Sylvia Park. He and Mathias arrive in the grey Audi, whip the orange jackets and hard hats over their suits, and gesture proudly at the metres of concrete that will house their 475 employees, which they refer to as FTEs.
Although the building is largely empty, they are upbeat. "The lab will be ready on March 1, and we'll be up and running on the first of May. That gives us two months to start running specimens through the machines to test our systems," says Bierre.
"By June we'll be going to some large general practices and taking their specimens to test our collection services in the lab and how to get results back to GPs." His full, seamless service is due to start on July 1.
High points of the new organisation include:
* A sophisticated new molecular lab, "a first for a community lab in Auckland", which will provide microbiology that almost eliminates growing micro-organisms in petri dishes. "In the past it's been about putting plates out and allowing them to grow, and that may take two or three days, or in the case of TB, three weeks. LabTests' new DNA probe, which locks on to organisms, will reduce the turnaround to the same day or next day.
* New tests for genetic abnormalities (previously only available in Australia or the US).
* "Point of care" diagnosis, achieved by small blood-testing machines at rural centres which could diagnose patients with, say, suspected heart attacks within 10 minutes rather than the three hours it takes now.
* A text, email and fax service by which diabetics will be able to send their blood sugar levels to the lab.
DML's Ockelford says the claims are simplistic and fudged. "There's definitely a blurring of the issues about what is being offered here," he says. "Those tests are not funded through the community service, but done by hospital labs. It's not whether one can do these things, but what the system allows.
"Installing small testing machines at GPs' surgeries won't be much faster than the three-hour turnaround we offer now. Basically, nothing fundamentally different from what we're doing is being offered by this new service - except for the cutbacks."
Throughout, Bierre shrugs off the problems that might be expected when you slash millions off a budget, cut the number of full-time equivalent pathologists from 26 to 18, and collection staff by almost half.
Throughout his earlier presentation there was an underpinning suggestion that the DML service is flabby and greedy - and he as a former director, should know. As he told me at that first meeting, his new contract relies on open book accounting: "Surprise, surprise. If the DHBs were spending $15 million less you'd have to say a significant part of that was excess profit."
No, this does not mean that services will suffer - "the cake will be better spent", he purred at our first meeting. "What I've presented to you is the truth. We see this as a critical part of Auckland health care and we're doing everything possible to make this a painless transition."
Meanwhile, Mathias is unworried by the unpopularity of her latest venture. "I've been interviewing new staff and they're very interested." Bierre, who told me a month ago he had more pathologist applicants than jobs, verifies that five have signed contracts.
He points out that even if he loses the court case, DML will not automatically get the contract back. "If the contract doesn't stand you have to run it again," he says. "All this [backlash] means is staff will miss out on good jobs.
"DML is playing what I understand is Russian roulette with their staff, which I think could be highly regrettable. This is a legally binding contract - essentially a Government contract. [If it fails] it places a question mark over any future contract the Government will sign."
In essence, this is a story of a gamble to save money. But it is the ordinary people - "surplus" DML employees, GPs who are not attached to large PHOs and their patients - who stand to suffer.
The day I finish my research I am sent for some blood tests. The walk to our local lab is around three minutes, the service swift, painless and impeccable. "Are you worried about the LabTests takeover?" I ask the young phlebotomist.
"Yes. I'll be out of a job."
