Brian Rudman: Lab loser's pique just part of commercial jungle law, it seems

Photo / APN

Sometimes life just doesn't seem to be fair. For more than three years after losing the contract to be the monopoly provider of community medical laboratory services in the Auckland region, Diagnostic Medlab (DML) went feral. On losing the tender process its first move was a scaremongering "important notice to patients" threatening "you may not receive the same level of service" and even, "your samples may be sent ... out of New Zealand for processing".

It tried every tactic possible to sabotage the handover to the successful tenderer, Labtests (LTA).

Now, 15 months after the change, a ministerial review into the chaotic changeover points the finger at the district health boards for, among others things, the sin of naivety.

"The assumption by the DHBs that there would be co-operation from the outgoing provider DML was not well founded," says the review team of Waikato University management associate professor Jens Mueller and Waikato District Health board chairman Graeme Milne.

"The good-faith provisions in the old contract requiring co-operation with the [three Auckland] DHBs were simply ignored by DML."

The boards are also criticised for inadequate leadership of the change process at the highest levels, and for failure to get buy-in from key stakeholders, like Auckland's GPs. Both of which are obviously true.

But blaming the boards for not expecting DML to totally spit the dummy and try to undermine the changeover does seem a little harsh.

However, this isn't a review apportioning blame for who did what to whom. It's more an academic tutorial on how to manage change in the health sector, using the Auckland example as a case study for other DHBs to learn from.

Thus it blandly lists the heinous behaviour of DML over the three-year period, not as criticism of the losing provider, but in the context of whether the Auckland health boards handled the tantrums well or not. In the review team's opinion, they did not.

The report criticises the boards for "a fundamental lack of understanding of the strong clinician backing of the outgoing provider ... [which] contributed significantly to the ability of DML to wage an unprecedented interference campaign, which drained DHB resources during the transition and caused confusion among patients and clinicians".

"It is likely that the venomous DML media campaign would have had considerably less effect and thus would have required less time and energy to deal with if the DHBs had spent more time and ensured that the incoming provider spent time to develop alliances with local clinicians."

The report refers to the "full-fledged media circus ... fuelled in part by DML operating its own video 'reporting' of patient dissatisfaction".

This is a reference to the losing tenderer hiring fake journalists to doorstep patients leaving the new testing centres, then rushing any negative comments off to the media - shamefully, state TV ran them.

It also notes DML "initiating a relentless media campaign to interfere with the transition".

The authors paint this white-anting as normal business practice. They were taken aback that most of the 80 people they interviewed were surprised "by the unexpected activity of DML".

They say "it could hardly have come as a complete surprise to the DHBs that the incumbent would not only have no desire to aid an orderly transition of providers but would vent its frustrations through a deliberate campaign to destabilise the transition process".

Their recommendation, as a result of the Auckland experience, is that the health sector should "create new contract language that reflects the competitive and sometimes combative realities of health care in the commercial arena today".

This means scrapping existing "expected good faith" behaviour expectations and spelling out "effective and enforceable provisions" holding parties accountable for performance, including "specifics of end-of-contract/transition behaviour".

To pick on the Auckland DHBs for not expecting and preparing for the loser's appalling behaviour seems to say, "It's a jungle out there and you should have known."

They might be right. But it hardly inspires confidence in the ethics of business behaviour.

Still, the report is not all gloom. It says the change is saving taxpayers $10 million a year and providing a service "considered by most to be efficient and reliable and by some to be superior".