Editorial: Job-sharing a Band-aid for Labtests' woes

The Auckland medical testing debacle is unlikely to be resolved by the return of 10 per cent of the work to the former operator this week. Doctors, while welcoming the partial restoration, note that it is for private hospitals and specialists. General practices remain with the new provider, Labtests, in which they continue to profess no confidence.

It is a small mercy - and possibly a temporary one - that Auckland's blood and tissue testing remains significantly less costly to the taxpayer than it was before the contract was contentiously transferred a few months ago. The expected annual $15 million saving has been reduced by $4.4 million, which still amounts to a worthwhile reduction on a service that used to cost $82 million.

The proper handling of public money is a thankless task, particularly in matters of health. That is why politicians delegate the task to district boards. Pat Snedden, the lone survivor of the chairmen of the three Auckland boards that jointly awarded the Labtests contract, has been left to deal with the mess. Little has been heard from members of the Labour Government that appointed them and this week Health Minister Tony Ryall has kept his distance, promising a review of what went wrong.

Any review needs to start at first principles. District health boards are obliged to use their allocated money as efficiently as possible, which means spending no more than necessary on any of the many vital services their district needs. Overpayment for one service deprives another.

There can be not the slightest doubt the three Auckland boards were paying too much for blood and tissue testing under their previous contract with Diagnostic Medlab. If there was any doubt, it was dispelled by DML itself when, having lost the contract, the company complained to the High Court that had it known the boards were seeking savings in community laboratory services, it could have offered them.

To have invited DML to match the lower bid would have defeated the purpose of competitive tendering. Nobody would go to the trouble of bidding if incumbents were given the right to match any better offer.

A better offer, of course, has to maintain a reasonable standard of service. Any review of the district health boards' decision has to examine that side of the equation. Labtests is a large, established Australian operation that could have been presumed capable of handling Auckland's needs. Yet the local medical fraternity expressed doubts from the outset.

The profession's predictions have been precisely fulfilled by mistakes and delays since the day of the transfer. Were these slip-ups more than normal for a daily operation of this scale? Were they entirely Labtests' fault? What made Auckland's medical demands so difficult to satisfy?

A proper review must not shy away from the possibility that Labtests' problems have arisen from the circumstances in which it was awarded the contract. Auckland medical practitioners largely backed DML's case for keeping the contract and some joined the company in court to argue they should have been consulted.

If a review concludes that the boards erred in defying the profession's resentment, it would be a fateful conclusion for competitive contracting in health services. Where the boards did err was in accepting such a rapid, all-or-nothing transition, especially once it became clear the defeated incumbent was making things as difficult as possible for the new provider. They erred, too, in defending the indefensible for too long, giving assurances for weeks after the takeover that clearly could not be sustained. For whatever reason, the implementation did not match the intention - which was to contain medical costs. The Auckland boards deserve some credit for that attempt but very little for its execution.