KEY POINTS:
The decision by the three district health boards in the Auckland region (Waitemata, Auckland, and Counties-Manukau) to switch suppliers for the community laboratory service is not just about money.
Contrary to the assertions of Carroll du Chateau in the Weekend Herald that in essence, this is a story of a gamble to save money, this was a carefully considered decision that took into account a range of elements.
There is no doubt that there is increasing demand on the health dollar. Just as relevant to the three district health boards (ARDHBs) is ensuring that the overall health needs of the region are met now and in the future within the money available.
This is particularly critical with the changing social and health profile in our communities, longer life expectancies with new medicines and techniques and continued innovation.
The ARDHBs fund virtually every aspect of health services in their regions, including hospitals, general practitioners, primary health organisations, the regions' pharmacy service, aged care (including rest homes), mental health, NGOs and community providers, health services undertaken by other DHBs, and the community laboratory service.
After these payments very little discretionary money is available to fund initiatives or improve current services. As an example, if the ADHB was to receive a third share of the $15 million annual savings this new contract will provide, it would double the amount of its discretionary spend on health initiatives.
When a large publicly funded commercial contract such as the community laboratory service ($560 million over eight years) expires, a tender is in accordance with Audit New Zealand guidelines. The project is scoped, taking into account current and future needs, level and quality of service required, and value.
The tender process came after a large body of work was completed on the future of community laboratory services. Stakeholders have been involved in developing the regional pathology strategy including the incumbent supplier DML and personnel from the new provider.
The successful tenderer for the contract was Labtests Auckland (a company 76 per cent owned by Healthscope Australia). The incumbent DML (a company owned 100 per cent by Sonic Australia), was not successful and subsequently took court action which is due to begin on February 12.
The ARDHBs were fully aware of the significance of changing suppliers, but the Labtests Auckland tender was considerably superior and the company provided the level of comfort required regarding its ability to deliver.
Labtests Auckland satisfied the ARDHBs that it could provide a quality, efficient service, incorporating innovation that will take community laboratory testing into the future. It's what is behind the scenes, just as much as the face of the company, that will matter.
People in the region will still be referred by their doctor to a collection centre for free tests taken by professionals. Those samples will still be tested in New Zealand by highly trained professionals and the results reported to the individual's doctor promptly.
GPs will still have the ability to consult pathologists as they do now and historical results and information will still be available.
The location of the test centres will change, first because DML has chosen not to engage with Labtests Auckland on its infrastructure, but also because the configuration of locations, size and opening times is not necessarily ideal.
Numbers and positions of collection centres are only part of the access issue. The real question is how many patients have the tests prescribed and how quickly after the GP visit.
In its tender, Labtests demonstrated an approach to collection centre locations and a desire to work with health organisations which supports the ARDHBs' drive to improve equitable access and consequently better health outcomes over the long term.
Reducing the number of laboratory collection centres was proposed by Labtests and DML. What is more, Labtests has also taken the step of matching the collection centres to patient flows in the community, with three different size categories.
In some places the collection centres will be significantly larger than the current rooms, with more employees so patient flows can be better managed. Matching resources to the level of demand is more efficient and can reduce patient waiting times in busier collection centres, and is an example of how savings can be made by the service provider.
Labtests is also talking to primary health providers about more convenient ways of taking tests, such as at GP surgeries.
This is not about cost shifting, as doctors who may choose to opt into such a programme will be compensated accordingly by Labtests. It's an option that doctors may or may not want to consider.
What it does is make it more convenient for people to have their samples taken at the same time as they visit a GP rather than travel to a second destination.
This, of course, would be a particular advantage to groups such as the elderly as well as people who do not access the health system as much as they should because of perceived barriers.
Technology is another area of innovation where Labtests has a strong commitment. Equipment and processes are high spec and use the latest technology.
Labtests' parent company Healthscope, is the third-largest community laboratory company in Australia and is experienced in setting up greenfield sites and running large laboratories.
This is an experienced company that has the benefit of a clean sheet to model the ideal laboratory set-up.
Tests will have appropriate turn-around times according to need. For instance, if they are required in a matter of hours, then they will be so provided.
If they are not required for several days because the health provider is not seeing the patient for a couple of days, then they will be provided within a couple of days.
Labtests' tender provided details of other innovations, as well as completely transparent financial information that allowed the ARDHBs to examine in detail how the company proposed to deliver the services, and at what cost, including the expected profit margins.
The ARDHBs seek this transparency so it can satisfy itself that the service is appropriate and that profits the company is intending to make are acceptable.
Also for the first time, the contract (effective from July 1) has Key Performance Indicators to ensure quality control.
At the end of the eight-year contract, the assets of Labtests' business may be acquired by the ARDHBs, which will provide greater flexibility in the future.
While there is naturally concern about a new provider for the community laboratory service, Labtests is progressing well towards the July 1 start date.
Not only do the ARDHBs have confidence in the company, they look forward to planning on how to use the $120 million that will be returned as a result of this contract to other health services in the region.
* Gary Smith is the contract's lead CEO.
