Ian McPherson: Collaboration best way to stretch health dollar

Healthcare spending in New Zealand is at crisis point. Photo / Sarah Ivey

New Zealand's public health system has been examined and the prognosis is not great. As a small, cash-strapped country it is time we reset our expectations of our health system.

But how many more reports do we need before we do more than just paper over the cracks? Reports - from the OECD to the Ministerial Review Group - warn that to maintain current health delivery standards, we'll have to ration services or compromise on other areas that we value equally - like government superannuation or lower taxes.

There are better solutions than meekly accepting a second-world health system - although they do require some shifts in thinking.

If we want a first-world health system, and an effective accident compensation system, we need to find ways for the public system and the private system to work collaboratively. They aren't in competition - so why not?

Of all the issues facing our health system, the fundamental one unfortunately is money.

We need money to fund infrastructure so we have facilities, money to fund technology to treat patients and money to fund our citizen's expectations of the day-to-day provision of healthcare services.

The current level of spending simply isn't sustainable. Of all the numbers released in Treasury's long-term fiscal projections in October, it was the numbers associated with health that were the most alarming.

Treasury predicts that if healthcare spending continues to grow at the speed it has it will consume over 75 per cent of the $1.1 billion allocated for new spending over the next couple of Budgets.

Quite simply, it has reached crisis point. Taxpayers don't have bottomless pockets and heaping more government debt on future generations is not the answer. But in crisis comes opportunity.

Why wouldn't we look to stem the increasing costs by involving some private in the public health mix?

Take infrastructure first. For too long we've clung to the notion that our public health infrastructure must be in public ownership. Why? Does it matter to a patient who owns the hospital or the operating table?

The "public facility = public purse" equation might be ideologically pure, but it's financially fanciful when the Ministry of Health can fund less than half of the capital requests it receives.

Around the world there are a wide variety of models through which private capital is getting alongside public health systems. Facilities are being developed which would not have been possible within the constraints of public funding.

Some of these facilities ultimately transfer to public ownership, others stay in private hands indefinitely - but whatever works seems best for the Kiwi economy.

In Britain, privately-funded independent-sector treatment centres were established by the Labour Government in 2003 as part of a package of health reforms and have been vital in helping the Government meet waiting time targets for elective surgery.

On behalf of the public system, these private-sector treatment centres perform common elective surgery and diagnostic procedures. Because they typically undertake "bulk" surgery such as hip replacements or cataract operations they are able to streamline the patient care pathway, resulting in drastically reduced waiting times for elective surgery.

By their very nature they do things differently - efficiently - setting the pace for the public sector to follow.

Would this sort of collaboration work in New Zealand? There will be a very significant increase in demand for elective surgery over the next 20 years, largely due to our ageing population, and it will always be difficult to afford.

Efficiency, quality and delivery are very important, not who owns the building or the expensive gear. The international examples work well for all parties.

A competitive tendering system ensures a competitive rate. Nobody is getting fat and rich there. The private sector is making a reasonable but not excessive return on its investment while the public sector has funds and facilities freed up for other priorities.

Meanwhile, the patients, who are after all the whole point of this, are getting faster, better care.

New Zealand is in a good position to succeed with models such as this.

Such statements from us may attract a cynical response - after all Southern Cross is the largest private-sector health funder and provider so it might be said we are being self-serving.

But we are also a New Zealand, not-for-profit organisation with a very real vision of driving better value from the health dollar to provide better health care for more New Zealanders.

In a similar way we are supportive of reforming ACC. Again, it is high time we moved away from the ideology and look at what is best this century for New Zealanders. The current "stocktake" is investigating introducing competition into aspects of ACC though what shape this takes is yet to be seen.

This is a wide spectrum and there are a number of choices that can be considered.

Some Australian states with a publicly-funded scheme have chosen to use private sector organisations in the claims management role. This is seen as a major factor in the success they have had in reducing their claims costs.

If this model was applied to New Zealand then ACC could partner with care and claims managers for a range of ACC accounts. Good candidates include the work, earners and motor vehicle accounts.

Contestability in the care and claims management area should over time help to improve injury rehabilitation rates and get people back to work sooner. This surely is better for the employee, the employer and therefore New Zealand.

And the reality is that competition does already exist within ACC for the provision of services - most people just don't see it. A good example is where ACC has contracted, through a competitive tender process, 80 per cent of elective surgery to the private sector.

We have been arguing for some time that when we stop thinking "public versus private" and put the patient first, we can deliver better health results overall.

I believe the private sector (particularly the not-for-profit sector) has a role to play in bringing innovation to the public system.

We can share knowledge and experience, provide new ways of working and new ideas, which can often be difficult for the public health system to generate from within.

Some may label this as privatisation - such an overused and meaningless term. We see this as smarter thinking to achieve better health outcomes for New Zealanders.

* Dr Ian McPherson is chief executive officer of the not-for-profit Southern Cross Healthcare Group, New Zealand's largest non-government health organisation.