Labtests deal costing DHBs extra $4.4m

Labtests will be assisted by Diagnostic Medlab in a move which will cost Auckland's DHBs an extra $4.4 million. Photo / Dean Purcell

Auckland's district health boards will pay $4.4 million more for community laboratory services this year than previously planned because of a deal to prop up the shaky new company Labtests.

After a flood of complaints about Labtests since it started taking over the taxpayer-financed lab contract in August, the boards yesterday re-hired the company they took the contract from, Diagnostic Medlab.

To take the pressure off Labtests and deal with concerns about patient safety, DML will by the end of this month take over 10 per cent of the community contract, for which it will be paid $10.6 million.

It will hold this contract initially for four years, and will do testing of patients and residents of private hospitals, private specialists, fertility clinics and rest homes, and home-visit tests ordered by specialists.

It will increase the DHBs' spending on community pathology by $4.4 million, to $71.4 million in the first year of the new set-up, with small rises later. This is an annual saving of more than $10 million when compared with what the boards were paying DML, although less than the $15 million saving on which the change to Labtests was sold.

"This change will take pressure off Labtests, enabling them to deliver a safe and reliable, high-quality, mainstream service to their contract specifications," said Auckland DHB chairman Pat Snedden.

He said the boards were reducing Labtests' payment by $6.2 million, to help pay DML $10.6 million. The balance of $4.4 million would be new money from the boards.

He portrayed this as a relatively small sum for the DHBs, and said it would not cause budget blow-outs or cuts to other health services.

He acknowledged the increased cost of having two providers, but said that was the price of "managing the risk in this public arena".

The testing being given back to DML includes much of the more-complex work which requires greater involvement of histo-pathologists - specialist doctors who diagnose diseases from tissue samples. Labtests has had too few of these specialists.

Mr Snedden said the health boards' safety and quality team had made $4.4m for Labtests deal considerable progress with Labtests' staff to improve the service and he was confident the company would eventually meet contract expectations.

The boards' move has apparently been agreed to by Labtests and its Australian owner, Healthscope. Representatives were at Mr Snedden's press conference, but would not comment.

Nor would DML chief executive Arthur Morris comment, although his company's Australian owner, Sonic Healthcare, said it hoped to retain the contract beyond four years.

Sonic chief executive Colin Goldschmidt said DML would be restructured to provide the limited, yet more complex services of the new contract.

The Medical Association and primary care group ProCare Health welcomed the changes to a lab service they said doctors and nurses had found extremely frustrating.

ProCare said its members held serious concerns about patient safety and their ability to provide good care.

Health Minister Tony Ryall said re-hiring DML was "an acknowledgement from everyone that the situation has been unacceptable, and the quality of the service is not what was promised. There will be a review focussed on what can be learned to ensure that this experience is not repeated."

The Medical Laboratory Workers Union's national president, Stewart Smith, said it was unacceptable for patients and doctors to have to feel the effects of DHBs' searching for a cheaper system.