Saving our med labs before they end up on the slab

Comment: When I was much, much younger, I believed that pathologists only saw dead people. I blame watching too many crime dramas involving forensic pathologists.
Working for the Association of Salaried Medical Specialists quickly corrected my error.
I recall asking an experienced specialist once why he specialised in pathology rather than other branches of medicine such as internal medicine, surgery or paediatrics.
His response was the fascination in – through diagnosis – being able to see almost everything and with so much variety.
This made sense because much of the work of pathologists involves tissue analysis. It is hardly surprising that their diagnosis affects all cancer treatments.
Overall it may well affect around 70 percent of all clinical outcomes. The best surgeons will have poor patient outcomes if pathologists err in their diagnosis.
Pathologists work in laboratories along with medical scientists and technicians who they depend on. Generally speaking there are two types of laboratory testing.
The first is community testing which processes referrals from general practitioners. The second is hospital testing where referrals come from within hospitals from specialists treating patients (usually surgeons and physicians).
Until the mid-2000s community testing was done in privately owned community laboratories. On the other hand, hospital testing was done in public hospital laboratories. Government funding for the former was demand-driven (uncapped) while, for the latter it was capped.
In 2001 district health boards were established. Their main feature was they that they became responsible for the whole of healthcare (community and hospital) for their geographic populations.
Consequently district health boards assumed responsibility for community testing. Confronted with demand-driven costs which, if left alone, they had no control over, they were required, sensibly so, to enter into capitation arrangements with the privately owned community laboratories. Most did satisfactorily.
However, some tried to take advantage of an opportunity to amalgamate community and hospital testing into one facility (the hospital laboratory). Given the level of automation in laboratory testing, this was logical subject to having sufficient modern equipment and workforce capacity.
With this in mind some district health boards, unable or unwilling to consider the downstream consequences of allowing this integral service to be compromised by profit extraction incentivisation, opted to privatise their hospital laboratories.
There were two main waves – the first and biggest under Labour health minister Pete Hodgson in the mid-2000s and the second under National health minister Jonathan Coleman in the mid-2010s. At the time, and much to his annoyance, I nicknamed Hodgson ‘Privatisation Pete’. However, ‘Privatisation Jonathan’ never had the same alliterative resonance despite its equal applicability.
Privatisation coupled with the move to a single laboratory forced some of the smaller privately owned laboratories to go out of business. Over time the privatisation has led to a near monopoly under New Zealand Healthcare Investments (branded as Awanui Labs) which originated nearly 20 years ago from the locally Dunedin based and owned Southern Community Labs.
The other smaller privatised laboratories are run by Australian owned Sonic Healthcare and Waikato based Pathlab.
What we now have as a direct consequence is a fragmented and private provider dominated pathology service model is unsustainable in the current health economic and workforce environment.
Health New Zealand Te Whatu Ora inherited a myriad of poorly defined district health board laboratory contracts with KPIs that are poor indicators of the true sustainable functioning of their contracted laboratory providers.
This has led to a ‘hands off’ and ‘nothing to see here’ approach to true auditing and reviewing of major issues such as staffing levels and wellbeing, service removals, and where patient samples are ending up around the country.  Unfortunately Health NZ has allowed this practice to continue although its relationship with the private operators is tense.
Privately operative public hospital laboratories has been an absence of effective national direction, governance, or service strategy to ensure national health initiatives and targets are implemented. There is no chief medical scientist and pathologist with the independence and knowledge of the sector necessary in order to provide expert advice and direction in 2024. is simply beyond belief.
Right from the beginning warnings of the downstream consequences of this privatisation were given. Much of this came from the Association of Salaried Medical Specialists whose membership included not just pathologists, along with other specialists working alongside them such as haematologists, but also the ‘end-users’ (primarily surgeons and physicians clinically dependent on their diagnostic support).
The baton was then picked up by the New Zealand Institute of Medical Laboratory Science, the professional body of medical scientists, particularly under its irrepressible and courageous long-serving president, Terry Taylor, despite the odd employment threat.
Taylor has worked fulltime in Dunedin as a medical laboratory scientist specialising in clinical flow cytometry and diagnostic immunology for over 30 years. He knows his stuff. Standing down as president in August 2023 he continues to serve as the Institute’s immediate past president.
The obvious is confirmed by Taylor; that the relationship between the privately operated hospital laboratories and their workforces has seriously deteriorated. This is most evident with Awanui, including acrimonious collective agreement negotiations, and protracted strike actions.
This is because the private operators have put their need for profits ahead of the unfairness of the huge salary differential with their counterparts in the Health NZ publicly operated laboratories. Taylor observes, no doubt while gritting his teeth, the obvious unfairness of scientists and technicians in the privately operated laboratory in Dunedin Hospital earning on average around $25,000 per annum less than their counterparts doing the same jobs in the publicly operated laboratory in Christchurch Hospital.
The skilled workforce has been neglected and service delivery (especially outside the main centres) has been reduced in the privately operated hospital laboratories, all in order to ensure greater profit margins. Taylor describes today as only having “bones and skin left”.
Chickens are now queuing up to come home to roost. Many of our public hospital laboratory services find themselves caught in a corporate world where decisions on staffing and service provision being made by investment company board members and shareholders.
These publicly funded laboratories run by private corporate investors are vulnerable to either corporate collapse or changes in corporate investment priorities in order to get a more profitable return elsewhere, including outside health systems.
In the words of one experienced scientist the private operators “…have taken millions out of the sector and driven it into the ground and now it is very overdue for a transformational change in how we provide pathology services, particularly within our hospitals.”
But extracting profits out of hospital laboratories now appears to be over. After raking in the profits over several years Awanui Labs’ financial position has dramatically changed for the worse. In the 2023 calendar year posted a $16.4 million loss. This was a massive 225 percent fall from its $13.1m profit in 2022.  
There is a straight-forward way forward whose many proponents include Taylor. As each of these hospital based privately operated laboratory contracts expire, they should not be renewed. Instead they should form part of their public hospitals operated by Health NZ.
Where they currently combine community and hospital testing, they should transfer together. That would leave remaining community testing services in Auckland, Hamilton, Bay of Plenty and Christchurch.
If the new controversial Commissioner of Health NZ, Lester Levy, wants to prove his many doubters wrong over his appointment, he now has right in front of him the opportunity to encourage them to reconsider. He should follow the above-mentioned advice.
His previous experience as chief executive of the NZ Blood Service should assist his understanding of the matter. It would not require courageous leadership. Instead it would only require firm competent leadership reinforced by good sound planning and explicit messaging.
This would then enable Health NZ to develop a badly needed national public pathology service that ensures true governance and direction plus brings back control and accountability over the funded (private) providers that are left but without the monopoly or corporate power to destabilise New Zealand’s health system as is happening now.
Ending the peril caused by profit-extraction incentivisation would not only make Terry Taylor a ‘happy chappie’. It would do the same for his professional colleagues, the whole hospital laboratory service, and those who depend on their diagnoses for around 70 percent of clinical decision-making.