Remark: When I was much, much younger, I believed that pathologists only saw dead people. I blame that on watching too many crime shows with forensic pathologists.
Working for the Association of Salaried Medical Specialists, my error was quickly corrected.
I remember once asking an experienced specialist why he specialized in pathology instead of other branches of medicine, such as internal medicine, surgery, or pediatrics.
His response was the fascination of being able to see – through diagnosis – almost everything and with so much variation.
This made sense because a large part of the work of pathologists involves tissue analysis, so it is not surprising that their diagnosis influences all cancer treatments.
Overall, it can affect about 70 percent of all clinical outcomes. The best surgeons will have poor patient outcomes if pathologists make a mistake in their diagnosis.
Laboratories before the mid-2000s
Pathologists work in laboratories with medical scientists and technicians on whom they depend. In general, there are two types of laboratory tests.
The first is community testing, where referrals from general practitioners are processed. The second is hospital testing, where referrals within hospitals come from specialists who treat patients (usually surgeons and physicians).
Until the mid-2000s, community testing was performed in private community laboratories. Hospital testing, on the other hand, was performed in public hospital laboratories. Government funding for the former was demand-driven (not capped), while for the latter it was capped.
In 2001, district health boards were established. Their main feature was that they became responsible for the entire health care system (community and hospital) for their geographical populations.
As a result, district health boards took on responsibility for community testing. Faced with demand-driven costs that, left alone, they had no control over, they had to, and logically, enter into capitation agreements with the private community laboratories. Most did so satisfactorily.
However, some sought to seize the opportunity to merge community and hospital testing into one facility (the hospital laboratory). Given the degree of automation in laboratory testing, this made sense, provided there was sufficient modern equipment and staff capacity.
With this in mind, some district health boards have decided to privatise their hospital laboratories, unable or unwilling to consider the implications of allowing this integral service to be compromised by profit-seeking.
There were two main waves: the first and largest under Labour Health Secretary Pete Hodgson in the mid-2000s, and the second under National Health Secretary Jonathan Coleman in the mid-2010s. At the time, and much to his chagrin, I nicknamed Hodgson “Privatisation Pete”. “Privatisation Jonathan”, however, never had the same alliterative resonance, despite its equal applicability.
Privatisation combined with the move to a single laboratory forced some of the smaller private labs out of business. Over time, privatisation has led to a near-monopoly under New Zealand Healthcare Investments (branded Awanui Labs), which emerged almost 20 years ago from the locally based and owned Southern Community Labs in Dunedin.
The other smaller privatised labs are run by Australia's Sonic Healthcare and Waikato-based Pathlab.
The direct consequence of this is that a fragmented and private provider-dominated pathology care model is not sustainable in the current economic and labor market situation in the health care sector.
Health New Zealand's Heritage
Health New Zealand Te Whatu Ora has inherited a large number of poorly defined laboratory contracts for the regional health board, with KPIs that are not good indicators of the actual sustainable performance of the contracted laboratory providers.
This has led to a ‘hands off’ and ‘nothing to see here’ approach to real auditing and assessment of key issues such as staffing levels and welfare, service removals and where patient samples end up across the country. Unfortunately Health NZ has allowed this practice to continue, although the relationship with the private operators is strained.
Privately operated public hospital laboratories are a lack of effective national direction, governance or service strategy to ensure national health initiatives and goals are implemented. There is no chief medical scientist and pathologist with the independence and knowledge of the sector required to provide expert advice and direction in 2024. is simply unimaginable.
From the beginning, warnings were given about the consequences of this privatization. Much of this came from the Association of Salaried Medical Specialists, whose members were not only pathologists, along with other specialists working alongside them, such as hematologists, but also the “end users” (mainly surgeons and physicians who are clinically dependent on their diagnostic support).
The baton was then taken over by the New Zealand Institute of Medical Laboratory Science, the professional body for medical scientists, notably under the leadership of the tireless and courageous chairman Terry Taylor, despite several threats of re-employment.
Taylor has worked full-time in Dunedin for over 30 years as a medical laboratory scientist specialising in clinical flow cytometry and diagnostic immunology. He knows what he is talking about. After stepping down as President in August 2023, he will remain the Institute’s immediate past President.
The obvious is confirmed by Taylor; that the relationship between the private hospital laboratories and their staff has seriously deteriorated. This is most evident at Awanui, including bitter negotiations over collective agreements and prolonged strikes.
This is because the private operators have put their need for profit ahead of the unfairness of the huge pay gap with their colleagues in the publicly run Health NZ laboratories. Taylor notes, no doubt through gritted teeth, the obvious unfairness of scientists and technicians in the privately run lab at Dunedin Hospital earning on average around $25,000 a year less than their colleagues doing the same work in the publicly run lab at Christchurch Hospital.
The skilled workforce has been neglected and services (particularly outside the main centres) have been reduced in the private hospital laboratories, all to ensure greater profit margins. Taylor describes today as having only “bones and skin”.
Chickens are now lining up to come home to roost. Many of our public hospital laboratory services operate in a corporate world where decisions about staffing and service delivery are made by board members and shareholders of investment companies.
These government-funded labs, run by private investors, are vulnerable to large corporate bankruptcies or to changes in corporate investment priorities to seek more profitable returns elsewhere, including outside health systems.
In the words of one senior scientist, private operators “…have taken millions out of the sector and run the sector into the ground, and now is the time for a transformative change in the way we provide pathology services, particularly within our hospitals.”
Time to end the danger
But it seems that the profit-making from hospital labs is now over. After years of making a profit, Awanui Labs’ financial position has changed dramatically for the worse. In calendar year 2023, it posted a loss of $16.4 million. This was a massive 225 percent drop from the $13.1 million profit in 2022.
There is a simple way forward, and Taylor advocates many of them. As each of these hospital-based, privately operated laboratory contracts expires, they should not be renewed. Instead, they should be part of their public hospitals, operated by Health NZ.
Where they currently combine community and hospital testing, they should move together, leaving community testing services in Auckland, Hamilton, Bay of Plenty and Christchurch.
If the controversial new Commissioner of Health NZ, Lester Levy, wants to prove his many doubters wrong about his appointment, he now has the chance to encourage them to reconsider. He should follow the advice above.
His previous experience as CEO of the NZ Blood Service should help him understand the issue. It would not require bold leadership. Instead, it would require strong, competent leadership, reinforced by good, solid planning and explicit messaging.
This would allow Health NZ to develop a much-needed national public pathology service that provides real governance and direction, while also restoring control and accountability over the funded (private) providers that remain, but without the monopoly or power of big business to destabilise New Zealand's health system as is currently happening.
Ending the danger posed by profit incentives would not just make Terry Taylor a “happy chappie.” It would do the same for his professional colleagues, the entire hospital laboratory service, and those who rely on their diagnoses for about 70 percent of clinical decision-making.