Developments are coming to a head over those of Aotearoa New Zealand’s public hospital laboratories which were privatised under both Labour and National led governments. This was foreshadowed in my recent column published by BusinessDesk: How to fix the hospital laboratory fiasco.

In the column I discussed the context in which several public hospital laboratories were privatised beginning with the National government of the 1990s, accelerated by the Labour-led government into a floodgate in the mid to late 2000s, and continuing with the National-led government in the 2010s.

I discussed the negative consequences of these privatisations particularly given that hospital laboratories directly affect around 70% of clinical decisions, including 100% of all cancer decisions.

These consequences include fragmentation and neglect of workforce, facilities and equipment. Increasingly they failed to be fit-for purpose for meeting the diagnostic needs of public hospitals.

Privatisation creates fundamental conflict between not-for-profit hospital and for-profit laboratory

At the core of this situation was a fundamental conflict arising out of not-for-profit public hospitals required to provide a universal accessible public good but dependent on critical diagnosis from for-profit companies vulnerable to investor whims.

After referring to the heightened vulnerability of the increasing monopolisation of the private laboratory companies (Asia Pacific Health Group – APHG), I urged Health New Zealand (Te Whatu Ora)  to develop a national strategy for publicly run integrated hospital laboratories.

Finally, I argued that Minister of Health Dr Ayesha Verrall, in drawing upon her own experience as an infectious diseases specialist who worked closely with laboratories in infection control, to provide the political leadership necessary to make this happen.

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Developing showdown: context

Now we have a showdown developing which highlights the vulnerability of hospital laboratories when privatisation is compounded by near monopoly control.

The initial big winner of this privatisation was then Dunedin based Southern Community Services. SCL was then take over by Australian owned Healthscope although it continued to brand itself as SCL.

By the mid-2010s Healthscope controlled the hospital laboratories in the following six out of the 20 district health boards (DHBs) – Wairarapa, Hutt Valley, Capital & Coast, Nelson Marlborough, South Canterbury and Southern.

This privatisation included two of the five tertiary laboratories (Wellington and Dunedin) responsible for more complex hospital testing.

Other much smaller private companies ran the hospital laboratories in another five DHBs – Bay of Plenty, Lakes, Tairawhiti, Whanganui and MidCentral. The remaining were DHB run and therefore not driven by the need to maximise profitability.

In addition to its hospital ‘empire’, Healthscope also controlled the community laboratory testing (general practitioner referrals) in 13 DHBs, including the entire South Island, the three in Auckland, and the lower North Island.

The last privatisation was Healthscope’s takeover of the three lower North Island hospital laboratories (including Wellington Hospital). Healthscope sold its entire New Zealand laboratory operation to an American company. The sale was helped by the boost to its asset base as a result of this privatisation.

Privatisation helped Healthscope boost its asset base in order to sell to another overseas buyer

Due to further changing investor priorities there were more sales of the former Healthscope. The current owner is now APHG which has recently rebranded itself as Awanui.

Awanui is a private company of which 96% of its shares are equally owned by the New Zealand Superannuation Fund and Ontario Teachers’ Pension Fund. The remaining 4% is held by a 28-iwi trust.

All it takes is a change of investor priorities for much of our hospital laboratory testing and most of our community testing to be thrown into crisis. This is unless political and health system leadership, in  anticipation of this realisable risk, rises to the occasion.

In other words, Aotearoa’s health system’s laboratories which affect over 70% of all clinical decisions and 100% of cancer treatments is highly vulnerable to the whims of these investors.

The emerging showdown

The privatised laboratory run by Awanui at Nelson Hospital has become the focus of a pending showdown.

Last week Awanui announced without advance consultation or warning to its stunned laboratory staff that it was planning to centralise their histology pathology services  to Christchurch. The announcement was in the form of an intention masquerading as a proposal.

The story was broken by Radio New Zealand’s investigative journalist Phil Pennington on 12 May: Private monopoly cutting public laboratory service.

Histology is the microscopic study of tissues and cells. It is a subdivision of anatomical pathology which is the study of organs and tissues to determine the causes and effects of particular diseases. Histology testing is critical for determining whether a patient has cancer, the nature and seriousness of the cancer, and what might be the best treatment for it.

Awanui attempting to use influence over Health New Zealand to slash hospital laboratories service provision

Awanui’s justification for its intention to slash laboratory service provision is two-fold. First, it alleged that it was part of a wider policy from Health New Zealand to centralise anatomical pathology services to large centres. This was news to almost, if not all, pathology leaders in the country.

No-one with relevant expertise and experience was consulted over this intention or the alleged policy – particularly pathologists, scientists and technicians. Further putting the disrespectful ‘boot in’ was that the same professional groups in the Christchurch laboratory were equally marginalised.

Second, Nelson’s histology service has to be transferred to Christchurch because its poor laboratory facilities and equipment. But most of our hospital laboratories now have poor facilities and equipment through underinvestment and investor profits trumping everything else.

If this logic was applied across the board we would not  have any hospital laboratory services in New Zealand.

Incidentally this is not the first occasion that histological pathology has been transferred away from a base hospital like Nelson. This has been done before at both Timaru and Southland Hospitals.

Then it was done ‘on the quiet’. Now those working in laboratories have learnt from these experiences making it more difficult to get away with no transparency.

Contrary to Awanui’s claim, this Nelson histology service slash (with more elsewhere signalled to follow) is driven by dropping profit margins.

In this context, the slash is due to the health system, including Te Whatu Ora, being held to ransom by a private company which believes that it is bigger than both the professions it depends on for its profits and the health authority which funds their profits.


The union representing laboratory scientists and technicians is APEX. It was also blindsided by the announcement. For good reason it has been sharply critical of Awanui’s intention.

APEX representative David Munro was clear about this when interviewed on Radio New Zealand’s Morning Report (12 May): Union critical of proposed laboratory workforce slash.

 Private tail wagging public dog!

So where does Health New Zealand fit in to this planning service slash? Awanui’s claim that it was following the entity’s policy and latter’s own publicly expressed implied agreement suggest that it was complicit.

It appears, however, that Awanui was naughty in ‘flexing the truth’.

Margie Apa, Chief Executive Te Whatu Ora: her organisation which funds Awanui to run privatised laboratories blindsided

Just like APEX, pathologists, scientists and technicians, also blindsided was Health New Zealand. Its public comments were more designed to try to calm the bedlam beyond the scenes that has been generated by the announcement. It even came as a shock to its Chief Executive Margie Apa.

This was not the cleverest of responses by Te Whatu Ora because it created further workforce and public confusion. But it is understandable from the perspective of a possum caught in car headlines and apprehension over perceived Awanui power in their relationship. Could the private tail wag the public dog?

Ayesha Verrall’s options: firm leadership or turning a Nelson’s eye

In my BusinessDesk column cited above I called on Health Minister Ayesha Verrall to fix the laboratory crisis by “reversing” the privatisation crisis.

I concluded by stating that this would “…not require Dr Verrall to make a tough decision; simply a firm one. The question is whether she has sufficient presence of mind to do so.”

Health Minister Verrall: can she provide firm political leadership to reverse laboratory privatisations?

Awanui’s misuse of its near monopoly over laboratory testing and the risks this poses for the ability of public hospitals to treat patients is brought to the fore by its Nelson behaviour. It has created a showdown over whether the private tail should continue to be allowed to wag the public dog.

The Minister should require Te Whatu Ora to first reverse Awanui’s intention and then to inform the private companies running privatised hospital laboratories that they will all return to public provision on their various expiry dates.

Further, Te Whatu Ora should be directed to ensure that this transition is smooth including with the necessary workforce, facilities and equipment investment.

If the Government is committed to its objective of an integrated national health system then this is a no-brainer. It doesn’t require courage; just firmness. There is, of course, an alternative. It is called turning the Nelson’s eye.

This is an idiom that means turning a blind eye to something. When you turn a Nelson’s eye to a problem, you deliberately choose to ignore it; you may even attempt to convince yourself that the problem does not really exist.

Is this really what Dr Verrall and Health New Zealand want to happen? Putting patients at greater risk would be both. Both should be much better than allowing this that to happen.


Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Otaihanga Second Opinion

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