They’re back!
Diagnostic Medlab has effectively forced the Auckland DHBs into an embarrassing u-turn, and have been granted 10% of the medical testing market under a four year contract.
The big loser isn’t so much Labtests, but the DHBs themselves. The decision to move to Labtests was not necessarily wrong, but the transition plan in hindsight was woeful. The transition should have been done over six months or so, allowing a couple of suburbs to transition every fortnight, and make sure everything is working, before the next suburb moves over.
Diagnostic Medlab got much criticism for their campaign against Labtest, as the work of bad losers. But the campaign worked, and they just gained a $10.2 m/year contract.
Labtests loses $6.2 million a year for its reduced workload, and the DHBs (ie taxpayers) make up the extra $4.4m a year. This means the change overall does still save money, but a lot less than before.
NZMA say:
Today’s announcement has been welcomed by the New Zealand Medical Association.
“The decision by the Auckland District Health Boards goes some way towards reducing the inherent risk in the current arrangement of having a single provider and is therefore a step in the right direction,” said NZMA GP Council Chair Dr Mark Peterson.
And this raises the very valid issue of should they have gone with a single provider at all. Having both providers in the market will allow some comparisons of service, price and quality, and over time the one that performs better should end up with a greater market share.
October 13th, 2009 at 2:07 pm
Mr Bradbury of Tumeke will be pleased. Perhaps he’ll get a big fat bonus cheque from his buddy Matthew Hooten as a result.
October 13th, 2009 at 2:12 pm
“And this raises the very valid issue of should they have gone with a single provider at all. Having both providers in the market will allow some comparisons of service, price and quality, and over time the one that performs better should end up with a greater market share.”
Because private ownership = Good, apparently.
Even when ALL of the work gets handed over on a platter to one private company, (as is our custom) and Joe Bloggses like me can’t see how there’s really any competition or incentive to do better at all. The same skilled people end up doing the same work, often in worse conditions, the main difference is there’s now an owner who gets to holiday in Europe twice a year. It’s certainly a better system for him…
October 13th, 2009 at 2:17 pm
Another Wayne Brown/Labour failure. Ha ha. Was always going to fail. No one bothered about the customer. i.e. the Doctors and more importantly those that used the service.
October 13th, 2009 at 2:27 pm
This is from my last NBR ccolumn, but I have saying this since they first put out the tender.
“The great debate on blood testing in Auckland, has unexpected parallels with the competing visions for the Auckland Council, and its transport in particular.
When the Auckland Health Boards called for tenders to supply blood-testing services in the Auckland region, Diagnostic Medlabs lost their monopoly privilege to the newcomer Labtests.
Unsurprisingly, the transition from one monopoly provider to another proved more difficult than Labtest had predicted. Understandably, Medlabs says “We told you so”.
We have not learned the obvious lesson, because it seems Watercare is to be monopoly provider of water services for the whole of Auckland.
The French do things differently. With their 36,700 municipalities I suppose they have to. Anyhow, most of the Councils, either on their own, or in one of 18,000 associations, own the water infrastructure, both water supply and treatment, but contract out the service delivery to private companies, three of which dominate the market.
These companies tender for fifteen or twenty year franchises and about 15% of the contracts come up for tender every year and about 5-6% of the franchises change hands.
Consequently the water companies are continually sharpening their pencils and their quality of service is being continually examined and improved. The end result is that these companies are now multinational corporations. For example, Veolia Water provides water services to 350,000 New Zealanders, including Franklin, through United Water. Will the Franklin franchise disappear with Franklin?
Surely we should divide Auckland up into say five or ten “farms” and franchise out both our water supply and treatment contracts, and our blood-testing services, so we have some sort of competitive environment for both these markets. We might even grow a few international companies to serve the emerging markets of the Pacific Rim.”
Why do we refuse to learn from others?
October 13th, 2009 at 3:08 pm
I’ve been part of a couple of changes of outsourced (IT) vendor that were bigger than this one. If any of our vendors had pulled the sort of stunts that DML had, we would have blacklisted them for eternity for all work with us, AND hauled them off to court. If any of their staff were were even slightly uncooperative during the transition then we would have blacklisted them too, so that if they wanted to later transition to the incoming vendor or another vendor doing work for us then we would have vetoed their appointment.
By giving in like this, the Auckland DHBs have ensured that every high value government contract from now until eternity will be subject to sabotage and dirty tricks in the hope that the government will reverse the tender process. This will cause us a fortune in disruptions, and in extra costs because the companies that currently have government contracts now know that they’ll have them indefinitely, regardless of the price they tender at renewal time.
The Minister needs to veto this move. Then he needs to sack the DHB boards involved and hire some people with a clue.
October 13th, 2009 at 3:20 pm
It was not that long ago that Auckland had two rival companies performing this task. Medlab and Diagnostic Lab services.
They were continually facing budget cuts whilst being ‘encouraged’ to invest in the latest technology so they merged and became the only game in town.
Faced with an opportunity to generate competition again, the DHB bailed and took a very risky option. The risk just bit them to the tune of at least 4 million in cash and untold ill-will from Doctors and the public.
I hope it will also have a cleansing effect on the board as no matter whose ‘side’ of the argument you are on, or if you are neutral about it, one thing is for certain and that is the board has handled the entire process in a very unprofessional manner.
October 13th, 2009 at 3:46 pm
Hopefully this will put an end to the pathetic PR drivel coming from the great repeater WhaleOil via his LabTests lunch buddies. He has fallen for almost as many whoppers as his doctor, but not without a few ‘pats on the back’ from LabTests by the sounds of his carry on.
October 13th, 2009 at 5:05 pm
So is it the consensus here that it DML had willing fallen on their sword and helped a competitor then there would have been no fuck ups?
Yea right
October 13th, 2009 at 6:17 pm
Stop crying it was a contest of majors and the rules were to get the cost down without consulting the people who use the system. So despite the apparent back down have the end users i.e. the patients gained anything? have they been granted back the convenience that they used to have or are they still required to travel up the road to have their blood tests rather than the convenient room at the Medical Centre?
Everyone in this argument forgot about the persons most affected. Just plain good old Kiwi customer bashing and lack of customer service. Fuck wer’e good at that.
October 13th, 2009 at 6:22 pm
lance>So is it the consensus here that it DML had willing fallen on their sword and helped a competitor
What is this “helped a competitor”? You’re talking about DML deciding to not release practitioner codes to the DHBs and Labtests, presumably.
If I had given tens of millions of bucks to a vendor over a period of several years, then I’d expect them to not withhold information I required to transition to a replacement vendor that I had chosen. This isn’t vendor IP we’re talking about here, but information inherent to the services they’d been delivering to me. If they thought that trying to sabotage the transition was a good idea, then I certainly wouldn’t reward them.
To make an analogy… If I replaced the company that cleaned my office building, I’d expect them to turn their building keys over to the replacement cleaners. On the day the contract changed, not months later. I certainly wouldn’t be impressed with the old cleaner saying that they were going to keep keys because they didn’t have to “help a competitor”. And if they squeezed locktite in to all the locks, then I wouldn’t reward them by letting them back to clean 10 percent of the building.
October 13th, 2009 at 7:14 pm
There is a bigger issue here. Again, from my last NBR column:
“The blood-testing debacle also raises the issue of why we need to go through these antiquarian processes, and why they cost so much.
If you take a bottle of your spa water to a pool retailer for testing, the shop assistant pours the water into an analyzer, and a few minutes later gives you a read-out of the chemical profile of your pool and a list of doses to bring it all into balance.
There is no charge.
Similarly, if you take your dog or cat to a vet in any main centre they will test and report on your pet’s blood for all the standard ‘panels’ in a few minutes. As one vet advertises:
“”Blood sample analysis
Our on-site blood chemistry and haematology machine can give us results within 30 minutes. This is extremely valuable in critical cases, and can be used to help diagnose kidney and liver disease, infections, anaemia and many other conditions. We can also run a blood test for Feline Aids and have the results within 5 minutes.”"
So if you want really fast, effective and low cost diagnostic service it may be time to buy a dog-suit and call yourself “Lassie” or “Spot”.
Many of us have friends who occasionally pull out a probe that takes a minute spot of blood from their finger and immediately analyses their blood sugar level and prescribes their insulin dose.
The Japanese are manufacturing “intelligent” toilets that read your blood pressure and pulse rate, analyse your blood and urine, and even test your stools to see if you have colon cancer.
You can entertain your friends with your daily read-out.
The toilet analyzer checks all levels against your personal bell curve rather than the bell curve for the general population. This individual ‘outrider’ analysis is much more useful than comparisons against the average. Your home computer analyses such data much better than any human being. Number crunching is what computers do so well; they will even dial the ambulance.
If your vet can have such a machine why not your GP? And why don’t our pets endure waiting lists?
It’s simple. Human health services are monopolised by Government and powerful unions.
October 13th, 2009 at 8:01 pm
Notice how they have moved over all of the private hospital and specialist work.
Wait for the announcement that private patients will no longer be funded and those with private insurance will have to pay for their own blood tests.
October 13th, 2009 at 8:08 pm
Wouldn’t it be nice if Telecom and Vodafone would be this ‘energetic’ at trying to get each other’s business!
October 13th, 2009 at 8:16 pm
Owen,
What you are describing is called near-patient-testing. It is used in urgent situations in the hospitals but would not be viable for high volumes. The cartridges for the mini analysers cost a packet so you would be looking at billions of dollars to process all of the community work in that manner. You also cannot report electronically or print out pretty reports from them. All the results from them need to be entered in to another system if anything fancy is required.
Animal testing has a lot less regulations, the volumes are less and it is fully user pays.
By the way, the animal testing lab in Auckland is owned by the same people who own Labtests!
October 13th, 2009 at 8:33 pm
Rachael,
I take my advise from an expert in bio analysis who worked with Linus Pauling.
Are you telling me that dogs and cats in the vet are urgent situations, and are you telling me that the regular self testing by diabetics in not viable. Of course you can print our reports from your computer – go to your spa pool supplier or look at the print out your computer does for much more complex analysis.,
I take it you have been indoctrinated by the medical mafia.
Yes animal testing has a lot less regulations and it is fully user paid.
Doesn’t that tell you something about the union/professional medical world we live in?
Why can we not go into a booth in the shopping mall and have our “bloods” done for a few dollars whenever we feel like it?
October 13th, 2009 at 9:35 pm
Owen,
Dogs and cats are not necessarily urgent but the Veterinarian can give you the option of paying $70 to have your dogs red cell count done then and there. Your GP could possibly do it too but it would be time consuming and if you wanted anything other than simple blood glucose or bicarbonate readings, it is much quicker to write a lab order. Also, why pay $70 for something that will cost $5 in a high volume lab.
We are talking high volumes of work for the human testing, most of it automated completely from separation of serum, processing the samples and reporting the results.
The mini analysers are too labour intensive to make it a profitable option for HIGH VOLUMES. Yes you can print out the results, but they are on sheets the size of eftpos receipts. Who is going to manage the storage of these?
You can go into a chemist and have a cholesterol test and yes, diabetics do their own testing but these are very basic tests. Anything more complex than this is not a viable option as it is not available at present and would not be profitable.
Nothing stopping you getting your own personal iSTAT if you have a few grand spare.
October 14th, 2009 at 10:56 am
The DHBs are the worst player in this debacle; Lab Tests and DML actions are entirely predictable given the contractual and practical background.
However the DHBs have been appallingly naive or stupid in the contracting process. The previous situation had DML as a monopoly supplier (apart from a tiny number of tests done by the hospital labs). The DHBs should have instituted a number of items when they (re)negotiated DMLs previous contract such as:
(a) Obligation to make administrative data available such as Doctor codes;
(b) Obligation to make technical data available if this was important for any new service supplier;
(c) An option to acquire the existing lab premises &/or staff &/or equipment &/or clinics at a specified amount [e.g. $10 million] if the contract was not renewed. This payment could have been funded by any new supplier (such as Lab Tests) in their bid for the contract;
(d) Arrangements for phased wind down and transfer to a new supplier [say over 3 months] if DML was not successful at the next tender round.
The complete transition of all Auckland tests over a few weeks was bound to lead to problems for Lab Tests. They had to build a complete new facility, install and calibrate equipment and systems, and train staff before they got any real work to do, and then had to cope with an immediate deluge once the handover started. Similarly, DML had to maintain all its systems, staff etc until Lab Tests demonstrated that it was successfully handling the new work. Thus for a brief period both companies needed the same sets of highly skilled staff who are in short supply. Something had to fail, and it has as we have seen.
If I had been running DML I would have given all staff a substantial bonus if they continued their employment until December 2009 to ensure that I could maintain the services that DML was contractually bound to provide to the DHBs. Although we have seen Lab Tests service failures we could easily have also seen DML service failures due to the large scale migration of staff to Lab Tests, possibly months before the handover so that Lab Tests could install equipment and train the staff and calibrate/validate the testing protocols. The continued high standard of service from DML is a credit to the company and its staff.
The DHBs should also have been aware that swapping from one monopoly supplier to another monopoly supplier may provide some short term cost savings but these are likely to evaporate at the next bidding round as at that stage any other potential bidder will be reluctant to be involved, having seen how the DHBs operate.
Anyone who is involved in large scale contracting out knows the importance of ensuring that there is a competitive bidding process AND ALSO that there will be a competitive market at the next bidding round. That could be assisted by having the transition payment arrangement mentioned above.
A better model would have been to have two suppliers, perhaps for two geographic parts of the Auckland region, as this would provide cost and quality benchmarks. Depending on bid price and actual performance, the market share given to one supplier or the other could move down to 20% or up to 80%.
October 14th, 2009 at 11:39 am
Medical association: “the money saved is not worth the potential risk to the service”
http://nz.news.yahoo.com/a/-/top-stories/6214599/shared-lab-services-a-step-in-right-direction/
Lest we forget…
Under a National Government, it is all about the bottom line: “Dr Martin Searle, head of Middlemore’s dialysis unit, said that Mr McKeown had been turned down for dialysis largely because of a shortage of funds. ”
http://www.bmj.com/cgi/content/extract/310/6977/421/a
October 14th, 2009 at 2:42 pm
I understood there were serious problems and conflicts of interests in the DHB tendering process, and in fact DML and Labtests tendered for 2 different things. Didn’t Labtests have someone on the board of the DHB?
In any case the judge seemed to think there was a real problem when he found in favour of DML in the courts initially overturning the award to Labtests.
From what I heard the whole process smelled to high heaven, and the fall-out was the death of DML in Auckland. I think anyone here if they owned DML would have had major problems with how the DHB dealt with it. So it’s really rich for people here to talk about how DML should bend over and take it up the jacksie from Labtests when they were already shafted by the DHB (who we pay to make messes like this).