GUEST BLOG: Ian Powell – Who benefits from outsourcing planned surgery: follow the funding

I still remember metaphorically sitting at the knee of legendary union leader Bill Andersen while listening to him opine pearls of wisdom. The most important question, when assessing a particular proposal or initiative, was ‘who benefits?’

This was the opening paragraph of my column published in Newsroom on 13 June:    Who benefits? Follow the money.

Levering off the expression ‘follow the money’ popularised by the film ‘All the President’s Men’ about the Watergate scandal which brought down United States President Richard Nixon in 1974, and in the context of Aotearoa New Zealand’s health system, I argued that:

It is becoming increasingly clear that Government funding decisions are strongly oriented towards the for-profit private health sector rather than addressing the critical needs of our health system.

I discussed this with specific reference to outsourcing (privatising) elective or planned (non-acute) surgery, public private partnerships, and funding urgent care facilities.

My conclusion was:

Following the funding will confirm whether or not the Government changes direction for the good of the public and their health system. The answer lies with who benefits.

Benefitting private health insurers and telehealth providers

Since my column was published further reporting has reinforced my conclusion that the Government’s health focus is on benefiting the for-profit private health sector and enhancing privatisation.

Ruth Hill reports taxpayers ‘subsidising’ private health insurers

On 19 June Radio New Zealand health reporter Ruth Hill revealed on Morning Reportthat from 1 July taxpayers would foot the bill for cancer drugs administered in private facilities for private patients: Private health insurers benefit from publicly funding cancer drugs for private patients.

This amounts to a 12-month subsidy to private health insurers while at the same time leaving the vast majority of New Zealanders who don’t have private health insurance missing out.

The decision is a conscious government action to benefit the for-profit private health sector instead of investing in the public hospital oncology workforce (specialists and nurses) with the objective of enabling people can get free care there.

Steve Forbes reports benefits for private telehealth providers

Meanwhile, NZ Doctor journalist Steve Forbes in a paywalled article (3 July) reported concerns over how “extravagant” funding gives telehealth providers a huge advantage over general practices in the Government’s new Online GP Care service.

This service provides telehealth for casual patients who are not enrolled in a general practice. The rate paid to telehealth providers for casual unenrolled patients is similar to the funding rate paid to general practices for their enrolled patients through capitation.

The General Practice Owners Association (GenPro) convincingly argues that telehealth providers should be paid the same (much lower) casual rate that is paid to general practices for casual unenrolled patients.

GenPro Chair Dr Angus Chambers succinctly explains the differential this way:

A [telehealth] provider offering the new online medical service would receive $65 for a consultation with a 14-year-old casual non-enrolled patient whose caregiver holds a Community Services Card. In contrast, a general practice would only receive $20.45.  

The Government’s favouritism towards private telehealth providers has reinforced the view among many general practices that instead of seeing telehealth as an aid or enabler for GPs, it is seen as an alternative.

Privatising planned (non-acute) surgery

Back on 13 May Radio New Zealand investigative reporter Anusha Bradley had covered on Morning Report Health New Zealand’s (Te Whatu Ora) intention to privatise planned surgery waitlists by outsourcing them to private hospitals on two to three-year contracts, along with extending the working hours of doctors in public hospitals:   Privatising planned (non-acute) surgery.

Expecting public hospital specialists (and nurses) to work longer hours in evenings and on weekends and public holidays on more complex planned cases enables private hospitals to ‘cherry pick’ the less complex high volume (ie, revenue generating) cases.

Bradley reported Nelson Hospital based surgeon Ros Pochin, Chair of the New Zealand Committee of the Royal Australasian College of Surgeons questioning what surgeons might be able to do this extended hours’ work. In her words:

Most surgeons already work long hours, including evenings and weekends. There are some surgeons who work purely privately, but most work privately and publicly so there isn’t a cache of private surgeons sitting there twiddling their thumbs in the evenings and weekends who can suddenly call in.

She added that most surgeons were already working long hours, including after-hours:

There’s only 800 of us in the country. We already work out-of-hours, as we all do on call. I’m about to start a week of continuous on-call myself, which I’ll do 81 hours straight day and night. And so we get very little time off as it is.

Outsourcing is essentially an admission that we have not got an adequately funded and resourced health system.

Health Minister Simeon Brown chose to ignore Health NZ and other warnings and instead favour private hospitals

Interestingly Health Minister Simeon Brown chose to ignore Health New Zealand advice that outsourcing to private hospitals was more expensive than expanding public hospital.

Health New Zealand also advised the health minister that outsourced operations could only be delivered if there were senior clinical staff available, “whilst ensuring Health NZ remains able to safely manage the clinical workload of our public hospitals”.

Further, he was warned of the risk that private hospital capacity would be “insufficient” due to workforce availability.

Andrew Connolly gives timely but ignored advice

Particularly important is the advice Brown received from the Chair of his Health Workforce and System Efficiencies Committee, Middlemore Hospital general surgeon Andrew Connolly:

It is vital those establishing contracts recognise there are clinical obligations and responsibilities in the public sector that must not be weakened by outsourcing. Health New Zealand must consider such risks in the contracting process.

Connolly is now the deputy chair of the newly appointed board of Health New Zealand. This will be interesting. His advice to the health minister became even more imperative following Brown’s subsequent decision discussed below.

Privatising planned surgery morphs into public-private partnerships

The above-mentioned outsourcing reported by Anusha Bradley, including the warnings ignored by Simeon Brown, was trumped by the Minister’s subsequent decision that private hospital contracts would be almost permanent – 10 year contracts which are longer than the terms for public service chief executive appointments.

These 10-year contracts for cherry-picked surgery has rightly been called Public Private Partnerships (PPPs) by economist Brian Easton in a column published by Pundit on 4 July: PPPs based in private hospitals.

PPPs enable in varying ways for private partners to maximise profit opportunities in the design, construction and operation of health facilities.

These PPP opportunities have been quickly recognised by private investors as reported by Hamish McNeilly in The Post (5 July): PPPs encourage private investors change plans.

The investors undisclosed company had resource consent granted to build private student accommodation in Dunedin. Now they have changed their plans by seeking to build a new private hospital instead.

The only way these PPPs by another name can maximise private profits will be for the crisis-ridden rundown public hospitals to be even further rundown.

This includes growing the private hospital specialist workforce at the expense of the public hospital specialist workforce.

Non-evidence based decision-making

Prime Minister Christopher promised in the last election that his government would be evidence-based in its decision making

On 17 June Treasury received the following request under the Official Information Act:

I would appreciate any Treasury papers on the proposal that HNZ should outsource treatment to private hospitals on ten year contracts. I am especially interested in how they will impact on the government’s fiscal position.

On 9 July Treasury responded:

I am refusing your request under section 18(e) of the Official Information Act as the information requested does not exist or, despite reasonable efforts to locate it, cannot be found.

Given that the information requested would have been recent, not historical, it is obvious that Treasury’s advice was neither sought nor provided.

The only information received by the health minister from his official advisers (Health New Zealand and his expert committee) was apprehensive at best.

Responsibility for this poor and risky decision-making rests solely and squarely on Health Minister Simeon Brown and his government colleagues. Ideology, not evidence based, has prevailed – again!

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