GUEST BLOG: Ian Powell – Flawed and Predetermined: Postscript on Waikato medical school decision

The business case used to justify the Government’s decision to establish a third medical school at Waikato University “…seemed to have a predetermined outcome: to favour the Waikato medical school the National Party took to the last election.”

Thomas Coughlan reports “deep” concerns about predetermined outcome

This was how NZ Herald Political Editor Thomas Coughlan reported a “deeply concerned” Professor Warwick Bagg, Dean of Medical and Health Sciences at Auckland University (27 July): Predetermined outcome?

I discussed this issue in my previous Otaihanga Second Opinion post (26 July): Poor process, ‘chumocracy and cosyism means likely poor outcome.

Drawing upon the use of terminology previously discussed by Bryce Edwards, Director of the Integrity Institute, I focussed on the poor decision-making process describing it as being based on a:

… “chumocracy” of elites who are connected by what he [Auckland University economics professor] calls “cosyism”.

I summarised the approved new Waikato medical school as follows:

The new medical school is to provide a four-year medical degree for students who already are graduates with a non-medical degree to work as general practitioners (or as other rural doctors) in regional and rural areas. The medical degree at the existing two medical schools, Auckland and Otago, is five years.

The advocated expectation is that the proposed Waikato Medical School will be graduating 120 doctors a year once it is up and running.

With its opening scheduled for 2028 the first graduates should start working as general practitioners or other rural doctors at the earliest in 2037. This gap comprises both the time at the medical school and the time as resident (junior) doctors in training.

I also quoted what was arguably Edwards most biting conclusion of the process:

The Waikato medical school greenlight might be a political win for a few, but it’s a loss for New Zealand’s standards of governance. It undermines confidence that our health investments are made wisely and fairly. And it should prompt some soul-searching in Wellington: if this is how we make big decisions now, what does that say about who really runs the country?

The politics of timing

My own concluding comment was about the timing of the health minister’s release of the business case supporting the decision – 6.45pm Friday 25 July.

My post was published shortly after this release so I could only give the claim of $50 million dollars per year savings a cursory look.

However, I focussed on the politics of the timing; that is, releasing complex material at a time when media scrutiny was most difficult. I finished up by stating that:

If the difficult to substantiate claim of $50 million savings per year stood up to rigorous scrutiny it would have been released at a time convenient for media scrutiny. But ‘chumocracy’ and ‘cosyism’ necessitated otherwise.

Subsequently, on 29 July, I was Interviewed by Michael Laws on the rightwing media online outlet The Platform: Breaking down the controversy.

Drilling down into the ‘business case’

The key ‘business case’ material was commissioned by government from the Sapere business consultancy rather than drawing upon the relevant expertise and experience from within the health system (of which there is much).

As Thomas Coughlan reported in his above-mentioned article:

With the Waikato option only narrowly ahead of the others after a cost-benefit-analysis, a tweak to the assumptions behind the business-case options might have changed the outcome.

Sapere advised on three options based on a “total lifetime cost” over 16 years (2026-2042):

1. Increasing the intake of students at the existing medical schools at Auckland and Otago universities was costed at $10.9 billion.
2. A joint specialist medical training programme focused on rural health run by both university medical schools costed at $10.2 billion.
3. The new medical school proposal at Waikato costed at $9.1 billion.

Sapere also claimed that the third above option (Waikato) has a narrowly better benefit-cost ratio than the second (joint Auckland-Otago).

Specifically, the former had a ratio of 1.99 (meaning that each dollar spent produced $1.99 in benefit) whereas for the latter the ratio was 1.8 ($1.80 in benefit).

Simeon Brown embellishes “game changer” claim

If this was taken at face value, then the Government made the right decision despite the poor process.

There might have been some justification for Health Minister Simeon Brown’s triumphant reported claim that this  was a “game-changer for the long-term growth of our medical workforce in New Zealand”.

However, that is a huge “if”. To begin with, the capital cost for the Waikato school option of $232 million was far greater than the Auckland-Otago joint school  option cost of $81.5 million.

This $150.5 million higher cost is unsurprising given that whereas Auckland and Otago would be expanding existing infrastructure, Waikato would be largely starting from scratch.

Unfair assumptions

Sapere argued that ongoing operational costs over the same 16 years for Waikato were estimated to be $361.6 million compared with $508 million for the joint Auckland and Otago option.

However, Professor Bagg countered this by advising that “…this modelling made unfair and inaccurate assumptions about the existing two medical schools that put them at a disadvantage.”

The argument of lower operational costs for the Waikato proposal largely centres on it being a shorter programme (that is, four years rather than five).

However, when the usual three years required to achieve an undergraduate university degree, which are also government subsidised, are factored in (as they should be)  the “tweaking” referred to by Coughlan comes into play.

As reported by Coughlan, Bagg pointedly notes that:

… the cost of turning Waikato’s students into graduates who can be admitted into the school isn’t reflected in the business case. Lifting those costs out of the business case made Waikato look better overall.

In Bagg’s own words:

They are focused on the four-year graduate programme … they haven’t focused on the three years that they’ll have to do to get into that medical school.

Bagg also identified another way in which Waikato’s high capital costs for Waikato were “offset”. That is, how the business case found “more benefits for the Waikato medical school”.

This is because of the assumption that far more Waikato graduates will go on to be GPs, and work rurally, than graduates from the proposed Auckland-Otago joint rural school.

The assumption was that whereas 38% of Waikato graduates would become GPs, it would only be 33% for the joint rural training programme. In the Waikato medical school’s case if taken at face value, the cost-benefit ratio would weigh “heavily” in Waikato’s favour.

According to Bagg, Sapere (who provided cost-benefit analysis for the business case) did not use “the data we provided them” to calculate the GP figure for the option of increasing capacity at Auckland and Otago medical schools.

In fact, rather than 23%, already “…about 35%” of graduates from Auckland and Otago medical schools are working as GPs eight years after graduating.

Sapere’s lower figure came from a survey of graduates’ intentions when they graduated from medical school, not what they actually ended up doing after undertaking resident (junior) doctor training, which includes general practice placements (including rural).

Sapere’s assumptions for the number of GPs graduating from the Waikato medical were based on figures from the rural GP medical school in Wollongong which similarly had a post-graduate four-year degree. In my view basing such an important assumption on one similar example raises a further concern about speculation.

The final word

On 29 July Otago Daily Times journalist Matthew Littlewood covered further concerns over the robustness of the business case: Flaws in medical school business case.

His article included disappointment over the quality of the business by Otago University Pro Vice Chancellor (health sciences) Associate Professor Megan Gibbons. She began by saying, referring to his comments in the above-mentioned Coughlan article:

We agree with University of Auckland dean of medical and health sciences professor Warwick Bagg regarding a business case that contains a number of obvious flaws including significant analysis gaps and some speculative assumptions.

Health policy professor Robin Gauld provides the final wise words

But the final word should be left to former Otago University health policy professor Robin Gauld (currently Executive Dean of the Bond Business School at Bond University in Queensland).

Noting that the differences between the options were “so infinitesimal” that Waikato could potentially carry the greatest risk and describing the Waikato medical school as a “mega project”, he advised that:

It could end up being that Waikato will actually be much more expensive than was going to be apparent right now when this decision was taken.

And some of the challenges, such as getting all the clinical placements lined up, which they admit in the business case will be challenging, could be more challenging than anticipated.”

So, they’re going to be relying on quite a bit of altruism and goodwill to get all the placements lined up.

So, I think like any grand project, such as the new Dunedin hospital, there’s a lot more in this than you could just read out of a business case.

There’s a heck of a lot more to it. It’s going to be much, much more complex.

Very wise words. This is the kind of wisdom that the political decision-makers over the new medical school chose to ignore.

 

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