GUEST BLOG: Ian Powell – Hospital laboratory privatisation unsustainable; leaving with a “heavy heart”

On 27 June the Otago Daily Times published a powerful paywalled article by  journalist Matthew Littlewood on the concerns of a leading highly experienced blood cancer laboratory scientist who was resigning his position at Dunedin Hospital to take up a new position in Brisbane’s Princess Alexandria Hospital.

 The resignation was with a “heavy heart” and the concerns were that the medical laboratory service is in disarray and the consequences could be deadly: “Worsening working environment”.

Terry Taylor: a courageous advocate for hospital laboratories not being undermined by business profiteering now resigned with a “heavy heart”

The experienced medical scientist is Terry Taylor, a former president of the New Zealand Institute of Medical Laboratory Science (and life member). He has more than 33 years’ experience in Dunedin Hospital as a blood cancer diagnostic specialist.

Not the cause but certainly a major catalyst was the critical finding of the Health and Disability Commissioner over the laboratory team at Southland Hospital missing a potential cancer diagnosis for a retired nurse until it was too late.

Context: Increasingly strained and chaotic circumstances

The tragic event occurred in the context of increasingly strained and chaotic circumstances in both Dunedin and Southland hospital laboratories since their privatisation in 2007. Since then both laboratories have suffered from constant staff burnout and limited resources.

Dunedin Hospital’s laboratory privatised in 2007 (as was Southland Hospital’s)

Privatisation began in the form of a private Dunedin based company, Southern Community Laboratories, taking over their operational management. In subsequent years there were several company ownership changes. The current owner is Awanui.

In respect of the Southland laboratory tragedy, drawing upon his own experience Terry Taylor said there was ‘‘nothing’’ to stop something similar happening in Dunedin.

Impact on personal health; “worn down by false promises”

After spending several years battling with Awanui for resources, Terry Taylor felt it was necessary for his own personal health. In his words as reported by Mathew Littlewood:

The decision to leave my current specialist cancer diagnostic role at Dunedin Hospital has not been an easy one but is a direct reflection of the worsening working environment within our diagnostic laboratories.

I simply see no end to the current constrained predicament, and I just want a working environment that I am not constantly fighting for staffing and training resource to provide our specialist diagnostic services.

Feeling “worn down by false promises” Taylor added:

The issues regards safe and functional staffing levels, lack of recognition and progression of specialists and the year on year absence of true national governance and direction … [and these have] effectively forced me, and many of my colleagues, to look elsewhere where our skill sets and experience is appreciated and valued.

Furthermore:

None of this is new. We have warned and warned at a national and regional level to tone-deaf ears, but still no significant intervention, workforce future-proofing or most importantly no long-term hope for a rapidly declining fit-for-purpose workforce.

And:

It is time control of the direction of our diagnostic services is given back to those scientific and strategy experts who are currently constrained by the current ideology based on outdated historical models of service delivery.

Looking ahead by way of contrast Taylor concluded:

I am looking forward to working within the integrated network that their public hospital laboratories operate within, providing expert training, and advancing technological capability and capacity for the people of Queensland.

Unfortunately, our current New Zealand environment is in a totally predicated race to the bottom and I simply cannot continue to stand by and watch the inevitable happening in front of me.

Awanui’s response was straight-out dismissive and patronising spin. It effect, Awanui asserts that it knows more about the working and related conditions of its workforce than the workforce itself knows.

Meanwhile, in response to workforce calls for a review of Awanui’s approach, Health New Zealand (Te Whatu Ora) adopted an ostrich head-in-sand position. It rejected the review call saying it was happy with  its relationship with Awanui.

Lisa Owen interviewed Terry Taylor for Radio New Zealand

Terry Taylor also did two subsequent national radio interviews. The first was on Radio New Zealand’s Checkpoint (29 June) describing the situation as a “race to the bottom in medical laboratory services”: Race to the bottom.

The second was on Mike Hosking’s Newstalk ZB breakfast programme focussing on unsafe staffing levels: “We’ve lost numerous specialists”.

Background to unsustainable laboratory situation

I discussed the background context that led to the above circumstances described by Terry Taylor in an opinion piece published in Newsroom (12 June) under the heading ‘Unsustainable situation’ drives senior lab scientist out of NZ hospitals’: Unsustainable situation.

Awanui now has a virtual monopoly of community lab testing and over one-third of hospital testing

After citing opening comments from Terry Taylor (along similar lines to those discussed above), I referred to Awanui as Aotearoa New Zealand’s largest private laboratory provider handling 98% of community (general practitioner) referrals and 35% of hospital referrals (from hospital specialists to their hospital laboratory) for testing.

Awanui had reported its third successive annual financial loss; $2.2 million after-tax loss for 2025 following $15.9 million and $16.4 million in the two previous financial years.

In conjunction with its third loss, Awanui also reported that it had refinanced $313 million of debt for a further five years.

I then discussed the historical evolution of private laboratory companies expanding beyond community testing to, through privatisation, operating a number of hospital laboratories, particularly since 2007 with Dunedin and Southland.

In 2006 there were several different largely locally based privately own community providers, and all but two of the then 22 district health boards operated their own hospital laboratories.

Today the landscape is radically different. There are now only three private community laboratory providers – Awanui (75%), Pathlab (16%) and Sonic (9%).

Health New Zealand (which replaced the DHBs in 2022) operates 56% of hospital laboratories. The remainder are privately operated by Awanui (predominantly), Pathlab and Sonic.

Around 70% of clinical decision-making and 100% of cancer diagnoses rely on laboratory tests. Unfortunately privatisation has not served public hospitals well because of the necessary focus on profit-making.

Profits are the focus

Profitably is the focus of the next part of my Newsroom column. After a deliberate strategy of being a loss-leader, Awanui’s predecessor owners made massive profits from the early to mid-2010s.

During the Covid pandemic, profitability was sustained by receiving a large part of the additional government funding of $495 million for PCR testing.

Profiteering focus the natural consequence of hospital lab privatisation

Since then the situation has deteriorated. I described it as follows:

Profitability goalposts have shifted since then. While Awanui continued to behave as it were still a profitable business, operational costs were skyrocketing and Health NZ funding tightening. This was coupled with the expanding corporatisation of the Awanui top leadership.

This has led to attacks on the scientific and technical workforce by enforcing hiring freezes, inadequate and insufficient scientific replacement, and a lack of spending on external professional development and training for frontline staff.

I noted the failure of Te Whatu Ora to not require Awanui to provide the staffing and specialist future-proofing and training commitment needed for such a vital service.

This enabled Awanui to engage in cost-cutting, largely through dismantling or reducing regional laboratory services such as histology (analysing cells, tissues, and organs) and microbiology as a key part of its endeavours to achieve profits for its owners.

Health New Zealand fell down in duty of care responsibility

I also discussed how the above-mentioned highly critical Health and Disability Commissioner rocked Awanui scientists and technicians.

Many were concerned that the Commissioner had not drilled more deeply into the difficult work environment and pressure on staff that some believed helped increase the risk of misdiagnosis.

They were also concerned that its decision had not sufficiently considered Health New Zealand’s statutory duty of care to ensure timely and reliable diagnosis.

What needs to happen

I also observed in my above-mentioned Newsroom opinion piece that:

One of the effects of privatising hospital laboratories is fragmentation. But what they need is integration because they are so central to clinical decision-making. They need to be integrated both within the hospitals in which they are located and between them.

However, hospital laboratories dependent on achieving a sufficiently profitable rate of financial return to their private operators is destabilising.

Health Minister Simeon Brown isn’t responsible for laboratory precariousness but his privatisation ideology probable prevents him from being part of the solution

The solution is simple. The perverse profit-maximisation (or extraction to express it more bluntly) motive needs to be removed from our public hospital laboratories.

As each contract for privately operated hospital laboratories ends, with appropriate notification, they should not be renewed. Instead the laboratories should consequentially return to public operation.

This is the best outcome for an integrated and nationally coordinated hospital laboratory service. It is also the best outcome for the 70% of clinical decisions that depend on laboratory diagnosis.

As an infectious diseases medical specialist former health minister Dr Ayesha Verrall fully understands laboratory precariousness; she is well-placed to be part of the solution should she become minister again

It does not require courageous political leadership; instead it requires leadership that is value rather than ideology based, that is firm, and that puts patients and health workforce first.