Health NZ withholds private hospital contract costs, raising concerns

Health New Zealand has chosen not to disclose the costs associated with contracts for elective surgeries at private hospitals, prompting concerns over transparency and value for taxpayer money. Critics, including general surgeon and chair of the Canterbury Charity Hospital Trust, Phil Bagshaw, argue that the public deserves to know how much is being spent on these services. “We taxpayers are paying, so we should know whether we’re getting value for money,” he stated.

The new contract, which was released under the Official Information Act, has sparked debate since the agreed-upon prices with private hospitals have been withheld. According to Health New Zealand, revealing these figures could put providers at a commercial disadvantage. Ayesha Verrall, former health minister and current Labour health spokesperson, described the lack of transparency as unacceptable. She said, “We need to know how much the procedures in private hospitals cost so that the public can have an informed debate on where these operations should happen.”

Verrall pointed out that the Ministry of Health regularly publishes data on the costs of procedures in public hospitals. She noted that research from other countries indicates outsourcing could often result in higher costs. “In many instances in a region, there’d only be one private hospital that’s being contracted with, so there’s no competitor that stands to gain from knowing that hospital’s pricing. This information should all be out in public.”

The acting Health Minister, Matt Doocey, did not directly address whether the information should be made public. However, he emphasized that thousands of New Zealanders have received necessary surgeries through the government’s Elective Boost initiative. “Kiwis rightly expect faster access to surgery, and that is exactly what we’re delivering,” he remarked. Doocey expects Health NZ to ensure value for money for taxpayers while providing faster treatment for patients awaiting care.

Under the new contract, private hospitals must submit quarterly reports detailing outcomes such as post-surgery infections, complications requiring transfers back to public hospitals, cancellations, patient no-shows, and complaints. Despite this requirement, Health NZ has admitted that it does not yet have this data, six months into the program. Verrall expressed deep concern over this gap, stating, “Without both cost and performance data, the public cannot judge whether outsourcing is delivering better results for patients or value for taxpayers.”

Health NZ indicated that this is the first time performance metrics have been collected on a national level. Some contracts were not finalized until March 2024, with others still pending. Quarterly review meetings with providers are expected to conclude by the end of the month, with performance data anticipated to be collected in August and September.

The situation has raised eyebrows in light of internal documents suggesting that Health NZ has been encouraged to explore Public Private Partnerships (PPPs) to address the backlog in elective surgeries. A market study commissioned by Health NZ and conducted by Deloitte found that outsourcing volumes have increased by one-third since 2019, with costs nearly doubling from $162 million to $317 million. The report highlights that “in dollar terms, outsourcing has increased from $162 million to $317 million during the same period, indicating higher prices being paid in tandem with increased volumes.”

Deloitte recommended that Health NZ negotiate national-level pricing and leverage facilities and expertise through public-private partnerships, although it cautioned that overseas PPP agreements have had mixed results. The report noted that while potential benefits include cost sharing and fostering innovation, risks such as exacerbating inequities and poor public perception exist.

In a March speech, Health Minister Simeon Brown expressed openness to utilizing PPPs. When asked about the progression of these plans, a spokesperson for his office stated that it remains the government’s expectation that Health NZ partners with private providers to maximize the delivery of elective treatment for patients. “With relation to service delivery, this is a matter for Health NZ,” the spokesperson added.

Health NZ has indicated that it is exploring various financing and delivery models. Rachel Haggerty, Director of Hospitals Planning at Health NZ, stated, “Health New Zealand will explore a range of alternative financing and delivery models for the provision of health services and infrastructure in order to determine the best value for the taxpayer.”

Bagshaw cautioned against the move towards PPPs, describing it as potentially disastrous. He expressed concerns that this approach reflects a government effort to evade its responsibilities in providing a comprehensive public health system. “If they expand nationally, we’ll end up with an American-style healthcare system. It will be excessively expensive, inefficient, and inequitable,” he warned.

He further emphasized that years of underfunding have already placed the public health system on the brink of crisis. “The worry is that we get to a tipping point where it’s not possible to bring it back to the situation where it should be,” Bagshaw said. The Deloitte report revealed that Health NZ and ACC together have outsourced two-thirds of all elective surgeries to private hospitals, with most of these being owned by just three companies: Southern Cross Healthcare, Healthcare Holdings, and Evolution Healthcare, which collectively dominate the market.

As the debate continues, the implications of these contractual arrangements and the future of elective surgeries in New Zealand remain uncertain. The need for transparency and accountability in healthcare spending is becoming increasingly urgent as the public seeks clarity on how their tax dollars are being utilized.