Health NZ Faces Criticism Over Lack of Transparency in Surgery Costs

Health New Zealand is under scrutiny for withholding information regarding payments to private hospitals for elective surgeries under a new national contract. Critics argue that this lack of transparency hinders taxpayers’ ability to assess whether they are receiving value for their money.

The contract, which was released under the Official Information Act, did not disclose the financial terms agreed upon with private providers. General surgeon and chair of the Canterbury Charity Hospital Trust, Phil Bagshaw, emphasized the need for clarity, stating, “We taxpayers are paying, so we should know whether we’re getting value for money.”

In response to concerns, Health NZ explained that revealing the pricing details could lead to “commercial disadvantage to providers.” Former health minister and Labour health spokesperson Ayesha Verrall criticized this stance, arguing that the public has a right to know the costs associated with procedures performed in private hospitals. She highlighted that while the Ministry of Health publishes data on nearly every procedure in public hospitals, similar information on private hospitals remains undisclosed.

Verrall pointed out that outsourcing surgical procedures often leads to increased costs, citing overseas research. “I do question the use of commercial sensitivity to withhold this information from the public,” she stated, noting that in many regions only one private hospital is contracted, removing any competitive advantage that could be compromised by disclosing pricing.

Acting Health Minister Matt Doocey did not directly address whether the pricing information should be made public. Instead, he stated, “Thousands more New Zealanders have been able to get the surgery they need thanks to this government’s Elective Boost.” Doocey affirmed that the government is committed to providing faster access to surgery while ensuring value for taxpayers.

Under the new contract, private hospitals are required to report quarterly on various outcomes, including post-surgery infections, complications that necessitate transfers back to public hospitals, cancellations, patient no-shows, and complaints. Yet, six months into the programme, Health NZ acknowledged it lacks the necessary data. Verrall expressed her 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 noted that this is the first time performance measures have been collected on a national level. Some contracts were signed as recently as March 2024, while others remain unsigned. 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, according to an official response.

These concerns arise as internal documents revealed that Health NZ had been advised to consider utilizing Public Private Partnerships (PPPs) to address the backlog in elective surgeries. A Deloitte market study commissioned by Health NZ found that outsourcing volumes surged by a third since 2019, with costs nearly doubling from $162 million to $317 million. The report indicated that outsourcing has increased from $162 million to $317 million, suggesting that higher prices accompany increased volumes.

The Deloitte report recommended that Health NZ negotiate national-level pricing and leverage facilities through public-private partnerships, although it cautioned that international PPP agreements have had mixed results. The report suggested that pricing, demand, capacity, and partnerships should be strategically managed to ensure sustainable outsourcing costs. However, specific recommendations on how to implement these strategies were redacted.

While the potential benefits of PPPs include cost-sharing and fostering innovation, risks highlighted in the report include exacerbating inequities and the negative public perception that could arise from the use of such partnerships. In a March speech, Health Minister Simeon Brown expressed his openness to employing PPPs, but a spokesperson indicated that it remains the government’s expectation that Health NZ partners with private providers to maximize elective treatment delivery.

Health NZ stated it is exploring various financing and delivery models for health services. Rachel Haggerty, Director of Hospitals Planning at Health NZ, mentioned, “Health New Zealand will explore a range of alternative financing and delivery models… to determine the best value for the taxpayer.” This could include PPP arrangements for the delivery of infrastructure and outsourced services.

Bagshaw warned against moving towards PPPs, expressing grave concerns about the potential consequences. He argued that this shift could signify a retreat from the government’s responsibility to provide a comprehensive and free public health system. “We’re starting with outsourcing, but moving to public-private partnerships is the next stage in that process,” he stated.

Bagshaw also cautioned that years of underfunding have already placed the public health system at risk. “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.” He expressed fears that expanding PPPs nationally could lead to an American-style healthcare system characterized by high costs and inefficiencies.

The Deloitte report indicated that Health NZ and ACC collectively outsourced two-thirds of all elective surgeries to private hospitals, primarily owned by just three companies: Southern Cross Healthcare, Healthcare Holdings, and Evolution Healthcare. These three entities dominate approximately 70 percent of the market. Southern Cross, the largest player, is owned by the Southern Cross Health Trust, while Evolution Healthcare, which operates Wakefield and Royston Hospitals, is primarily owned by the Queensland government.

As discussions around outsourcing and potential PPPs continue, the call for transparency in costs and performance data becomes increasingly urgent. Without this information, taxpayers remain in the dark regarding the efficacy and value of outsourcing surgical services to private providers.