Health NZ told to give private hospitals 10-year outsourcing contracts

Health Minister Simeon Brown says 10-year contracts with private hospitals would "improve the cost effectiveness of delivery".
Photo:
RNZ / Marika Khabazi
Health NZ has been directed to give private hospitals 10-year outsourcing contracts to perform elective surgeries.
Health Minister Simeon Brown made the request in his
Letter of Expectations
to Health New Zealand's Commissioner Lester Levy, which was sent in March, but only publicly released recently.
Brown
announced last week
that nearly 10,000 elective surgeries had been performed, most outsourced to private hospitals, putting Health NZ on track to reach its end-of-June target of more than 10,579 operations.
Private hospital outsourcing contracts tended to be short-term in the past, but Health NZ has been negotiating three-year panel agreements with private hospitals that guarantee high volumes of "low complexity" patients.
In his letter, Brown has now directed Health NZ to seek even longer-term agreements.
"Prioritise medium term (circa 3 years) agreements with private providers prior to moving towards longer term agreements (circa 10 years)," he wrote to Levy.
Such deals would "improve the cost effectiveness of delivery" and "provide clear investment signals" to the private sector, Brown said.
In a statement, Levy said the delivery of health services had always seen the private sector supplementing public health services.
"The move to establish longer-term contracts will allow us to build more capacity in the system, secure competitive pricing for services and meet the needs of our communities."
Levy said work was underway with private providers to ensure outsourcing was sustainable for the health system.
But Labour's health spokesperson Ayesha Verrall did not support such long outsourcing contracts.
"This indicates a direction that private provision will become part of the normal arrangements for elective surgery and in New Zealand, not just a stop-gap to clear backlogs," she told RNZ.
The Royal Australasian College of Surgeons said it was "very concerning."
"We were sold outsourcing as a short term solution to a backlog, and in that situation it has been moderately successful.
"But outsourcing is not a solution to an inadequately funded health system," RACS president Ros Pochin said.
Outsourcing electives deprived surgical registrars' of the training they needed, but it was also much more expensive, said Pochin.
"There's plenty of studies world-wide showing that private healthcare actually costs more. It's actually much cheaper to appropriate resource hospitals.
"I understand that the private hospitals needs certainty in terms of contracts, but why don't we just invest in infrastructure and provide care in the public system where we already have hospitals.
The New Zealand Private Surgical Hospitals Association (NZPSHA) was unaware of the minister's plans for decade-long deals, until alerted by RNZ.
NZPSHA president Blair Roxborough said they had been asking for longer-term arrangements but had not been given a specific time frame.
"I'm not quite sure where 10 years comes from, but obviously with that certainty, that length of agreement, that does allow for better planning, better investment."
Any discounts for such long contracts had yet to be discussed but it was "not unreasonable" to expect such deals would provide "certainty on costs," he said.
In a statement, Brown said Labour's long wait times for elective surgery were unacceptable.
"Patients don't care who is delivering their surgery, they care about getting their hip, knee and cataract operations done.
"I make no apology for outsourcing procedures so that we can reduce the wait lists and ensure patients receive the timely, quality care they deserve."
Brown said under Labour, the number of people who were waiting more than four months for elective surgeries had grown from 1000 in 2017 to over 28,000 in 2023.
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