Auckland Health Boards Give DML Some Testing

Responding to problems at Labtests, officials return 10% of testing to Diagnostic Medlab

CEO SUMMARY: Auckland’s chaotic lab testing situation just became more complicated. Today the Auckland District Health Boards announced a four-year contract to allow Diagnostic Medlab to perform 10% of the area’s test volume, primarily for private hospitals and private specialists. Its purpose is to take some pressure off Labtests by having Diagnostic Medlab perform the more complex and sophisticated assays.

HERE’S A NEW TWIST in the lab contracting debacle involving monopoly provider Labtests that continues to unfold in Auckland, New Zealand.

Today the Auckland District Health Boards (DHBs) held a press conference. It was announced that Diagnostic Medlab (DML) would return as a contract provider of laboratory testing in the region, but in a limited role. DML was given a new four-year contract which will become effective before the end of October.

Diagnostic Medlab will provide laboratory testing services to patients being treated in private hospitals, private specialists’ clinics, rest homes, and fertility clinics. This represents about 10% of the total exclusive lab testing contract that became effective between the DHBs and Labtests on September 7, 2009.

It will cost the DHBs extra to bring Diagnostic Medlab back. DML will be paid NZ$10.6 million per year. Of this amount, NZ$6.2 million will be deducted from the contract with Labtests. The addi- tional NZ$4.4 million will be funded by the district health boards.

This is a stunning development. It is headline news in New Zealand. That’s because, for the past three years, officials at the district health boards repeatedly assured both the medical community and residents of Auckland that the transition to Labtests would take place without incident or risk to patient care.

In fact, just the opposite happened. During Labtests’ soft opening in August, and since the September 7 contract launch date, almost every day brought news headlines about patient wait times, delayed lab test results, and incidents of patients getting the wrong test results. (See TDR, September 21, 2009.)

Thus, there is great significance in the fact that this announcement comes just 35 days after Labtests initiated service to 12,000 patients per day. By its action, the DHBs are acknowledging that Labtests failed to meet contract criteria for clinical quality and patient service. It further suggests these deficiencies are deep-seated and the time required to cure them would subject patients to unacceptable levels of risk, not to mention ongoing disruptions to the health system served by Labtests.

This is no surprise to those pathologists and laboratory professionals in New Zealand and worldwide who have followed this story since its inception in 2006. There is no precedent in modern medicine for the decision by the Auckland DHB’s to grant an exclusive lab testing franchise to a company which had no lab- oratory and no laboratory staff in Auckland—and to have that lab company “cold start” lab testing services to 12,000 patients as of 12:01 a.m. on the first day of the new contract.

Insurmountable Task

A laboratory that size ranks in the top tier of pathology labs in Europe and North America. The sophistication of modern diagnostic testing technologies, along with highly complex IT and organizational requirements, make the goal of opening a pathology laboratory of this scale—with acceptable clinical quality and service performance—an insurmountable task. The disruptions and service problems seen in Auckland since August 10, when the first stage of Labtests’ three-stage soft opening began, are evidence that Labtests failed to achieve what THE DARK REPORT characterizes as “Mission Impossible.”

Newspapers and television news have widely reported the most obvious and visible breakdowns in service, such as long wait times in blood collection centers and STAT or urgent tests which did not get reported for more than 24 hours. But the most important dimension of this story, concerning patient safety, remains untold by the media in New Zealand. That is understandable, because only trained laboratory professionals understand how breakdowns in the science can cause a laboratory to imperfectly analyze a specimen and report an inaccurate or unreliable test result.

Some Problems Not Public

It is inconvenient for a patient to wait two hours for a blood draw. It is potentially life-changing or life-threatening for a patient to get a clinically inaccurate or unreliable result that might prove harmful because it leads to a wrong diagnosis or inappropriate therapy. It is this dimension of possible problems at Labtests which has not been made public.

That is understandable. If the public and Auckland physicians learned that some assays run at Labtests were producing unreliable results, chaos would ensue. Patients and physicians would demand an immediate solution to the problem. But the DHBs would not be in position to immediately fix these issues, because they put all their lab testing eggs in the single Labtests basket. That fact limits the DHBs’ options to improve the current situation.

In fact, since its full start on September 7, certain facts hint at serious deficiencies in some of the lab test results produced by Labtests. For example, enough patient and physician complaints reached New Zealand’s Health and Disability Commissioner Ron Paterson to cause him to go public with his concerns about the problems at Labtests. This happened on September 11, just four days after Labtests went fully operational at the 12,000 patient-per day level.

“The information I have received indicates there may be a risk to public safety given the broad concerns that have been raised,” he stated. Paterson is a recognized advocate for patient safety and quality improvement in healthcare.

Paterson’s comments triggered swift action by the DHBs. Only 48 hours later, on September 13, Auckland DHB Chairman Pat Snedden dispatched a team of seven senior DHB officials to Labtests. They were to oversee safety and quality functions at Labtests and the lab company would reimburse these costs.

Today’s announcement by the DHBs is another clue hinting at serious deficiencies in the quality and accuracy of lab test results inside Labtests. It is a major step for the DHBs to pull the more sophisticated testing generated by the private sector away from Labtests and give it to Diagnostic Medlab—at a higher price—for four years.

DHB Quality Team Findings

Why would the DHBs take this action only 28 days after their quality team went into Labtests? Did the seven quality overseers identify serious issues affecting patient safety? Most lab professionals outside New Zealand with some knowledge of the situation believe that is likely to be the case.

The variables of simultaneously bringing up an entire laboratory full of new analyzers, demonstrating proficiency on 600+ unique assays, and turning on a newly- installed LIS (laboratory information system) are loaded with pitfalls. Add to this the challenge of hiring 400 pathologists, clinical biochemists, medical laboratory technicians, and others—then training them to newly-established protocols.

One Pacific Rim pathologist listed these challenges to THE DARK REPORT. She then speculated that it probably didn’t take long for DHB quality overseers to fully comprehend the scale of the problems at Labtests. Because many of the issues affecting analytical accuracy would be systemic, months would be required to correct these serious deficiencies.

This likely also presented the DHBs with an interesting dilemma. Assume the DHBs were now informed about the ways in which patient safety would be compromised. One consequence to this knowledge is legal exposure for the DHBs if a patient sought compensation for medical malpractice after suffering a serious medical incident because of an inaccurate or false lab test result reported by Labtests.

Bringing DML Back

Finding themselves in such a situation, it would make sense that the DHBs would want to bring Diagnostic Medlab back as a contract provider. One, it demonstrates the DHBs are taking action to address the problems at Labtests. This step would generate favorable news coverage.

Two, by assigning to Diagnostic Medlab only the hospitals, specialists’ clinics, rest homes, and fertility clinics in the private sector—representing the more complex reference and esoteric tests—the DHBs may be attempting to ease complaints and pressure from its most vocal critics.

Three, bringing Diagnostic Medlabs back to serve 10% of the total contract for four years gives the DHBs several useful downstream options, depending on how Labtests performs in coming months.

By no means will this be the end of the story about Labtests and the three Auckland District Health Boards. Since the controversial contract award to Labtests in 2006, these unfolding events have been followed by pathologists and laboratory professionals around the world.

More To Come In This Story

As well, it remains to be seen whether the New Zealand press will learn the details about any internal testing failures that could expose patients to misdiagnosis and unneeded or inappropriate therapy. Trust in the integrity of a laboratory test is fundamental to patient care. If it were ever to become known that actions by Labtests and the District Health Boards breached that trust, it would likely be a remarkable news exposé for both New Zealand and the world pathology community.


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