Health NZ under fire for secrecy over private hospital contracts

Anusha
Bradley, Investigative Reporter

Health
New Zealand is refusing to reveal how much it is paying
private hospitals to perform elective surgeries under a new
national contract – a move critics say makes it impossible
to know if taxpayers are getting value for
money.

General surgeon and Canterbury Charity Hospital
Trust chair Phil Bagshaw said the public deserved
answers.

“We taxpayers are paying, so we should know
whether we’re getting value for money.”

The new
contract comes as the government’s ‘Elective Boost’
programme has outsourced thousands of procedures to private
hospitals since March, with a further 21,000 expected
between July 2025 and June 2026.

The new contract was
released under the Official Information Act, but the prices
agreed with private hospitals were withheld. Health NZ said
publishing them would “create a commercial disadvantage to
providers”.

Former health minister and Labour health
spokesperson Ayesha Verrall said the lack of transparency
was unacceptable.

“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.”

She pointed out that the Ministry of Health
published data on the cost of nearly every procedure carried
out in public hospitals and noted overseas research showed
outsourcing was generally more expensive.

“I do
question the use of commercial sensitivity to withhold this
information from the public. 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.”

Acting Health Minister Matt Doocey
did not say whether he believed the information should be
made public, but said: “Thousands more New Zealanders have
been able to get the surgery they need thanks to this
government’s Elective Boost.”

“Kiwis rightly expect
faster access to surgery, and that is exactly what we’re
delivering. I expect Health NZ to continue working with
private providers to ensure we get both value for money for
taxpayers and faster treatment for patients waiting in
pain.”

No performance data yet

Under the new
contract, private hospitals must report quarterly on
outcomes such as post-surgery infections, complications
requiring transfers back to public hospitals, cancellations,
patient no-shows, and complaints.

But six months into
the programme, Health NZ admitted it did not yet have this
data.

Verrall said that was deeply
concerning.

“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.”

She warned that without both cost and
performance data, the public could not judge whether
outsourcing was delivering better results for patients or
value for taxpayers.

Health NZ said it was the first
time performance measures had been collected on a national
level. Some contracts were not signed until March, while
others were yet to be signed.

Quarterly review
meetings with providers were expected to be completed by the
end of the month, with performance data collected in August
and September, it said in an OIA response.

Push for
PPPs

The concerns come as internal documents revealed
Health NZ had been urged to consider using Public Private
Partnerships (PPPs) to tackle the backlog in elective
surgeries as early as March 2024.

A Deloitte market
study commissioned by Health NZ found outsourcing volumes
had surged by a third since 2019, with costs almost doubling
from $162m to $317m.

“In dollar terms, outsourcing has
increased from $162m to $317m during the same period
indicating higher prices being paid in tandem with increased
volumes.”

It recommended Health NZ negotiate
national-level pricing and “leverage their facilities and
expertise through public private partnerships”, though said
overseas PPP agreements had been “mixed”.

Pricing,
demand, capacity and partnerships should all be targeted to
“manage demand and ensure sustainable outsourcing costs,”
Deloitte said, but its recommendations for how each should
be tackled were redacted.

While cost sharing and
fostering innovation were listed as potential benefits of
PPPs, risks included exacerbating inequities and “poor
public perception – that it could be a sign of a failing
public system”.

In a March speech, Health Minister
Simeon Brown said that he was “open” to using
PPPs.

When asked if plans had progressed since then, a
spokesperson for his office said it was still the
government’s “expectation that Health NZ partners with
private providers to maximise the delivery of elective
treatment for patients”.

“With relation to service
delivery, this is a matter for Health NZ.”

Health NZ
said it was exploring ideas.

“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,” Health
NZ Director of Hospitals Planning Rachel Haggerty said in a
statement.

“This may see Public-Private Partnership
(PPP) arrangements entered into by Health NZ in the future
for the private sector delivery of the infrastructure and
some outsourced service, including related to the delivery
of infrastructure and or the provisions of some clinical
services.”

A ‘slippery slope’

Bagshaw warned
that moving towards PPPs would be disastrous.

“I have
grave concerns. This is about the government trying to avoid
its responsibilities of providing a full, free public health
system. We’re starting with outsourcing but moving to public
private partnerships is the next stage in that
process.”

He said many overseas PPPs had failed and
required taxpayer bailouts.

“If they expand
nationally, we’ll end up with an American-style healthcare
system. It will be excessively expensive, inefficient, and
inequitable. This is the slippery slope.”

Bagshaw said
years of underfunding had already pushed the public system
to the brink.

“Year on year, we’ve been underfunding
the system. The worry is that we get to a tipping point
where in fact it’s not possible to bring it back to the
situation where it should be. And if this government has its
way, particularly with a 10-year system of outsourcing, then
we will definitely pass that tipping point.”

Market
concentration

The Deloitte report found Health NZ and
ACC together outsourced two-thirds of all elective surgeries
to private hospitals -most of which were owned by just three
companies.

Southern Cross Healthcare, Healthcare
Holdings and Evolution Healthcare made up 70 percent of the
market.

Southern Cross, the biggest player, was owned
by the Southern Cross Health Trust. Evolution Healthcare,
which owned Wakefield and Royston Hospitals, was majority
owned by the Queensland government. Sir Stephen Tindall’s
Albert Park Trustee owned a 42 percent stake in Healthcare
Holdings, with private equity firm Waterman owning 34
percent.

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