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Health Law – Targeted Investment in the Local Health Economy

By Veronica Culpan, Associate

The successful collaboration with the private sector to reduce heart surgery waiting lists is welcome news after the recent barrage of criticism over the handling of the contract for certain diagnostic services.  By building on the successes and learning from past experience, the future of public/private collaborations within the health sector should continue to strengthen.

Key to the success of future clinical service outsourcings will be to ensure that the proposals are commercially viable, clinically justifiable, and structured in an appropriate way.

In July 2009 there were reports of an extra $5 million of central funding being invested into the Auckland and Northland local health economy, showing that the Government wished to make a concerted effort to improve outcomes for heart patients.

The aim of this welcome cash injection was to return to zero by the end of this month (October 2009) the number of people who had been waiting for more than three months for their heart surgery.  Earlier this year an audit of Auckland City Hospital figures indicated that approximately 99 people had been waiting longer than three months – this has been significantly reduced. 

Going forward, Auckland City Hospital has promised to cut waiting times to a maximum of three months.  To have achieved its aims ahead of deadline is commendable and a strong step in the right direction.  But will it be sustainable given current levels of funding and resources?  Will it be sustainable when adding other variables and implementation of both a requirement that:

• No heart patient should wait more than three months for surgery.
• Heart patients are assessed and prioritised based on clinical need?

The waiting lists were reduced by a mixture of increasing capacity within the public system, outsourcing to Dunedin Hospital and outsourcing to the private sector. 

This type of targeted investment has worked well in the UK, where the National Health Service has seen considerable investment under Tony Blair’s New Labour, inherited by Gordon Brown.  Much of this investment has been focused on deprived areas and reducing waiting lists for surgery, with the provision of both clinical and non-clinical services.  An approach not without its criticism, successes in the UK have been achieved through cross-selling within the public sector and through collaboration and partnering with the private sector.

Collaboration with the private sector can work, but such arrangements need to be structured in the right way in order to achieve an appropriate allocation of risk (as between the commissioner of the services and the provider of the services), maintain the public health system and to deliver better health outcomes for patients.

Matters to bear in mind when outsourcing clinical services include the need to:

• Provide a seamless patient experience.
• Ensure the quality and competency of staff, through the implementation of appropriate standards and vetting procedures.  A provider’s workforce strategy should be able to withstand scrutiny by the contracting authority. 
• Ensure that the capacity of the public sector is not indirectly reduced. 
• For instance, there is a perceived risk that the private sector might attract healthcare professionals away from the public sector, causing the public sector to rely even more on the private sector.  There are also concerns that this can happen where there is an inappropriate allocation of the less resource demanding procedures to the private sector.
• Share knowledge and training.  For example, procedures that would have been carried out in a teaching hospital but for having been outsourced could still be involved in the teaching programme even though the procedure might be performed in a private facility.
• Demonstrate a level of transparency commensurate with the use of public funds.
• Require adherence to appropriate standards of care.
• Require measurable and monitored performance with contractually enforceable appropriate sanctions for sub-performance.
• Establish handover protocols to follow at the end of the contract.
• Demonstrate value for money.
• Adopt an appropriate pricing model.  

Outsourcing clinical services can be priced in different ways.  These include having regard to:

• Referred surgical activity costs.
• Costs for extra services which are clinically justifiable, but for which acquiring the contracting authority’s prior approval may not be practical.  For instance, it may not be practical to seek or be given prior approval if an extra service is identified as being clinically necessary and desirable whilst performing the primary procedure.
• Minimum and maximum number of procedures.
• Targets and deadlines.

Selecting the right partners and structuring and negotiating sound contracts has the potential to deliver commercial benefits and better health outcomes for patients.