District Health Boards in New Zealand use medical laboratory test contracts as one way to control cost of testing and better manage utilization
HAMILTON, NEW ZEALAND—Medical laboratory testing in this mid-sized city is carefully divided between a community laboratory company and the cluster of hospitals located in and around Hamilton. The test menu offered by each clinical laboratory is defined by contracts negotiated with the individual District Health Boards (DHB) that manage the healthcare system in this region of New Zealand.
This week, your Dark Daily editor, Robert L. Michel is in New Zealand. He is visiting clinical and pathology laboratories in two cities and speaking at the 2012 Pathology Laboratory Meeting that is conducted annually by Canterbury Health Laboratories (CHL), located in Christchurch.
Clinical Laboratory Serves New Zealand’s Fourth-Largest City
My first medical laboratory site visit was to Pathology Associates Ltd. It is based in Hamilton, which is New Zealand’s fourth largest city. Located about 100 miles south of Auckland, Hamilton is a city of about 400,000 people.
Because of earlier mergers and acquisitions, Pathology Associates owns and operates several laboratories across the region. These are Pathlab Bay of Plenty, Pathlab Waikato and Pathlab Whakatane. It also has partial ownership of Laboratory Services Rotorua.
Pathology Associates and its operating units hold contracts to provide testing to office-based physicians in each service region. What many pathologists and clinical laboratory managers in other nations will find interesting is that these contracts define the specific menu of tests that Pathology Associates is allowed to perform.
Among the four separate contracts held by Pathology Associates with different District Health Boards, it is authorized to perform a menu of about 125 assays. Most of these are routine tests, including automated chemistry panels and CBCs (complete blood counts). Other types of medical laboratory tests are performed by the local hospitals or one of New Zealand’s two larger reference laboratories.
The main laboratory facility for Pathology Associates handles about 5,000 patient requests each day. The laboratory has a new Beckman Coulter automated chemistry line. It currently handles 450 specimens per hour and, when additional instruments are added in future months, the automated line will handle 1,200 specimens per hour.
Microbiology and Histopathology at Pathology Associates
Pathology Associates also provides microbiology and histopathology services. However, the menu of lab tests it is allowed to provide in these disciplines of laboratory medicine is also governed by the specific terms of the four contracts it holds with different District Health Boards. From this perspective, this laboratory company has untapped potential. It has additional space, unused capacity, and the laboratory medicine expertise to offer a larger menu of medical laboratory tests.
The second site visit conducted in Hamilton this week was to the laboratory of Waikato Hospital. This is a 600-bed hospital is one of the largest in New Zealand and was founded in 1886. With its associated hospitals and affiliated clinics, Hamilton Hospital serves a population of almost 365,000 people. The associated hospitals are located in the communities of Whakatane, Lakes area, Tauranga, Thames, Tokoroa, and Rotorua.
The noteworthy aspect of this hospital lab organization is that it has achieved standardization of hematology and coagulation testing across the hospital labs operating in this network. However, the same level of standardization in chemistry has not yet been achieved.
The Waikato Hospital laboratory was recently remodeled into an open-space lab facility. It has a new automated chemistry line manufactured by Roche Diagnostics that was put into operation last fall. The laboratory handles about 2,000 specimens per day.
Because the laboratory was preparing to implement a new LIS (laboratory information system) implementation this Saturday, July 14, your Dark Daily editor cut his site visit short, thanked his hosts, and wished them well on their Herculean task this weekend.
It is the manner of contracting between the District Health Boards and the participating pathology laboratories which sets these arrangements apart from how medical laboratory testing is organized in such nations as the United Kingdom, Canada, the United States, and Australia. The fact that the contracts specify a defined menu of tests that the contract laboratory can provide means that the full potential of the lab facility and its scientific staff goes untapped.
Using New Medical Laboratory Tests to Advance Patient Care
This has some interesting consequences. First, the terms of that contract seem to act as a barrier in cases where pathologists and laboratory scientists at the contract laboratory see an opportunity to offer a newly-developed lab assay that would improve diagnostic accuracy or advance patient care. Because the test menu is set by the terms of the contract, it would require considerable time to negotiate with the DHB to incorporate such new tests into the contract.
Second, the contract laboratory has limited ability to change the methodologies for the test menu that it offers, per the contract terms. This can inhibit the adoption of lab test methodologies that might offer improved sensitivity and specificity—or that shorten the time to answer. Again, the potential of the laboratory to contribute more clinical value is constrained by the terms of the contract.
Both of these observations must be tempered by the fact that these contracts have operated with a degree of success to date. Further, these observations are made without knowledge of the full details in the goals of the contract as well as the terms.
What is clear is that each of the two medical laboratories visited in Hamilton are equipped with state-of-the art instrumentation and are operating with a high degree of productivity and quality. On that point, it was about seven years ago when New Zealand adopted ISO 15189 as the basis for clinical laboratory accreditation.
Thus, the pathologists and laboratory scientists are knowledgeable about quality management systems (QMS). They support the ongoing use of Lean, Six Sigma, and similar process improvement methods to raise quality and improve patient care.
My next stop is Christchurch. This city is recovering from the 6.3 magnitude earthquake that happened on February 22, 2011. Look for a Dark Daily e-briefing on how the clinical laboratory profession has responded during and after this natural disaster.
Your Dark Daily Editor,
Robert L. Michel
e-mail: firstname.lastname@example.org with your comments.