Healthscope – Best Medical Service Outsourcer FINALIST– 2017
Healthscope New Zealand Limited is the largest provider of laboratory services in New Zealand through its subsidiaries, Southern Community Laboratories (SCL), Labtests and Northland Pathology and is strong, broad based and underpinned by a committed parent company. The New Zealand pathology group comprises 25 laboratories and 152 collection rooms, provides services to 15 public hospitals, has 1,921 employees, and provides over six million patient episodes annually.
In 2015, SCL was awarded the exclusive single-provider outsourcing contract to provide pathology laboratory services to the Greater Wellington region.
The laboratory outsourcing has involved a comprehensive list of tests done across all pathology disciplines. Wellington SCL will derive revenue of NZ$54 million in the first year of the contract (based on the agreed funding level), with indexation applying in subsequent years.
Expected savings of over NZ$100m over ten years, turn around times for histopathology reduced from 9 days to under 5.
Briefly describe the organisation giving the number of facilities, staff, revenue numbers.
Wellington SCL Limited is a wholly owned subsidiary of Healthscope New Zealand Limited, which in turn is part of the Healthscope group.
Healthscope Limited is an ASX listed top 100 company with an enterprise value of over AUD5 billion. It generates revenue of AUD2.3 billion annually from its portfolio of 45 private hospitals, 48 medical centres and a network of 60 laboratories across Australia, New Zealand, Singapore, Malaysia and Vietnam. A combined workforce of 20,000 staff is employed by the Healthscope group.
Healthscope New Zealand Limited is the largest provider of laboratory services in New Zealand through its subsidiaries, Southern Community Laboratories (SCL), Labtests and Northland Pathology and is strong, broad-based and underpinned by a committed parent company. The New Zealand pathology group comprises 25 laboratories and 152 collection rooms, provides services to 15 public hospitals, has 1,921 employees, and provides over six million patient episodes annually.
SCL has a rich history and has been an integral part of the healthcare system in New Zealand for over 50 years, starting in 1960 as the Otago laboratory service. After establishing a sound base and a strong reputation for quality, SCL undertook a strong expansion phase in the early 1990’s, establishing operations in Oamaru, Christchurch, Queenstown, Gore, Balclutha, Ashburton, Invercargill, Hastings, Kapiti Coast and Auckland. The growth phase continued in the 2000’s through the acquisition of Medlab Hamilton and Medlab Gisborne.
In 2001 the funding for community pathology was devolved to 21 District Health Boards (DHBs). There are now 20 DHBs following the integration of Otago and Southland to form the Southern DHB. Since then many DHBs have chosen to outsource community pathology laboratory services within the district to private providers under long-term exclusive (single provider) contracts using a formal tender process. Furthermore, some DHBs have also outsourced hospital pathology laboratory services requiring the single private provider to establish and operate an integrated (community and hospital) pathology service.
SCL has successfully won the following contracts through competitive tender processes:
• Otago & Southland in 2006;
• Hawkes Bay in 2007; 2015;
• Lakes (Taupo) in 2007;
• Canterbury in 2012 (following which SCL also acquired the Sonic Healthcare businesses and relevant contracts for South Canterbury and Nelson Marlborough DHBs); and
• The combined Capital & Coast / Hutt Valley / Wairarapa (referred to as “Greater Wellington” in 2015.
In addition, through a contract with the National Cervical Screening Programme, SCL also provides more than 45% of all cervical cytology services for New Zealand.
In 2007 SCL became a wholly owned subsidiary of Healthscope Ltd.
For the financial year ended 30 June 2016, our New Zealand Pathology business had a combined revenue of NZ$223m and our operating EBITDA was NZ$51m.
Healthscope now has significant experience in laboratory outsourcing and transitioning from multiple public and community laboratories to an integrated laboratory and know how to do this in the most detailed, effective and robust manner so that the process reflects positively on all parties but most importantly, doctors and patients.
We believe that social demographic challenges and growing healthcare expectations give rise to opportunities and the need for fresh solutions – solutions that promote efficiency, a coordinated approach to better health outcomes, the sharing of knowledge and a partnership ethos that provides a sustainable platform for all.
We have an absolute commitment to quality, clinical excellence and providing the infrastructure and investment necessary to deliver it.
Our systems are tested, resilient, and incorporate multi-faceted redundancy. We can bring the capability of New Zealand’s largest laboratory network to any service offering.
Our national Infrastructure across New Zealand enables us to invest in and employ specialist expertise and depth of talent in clinical leadership, human resources, health and safety, privacy and quality assurance to further ensure absolute professionalism and robustness in our service provision. It also means that we can share and develop knowledge, systems and capability through both the community and hospital platforms.
Healthscope Limited’s New Zealand business currently provides services to 13 of the 20 District Health Boards (‘DHBs’) and our priority is to maintain strong relationships and continue to deliver a high quality and cost-effective value proposition to the DHBs as well as driving operational efficiencies that generate benefits for both Healthscope and our partners. We currently have:
– 25 laboratories
– 152 collection centres
– 1,921 employees
As part of the SCL network, Wellington SCL now provides pathology laboratory services to the Greater Wellington region:
– Population – 484,000
– Four hospital-based laboratories
– 27 collection centres
– Annual revenue: NZ$54m
Please describe precisely what medical services have been outsourced.
In 2015, SCL was awarded the exclusive single-provider outsourcing contract to provide pathology laboratory services to the Greater Wellington region. The three DHBs had earlier agreed upon an integrated community and hospital laboratory services model and instituted a tender process to select a single private provider who would establish and operate a new laboratory within the Wellington Regional Hospital. Previously, the three DHBs operated their own hospital laboratories.
This was the biggest laboratory integration project undertaken in New Zealand and the transition to the new service has proceeded seamlessly.
Wellington is the capital of New Zealand. The three DHBs had to ensure that the outsourcing process did not compromise the perception of service quality whilst extracting significant cost savings for the DHBs. A rigorous governance process was established and administered by officials from the Ministry of Health, the DHBs and key medical opinion leaders. Various stakeholders, such as unions and the opposition party were watching with interest, as any failure on the part of Wellington SCL would be seen as a failure by Government. SCL is proud that there was not a single incident or issue during the establishment and post implementation that was negatively portrayed in the media, and that both sides of politics acknowledged the tremendous success of SCL established a superior, more efficient, higher quality pathology laboratory service without incident.
The laboratory outsourcing has involved a comprehensive list of tests done across all pathology disciplines including:
– Anatomic Pathology (including Cytology)
– Molecular Diagnostics
– Blood Bank
Wellington SCL will derive revenue of NZ$54 million in the first year of the contract (based on the agreed funding level), with indexation applying in subsequent years. The three DHBs expect to save over NZ$100 million over a 10-year period which can be reinvested into frontline services to improve the health of their local communities.
Who is the client?
Capital & Coast, Hutt Valley and Wairarapa District Health Boards.
Please describe the contract.
Key features of the contract are:
– 10-year term (initial five years plus option for another five years)
– Commenced November 2015
– Fixed price contract, with risk share mechanisms
– Year 1 revenue NZ$54m
– Agreed service level KPIs, and built in penalties for failure to reach improvement targets
– Clinical governance board (comprising key stakeholders)
– Specific efficiency initiatives outlined for future years, with financial benefits shared by SCL and DHB
Please describe overall the impact of the outsourcing contract so far.
- Savings expected – NZ$100m over the contract term
The total cost savings to the funders (the three District Health Boards) over the 10-year term of the outsourcing contract is NZ$99.8 million.
The cost saving in year one is NZ$8.4 million
The cost saving in year two is NZ$9.6 million
Importantly, the cost savings have been achieved through structural change in the service delivery model, which essentially is a permanent change, so in accounting parlance the cost savings should accrue to the funders in perpetuity.
- Labour productivity improvement – Merging the workforce and streamlining the workflow and systems in the new state of the art laboratory has to date resulted in headcount saving of 50 staff
- Service improvement – contract KPIs being met, with superior turnaround times (‘TATs’) to those previously achieved by the individual laboratory services (which translates into better patient care – eg histopathology TATs reduced from 9 days to <5 days means “Faster Cancer Treatment” targets are being improved). Other KPIs include: waiting times in collection centres, call centre responsiveness, and satisfaction surveys for patients and clinicians.
- Facilities upgrade – new integrated laboratory at Wellington – allowing processing of both hospital and community work in a single laboratory and significant capital improvement to the Wellington Hospital site
- Equipment upgrade – significant investment in state-of-the-art equipment
- IT systems – central repository for results – allowing clinicians full visibility of patient results, whether tested in hospital or as an outpatient. Introduction of electronic ordering system to hospitals by end 2017.
- Clinical Service KPIs – Quality Key Performance Indicators represent the value the clinicians and District Health Boards place on service delivery. Within the first year, Wellington SCL has achieved or exceeded all targeted KPIs:
Turnaround Time for Test Results – Hospital and Community referrals, Urgent and Routine
- hour of available result
- Real time access to Hospital test results – within two minutes of finalisation of result 99.5%of the time
- Real time access to Community results (integrity of data management systems and integration with individual practice management systems) – within 30 minutes of finalisation of result 95% of the time
- Access to Clinical advice (from pathologists) – 24 hours per day, 7 days per week
- Access to Test Results – including telephone result line waiting times (less than 5% calls wait longer than 150 seconds)/unanswered calls (less than 3% abandonment rate)
- Attendance and case presentation at Multidisciplinary Meetings – case review and treatment planning for patients with positive biopsy results
- Collection Centre Waiting Times – less than 5% patients wait more than 30 minutes
- Response Times for Complaints and Reportable Events
- Patient Satisfaction Survey – 99.7% Satisfied/Very Satisfied
- Laboratory accreditation – International Accreditation New Zealand (IANZ) is New Zealand’s premier accreditation body. Wellington SCL was successfully awarded IANZ Accreditation – achieved at the four laboratories including the newly constructed Wellington laboratory.
Excerpt from the Executive Summary of the Wellington laboratory assessment:
“The WSCL leadership team had successfully managed Part 2 of the accommodation upgrade and the relocation of the Histology, Microbiology and Molecular Pathology Departments into their new purpose built laboratory. The new accommodations were well planned, spacious, and appropriately equipped. The move was conducted with military precision resulting in very little disruption to workflow, a testament to the hard work and commitment of all staff members of the organisation.”
Excerpt from the Executive Summary of Hutt and Kenepuru laboratories assessments:
“Wellington SCL Hutt Valley and Keneperu Hospital Laboratories demonstrated very high levels of performance in terms of their quality management systems. Internal audit processes were thorough and stringent, underpinning the excellent management review reports. Equipment management was exemplary and there was evidence of good validation and verification of most new equipment acquired since the last assessment. There was ample evidence of technical excellence leading to high quality results and a commendable contribution to patient care.”
- Design and build of the state-of-the-art laboratory in Wellington – The construction and infrastructure project at the Wellington hospital site delivered a state-of-the-art laboratory capable of processing integrated (hospital and community) referrals for the entire greater Wellington region. The previous hospital laboratory processed 180,000 patient episodes per annum, while the new laboratory is processing over 1 million patient episodes per annum.
Future proof design and construction compliant to the new earthquake building code has been made to ensure the laboratory can deliver quality and service over the life of the contract including significant capital investment in laboratory equipment and pre-analytic automation. The new laboratory includes an automated Molecular Diagnostics department to cater for the fastest growing pathology specialisation which will include genetic testing.
- Successful merger of staff and culture, with limited redundancies – The people aspect of the project was highly complex from an employment law perspective but perhaps more challenging were the strong cultures of the four different and distinct groups of staff we would employ.
Those employed within the Public Health sector were philosophically opposed to the service being provided by a private operator, and together with their employee unions resisted the integration proposal leading up to the tender process.
Staff within the different laboratories were employed on different terms and conditions, some negotiated by a union with which we had an association, others with unions with whom we had not previously engaged. Our management team dealt with seven completely different sets of terms and conditions covering various staff, often doing the same job. We engaged in several rounds of robust negotiations with unions and over time with willingness on both sides compromises were reached.
As the delivery of cost savings to the funders was an integral part of the outsourcing
process, it was clear to everyone that there would not be job opportunities for all existing staff. A further complexity was presented through New Zealand’s employment legislation, whereby some staff were guaranteed roles in the new entity but others were not. We were honest and open in our communication with the groups who would have job losses, explaining the legalities and our intentions. We supported all the staff who wished to apply for roles and those who did not want an ongoing position. Due to the planning and execution skills of the operational management teams, we were able to limit job redundancies to only 10 positions despite shedding over 80 positions mainly through attrition and re-assignment. The goodwill generated by minimising redundancies has gone a long way to ensuring a loyal and committed workforce dedicated to ensuring business success.
- Upgraded single IT platform – Underpinning the integrated pathology service is the implementation of a single Laboratory Information System (LIS) – Ultra – which replaces four separate IT systems previously in use, with a single platform for the entire Wellington region. In pathology practices, the LIS is the heartbeat of the laboratory, enabling automation, data capture and storage, and customisation of the results delivery process to doctors. Transitioning from four separate LIS platforms has been a complex and challenging exercise requiring significant planning and risk mitigation processes. The LIS transition has been achieved with seamless precision and is one of the key success factors to delivering not just cost efficiencies to the funders but also enhanced clinical services to clinicians.
Additional functionality of the new LIS includes:
- a Client Management System to support pre-analytic functions (specimen collection, specimen receipt, data entry) linked to electronic requesting, which was not previously available with the hospital IT systems
- decision support system to enable auto validation of results and expert auto commenting based on a proprietary Healthscope pathologists rules engine
- provision of a single Patient Data Repository for all community referrals and hospital admissions across the entire greater Wellington region