Canterbury Charity Hospital Trust chair Phil Bagshaw. Photo: Supplied
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."
Former health minister and Labour health spokesperson Ayesha Verrall. Photo: RNZ / Angus Dreaver
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 Minister Simeon Brown. Photo: Calvin Samuel / RNZ
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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