Wellington-region health boards say they plan to contract out all community and hospital medical testing to a private firm.
The Capital and Coast, Hutt Valley and Wairarapa District Health Boards (DHBs) have decided to integrate hospital and community laboratory services throughout the region.
The contentious decision, which is still subject to consultation, was announced a short time ago.
The DHBs said private firm Southern Community Laboratories (SCL) is their preferred provider for a planned new integrated laboratory service, to begin in November.
They said SCL would develop a multimillion dollar state-of-the-art lab facility at Wellington Hospital as part of its contract with the DHBs, and also upgrade equipment at Wairarapa, Hutt and Kenepuru hospitals.
The boards said it would not be possible within the DHBs' capital budgets, and it would improve lab services.
Some pathologists have opposed the plan, labelling it privatisation to save money.
Aotea Pathology, with about 220 staff, will end its contract in late October.
Chief executive Karen Wood said the firm does not regret its decision to withdraw from consideration for the work.
"Our shareholders are very comfortable with the decision made and at the moment our main focus is on the staff, supporting them through what's obviously quite a difficult process, and doing everything that we can to try and ensure that they have future employment."
SCL director Peter Gootjes said his firm intended to employ current DHB lab staff, and some from Aotea Pathology if possible.
"Aotea is a private provider of services and it doesn't have the same protection that the hospital staff have. But we would be looking at talking to the Aotea staff and working out appropriate jobs for as many as them as we can."
Final approval is needed from the Health Minister, Jonathan Coleman.