In May 2025 Health NZ released under the OIA eight previously confidential papers relating to outsourcing public sector planned surgery waiting lists to private hospitals.
https://www.tewhatuora.govt.nz/publications/outsourcing-elective-treatments-advice
Some of the information – including all financial details – was redacted in the papers. This paper summarises the key issues revealed in the released papers. Thank you to RACS for their assistance with this assessment.
Timeline:
1 November 2024:
Health NZ briefed Minister of Health Shane Reti on Private Sector training. The Orthopaedic training initiated in early 2024 was seen as a “welcome development”. 12 trainees completed their training in 2024, and up to 20 private hospitals were expected to be involved in training in 2025.
Other specialities had identified similar opportunities to add private training capacity. Obstetrics and Gynaecology was Health NZ’s next focus area, with work underway with RANZCOG.
By June 2025, Health NZ intended to have an agreed policy and framework, and MOUs with private hospitals, that provided for a consistent approach to training obligations with private providers to be agreed when renegotiating outsourced services.
The training challenges were acknowledged: “This has significant technical and administrative complexity, including working with colleges to appropriately accredit training sites, supporting changes to care delivery models… and agreeing commercially reasonable cost-sharing models…”.
12 December 2024:
Rachel Heggerty, Director, Funding – Hospitals, sought internal approval at Health NZ to secure three-year Panel Agreements for Te Manawa Taki, Central and Te Waipounamu, replicating the existing Northern region Panel Agreements.
The paper states that the lowest cost option to increase planned care was improved productivity within the public hospitals. However, this alone would not meet the elective health targets.
“Privately provided surgical services play an important role in Health NZ’s ability to manage health service delivery and meet health targets…. The historic approach to outsourcing has been fragmented …. This Panel Agreement approach is embedded in a strategic outsourcing plan to improve the relationship with the private sector to drive better value for money and performance from the relationship.”
The paper states that Panel Agreements for the three regions would be ready for execution the week of 16 December. They would have an initial term of two years, with a one year right of renewal.
28 January 2025:
Health NZ provided an initial response to a request from the new Minister Simeon Brown for a strategic approach to partnering with the private hospital sector.
Health NZ had increased the spend on clinical outsourcing from $163m in 2021 to $350m in 2024, because of increased demand and public sector capacity limitations. However, the 2024/25 activity plan was not keeping up with waiting list growth. Almost 90,000 patients were on the surgery wait list and 40% had been waiting over 4 months.
If provided with funding Health NZ could act to secure additional treatments from private hospitals over the next 3-6 months, but it warned that past experiences showed that short-term ‘waiting-list initiatives’ were not efficient and put pressure on workforce availability.
Health NZ identified an opportunity “where private hospitals are a central part of our planning in the production of treatment services rather than an adjunct to delivery that results in short-termism and uncertainty of signals. This uncertainty makes it difficult for private providers to plan.”
“Longer term arrangements and partnerships are expected to be more cost effective in delivering sustained reductions in waiting lists for planned care…. Provide greater ability for Health NZ to negotiate on price and private providers can plan their activity (including investments) with greater confidence.”
Health NZ told the Minister that “as part of outsourcing arrangements we aim to negotiate that private hospitals also provide training opportunities to grow the workforce”.
30 January 2025:
Commissioner Lester Levy provided Minister Brown with advice on reducing waiting lists in the short term by increased outsourcing.
Two scenarios were provided – over four months to 30 June 2025, or ten months to 31 December 2025. The latter timeframe was seen as more feasible.
The cases prioritised were high-volume lower cost procedures.
10 February 2025:
Commissioner Levy provided the Minister with further advice on additional outsourcing.
The aim was for 63% of waiting list elective patients to get their treatment within four months in the 2024/5 year, against a year-to-date performance of 60% (and a Health Target of 95%).
All four regions were negotiating additional outsourced and insourced treatments, with an intention to deliver 22% more treatments between February and June 2025 than previously planned.
Two key risks were noted: the availability of the senior clinical workforce, and physical capacity constraints in the private sector.
The paper notes that to achieve sustained improvement, longer term agreements (2-3 years) were needed with the private sector. These were being negotiated by regional DCE’s through new Panel Agreements.
19 February 2025:
Commissioner Levy and Health NZ Acting CEO Dale Bramley provided advice to Minister Brown on greater outsourcing out to June 2026, which could improve the waiting time performance by that date to 70%.
The greatest uplift in activity was proposed to be in the Northern region, where the available private capacity was greater. The procedures with the biggest percentage uplift would be ENT, Cardiothoracic, Ophthalmology, Dental and Orthopaedic.
The successful implementation of this plan relied on the capacity of the private sector to absorb the volumes, Health NZ putting longer term contracts in place, clinical support for appropriate prioritisation, appropriate monitoring of patient outcomes, and negotiating acceptable pricing.
13 March 2025:
Health NZ provided a meeting note to Minister Brown for an upcoming meeting with senior Southern Cross managers.
Health NZ described a strong and engaging relationship. Southern Cross had entered into new Panel Agreements in December 2024 for Te Manawa Taki, Central and Te Waipounamu, replicating an existing agreement in place for the Northern Region.
Health NZ noted that: “future agreements will be consistent with your expectation that Health NZ end the use of expensive, ad-hoc, shorter-term contracts for elective surgeries, negotiate longer-term, multi-year agreements to deliver better value for money and better outcomes for patients; and agree on joint public–private plans to recruit, share and train staff.”
The paper notes the MOU signed with NZPSHA and NZOA facilitating the training of Orthopaedic surgical trainees in private hospitals, and that other specialties are keen to explore options.
13 March 2025:
The Chair of the Health Workforce and System Efficiencies Committee, Dr Andrew Connolly, provided Minister Brown with a detailed paper for improving planned surgical care delivery using the private sector.
The paper outlines the options, the opportunities, risks and mitigations.
The paper notes that outsourcing has been a long standing and necessary component of planned care and done well, is patient-centric with significant advantages for patients, providers, funders and clinicians.
A collaborative approach was essential to maximise the opportunities. Advantages of a public-private collaborative model include improved timeliness and choice for patients, increased production, retention of staff, and potentially some cost reductions.
Risks include destabilisation of public staffing resources, waiting times for complex cases not suitable for outsourcing increasing, degradation of training, a failure to reduce costs, a lack of national consistency, and perceived conflicts of interest in regard to clinicians obtaining personal benefits.
The paper notes there are mitigations to avoid these unintended consequences.
The Committee recommended:
- A collaborative approach with the private sector.
- Contracts that allow for better investment and planning.
- A phased approach to any significant uplift in public surgery volumes transferred to private facilities.
- Clinicians being required to maintain a public equivalent commitment.
- Full credentialing and auditing.
- Agreements on the role of private facilities in education and training.
- Analysis of ‘private-like’ in-sourcing models for districts lacking private facilities.
- Consideration of public-private partnerships to invest in assets on public sites.
- Reviewing employment arrangements for public staff.
- New Health NZ governance arrangements to ensure nationally consistent policies and procedures.
- Reviewing outsourcing models ranging from whole treatment pathway, through to operation only.
Conclusion:
There is a clearly stated desire from the Minister and from Health NZ to improve the provision of planned health care through the private sector. This requires the successful negotiation of multi-year contracts. Done correctly, it can be a win for patients, providers, funders and clinicians.
