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U-turn in key private health provider's take on shareholder models

Publish Date
Mon, 19 Feb 2024, 10:57AM
Radiology services provision in New Zealand has been the subject of fraught debates in recent years. Photo: 123rf
Radiology services provision in New Zealand has been the subject of fraught debates in recent years. Photo: 123rf

U-turn in key private health provider's take on shareholder models

Publish Date
Mon, 19 Feb 2024, 10:57AM

The country's largest medical imaging business is looking at adding a shareholder model that it up till recently was deploring as bad for patients.

A bitter battle was waged at the High Court, Commerce Commission and Medical Council 18 months ago over the model.

Radiology clinics have been springing up, owned by doctors and surgeons, who can refer patients to their own clinic.

Sector leader RHCNZ, the parent of Pacific Radiology, was in an alliance that fought and failed to scupper the model it claimed would encourage unnecessary scanning for profit.

Now though, it is seeking its own doctor and surgeon investors for a share offer in June.

It says the sector has strengthened the guidelines to manage financial conflicts - and that its version of the "referrer shares" model "addresses potential conflicts of interest better than other private health providers in the market".

Smaller players like Mercy Radiology began setting up the new model in Auckland two years ago, on the wings of well over a billion dollars of private investment in radiology in New Zealand since 2021, as public hospitals struggled with lengthening queues for MRI, CT, ultrasound and other high-tech scans.

An alliance including RHCNZ, fought to deny crucial ACC funding to such clinics.

"This is just the thin end of the wedge," Dr Adrian Balasingam said at the time. He chaired the Institute of Independent Radiologists, a body set up to oppose the clinics, and was also chair of Pacific Radiology.

"Where else could this go? If this sort of thing is allowed to propagate around the healthcare system, then all of a sudden, you've got, again, the patient safety concerns," he said.

Mercy Radiology and others hit back, including the Orthopaedic Association that told RNZ this was "big money trying to disrupt and scare off potential players in the radiology market".

The alliance lost on all three fronts in late 2022.

The clash was a uniquely New Zealand version of the sorts of debates over the business of profit-making medical care that the US is riven with.

RNZ approached Balasingam for comment but did not hear back. The institute is now defunct.

Now, RHCNZ has moved from opposing, to adopting the referrer model.

Last week, it briefed potential investors - doctors and surgeons - about a share offer it has in the pipeline. Its documents around this were marked: "Strictly confidential - not for distribution".

RNZ approached RHCNZ, and its chief executive Terry McLaughlin issued a statement:

"While the company and its senior radiologists had raised concerns about potential conflicts of interest when doctors make patient referrals to clinics in which they had a financial interest, the broader health sector's view was that any conflicts could be managed in the patients' interests," he said.

"The NZ Medical Council subsequently strengthened their guidelines for doctors' management of financial conflicts when referring patients.

"The trend amongst health providers is to deliver services at scale and in a more integrated way.

"We are responding to these developments in the health sector."

The company has been making calls to doctors about the offer. One told RNZ that having failed with its patch protection effort, it was now going down the route of collaboration.

Another, with links to a competing business, said: "It seems all their lofty and loudly shouted principles have been forgotten."

But RHCNZ said their referrer or "R class" non-voting shares model was better than rivals'.

"We are explicit that the interests of patients and the independence of doctors come first," said McLaughlin.

"The radiology provider a doctor chooses when referring is a matter for them to consider independently in the patient's best interest."

'Cost has come down'

However, a surgical specialist who is a shareholder in one of the rival businesses, said patients' interests came first for him, too.

He still referred plenty of patients to Pacific Radiology, especially if they lived closer to it, and not to the clinic he had shares in, he said. And he declared his financial interest to patients.

The ethics were up for debate, said the specialist, who RNZ interviewed on condition of anonymity - and they have been debated, in papers put out as the dispute ploughed on in 2022, by the Royal Australian and New Zealand College of Radiologists and the Medical Council, as reported on by RNZ.

"This was a kneejerk reaction to try to kill off any potential competition", focused on Auckland, said this specialist about the alliance.

"A levelling playing field is better for patients - timeliness is better, cost has come down."

Having more investment to set up more clinics gave stressed public hospitals more options for outsourcing: "From the public point of view, there's more capacity," he said.

The downside of that, however, as critics point out, is that every private practice that opens draws on a very limited pool of radiologists and technicians to staff it, and there is a stream of them leaving the public for private.

The specialist said RHCNZ was "now reaching out to specialists based on referral patterns, those who do a lot".

RHCNZ is majority controlled by investment firm Infratil.

Its offer, in draft form at least, does not block shareholders in rival radiology practices from buying the new R Class shares.

However, it does suggest that any referrer who does buy them, would not then be able to enter commercial arrangements with competing clinics.

Infratil documents state that high-tech scans are a growth area in an ageing population which increasingly expects to get a scan, and an area that benefits from a wide range of funding sources, including from public ones via Health NZ - Te Whatu Ora and ACC. Infratil also owns a large group of radiology practices in Australia.

When approached, Mercy Radiology said it did not have a detailed understanding of RHCNZ's model.

"It isn't clear why their proposed shareholder model is better on any dimension," it said.

"Our shareholding model allows the doctors to be involved in the decision-making, clinical quality and governance of the business and they have independence to refer the patient to the most appropriate provider for their individual needs."

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