Opinion: Terry Taylor has worked as a medical scientist in Dunedin Hospital’s pathology laboratory for 33 years. He is a past president of the Institute of Medical Laboratory Science.
But despite being proud of the dedication and skills of his professional work colleagues and of being an ‘Otago boy’, the sorry state of his laboratory and that of other hospital laboratories has led him to resign to take up a more professionally satisfying position in Australia.
“Our New Zealand hospital laboratories desperately need a well-staffed expert specialist diagnostic pathology workforce, especially in my area, blood cancer diagnostics,” he argues.
Update: Awanui Labs chief executive Anoop Singh responds, denying services are being undermined through cost-cutting. See below.
The situation is worse in those hospital labs run by contracted private providers, where he says specialist staff can earn 20 percent less than their Health NZ colleagues. Recruitment of specialists is virtually impossible.
“The options are obvious for people like me,” he says. “Unfortunately for New Zealand, I am taking my 33 years of specialist skillset and professional governance experience to the public pathology sector in Queensland.”
Taylor says that without significant Government and Health NZ intervention in workforce strategy and funding, the medical lab system let down too many New Zealanders in their moment of need.
“The public deserve to have confidence that we have the appropriate level of specialist skillset involved with their precious blood and biopsy samples,” he says. “Unfortunately the Government and Health NZ response continues to be ‘nothing to see here’, despite the very public professional warning after warning that this is an unsustainable situation.”
His comments come after Awanui, the country’s largest private laboratory provider, reported its third successive loss. Awanui handles 98 percent of GP referrals and and 35 percent of hospital testing.
The company this month reported a $2.2 million after-tax loss for 2025. This was after refinancing $313 million in debt for a further five years. It lost $15.9m and $16.4m in the two previous years.
Taylor’s comments are not driven by these negative fiscal outcomes; rather, they are symptoms of the same illness.
What set the scene was the impact of a significant change in laboratory funding in the early to mid 2000s.
The emergence of private labs
Historically there were two forms of laboratory testing. The first was community testing for general practitioner referrals for further diagnosis to privately owned community based laboratories.
The second was referrals from hospital specialists for further diagnosis to their hospital laboratories. Whereas government funding for the former was demand-driven, it was not for the latter.
From 1993 to 1999 the health system underwent a market forces experiment that incentivised privatisation. Four public hospital laboratories were privatised – North Shore, Taranaki, Palmerston North and Timaru – although the first two later reverted back to being publicly operated.
The sea change occurred under the Public Health and Disability Act 2000 which created for the first time new statutory bodies (district health boards) responsible for both community and hospital care. Since 1938 the Ministry of Health had been responsible for the former while different separate structures were responsible for public hospitals.
As implementation of these new responsibilities evolved, DHBs found themselves challenged by the uncapped community testing costs they’d inherited.
In response, some chose to enter into a questionable bidding process in which private providers could compete against the hospital laboratory to run both community and hospital testing. Hospital labs already had sufficient plant capacity to do some, much or all of community testing.
The problem was that while private bidders could start off as a loss leader in order to win the contract (and make up for it, and more, with profits in subsequent years), hospital laboratories were not in the same position. It was not a level playing field.
The camel’s back was broken when, in 2007, Dunedin-based Southern Community Laboratories took over the running of the hospital laboratories of the Otago and Southland DHBs. In 2007 and 2008 there were similar outcomes in some of the other DHBs.
There was a further round of privatisation in 2016 involving the three lower North Island DHBs. The successful bidder was Australian-based Healthscope, which already had a significant penetration Auckland’s community testing and had also purchased Southern Community Laboratories.
After its successful bid, Healthscope quickly sold its New Zealand laboratory business to an American company. It was suspected that Healthscope sought the funding contract in order to improve its financial attractiveness to buyers.
After a further ownership change in 2020 it is now run by Awanui, which is primarily owned by the NZ Superannuation Fund and a Canadian pension fund.
New laboratory landscape
The laboratory landscape has changed radically since 2006 when there were several different largely locally based community providers, and all but two of the 22 DHBs operated their own hospital labs.
Today there are three private community laboratory providers – Awanui (75 percent), Pathlab (16 percent) and Sonic (9 percent).
Health NZ (which replaced the DHBs in 2022) operates 56 percent of hospital laboratories. The remainder are privately operated by Awanui, Pathlab and Sonic.
Around 70 percent of clinical decision-making and 100 percent of cancer diagnoses rely on lab tests. But privatisation has not served public hospitals well, and though all three private companies are focused on profit-making, there are also differences in leadership culture between them.
Awanui is considered to be more corporate and top-down in respect of its workforce. Pathlab also does not escape criticism but its regional base (Waikato and Bay of Plenty) does enable it to be relatively more sensitive in its workforce approach. The smaller Sonic allows its clinical leadership more influence which helps its approach to workforce relations.
Fighting for profitability
Southern Community Laboratories’ loss leader strategy for its successful bid to operate the laboratories at Dunedin and Southland hospitals certainly paid dividends. From the early to mid-2010s its owners were making profits of $40-50 million a year. During the Covid pandemic, profitability was sustained by receiving a large part of the additional $495m from government for PCR testing.
Profitability goalposts have shifted since then. While Awanui continued to behave as it were still a profitable business, operational costs were skyrocketing and Health NZ funding tightening. This was coupled with the expanding corporatisation of the Awanui top leadership.
In Terry Taylor’s opinion, this led to attacks on the scientific and technical workforce by enforcing hiring freezes, non ‘like for like’ scientific replacement, and a lack of spending on external professional development and training for frontline staff. He has had to pay out of his own pocket and use annual leave to attend professional development events.
This is not just a continuing failure by Awanui. Equally, it is a failure of Health NZ to not require Awanui to provide the staffing and specialist future-proofing and training commitment needed for such a vital service that includes blood cancer.
Cost-cutting, largely through dismantling or reducing regional laboratory services, has been a key part of Awanui’s endeavours to achieve profits for its owners. As one scientist told me, this is usually done by “stealth with zero consultation with referrers or patient groups” and with staff not allowed to speak out.
Histology is central to much of what hospital laboratories do and what hospital specialists such as surgeons and physicians depend on. It involves analysing cells, tissues, and organs.
Histology services have been removed from Awanui-operated hospital laboratories in Timaru and Invercargill.
This was also attempted in Nelson in 2023 but a public outcry and an intervention by then health minister Ayesha Verrall (herself an infectious disease specialist with consequential laboratory experience) led to the decision being reversed. Recently, Blenheim histology (which was previously sent across to Nelson Hospital) has been sent to Awanui’s community laboratory in Christchurch.
Sometimes, word of intended cost-cutting gets out into the public arena as it did with Nelson histology.
Last year Awanui was intending to transfer the community-based laboratory immunology testing done in Auckland to Wellington, which would have involved job losses. Immunology testing evaluates components of the immune system to diagnose immune disorders, detect infections, monitor disease progression, and assess immune status. The outcry that arose, including by the staff’s main union Apex, eventually led to the decision being scrapped.
Microbiology is one of the key features of hospital laboratories. It involves analysing microscopic organisms including bacteria, viruses, fungi, and parasites. There is now virtually no onsite microbiology services in hospital laboratories such as those in Invercargill, Timaru and Masterton.
Rocked by ruling
Earlier this year Awanui was rocked by a highly critical Health and Disability Commissioner decision over a complaint from a woman’s family. She had died in Invercargill from stomach cancer following persistent gastrointestinal bleeding.
The failure to detect the disease in two different biopsies left her undiagnosed for eight months. The Commissioner found against Awanui and a pathologist for misdiagnosis leading to a “significantly delayed diagnosis”.
Among scientists and technicians employed by Awanui there was concern that the Commissioner had not drilled more deeply into the difficult work environment and pressure on staff that some believed helped increase the risk of misdiagnosis.
They were also concerned that its decision had not sufficiently considered Health NZ’s responsibility. Outsourcing a service should not abrogate Health NZ’s statutory duty of care.
These concerns prompted a call for a review of Awanui’s performance which, to date, has been declined by Health NZ.
These concerns, accompanied with documentation, have also been raised with the Health and Disability Commission – who appears to be taking them sufficiently seriously as to raise them with Health NZ.
Getting from fragmentation to integration
One of the effects of privatising hospital laboratories is fragmentation. But what they need is integration because they are so central to clinical decision-making. They need to be integrated both within the hospitals in which they are located and between them.
However, hospital laboratories dependent on achieving a sufficiently profitable rate of financial return to their private operators is destabilising.
Terry Taylor has been a tireless advocate for a joined up integrated national hospital laboratory service. While the wider health system would benefit from this, it will not happen until New Zealand has a health system leadership committed to not renewing these funding contracts on their expiry dates.
“Given that laboratories affect around 70 percent of clinical decision-making and all cancer diagnoses, this response must change immediately,” he says.
“Otherwise flashpoints will continue to be exposed and the consequences are not worth thinking about. Our most skilled laboratory specialists will continue to walk out the door to a better place. All health and political leadership must stop kicking the can and show genuine intent and leadership before there is nothing left.”
Awanui boss: ‘We are held to the high standards expected of a critical health infrastructure provider’
Newsroom invited Awanui Labs chief executive Anoop Singh to respond. He says the medical lab company is one of New Zealand’s critical health providers, delivering millions of diagnostic results every year and supporting clinicians, hospitals and communities across the country.
“As healthcare evolves, so too does our role. We are moving from being a traditional pathology provider to a future-focused diagnostics and preventative health partner, helping to improve long-term health outcomes for New Zealanders.”
The future of pathology will rely increasingly on modern technology, digital services, high-quality clinical oversight and a skilled specialist workforce, Singh says. Awanui is increasing investment in these areas, including technology across its regional laboratory network and the development of digital pathology capability that will make it the first connected digital pathology network in Australasia.
“It is devastating for patients, whānau and clinicians whenever something goes wrong in the healthcare system. Our responsibility is to learn from those events and continue improving our systems and processes.
“In the case highlighted above, we have previously expressed our profound regret to the family involved, accepted the Health and Disability Commissioner’s findings, and implemented all recommendations relating to the case.”
He disputes Powell’s assertion that histology services have been removed from Awanui-operated hospital laboratories in Timaru and Invercargill.
“Histology samples continue to be collected and processed at regional laboratories, with analysis and diagnosis undertaken in larger centres to provide integration, oversight, efficiency and scale. Awanui has engaged with staff and Health NZ on the structure and design of these services, with the intention of developing a modern and sustainable pathology service for the country.”
And he rejects Powell’s claim that services are being undermined through cost-cutting, saying Awanui continues to invest in the technology, systems, infrastructure and workforce capability required to provide safe, reliable and high-quality diagnostic services across New Zealand. This includes ongoing investment in regional laboratory technology, digital pathology, workforce training and development, continuing education and professional development for employees, leadership development, and specialist clinical training.
“We are particularly proud of our investment in workforce development, including our own pre-analytical technician training programme with Ara Institute, our significant registrar training programme for pathologists which is the largest in Aotearoa, and the professional development opportunities we provide across our workforce.”
Singh says Awanui operates within clear service and quality standards contractually set by Health New Zealand. “There is significant accountability in the services we provide including reporting obligations and regular governance meetings, and we are held to the high standards expected of a critical health infrastructure provider.”
And finally, Singh reiterates his comments made to Newsroom last week, in a report on Awanui’s third successive financial loss. “Like all parts of the health system, we operate in a constrained funding environment,” he says. “We believe New Zealand needs a sustainable, nationally coordinated diagnostics strategy that enables long-term investment, workforce development and innovation.
“Despite ongoing sector pressures and increasing operational demand, Awanui remains focused on supporting a sustainable, future-focused health system with trusted, high-quality diagnostic capability at its centre.”
