Rich and powerful interests in healthcare are clashing, with each side accusing the other of putting money ahead of patient welfare.
Doctors have gone to court to block surgeons from owning medical imaging services. Photo: 123RF
This is the first in an RNZ series about the growing pressures, profits and waiting lists in the fraught field of radiology, the jammed bottleneck that most patients must pass through.
Doctors have gone to court to block surgeons from owning medical imaging services, saying it is "dangerous" for them to be able to refer patients for scans to practices they have a stake in, when that referral would benefit them financially.
Their action at the High Court, Commerce Commission and Medical Council aims to get the new radiology businesses barred and broken up.
RNZ can reveal the bitter fight has broken out since more than a billion dollars began pouring into private radiology a year ago, even as crushing pressure on public services has ramped up.
Demand for x-ray, CT and ultrasound scans, and most especially MRI, is soaring.
Payouts by ACC, the largest single funder of private radiologists to do scans of trauma injuries, have doubled in a decade to $177m last year.
Private insurers were estimated to have paid out $128m for scans in 2017-18.
Private equity firms are among those getting into the market.
So too are some surgeons, and some doctors who are not radiologists, who have now begun investing in scanning businesses.
ACC says in its guidelines such perceived or actual conflicts of interest must be managed - and the owners must spell out exactly how.
"A common example [of a conflict] is where a referrer holds an ownership position in a radiology supplier," ACC said.
"Appropriate and verifiable 'arm's-length' referral procedures are required."
Claims and accusations
The moves to set up at least four new companies have triggered an extraordinary scrap that has unfolded behind closed doors until now.
Claims of "corporate greed", and complaints against surgeons engaging in unethical practices, are being slung around.
Investors on both sides who have long track records of serving patients, and who often rely on each other's medical judgement, have been quick to impugn each other's motives.
"Financial incentive shouldn't be part of the decision-making process for patients in their care ... unfortunately, this sort of situation, in our opinion, may contravene that," one side said.
The Orthopaedic Association shot back: "Our understanding is that all the radiology ventures that involve surgeons do not involve any incentive or kickback on the basis of numbers of referrals.
"This is big money trying to disrupt and scare off potential players in the radiology market to to protect the financial interests of those who stand to maintain very big payouts for their shareholdings
"This is not pleasant and not welcomed," said Dr Lloyd McCann, a director of businesses in the crosshairs of the recently-formed Institute of Independent Radiologists.
"You know, we're bringing additional capacity to the market to deal with increased wait times, morbidity and potentially mortality."
The institute is taking the Accident Compensation Corporation to the High Court, demanding it clamp down against anything that is not "arm's-length" referral.
"New Zealanders and the wider medical community would be shocked to know that, one, this is going on, and that it actually has some very negative health outcomes," institute chair Dr Adrian Balasingam told RNZ.
Judicial review proceedings to force ACC's hand were set down for the High Court in Wellington this week, but have been postponed.
The institute told RNZ if it succeeded, the new business model would be denied ACC's crucial funding and cease to exist, and existing shareholdings would have to be unwound.
It launched the legal action late last year - though even the Royal Australasian College of Surgeons was unaware of it till RNZ told it.
"This followed almost a year of [us] trying to work with ACC to bring to light the dangerous practice of non-arm's-length referrals happening in the New Zealand radiology sector," the institute told RNZ.
The Orthopaedic Association that represents many surgeons is having none of it.
"That's just complete bollocks," retorted its president, surgeon John McKie.
"Their argument completely relies on producing some evidence of over-servicing or inappropriate behaviour.
"Now, I suspect all our members would be very happy to have their referral practices audited."
ACC wouldn't say how many businesses had told it how they were managing their conflicts of interest.
It declined to comment on the legal action that it had brought in external lawyers for.
'Very low' move
The Institute of Independent Radiologists argued the new business model would disrupt the tightly stretched radiology workforce, and could actually decrease access to scans and worsen equity for patients.
The surgeons and their radiology partners argued the opposite, that what's at stake was making more scanning available to cut long public waiting lists.
The institute had lodged complaints against individuals with the Medical Council.
McKie called this a "very low" move, and he wrote to the Medical Council on 7 July, saying:
"We now write to express concerns about current corporate financial manoeuvrings by [the institute] parading as complaints of unethical and unprofessional behaviour by identified orthopaedic surgeons."
The surgeons' shareholdings were passive, the association's letter said.
"It is utterly unacceptable for doctors who have no valid complaint against them to have limitations placed on their practice while you investigate the complaint.
"In our opinion, the Medical Council is at risk of having its processes manipulated for commercial gain by a group motivated by personal financial self interest and corporate greed."
McKie bluntly told RNZ:
"Why do they want us shut down? Because they want to be a monopolistic provider."
'Thin end of the wedge'
Balasingam paints a very different picture - that healthcare in New Zealand was at a crucial juncture and it could not let the new business model get its hooks in.
"The primary motivation is a financial one with this set-up," he said.
Already, some existing scanning providers had witnessed almost a "100 percent" change in referral patterns towards the new businesses, Balasingam said.
"If this continues, this could be everywhere very quickly.
"This is just the thin end of the wedge.
"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."
The institute said ACC was belatedly asking some of the new businesses for their conflict of interest management plans, but this was inadequate and patchy.
It had raised its concerns with the Health and Social Development Ministers.
ACC in an OIA response shed more light on the big changes in radiology, which was a key bottleneck in the incredibly stressed health system.
"We have had three new facilities open over the last financial year with at least another three facilities expected to open over the next financial year," an ACC memo said.
"A number of our existing suppliers have found the expanding market more competitive and difficult to capture their previous volume of services."
Balasingam is a radiologist and director of the country's largest private imaging group that includes the biggest player, Pacific Radiology.
In June 2021, big investment firm Infratil bought a majority stake in Pacific for about $350m off its radiologist shareholders, and did other deals with Auckland Radiology and Bay Radiology.
These were among more than a billion dollars of radiology deals done in the last 12 months in New Zealand.
Two months earlier, in April 2021, the government had announced major health reforms that this July killed off district health boards and centralised control.
Infratil in its annual report said the reforms would lead to "larger, more centralised contracting systems" and it was "well placed" for this.
High-tech scanning claim payouts, though, have not been raised this year by ACC.
They were comparatively high already, the draft memo said.
"Expansion of the private HTI market at this rate indicates the sector is sustainable."
The Institute of Independent Radiologists was set up last September to advocate for "independent" imaging services; Pacific, Auckland Radiology and Bay Radiology are members.
The Orthopaedic Association told the Medical Council on 7 July:
"Since a number of private radiology providers have been purchased by Infratil, the radiologists have had very large payouts for their shareholdings, but these are contingent on the maintenance of service volumes."
'This has created tension'
Lloyd McCann is chief executive of the long-lived Auckland provider Mercy Radiology and involved in four of the new businesses: the two-month-old MSK Radiology and three-week-old North MRI in Auckland, Affinity being set up in Wellington, and a fourth being set up in Christchurch.
All were "joint ventures" between radiologists and surgeons, with multiple checks and balances on referrals that had been outlined in plans to ACC, he said. They had sought legal advice on the business structures.
They were bringing more competition, such as to Wellington where Pacific was dominant, which would bring prices down, he said - adding their opponents' claims were wrong and unproven.
"Can't speak to the motivation," McCann said.
"This has created, obviously, some tension within the clinical community across the country ... It's not a good place for clinicians to be.
"You know, we're bringing additional capacity to the market to deal with increased wait times, morbidity, and potentially mortality."
The court action was "somewhat bizarre" because healthcare had a long history of businesses that managed conflicts of interest, run by GPs, opthamologists and others, and Pacific Radiology had participated in such joint ventures for years, McCann said.
Affinity was approximately half owned by several Wellington orthopaedic surgeons through Wellington Regional Radiology, Companies Office records showed; the other businesses Mercy was involved in had a similar set-up, McCann said.
At Affinity, other investors include two big players in radiology, Healthcare Holdings and private equity firm Waterman.
ACC map of medical imaging (radiology services) showing number of machines per region, claims per machine, population per machine. Photo: Supplied / ACC
RNZ asked McCann if scans sought by patients turning up at public hospitals, could end up enriching private radiology operators owned by surgeons, because some surgeons work in both private and public spheres. He said no, because their surgeon-shareholders had zero influence over how hospitals outsource scans.
Outsourcing is taking a hefty slice from public hospital budgets in places like Wellington, where the bill to send public patients for private scans is expected to jump from a budget of $1.2m this year, to up to $9m next year ($2m of that due to a halt on scans while services are upgraded).
Equity of access was a big driver, and though the new businesses were not putting practices in the regions, they would offer mobile PET/CT scanning, McCann said.
They would also contribute to training new radiologists and already Mercy offered fellowships for upskilling, he said.
The Orthopaedic Association told the Medical Council there was a long history of self-referral among GPs, cardiologists, dentists, obstetric and vascular surgeons - and radiologists themselves, when they recommended extra scans.
'Rich doctors are fighting amongst themselves'
Prompted by the dispute, the Royal Australian and New Zealand College of Radiologists put out a 12-page paper last year.
It concluded that arm's-length referral was the most appropriate and ethical approach, and avoided the risks of the new business model.
But the Orthopaedic Association has protested at this in a letter sent just this Monday.
It said some of the research which the college had cited was outdated and irrelevant, though the radiologists' institute referenced this same research to ACC, the Commerce Commission and Medical Council.
The Commerce Commission told RNZ it was making initial inquiries into the institute's complaint.
The College of Radiologists president, clinical associate professor Sanjay Jeganathan, also undercut the research when he spoke to RNZ, saying an inquiry in Perth into referrer-owned practices found no problems.
Jeganath, who lives in Perth, said the institute wanted college backing for "a restrictive trade practice", when instead any ethical dangers should be dealt with by ACC and insurers.
"When your back pocket gets affected people probably are quite upset about it," Jeganathan said.
"[But] that poor guy on the street is not a wealthy doctor.
"And we need to provide a service.
"And from the public's perspective, it could be argued that the rich doctors are fighting amongst themselves, which is really wrong for us to do."
However, the College of Surgeons had earlier appeared to accept the research in a note on 'ethical referrals' to members, sparked by this dispute:
"Some surgeons have financial stakes in private radiology companies and while they may not think this increases their referral for radiology tests consciously, international research has shown that referrals for tests increase when the referrer has an interest in the company providing the tests," it said.
"We have a duty to protect our patients and to also inform them of alternative companies that can provide the test needed."
Most of the research comes from the US. It had the "strict" so-called Stark Law, that has for a long time barred doctors with a direct or indirect financial relationship with a medical practice referring patients to it, directly or indirectly. Recently, however, it has been loosened up to lessen red tape and allow arrangements that coordinate patient care better.
'Patient radiation'
The institute claims the new business model will lead to not just unnecessary scans - exposing patients to radiation and wasting public money - but also unnecessary surgeries because it would erode the independence of radiologists and their traditional role of being able to challenge surgeons.
It claimed ACC simply dismissed its complaints.
Its concerns got some backing from the Health Ministry.
It had a meeting last November, where it agreed that surgeons referring patients to imaging services where they hold a financial interest raised several concerns, the ministry told RNZ.
These included around ethics and "patient radiation safety due to the potential for over-imaging".
Other concerns were the ability of patients to give informed consent, poaching skilled workers and "perverse financial incentives and increased costs to the health system".
However, the ministry concluded it was up to the Medical Council to address the concerns as regulator of the profession.
The Medical Council told RNZ it does not directly regulate business models adopted by doctors.
But if the public alerted it to a doctor breaching guidelines or standards it would take that "very seriously, with our primary focus being public safety", it said.
It "reminds doctors that commercially motivated conflicts of interest can result in inappropriate care and patient harm".
Doctors were required to declare any financial interest and offer patients alternative services so they did not feel "pressured or forced into receiving care".
As to the risk of too much imaging, the council's statement stressed "doctors must put patients' interests ahead of their own".
It has issued a lot of advice on this.
'It's urgent'
The chair of the College of Surgeons Aotearoa National Committee, Associate Professor Andrew MacCormick, said it was enough if a surgeon disclosed any potential conflicts of interest, especially pecuniary ones, to a patient.
"We believe that adequately addressed the College of Radiologists' concerns," he said.
MacCormick had meetings over the dispute with the Institute of Independent Radiologists, ACC, the Health Ministry, the College and private surgical hospitals last year.
He thought that was the end of it and was surprised when RNZ came asking about the court action.
The meetings were not presented with any data from New Zealand to prove there was a problem, and ACC did not provide any, he said.
"If we haven't got data to support that patients are getting unnecessarily scanned, then it'd be hard to be able to then follow up saying that it's dangerous," MacCormick said.
The two sides are pitted against each other, and the calls now come down to the courts, the Commerce Commission and the Medical Council
Is New Zealand opening a can of worms?
Pacific Radiology chief executive Terry McLaughlin thought so, still soft from the laissez-faire 1980s.
"New Zealand is an outlier in its regulatory environment.
"This sort of stuff doesn't happen in Australia, for good reason," he said.
"There's good research that those kind of ownership models aren't good for patients, which is why there are regulatory interventions in other countries."
If the real issue was with Pacific Radiology's size, that should be challenged in other ways, and regulation would aid competition.
"We think it's urgent because, you know, you don't want to get five years down the track and go, 'Oh, actually, we've got a problem'."