Awanui runs lab services in more than a dozen regions and cities, but its revenues have been dropping. File photo. Photo: MPI
New Zealand's largest privately-owned medical laboratory has posted a $16 million loss for last year, after recording a $13m profit in the previous year.
The loss comes after staff warned the health minister last month the workforce is at breaking point, potentially putting patients' lives at risk.
The Crown paid private pathology providers $339m a year in 2022-23, out of the $617m in total, which includes publicly-provided diagnostic pathology.
Awanui runs lab services in more than a dozen regions and cities, but its revenues have been sliding, amid industrial disputes.
It told RNZ it remained financially solvent with an adequate balance sheet and net assets, along with full backing from the board and investors.
"General cost inflation and higher interest rates are impacting all New Zealand businesses.
"Furthermore, the labour rate increases we have paid to our people are significantly higher than historical rates of growth, and we have not received funding from Health New Zealand which matches or covers the increases."
It settled months of industrial action with a pay deal in February that saw wages lift by about 5.5 percent, with a $3000 bonus.
Te Whatu Ora told staff it was working with Awanui to address the issues they raised in their letter to Health Minister Shane Reti.
But the agency told RNZ it had no concerns about the company meeting the needs of patients.
"The performance of our contracted laboratories is fulfilling our expectations, and there are no concerns about them meeting the needs of our patients, which is always our first priority," said spokesperson Tim Wood in a statement.
It had told staff in a letter in late May that it was also "reviewing commissioning arrangements for laboratory services in Aotearoa over the coming year" and would take "performance issues raised in your letter... into consideration as part of this".
But Wood told RNZ this week that there was "no commissioning review of laboratory services currently underway".
Several Awanui contracts had been due to expire around now.
"Health NZ is in negotiations with a number of laboratory service providers and as such those negotiations remain confidential," Wood said.
Awanui told RNZ it was in talks with Health NZ to ensure laboratory service contracts were "adequately funded to ensure the laboratory sector remains financially sustainable".
"Regarding the letter sent to the minister from our staff, we are aware and acknowledge the impact of difficult environment for us and the sector more broadly and our staff are telling us the same.".
Its financial results show a slide in revenue from $385m a couple of years ago, to $316m in the year to December 2023, and profit turning to loss in the past two years. There was also no dividend paid out, compared to the $40m dividend for the 2021 financial year paid to its owners - NZ Super Fund, Te Pūia Tāpapa and the Ontario Teachers' Pension Plan.
Salary and wages were steady at about $144m. RNZ has asked Awanui if its headcount has dropped.
A pay equity deal for public lab workers has exacerbated a pay divide, and Health NZ has been investigating it, its May letter to Awanui staff said.
"Once we have a complete understanding of this, consideration can be given to next steps that can be taken in a fiscally constrained operating environment," it said.
Nineteen staff around the country had signed a letter to Reti that said:
"The Awanui laboratory workforce is stretched to breaking point, work from some sites is being sent away because of lack of trained staff which is undesirable, inefficient and puts not only patient samples but potentially patient lives at risk."
They claimed was "being sent away to other already over-loaded sites due to staff shortages" and "old machines breaking down with no back-up".
Te Whatu Ora told them in its letter: "We are actively working with Awanui to review their improvement plans and monitor progress in addressing issues such as these.
"Health New Zealand continues to hold Awanui to account for their performance" and meeting key performance indicators in the contracts.
Reti's office told RNZ: "The minister wouldn't comment on Awanui's financials as they are a private company but that he understands that Health New Zealand continues to work closely with them on the health services they provide across the country."
Former Institute of Medical Laboratory Science president Terry Taylor said the government and health agency had to come up with a new model for how the $600m for lab services was spent.
"What's the best spend for that, with the current situation we have in this country, to shore up all the bits and pieces that are just not functioning the way they should be at the moment.
"We marched to Parliament in 2022", warning the system was close to breaking, he said.
"We're starting to see the creaks and the groans now, so the time is now.
"If you don't have a pathology service, you do not have a health system."