New medical network from major health insurer already making savings in surgery costs.

If you need a hospital operation, like a knee replacement, it's generally cheaper in Christchurch.

It will cost, on average, $22,125 there. That is 10 per cent cheaper than the national average for the same operation and a whopping 23 per cent less than having it in Auckland.

Those variances in cost – there are more contained in the table of sample procedures below – are a large part of the reason why health insurance company nib introduced its First Choice network for members in New Zealand a little over a year ago.

Claims data they analysed showed there were big differences in the cost of surgeries and surgeons around the country. Patients being charged more for no clinical reason were effectively helping to push up health insurance premiums.


So the First Choice network set out to reduce costs for members by ensuring medical providers in the network are within an acceptable range of national averages for the procedures and surgeons involved.

It's working – Justin Vaughan, nib's Group Executive, Benefits and Provider Relationships, says the First Choice Network has already saved more than $1 million so far by directing patients to providers within the network, helping to keep premiums affordable.

*With polypectomy
*With polypectomy

"Obviously, bigger cities like Auckland have higher cost structures but that's not the only reason we have found for cost variations, in Auckland and in other areas," says Vaughan, the former New Zealand batsman and CEO of New Zealand Cricket, and a qualified doctor himself.

"We've seen some of those variations occur simply because the physicians and hospitals involved are charging certain fees. That can lead to the variations we are still seeing – and we have had a year of robust data now to base our findings on.

"We've also found no evidence that these higher fees result in better quality health care."

Vaughan says members using First Choice providers can choose from medical professionals whose services and treatment are 100 per cent covered by nib, up to the limit of individual policies.

"That provides transparency and flexibility," says Vaughan. "You can still elect to go to a medical provider who is not in the First Choice network – but you will only be reimbursed up to the level of the national average for whatever procedure is involved.

"This transparency issue has become a really hot potato in Australia. There has been a lot of bad publicity about 'celebrity' surgeons taking on cases, sometimes involving terminal patients. Sometimes the costs are so great, the patients involved have resorted to crowdfunding to pay for them.


"I do not think there is any way a health system should see people crowdfunding. How much better is it to have a network where people can see what the costs are?"

The New Zealand variances don't just occur in knee replacements – hip replacements are 5 per cent cheaper in Christchurch than the national average and 19 per cent and 12 per cent cheaper than the same procedure in Auckland and Wellington respectively. Wellington is cheapest for Mohs skin cancer operations and hysterectomies while Auckland comes out on top for varicose veins.

However, looking through all the various procedures and surgeons' fees in the table, Christchurch clearly comes out ahead and is below the national average in all but three of the nine procedures featured.

The network not only means patients can choose to have their operation done without additional costs. Vaughan says patients can still opt for an out-of-network doctor – though they have to contribute towards any higher costs.

The First Choice network is being expanded from July 1 to include more specialties and, in time, he says is aiming to include about 90 per cent of all New Zealand medical professionals in the 100 per cent repayment bracket. At present, about 70 per cent are on board and Vaughan says they are helping nib "take a big step towards controlling claims costs and keeping premiums manageable."