The Health Minister is surprisingly relaxed as he drives through the Timaru countryside. It is only when his cellphone connection fades in and out that Pete Hodgson becomes mildly irritated. "No, I don't think so [there's a structural problem with the DHBs]" he begins. "But here's a contradiction: although the 21 DHBs are settled [under the current local democracy structure] the way hospitals interact with others has to improve."
Hodgson also acknowledges Justice Raynor Asher's criticism of the lack of public and GP consultation in the Auckland laboratory case was valid. The legislation that governs the way DHBs operate requires a "broader" level of consultation than was carried out during the tender process. "The consultation process was inadequate," he says. "That's a clear judgment and I'm pleased to have it."
On the other hand, says the Minister, in his relaxed, matey way, "we need to find out what that means. We may want to test it - go to court for a declaratory judgment to find out what this piece of legislation means - or codify it. We don't quite know yet where legal opinion will settle."
What Hodgson does not agree with, is the assertion that the entire DHB structure has been called into question - "failed completely is pretty strong language" - and he insists on a distinction between what happened in Auckland "where the the lab testing consultation was not up to scratch, but the consultation processes in general are up to scratch."
The villain, according to Hodgson, is not the DHBs, not the ineffectiveness of elected members who may be cowed by government representatives on the board ("In a democracy you're not allowed to say I got browbeaten by the chairman. You get up and speak and you get to vote"), not Auckland's fiery chairman, Wayne Brown, but an easier target, Dr Tony Bierre, the DHB member and Labtests shareholder, who set up the Labtests bid for Auckland's community lab testing. "When Wayne Brown first became aware of his conflict of interest he immediately challenged Dr Tony Bierre. Bierre said his plans were 'mothballed'. What he did not tell his chairman was that he had subsequently taken them out of mothballs."
For all of Hodgson's apparent faith in the DHB structure, the community laboratories debacle has thrown up some serious flaws in its so-called democratic process. How is it possible that the three Auckland Health Boards' management teams were not experienced enough to recognise a blatant conflict of interest? Why did they not recognise that they had broken their mandated duty by failing to consult not just the people but their own primary health organisations and GPs? Why did they not listen to their stakeholder, the patients, who protested in their thousands? Last, why were there no checks and balances at Government level? The Minister and the Ministry of Health plainly see this as the DHB's problem.
But the community laboratory case is not the only DHB issue. About to erupt next Saturday, is a similar stoush with the country's pharmacies. Just before Christmas, the country's 21 DHBs announced a zero increase in pharmacy dispensing fees, fixed to stay in place for another three years.
Coming after four years with no increase - and with a refusal from all 21 DHBs to discuss the issue - the sector was understandably upset. As Pharmacy Guild chief executive Murray Burns says, "You can't have a public body refusing to consult and negotiate, it's a misuse of their market power.
"Do all of the country's 902 pharmacies have to now line up and lodge 902 requests for judicial review? We think they're being unduly aggressive and unreasonable."
The other thing, says Burns, is the fact that this case has a remarkable similarity to the laboratory experience. There has been mention of the the DHB's belief that the country has too many pharmacies - and that they are making enough money already because of a rise in prescription rates. "That's like saying to a nurse, because you have more patients we're going to pay you less!" The DHBs also disapprove of some Canterbury pharmacists adding their own charges to prescriptions to cover their costs. "What's their agenda?" Burns asks. "They've made it quite clear that they want to see a reduction in the number of pharmacies and a reduction in the cost of pharmacy services."
Another obvious target for the DHBs' flinty gaze is likely to be community radiology services.
How did this happen? How, with no consultation and precious little fanfare, do such sweeping changes make it on to the DHB agenda? Probably because this is the way the system is designed to work.
Back in 1989, then Health Minister, Helen Clark, sacked the Auckland District Health Board (including her husband Peter Davis) and installed a commissioner, Harold Titter. At the time the board, which was 100 per cent democratically elected and chaired by Dr Frank Rutter, had serious financial problems - and even worse problems making decisions. It presided over scandal after scandal: the National Women's cervical cancer inquiry; problems at Oakley Hospital and the ill-planned move into the community of mentally ill people from Carrington and much more.
Four years later the National Party of 1993 abolished democratically elected boards in favour of a market-oriented purchaser/provider model. Hospitals became Crown Health Enterprises (CHEs) and their funding, rather than from the Ministry of Health, was devolved to Regional Health Authorities, which, by 1997, morphed into a single Health Funding Authority. The aim was to add rigour to a sector that had infinite demands yet finite dollars. Under the new system CHEs were required to justify their spending and compete with other hospitals for funding from the funding authority.
This was all too market-driven for the new Labour Government of 2001. Under Prime Minister Helen Clark - the same person who had sacked the Auckland Hospital Board - the CHE structure was dismantled and 21 DHBs took their place. Now hospitals were run by 11-member health boards made up of seven elected members and four government appointees, including a government-appointed chairperson and deputy chair. Many appointees were businesspeople with nerves of steel and reputations for getting things done.
The new DHBs were responsible for providing, or funding the provision of, health and disability services in their district. And although they promote themselves as customer-focused, highly democratic organisations, the laboratory debacle suggests they are not far removed from the CHE model.
Auckland's current board has been in office since December 2004 and is headed by Wayne Brown and deputy chair Ross Keenan who is also deputy chair of Counties Manukau and Waitemata DHBs (to give some cohesion over the region). They are supported by three advisory committees and chief executive officer Garry Smith who manages the implementation of policy decisions and employment within the ADHB.
"As an elected body, the board's decision-making is highly transparent," reads its website. "Meetings are open to the public and board agendas and minutes are published on this website. In addition, the Strategic Plan is subject to a public consultation process."
What the website does not mention is that much planning takes place behind closed doors. Lynda Williams, a women's health activist who has attended almost every DHB meeting in the Auckland area, says that the amount of information in the agendas that pass through the public part of the ADHB process has "dropped off" compared with five years ago. "You're only going to get what they're willing to have out in the public domain," she says. "The Waitemata Board is far more open and consumer friendly."
Williams is aware that the DHB's Audit Committee is the place where the big decisions are made - and where the early scoping of the community diagnostic service was carried out. The Audit Committee is a closed, non-transparent committee and its minutes are not publicly available.
In the case of the community lab tender, this committee was backed by a third entity, made up of the chairs and deputy chairs of all three Auckland Regional District Health Boards, who finally awarded the laboratory tender. These meetings were also closed to the staff, public and media and the full boards were not involved.
All of which meant Williams had little information to go on. What she did pick up at the public meetings was that all three DHBs were confident the court case would go with them and that "this is a bit of a waste of time, postponing the inevitable".
She also noticed Wayne Brown's growing irritation with Tony Bierre. "There was a responsibility on Tony Bierre to resign a long, long way back - almost as soon as he got elected. He was always on the lookout for a private sector contract, should never have put himself forward for any district health board," she says.
On the other hand, the board should have realised what was going on: "This was a fair cop. It is a wake-up call for every single health professional on a DHB."
There are other layers of bureaucracy. The Northern DHB Support Agency, a shared service organisation for the funder arm of the northern DHBs, prepared the Request for Proposal for the lab services tender.
Then, way to the side of the individual DHBs is another layer of bureaucracy in the form of DHB New Zealand, an incorporated society run by the district health boards and responsible for hatching new ideas - many to save money. Although not exactly secret, the Wellington-based society works behind the scenes. "It is not an arm of government, it's not amenable to things like the Official Information Act," says Dr Ross Boswell, chairperson of the New Zealand Medical Association. "And," he continues, "We don't think health policy should be made by a private club."
The medical association has been concerned from the start that there was no national strategy for community and hospital laboratory services and has been writing to the Minister and the Ministry of Health since 2004, asking that one be formulated.
The DHBs had already asked DHB New Zealand to look into the issue and Dr Reinhard Pauls, an economist, was commissioned in 2002 to write a paper on the possible restructuring of diagnostic services. It was this paper, which scoped potential changes in the service, and savings to be made, that triggered the current community laboratory crisis. "It said the DHBs could save money by putting together their community and laboratory testing and contracting it out to the cheapest bidder," says Boswell, a specialist pathologist.
And although the medical association has continued to ask for a national strategy ever since, the requests were ignored. Meanwhile, the Auckland DHBs, largely below the public radar, proceeded to try to cut $20 million a year from the community laboratory budget.
Now, says Pete Hodgson, the resulting shambles is largely Bierre's fault.
Would he be happy to have such a person running Auckland's lab testing in the future?