KEY POINTS:
Deal-making for Auckland's lucrative community laboratory service has been thrown into fresh turmoil by a Court of Appeal decision, but the case may go to the country's highest court.
Three judges yesterday released their verdict upholding the appeal by the newcomer to the Auckland market, Labtests Auckland.
This
would allow the company to replace its rival, Diagnostic Medlab (DML), under a reinstated contract with the region's district health boards. But Medlab wants to take the case further.
"We will be applying for leave to appeal to the Supreme Court," said DML chief executive Arthur Morris.
In 2006, the boards announced that Labtests, owned by multi-national laboratory and hospital operator Healthscope, would be the region's provider of community lab testing.
The $560 million contract was to have started in July last year, but this was foiled by a successful High Court review brought by DML.
The new contract would have reduced the number of blood test collection centres in the region to 43 from 85, but both bidders were committed to similar levels of reduction. Labtests wanted GP clinics to take more blood samples, but said it would pay them and provide training.
The High Court review found the contracting process was unfair to DML because Labtests' then-chief executive Dr Tony Bierre was also an Auckland board member and had inside knowledge. Justice Raynor Asher also criticised the boards' failure to consult primary health organisations adequately.
But Appeal Court judges Grant Hammond, Terence Arnold and Ellen France overturned the High Court decision.
" ... we do not consider that the evidence establishes any improper use of inside information by Dr Bierre, or that DML was at an informational disadvantage when compared to Dr Bierre," the three judges said.
The DHBs were required by law to consult when significant changes were contemplated, but in this case they were seeking the same service specifications, they said.
GPs were concerned about the number of staff Labtests would employ, but that was up to Labtests.
Labtests should be allowed to start the contract as soon as this could reasonably be achieved, the judges ruled.
Healthscope managing director Bruce Dixon said the company now wanted to start the transition arrangements with DML.
Auckland DHB chairman Pat Snedden said the boards were working on the basis that Healthscope would be running within nine months and would complete the remainder of its eight-year contract - unless DML was allowed to proceed in the Supreme Court, in which case the interim DML contract would continue.
Former ADHB chairman Wayne Brown said he wanted an apology from National's health spokesman Tony Ryall, who had called for Mr Brown and other Auckland health chiefs to be sacked after Justice Asher's decision.
THE STORY SO FAR
July 2006
Auckland's three district health boards award a $560 million, eight-year contract to Labtests Auckland for community laboratory services, starting from July 2007 and saving the boards $15 million a year. Incumbent Diagnostic Medlab Ltd is to get the boot.
March 2007
High Court ruling on judicial review, brought by DML, overturns the new contract, finds Labtests chief executive Dr Tony Bierre had inside knowledge as an Auckland District Health Board member and the health boards failed to consult primary health organisations adequately.
March 2007
DHBs sign interim $72m-a-year contract with DML.
April 2007
* Labtests starts appeal process.
* This week DHBs start public consultation for a new contract.
* Yesterday Court of Appeal releases its verdict, upholding Labtests' appeal and overturning High Court ruling. DML plans to seek leave to appeal to the Supreme Court.