A private sector procurement team that proposed locking into decade-long contracts worth hundreds of millions of dollars with a three-player oligopoly, without disclosed pricing, without performance baselines, and against internal advice that the model costs more than the alternative, would face a governance review. Health NZ is doing exactly that with taxpayer money, and the government is helping it avoid scrutiny.
The bill doubled but nobody can see it
The numbers tell a clear story. A Deloitte market study commissioned by Health NZ found outsourcing volumes surged by a third since 2019, but costs nearly doubled from $162 million to $317 million. Per-procedure costs are rising, not falling.
OIA data shows total day case procedures outsourced to private facilities grew from 26,648 in 2019/20 to 46,004 in 2023/24, a 73% increase. Ophthalmology is the standout: eye procedures nearly doubled from 12,494 to 24,094 over five years. Cataracts dominate, high volume and low complexity, exactly the work private hospitals want.
Health NZ’s Statement of Performance Expectations targets an additional 31,600 elective treatments between March 2025 and June 2026, with a further 21,000 procedures expected to be outsourced in the coming year. The programme is accelerating. The transparency is not.
Health NZ released its new national contract under OIA but withheld all pricing information, claiming disclosure would “create a commercial disadvantage to providers.” A separate OIA request seeking procedure counts, total payments, and regional waiting list data was refused on the same grounds. Meanwhile, the Ministry of Health publishes cost data on nearly every procedure performed in public hospitals. Full transparency for public delivery, none for private. Independent cost comparison is impossible by design.
General surgeon Phil Bagshaw, chair of the Canterbury Charity Hospital Trust, puts it simply: “We taxpayers are paying, so we should know whether we’re getting value for money.”
Three companies, one buyer, ten years
The market structure should alarm anyone who believes in competitive procurement. Southern Cross Healthcare, Healthcare Holdings, and Evolution Healthcare control 70 percent of the private hospital market. Health NZ and ACC together outsource two-thirds of all elective surgeries to these providers.
Health Minister Simeon Brown’s March 2025 Letter of Expectations directed Commissioner Lester Levy to offer private hospitals 10-year contracts. The rationale is that long-term commitments provide “investment signals” that unlock new capacity. But locking a dominant buyer into decade-long arrangements with a concentrated seller base is the opposite of competitive discipline. It surrenders negotiating leverage before establishing what fair pricing looks like.
Labour’s Ayesha Verrall has identified the logical gap: “In many instances in a region there’d only be one private hospital that’s being contracted with, so there’s no competitor that stands to gain from knowing that hospital’s pricing.” If there is only one provider in a region, the commercial sensitivity claim is hollow.
The risk warnings Simeon Brown blanked out
RNZ obtained two versions of a Health NZ internal memo, one redacted by Brown’s office, one unredacted. The full memo warned that rapid outsourcing risked losing specialist surgeons, anaesthetists, and imaging technicians to the private sector, that wait times for complex cases including cancer surgery would increase, and that junior doctor training would degrade as simple operations shifted out of public hospitals. The memo stated: “Unless the contracting processes establish clear safeguards, a sudden dramatic increase in private contracting risks loss of full-time employment and expertise from public.” Brown’s office blanked out all but one of the 13 risk mitigation strategies before release.
Health NZ’s own executives told Brown in January that outsourcing to private hospitals was more expensive than expanding public sector capacity. The strategy proceeded anyway.
Royal Australasian College of Surgeons president Ros Pochin is direct: “We were sold outsourcing as a short-term solution to a backlog… outsourcing is not a solution to an inadequately funded health system.”
Why business owners should care
Brown’s starting point is legitimate. People waiting more than four months for elective surgery grew from 1,000 in 2017 to over 28,000 in 2023. That is a real crisis with real productivity costs: employees unable to work, ACC claims dragging on, workforce participation declining.
But the workforce dynamic makes outsourcing self-defeating. As Associate Professor Kaaren Mathias of the University of Canterbury explains, doctors work in both systems. When private demand and private pay rise, public throughput falls. A private cataract operation does not free up a public surgeon. It pulls one away from the complex cancer case that no private hospital wants to touch.
For employers, the tail risk matters more than the headline throughput. Clearing a cataract backlog is useful. Degrading the public system’s capacity for serious injury, cancer surgery, and multi-morbidity care is a workforce time bomb.
The procurement principle is straightforward. Six months into the Elective Boost programme, Health NZ admitted it did not yet have data on post-surgery infections, complications, cancellations, or complaints from outsourced procedures. It is moving toward 10-year contracts without knowing what it currently gets for its money. Any business owner would recognise that as a deal you walk away from, not one you sign for a decade.
Sources
- RNZ: Health NZ told to give private hospitals 10-year outsourcing contracts (2025-03-27)
- RNZ: Health NZ under fire for secrecy over private hospital contracts (2025-08-07)
- RNZ: Warnings about serious risks in surgery outsourcing blanked out by Simeon Brown’s office (2025-02-06)
- RNZ: Health NZ aims to cut surgery waitlists by outsourcing to private hospitals, extending doctors’ hours (2025-02-05)
- RNZ: NZ’s shift to more private healthcare will likely raise costs and reduce quality (2025-08-12)
- OIA response: Publicly funded hospital procedures discharged to private system (HNZ00075272)
- OIA request: Outsourcing elective procedures (Andrew Riddell)
- Health NZ Statement of Performance Expectations 2025/26
- Scoop: Health NZ under fire for secrecy over private hospital contracts (2025-08-07)