Local lab services going back to private hands

Five years ago Alberta Health Services ended a local private laboratory service contract to save $6.5 million, and now it wants to return to a private contractor.

Alberta Health confirmed this week that AHS will put out a request for proposals before the end of the year for private lab contracting to take place across the province.

The press secretary for Alberta Health said it would not become clear how much the savings will be until there are responses to the RFP, but claims that northern Alberta private contractors are used with significant savings.

This was also suggested in the Ernst & Young review on AHS – revealed about 10 months ago.

For more than five decades Medicine Hat Diagnostic Laboratory provided laboratory services from its building on the Southeast Hill. In 2014, AHS told MHDL its services would end in March 2017, with AHS itself taking over.

Initially AHS said the savings would be $5 million a year and later said it would be about $6.5 million.

A 2015 AHS document says the savings would be accrued by not having AHS and MHDL equipment and staff, centralizing management functions, computer systems being consolidated into the hospital’s and eliminating duplication of fees, processes and accreditation. There would also be economies of scale when purchasing supplies.

“Through eliminating duplication, we estimate those equipment and other costs will be recouped within two years,” said Shelley Rawlake, senior operating officer, AHS laboratory services, in July 2015.

There would be a larger outpatient lab built at the hospital and one large community AHS outpatient collection site, which was ultimately leased and renovated on Carry Drive.

Kerry Williamson, spokesperson for AHS, told the News it is critical for AHS to adapt in order to provide the best patient care efficiently.

“Through the AHS review and a subsequent analysis, an estimated $18 million to $36 million in potential annual savings has been identified through contracting of community lab services across the province,” Williamson wrote in an emailed statement.

The AHS initiative in 2015 began under the previous conservative government and was executed under the NDP.

At the time Cypress-Medicine Hat MLA Drew Barnes told the NDP health minister that it was wrong to have AHS and government bureaucrats dictate how lab services should be operated in Medicine Hat.

He says he heard from constituents at the time about MHDL being well run and claimed there was no evidence that having AHS run the lab would save money or improve service.

“And now the GOA (government of Alberta) is transferring the provision of services to private providers,” said Barnes. “It is incumbent on the government to use sound business practices and ensure Albertans will receive cost savings without service reductions.”

Barnes has asked the health minister to provide the business case for any privatization within CypressMedicine Hat.

Michaela Glasgo, MLA for Brooks-Medicine Hat, says there is no need for the government and AHS to be in the business of directly employing laundry, janitorial, cafeteria and lab work staff.

“The end result will be a health-care system that offers greater efficiency, lower costs and better quality of care that matches the needs of patients and communities,” Glasgo said. She did not respond to questions specifically about the decision made five years ago.

AHS has never revealed the cost of renovations required for its facility on Carry Drive other than to say the lease on the building plus renovations and utilities was $170,000 annually. What portion of that amount was the renovation has never been revealed nor how many years it would have to pay the $170,000 to cover the renovation costs.

It is also not clear what the expansion of the hospital laboratory cost.

In February 2017, MHDL closed its doors after more than 50 years of service in the area.

It had taken two years of planning and six months of transition to reach the point of the official opening of the new AHS lab on Carry Drive. It has been in use for three years and seven months.