Evaluation: For many of us, visits to Awanui Labs will turn out to be extra frequent as we become older. Its shopfront model companies are ubiquitous all through virtually your entire nation. The enterprise says 25,000 New Zealanders use its companies each single day. That’s huge.
The image above is me getting bloods taken at their Onehunga clinic. That was to check my important statistics for my Powder Keg podcast, investigating the efficacy of a doubtful billion-dollar well being complement. The workers had been nice. And like they stated, it really didn’t damage!
However most of us will likely be despatched there by our medical doctors for extra routine exams.
Awanui additionally operates most of the hospital labs across the nation. About 70 p.c of medical choices and one hundred pc of most cancers diagnoses depend on pathology and laboratory exams, it says.
New Zealand started outsourcing its neighborhood laboratory testing within the Nineties; greater than 20 regional companies picked up contracts. The outsourcing was prolonged to regional hospital labs about 20 years in the past.
By way of this, a small Dunedin firm known as Southern Group Laboratories progressively expanded because it purchased up different lab corporations. In 2023 it unified eight lab-testing companies below the only nationwide model, Awanui.
It’s owned by the New Zealand Tremendous Fund (48 p.c) and the Ontario Academics’ Pension Plan (48 p.c) with slightly below 4 p.c held by Te Pūia Tāpapa iwi funding fund.
Its revenues (virtually fully from Well being NZ contracts) have been growing by the yr. $340 million within the yr to December 2025. It has a near-monopoly. It must be a licence to print cash. We must be involved.
But this week, Awanui reported a pre-tax lack of $2.9m. It’s the corporate’s third loss in three years ($22.5m in 2023, $21.4m in 2024). So what’s going incorrect?
Well being NZ is conducting a nationwide evaluate of pathology companies, with a 10-year plan being developed for laboratory testing throughout private and non-private sectors. That evaluate is due again later this yr, and may assist reply some questions on Awanui’s monetary sustainability.
Anoop Singh, the chief govt, tells me that this yr’s loss has narrowed. “Like many healthcare suppliers throughout New Zealand, Awanui is working in a system below stress from growing demand, workforce shortages, rising prices and a constrained funding setting.”
Regardless of these challenges, he says, the corporate has continued to concentrate on constructing its workforce functionality, companies, and the know-how and infrastructure wanted to underpin a contemporary and environment friendly pathology system.
Awanui’s management has been working arduous to handle down prices and keep self-discipline to its funding in a difficult working setting, he says. The losses pose no risk to its much-needed companies.
“The hospital and neighborhood laboratory companies we offer stay steady, resilient and centered on assembly the wants of sufferers and clinicians throughout New Zealand,” he insists. “Awanui delivers greater than seven million diagnostic outcomes yearly, and we stay centered on sustaining secure, dependable and high-quality companies within the areas the place we function.”
The corporate has been embroiled in industrial motion. About 500 Apex union workers went on strike final yr over pay talks. They gained a 6 p.c rise, adopted by a smaller enhance this yr – but worker bills have remained pretty flat, suggesting the pay rise has been offset by no less than some workers cuts. The corporate declines to reveal its FTE headcount to me.
Because the December 31 stability date, it’s additionally refinanced $313m in debt, pushing again compensation obligations to March 2031. These aren’t the actions of an organization with wholesome cashflow, nor a sustainable capex technique.
Well being commentator Ian Powell, the previous govt director of the Affiliation of Salaried Medical Specialists, isn’t so satisfied that Awanui can maintain its losses. “This example has been predictable for a few years,” he tells me. “Awanui is now not in a position to extract earnings from the general public system. Its solely hope is to additional cut back companies. Laboratories have an effect on round 70 p.c of hospital medical decision-making. Privatisation of those labs wants to finish.”
Institute of Medical Laboratory Science president Tony Barnett welcomes the narrowed loss. “But it surely illustrates how arduous it’s within the lab sector for the time being,” he tells NZ Physician. “From the occupation’s viewpoint, it’s at all times arduous to say how these items will play out.”
The general public must have faith that the continued issues within the lab sector are going to be “fastened at some stage”, Barnett provides. “Awanui has a contract with the Authorities, and Well being NZ actually wants to assist discover a approach via this.”
Singh, Powell and Barnett are all proper in a single respect. This Authorities has been demanding efficiencies wherever they are often discovered (and generally the place they will’t be discovered). Public funding for the corporate, like different healthcare suppliers, is more and more constrained.
However Awanui shouldn’t be like different corporations. It supplies pressing and demanding companies. And it has a monopoly in lots of areas. The implications if it had been to shut its doorways are unthinkable.
So the query for me is, how did we get to a degree the place the sustainability of 1 large firm may have such a far-reaching influence on healthcare nationwide?
Again in 2005, the Commerce Fee rejected an try and merge two of the lab testing corporations. The chair, Paula Rebstock, warned of the dangers to the general public well being system if one firm turned dominant. But that’s now occurred – with none additional protest from competitors regulators.
Rebstock’s concern was {that a} single firm like Awanui would have district well being boards over a barrel and be capable to identify its value. What she couldn’t anticipate is that the nation’s 20 DHBs could be merged into one huge nationwide well being service, which was in a position to clamp down on what it pays.
The web final result is that, as an alternative of getting a singularly highly effective lab service supplier that may hike costs, now we have a singularly uncovered and co-dependent relationship between Awanui and Well being NZ. Each rely on the opposite.
The uncomfortable conclusion is that Awanui Labs is just too large to be allowed to fail.
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