Labtests has lost 10% of its market share to rival Diagnostic Medlab after Auckland’s three district health boards stepped in to improve its dismal performance, admitting the move from one large provider to another may have been “a bite too large.”

Effectively a penalty for Labtests, after months of complaints and questions of quality control, the arrangement is part of a wider raft of changes including key performance indicators for both companies.

Auckland Regional District Health Board governance committee chairman Pat Snedden said it intervened to safeguard the quality delivery to the people of Auckland.

The ARDHB said it would strictly monitor the KPIs and make them publicly available every month.

Diagnostic Medlab (DML) will cover private sector work, including private hospitals, private specialists, private home visits, fertility treatment and rest homes.

Asked what assurances of quality service he could make to public sector patients in the three to four months expected to bring Labests “up to scratch,” Mr Snedden said introducing publicly available KPIs would significantly inform the debate.

The ARDHB would remedy any situation where people were not performing, he said.

He would not say if Diagnostic Medlab was likely to win more than a 10% share of the contract should Labtests fail to meet those KPIs.

“We’ll work out what happens if we have an under performing arrangement going into the future.”

Mr Snedden said the four-year contract to transfer 10% of the more complex testing to DML would take some of the pressure off Labtests at the front end.

It would also use some of the redundant capacity in the pathology and science workforce.

“This change will take pressure off Labtests enabling them to deliver a safe and reliable high quality mainstream service to their contract specifications. Diagnostic Medlab can utilise its exiting workforce to take on the private hospital and specialist work.

“Diving up this work under the supervision of the ARDHBs is the most considered route to ensuring delivery of a measurable, high quality, safe service,” he said.

Mr Snedden said the three DHBs would absorb the additional $4.4 million cost to have two providers – paying a total of $71.4 million instead of $67 million a year.

The move follows a “quality and safety turn around assessment team” (QSTAT) at Labtests led by Johan Vendrig, chief information officer at Auckland DHB.

He said Labtests was “doing its best” to address issues.

Pathologist Ian Beer who has assessed both Labtests and Diagnostic Medlab for the job over the past two weeks, said the problems with Labtests arose from logistics, handling, data entry and processes that worked reliably.

“DML has the advantage of running the system for 10 years, Labtests has had to start up from scratch,” he said.

Mr Beer anticipated it would take two to three months to bring those systems up to scratch.