Health Minister Stephen Wade this morning released the consultant’s report into the privatisation of SA Pathology, which was commissioned by the Government last September following years of speculation the service would face significant job cuts.
The PricewaterhouseCoopers report states SA Pathology has been operating at a loss for the last five years, with deficits ranging from $93.2 million in 2014 to $67.6 million in 2016.
It says last year, SA Pathology’s operating expenses were $230 million with an operating deficit of $83 million, meaning the service “would be unlikely to be sustainably competitive in a contestable environment without extensive changes to its operating model”.
All up, the report makes five recommendations, including changing SA Pathology’s business and operating models, establishing service level agreements and new pricing options, and improving the organisation’s “financial, commercial and managerial capability”.
The Government has broadly accepted all the recommendations, with Wade today announcing he would give SA Pathology 12 months “to prove that they’re up to the task” of improving its financial viability, before moving to a potential privatisation – a move flagged in last year’s state budget.
However, the one-year reprieve has come with a warning for workers, with Wade flagging the Government would need to reduce SA Pathology’s workforce from 1400 full-time employees to 1200 employees over three years to ensure the organisation’s financial sustainability.
“While the PwC report doesn’t quantify a staffing impact, it is clear that SA Pathology has more staff than required across the business,” he said.
“Let me stress, the estimates that we’ve done are high-level (and) there’s still a lot of work to be done on the proposals within the paper.
“Much more detailed work needs to be done within each of these investment opportunities to see what the impact would be.”
Wade said the job losses wouldn’t fall on doctors or nurses; rather, they would most likely impact back-room staff.
He said there was scope for both “natural attrition” and voluntary redundancies within the organisation.
In 2014 Labor had plans to cut 332 full-time employees from SA Pathology and close six sample collection centres.
Wade said the Marshall Government would also consider closing 10 “unprofitable” SA Pathology centres across the state, but would open five new centres in more commercially strategic locations.
SA Pathology currently operates 18 laboratories including seven in metropolitan locations and 11 in regional locations.
“In regional South Australia, SA Pathology is particularly the dominant provider and the report makes clear that any rationalisation of collection centres will maintain access,” Wade said.
“Let’s be realistic about this, there are communities in South Australia, in the closer non-regional areas, where we have up to four or five collection centres and one of them being an SA Pathology service.
“You can have a rationalisation of SA Pathology without significantly reducing the patient access to services.”
Wade has recruited former Department of Transport, Planning and Infrastructure acting chief executive Julienne TePohe as SA Pathology’s interim executive director.
He said the Government would work to “refresh” the SA Pathology leadership team following the resignation of the former executive director Dr Glenn Edwards in March.
Edwards had been a vocal supporter of maintaining a centralised public pathology service.
“SA Pathology is a $257 million business and yet we’re asking a pathologist to run such a large business,” Wade said today.
“One thing we’ll be doing in the very near future is refreshing the leadership, having an interim executive director who manages the business challenges and having a clinical leader who manages the clinical aspects of the business.”
Shadow Health Minister Chris Picton said it was “contemptuous” that Wade had informed the media of the potential 200 job cuts instead of speaking to SA Pathology staff directly.
He also accused Wade of attempting to “hide” the news of the potential job cuts by releasing the report on the same day the Federal Government hands down its budget.
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