Image for COMMENT: Does the Tasmanian Government really know what its policy is on pathology privatisation?

The Minister for State Growth, Matthew Groom, emphatically told State Parliament on Wednesday last week that the Hodgman Government’s policy was that there will be “no further outsourcing of pathology services.”

Groom’s statement was in response to the Labor Party’s Shadow Minister for Health, Rebecca White, who sought clarification on whether he was referring to pathology services when he told Parliament that one of the unsolicited bids received by the Office of the Coordinator-General was for “medical services.”

Just minutes earlier White had asked asked the Minister for Health, Michael Ferguson, whether the “medical services” proposal related to private pathology services.

Ferguson’s response was far, far more ambiguous than Groom’s. “At this moment there are no plans to outsource any more public pathology services to the private sector,” he said.

Then on Friday afternoon a spokeswoman for the Tasmanian Government told Tasmanian Times that “the Minister for Health made clear in Parliament this week that the Government’s policy position is not to further outsource pathology services.”

The problem is that Ferguson did no such thing. Indeed, Ferguson’s comments raise far more questions than they answer.

Ferguson’s statement to Parliament had two crucial qualifiers in one sentence: “at this moment” and “plans.”

Ferguson didn’t say that there would be no further pathology privatisation in the term of the current government or even in the longer term. All he would commit to was “at this moment” the government didn’t have “plans.”

With the “moment” come and possibly already gone, we are left to wonder how exactly Ferguson defines “plans”. (The Oxford Dictionary defines a plan as “a formulated and especially detailed method by which a thing is to be done; a design or scheme” or alternatively “an intention or proposed proceeding.”)

Ferguson didn’t say there had been no preliminary discussions about further pathology privatisation or that he wasn’t thinking about this in the short-to-medium term.

Perhaps the Government doesn’t have “plans” right now, but there is no reason to believe that Ferguson might not have them next week, next month or later on in the current term of the Hodgman Government.

The implausible “intellectual property” defence for secrecy

On Friday Tasmanian Times sought clarification from the Government’s Communications Office on whether the unsolicited bid was for “medical services” was in fact for pathology services and whether it was from Diagnostic Services, the subsidiary of the private pathology behemoth Sonic Healthcare. If it wasn’t from Diagnostic Services or Sonic Healthcare, who was it from?

A spokeswoman for the government disclosed nothing, arguing that “the whole point of the unsolicited bid process is that its initial stages can be undertaken in confidence in order to protect intellectual capital.”

The claim that secrecy surrounding unsolicited bids is necessary to “protect” the “intellectual capital” of proponents’ plans is far-fetched.

While some part of a proposal may constitute “intellectual capital”, such as the details of a new medical test or the code for a software product, the basic information sought in Parliament last week about what “medical services” were the subject of a private company bid fell far short of that level of detail.

The Unsolicited Proposals Policy and Guidelines released by Department of Treasury and Finance in January state:

”All proponents are strongly encouraged to discuss their proposal with the Office of the Coordinator-General, on a confidential basis, in order to gauge the suitability of the proposal and discuss key requirements under the Policy and Guidelines prior to making their submission.”

Treasury’s guideline offering developers an initial level of secrecy only applies for the period “prior to making their submission.”

In Parliament last week Groom made clear the “medical services” proposal “is currently being considered,” implying that a submission has already been received. (Another private company proposal for a software service was described by Groom as being at a “very preliminary stage.”)

The Treasury guidelines also state that when considering unsolicited bids the Government will ensure “the proponent’s Intellectual Property (IP) is respected and that proponents are fairly compensated as part of the process.”

It is perfectly possible to disclose basic details of proposals publicly and still protect a company’s “intellectual property.” It is important to note that the Department of State Growth, which the Office of the Coordinator-General is part of, is legally obliged to comply with the Right to Information Act, so the agency has no carte-blanche exemption from disclosure as Forestry Tasmania once did.

Even so, the Treasury guidelines also state that the Government will seek to ensure, amongst other things, that the assessment process is “confidential.”

It is also important to remember that the unsolicited-bids’ process caters only for projects over $10 million or 100 direct jobs such as for projects involving public land, buildings or contracts for government services. For proponents, it has the advantage of winning government backing to push and even financially support a project without going through a competitive tender process. In essence, it is fast-tracking by another name.

Disclosing that a proposal has been received from company X relating to a government-owned asset Y or a contract for X service cannot be construed as breaching any undertakings to protect “intellectual property.”
That the Government seeks to defend secrecy surrounding the activities of the Office of Coordinator-General can only stem from a fear that disclosure of basic information on deals being considered behind closed doors will spark a public backlash.

With Ferguson’s heavily qualified statement on the privatisation of public pathology services and Groom’s refusal to disclose details, the public would be well justified in thinking that the Government’s explanations are far from adequate.

Of course Ferguson and/or Groom could have simply said that the unsolicited bid for “medical services” didn’t involve pathology services, but they didn’t. This only fuels the suspicion that the proposal does indeed involve the privatisation of pathology services.

Warning: political donors may be operating in this area

This leads us to the murky world of political fundraising.

As detailed last week last week the private pathology industry has been a very generous donor to the Tasmanian branch of the Liberal Party. Sonic Heathcare and its subsidiary Diagnostic Services have contributed $36,500 since 2010. However, since then Diagnostic Services told Tasmanian Times that the unsolicited bid for “medical services” is not from them.

Another $77,200 was donated to the Tasmanian Liberals by Pathology Australia, a lobby group for a number of pathology companies. However, an industry lobby group for a number of private companies would not submit a bid for a government contract.

Healthscope, which currently doesn’t have operations in Tasmania, has also been another generous donor to the Tasmanian Liberals. They have contributed $27,500 since 2011, with their contributions rising in each of the last three years. In June this year Healthschope sold their private pathology business to the private equity firm Crescent Capital Partners.

Crescent Capital Partners declined to comment on whether they have submitted an unsolicited bid for public hospital pathology services. “No comment from us on this matter,” Chris Yoo, Investment Director at Crescent Capital Partners, wrote in an email.

It should be noted that while Healthscope made political donations to the Tasmanian Liberals in the three financial years to mid-2014, there is no evidence to suggest that this is a practice which will necessarily continue under the new private owners of Healthscope Pathology. According to Australian Electoral Commission records, Crescent Capital Partners have made no donations over the disclosable threshold in the last three years. Yoo declined to comment on the firm’s policy on political donations.

There may be other smaller pathology companies eyeing off Tasmania’s public hospital pathology services too.

A few weeks back Tasmanian Times asked a Government spokeswoman whether the Minister for Health, Michael Ferguson, had met with private pathology companies at Liberal Party fundraising events. The Minister’s spokeswoman confirmed he had met all “private pathology providers” at “various forums” leaving it unclear whether any meetings had occurred at fundraising events.

Last Friday Tasmanian Times asked the spokeswomen whether the Minister for State Growth, Matthew Groom, was aware that Diagnostic Services (or its three units), Sonic Healthcare, Pathology Australia or Healthscope were major Liberal Party donors. We also asked whether the Minister had met with representatives of the private pathology companies at any Liberal Party fundraising functions? “Any suggestion trying to link political donations to policy outcomes is categorically wrong,” the Government’s spokeswoman wrote in an email.

Tasmanian Times does not suggest donations from private pathology companies have directly influenced Mr Ferguson or Mr Groom’s decision-making. This was also clearly stated in the original articles. It is worth stressing that it is perfectly legal for Ministers’ to meet major donors at party fundraising events.

However, the question of whether the two Ministers were aware the companies have been major donors and/or have met with their representatives at Liberal Party fundraising events remains unanswered. The questions deserve a direct answer.

If the Ministers weren’t aware the companies were donors and have not met any of their representatives at Liberal Party fundraising functions then it’s a non-issue. A simple ‘no’ and ‘no’ would lay the issue to rest.

If, however, the two Ministers did know the companies were major party donors and have met them at Liberal Party fundraising events, then the public has a right to know.

The Hodgman Government’s approach to pathology privatisation and the unsolicited bids process is symptomatic of the Government’s predilection of secretive deal-making involving public assets such as land, buildings and public services. That major Liberal Party donors may be lobbying for potentially very lucrative contracts – whether through the unsolicited bids process or otherwise – makes the case for complete transparency even stronger.

The Treasury guidelines on unsolicited proposals states that one of the objectives which will “guide” the Government’s assessment of projects is:

“ensuring an open, transparent and fair process that involves a high standard of probity and public accountability.”

Note the keywords: “open”, “transparent”, “fair”, “probity” and “public accountability.”

What the Hodgman Government have delivered so far is secrecy and spin.

If warning lights aren’t flashing for those who value good governance, they should be.

Bob Burton is a Hobart-based Contributing Editor of Tasmanian Times.

Tasmanian Times (TT) is free - always has been, always will be. If you like what TT does, please make a donation.

EARLIER in this series of articles on TASMANIAN TIMES ...

• October 27: The private pathology industry emerges as major Tasmanian Liberals donor

• October 28: Who’s a Liberal donor gonna call? Rentbusters!

• October 29: What happens if a major political donor doesn’t disclose?

• November 3: State Government considers secret private bid for public ‘

• John Hayward in Comments: I’m advised that a donation to the Liberal Party can be distinguished from an improper inducement by arising from a Party-approved form of altruism exercised in secrecy. Under Party rules, the terms “intellectual property” and ” business in confidence” have incantatory powers which preclude further explanation.