An Auditor General’s report on AHS’s community lab services contract with DynaLIFE, a lab services company, presented on Wednesday, identified issues in governance and oversight, financial management, and procurement. “Based on sworn testimony and an examination of documents and communications, our work identifies notable breakdowns in due diligence, risk assessment, and financial analysis,” said Auditor General Doug Wylie.“Decisions about how public funds are spent on health care can have far-reaching consequences. When procurement processes are guided by evidence and strong governance, they protect taxpayer dollars and ensure services meet the needs of Albertans.”The issues contributed to $125 million in unnecessary taxpayer spending between 2013 and 2023. Additionally, they negatively impacted patients and staff, and caused disruptions in lab services. “We recommend that the Department of Hospital and Surgical Health Services and the Department of Primary and Preventative Health Services ensure their own procurement processes, and those of their reporting entities, are followed, specifically that an analysis is conducted and retained to support the expenditure of public money prior to proceeding with major procurements,” reads the report. .A key finding from the report was the then Minister of Health, Adriana LeGrange's overinvolvement, which interfered with AHS's ability to operate during the process.“Throughout our examination, we found instances where AHS was directed by the Minister and Department of Health to take certain operational actions,” reads the report. Legrange also pressured AHS to continue with outsourcing, despite concerns about cost savings, COVID-19 pressures, and the project having only one proponent. “At key points throughout the community laboratory services procurement, evidence demonstrated that AHS received direction from the Minister and Department of Health to proceed without delay or cancellation — even as the following concerns and risks emerged, the report reads. A risk identified in the report was that cost savings, which was a primary reason for outsourcing, would be lower than initially projected. An independent report initially projected $102 million in annual savings, but later AHS calculations placed the expected annual savings between $18 million and $36 million. .The Auditor General’s investigation also revealed that AHS and the Department of Health failed to follow their own protocol by not preparing a business case for outsourcing laboratory services. Instead, AHS management believed that a previously prepared report from a third–party source was sufficient. “Developing a business case — or an equivalent document with key components — is considered best practice in procurement,” the report reads. “It provides a structured, evidence-based rationale for proceeding, ensuring alignment with strategic goals and value for money. By evaluating alternatives, assessing risks, and justifying the preferred option, it supports transparency, accountability, and effective resource use." “We found no evidence that either AHS or the Department of Health developed a business case prior to initiating the procurement process for community laboratory services.""Information required under the Procurement Accountability Framework to support the decision-making process, such as an analysis of alternatives, procurement plan, and financial analysis, was not completed.”.Additional findings revealed that patient wait times were negatively affected as the AHS transitioned services to DynaLIFE. “Within weeks of the transition, service disruptions emerged in Calgary, including reduced appointment access, long wait times, delayed test results, and diagnostic errors,” the report reads. “By February 2023, wait times for community laboratory tests had increased from a few days to five weeks.” AHS’s contract with DynaLIFE also created added difficulties for lab services staff. “Throughout our interviews, staff and leadership from AHS and APL consistently expressed concern over the repeated changes in the delivery model for community laboratory services,” the report reads. “These ongoing shifts led to confusion and frustration across both organizations.”In October 2019, AHS began exploring the possibility of outsourcing community labs, following a request from Shandro. A request for proposal was issued in December 2020. By May 2021, AHS and DynaLIFE had begun contract negotiations after Sonic Healthcare, the other finalist for the project, withdrew from the process due to COVID-19 travel restrictions. In January 2022, AHS announced its intention for DynaLIFE to take over the services, and a 15-year, $4.8 billion contract between the two parties was finalized in February 2022. AHS and DynaLIFE ended their contract in August 2023 when AHS paid $32 million to acquire the company's remaining assets and liabilities. For additional findings and information on the investigation, see the Auditor General’s report.
