Biotech & Health

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Focus: Health

2 March 2006

In this issue: we look at whether PPPs could help alleviate the infrastructure crisis in Queensland Health; the recommendations of the Lockhart Review on embryo research legislation; the court assessing a doctor's standard of care in relation to the Trade Practices Act; and an update on the AB v Attorney-General of the State of Victoria case.

PPPs: medicine for health?

In brief: There is a growing consensus that the Queensland health system is in crisis and will require a major investment over the long term to bring it back to health. Partner Adam Thatcher examines the issue of whether Public Private Partnerships can help resolve the infrastructure requirements of the state health system. 

The diagnosis

In recent months, there has been extensive media coverage regarding the perceived shortcomings of the Queensland health system. According to those reports, the health department is in crisis, with hospitals and wards either closing or operating on reduced capacity because of doctor shortages and insufficient facilities.

In addition, the increasing population of Queensland, particularly South-East Queensland, and the ageing of the Australian population generally, has and will continue to put huge demands on a health system already under extreme pressure. The urgent need for doctors is almost matched by the demand for health infrastructure and technology, which, in turn, will require significant capital investment now and into the future.

Are Public Private Partnerships the right medicine for health?

Although the Queensland Government has earmarked a significant amount of resources and funding for the development of infrastructure throughout the state, it is becoming increasingly apparent that the private sector may have to play a greater role in the provision of much-needed infrastructure, facilities and ancillary services. Public Private Partnerships (PPPs) are not new to the health sector, having long been pursued and implemented in the UK, with a number of health projects also currently being developed and undertaken under the PPP guidelines in other Australian states, including:

  • the $130 million Long Bay Correctional Hospital project (NSW), being undertaken by PPP and Solutions (Babcock and Brown, Multiplex, Honeywell as facility manager and Medirest as soft services provider to the forensic hospital);
  • the $132 million Newcastle Mater Hospital redevelopment (NSW), being undertaken by the Novacare consortium (Abigroup, Medirest, Honeywell and Westpac);
  • the $850 million Royal Children's Hospital redevelopment (Victoria), not yet in the market; and
  • the $364 million Royal Women's Hospital redevelopment (Victoria), being undertaken by the Royal Women's Health Partnership (Bilfinger Berger BOT, Baulderstone Hornibrook, United KG, ANZ and Macquarie Bank).

The Casey Hospital project (formerly the Berwick Community Hospital project), the first hospital to be procured in Victoria under Partnerships Victoria, was opened on time and on budget in late 2004. The development's delivery was based on the UK model, with the private sector designing, constructing and maintaining the building but with all clinical services provided by the public sector under an availability and key performance indicator-based (KPI) payment regime.

Are there any side effects?

The direct social implications that may come from poor service from a healthcare facility make private sector involvement in the delivery of social infrastructure a more risky proposition from a political perspective than other types of infrastructure, where the consequences of poor service might only be financial or legal in nature.

PPP experience with the health sector has enjoyed mixed success. For example, the La Trobe Valley Hospital, and NSW's first PPP hospital at Port Macquarie, are cited as examples of failed PPP hospitals where the infrastructure was surrendered to, or bought out by, the government after services levels declined as the hospitals proved more expensive to operate than the private sector anticipated.

Although it is early days, the Casey Hospital project seems to be at least one example of a well-planned PPP that has delivered much-needed health services on time and on budget and is continuing to improve the facilities and services available to the community.

Ingredients for the remedy: issues to consider

The key issues that need to be addressed when determining the suitability of a PPP as a delivery model for health infrastructure include:

  • the nature of output specifications defined by the state;
  • the services required and undertaken by the private sector;
  • payment mechanisms (particularly whether such mechanisms transfer volume risk to the private sector); and
  • risk allocation and contractual issues.

The essential element of PPPs in healthcare is that the state defines its needs in terms of 'outputs', ie the nature and level of the service required, and invites private sector bidders to present their solutions to meet these service needs. This allows the private sector the flexibility for maximum innovation for providing cost-effective developments and services that meet the state's healthcare needs.

Usually the core health services will continue to be provided by the public sector, with the private sector providing non-clinical support services such as catering, laundry, security and maintenance, managing utility services and building services.

The supply of equipment has been one of the most problematic issues encountered on health projects developed under the PPP model because of the difficulties in identifying equipment requirements at the outset, as well as issues of obsolescence. In the Casey Hospital project, the private sector was prepared to supply and maintain normal furniture and fittings but was asked to bid a price for the supply of a pre-determined list of medical equipment.

Information management and technology (IM&T) is critical to the provision of clinical services. Whether IM&T infrastructure and IM&T systems or IM&T infrastructure-only is to be provided will depend on whether it is a new hospital or a refurbishment of an existing facility with existing IM&T systems in place. If IM&T is included within the PPP contract, careful consideration should be given to the period of responsibility, risk allocation and payment mechanism penalties. In the Casey Hospital project, only the provision of IM&T cabling was included in the contract.

There has been considerable debate in the UK as to whether soft facilities management (FM services) (eg catering, cleaning and security) should be included or excluded from PPP projects. The private sector has expressed concerns that the exclusion of FM services may cause synergies between the construction and operation phases of a PPP project to be lost.

In the Casey Hospital project, FM services included car parking, external cleaning and grounds maintenance, pest control, helpdesk, training and security services. The Royal Women's Hospital project will include more FM services, including cleaning, security, car parking and porterage and the consortium is to investigate commercial and retail opportunities on the site.

Usually contained within the modern PPP contract is a performance regime which ensures that the private sector delivers the specific outputs that the public sector intends to purchase, with appropriate mechanisms to ensure the public sector achieves value for money (usually reduced payments or no payments when services are unavailable, dependent on the criticality of the service or facilities and the effects of its unavailability).

Since the early health PPPs, payment mechanisms have become more sophisticated, with emphasis on optimal rather than maximum risk allocation; with more of a recognition that risks should be allocated between the public and private sector to those parties best positioned to manage and control the specific risks for the smallest cost. This approach attempts to achieve value for money and to minimise the consequences if they do arise.

It will be important to consult effectively with the market to ensure the risk allocation for the project is sufficiently attractive to generate market interest and attract competitive bids. Considering experience from previous health PPP projects, particular regard will need to be given to the allocation of the following risks:

  • demand risk (eg what happens if services/facilities are insufficient to cope with demand or if demand decreases and services/facilities are under-utilised?);
  • security risk (can be an issue for a new facility in a new catchment area with a growing population);
  • insurance risk;
  • patient and visitor damage risk; and
  • infection risk (there is a risk that patient infection could be traced directly to the actions of staff employed and managed by the facility's manager, eg as a result of food or cleaning services provided).

Upon termination of a PPP contract (whether due to private sector or public sector default, or other uncontrollable events) various factors influence compensation. With a private sector default, it is generally accepted that compensation will equal the market value of the project asset, less the public sector's costs.

The prognosis

The Queensland Government is determined to mend Queensland Health. PPPs should be given serious consideration having regard to the amount of capital investment and the urgency of the problem. PPPs also offer the government the ability to give the private sector increased flexibility to develop innovative options for delivering ancillary commercial, educational and research facilities (such as specialist clinics, childcare, accommodation, research laboratories and car parking) to provide more value to both the public and private sectors. It will be important to ensure that all issues are addressed if a successful PPP formula is to be employed and a long-term solution is to be provided.

The Lockhart Review

In brief: The Legislative Review Committee examining the Research Involving Human Embryos Act and the Prohibition of Human Cloning Act has recommended the relaxation of laws relating to the use of human embryos for research purposes and, in particular, that the controversial practice of therapeutic cloning should be permitted. Partner Richard Hamer and Articled Clerk MaryAnn Puthussery consider the recommendations. 

Summary of the legislation

The Research Involving Human Embryos Act 2002 and the Prohibition of Human Cloning Act 2002 provide a national legislative framework for the regulation of human cloning and the use of human embryos for research purposes.

The Acts currently prohibit a number of reproductive practices, including human cloning and the creation of human embryos (except for the purposes of assisting woman to become pregnant). The Acts also provide regulations for the use of excess human embryos for research purposes.

In accordance with the requirements of both Acts, the Legislative Review Committee, chaired by the late John Lockhart AO QC (formerly a justice of the Federal Court), was appointed in June 2005 to conduct an independent review of each Act's operation.

Having consulted extensively with the community, the Legislative Review Committee submitted its review to the Federal Government on 19 December 2005.

The recommendations

The committee made 54 recommendations in total, including that the following reproductive practices continue to be prohibited:

  • human reproductive cloning;
  • the implantation in a woman of human embryos created by a means other than the fertilisation of an egg by a sperm;
  • the creation of human embryos by fertilisation of an egg by a sperm for any purpose other than to achieve pregnancy;
  • the placing of human embryos in the body, other than in a woman's reproductive tract;
  • the implantation in a woman of a human-animal embryo, an embryo with genetic alterations or an embryo containing genetic material from more than two parents; and
  • the collection of viable human embryos from a woman's body.

The committee also recommended that a number of changes be made for the use of human embryos for research purposes. Although under the current provisions the use of excess embryos in research is permitted, the committee felt that the current laws were 'impeding' artificial reproductive technique (ART) research.

One of the committee's recommendations was that the definition of a human embryo be changed so that an egg fertilised by a sperm is considered an embryo at a later stage of development (at the first mitotic cell division). The committee took the view that the current definition, which characterises an embryo as forming at the point male and female pronuclei appear in the fertilised egg, has prevented valuable ART research.

The revised definition would mean that much of the research involving immature eggs, gamete development and certain aspects of in vitro fertilisation techniques would fall outside regulation under the Research Involving Human Embryos Act.

Another more controversial recommendation of the committee is its recommendation to permit therapeutic cloning. Therapeutic cloning involves transferring the nucleus of a human cell into an egg whose nucleus has been removed (somatic cell nuclear transfer) for the purpose of creating embryonic clones from which embryonic stem cells can be extracted.

The current position is that only excess ART embryos can be used to generate embryonic stem cells. The committee, however, recognised that embryonic stem cells, created by therapeutic cloning, differed from embryonic stem cells that are derived from excess ART embryos, as they could be exactly matched to a patient or made to have a certain genotype.

Therapeutic cloning is controversial as it uses the same technology as human reproductive cloning. However, the committee distinguished therapeutic cloning from human reproductive cloning on the basis that therapeutic cloning involves making embryo clones for the purposes of creating stem cells, not implantation that leads to the creation of a cloned human being. Therapeutic cloning is currently permitted in the UK, South Korea, Singapore and the US.

The committee has also recommended that a national stem cell bank be established to facilitate access to stem cells by researchers and reduce the number of embryos needed to create stem cell lines. The committee recognised that this would bring Australia in line with a number of other countries, including the US, the UK, Sweden and China, who are either planning to, or have already, established stem cell banks.

In addition, the committee also made the following recommendations, which are aimed at facilitating research:

  • Fresh ART embryos deemed unsuitable for implantation should be permitted to be used for research. (The current legislative provisions have meant that these embryos are discarded.)
  • Creating human embryos by a means other than the fertilisation of an egg by a sperm for research purposes should be permitted in certain circumstances.
  • Creating and using embryos with more than two genetic parents or which have heritable genetic alterations should be permitted for research purposes in certain circumstances.
  • Interspecies fertilisation should be permitted in certain circumstances.
  • A national register of excess donated ART embryos should be established to facilitate donations of embryos for research and possibly for infertile couples.

A number of recommendations have also been made in relation to licensing, monitoring, commercialisation, consent requirements and public education.

A doctor's liability for misleading and deceptive conduct

In brief: The recent case of Fitzalan v Wright considers whether a gynaecologist who gave advice regarding pre-natal testing, breached both his duty of care, and the Trade Practice Act 1974. The court confirmed that the engagement by the patient of the gynaecologist for medical advice came within the meaning of 'trade or commerce'. Lawyer Christalyne Look reports on the case.


Mrs Fitzalan was born on 13 July 1970, and was almost 31 years old when she became pregnant with her daughter Kelly Marie Fitzalan, who was diagnosed as having Down syndrome and cardiac defects shortly after her birth on 1 November 2001. Her parents (the plaintiffs) sought to recover damages from Dr Wright (the defendant), a specialist gynaecologist and obstetrician, for failing to advise Mrs Fitzalan to undergo an amniocentesis test, which would have revealed whether the foetus had Down syndrome.

Having witnessed the difficulties associated with parenting a child with Down syndrome and other abnormalities, as well as Mr Fitzalan's childhood memories of his mother's psychiatric condition, the couple were particularly concerned about parenting a child with defects. The couple asserted that, if they had been aware that the foetus was afflicted with Down syndrome, they would have elected to terminate the pregnancy.

On 3 May 2001, Mrs Fitzalan consulted the defendant (first consultation) to discuss testing for Down syndrome and other abnormalities. There was basic agreement between the parties as to the format of the first consultation, although there was significant conflict about what was said at the post-examination discussion. Mrs Fitzalan argued that the defendant's statements at this first consultation led her to believe that an 'ultrasound replaced the amniocentesis'. The defendant, however, gave evidence that it was his standard practice to use an 'Ultrasound Detection' handout as a guide to his discussion on pre-natal testing. Relevantly, this handout covered the topic of amniocentesis testing.

On 4 June 2001, Mrs Fitzalan went to Cairns Diagnostic Imaging, where she underwent a first trimester ultrasound. Her next consultation with the defendant was on 8 June 2001 (second consultation). At that consultation, the defendant read over and explained the ultrasound report. It was accepted by the plaintiffs that no demand was made at the second consultation for Mrs Fitzalan to undergo an amniocentesis.

Plaintiffs' claims

The plaintiffs asserted that the defendant, in the course of the two consultations, breached his duty of care and breached section 52 of the Trade Practices Act 1974 (Cth) (TPA Act) by making certain statements that the plaintiffs:

  • understood and believed that there would be no need to have an amniocentesis test because the 18-week test would reveal any abnormalities;
  • understood and believed that there would be no need to have an amniocentesis test as the first test and the 18-week test would reveal any birth abnormalities and an amniocentesis test would not provide any further, better or additional information.

The plaintiffs argued that, in reliance upon statements made by the defendant during the consultations, Mrs Fitzalan did not undergo an amniocentesis test, nor seek any alternative opinion as to the need for an amniocentesis test, and she continued with her pregnancy.

Court's findings

On 7 November 2005, in the Queensland Supreme Court, Justice Jones dismissed the claims made by the plaintiffs against the defendant. His Honour did not accept, on the facts, that there was any conduct on the defendant's part that would have reasonably led the plaintiffs to understand and believe that there was no need for an amniocentesis test, given that the 18-week scan had been undertaken. Accordingly, Justice Jones concluded that there was no breach by the defendant of the duty imposed on him at common law.

In relation to the plaintiffs' allegation that there was a breach of s52 of the TPA Act, his Honour said that the section requires a determination of whether, objectively, the conduct was misleading or deceptive. Further, in order to recover damages, the plaintiffs needed to prove that the loss or damage claimed to have been suffered was 'by' conduct in breach of the TPA Act. In his Honour's view, the defendant's conduct was not, in any sense, misleading. Neither the ultrasound scan results, nor the advice given by the defendant, suggested that there was no need for an amniocentesis test.


The present case suggests, in accordance with the earlier case of Richards & Ors v Rahilly & Anor [2005] NSWSC 352, which was discussed in the November 2005 edition of AAR's Focus: Health, that a medical practitioner has a duty to recommend to patients treatment or tests that they consider most appropriate in the circumstances, and to explain fully to patients the advantages, disadvantages and limitations associated with that treatment or test.

In providing medical advice, however, a medical practitioner should not represent to patients that no other treatment or tests are necessary or available if that is not, in fact, the case, for fear they find themselves liable, not only for negligence, but also for misleading and deceptive conduct under s52 of the TPA Act.

AB v Attorney-General of the State of Victoria – an update

In brief: The Victorian Supreme Court last year determined that the Infertility Treatment Act 1995 bans the insemination of a woman with sperm from a man known to be dead. Partner Belinda Thompson and Lawyer Tanya Vaysman report on developments following this decision.

In the highly publicised decision of AB v Attorney-General of the State of Victoria1 AB applied to the Infertility Treatment Authority (the ITA),2 established under the Infertility Treatment Act (the Act) to seek its written approval to export sperm from her deceased husband from Victoria to a different jurisdiction3, where there are no similar prohibitions on the posthumous use of the dead man's sperm4.

The ITA refused and stated that 'the particular precedent that may be set, does not allow the Authority to grant approval'. (Read our earlier report on the Act by the same authors: AAR's Focus: Health, November 2005.)

Current proceedings

On 9 September 2005, AB (now described as 'XY' for the purposes of the current proceedings) applied to the Victorian Civil and Administrative Tribunal (VCAT) to review the decision made by the ITA. Under the provisions of the Act, VCAT has the power to re-hear the merits of a case, as if the original decision had never been reached.5

This time XY was successful – Justice Stuart Morris approved the export of frozen sperm taken from XY's dead husband from Victoria, subject to the sperm being transferred directly to a Sydney IVF clinic to produce an embryo to be implanted in XY.

Issues discussed
Section 56(2) allows ITA a broad discretion under the Act

VCAT noted that three subsections of the Act, namely 56 (2), 56(4) and 56 (5), set out a discretionary regulatory framework for the import and export of the gametes6 and embryos into and from Victoria.

In the particular circumstances of the case, XY applied to the ITA under subsection 56(2), which, unlike other subsections, provides the ITA with a broad discretion not confined to any particularised criteria. VCAT noted that, in conferring such a broad discretion, the Victorian Parliament had allowed a decisionmaker to determine what they should regard as the relevant matters, in light of the scope, purpose and the subject matter of the Act. However, Justice Morris stated that the guiding principles set out in s5 of the Act were clearly intended by Parliament to direct the exercise of the discretion.

Justice Morris stated that XY should not be prejudiced by the circumstance that her husband had died. The fact that the child would be conceived after the death of the biological parent was not a sufficient reason to refuse consent for the export of the sperm. Justice Morris found that XY's decision to have her dead husband's child was rational and genuine and was supported by key family members, including those of her dead husband. He was satisfied that the applicant had the will and capacity to provide a loving and caring environment for the child, and that both sets of grandparents were willing to provide the required support for the child. Further, he considered that, as the concept of a family is not defined in the Act, it should be construed broadly. Justice Morris stated that the notion of 'family' does not have defined edges and should not be taken to be referring to the interests of individual family members but rather to the interests of the family as a unit.

Section 8 of the Act

Section 8 of the Act provides that, in order for a woman to access infertility treatment, she must be married and living with her husband, or living with a man in a de facto relationship.

In McBain v The State of Victoria,7 the court held that those requirements, and various other provisions of the Act that are dependent upon s8, were inconsistent with the federal Sex Discrimination Act 1984, and therefore invalid. Justice Morris concluded that, although XY was not married, due to the invalidity of s8, she would not be prevented from undergoing the fertilisation procedure.


It is obvious that the current legislation is falling behind the rapidly developing assisted reproductive technology.

The Act has not been updated for some time; therefore, it does not take into account the developments such as the McBain decision, nor Australia's ratification of the Convention on the Elimination of all forms of Discrimination Against Women.

Currently, the Victorian Law Reform Commission is reviewing the posthumous use of sperm for conception, so the outcome of future cases in this area might depend on the Commission's recommendations and whether those recommendations are acted upon by the Parliament.

We will keep you updated on any further developments in the area.

  1. [2005] VSC 180.
  2. Part 9 of the Act.
  3. The Act s56(2).
  4. In NSW and ACT there are no similar prohibitions.
  5. The jurisdiction for the review provided by s51 of the Victorian Civil and Administrative Tribunal Act 1998.
  6. 'Gamete' is defined in s3 of the Act to mean either an ovum from a woman or a sperm from a man.
  7. [2000] 99 FCR 116, [2002] CLR 327.

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