The Silo Strategy –Part 1

How did the for-profit labs become the sole providers of laboratory services for all non-hospital patients in Ontario?  These patients, often called community patients, usually need a lab test that is ordered by their family doctor or a nurse practitioner.  In Ontario multinational corporations have achieved a feat unparalleled in any other province in Canada.  They have complete domination of the community laboratory market.  All other provinces use public non-profit facilities to serve rural and northern areas and most, if not all, urban community patients.

In 2000 the Ontario Association of Medical Laboratories, the lobby group for the private laboratories, argued that government policy should recognize hospitals and commercial laboratories as the primary providers in the sectors they controlled. This silo strategy emerged from the failure of the for-profit laboratories to successfully expand into providing inpatient services in the 1990’s.  Since then the for-profits have actively opposed integration, fearing that integration would bring about their decline, as it did in Alberta and Saskatchewan after the private labs were bought under the control of those provinces regional health authorities. Opposing integration also improved their chances of increasing their share of the community market: which they have done, with help from their government friends.

We may never know the back story behind this result.  But a couple of recent legislative changes were important. The 2006 change in the definition of a hospital in the Public Hospitals Act helped compete their anti-integration-silo strategy.  This amendment was tacked onto the legislation that brought in Ontario’s regional health authorities, the LHINS.  Section 52 of the LHINs legislation changed a hospital from a place that can care for all people who are ill, to one focused on those admitted to hospital. The change limits access for community patients to all those services that hospitals provide.

By legislatively narrowing the scope of hospitals the government has limited the possibilities for integration.  If each region is to make maximum use of all its health care resources in the way that best suits that region, precluding hospitals from being used in certain ways undermines the their best use: it takes away options. Narrowing the role of hospitals increases the potential market for-profit companies even if it decreases access for community patients and increases health care costs.  The limited definition of a hospital not only affects laboratories services, but other services like imaging and rehabilitation, that patients are finding increasingly hard to access in a hospital.

It is not clear what back room dealing brought about this change but the winners are Lifelabs, Gamma Dynacare, and CML.

Changes in a second piece of legislation, the Commitment to Medicare Act of 2004, were a complementary precursor to the changes in the definition of a hospital and also favoured the for-profit silo approach: that is the story in next week’s blog.

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