Posted tagged ‘competition’

Private Hospitals in Specialty Clinic Clothing

September 6, 2013

The provincial government’s mid-summer announcement that regulations under the Independent Health Facilities (IHF) Act will be drafted to permit “specialty clinics” raises some serious concerns. Changes in the LHINS enabling legislation will also be required. While the details are sparse the government’s stated goal is to permit the LHINs, Ontario’s regional health authorities, and Cancer Care Ontario to establish and fund clinics to provide services currently delivered in public hospitals. The government is committing that these new clinics will not harm a hospital’s ability to deliver services.

The official proposals are this general. Some best-guess inferences are: the IHF administration will be responsible for licensing and quality of the new clinics, and they will be paid under some form of global budget-facility-fee-fee-for-service hybrid probably determined through a competitive request for proposals (RFP) process. This is how democracy works these days: in lieu of accountability and transparency, the public has to read the tea leaves.

The proposal for specialty clinics continues trends that move services out of hospitals and shift planning to the regional organizations. These developments have been slow and erratic but seem destined to cut health care expenses, especially for publicly protected services, expand the power of the Ministry at the expense of both doctors – good – and the community – bad, and increase for-profit delivery and market competition in Ontario’s health care system.

These specialty clinics require new regulations because, unlike other IHFs which also take work from hospitals, they will be established and funded by organizations other than the Ministry of Health. The LHINs and Cancer Care Ontario will then be in a position to decide if they should use their money to fund hospital based services or community clinics, some of which will look like private hospitals.

There is reason to be skeptical of the claim that these clinics will only be set up if they do not harm a public hospital’s ability to deliver a service. Currently, in Ontario, there are over 900 IHFs all of which perform work that could be done in hospitals. Not all of it should be done in hospital’s but there are many instances, especially in smaller communities, where centralizing laboratory work and diagnostic services in hospital facilities would increase the hospital’s ability to provide care for its in-patients, increase access for community patients and cut overall costs. The government has opposed all proposals that would help achieve these goals.

The intent of the government to dogmatically limit the scope of all hospitals is reinforced by the 2006 changes to the definition of a hospital in the Public Hospitals Act. Formerly hospitals were institutions to improve the health of the community, under the new definition hospitals are only to provide services to acute care in-patients. This change in definition has already been used in many smaller communities to cut back or close hospital laboratory and radiology services often limiting access to community patients where is limited or no community alternatives. Almost all this previous hospitals work, to the extent that it is still done, has gone to private corporations. Unless the government’s one-size-fits-all limited approach to hospitals, symbolized by the new legal definition, is changed any commitments to safe guard hospital care need to be taken with a grain of salt.

The most reasonable interpretation of how the new speciality clinics will work is that the LHINs and Cancer Care Ontario will decide which ambulatory hospitals services will be moved to IHFs which are primarily for-profit. The decision on who should provide services will be primarily determined through a competitive RFP process, which is the method enshrined in the IHF Act: public hospitals will end up bidding against private speciality clinics/hospitals to deliver services. This outcome is a logical extension of the competitive approach the government has been using between hospitals for some services. The LHINs and Cancer Care Ontario will pay for these new services primarily by taking money from hospital budgets further increasing the threat to hospitals and public health care.

There are some potential positive benefits from the Specialty Clinics proposal. Following the recent physiotherapy changes it seems likely that these new clinics will be paid on something other than simple fee-for – service, which is helpful. Similarly moving some work in some communities to stand-alone community clinics and shifting more services to the regional planning process could make for a more sustainable and accessible health care system. To achieve these desired goals, these new clinics would need to be public non-profit and preferably run under existing hospital or Community Health Centers administrative structures. This formal linking will allow for better use of staff, greater integration and permit the government to achieve its formal goal of expanding non-profit public health care. The capital expenses required would come from the public purse making them part of the overall public planning process and reducing cost.

These new specialty clinics can only benefit our public health care as non-profit entities within a non-profit system. For these regulations to gain public support they need these guarantees as part of the proposals. Unfortunately the government’s pig-headed commitment to increasing for-profit delivery and market competition will only increase cost, and undermine integration, accessibility and quality.


Health Facility License Auction Health Cost Driver

October 19, 2012

It seems so obvious in hindsight:  if you want to know what is going on in business-side of community medicine look where doctors look – the classified section of The Medical Post.

After reading all of the articles, during a slow day at work, a big flashy classified ad for MCI: the Doctors Office caught my attention.  It is one of the expanding chains of family practice centers that are the face for-profit primary care in Canada.  The ad provided no further insights into the operations of the chain.

Below this ad was a more interesting offering: the sale of an Independent Health Facility (IHF) license.

Auction of IHF in GTA

A rare multi-modality IHF in Pickering, Ontario is to be auctioned

 The IHF license has the following modalities: Nuclear Medicine; In Vivo – General and SPECT; Diagnostic Ultrasound; General Ultrasound; Vascular Ultrasound; diagnostic radiology; fluoroscopy; Bone Mineral Density; mammography; and, Radiography

No other assets or liabilities to be sold with this.  This is strictly a license only sale.  Non-conditional sealed bids must be received by end of business hours on Thursday Nov. 1, 2012. Closing of the above transaction will take place no later than December 31, 2012.  A minimum reserve bid is in place.

Only serious principals send inquiry to

The ad is interesting because it puts no caveats on the sale except that it is a final transaction and that there is a minimum reserve bid:  standard practices in any estate auction. Unfortunately this is a sale of an essential health service.

The bid is to be non-conditional but this seems at odds with the Independent Health Facilities Act. The Minister of Health has the power to refuse the transfer of a license.  She ‘may’ allow the transfer if she is satisfied that the new owner will provide a quality service and “operate competently and with honesty and integrity”.  Now it seems to me it should take the Ministry longer than a few weeks over Christmas to assess whether a new owner meets these criteria.

Then there is also the concern about location.  The license is tied to a location and clearly there is nothing but the license being sold.  Is there a lease on the building?  Is it up?  And there appears to be no equipment or staff.  So the purchaser will be setting up a new business with a non-conditional bid and a closing date of less than two months. If the Minister rejects the transfer than we potentially lose needed services, and certainly the purchaser loses money: pretty high stakes for a non-conditional bid.

The transfer cannot really be non-conditional unless the transfer is relatively free from ministerial interference: somewhat like what happened with the establishment of Specimen Collection Centers (SSC) under the laboratory licensing provisions.  The Ministry simply stopped fulfilling its obligation to protect the public interest in the location of SSCs. The indication is that now the transfer of IHF licenses and location of facilities also operates without any significant Ministry control and outside the LHINs, which were supposed to be integrating health care in Ontario.  This would be a good topic for the auditor when the office next examines IHFs.

The ad also shows that these licenses have a market value independent of quality, quantity or accessibility of care. A market price tied to a license only drives up the cost of care.  The private market in the sale of licensees would also facilitate the corporate consolidation of Independent Health Facilities in Ontario: creating a stronger force for more for-profit health care.

Those who doubt the primary business interests in family medicine should take a good look at The Medical Post’s classifieds and follow the money.

The Independent Health Facilities Act can be found at:  The ihfacution-ad was in the October 9, 2012, print edition of The Medical Post.


The Silo Strategy – Part Two

February 21, 2012

On January 31, in “The Silo Strategy: Part One,” I wrote about the exclusion of the for-profit laboratories from Ontario’s regional health authorities, the LHINs, and the negative effects of this exclusion on recent attempts in Wallaceburg, Thessalon and on St. Joseph Island to control laboratory costs and maintain local access.

The silo strategy, securing all the community laboratory work for the for-profit laboratories, was first voiced in 2000.  It was a change from their 1997 position when the CEO of the Ontario Association of Medical Laboratories (OAML) argued for a competitive process to determine a single supplier for all medical laboratory services in each region.  A 1999 pilot RFP in three regions failed to produce a successful bidder. In part the for-profit labs realized that the competitive process meant “winner-take-all” and any one company could lose all their business: the big three private labs have a very comfortable oligopoly with stable incomes and profits.

So the private labs blinked and decided to limit their goal to providing, as a group, all the community lab work in Ontario. This strategy required that the private labs maintain their separate funding, have direct negations with the province and stop non-profit labs, primarily hospitals, from performing community work.

The first major legislative hurdle for the new silo strategy came in 2003 when the province introduced the Commitment to the Future of Medicare Act.  The initial version of the Act treated the private laboratories the same as hospitals and subjected them to the same financial, accountability and transparency provisions.

The OAML fought this inclusion.  They argued that the legislation was draconian, that it allowed the province to micromanage the health care system and they argued that all sectors should negotiate separate agreements with the province: the antithesis of an integrated system.

When the Commitment to the Future of Medicare Act was passed the private labs got most of what they wanted.  They were included in the provisions barring extra billing but they managed to escape the requirements on accountability and transparency.  This victory laid the basis for the exclusion of many for-profit providers from the regional health authorities.  It also limited the use of hospitals as providers of community medical services, even where it would clearly increase access and decrease cost, like in Thessalon, Wallaceburg and on St. Joseph Island.

For the OAML’s position see their brief, “Commitment to the Future of Medicare Act, Bill 8/2003: the Community Laboratory Perspective,” January 2004.

Competition and Quality

July 21, 2011

I submitted the following comment to a blog dedicated to medical laboratory quality.  One of the posts argued that more competition would improve quality.  The blog can be found at:

The argument that more competition would increase laboratory quality is, at best, weak.  Apple may have a more consumer friendly product, but is it of better quality? Blackberries work pretty well. More to the point, there are many examples in computers, cars, hedge funds and children’s toys, all competitive sectors, that have produced terrible quality: think pinto, Microsoft millennium 2000, dell batteries, firestone tires and cadmium.  Further to the point, health care is not like other consumer products and it is hard to argue sectors of health care that are not competitive, like hospitals or the NHS have poorer quality, though they certainly can be improved.  In the 1970’s when Ontario’s community laboratory sector was very competitive quality was poor, so much so that a series of conservative governments felt compelled to bring in regulations to improve quality and reduce competition.  Your example of Newfoundland pathology testing ignores the fact that similar problems have occurred in the United States with a competitive laboratory market and in Ontario, Manitoba and BC with multiple laboratory providers. The effect of more competition in the provinces with multiple laboratory providers has been increased secrecy, a barrier to improved quality, and decreased pre-analytic and post analytic quality.  Based on the evidence it is hard to sustain the argument that more competition will increase quality: the sounder argument
makes the opposite point.