Ontario Budget Debate Ignores Taxes and Billions Transferred to For-Profit Corporations

Ontario’s budget debate may be high profile, but it misses two essential points.

With the NDP signaling NO TAX INCREASES (on the middle class) a serious discussion about taxes, particularly the need to increase corporate and wealth taxes, will not take place. It is hard to have any serious budget discussion without considering the income side. Many commentators have made this point.

At the same time, the expanding use of for-profit companies, often multinational conglomerates, to deliver and finance public services, is being ignored. The negative impact of private delivery on cost, quality, accessibility and democratic control of public services has been well documented and may be the most destructive government expense.

The exact amount transferred to for-profit corporations is unknown. This secrecy, by itself, is a strong democratic argument against the use of private companies. Yet, a quick look at the public accounts for the Ministry of Health shows well over one quarter of that budget is paid directly to private for-profit companies. The easy pickings for large payments to for-profit providers in health care are:

Pharmaceuticals – 4.6 Billion Dollars

Only about 2% of the Ontario Drug Programs budget is used for administration. The rest is transferred to large drug store chains and then much from there to the pharmaceutical conglomerates. The $4.6 billion figure includes $414.5 million that is paid to hospitals, Cancer Care Ontario and the Trillium drug plan which is also primarily transferred to ‘Big Pharma’.

Long Term Care (LTC) – 2 Billion Dollars

The Canadian Union of Public Employees estimates that in 2010 fifty-three percent of LTC beds were in for-profit facilities. $2 billion is low because some of the non-profit homes contract services like food preparation, cleaning and maintenance to private health care conglomerates.

Capital expenses – 1.3 Billion Dollars

Most of the $1.46 billion in the Health Capital account to build, finance, maintain, operate and/or renovate hospitals will be transferred to consortiums of multinational companies or to large private contractors.

Home care – 1.2 Billion Dollars

The Ontario Association of Community Care Access Centers says that 91.3% of the home care budget is spent on direct patient care of which the Ontario Health Coalition estimates 58% of nursing care and 64% of personal support services are provided by for-profit companies.

Medical laboratories – 680 Million Dollars

Over 93% of the medical laboratory services outside of hospitals in Ontario are provided by three multinational corporations. Ontario based for-profit companies provide the rest.

Independent Health Facilities (IHF) – 396 Million Dollars

97% of IHFs in Ontario are for-profit companies.

Physiotherapy, Assisted Devices and Home O2 – 598 Million Dollars

Community physiotherapy services, the Assisted Devices Program and home oxygen providers are primarily for-profit.

eHealth – 291 Million Dollars

The 2010-11 eHealth Annual Report says that 80% of their budget is transferred to public-private-partnerships, in other words paid to large for-profit companies.

Hospitals, Primary Care and Multimillion Dollar Incidentals

Hospitals and primary care are still nominally non-profit. However, significant portions of both their expenses go to for-profit corporations (usually very large ones). Hospitals often contract out cleaning, security, food services, information technology and maintenance. Temporary agencies supply nurses. Consultants and management services are regularly hired.

For-profit chains increasingly provide urgent care services and physician offices. These chains are paid from a percentage of the physician’s billings to the government. Management companies, IT firms and temporary help agencies also receive money from the primary care budget.

Then there are a variety of isolated payments from the Ministry of Health to private corporations: for example, the $56 million paid to IBM and the $35.6 million paid to Sykes International. The Community and Priority Services Program, with a $638 million budget, uses a number of private corporations. And the list could go on – the Ministry of Health’s budget is large and complicated.

In addition to the $11.1 billion itemized above, hospitals, primary care and incidentals probably account for billions more public health care dollars transferred annually to for-profit companies.

The use of for-profit companies is not a small problem even in this single case of the Ministry of Health. Two provincial budget provisions would increase accountability, limit further damage and require no party to directly confront the existing problem of for-profit provision.

1) Detail and publish all payments to private-for-profit corporations, and,

2) Prohibit new use of for-profit providers.

A serious debate on these suggestions would help bring the current budget bargaining back to the big issues facing Ontario’s finances: taxes and private delivery of essential services.

Private Hospitals in Specialty Clinic Clothing

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.

Response to Toronto Star Pro For-Profit Clinic Opinion Piece

On December 10, Rick Janson, Campaigns Officer, Ontario Public Service Employees Union, published the following post in response to an opinion piece in the Toronto Star:

Who should you trust? Former PC advisor shills in the Star for private health care

Francesca Grosso says she is an established expert in health care policy. A former PC health care policy director, her day job these days is a principal at Grosso McCarthy, a public affairs company for hire… continued at

http://diablogue.org/2012/12/10/who-should-you-trust-former-pc-advisor-shills-in-the-star-for-private-health-care/#more-2618

Quality Program Fee Increases and IHF Corporate Concentration

This year Independent Health Facilities (IHFs) in Ontario will start paying an annual administrative fee to cover the costs of their quality control program plus a new fee for the direct costs of each quality assessment. Prior to June 2012 the Ministry of Health had paid the College of Physicians and Surgeons out of Ministry funds to run the quality program.

The administrative fee per license is set at 860 dollars for the first year. The amount per license is not large but it is continuous.  Many IHFs also have more than one license, for instance, they may be licensed for diagnostic imaging and pulmonary function testing, so their yearly increase will be thousands of dollars. The administrative costs, plus the new fees for each assessment, are on top of increasing costs for electronic medical records, more reporting, more in-depth accreditation and quality control measures, newer technology and a host of costs.

Moving the quality control costs off the government books is a bit of a shell game. IHFs are primarily funded by OHIP payments, or in other words, public revenues. Having IHF operators directly pay for quality programs means they are going to request more money from OHIP. Either way it comes from the public purse.

The government is hoping that the IHF operators will simply absorb the costs.  Under current rules the extra charges cannot be passed onto patients because of the ban on extra billing.  Operators could ask for increased fees-for-services but in the short-term this seems unlikely given the recent fee cuts imposed by the government. Larger corporations with reserves and the ability to reduce costs through multi-site efficiencies will ride out the increases and recoup losses in future fee negotiations. Many smaller operators will simply feel the most pain.

An article in the October 2012 edition of Health Affairs pointed out an increased quality cost on the clinical side.  The authors make the argument that under the fee-for-service payment structure for surgeries in the United States improving quality outcomes can lead to decreased revenues.  Fewer complications from better quality control lead to fewer billing opportunities per surgery plus extra costs in prevention.  The logic underlying this research finding could easily be applied to other fee-for-service health environments, including most IHFs in Ontario.

In case I sound like a defender of millionaire IHF operators that is certainly not my intention. Nor do I think that quality assessment programs are not needed. They obviously are: though it would probably be better if the College did not run them with its conflict of interest – doctors run the College and are responsible for quality in the clinics – and the College’s history of questionable quality practices, at least in the laboratory sector where they are also in charge of quality.

The point is that the long-term provision of for-profit health services by small physician run facilities is a non-starter. As the costs increase to ensure quality it is more challenging for smaller operators.  Smaller operators also pay a disproportionately larger share of their expenses on the process of licensing and maintaining a separate administration to oversee the private market.  It is telling that in the fact sheet outlining the increased fees the last point discusses how IHF operators can give up their licenses. Licenses usually don’t disappear; they are taken over by other operators, more often than not IHF chains which are, in turn, often part of a larger health care conglomerates.

Small physician-run laboratories have long since moved into corporate giants, individual doctors’ practices are quickly becoming an historical artifact and IHF s are  amalgamating into fewer and larger corporations.  The dynamics of quality control and regulation among for-profit providers lead to long-term, non-competitive, corporate domination of these sectors.

The Health Affairs article can be found at: http://content.healthaffairs.org/content/early/2012/10/12/hlthaff.2011.0605

Health Facility License Auction Health Cost Driver

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 ihfauction@yahoo.ca.

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:

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90i03_e.htm.  The ihfacution-ad was in the October 9, 2012, print edition of The Medical Post.

 

Are OHIP Fees to High? – Part 1

Ontario’s recent decisions to cut fees for doctors’ services and move more services from hospitals to community facilities, called independent health facilities (IHF), raise numerous questions about doctors incomes, fee-for-service payment and for-profit clinics.

The Ontario government is arguing that they need to cut many fees because technology has changed making it less costly for doctors to perform certain services.  The government wants “better value for money”.  These arguments leave the impression that there is some measurable process to determine the value of medical services.

Predictably doctors are crying foul.  They argue that the technologies are expensive, staff costs are ongoing and services will need to be cut if fees are cut: once again reinforcing the idea that there is some objective logic to fee setting.  A position supported by doctor’s organizations which for a century have had committees of doctors that determine the value of a service.

The problem for both parties is that the relationship between fees and the actual cost of providing that service is tenuous.  There is a ‘ballpark’ relationship: a visit to a doctor for a sore throat is paid less that a cardiac catheterization.  But below this level of generality the precision falls away dramatically.

This is not a new observation. From my own research, when lab fees in the 1970’s were set by committees of doctors, pathologists earned millions of dollars from their connections to the expanding for-profit laboratory industry. When this became public the resulting political storm – a million dollar income from the public purse was even more outrageous back then – alleged conflict of interest, inflated fees and, if not fraud, highly questionable billing practices.

The Ontario Medical Association (OMA) responded by establishing a new and improved fee structure for laboratory services.  Within two years of the new fees being introduced the Ministry of Health found that there was no reliable data to determine what a fair fee for a laboratory test was. A finding identified again, this time by Ontario’s Auditor General, in 2005.

In 1996 and 2004 Ontario’s Auditor General also found that it was not possible to adequately assess whether the fees paid to independent health facilities reflected their costs.  In 2007 the Ministry of Health said that they were still working with the OMA on solving the problem.

Marketplace, an American TV show, found similar problems in the United States. Marketplaces’ analysis of the Relative Value Update Committee (RUC), the committee of the American Medical Association that recommends fees for medical procedures, detailed how physicians, specifically specialists, can increase the values of certain procedures in their favour.  One commentator said “that if you want to know what is wrong with health care, Google the RUC…a process that for all intensive (sic) purposes isn’t a public process, and doesn’t appear to be accountable to much of anybody.”

I can safely say that these three examples are just the tip of the iceberg of problems with fees paid to medical professionals.  In all instances procedures and technologies change so quickly that, even if fees start out being relatively appropriate to the service, they quickly become obsolete.  There is also the overwhelming problem of conflict of interest with doctors setting their own fees than solely determining what required care is.

So are physician’s fees exorbitant?  Who knows from a technical point of view?  The bottom line is that what we pay doctors is a social decision that reflects technical considerations, training, cultural norms, economic factors and political power. Historically doctors have demanded, and been given the right to set their fees and bill what they want.  Ironically, over the last forty years, as the world has lurched towards greater corporate control, doctors, as private practitioners, have come under greater government control.

At the same time setting prices for medical services through some sort of bidding process in a market environment or administrative procedure has become more common: mechanisms that work well with the private delivery of health care and for-profit medicine.

The recent conflicts between the OMA and the Ontario government raise other issues that will be discussed over the next weeks in an ongoing evaluation of the changes in the fee schedule and the push for more Independent Health Facilities.

Independent Health Facilities and For-Profit Delivery: Reassuring Words, Troubling Results

Who said these words and when?

We have three broad objectives: to develop a more community-based health care system to ensure that patients receive quality medical care as close to home as possible; that the procedures are carried out in a safe, effective manner; and to regulate facilities so that they are appropriately located and established in a planned way.

What we want to see is the freeing up of hospitals to do what they do best: provide the patient care and the patient care services that require a hospital setting. As a result, our institutions will be free to direct their expert care to those most in need, which in turn will result in substantial savings and efficiencies in our hospital sector.

For community-based facilities, the Ministry [of Health] will give preference to Canadian and not-for-profit groups. (minor editing was done to improve word flow)

You could be excused if you guessed Deb Mathews, Ontario’s current Minister of Health, or Dwight Duncan, the Minister of Finance. Either could have used these exact words when describing the 2012 changes in funding to health care.  But you would be wrong.

Elinor Caplan, Minister of Health in 1988, made these comments when she introduced the Independent Health Facilities Act (IHFA).  The IHFA legalized and structured the market for non-hospital facilities that provide medically necessary procedures, much the same as the Laboratory and Specimen Collection Center Licensing Act did for private laboratories.

Both of these pieces of legislation created separate silos for private providers further dividing health care provision.  A fact reinforced by Ontario’s recent initiatives to move more hospital services into the community.

I know that Caplan, presaging recent comments by Minister Mathews, said that preference would be given to non-profit providers, but what is the result of her government’s actions?

Twenty-five years after the introduction of the IHFA the ten largest for-profit chains governed by the IHFA account for 2% of all the providers yet hold 38% of all the licences and control 24% of the locations.  Two companies, CML Healthcare and Medical Imaging Centers have 23% of the licences. Limitations on public data provided by the Ministry of Health make more interesting comparisons, like income, corporate interlinks, volume of patients and quality records, of these publicly funded health care providers difficult, if not impossible, to obtain.

The words that Caplan and Mathews use are reassuring but the outcomes of their actions are troubling. One consistent fact has been the disconnect between what they say and the continued expansion of the for-profit sector to the detriment of public services and patient care.

Health Integration: Not in Ontario

I am sure there is a plan to improve health care. There must be: Ontario’s recent budget says it wants to improve integration, control costs and increase access.  Yet Ontario’s provincial budget just does not do it.

The section heading says “Providing the right care, at the right time, in the right place”. Praise worthy sentiments.  The regional governments, the LHINs, responsible for meeting this goal are going to be reformed again to increase their power. But the next point says that routine procedures in hospitals will be shifted to non-profit community based clinics.

The problem is that these clinics don’t come under the LHIN’s mandate; they are not part of the services the LHIN’s integrate.  These clinics are legislated under the Independent Health facilities’ Act and funded directly from the Ministry of Health.  When these services move from hospitals they will join doctors, medical laboratories and over 900 other, mostly for-profit clinics, already outside the LHINs.

So the government is shifting money from hospitals, which are part of an integrated system, making that system smaller, and increasing funding to another separate system of clinics.  The divisions will become deeper and stronger.  Hospitals and the regional governments will become weaker. I do not follow the logic, which means there may be none.

The “poster child” for this strategy is the Kensington Eye Clinic.  This center has worked because it is in downtown Toronto. There is a large local population requiring enough simple eye procedures to support one clinic performing standardized procedures.  But it is an example of how this strategy does not work for Ontario or for health care integration.

The Eye Clinic is outside the regional organizing structure. It does not provide for the movement of staff, or purchasing, or patient records, or money between institutions.   The Doctors in these clinics are among the highest paid in Ontario. And this structure will not work for most communities in Ontario: they are too small. In most communities not integrating all their service in local facilities, usually a hospital, will deprive these communities of needed services.

The one-size-fits-all approach further undermines the LHINs which are supposed to integrate local heath care to fit the needs of each region.  Having a dedicated building for one service may make sense in Toronto and maybe in Ottawa and London. Even in these communities a separate building does not necessarily mean an entity separate from other services.  It could be administratively integrated with a local hospital.  It could be located in unused hospital space and dedicated to that purpose.  There are many options all of which could work in certain situations.  But the province wants it done in only one way, a way that only works for a minority of large communities in Ontario.  This approach does not make sense.

These separate silos with different funding sources force services out of hospitals. This is how it works: the government tightens budgets for hospitals and LHINs so these organizations need to dump expenses.  Then they provide incentives and misleading information to support organizations that fall under a different ministry budget, in this case the Independent Health Facilities’ budget and fee-for-service OHIP payments.  So, like a strong osmotic pressure, work is pulled from hospitals into clinics.  The system further disintegrates.  The ability of local communities to develop the most cost efficient and effective options for their circumstances is diminished.

Part of the political cover for this restructuring is the myth that it is cheaper.  This statement is, at best, misleading. These clinics will do only the simplest cases.  That is there stated mandate. The cost per procedure compared to the average cost per case in a hospital, which includes all the difficult cases, could possibly be cheaper.  But a recent government document found that hip and knee surgeries in a for-profit clinic in Alberta were more expensive than in the public hospitals, so clinics are by no means always less expensive.  Regardless, equating clinics to hospitals is an apple and orange comparison.

If Ontario’s goal is to provide the best local health care and integrated services then the budget does not make sense.