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.

Will That Be Raspberries With Your Rectal?

The changing face of primary care is on special at Loblaws’.  Primacy, a for-profit chain of primary care clinics, has 112 outlets in Loblaw Stores. Most Loblaws’ also have in-store pharmacies.  The synergies are obvious.  Primacy’s web site says, “an on-site pharmacy provides expert advice and services to our patients.”  A recently signed preferred pharmacy agreement organized by international professional services company Towers Watson is also designed to boost pharmacy sales; and presumably traffic to the Primary clinics, and Loblaws’ vegetable aisles. The preferred pharmacy agreement aims to reduce drug plan costs for the companies covered.  A win-win for Towers Watson, Loblaws’ and the Companies’ benefit costs. Employees using the drug plans get convenience, if they go to Loblaws’, and “enhanced services” offered by the Loblaws’ pharmacies.

Rounding out their current suite of health services many Loblaws’ include a GoodLife fitness center. GoodLife is a different service in that it receives little, if any, public money for its primary business.  Mind you it did just receive a very generous tax credit for a 5 million dollar donation to the University Hospital Network’s Peter Munk Cardiac Center in Toronto.

The existence of the Primacy chain and its association with Loblaws’ is what caught my attention.  In days past, a physician, or a small group of doctors, would rent, sometimes buy, an office space and run their practice.  There were many problems with this model.  Doctors ran the show, there was limited integration of other health professions in patient care, and it was hard to provide after hours or 24 hour primary care.  But at least the public money trail was fairly obvious. Doctors received medicare payments, ran the practice, and paid staff, suppliers and landlords.  Community Health Centers are a non-profit alternative that improves primary care access and local  community control.

Chains like Primacy change some fundamental elements of this service provision. Primacy, with annual revenues of 3 million dollars, has 450 physicians providing services to 3.5 million patients per annum (from company media release).  It was recently purchased by Calian Technologies Ltd. (TSX:CTY). Calian is a diversified Canadian company with a high yield dividend – a good match with Primacy’s assured payments from public insurance.  Primacy is part of Calian’s  Business and Technology Services division which primarily provides staff outsourcing, consulting and contracted management services.

Is there something wrong with these changes?  The Doctor still runs their medical practice and Primacy just makes it easier? Good questions, and since we just starting to see the emergence of these significant for-profit incursions into primary care, the concerns are more extrapolation from past experience and reasonable assumptions until we obtain more information. We don’t even know the extent of for-profit primary care  and no one is monitoring it.

The lack of knowledge is a concern in itself. No matter how you cut it the bulk of the money funding these developments is public money going to provide a core service for Canadians.  And these changes are no longer trivial.  There are many primary care chains all across Canada, employing thousands of doctors and serving millions of individual patients. If nothing else, control is shifting to corporate boardrooms.

Since it is primarily public money providing an essential service, as a minimum we need to know the contractual arrangements between the companies, and between the companies and practitioners.  In the United States, where interlocking corporate structures governing various aspect of care are common, there have been many reports of misuse: over-referring being a central one.  In Canada there has been a long history of for-profit laboratories exchanging various perks, like cheap rent and subsidized staff, for increased or monopolistic referral patterns.

Then there is the cost.  What percentage of this public money is now being used for advertising, profit, and multiple layer of administration?  And what if Calian mandates the use of a proprietary technology in the clinics, or engages its clinic staff in labour practices which the health care providers are worried might affect care?  Are their confidentiality clauses?  Are their restrictions on staff employment patterns, like the one imposed by a private methadone clinic? Are their benefits to staff for referrals to the Loblaws’ pharmacy?

These questions are just the tip of the iceberg of concerns.  The initial step is to shift our gaze onto this changing landscape and determine what these changes mean for access, quality, cost and democratic control of primary care.  Is it really useful to have the long-term stability of frontline medicine determined by the success of the raspberry futures market?

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.