For-Profit Care in Canada: A Bust
Thanks to Dr. Don McCanne for identifying the following related reports:
Delivery Matters: the high costs of for-profit health services in Alberta
By Diana Gibson
In Alberta and across Canada, the private for-profit healthcare sector is being positioned as a solution to wait times and the financial challenges facing the health care system. Consequently, for-profit delivery of healthcare is increasing.
(T)his report explores the delivery of clinical services, specifically arthroplasty or total hip and knee replacements, through private, for-profit clinics. It includes a case study of Calgary’s Health Resource Centre (HRC) that specifically examines the cost, quality, access and other implications of expanding this form of provision and places it in the context of national and international research. (The Health Resource Centre, based in Calgary and owned by Networc Health Inc., was Alberta’s flagship private surgical facility until it went bankrupt in 2010.) It also examines a wait-list reduction pilot project, the Alberta Hip and Knee Replacement Project, which includes for-profit and not-for-profit providers, allowing for a comparison of the two models.
The Alberta Hip and Knee Replacement Project
In 2004 the provincial government initiated a pilot project to address a myriad of challenges within the arthroplasty field. One of the key elements of this pilot project was to address wait times as directed by the Premier’s Advisory Council on Health and its Framework for Reform. A partnership was carved out between Alberta Health – which contributed $20 million in funding – three regional health authorities (and their clinical partners including HRC), the Alberta Orthopedic Society, the Alberta Bone and Joint Institute and physicians from across the province.
The trial illustrated that with improved management practices (such as centralized intake and assessment), realignment of resources, and collaboration and cooperation across the delivery path, costs can be reduced, wait times can be decreased and benefits to patients enhanced within the public, not-for-profit system. Specifically, the trial reduced overall wait times from family doctor through to surgery by 90 per cent (from 19 months to approximately 11 weeks).
Risks and Opportunities of HRC
The surgeries were more expensive, but came with significant risk in other areas as well: the dependency between the parties became detrimental to both; the relationship created expensive duplication of capital and lack of control over infrastructure planning; and the private contract meant a serious lack of accountability and transparency. Additional risks identified in international studies include lower quality of services and poorer articulation with the broader health community.
Comparing For-Profit to Non-Profit
The Alberta government acknowledged that the for-profit surgeries would cost more but justified this with the wait-time reductions were worth the cost. The examination of the performance of HRC in contrast with the public non-profit elements of the pilot project helps to illuminate the wait-list issue. The analysis above reveals that the public partners in the Alberta Hip and Knee pilot are still working well, with wait-time advances at lower cost than the HRC and without the risks.
The wait-list reduction achievements of this project were attained despite, not because of, for-profit involvement in the trial. It was the specialized or focused nature of the clinic, not the investor-owned nature, which increased patient access and enabled innovation. This is consistent with international evidence from Canada and abroad demonstrating that wait lists are actually lengthened as a result of the existence of for-profit entities delivering clinical health care services.
What advocates of for-profit delivery suggest is that the removal of patients from the public queue will shorten the queue. What they fail to note is that the removal of health professionals from the public delivery system will slow down the system and result in the queue growing even longer.
The Alberta Hip and Knee pilot project demonstrates the capacity of the public health system to evolve and innovate in such a way that costs are maximized, wait lists are reduced, and patient outcomes are improved. The pilot set the stage for province-wide learning and provided a platform for a revolution in hip and knee surgical practices. Gains from the pilot continue to be made through the Transformational Improvement Program (TIP), which specifically addresses wait lists. Results to date show improvements in length of stay at almost every site, as well as gains in other key indicators of quality such as patient satisfaction and early mobilization after surgery. The rewards are substantial. They include higher volumes of surgeries as more bed days become available, greater satisfaction as patients move more quickly from referral to surgery, and reinvestment of the efficiency savings in ways that can further improve care quality and safety. Our public health system is more than able to meet the needs of our citizens when the political will exists and resources are allocated.
It matters who delivers clinical services. The spectacular fall from grace of HRC is a fascinating study in the ills of health care privatization, the risks to patient care, and the need to reiterate the importance of our publicly financed and delivered health care system. The case study of HRC is very consistent with international studies, validating the conclusion that for-profit incursions into the health care system are risky, costly and lack the accountability Canadians expect, demand and deserve.
The success of the public partners in the pilot project on wait-time reductions in Alberta clearly shows that public solutions can achieve the same wait-list targets at less cost and much less risk to the public.
Canadian Doctors for Medicare
Neat, Plausible, and Wrong: The Myth of Health Care Unsustainability
Which Costs Are Rising?
While the cost of Medicare has not grown as a percent of GDP over the last 35 years, there have been significant increases in total health care system costs over the same period, and those increases have accelerated in the last decade. Overall health spending in Canada has risen from about 7% of GDP in 1975 to about 10.7% in 2008. In 2010, heath care spending was estimated to be about 12% of GDP.
If Medicare costs are stable, and public sector costs are rising slowly, why are total health care costs increasing rapidly? The real cost driver is precisely the thing that critics of Medicare tout as the solution: private health care.
Currently 30% of all health care spending is in the private sector, up from 24% in 1975. That growth is the result of significant increases in costs in the private health care sector, including out-of-pocket spending and the costs of private insurance.
Dr. McCanne's comment:
In spite of the overwhelming body of evidence to the contrary we still hear over and over again that the private sector always produces higher quality at lower costs - whether in health care financing through private insurers, or in health care delivery through investor-owned facilities. Canada has provided us with yet another real-life experiment that confirms, once again, that the opposite is true.
The Alberta government understood that private care would cost more than in the public sector, but they agreed to it in an effort to reduce wait times. However, not only did the private sector provide care at higher costs, they had intruded into the loosely-integrated public system, creating the potential of increasing wait times in the public sector (explained above).
Fortunately, with a coordinated effort to attack this problem - coordination that only happens in the public sector - Alberta was able to reduce its wait times for orthopedic procedures from 19 months down to 11 weeks - in spite of, rather than due to, involvement of the private sector.
Also, quite ironic but very instructive, not only did care cost more when delivered by the private, for-profit Health Resource Centre, the extra costs were not enough and the business model failed - ending in bankruptcy.
In health care financing and delivery, public and non-profit institutions can always provide greater value and efficiency than the for-profit private sector, but it requires a government that is supportive of their public financing system.
In 2005, Conservative Premier Ralph Klein of Alberta wrote in the Calgary Herald, "Let me be blunt. We have unacceptable waiting lists in our publicly funded, rationed health-care system, and all the money in the world is not going to eliminate them... In simple terms it means that if you are in pain or suffering and cannot wait in line, you should be able to buy the health care you need."
The Calgary Herald published my response which stated, "Ralph Klein states that 'all the money in the world' is not going to eliminate waiting lists, unless the source of the funds is private instead of public. What nonsense. Excessive queues are eliminated by making minor, selective adjustments in the system’s capacity. Responsible stewards of any health-care system, public or private, will make these adjustments. The difference is the public system would be adapted to accommodate everyone, whereas private systems accommodate only those who can pay."
Of course, Alberta didn't listen to me and continued on with its efforts to privatize. However, they did involve the public sector in queue reduction, with considerable success. But by including the private sector, the experiment was much more expensive, and resulted in further losses through the HRC bankruptcy.
The for-profit motive is always at variance with the motive for the best in patient care. In truth, one can not optimize profits while providing the best possible care. The drive for profits distorts health care delivery through perverse incentives, a fact well documented by the American experience over many decades and now re-established in this small scale experience in Alberta, Canada.
Dr. Joe Jarvis