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26 Healthcare Management Forum Gestion des soins de santé
s a healthcare manager, cast yourself as the negotiator of
healthcare contracts with the for-profit sector. There are two
central goals: preserve the access and equity provisions and
spirit of Medicare; and get a good deal on quality and cost. For-
profit healthcare asserts that it delivers both. Perhaps so, but in
the public interest, the following nine critical questions must
first be addressed:
1. What are we specifically contracting for and precisely what would we
be paying in the public system for the same services or subsets of
services? Are the contracts transparent and signed off by the provincial
auditor, including the tendering processes, specifications, and costs?
We should be cautious about signing anything we wouldn’t be happy
to see on the front pages of reputable newspapers.
2. Is the for-profit option less expensive? If so, does the lower cost
result from greater productivity or less red tape – (real efficiencies);
or from paying lower wages or cherry-picking the easy-to-do services
– (illusory efficiencies)?
3. Are there service quality standards and guarantees, and if these are
not met, who’s accountable? Evidence from US studies reveals
poorer quality care and more deaths in for-profit hospitals and lower
dialysis survival and transplant rates. Accordingly, data must be
available to public scrutineers and evaluators. It is important that the
would-be care providers must show how their bottom-line
imperatives won’t create incentives for cutting corners.
4. Who makes the money and who bears the risks? Suppose we are
considering one of those much-vaunted public-private-partnerships
(P3) to build hospitals. Using private-sector logic, profits should be
commensurate with risk and ingenuity. As profit-seekers know, there’s
no adrenaline rush without the prospect of failure and loss. Clearly,
the public should not assume all the risk while the contractor gets
all the benefits. Consider the UK, where private capital has built
hospitals with guarantees of a huge rate of return for decades. It’s like
issuing a 30-year Canada Savings Bond to favoured investors at a
15% rate of return, fully guaranteed. Even we as woolly-headed
BRIEF REPORT
ANine Questions for the For-ProfitDelivery of Healthcare in Canada
by Steven Lewis and Tom Noseworthy
Steven Lewis is Presidentof Access Consulting inSaskatoon and AdjunctProfessor of Health Policyat the University ofCalgary’s Centre forHealth and Policy Studies.
Tom Noseworthy, MD,MPH, MSc, FRCPC, is theDirector of the Centre forHealth and Policy Studiesand a Professor and Headof the Department ofCommunity HealthSciences, Faculty ofMedicine, at the Universityof Calgary.
Healthcare Management Forum Gestion des soins de santé 27
academics could make a fortune on those terms, but it’s
a bad deal for taxpayers.
5. Are we paying prices based on actual costs of services
or inflated cost estimates? Simple cases cost on average
less than complex cases, in both the public and private
sectors. Usually private clinics do uncomplicated, high-
volume cases. If you pay a private agency the average
price for all cases, but the agency only does simple
cases, you’ve paid too much. Similarly, hospitals are
always left with the most complicated cases, which cost
more. When comparing public and private costs, we
have to match apples with apples. Otherwise, we may
wrongly label both efficient and inefficient providers.
6. Are all costs and benefits calculated? If complications
from procedures performed in private facilities end up
in the public system, those costs must be added to the
costs of the private clinic episode. What’s cheaper on
the surface may be more expensive when all details
are known.
7. Are our contracts so lucrative so as to siphon crucial
physicians and other providers away from the public
system, which then faces even worse shortages and
greater unmet needs? We happily spend hundreds of
thousands of dollars to train specialists and reward
them with substantial incomes. We would be negligent
to reward for-profit options so richly so as to create a
huge financial incentive for providers to abandon the
public system, in whole or in part.
8. Do we sign deals with contractors who not only perform
the services we want them to do, but also generate
further demand to be paid by public funds? Add in a
whole body scan for $499, plus GST. If for-profit enterprises
market their services and skew the system towards
certain kinds of procedures to the disadvantage of those
who need other less financially lucrative services, at a
minimum the system becomes less fair. It’s a certainty
that the entrepreneurs want to sell the body scans, but
they’re not likely to be lining up to provide children’s
mental health services.
9. Is it possible to be taken hostage later? If, say, we
contract out joint replacements, we remove capacity
from the public system. Suppose the contractors want
to jack up the rates next time around. If we don’t like it,
we can’t just turn on orthopaedic capacity in the public
system again. Knowledge and resources are now
elsewhere. The only way to minimize this risk is to build
in overcapacity – for example, deliberately produce too
many orthopaedic surgeons. Who pays? The taxpayer.
Before we get too far with new for-profit healthcare
contracts, it might first be wise to look at the deals now in
place, to see if they can pass the test. If we are to exhibit the
qualities of hard-nosed entrepreneurship, so widely praised
by some, surely our first duty is to develop a highly refined
sense of smell to detect who is truly being served by various
arrangements.
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