Make hospitals ‘compete’ for patients, report says

Frontier Centre, Healthcare, Worth A Look

OTTAWA – The medicare system is headed toward financial collapse unless governments introduce “market forces” to encourage competition among hospitals, says a new report to be released today.

The report, authored by Senators Michael Kirby and Wilbert Keon, finds that for all of medicare’s merits, it contains significant “structural” flaws that allow far too much money to be wasted.

They conclude effective reform can only be achieved by implementing “incentives” that encourage health professionals and hospitals to act “in their own self-interest” and make the required changes.

“The introduction of what are usually called ‘market forces’ is the only effective way to make the health care delivery system more efficient and its providers more productive.”

The duo hopes to kick-start a national debate so the Prime Minister and the premiers turn their attention to an issue they are ignoring in the lead-up to next month’s conference on medicare reform.

“The current habit of governments promising billions of additional dollars … is not sustainable because, to date, by adding money, governments (and those within the system) have simply managed to avoid confronting the most important structural weakness of Canada’s existing system: its lack of incentive to increase productivity.”

They suggest governments fund hospitals on the actual volume and type of services they provide, rather than the existing practice in which they are given global budgets based on historical patterns.

“Hospitals [now] hold monopoly power because they do not compete for patients on the basis of either price or quality of service.”

The theory is that the proposed change in how hospitals are funded would lead to increased productivity and likely encourage facilities to become more specialized in the type of care — such as cataract or orthopedic surgery — they provide. This would improve the quality of care, enhance a hospital’s reputation and draw more patients into its doors. Thus, there would be a competition among hospitals over who provides the best care, a race that would translate into which hospital gets more government funding.

Mr. Kirby and Dr. Keon said this approach could have a significant “psychological impact” on people employed in hospitals.

“A patient coming into a hospital would be important not only as a person in need of help but also as a source of revenue; that person could no longer be considered a drain on the hospital’s limited resources as determined by its global budget.”

Mr. Kirby and Dr. Keon were members of a Senate committee that held public hearings into the public health system in recent years. Mr. Kirby chaired the committee, and Dr. Keon is the world-renowned physician who founded and led the University of Ottawa Heart Institute until this year.

In their new report, written for the Institute for Research on Public Policy, they stress they are not advocating the establishment of a parallel private health system. Rather, they applaud medicare’s basic tenet — that governments should be the sole funder of health care — as the best way to ensure patients are not denied treatment due to an inability to pay.

They write that none of their proposals to boost competition would require, or even create incentives for, the creation of for-profit private health delivery services. They insist the benefits can be achieved regardless of whether hospitals and clinics are publicly or privately owned.

“The Canadian health care system precludes competition among sellers of health care services. The resulting monopoly occurs at two levels: health care professionals and hospitals. … The result of this structure is an imbalance of bargaining power between governments, as funders, and groups of providers.”

Mr. Kirby and Dr. Keon also advocate that rigid “scope of practice” rules should be be loosened so that, for instance, qualified nurse-practitioners or other health professionals could do the work of more highly paid physicians. Similarly, they draw attention to collective agreements that prevent emergency wards — when they become suddenly busy — from temporarily transferring nurses from other quieter floors of the same hospital.

They write that because governments are so fearful of strikes in the health care sector, they almost never demand changes during collective bargaining to the types of “work rules” that prevail in medicare.

“The excessive power wielded by associations of health care providers has enabled them to win pay increases that have surpassed those achieved in other industries. These increases were secured with virtually no consideration for increases in productivity or variations in the quality of services delivered by different providers.”

Mr. Kirby and Dr. Keon write that the “latest taboo” in medicare isn’t a parallel private system, but rather, introducing competition into medicare.

“Various groups in Canada have been largely successful in asserting — without any supporting argument or evidence — that competition among providers would put Canada on a slippery slope to an American-style system.

“The irony of this position is that without increased productivity, for which competition provides a powerful incentive, timely access to medically necessary treatment in Canada will be inhibited further. This would, in turn, increase demand for a parallel private for-profit tier of health care services [which would violate the Canada Health Act].”

Paul Martin and the premiers are to meet Sept. 13-15 to negotiate a health-care deal. The provinces are demanding billions of dollars more in federal financing and want the Martin government to assume responsibility for a national pharmacare program.

The Prime Minister says he will provide significant long-term funding, but also wants the provinces to use some federal funds to reduce wait times, enhance home care, and provide better coverage for patients’ “catastrophic” drug costs.