Bankrupt politics
Health care debate flares as private care provider files bankruptcy
Mimi Williams / mimi@vueweekly.com

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Depending on who you listen to, the Health Resource Centre (HRC) in Calgary is either the victim of provincial government bungling or it stands as the embodiment of a failed experiment in private, for-profit health-care delivery.
According to a media release issued last week by the Wildrose Alliance Party (WAP), the embattled private clinic has had the "rug pulled out from beneath it" by a government that has reneged on its commitments and forced the private company into receivership. Not so, countered the Friends of Medicare (FOM) in a subsequent media release in which FOM executive director David Eggen cited the ongoing legal tangles surrounding HRC as an excellent reminder that private contracts for health care service delivery are more expensive, less efficient and less transparent than those services delivered in the public. "Let's not forget this private facility would be shut down and not delivering any medical services if Alberta Health Services wasn't forced to bail them out," he noted.

The beleaguered HRC has been at the centre of the private vs public health care debate since it was first awarded a contract to perform joint replacements by the former Calgary Health Region in 2004. The privately owned clinic, located in the former Grace Hospital, performed 916 operations from the clinic in 2007 – '08, at a cost of about $7.6 million. The clinic also performs about 900 procedures a year for the Workers' Compensation Board.
Private clinics such as HRC were enabled by the Alberta Health Care Protection Act in 2000. Known at Bill 11, it allowed the government (through its regional health authorities) to use tax dollars to purchase certain surgical services from private providers. Intended to reduce surgery waiting lists, the legislation stipulated that such contracts would be approved only if they improved access to health services and were cheaper than the public system.
Although a decade has elapsed since Bill 11 passed, little analysis has been undertaken to examine the impact of private, for-profit service delivery on the province's health system. Research released last November by the University of Calgary's School of Public Policy suggested contracting out surgeries may actually inflate costs. The study found that each joint replacement done at HRC costs $12 500 while the same procedure can be performed in the hospital for just $4000.
In response, Alberta Health Services (AHS) CEO Stephen Duckett said the report did not paint a complete picture. Duckett, along with AHS's chief financial officer Chris Mazurkewich, explained that hospital costs such as housekeeping were not included in the figures and promised, back in February, to release a public benefit analysis that would fully reveal the total costs for private versus public facilities.
Before that happened, the Cambrian Group of Companies, which built a new surgical centre in northwest Calgary, filed a claim that they are owed $65 million because they have a 10-year lease on the facility with Networc Health Inc, which owns HRC. In May, AHS stepped in to ward off the proceedings—which would have forced Networc into bankruptcy—and promised to pay for the costs of an interim receiver along with at least $2 million to keep the centre operating until January, when AHS anticipates a new surgical tower at the Foothills Medical Centre will be operational. In July, AHS revealed its intention to terminate its contract with Networc altogether.
HRC executives, along with WAP leader Danielle Smith, blame the province for the private clinic's financial woes. Explaining why HRC signed a 10-year lease with Cambrian when its current agreement with AHS expires in March 2012, its executive management team have repeatedly alleged it was promised a substantial increase in the number of surgeries the province was going to contract with it to perform. Smith repeated the allegation in an interview with Vue this week.
A September 2009 Calgary Herald story about the Health Resource Centre's expansion, however, raises questions. In it, Bernie Simpson, chief operating officer of Networc Health Inc, is quoted as saying that there hadn't been any negotiations to expand the company's surgical contract with the province. "It just makes business sense to try to continue to grow," he said. Smith was unable to explain the contradiction; Simpson did not return calls.
PriceWaterhouseCooper (PWC) was appointed Interim Receiver by an order granted in the Court of Queen's Bench of Alberta in May, 2010. They have submitted three interim reports to date, the latest of which triggered the volley of media releases mentioned above.

"This bankruptcy gives us a rare glimpse into the books of a private health provider, where we see executive management with excessive salaries racking up unpaid bills all over town," says Eggen, noting that the reports indicate that AHS has raised objections to the executive compensation offered at HRC. The receiver notes that the base salaries (excluding bonuses or benefits) of the top three executives employed by HRC will total $360 000 for the six months between July and January, 2011. According to PWC, the executives were asked to revise their compensation package but, other than one of them offering to give up their car allowance, no proposals have been received.
Heather Forsyth, MLA Calgary-Fish Creek and Wildrose Health Critic, joined Smith in condemning the government's actions, saying it will have devastating effects on patients waiting for hip and knee replacements. "By reneging on this contract, the PC government has pulled the rug out from underneath some of our finest surgeons and thousands of Albertans waiting in pain for these procedures," stated Forsyth.
Eggen has a different take on the matter, noting that Alberta Health Services intends to hire the health professionals who actually do the work, removing both the profit motive and "the overpriced executive management from the equation."
Meanwhile, WAP Leader Smith demanded that AHS CEO Stephen Duckett provide the figures promised back in February. "Either he is stalling for some reason, or AHS doesn't have a measure of the costs and quality of Alberta's health care system," said Smith, noting that both scenarios are unacceptable.
For his part, Eggen suggests that the government does have the numbers and suspects that the delay in releasing them has more to do with optics than with health-care delivery. "As always," he said, "when politics gets in the way of good management, we all suffer."
The case continues in the Court of Queen's Bench in Calgary this week. V

Wildrose Alliance backs private clinic in fight with AHS
Parties draw battle lines in health debate
By Jason Fekete, Calgary Herald August 20, 2010 8:02 AM
• Wildrose Alliance Leader Danielle Smith is going to bat for the operator of a private orthopedic surgery clinic that is embroiled in a dispute with Alberta Health Services.


The ongoing legal and financial fight between Alberta Health Services and the for-profit Health Resource Centre -- a private facility owned by Networc Health Inc. -- may finally crystallize next week when officials file new affidavits in court.

It's an intriguing battle over not only the health centre, but the role of private clinics in a publicly funded health-care system. And it has political parties drawing their battle lines on a health-care debate that could be a dominant issue in the next provincial election.

Wildrose Alliance Leader Danielle Smith and HRC officials are urging Health Minister Gene Zwozdesky to step into the brouhaha between the superboard and the health centre. His intervention is necessary, they argue, to ensure the facility doesn't close because of financial woes caused by the government.

Smith said the medical board has broken its commitment to contract out up to 3,500 hip and knee surgeries a year at the health centre -- up from the current 1,000 or so.

"It would be absolutely devastating if this facility was closed down," Smith said Thursday at the health centre. "It's incumbent upon the health minister to intervene."

Dr. Stephen Miller, the health facility's medical director, said his group feels "very strongly" it had a contract with the former Calgary Health Region and AHS to perform additional surgeries. "We feel that there has now been a change, a reneging on that," he explained.

Miller said his group will file court documents next week to support its claims. But Alberta Health Services, the provincial agency responsible for delivering care, said in a statement that it "has honoured all commitments related to the contract with Networc Health."

Zwozdesky is on holiday and wasn't available for comment, while Alberta Health officials refused to discuss the matter.

Opposition parties and health advocacy groups assailed the Wildrose's support of the private facility -- insisting the public system can provide superior care. "I'm struck with how Danielle Smith jumps to the defence of a corporation instead of a defence of the taxpayer and patients who need quality care," said Liberal health critic Kevin Taft.

Alberta Health Services is seeking to terminate a four-year-old contract with the Health Resource Centre. Located in the former Grace Hospital, the centre provides roughly 1,000 joint replacement surgeries each year for the province -- about 90 per cent of HRC's business.

But this spring, HRC became entangled in a legal dispute with one of its creditors, Cambrian Group of Companies. Cambrian, which built a new centre in northwest Calgary, claimed it was owed more than $65 million for a 10-year lease on the facility that the centre planned to move into this year.

AHS stepped in to ward off the bankruptcy proceedings and promised to pay for the costs of an interim receiver and spend at least $2 million to keep the centre operating until the end of the year.

In July, the health authority then filed court documents revealing its intention to terminate the contract with Networc and hire the majority of staff for a new surgical tower opening at the Foothills Medical Centre this fall.

Both Taft and David Eggen, with the Friends of Medicare, believe Alberta Health Services is acting appropriately as it looks to kill the current contract and move the surgeries to Foothills Hospital.

"It's a huge lesson to be learned about the pitfalls of contracting out essential medical services to business people," Eggen said.

Dr. Tom Noseworthy, a health-policy specialist at the University of Calgary, said "the evidence shows" for-profit, private delivery doesn't improve public access to the system, nor is it cheaper or better quality. Private care should generally only be looked at to expand capacity in the health system when it's not available in the public realm, he said, but that won't be the case once the new surgical suites open at Foothills.

Smith and HRC maintain the facility can perform publicly funded surgeries "faster, better, cheaper" than the public model. "Under a publicly funded system, we don't think that patients care whether or not they're getting treated at a public hospital, or a private facility or a not-for-profit facility," she said.

jfekete@theherald.canwest.com

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