Till Debt Do Us Part

Head Table Guests

Willis Blair, Member, Toronto East General Hospital Foundation and Secretary, The Empire Club of Canada; Sonya Paisley, OAC student, Forest Hill Collegiate Institute; Major Wil Seabright, Chaplain, Scarborough Grace Hospital; Mark Rochos, President and CEO, Humber Memorial Hospital; Elizabeth Forster, Partner, Blaney McMurtry Stapells Friedman; Stephen Pustil, President, Penwest Development Corp. and Chairman of Region 3, Ontario Hospital Association; Jan Dymond, Vice-President, ZED Communications and a Director, The Empire Club of Canada; Murray MacKenzie, President and CEO, North York General Hospital; Paul Newton, Vice-Chairman, Ontario Hospital Association and Associate, Royal LePage Commercial Real Estate; Brian Birkness, Past Chairman, Ontario Hospital Association, Past Chairman, Ontario Blue Cross, Partner, Deloitte & Touche and Member of their National Health Care Committee; and Margaret Mottershead, Deputy Minister of Health, Government of Ontario.

Introduction by David Edmison

On November 16, 1989 The Empire Club hosted a lunch featuring David Martin, our honoured guest today, as keynote speaker. Mr. Martin spoke to the Club in his capacity as President of the Hospital for Sick Children. He concluded his remarks by saying that our political leaders had to make some difficult choices in order to ensure the maintenance of quality health care in this province. He said: "I hope we do not wait until a VIA-Rail-type solution is upon us." VIA Rail, as you may all remember, was forced to drastically reduce service, staff and outlying routes due to funding cuts.

Well here we are six and one half years later and many feel that the Ontario hospitals are indeed experiencing a VIA-Rail-type situation. Hospitals around the province are having to radically restructure their operations and rationalise their services in the face of funding cutbacks. In fact over the next three years hospitals will lose 18 per cent of their budgets or $1.3 billion. Responding to these cutbacks, hospitals around the province have had to become more efficient by closing unproductive facilities, combining purchasing power and moving toward regional specialisation. These changes have not been easy, nor have they come about without a human cost. Like the VIA-Rail situation there is still a great deal of uncertainty about which services will be affected and no one is quite sure when the next derailment will occur. In view of an aging population, it becomes more than an academic question to ask what is the future of health care in this province?

Returning to this podium to address these and other issues currently facing our care-giving institutions is the station master of the Ontario Hospital Association, our distinguished guest, David Martin. Mr. Martin, during his term as interim President, has headed an organisation representing more than 200 public hospitals in Ontario. Founded in 1924 as an independent, non-profit organisation, the OHA is governed by a 26-member Board of Directors made up of trustees and CEOs across the province.

Our guest has an impressive track record of over 35 years of managerial experience at all levels within Ontario's health-care system and is well qualified to impart his knowledge on this important subject.

He is an accountant by training and served as President of the Certified General Accountants Association of Ontario and as a board member of the Canadian Certified Accountants Association. From 1971 to 1982 he was Executive Director of the Ontario Crippled Children's Centre and from 1982 to 1986 he served as President of the Toronto East General and Orthopaedic Hospital, the first President to be appointed under the new supervisory legislation passed by the provincial government. He then, of course, became President of the Hospital for Sick Children in 1986 until his retirement in February 1994. Mr. Martin was recruited out of retirement as interim President of the OHA, a position he has held since October 1995.

During his distinguished career our guest has developed a reputation for effectively managing change in organisations confronted with fiscal and management problems. Also an educator, he is an assistant professor in the Department of Health Administration at the University of Toronto, Faculty of Medicine.

Mr. Martin is active in a host of organisations. He has served as Vice-President and President of the Ontario Council of Teaching Hospitals and on the executive committees of the Canadian Association of Teaching Hospitals and the Toronto Academic Health Sciences Council. He has also served on the boards and council of the Canadian Association of Paediatric Hospitals, the Metropolitan Toronto District Health Council, the Hospital Council of Metropolitan Toronto and the Association of Treatment Centres of Ontario.

The health-care industry, and the Ontario hospitals in particular, are facing unprecedented challenges. Like VIA Rail several years ago the industry is experiencing turbulent times, and if there seems to be light at the end of the tunnel, I can think of no one more qualified to determine for us if it's reason for hope or just another oncoming train.

Ladies and gentlemen, would you please welcome our distinguished guest, the interim President of the Ontario Hospital Association, David Martin.

David Martin

Thank you for that introduction. It's an honour to be here for a return engagement. When I addressed The Empire Club in 1989, just six years ago, I suggested that our health-care system could not survive in its present form without a serious overhaul including a new approach to funding of services. The Minister of Health at the time was not amused, and suffered a rather severe case of dyspepsia. Today, the remarks I made wouldn't cause a ripple.

I have spent my entire professional life working in Ontario's health-care sector. I have been both a decision maker, and a consumer of health-care services. And, of course, I'm a taxpayer.

I appreciate our system for the world-class, complex--and expensive--achievement that it is. I can tell you that it is the equal of any system anywhere, and better than most. At the same time, I know that restructuring and reform here in some ways lag behind other jurisdictions. Some look at our system and see how much has been accomplished in terms of restructuring in the past few years. I look at it and see how much more is needed.

The biggest single challenge that we face in health care is to deliver high-quality medical care while we change what we do and how we do it. The driving force has not been purely for medical reasons, but rather the economics that are re-shaping all of society, not just our health-care system.

The theme I have chosen for my talk is "Till Debt Do Us Part." I chose that because of my concern both as a health-care manager and a taxpayer that debt is dividing us and preventing us from moving ahead. Our federal and provincial governments today are constrained by debts and deficits that are the legacy of past and current governments. No one wants taxes to go up to support continued increase in that indebtedness. It would drag down individuals, businesses and, ultimately, the provincial and national economies.

The Ontario government has taken every opportunity to remind us that, every hour of every day of every week, it spends $1 million more than it takes in. Last year, it spent $9 billion on interest charges alone--one of the largest single categories of government spending. In fact, on an annual basis, it's more than the cost of managing all our hospitals.

Debt, and deficit. These two fiscal forces have overwhelmed the abstract debates of planners and policy makers. Governments everywhere are trying to strike a balance between what we want, and what we can afford.

Ontario voted for change in 1990, and ended up five years later $50 billion deeper in debt--a debt that won't be paid off in my lifetime, and probably not in yours.

Some people are now stunned by how fast the Ontario government has moved since it came to power last June. But, as the Tories keep saying, they are simply doing what they said they would do--and, through measures like the controversial Bill 26, giving themselves extraordinary power and authority. This would have been unheard of five years ago.

Health care accounts for just under one-third of provincial government spending. Clearly, you can't re-invent government without touching that sector. And the two largest components of health-care spending are physicians' fees and hospital costs--two groups that have been targetted in the reform agenda.

Last November, the province announced major cuts to hospital spending--a first in Ontario's history. Hospital funding will be reduced by $1.3 billion, or 18 per cent, over the next three years.

The cut this current year is $365 million, or five per cent. Next year, it will be six per cent; and the year after, eight per cent. When you consider inflation, and the expiry of the Social Contract at the end of last month, that 18-per-cent reduction will be closer to 25 per cent. It is impossible to predict what the system will look like three years from now, except to say that it will certainly be a lot more streamlined. There's no question there will be serious consequences, in terms of services, employment and in the number of hospitals that survive.

Hospitals and the medical profession have both been through major changes since I spoke here in 1989. At that time the wounds from the physicians' 1986 strike over extra-billing were still open. Back then, hospitals were still accustomed to major increases to their annual base budgets as costs were driven up principally by arbitrated labour settlements in the range of seven and eight per

cent and expansion of medical services. It was a controversial period--although from today's vantage point, it looks like the "good old days." That's how far we have come.

Doctors' incomes have been capped, reduced by 10 per cent, and millions of dollars are actually being clawed back from individual physicians by the government. Newly-trained doctors may not be free to live and practice where they wish. As hospitals close, merge and focus on their "core businesses," established specialists may not be able to retain their hospital admitting privileges. Under Bill 26, if doctors do not have admitting privileges, they will not be able to obtain billing numbers, and therefore will not be able to practice. The Metropolitan Toronto District Health Council has recommended closing 11 Metro hospitals and yet I have heard no discussion of how these hospital closures will affect doctors. We are in danger of creating a generation of lost physicians. Meanwhile, physicians in academic health-science centres are willing to consider options like going on salary as an alternative to fee-for-service. In fact, all the medical staff at the Hospital for Sick Children in Toronto have agreed to move to fully salaried positions, abandoning fee-for-service. That is happening in the Kingston teaching hospitals as well.

Primary-care physicians are increasingly interested in capitation arrangements, where they would be paid based on the number of people who register as clients for their services. However, there is a place for salaried and fee-for-service physicians in this complex system.

Still, the day is not too far off when we are likely to see unemployed doctors in Ontario, something that has already occurred in many European nations as a result of reform.

When I was at the Hospital for Sick Children, our strategic plan said that the most significant problem the hospital would face in the future would be the ability to attract and retain world-class medical and professional staff. Patients do not go to a hospital because it has the best board or administration. They go for the best possible medical care. That major challenge must always be in the forefront as reform and restructuring occur.

Like the medical profession, hospitals have changed dramatically. Until about the 1940s, they required little investment except in bricks and mortar. They were labour intensive to operate, however--as they still are today. As Peter Drucker has written, modern hospitals are among the most complex, capital-intensive organisations in existence today. They require enormous investments in sophisticated technology such as ultrasound, scanners, and magnetic resonance imagers, or MRIs. Those new technologies are accompanied by the need for additional, highly-paid staff with new specialised skills. They don't reduce staffing needs.

About 75 per cent of a hospital's operating budget goes to salaries and benefits. You don't have to be an economist to realise that managing an organisation that is both labour-intensive and capital-intensive is a difficult challenge. Adding to that mix, our health-care system is both publicly and politically driven.

There have been enormous changes in the delivery of hospital services in the past few years. Better diagnostic imaging, new surgical techniques and drug therapies have made possible a shift away from lengthy hospital stays. Medical devices--for dialysis, as an example--are becoming much more portable. Increasingly, many hospital admissions are avoidable. Fewer people are admitted to hospitals, and when they are admitted, they stay for a much shorter period of time.

For example, I had gallbladder surgery in the late 1970s. The incision was huge, and I spent nine days in the hospital. I probably wasn't fully recovered for six months. Today, that operation is done using minimal invasive surgery, and the scar is the length of a small paper clip.

For routine cases, patients go home in less than two days on average. In fact, more than three per cent of routine gallbladder surgery is done as day surgery.

Hospital in-patient days are dropping, and out-patient treatment is soaring. Overall, the number of people treated in hospitals is increasing, and so is the need for care in the community and in the home. This shift has happened without major criticism or concerns from the public. Between 1990 and 1995, the total number of hospital beds in the system went from 48,600 to 39,700. That's a drop of almost 9,000 beds in six years, which would be equivalent to closing 18 500-bed hospitals and yet, up to now, there have been relatively few hospital closures, mergers or amalgamations. There are many ongoing restructuring studies and reports--about 30 of them, all over the province, but over the years, the health-care system has been studied into paralysis. That inaction is about to change.

Bill 26, the controversial omnibus bill, created the Health Services Restructuring Commission. As I said earlier, it was given a broad, sweeping mandate for change. The Ontario Hospital Association appreciated the need for enabling legislation like Bill 26 to overcome barriers to change where necessary. We opposed many of the Bill's original provisions, and proposed changes such as the four-year sunset clause for the Commission, a recommendation which was accepted.

The Commission's first task is to review the hospital restructuring reports prepared by District Health Councils across Ontario. It will then either act on recommendations for hospital closures, mergers, amalgamations, or amend and implement the plans. For the first time, we have an opportunity to move restructuring away from the public, political sphere. Dr. David Naylor, the head of the Institute for Clinical Evaluative Sciences in Ontario (ICES) and a special adviser to the Restructuring Commission, recently said its members will try to de-politicise and de-bureaucratise some of the more difficult decisions.

The Commission is looking for swift results, in the public interest. As Dr. Naylor said, the winners must be our fellow citizens, both as patients and taxpayers. If action isn't quick, the losers will be the next generation. It might be considered the "ultimate weapon" for imposing restructuring where there is no consensus, but I sincerely hope that voluntary action will minimise the need for forced restructuring.

Right now, we are going through an unprecedented age of social transformation. In these final years of the 20th century, we are experiencing changes as significant as the industrial revolution was in its time.

The infrastructure of the health-care system that has been evolved in North America during this century has been characterised as the "medical-industrial complex." But we now know that spending more money does not necessarily yield equivalent benefits when it comes to the overall health of the population. It is not surprising that the system in Canada, and here in Ontario, is going through the greatest change in history. The greatest need is to perfect outcome measurements that will guide us to more efficient and effective medical management.

In 1994, per-capita expenditures on health in this province came to just over $2,000 for each individual. The Ontario government's share of that amount was $1,700 and that's a lot of money.

There has been a great deal of talk, in the name of reform, about measures such as de-listing insured services, co-payments or user fees, health taxes on employers and individuals, and finding the right mix of public and private financing of health care. What often gets overlooked in this debate is that these approaches do not reduce costs. They shift them.

Cost-shifting doesn't make the system more efficient, but it does affect corporate bottom lines and competitiveness. For example, between 1990 and 1994, members of the Employers' Committee on Health Care in Ontario, ECHCO, experienced a 74-per-cent increase in the cost of providing supplementary health and dental benefits for their workers. The public-sector spending accounts for almost three-quarters of total health-care spending. Private-sector spending on privately insured or uninsured services has crept up from 23.6 per cent to almost 30 per cent since 1975. That money comes either from individuals, employers, or private insurers. But cost-shifting is a shell-game that often has unintended consequences.

For example, just a few years ago, the government changed its policy on OHIP coverage for snowbirds and other travellers. With insufficient warning from government, out-of-province OHIP coverage was capped at $400 per day. That off-loading caused Ontario Blue Cross to lose $15 million, which in turn caused OHA to focus on potential liability at a time of significant turmoil in the industry. The result was a refocusing of OHA on its core business of advocacy, education and labour relations, and the sale of Blue Cross to the Liberty Mutual Insurance Company.

Since OHA has been so much in the news recently, let me tell you a little about what has happened in the past six months. In the past few years, it has downsized from 650 employees to 82, while divesting itself of a number of operations, including Blue Cross. I am pleased to say that OHA's Board recently approved the creation of two separate entities--a foundation and a trust fund--with the proceeds of that sale. Greystone Hospital Trust will use roughly $50 million to generate a revenue stream that will allow OHA to help support hospitals, while keeping the capital intact.

The Change Foundation will use a similar amount to provide funds supporting research dedicated to improving the delivery of health care. Hospitals and other health-related organisations will be able to apply for grants aimed at improving the system.

I want to say that the changes at OHA--through divestment, downsizing and restructuring--mirror changes that have occurred in the business sector in the past decade, and the changes that lie ahead for the other elements of the broader public sector. They also illustrate the gains that effective management can create. For example, ORA's bottom line last year was a $6 million loss. That has been transformed to a projected surplus of $1 million for the fiscal year that began April 1 and that will be done while reducing the membership fees to the hospitals by 25 per cent over the next three years.

I can tell you that the OHA is a leaner, more effective organisation today that it has ever been. In bringing this about, it has been essential to set priorities and that is true of the health-care sector as a whole.

To date, most of the debate about health-care reform has been about who will pay for what services. We have not yet focussed clearly on measuring outcomes and determining which services are worth paying for. That is the question that all governments are coming to terms with, in health care and other sectors, such as education. There's a growing need to get the best value possible for the money spent, because the debt is eating into what resources are available. In health care, that applies equally to clinical and management functions.

This has prompted innovative initiatives such as the Institute for Clinical Evaluative Sciences in Ontario--ICES--which is focussed on identifying and analyzing regional variations in medical practice, in an effort to determine "best practices."

I have to say that I find it curious that the government has no dedicated funding for ongoing research to directly address efficiency and efficacy, when assessing outcomes is the key to getting value for money spent.

Another progressive partnership within the healthcare sector is the Joint Policy and Planning Committee, or JPPC, a partnership between the OHA and the Ministry of Health. That has been among other things, a forum where hospitals could argue for a formula that attempted to link funding cuts to efficiency, rather than have them imposed across the board.

In the future, hospitals will be funded on efficiency determined by comparative costs. The case-costing method is being developed jointly by OHA and the Ministry through JPPC.

I am here to say that the best solutions for the challenges in health care must come from the health-care sector itself. Imposed solutions will be second-best. With that in mind, I'm pleased to say that the OHA Board has formalised its support for JPPC, through a cost-sharing arrangement with the Ministry of Health. As I said earlier, we must change what we do, and how we do it. It's the same challenge the government faces as it tries to balance services and available resources.

Public expectations of social programmes like medicare and pensions have risen steadily over the past generation. The fiscal crisis has created growing awareness and acceptance that those expectations simply can't all be met. As a society, we are coming to terms with the fact that the old pattern of reliance on economic growth and debt has ended. Open-ended, unlimited access to social programmes--including health--is simply not affordable.

Medicare is a sacred institution in Canada. It is based on values that distinguish this country from every other in the world. But we are engaged in a struggle with the relentless forces of debt and deficit, which are driving changes to our social programmes.

Ontario has just been through an unprecedented fiveweek labour dispute highlighting the divergent forces that impact our current situation. The people of Ontario have accepted the need for change. They understand that debt is parting us from the familiar ways of the past, but debt and deficit have also helped create a shared vision. Our challenge is to provide within the resources available, a health-care system that is effective and efficient, delivering the highest-quality care possible. We cannot just shrink the system. It must change substantially. Fortunately, that change is underway.

As I retire--for the second time--I am confident that our leaders are pulling together, down the same path. That is very encouraging.

Thank you.

The appreciation of the meeting was expressed by Jan Dymond, Vice-President, ZED Communications and a Director, The Empire Club of Canada.