An Innovative Alternative for Health Care in Canada
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Canada 2020 Analytical Commentary: No. 01 The Circle Model An innovative alternative for health care in Canada Arianne Charlebois February 2013 Analytical Commentary Canada 2020 produces original research in a variety of formats. Our Analytical Commentary series presents unique insights into emerging trends and innovative solutions to big policy challenges. Papers are topical, accessible, and oriented towards drawing lessons for federal policy. About Canada 2020 Canada 2020 is a leading, independent, progressive think-tank. Our objective is to inform and influence debate, to identify progressive policy solutions and to help redefine federal government for a modern Canada. We do this by convening leading authorities from Canada and abroad, generating original policy thinking, and prioritizing effective communication. Our orientation is: • progressive and non-partisan • long-term, with an emphasis on key structural issues facing Canada • collaborative and outward focused • activist: we aim to influence the policy agenda. Visit us online at www.canada2020.ca About the Author Arianne Charlebois holds a BA in History from McGill University and recently completed her Master's degree from the Norman Paterson School of International Affairs at Carleton University. Introduction There are few Canadian institutions more emotionally charged or heatedly debated than Medicare. Free universal health care is an integral part of Canadian identity, as well as one of our greatest national concerns. In a 2008 survey, Canadians identified with Medicare more strongly than with any other Canadian ideal, including democracy and compassion.1 However, long wait times, rising costs and a lack of coverage have damaged the reputation of Medicare in recent decades. Attempts to increase efficiency within the public system have had, at best, an incremental effect and privatization is considered immoral by a large portion of the population. We have therefore reached something of an impasse. Meanwhile, in the UK, an alternative model is emerging. In February 2012, the Circle Partnership, a privately owned healthcare company, was awarded a 10-year contract to manage a publicly-funded hospital. This model allows the UK’s National Health Service (NHS) to continue to provide free universal health care while introducing private-sector incentives to maximize efficiency. Still in its early stages, the model has shown promise in addressing similar concerns to those faced by the Canadian healthcare system. This paper will discuss the Circle Partnership’s philosophy and operations and reflect on the applicability of this model to Canada. The Circle Model The Circle Partnership is a British company founded in 2005. It represents the largest partnership of physicians anywhere in Europe. Doctors, nurses, and other Circle employees collectively own 49.9% of the company (a group of hedge and venture capital funds owns the rest). It is founded on the principle that employees who benefit directly from the company’s success will be motivated to work as efficiently as possible. Circle runs several privately- and publicly-funded clinics. In February 2012 it became the first private firm to manage an NHS hospital when it was awarded the management contract for Hinchingbrooke hospital in Huntingdonshire.2 This was a change of scope and complexity for Circle: clinics operate on a smaller scale than hospitals and cannot provide complex procedures or inpatient services. Hinchingbrooke hospital, by contrast, is a full-service hospital that had accumulated a debt of £39 million and was facing closure. Following a competition, the government granted Circle a 10-year contact to run the hospital. The NHS continues to fund services and employ the staff, but Circle has taken over administrative responsibilities. Over time, Circle hopes to offer NHS employees an opportunity to become Circle shareholders. The UK government provides hospitals with a set amount of annual funding. If efficiencies by Circle yield a surplus at Hinchingbrooke, profits will be shared by the hospital, the NHS, and Circle. Circle will keep the first £2 million of profit, 25% of profit between £2-6 million and 33% of profit between £6-10 million, after which all further surplus will go to paying Hinchingbrooke’s debts.3 If the hospital 1 continues to post a deficit under Circle’s management, Circle will earn nothing and has agreed in its contract to be responsible for the first £5 million of fresh debt.4 The Canadian Healthcare Problem The Canadian and British healthcare systems share many of the same problems. The UK faces soaring costs that have led to an unsustainable budget, as well as long wait times.56 These problems have been compounded by tight recession budgets. In Canada, the biggest public concern about healthcare has been long – and growing – wait times, both in the emergency room and for access specialist care.7 A 2011 Commonwealth Fund study ranked Canada last out of 11 countries in all categories related to timeliness of care, whether in the emergency room, to see a specialist, to see a doctor when sick, or for surgery. By 1998 a majority of Canadians were calling for fundamental changes to the healthcare system.8 A 2010 Commonwealth Fund study showed that public opinion had not improved, with 52% of respondents believing that the system needed fundamental changes and 10% feeling that it had to be completely rebuilt.9 Again, the main complaint was wait times. The Euro-Canada Health Consumer Index ranks countries based on patient outcomes as well as “patient friendliness,” which incorporates factors such as wait times and services covered. Canada placed 25 out of 34 countries in 2010.10 A lack of resources is a main factor in wait times for emergency treatment as well as specialist care and surgery: there are too few daytime operating room slots, operating room nurses, surgeons, and anesthesiologists. Canada’s lack of doctors is a growing problem despite high salaries for doctors, both by Canadian and international standards, and increased funding for training positions. This is due to a number of factors, including poor work-life balance, long training times, fewer international medical graduates immigrating to Canada, and a high retirement rate. Another problem is fragmentation. Doctors work alone rather than in teams, and the administrative burden of passing patients with complex health issues from doctor to doctor, as well as lack of communication between doctors regarding a patient’s care, greatly increase wait times. Lack of coordination and planning can also cause unnecessary bottlenecks.11 Moreover, under-funding of home care and long-term care have created additional stress on the hospital system. This cannot easily be addressed due to the growing costs of healthcare. Finally, because hospitals receive a set amount of annual funding, regardless of the number of services performed or patients treated, there is no financial incentive to move patients through quickly. Other complaints in Canada include Medicare’s limited coverage, combined with costs that are growing at an alarming rate. The public system cannot afford to fund a full range of therapies, especially newer ones. Canada is also one of the only countries among those providing publicly funded healthcare that does not provide national prescription drug coverage.12 When Medicare was founded, most ailments were treated by a family doctor or at a hospital. Healthcare has evolved now to the point where many illnesses can be treated by technology in a clinic or at home – without the need to visit the hospital – or with medications. Unfortunately, the healthcare system has not kept up. Only 2 70% of healthcare services in Canada are publicly funded, putting us in the bottom third of OECD countries on this metric.13 Canada’s aging population, increased incidence of chronic diseases, and rising obesity rates, combined with the growing costs of treatment as technology advances, are straining the system to its limits. Provincial governments spend 42-45% of their budgets on health care, and costs continue to grow faster than any other government program and as well as faster than revenues. A TD Financial Group report has forecasted that by 2030 health care spending will require 80% of Ontario’s budget14. It is notable that Canada spends significantly more per capita on health care than the UK and is consistently ranked in the top five countries in the world for per capita health care spending, but without cracking the top five for health care outcomes. Canada came sixth out of seven countries in a Commonwealth Fund study surveying the quality of healthcare systems in Canada, the United States, New Zealand, Australia, Germany, the Netherlands, and the UK. Only the U.S., a country without universal healthcare, was ranked lower than Canada.15 Importantly, the OECD has estimated that Canada could decrease healthcare spending by 2.5% annually if Medicare became as efficient as the most efficient performers in the OECD.16 Given funding constraints and growing demands on the system we clearly need to look anew at all opportunities to increase efficiency. Past Attempts at Efficiency There is a widely held belief that any form of healthcare privatization can be avoided in Canada by making the current system more efficient. Several attempts have been made to do just this, focusing, most recently on wait times: • In 2004, $5.5 billion was dedicated to the Wait Times Reduction Fund to lessen wait times for specific common procedures. Wait times for non-prioritized procedures were not reduced, indeed some ultimately increased due to the heightened emphasis on priority areas. • In 2005, the Patient Wait Times Guarantee allocated $612 million to provinces to create guaranteed maximum wait times in at least one priority area. By 2011 the provinces had instituted the guarantees, but few patients knew about them. Moreover, some guarantees were up to two times as long as those announced in 2005. • In 2008, the Emergency Wait Times Strategy was instituted to ensure that 90% of patients in emergency rooms requiring complex treatment would be admitted or discharged within eight hours.