If you’re looking for evidence that private markets are not good at providing health care, you won’t need to look much farther than the building that used to be Grace Hospital in Calgary. Or the two Masterpiece Inc. seniors residences in Red Deer.
But the arguments that opponents of private care like to cite are not necessarily the reasons behind the bankruptcies of either the now-private hospital in Calgary or the residences here.
Reality is more complicated than ideology — whichever side you argue. One reality is that people who provide surgical services for profit to a public funder do so at their peril. Another is that it can be very risky to overestimate what seniors will pay for supported living.
Two recessions ago, the Klein government was convinced that we had too many hospitals, particularly in Calgary. They needed to cut expenses, so they shut down Grace Hospital and planted explosives under another.
That bit of brilliant underestimation became an icon of the problematic relationship between Calgary and the government, which still echoes today. The province soon discovered it desperately needed that lost surgical capacity. So they contracted to the private investors who took over Grace, for up to 3,500 hip and joint surgeries a year. It was to be an icon of how private markets work quickly and efficiently.
Well, as of this week, it’s an icon of something; we’re just not sure what.
Actually, the province signed a pretty good deal — for the province. But if you were planning to provide up to 3,500 surgeries a year, investors would need assurances that they’d get at least close to that number.
Networc Health provides those surgeries, but it’s something less than a third the maximum volume. Networc also signed a 10-year lease on the physical plant to another for-profit agency, the Cambrian Group of Companies, worth a total of $65 million — even though the province had only promised to send them work until March 2012.
In the meantime, the government has been building new capacity in Calgary within the good old public system, to the point that they may not need to send Networc any business at all by this time next year.
Obviously, anyone who was owed $65 million on a 10-year contract should be able to see the writing on the wall. Cambrian began bankruptcy proceedings against Networc, and the province gained a very expensive stay of proceedings to keep the facility running while the lawyers pile up their billable hours.
Now, taxpayers are paying millions to keep a private clinic operating. The failure of that clinic is partly the government’s doing, and the “market” may only need it for another year or so.
Business as usual, in Alberta health care.
The financial problems of Masterpiece are more classic. They bet a whole lot of money that Red Deer seniors would pay between $31,000 and $60,000 a year for room, housekeeping and board, plus a dedicated movie theatre, bowling alley, billiard room, pub, therapy pool and woodworking shop.
Not so much. Even though the government pays to keep people in some of the rooms (who need long-term care but are on waiting lists for other facilities), Masterpiece Inglewood still has only a 46 per cent occupancy rate. Hard to pay the mortgage and meet payroll at that rate.
So, while we’re subsidizing a private health clinic in Calgary, while we wait for some (more efficient?) public clinics to be completed, what are we going to pay to keep Club Sierra afloat, lest some seniors with above-average incomes lose the roofs over their heads?
What could have been saved — if anything — had government built capacity in tune with population growth, instead of taking the money from growth to pay off the debt prematurely?
Greg Neiman is an Advocate editor.