Shared Enterprise: Sustaining and Improving Health Care for Canadians

May 31, 2002

Good morning and thank you. The Canadian Council of Chief Executives, then known as the Business Council on National Issues, had the benefit of the Commissioner’s insights last autumn, and I am now happy to offer some of our thoughts in return.

Canada’s business leaders have been strong supporters of Canada’s universally accessible public health care system, and we too are worried about its future. The cost and quality of health care has real implications for the competitiveness of our enterprises and for our country’s ability to attract people and investment.

The Commission has defined its inquiry in terms of four themes: Canadian values, sustainability, managing change and cooperative relations between governments. We have addressed the first three themes in the following terms:

1. Sustainability: How much money will we as a country be able to afford for health care?

2. Fairness: How should Canadians share the costs of health care within our society?

3. Efficiency: How can Canadians get the best health outcomes for whatever amount we spend?

Sustainability. This concept cannot be discussed only in terms of the capacity of governments to finance the public portion of the health care system. Whether Canadians pay their bills for health care directly, through private insurance or through their taxes, the money has to come out of the same paycheque. The real difference between public and private funding lies in the distribution of these costs within society. Around the world, national income and total spending on health care go hand in hand. Only by increasing our collective prosperity can we share in its fruits, whether in the form of good health care or other aspects of a high quality of life.

Fairness. The Canadian model of health care gives universal access to all "medically necessary" services provided by doctors and hospitals without out of pocket costs. Most countries use one of three other models to share the costs of health care fairly within their societies.

• The first is based on choice. Patients decide for themselves whether they want service from a no-fee public system or a parallel private system.
  
  
  
• The second model is group based. It provides public health insurance only to those who need it most.
  
  
  
• The third model shares responsibility. It provides public support for a wider range of services but requires patients to pay a portion of the cost of the services they use.
  

No model dominates and none provides consistently superior outcomes for any given level of expenditure. In other words, national choices about what to cover, who to cover and how much to cover publicly essentially reflect decisions about what is most fair. They appear to have little impact on either efficiency or sustainability.

Efficiency. Canada’s health care system is full of perverse incentives that reduce efficiency. The fact that hospital care is covered but most long-term care and drugs are not, for instance, gives patients a powerful reason to choose the most expensive form of care available. Neither doctors nor patients have any incentive to take costs into account. Also missing is an optimal balance between prevention and treatment, which brings into play other social policies that affect population health.

At the operational level, health care institutions lack sufficient access to financial capital for investment in infrastructure and new technologies. They also are facing stiff competition globally for health care professionals. But the biggest single barrier to greater efficiency is that the public health care system is organized in a way that fails to make the most effective use of the people and money it does have.

How the private sector can help

The private sector already is a vital partner in the delivery of public health care. Most doctors are small business owners, and health care institutions buy a wide range of products and services from for-profit suppliers. We would suggest that the private sector could make a real contribution to improving public health care on a number of fronts.

1. Innovation. Canada’s public health care system does not take full advantage of the innovative output of the country’s private sector. In addition to speeding the adoption of innovative products by the public system, governments should encourage innovation by pursuing broader policy thrusts such as strong intellectual property rights and effective incentives for the commercialization of research.

2. Human resource policies. Employers can make an important contribution to improved population health by pursuing human resource policies that encourage healthy lifestyles.

3. Corporate community investment. In addition to the donations companies make directly to health care institutions, corporate community investment addresses many social needs — including education, nutrition, shelter and environmental quality — that have a significant impact on population health.

4. Expertise. Business leaders have often been recruited by hospitals, but primarily to assist with fundraising. As health care institutions face increasingly complex management challenges, they will need to draw in a growing range of expertise from the private sector on either a voluntary or paid basis.

5. Access to capital. Health care institutions have had very limited direct access to capital for investment in infrastructure and new technologies. There is now growing interest in the use of public private partnerships (PPPs) to help public institutions access private capital for the construction of new infrastructure.

6. Support services. Hospitals already contract out a wide range of support services such as laundry, security and meal service to companies with greater scale, expertise and efficiency. Such purchasing could be expanded across many other non-medical services including procurement, information technologies, human resource administration and property management.

7. Clinical services. Medical services such as laboratory testing are widely provided by for-profit suppliers. A few private, for-profit health care institutions provide insured services and Alberta is leading the way in exploring further opportunities.

8. Safety valve. No matter how Canada organizes and allocates its public health care resources, some Canadians will find themselves unable to obtain adequate care as fast as they would like. Privately owned and funded facilities will continue to provide a backup to the extent that the public system fails to meet either public expectations or commitments that governments may make with respect to waiting lists or other minimum standards of service.

Canadians must not be afraid to talk about profit and health care in the same sentence. Profit can be earned only to the extent that the existing public sector structure is failing to deliver the quality and efficiency of care that it should. For that matter, if doctors, nurses, technicians, managers and others working in the health sector can contribute to better patient outcomes while containing or reducing costs, they too should profit from their initiative. In the public and private sectors alike, what gets rewarded gets done.

In summary, the Council believes that private sector energy, initiative, innovation, expertise and capital all can play important roles in sustaining and improving the quality of publicly funded health care in Canada.

Bringing the public and private sectors together

Let me conclude by touching on the Commission’s fourth theme, collaboration. I want to speak here not just about collaboration between governments, but also between the public and private sectors.

Between governments, health care financing has become a major source of tension even now that spending is rising sharply. With respect, such conflict misses the point. The same taxpayers have to support all levels of government.

Given the current mix of tax revenues and spending programs, the federal government does have a responsibility to maintain a significant and stable contribution to provincial health care costs. But instead of using the Canada Health Act as a stick to restrict provincial initiative, we suggest that the federal government should use any incremental funding as a carrot for innovation. In short, the primary federal role should shift from one of protecting the status quo to one of acting as an agent of change.

A wide range of provincial reform initiatives is underway, including the consolidation of management into regional authorities, the reform of primary care delivery and the collection and analysis of better data on system performance. Still missing, though, is a real evidence-based process for setting priorities and for shifting resources toward uses that would produce similar or better health outcomes at lower cost. This requires a further structural change in the management of health care.

The Canadian Council of Chief Executives therefore recommends that provincial governments reinforce the strengths of regional health authorities by considering the conversion of much of the provincial health care bureaucracies into Crown corporations.

The Council raises this possibility with a significant caveat. Canada’s political landscape is littered with the stranded debt and other legacies of badly run Crown corporations, and ensuring public accountability without political interference is a never-ending challenge for any government-owned venture. Effective governance therefore will be critical to the success of such enterprises in health care. Given this caveat, such a structure offers several important advantages:

• First and foremost, it would divide the political question of what services to cover publicly from the management question of how to deliver these services most effectively.
  
  
  
• A Crown corporation would have the ability to raise capital through private markets on more favourable terms than individual districts or institutions.
  
  
  
• It would encourage effective competition for capital within the provincial system and the allocation of capital to the projects with the greatest marginal benefits.
  
  
  
• It would have the scale to build greater expertise in complex areas such as corporate finance and contract management. This would avoid the steep and often costly learning curve involved in managing big public private partnership agreements.
  
  
  
• It could consolidate support functions, reduce duplication and achieve greater economies of scale.
  
  
  
• It would improve the continuity of management and the consistency of decision-making. The rapid turnover of decision-makers at the Cabinet and deputy minister level is a perennial problem in managing multi-year initiatives.
  
  
  
• More generally, a corporate structure would be able to create new incentives for all stakeholders to make optimal use of resources across the full spectrum of care.

A Crown corporation is by its very nature a compromise, not a silver bullet. But health care is one field in which its mix of public ownership and corporate discipline could be especially effective in combining the strengths of the public and private sectors to drive forward an ambitious agenda of health care reform.

Conclusion

In conclusion, the challenge of meeting the health care needs of Canadians is part of the broader challenge of building a prosperous and sovereign country within a highly integrated global economy.

First, if we want to sustain high quality health care for all Canadians, we have to get the economy right.

Second, we have to make sure that the way we meet the evolving health care needs of Canadians remains consistent with our social values. In doing so, we should understand that these discussions will have little impact either on total health care costs or on the health outcomes achieved for any given level of spending.

Third, we must leave no stone unturned in our efforts to get the best possible value from our collective investments in health care. The key here lies not in any single policy prescription, but rather in creating an underlying culture of innovation. This in turn requires a significant structural change in the management of the public health care system.

In health care as in economic growth, Canadians should be proud of our past achievements, but we can and must do better. In the shared enterprise of providing universal access to high quality and timely health care for Canadians, business can help.