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Hospital funding falls short: legislation, demands of an aging population drive up costs.

The following is the second instalment of a three-part series which puts Ontario's health-care sector under the microscope. This month Northern Ontario Business staff writer Chris Krejlgaard examines the reasons for the sector's funding shortfall. Next month: some potential solutions to the crisis.

The crisis facing the province's health-care system is no secret. There are daily accounts in the media of hospitals faced with funding shortages and doctors threatening to leave for greener pastures.

Faced with this news, the public is becoming increasingly concerned about the availability of quality health care and the distances which it must travel for treatment.

There are few options for hospitals attempting to cope with the cash crunch. The bulk of their operating revenue comes from the province, and most of their operating expenses are tied to staffing and government-legislated costs.

Ontario's hospitals receive about 85 per cent of their operating funds from the province, with the balance provided through fees charged for private- and semi-private rooms, technical services, out-patient services and parking.

Ontario Hospital Association president Dennis Timbrell has told the health ministry that at least $200 million is needed for the hospitals to balance their books for the 1991/92 fiscal year which ends in April.

If the funding is not provided, then many hospitals will likely start closing beds and reducing staff - something which has already happened in Sturgeon Falls.

The OHA has requested an 8.6-per-cent ($630-million) increase in funding for the 1991/92 fiscal year.

However, it is unlikely that the province will meet the request while facing a burgeoning deficit, reduced transfer payments and a substantial drop in income tax revenue.

According to a report released last spring by the Canadian Medical Association, Ontario will likely receive $1.2 billion less in federal transfer payments than it had anticipated.

The province spends $17 billion - a third of its annual operating budget - on health care, and yet it appears that the money is not enough to support the system.

The lion's share of the support - $8 billion - goes to the province's hospitals. However, 149 of the 224 hospitals belonging to the Ontario Hospital Association (OHA) are in the red, according to the association.

Hospital administrators attribute much of the funding crisis to double-digit wage settlements - which set the tone for future contract talks - as well as to government-mandated costs such as pay equity.

Esko Vainio, executive director of Sudbury Memorial Hospital, says Ontario's hospitals were instructed to set aside a fund equal to one per cent of their payrolls to cover the cost of implementing pay equity.

"It's a significant item," Vainio says.

While hospital administrators say they support the concept of equal pay for equal work, the legislation's impact on operating costs will be devastating for some of the institutions.

"It's going to put a strain on the hospital's resources," comments Dan O'Mara, executive director of Anson General Hospital in Iroquois Falls.

"If the government is going to mandate things like pay equity, then they should help pay for some of the increased costs," adds Tommy Boyd, administrator of Smooth Rock Falls Hospital.

Dr. Robert MacMillan, executive director of the Ministry of Health's health insurance division, attributes rising health-care costs to four main factors.

"The population of the province has increased, and there has been an increase in the number of medical services being done," MacMillan explains.

In addition, he says the number of physicians practising medicine in the province has increased at a rate three times greater than the rate of population growth.

The aging of Ontario's population also plays a large factor in the equation.

"The change in demographics has resulted in significant new pressures on health care," MacMillan says. "About 80 per cent of health care resources are used during the last two decades of a person's life. There are more debilitating diseases, more chronic care is necessary and there is a higher incidence of heart attacks and cancer."

The change in demographics is perhaps most evident in Elliot Lake, a city which has been marketing itself as a retirement community for the past few years.

"It keeps us busier than we were before, and we're seeing different types of ailments than we used to," says Dr. Neil McMillan, president of the Elliot Lake Medical Society. "There are a lot more chronic ailments. People are requiring more care, and their stays in the hospital have to be longer."

Provincial Health Minister Frances Lankin suggests that Ontario's health-care system is being adequately funded and that money can be saved by reevaluating which medical services should be funded by the public purse.

At the OHA annual meeting last month, Lankin claimed that between 25 and 30 per cent of all health care services have no proven value.

Vainio, who attended the conference, says studies exist which "question (the value of) some clinical, diagnostic and treatment procedures."

Ministry spokesman Paul Howard says the figures used by Lankin were taken from several studies, including ones conducted by Dr. John Eisenberg of the University of Pennsylvania and by Dr. Donald M. Berwick of Harvard University.

"In a Medicare situation, there are always pressures and priorities the government needs to examine for re-assignment or directing funding," OHIP's MacMillan explains.

Lankin advocates re-allocating funds from procedures with dubious value to programs which are intended to promote a healthier lifestyle.


Vainio, whose hospital performs the majority of cardiac care for northeastern Ontario, supports Lankin's call for an increased emphasis on preventive measures.

"About 85 per cent of the cardiac care for northeastern Ontario is done here, and the majority of the problems are lifestyle-related," he says, noting that workplace stress, poor eating habits and insufficient exercise are the main contributing factors to heart attacks.

Dr. Mimi Divinsky, a spokesman for the Toronto-based Medical Reform Group of Ontario, agrees with Lankin that government funding for health care is not being spent wisely.

The reform group is an organization of physicians from across the province which advocates universal health care and the eradication of the environmental, social and economic causes of disease.

The group believes in giving health-care professionals input into resource allocation decisions.

Vainio says hospital administrators are well aware of governments' financial problems and are re-evaluating their respective operations in anticipation of funding shortfalls.

"We've had to become more efficient," he says, pointing out that Memorial Hospital has reduced the average length of stay of its patients.
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Author:Krejlgaard, Chris
Publication:Northern Ontario Business
Date:Dec 1, 1991
Previous Article:Layoffs.
Next Article:Video producers, airlines object to ONTC expansions.

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