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This is the 1st article in our series on the Big Challenges facing Canadians in the decades ahead. We begin with some key growing social issues, and in this article the challenge of health care cost escalation. This topic is extremely important to all Muskoka residents, especially given the open questions surrounding the future of our local hospital redevelopment and the implications that arise from it.
Global Health Care costs are rising at over 5.4 percent annually, more than double general inflation or GDP growth. It has pushed health care spending to become the single largest budget item in all Canadian provinces, consuming about 41 percent of all provincial program spending on average. In Ontario, hospitals gobble up 36 percent of the massive $60B health care budget. This challenge is what lies behind provincial premiers’ recent call for Ottawa to boost provincial health care transfer payments (covering 1/4 of health care spending in Ontario) from 3 percent to 5.2 percent annual growth.
The principal drivers of the rising health care costs are well understood, and they are most prominent in developed countries:
Demographics – ageing (increase in human longevity) & the high level of chronic disease associated with this segment of the population
Unhealthy lifestyles and diets
Growing societal stresses, mental illness & addiction
Increasing expectation by the public for costly new drugs and advanced clinical treatments
This situation becomes more urgent as governments face slowing economic growth, a growing list of spending priorities and rising debt levels. Canadian economic growth is stalling with real GDP per capita growth recently turning negative (Ontario just above zero).
Clearly, the current path is not sustainable, and solutions must be found. There is no silver bullet to easily solve this cost dynamic. These key elements are emerging as important parts of most governmental strategies and investment priorities:
Population wellness and prevention/reduction of escalating chronic disease.
Early diagnosis & intervention (particularly mental health & addiction) that supports keeping people out of inpatient care.
Expanded capacity of senior living infrastructure and in so doing vacating high cost ALC beds in acute care hospitals.
Improved operating efficiencies and effectiveness through new technology.
Streamline overheads, administration structures, processes (e.g. capital planning).
Purchasing standardization and aggregation.
Extend lifetime of existing infrastructure - increased emphasis on regular maintenance/upkeep.
Align user expectations to limitations.
It is clear that we are at the beginning of major transformational change in health care. Investment in these (and more) priorities should slow accelerating health care demand and cost escalations. Given governments’ growing fiscal challenges, investment in these priorities is critical, or significant reductions elsewhere is inevitable.
So how does this impact us locally? MAHC’s recently submitted hospital redevelopment plan to the Ministry of Health more than doubles the existing hospitals’ footprints, expands bed count by 64 percent, and pushes up un-escalated operational costs by 40 percent. This, despite a forecasted 10 percent population growth and a senior population share increase of 8 percent during the same 14 year period. Adding new MRI and stroke rehabilitation services/beds is very positive, but the overall scale of increases seems out-of-line.
MAHC’s submission also lowered the local share cost from $148M (recommended by their consultant) to $94M, a 54M$ reduction. This reduction was achieved through a $19M Furniture Fixtures and Equipment & Information Technology (FFE&IT) reduction, plus the reuse of almost all existing FFE&IT assets, valued at $35M. This seemingly overlooks the existing $9M FFE&IT deficit and is un-aligned with priority #4 above. Investing more capital in technology and equipment supporting new services and capabilities and less in large new buildings is a better use of scarce health care funds.
This cost estimate is well out-of-line compared to other hospital infrastructure projects (see attached chart). In addition, all amounts are stated in 2019 $ and so they exclude significant cost escalations expected in the future.
Our conclusion remains as stated previously: MAHC’s plan runs counter to the above government priorities and is well out-of-line with what other communities actually receive. Our Municipal and District governments should not wait for the province to reject it, which could take years. Instead, they should demonstrate leadership by sending a clear message to MAHC that it is mistaken – in fact ‘Municipal support is NOT growing’.
Watch for our next article, which lays out our suggested better pathway forward!
Dave Wilkin, P. Eng, M.Eng.,
Ross Maund, career senior executive
Both are Huntsville residents, and former MAHC board directors