Why is the McGuinty government paying more for less when it comes to private labs?

The Ontario government is considering ending provincial health payments for Vitamin D tests, according to a front page Globe and Mail story on Thursday.

While delisting is not new for the McGuinty government, of particular interest was the reporting of the costs.

According to the Globe, the cost of these tests done in a private laboratory is $52 compared to $32 when conducted in a hospital.

Yet increasingly the government is forcing hospitals to abandon community-based testing and send more work to three major private-sector for-profit laboratories.

This has always been an irrational policy given the private sector laboratories have always cost more and in most cases, take longer to turnaround results. The loss of payment for community volumes also affected the ability of hospitals to keep their labs better equipped and staffed.

After the fight to keep community testing at Muskoka Algonquin Healthcare in 2007, the government commissioned a study by RPO Consultants into a ten-year “pilot” in which 12 small hospitals were paid a fixed amount to do testing ordered from doctors in their community.

The envelope funding to the hospitals was initially calculated on expected volumes funded on 85 per cent of what OHIP normally pays to the private labs.

For the first seven years of the project the government did not give the hospitals any increase in this funding envelope despite significant increases in the number of tests some hospitals were being asked to perform. Volumes had increased by as much as 144 per cent during this freeze. The private labs were under no similar constraint.

The result has been an increasing spread between costs of performing tests in the hospitals and the cost of sending them to the private sector.

RPO reported that by the time of the study, it cost an average of $22 per community patient visit when the tests were conducted by the small hospitals, $33 when sent to the private labs – a difference of 50 per cent.

RPO tried to play down the difference, suggesting the hospitals were subsidizing their lab overhead costs from their global budgets – something the Ministry denied to us.

All hospitals consulted by RPO submitted briefs which touted the benefits of keeping the testing in-house. Two of the original 12 hospitals involved dropped out due to an inability to maintain increased volumes with static funding.

By conducting all testing in the hospitals, it allowed doctors to find all lab information in one place and avoid duplication. While the province plans to integrate lab information as part of its e-health initiative, no such integration has yet to take place.

Hospital also indicated that the community volumes allowed them to purchase new equipment, provide a wider scope of testing, and allow more hours of coverage.

In the end, RPO recommended the community volumes be given to the private sector, giving the flimsly excuse that the model didn’t work well within the structure of the Local Health Integration Networks. Hospitals are within the scope of the LHINs, private labs are not.

The impacts are already being felt. Muskoka Algonquin, the first hospital from the pilot to lose its community volumes, is proposing to eliminate its night shift from the lab and require a reduced number of ER nurses to conduct limited point of care testing.

If the province was serious about saving costs in health care, it would look at RPO again and realize incredible efficiencies could be realized by using assets we already have in our communities – the hospitals.

2 responses to “Why is the McGuinty government paying more for less when it comes to private labs?

  1. We understand that the government is testing 3 new automated lab projects in the province. Anyone have comments about this?
    We have heard it is being touted as a way to deal with the lab shortages rather than train more techs.

  2. Pingback: Les modifications réglementaires donnent à penser que les hôpitaux cèderont bientôt leurs procédures ambulatoires | DiaBlogue

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