Scarborough-Rouge merger comes with costly conditions

The merger of The Scarborough Hospital (TSH) with the Rouge Valley Health System (RVHS) will not come cheap. Last night the hospital boards approved the idea of merger but only under very specific and costly conditions.

Nor will the merger necessarily stem the tide of cuts The Scarborough Hospital has been experiencing. At last night’s special meeting of the TSH board, CEO Robert Biron was asked whether continuing cuts would be seen as a failure of the merger?

Biron said funding constraint is part of the government’s transformation agenda and that merged or not, the hospitals would have to navigate it anyway. He told the board that together they were more likely to minimize the impact of such restraint.

Given an estimated $29.5 million in one-time fixed costs around the merger plus a wage harmonization bill of $5.4 million, these costs are likely to be held up against the loss of any services the merged hospital decides to shed in the future. There is still resentment over the loss of $17 million worth of services earlier this year to balance TSH’s budget.

One of the conditions to proceed is a $2.5 million grant to do a legal and financial “due diligence” on the merger. This is on top of the $1.3 million already spent on the consultation process that began in late summer. The hospitals are also asking that approval be conditional on a grant to proceed with feasibility, planning and design for two major new infrastructure projects, one in Scarborough, the other in West Durham. This could be a multi-billion dollar ask.

One of the questions Biron couldn’t answer is whether the hospitals could go it alone on the immediate merger costs given their cash flow situation. Both hospitals already have much higher levels of debt as a percentage of total revenue than the provincial average.

Biron insists that the one-time investments can be offset over time by savings from both economies of scale and efficiencies, such as the merger of administrative services between the two hospitals. Those net savings after wage harmonization would be less than $10 million on a combined annual budget of about $680 million.

Those savings came under scrutiny by the board – one member suggesting that the savings may be more fleeting and that the merger proposition should be instead weighted on the perceived qualitative advantages.

This issue of new hospitals may be why discussions about locating services within the three Scarborough sites was off the table during the fall consultation. If the decision is to build a new Scarborough Hospital, it is possible that it may replace more than one present site, and likely could replace all three. The assurances that the emergency rooms would remain at all four sites is clearly a short-term promise.

Biron reminded the board on several occasions that the merger study does not include a detailed budget or operating plan for the potential amalgamated hospital. That will be up to the new board to decide.

The final report of the Integration Leadership Committee stresses the importance of infrastructure renewal in any merger process. The hospitals estimate that maintaining the four sites could cost $1 billion over the next 20 years. Needed upgrades to meet current demand or standards could add another $0.5 billion.

Even if the new hospitals were to be built, maintenance costs would be part of any new infrastructure. Should the government pursue a public-private partnership, those costs would be built-in from the start.

Listening to Biron’s presentation, one has to wonder about the effectiveness of the Liberal MPPs in advocating for their local hospitals when the age of equipment is double the provincial average, the physical condition of the Birchmount campus is considered to be among the lowest 10 per cent in the province, and the other two Scarborough sites to be in the bottom half. Did they just wake up to discover this yesterday?

For Ajax one has to question why, after recently completing a major expansion, it is already operating at its physical capacity. Was planning really that poor? The final report states that almost 70 per cent of West Durham residents are seeking in-patient care and surgical services elsewhere.

Biron argues its time that Scarborough gets its share of the infrastructure investment.

This comes at a time when the McGuinty/Wynne government has already invested in more than 100 major Ontario public hospital infrastructure projects. Will there be room for two more?

Board member Warren Law warned toward the end of the meeting “be careful of what you ask for.” Management and the board clearly have an “onerous” job going forward should the LHIN approve the initial proposal November 27.

The hospital leadership clearly believes that by becoming the seventh largest hospital system in the province that they can leverage that size to their advantage.

The merged hospital would also rank first in day surgeries (75,000), second in emergency visits (235,000), second in acute separations (57,000) and would be in the top 10 for intensive care days, ambulatory care visits and average beds staffed and in operation.

While the merger conditions will likely pass the Central East LHIN, it is unknown whether the Minister of Health would approve such a costly proposal at a time of austerity. While Biron wraps this up in the flag of health care transformation, he is essentially asking for a major investment in hospitals at a time when the province clearly wants to put its cash into smaller community-based providers.

This may not yet be a done deal.

One response to “Scarborough-Rouge merger comes with costly conditions

  1. The days of exclusively acute-care providers answering a young, healthy community’s needs are a post-war concept. If we dont invest in complex and chronic continuing care and stop pretending we are treating the government and “evidence-based” numbers instead of these health concerns of Canadians, electoral mutiny and mass migration of health carr dollars are just the beginning.

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