Former health services chief says privatization among reasons Alberta health costs so high

Stephen Duckett, the former CEO of Alberta Health Services, says privatization is among the reasons why Alberta's health costs are so high.

Stephen Duckett, the former CEO of Alberta Health Services, says privatization is among the reasons why Alberta’s health costs are so high.

The former head of Alberta Health Services says there are several reasons why Alberta consistently has the highest health costs and worst outcomes in Canada: provincial wealth, politics and privatization.

Stephen Duckett, speaking September 17 in Toronto at Longwood’s Breakfast With The Chiefs, was President and CEO of Alberta Health Services from 2009-10.

An Australian economist who still lives in Alberta, Duckett says that he inherited a situation where cataracts were outsourced in Calgary and Edmonton. The “unusual” method of tendering these contracts encouraged providers to bid high. Instead of giving contracts to the low bidder, Alberta Health Services took all the bids, set a uniform price by averaging the costs in the tenders, then made “everyone a winner” by contracting the service to all of the submitting companies.

When the private Health Resource Centre (HRC) was facing bankruptcy, Duckett says he was encouraged to find a way to help them out of their financial troubles. When he looked at the cost of publicly funded procedures performed by the bankrupt HRC, he realized that public hospitals were doing the same orthopaedic work for considerably less. For a hip arthroplasty, for example, the cost was $486 more per procedure at the private provider, $1,814 more for a foot and ankle procedure.

Similarly, Duckett was in office when Calgary workers took the unprecedented step of mounting a class action lawsuit against a Telus subsidiary which had been given a contract to do payroll for the former Calgary Health Region. The employees claimed to have been underpaid, found mistakes on their T-4 slips, and problems in vacation calculation.

“Employees sued Telus because payroll was so badly done,” said Duckett, the situation eventually becoming resolved when the service was in-sourced again.

Blaming privatization on a one-party state, he quoted the Calgary Sun’s Rick Bell, who suggested the ruling PCs received support because they had “an acute sense of smell – for the gravy at the trough.” Duckett suggests that what is taking place is clientelism – “a symbiotic exchange relationship” between government and private contractors.

Duckett said this all took place in an environment that stifled public advocacy, where whistle blowers were ostracized, one stating “it was like I had rabies.”

Alberta also has what Duckett describes as “an ideological antipathy to home care – it was seen as a family responsibility rather than part of the continuum of care.”

That means it is harder to get patients home and hospital utilization rates remain high.

He says that Alberta also underinvests in seniors’ accommodations, preferring to build more hospitals instead.

He admits that Alberta’s oil wealth makes it difficult for the health minister to say “no.”

While they enjoy building new hospitals, they are less enthusiastic about paying for the services within them.

The money Alberta is spending – with the youngest demographic – is driving up costs in other provinces that may not be sharing that wealth. Duckett suggested that Alberta’s high physician fees and incomes are cost-drivers to the rest of Canada. That same effect is taking place by virtue of Canada being a neighbour to the high cost U.S. system.

Duckett says Canada’s overall public health care costs are not much more expensive that the OECD average, but there are many ways we could still do better.

That includes tackling the high price Canadians are paying for pharmaceuticals and by looking a inequities not only between provinces, but within provinces. As an example, he raised the issue of variation in Ontario where some regions are performing three times the number of hysterectomies.

But those costs also appear to be growing less quickly than other comparator countries. The increase in Canada’s health care costs was actually below the OECD average between 1997-2007.

Duckett is best known as the “cookie monster,” having left his post four days after refusing to answer media questions about the situation in the province’s emergency rooms. He used the excuse he was eating a cookie, although later said he was told by then Alberta Premier Ed Stelmach not to make any comment.

5 responses to “Former health services chief says privatization among reasons Alberta health costs so high

  1. Thanks for covering this week’s Breakfast with the Chiefs at which Stephen Duckett spoke. You covered his fascinating speech in yesterday’s Diablogue and may get some response from the audience of 100 healthcare leaders. One of them was not in the mood to respond on the blog and instead called me this morning to remonstrate. In the end I invited him to respond online. He said “I just did” and so I will be his messenger . . .

    As I remember the conversation with your anonymous critic, he noted you quoted selectively from Mr. Duckett’s remarks in a manner that makes it appear that Mr. Duckett thinks that privatization is a bad course of action. I believe that Mr. Duckett’s point was that privatization was badly executed in Alberta not that privatization is an illegitimate policy choice. For example, he quite clearly contrasted contracting out ophthalmology services in Alberta and Australia. He said that the problem with the Alberta approach was that it did not take advantage of competitive forces to squeeze value from providers of services.

    Since there is no video record of this particular presentation, readers of this blog may be interested in summaries of Mr. Duckett’s observations in a recent book – The Australian Healthcare System by Stephen Duckett and Sharon Willcox …

  2. I think the three examples he gave, and that I quoted, rather speak for themselves. It was also clear that his use of the word “clientelism” certainly defined why he thought privatization didn’t work in the Alberta context. In this political context it would be difficult to see how privatization would work under any circumstance. The opening paragraph, where he defines the three reasons, was lifted pretty much word for word from my notes.

  3. Less anyone think that Australia is doing a bang-up job on privatization, this from Dr. Michael Rachlis 2007 paper for the Wellesley Institute: “In Australia, governments have had to bail out two P3 hospitals. The Victoria state
    government had to buy the La Trobe Hospital from a private firm because it was losing so much money, it could ‘no longer guarantee the hospital’s standard of care.’ Controversially Australia recently announced it was privatizing administration of its Medicare system.

  4. To be clear, I’m not opposed to private contracting (within the context of Medicare), but it is very difficult to do well. The evidence is it wasn’t done well in Alberta.

    As an aside, I wasn’t fired, but just gave up. ‘Mutual agreement’ was the term used.

  5. Appreciate the update. Cheers.

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