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Government & policy

Ontario hospitals told to expect funding freeze

TORONTO – The Ontario government has informed the province’s 154 publicly funded hospitals to prepare for a possible funding freeze next year. A freeze would lead many organizations to cut services that affect patients.

Health Minister Deb Matthews (pictured) said the government might have no choice but to freeze hospital budgets to help the province sustain an extraordinary period of multi-year, multibillion-dollar deficits.

In the worst-case scenario, hospitals will get no increase in their budgets for the fiscal year beginning April 1, 2010, she said in an interview with the Globe and Mail. The best that hospitals can hope for, she said, is an increase of less than the 2.1 percent they received this year.

But even then, hospitals would be forced to make some cuts because the extra money would not keep pace with rising costs for drugs, medical equipment and supplies.

“I know that hospitals are being challenged by it, but our fiscal reality is that we’ve got to really take a hard look at every dollar we spend,” Ms. Matthews said.

Hospitals usually know well before this time of year how much funding they will receive for the coming fiscal year. But the government is dealing with enormous uncertainty in its own revenue numbers, which have fallen dramatically during the economic recession.

“I’m certainly aware that they would like that number as soon as possible and I’m just not in a position to give it to them yet,” Ms. Matthews said.

Earlier this month, hospitals submitted operating plans to her office for the next fiscal year under three scenarios - a funding freeze, a 1-per-cent increase, and a 2-per-cent increase. The minister wants to see what impact freezing the budget will have on hospitals.

“All across Ontario, there will be reductions in the scope of services that hospitals provide,” said Natalie Mehra, director of the Ontario Health Coalition.

As a result, she said, patients would have to travel longer distances for physiotherapy and other services or wait longer in emergency rooms before seeing a doctor.

Healthcare executives said the province’s hospitals are already among the leanest in Canada, leaving no room to cut further without compromising patient care.

Even with a 2.1-per-cent funding increase, to just over $14.5-billion in fiscal 2009-2010, dozens of hospitals have been forced to close beds, cut patient services and lay off staff in an effort to balance their books. The budgets have not kept pace with the rising costs of drugs, medical equipment and supplies.

The Niagara Health System, which operates seven hospitals, will close 39 beds next year as part of a four-year plan to find $28-million in savings and eliminate its deficit.

Chief financial officer Angela Zangeri said the Niagara hospitals’ plans are based on the assumption they will receive a 2-per-cent funding increase in fiscal 2010-2011.

“Anything less than that would require significant service reductions,” she said.

If funding is frozen for next year, the Niagara hospitals would be forced to find another $9-million in savings, she said.

Nearly one in every three hospitals in Ontario ended fiscal 2008-09 with a deficit. Of the 61 hospitals in the red, those of the Niagara Health System were among the hardest hit, with a deficit of $18.3-million.

The gap between funding and expenses is forcing more and more hospitals to borrow money to repay cash advances needed to replenish dwindling working capital.

Tom Closson, president of the Ontario Hospital Association, said this is becoming a growing problem for the sector.

He said he hopes the government will continue to invest in hospitals at a reasonable level. The sooner hospitals know how much funding they will receive, the better, he said.

“Regardless of what the number is, they need a target, they need to know.”

For their part, Ottawa-area hospitals are facing at least $51.6 million in cuts just to balance their budgets, and some are contemplating closing beds and laying off staff. The cuts represent about 2 percent on total budgets of $1.8 billion among the city’s six hospitals, and the shortfall could grow if the province imposes a funding freeze next year.

“If we get a zero-per-cent (increase), we’re going to have to close some beds,” said Daniel Levac, chief financial officer of Bruyère Continuing Care.

Some, such as the Queensway Carleton Hospital, are planning for the worst by warning their employees of potential job losses. Others, such as The Ottawa Hospital, Children’s Hospital of Eastern Ontario and Montfort Hospital, are taking a wait-and-see approach.

“We have some ideas about what to do,” said Michel Bilodeau, CHEO’s chief executive. “None of them is palatable in terms of service to the population. .It would be irresponsible for us to start raising the worry of the population
for something that may not happen.”

Ontario has a $24.7-billion deficit and plunging tax revenues.

So the best that hospitals could hope for is a two-per-cent funding increase, which would still force them to make less severe cuts. But some analysts maintain a funding freeze is inevitable.

“The hospitals that are being prudent and those that are looking at no (funding) increases are being very realistic,” said Doug Angus, University of Ottawa health economist. “I think if they get anything above a zero-per-cent increase, it’s just going to be a bonus.”

Posted Dec. 24, 2009