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Government & policy

Ontario to curb pay increases for hospital CEOs

TORONTO – The Ontario government is planning measures to control the salaries of hospital CEOs by installing new accountability rules that link pay increases to the quality of care and outcomes in their facilities.

Until now, Ontario hasn’t meddled in the compensation packages of hospital chiefs, and has allowed hospital boards to set salaries, bonuses and other forms of remuneration.

However, healthcare CEOs have been in the public spotlight of late over their relatively high pay packets and salary increases, all at a time when cash-strapped hospitals have been cutting services and laying-off nurses.

Indeed, 14 hospital CEOs made more than $500,000 last year, according to the annual sunshine list of public sector workers who earned more than $100,000.

“If a CEO has an enormous pay increase and talks to employees about holding the line, it undermines their credibility,” Ontario Finance Minister Dwight Duncan (pictured) told the Globe and Mail newspaper. “You cannot expect a front line nurse or clerk to just accept the notion that you’ve got to restrain your pay when they see CEOs getting huge increases.”

Exploding healthcare costs are one of the biggest challenges faced by provincial governments across the country. In Ontario alone, healthcare costs will rise 6 per cent this year to $46.1-billion.

Salaries for hospital executives, doctors, nurses and other health-care workers will account for nearly two-thirds of the additional $2.6-billion in spending.

The proposed legislation is part of the government’s call for a wage freeze for one million public sector workers to help Ontario erase its record $21.3-billion deficit.

Healthcare in Ontario now accounts for 46 cents of every $1 in program spending. Left unchecked, Mr. Duncan said, it could account for 70 cents of every $1 in 12 years.

The government is also introducing changes to the province’s prescription drug system to lower costs for generic drugs. But Mr. Duncan said healthcare is primarily driven by the cost of services provided by “human beings.”

As a result, he said, wrestling with compensation – something he acknowledges won’t be easy – is the single most effective way to curtail the rate of growth in healthcare spending.

He has not assigned a target regarding how much money the province would save through the proposed legislation. But he said the push to rein in compensation has to start at the top.

The government froze wages for two years for MPPs and 350,000 non-unionized public sector workers in the March provincial budget. It also put teachers, nurses and other unionized workers on notice that there will be no money for wage hikes when their contracts expire.

The government will save $750-million from the wage freeze with non-unionized workers. By fiscal 2012-13, it aims to reduce the overall growth in healthcare funding to 3 percent a year.

Posted April 8, 2010