Failing to Deliver

Announced in 2019, the Alberta Surgical Initiative (ASI) represents a significant expansion of for-profit, corporate health care. In February 2020, the Alberta government announced it would spend $400 million outsourcing surgeries to for-profit facilities and committed to doubling the number of outsourced surgeries over three years, from 15 per cent to 30 per cent of total surgeries provincewide. These publicly funded surgeries would be paid for by Alberta Health Services and the Alberta Health Care Insurance Plan, but performed in private, for-profit facilities. While only three years of data are available so far, the significant costs and risks to Alberta’s public health-care system are already apparent.

Through Freedom of Information requests, statistical analysis, and a review of the research literature, this report evaluates claims made by the Alberta government about the effectiveness of the Alberta Surgical Initiative in reducing wait times and the role of for-profit surgical outsourcing. This report finds that Alberta has among the worst performance in reducing surgical wait times in Canada. The province has prioritized for-profit surgical delivery rather than system improvement and fully utilizing the nearly 30 per cent of unused public operating room capacity.

Contrary to government claims that outsourcing to for-profit facilities increases provincial surgical capacity, data suggest that the expansion of chartered surgical facilities (CSFs) has diverted resources away from public hospitals and, in turn, reduced provincial surgical volumes.

Under the Alberta Surgical Initiative, provincial surgical activity has failed to increase from pre-pandemic levels, and public hospitals face reduced capacity and operating room funding. And yet, investor-owned surgical facilities are expanding through substantial contracts with the government. Between 2018-2019 and 2021-2022, surgical volumes in chartered surgical facilities increased by 48 per cent while surgical activity in public hospitals declined by 12 per cent.

Surgical outsourcing comes at the expense of public hospitals and undermines efforts to reduce surgical wait times over the long term, especially for patients requiring complex surgeries only performed in the public system. The expansion of this for-profit sector invites a greater risk of two-tier health care through unlawful patient fees contrary to provincial and federal legislation.

A New Legal Framework for Chartered Surgical Facilities

In 2020, the Alberta government passed Bill 30, which established the new Health Facilities Act, and amended the Alberta Health Care Insurance Act. The legislation itself does not increase surgical outsourcing, but the creation of “chartered surgical facilities” streamlines the process of approving facilities, creates greater certainty for investors looking to open CSFs, and establishes a more expansive form of for-profit surgical facility that paves the way for a private, for-profit hospital sector. Under the legislation, CSFs can upsell patients medical goods and services, as well as perform private-pay procedures. Public funds will subsidize the expansion of this for-profit sector by allowing these corporations to maximize public and private revenue streams.

Changes to the Alberta Health Care Insurance Act also allow legal entities other than physicians and physician professional corporations to bill the government for the provision of insured services. This fundamentally restructures how public funds may flow by allowing corporate (non-physician) entities to have a direct payment relationship with the government.

With this new framework in place, the for-profit sector is expanding with significant new public subsidy under the Alberta Surgical Initiative. In 2009-2010, AHS held contracts with 36 CSFs; by 2021-2022, 51 CSFs were under contract. Since the introduction of the ASI (2018-2019 – 2021-2022), the number of contracted surgical procedures performed by CSFs has increased from 29,052 to 43,078 — an increase of 48 per cent. Payments to contracted CSFs increased from $17.2 million in 2018-2019 to $27.7 million in 2021-2022 — or by 61 per cent. The largest annual increase in AHS payments to CSFs was between 2020-2021 and 2021-2022 (27 per cent) — the third year of the ASI. This reflects new and expanded CSF contracts taking effect.

The continued growth of the for-profit surgical sector will likely continue based on analysis of signed contracts between AHS and for-profit providers. In 2022-2023, the maximum value of all surgical contracts was $79.7 million — a significant increase in the actual AHS payments to CSFs from $27.7 million in 2021-2022.

Evaluating the Performance of the Alberta Surgical Initiative

Like all provinces, Alberta is struggling to work down the pandemic surgical backlog. However, wait times for three of four priority procedures were already increasing prior to the pandemic.

In 2022, Alberta had among the worst wait-time performance for priority procedures in the country. Furthermore, the trend from 2019 (the start of the ASI) to 2022 indicates that wait times for hip and knee replacements have worsened significantly, and more precipitously than the Canadian average:

• In 2022, 65 per cent of Alberta cataract patients received surgery within the benchmark, and just below the Canadian average of 66 per cent. Since the start of the ASI (from 2019 to 2022), the share of patients meeting the benchmark has increased from 44 to 65 per cent — the largest increase among the provinces.

• In 2022, 38 per cent of Alberta hip replacement patients received their surgery within the benchmark compared to the Canadian average of 57 per cent. Since the start of the ASI, the share of patients meeting the benchmark declined from 64 to 38 per cent — the second-largest decline among the provinces.

• In 2022, 27 per cent of Alberta knee replacement patients received their surgery within the benchmark compared to the Canadian average of 50 per cent. Since the start of the ASI, the share of patients meeting the benchmark has declined from 62 to 27 per cent — the third-largest decline among the provinces.

Some provinces increased surgical activity in 2021 over pre-pandemic levels (B.C., N.B., N.S., and P.E.I.); Alberta never achieved this, raising questions about the prioritization of funding and staffing for CSFs and its effect on public hospitals.

Increasing total surgical capacity in the province has been the primary argument for greater outsourcing through the ASI. However, surgical volumes data obtained through Freedom of Information requests reveal that the ASI is failing to meet its stated objectives. Of most concern is the fact that the province’s total surgical activity declined in the first three years of the ASI.

Specifically, analysis of data obtained from AHS shows that:

• Total provincial surgical volumes have declined since the beginning of the ASI, to levels below those of the 2014-2015 volumes. Fewer total surgeries were performed in 2021-2022 (268,335) than in 2018-2019, that is, pre-pandemic and before the ASI (285,945).
• Total provincial surgical volumes declined by 6 per cent between 2018-2019 and 2021-2022 (the most recent data available).
• The expansion of for-profit surgical delivery appears to be undermining the ability of AHS facilities to increase or even maintain their surgical volumes. The number of surgeries performed in CSFs increased from 29,052 in 2018-2019 to 43,078 in 2021-2022 (or 48 per cent), while public hospital volumes declined from 256,893 to 225,257 (or 12 per cent).
• The share of total provincial surgeries outsourced to CSFs increased from 10 per cent in 2018-2019 to 16 per cent in 2021-2022. During the same years, the share of total surgeries performed in public hospitals declined from 90 per cent to 84 per cent.
• Since 2010-2011, the greatest reduction in public hospital surgical volumes occurred during each of the first three years of the ASI (2019-2020, 2020-2021, 2021-2022), suggesting that funding and staffing resources have shifted from the public to the for-profit sector — or at least constrained public hospitals from increasing surgical activity.

This reduction in AHS surgical volumes cannot be explained by the pandemic alone, since surgical activity in CSFs increased between 2018-2019 and 2021-2022. Declining funding for public operating rooms (ORs), as well as a reduction in staffed hospital medical and surgical beds per capita, suggest that the government’s focus on increasing CSF surgical activity has constrained hospital staffing and surgical activity. Between 2018-2019 and 2020-2021, public operating room expenditures decreased from $576 million to $561 million. In 2018-2019, Alberta had 139 hospital medical and surgical beds per 100k population, which declined to 130 beds per 100k in 2020-2021. Declining public operating room funding limits surgical activity, and hospital capacity constraints limit the number of surgeries that may be completed; this can lead to surgery cancellations and longer wait times.

Provincial surgical volumes were lower in 2021-2022 than in 2018-2019, despite claims that the ASI would increase provincial surgical capacity. Reduced public sector surgical volumes — and reduced public operating room funding and staffed hospital beds — at a time when CSFs have increased surgical activity suggest that public funding and staffing resources have been redirected to for-profit facilities.

The growth of this for-profit sector appears to be exacerbating AHS staffing shortages and constraining surgical activity in public hospitals.

Problems With For-Profit Surgical Delivery

Increased public-sector staffing shortages and destabilized public hospitals: Outsourcing surgeries leads to competition between public and for-profit sectors for a limited pool of specialized healthcare professionals. The private sector offers incentives such as reduced workloads, less complex patients, and higher pay to attract workers from the public system. As a result, surgical activity in public hospitals has declined while for-profit facilities focus on lower-complexity procedures, destabilizing the public hospital system. Over time, entrenching for-profit providers also reduces the public system’s ability to negotiate prices with private providers.

Unlawful extra-billing and two-tier health care: Arguments in favour of for-profit delivery are often based on the claim that contracted facilities will not engage in unlawful extra-billing (also called two-tier health care), which is the practice of private billing for medically necessary procedures that are covered by public healthcare. However, evidence shows that for-profit clinics and surgical chains are entrenching two-tier health care in Canada through unlawful extra-billing practices.

Higher cost of for-profit surgical delivery: The Alberta government claims that surgical outsourcing will reduce costs because the per-procedure costs are lower in CSFs. While it is not possible to evaluate this specific claim because the data have not been made public, evidence from Alberta, other provinces, and internationally do not support this claim and point to a higher cost of for-profit surgical delivery.

Conflict of interest and medical decision-making: When surgical care is provided by a for-profit facility, medical decision-making is much more susceptible to conflict of interest leading to inappropriate surgeries and diagnostic testing. When outsourcing surgical services, governments may face increased costs because for-profit providers have a financial incentive to selectively offer and perform more profitable procedures even if they are clinically inappropriate.

Patient safety and care quality concerns: Evidence shows that private, for-profit health-care delivery is generally less safe and provides lower-quality care. When health-care facilities are profit-motivated, they must find ways to reduce costs and return profits to investors. The primary strategy among for-profit hospitals, ambulatory care facilities, and long-term care homes in Canada and the U.S. is to maintain lower staffing levels and fewer highly-skilled personnel per patient.

Conclusion

The Alberta Surgical Initiative, with its focus on for-profit surgical delivery, has failed to increase total provincial surgical activity to pre-pandemic levels.

Alberta’s wait times for priority procedures are among the longest in Canada. Despite claims that the Alberta Surgical Initiative would increase the surgical activity in the province, an evaluation of the first three years of the initiative suggest that funding and staffing have been diverted to chartered surgical facilities at the expense of public hospitals.

This evaluation provides new evidence indicating that health-care personnel are a fixed resource, and that expansion of a parallel, for-profit surgical delivery sector is constraining surgical activity in public hospitals. Between 2018-2019 and 2021-2022, contracted surgical volumes in chartered surgical facilities increased 48 per cent, and public payments to for-profit facilities climbed 61 per cent. At the same time, public hospital surgical activity declined 12 per cent as the public sector faces reduced capacity and operating room funding.

For-profit surgical delivery has become a big business. Public contracts for surgical outsourcing could reach $78 million in 2022-2023. At the same time, staffing and funding levels in public AHS facilities have declined. A new contract with a national for-profit surgical chain shows that AHS will be subsidizing this corporation by up to $105 million through 2029.

Evidence shows that the for-profit surgical sector is a gateway to two-tier health care, as for-profit facilities and corporate chains have been found to provide preferential access and charge patients unlawfully.

Surgical privatization comes at the expense of public hospitals and undermines efforts to reduce surgical wait times over the long term. However, by focusing on public-sector policy strategies based on research evidence, the Alberta government can reduce surgical wait times. This will require a move away from privatization and for the government to commit to public investment and improvement.

Recommendations

Based on the research evidence, this report recommends that the provincial government shift away from private surgical delivery and fully commit to public system improvement. The Alberta government should implement policy strategies that can reduce wait times over the long term:

• Adopt single-entry models, teamwork, and improved waitlist management: Primary care providers often refer patients to specific surgeons who each keep their own waitlists for consultations and surgeries. There is often no centralized management or oversight of these waitlists by hospitals or health authorities. Single-entry models, on the other hand, include the central intake of referrals from primary care providers (or self-referrals, if appropriate), pooled referrals and a waitlist shared by a team of surgeons and other providers, and triage for urgency and appropriateness.
  
  
• Maximize and extend hospital operating room capacity: Maximizing and extending hospital operating room hours as well as improving performance can also reduce wait times and costs. Specific strategies include optimizing scheduling and reducing downtime. The 2019 Ernst & Young AHS review found that physical public operating room (OR) capacity was used at 71 per cent in 2018-2019 and that an additional 18,713 operating room slates could be added, particularly during underutilized evenings and weekends, to make more effective use of existing public capacity. International evidence shows that increasing public sector capacity, rather than outsourcing, has the greatest potential to reduce waits in the long run.
  
  
• Increase Access to Seniors’ Home and Community Care: Increasing access to these services, especially for seniors, reduces hospital bed shortages, cancellations of scheduled surgeries and, ultimately, surgical wait times for all patients. Many patients occupying inpatient hospital beds cannot be discharged due to the lack of community-based alternatives. They are referred to as “alternate level of care” (ALC) patients, and the majority are seniors. The lack of available publicly funded seniors’ home and community care in Alberta has been documented by the Parkland Institute; recent data show it to be an ongoing barrier to improving patient flow and reducing surgical wait times. 

• Reduce the overuse of medical imaging and surgeries: Reducing surgical wait times also requires a focus on addressing the overuse of medical imaging and surgeries when they provide little or no diagnostic or treatment benefit or may cause harm. In Canada, up to 30 per cent of medical and surgical interventions are potentially unnecessary. Alberta is making improvements across most areas with common overuse of tests and treatments of low clinical value. However, expanded outsourcing of low-complexity surgical procedures to profit-motivated facilities (and surgeons) is likely to undermine efforts to reduce and eliminate clinically inappropriate surgeries and diagnostic tests that provide little or no value to patients. 

• Adopt a “vaccines-plus” public health strategy to reduce health system strain and delayed surgical care: The ongoing burden of unmitigated SARS-CoV-2 transmission — along with other viruses disproportionately affecting children, seniors, frontline workers, and vulnerable people — is contributing to severe health system strain. In order to manage inpatient volumes that remain much higher than pre-pandemic, hospitals have been forced to continue postponing scheduled surgeries in order to free up staffing resources, especially nurses, and inpatient beds. As a result, AHS faces challenges in increasing surgical volumes above pre-pandemic levels as this report shows. Alberta will have greater success at preventing delayed surgical care and working down backlogs if it adopts a “vaccines-plus” public health strategy. This requires the provincial government and public health officials to manage the ongoing pandemic and severe pressures on the health system in a manner consistent with scientific evidence and the goal of reducing transmission and infection, including public indoor air-quality standards, universal mask use in high-risk settings and when viral transmission is high, access to testing, employer-paid sick leave legislation, and encouraging vaccination.