Competitive Bidding in Health Care

SYMPOSIUM ON THE IMPACT OF MANAGED COMPETITION ON HEALTH CARE
Institute for International Research Conference
Toronto
Jan 24 - 26, 2001

Report submitted by: Stan Marshall
CUPE Research

A “Symposium on the Impact of Managed Competition on Health Care” was part of a two day Conference on “Reorganizing the Continuum of Care in Canada” sponsored by the Institute for International Research.

Panel members were asked to focus on the history, current practices and future improvements of managed competition [competitive bidding] in home care in Ontario. A synopsis of their remarks is provided below. Comments ranged from unqualified support for managed competition to highly critical of the whole process.

Both Mary Kardos Burton of the Ontario Ministry of Health and Long Term Care and Susan Vanderbent of the Ontario Home Health Care Provider Association were very supportive of the competitive bidding process. Joe McReynolds of the Ontario Community Support Association was highly critical while Stephen Handler from the North York CCAC and Barb Mildon from Saint Elizabeth Health Care were more moderate in their comments, perhaps reflecting their organizations’ precarious position in the whole process.

A SYNOPSIS OF THE COMMENTS OF THE PANELISTS

Mary Kardos Burton, Executive Director, Health Care Programs, Ontario Ministry of Health and Long Term Care

Burton outlined the development of CCACs and the managed competition process saying that they were a vast improvement on pre-CCAC days which lacked transparency and accountability.

Burton says that there is a Managed Competition Stakeholder Committee that has been and continues to dialogue with key stakeholders to ensure that the process is effective. The Committee has produced a number of papers on a variety of ”best practices” including: disclosure, debriefing, deposits, specialty contracts, site visits, notification, pricing for volume, transition and managing volume. They are currently looking at papers on “best practices” relating to contract language and performance monitoring.

Burton says that the following are “myths” and the managed competition process with RFPs is working just fine:

• The managed competition process is concerned with getting the best price for services. Price is only a consideration and the greatest emphasis is on quality care.
• The managed competition process is responsible for nursing and homemaking shortages in long term community sector. CCACs consider employment matters issues in their assessment of quality and longer term contracts will help matters.
• The managed competition process fails to put the client at the centre of care. Attention to measurement outcomes and quality standards puts client at the centre.
• Managed competition has severely restricted collaboration among service providers. Three to five year contracts will facilitate cooperation.

Price Waterhouse Coopers has undertaken a review of all 43 CCACs. Results are not available to the public as yet [and may never be.] The review has been presented to the Minister and focuses on standard approaches, consistent standards, uniformity, and better monitoring mechanisms.

Stephen C. Handler, Executive Director, North York Community Care Access Centre

Handler reviewed the history of “one-stop shopping” for continuing care services from 1984 to the present day. He says that the new CCAC model is ideologically motivated and takes services from Municipal Health Departments with the intention of keeping them.

The transition timetable for RFPs was unrealistic – more complex and time consuming than anyone realized. Clerical and administrative personnel found themselves in a legal process where they had to be prepared to defend themselves in court if need be. Smaller companies were not likely to sue CCACs but large corporations with legal services would be more likely to challenge any decision on contracts.

CCAC board members wanted to be more in control of standards but found it difficult to do so. The whole process was “carved in stone” and resources had to be spent on evaluation of the RFPs and feedback to the bidders. CCACs had to become experts in client services, information technology, and contract law. Any change in providers has implications for staff at the CCACs, for those under contract and for public relations activities.

Handler identified the following pros and cons:

Pros - Quality is still difficult to define but contract monitoring is improving quality. The desire of a company to renew contracts is an incentive to improve care. Price has not decreased because it is determined by the market and there is a need to compensate appropriately.

Cons – The cost/time issue is real. A lot of time is spent on the contracts, both by the CCAC and the competing organizations. The emotional trauma faced by workers is real. Handler asks the question of whether non-profit organizations should have to spend so much time and money to compete. Is the residual value enough, especially in small communities?

Finally, Handler asks, “Should politics replace pragmatism in the provision of human services?” [One is left with the feeling that he doesn’t think so.]

Joe McReynolds, CEO, Ontario Community Support Association

McReynolds is highly critical of the managed competition process. He says that the assumption was that home care had a management problem when the real problem was inadequate planning and insufficient funding.

McReynolds is highly critical of the managed competition process. He says that the assumption was that home care had a management problem when the real problem was inadequate planning and insufficient funding.

The negatives fall into three areas:

(1)	It resulted in low quality of service. Continuity of care decreased, there was a loss of the therapeutic relationship, and a loss of cooperative sharing of best practices.
(2)	The workforce was de-stabilized. Workers were not shifting with the contracts; workers began leaving the field; new workers were not attracted to the field; and there was a degradation of working conditions. The annual turnover rates are 25% - 40%. There has been a decrease in salaries, benefits and working conditions.
(3)	There are many false savings from managed competition. There is the cost of developing the RFP, the cost of the RFP process itself, the lengthy review process, and the administration of the contract. All providers are engaged in low-ball bidding to stay in the field. Labour costs are lowered through this interference in the market. It is harder to attract workers. Employee costs to the employer are higher with increased costs of absenteeism, injuries and resulting insurance premiums. Waiting lists are longer.

McReynolds says that public accountability is also compromised. The legalistic aspect of RFPs results in less openness, less transparency and less reporting. While standards of care were established, there are now 43 different standards of care across the province and there is no data to support the standards.

McReynolds says that public accountability is also compromised. The legalistic aspect of RFPs results in less openness, less transparency and less reporting. While standards of care were established, there are now 43 different standards of care across the province and there is no data to support the standards.

He makes the following recommendations:

• Conduct an independent and impartial review of managed competition.
• Establish compensation parity for nurses and homemakers with other health care workers.
• Create two funding envelopes – one for acute care substitution and one for care delivered to the ageing population and people with disabilities.
• Continue to explore alternative approaches to managed competition.

Barb Mildon, VP Nursing Leadership, Saint Elizabeth Health Care

Mildon also identified some positive and negative developments from the managed competition process. The following is not an inclusive list.

Positive:

• Some CCACs are passing on 100% of the new rate increase to frontline providers.
• Longer term contracts with renewal clauses
• New rates for specialty nursing care
• Both RN and Practical Nurses’ scope of practice is maximized

Negatives:

• Reduction in educators when forced to be “lean”
• Exodus of experienced nurses from the community
• Influx of new graduates without experience
• High turnover rates adds stress to existing staff
• Labour unrest
• Shortage of nurses
• Orientation programs are shortened in order to be competitive
• Fewer student placements
• Continuing education curtailed by fee-for-visit funding
• Fewer advancement opportunities as forced to be “lean”
• Limited interaction between hospital and community
• Less exchange of knowledge and fewer collaborative efforts
• Pay differentials are in the order of 20% to 30% with other health sectors
• Compensation on a fee-for-visit basis is not as desirable as wage/salary within standard treatment times e.g., dialysis is 1 hour
• There has been a dramatic shift in full time to part time ratios. In 1980 the ratio was 60/40 fulltime to part time. In 2000 the ratio was 20/80.
• Agencies are not paid for “virtual” time i.e., liaison with case managers, physicians and for telephone contacts but have to pay employees for that time.

Susan D. Vanderbent, Executive Director, Ontario Home Health Care Provider Association

Vanderbent, representing the corporate for-profit employers, was most definitely in favour of the managed competition process. She prefers the term “proprietary” sector when referring to private for-profit providers, and “private” means both for-profit and not-for-profit.

Vanderbent, representing the corporate for-profit employers, was most definitely in favour of the managed competition process. She prefers the term “proprietary” sector when referring to private for-profit providers, and “private” means both for-profit and not-for-profit.

In Ontario home care has been delivered by the private sector (proprietary and not-for-profit) in a publicly funded system for the last 30 years. The proprietary [for-profit] sector was used primarily as a “secondary workforce” to cover hours not covered by not-for-profits. But the system was inherently unstable because it did not have a level playing field for the for-profits.

Home care in Ontario is the most generous in terms of spending per capita but wages are lower than elsewhere. It is one of the few systems that is delivered by the private sector and does not impose user fees. It also uses a contracting system to select providers. Vanderbent says that in 1995, 30% of nursing care and 50% of home care in Ontario was delivered by the proprietary sector [for-profits.]

Vanderbent uses concepts from Osbourne and Gaebler (Reinventing Government) to frame her argument. She says that governments should not be “rowing” but only “steering” and the state should actively encourage an increase in the role of the private sector in the delivery of health care. Here she speaks of not-for-profits and for-profits as being equals within the “private sector.”

Vanderbent claims that public sector rollbacks were due to a failure in government provision (lack of effectiveness, efficiency and accountability), economic uncertainties and the fact that the private sector was more “vibrant” in organizing health care. The private sector is “relieving the state of burdens it can no longer adequately shoulder.”

Vanderbent says that there are some specific impacts and outcomes from managed competition.

• Competition allows for the not-for-profit and for-profit sector to provide home care with greater accountability
• Choosing providers will mean higher transaction costs
• Home care is emerging as a force and providers are becoming stronger
• Impacts on professional caregivers are similar to the other major shifts in health care e.g., nursing
• Individual providers have developed ways to reduce overhead costs, improve the use of technology, and be more efficient.
• There has been some consolidation and losses, but overall there has been growth among providers.
• A lack of standardization in implementation of managed competition has led to frustrations.
• There is a need for a stronger regulatory role by the state.

According to Vanderbent the state has not pulled back from an authoritative role in providing health care. She thinks they should. In fact, she states that access to the private sector “has given the state a broader span of services over which it can exercise legitimate control.” [In other words, she thinks the private sector has expanded the areas of service. The state can now get out of the business of providing service and concentrate on its legitimate regulatory function.]

She concludes that managed competition is a new relationship that will tie the public and private sectors together with the government as “chief overseer” but not primary deliverer of care.

CUPE Research

March 2001