Background
The purpose of this paper is to identify and quantify non-medical spending in Canada, as well as known instances of waste from financial mismanagement and redundancy that represent costs for the health system with no direct benefit to patients, in order to illustrate the scale of potential savings from more public scrutiny of these categories of health spending.
All levels of government across Canada (including provincial, territorial, federal and municipal governments, plus compulsory Social Security Funds) collectively spent almost $159 billion on healthcare in 2015. To manage public healthcare costs, governments devote substantial resources to assessing the cost-effectiveness of, and rationing access to pharmaceuticals, medical devices and diagnostics that directly benefit patient health outcomes, and even though such medical technologies account for a minor percentage of total health spending. Governments also spend a lot of political effort to control the number of practicing physicians, physician fees, hospital operating budgets (and by extension the number of practicing nurses), even though it is these health professionals that deliver medical care directly to patients.
By contrast, there is a serious lack of political attention to assessing the efficiency and effectiveness of healthcare administration and to scrutinizing spending on things other than medical care. The evidence suggests that billions of dollars are potentially being squandered annually on non-medical expenses without any demonstrable benefits for patients. In 2015, over $33 billion was spent by governments on things other than the direct costs of providing hospital and clinical medical services, and pharmaceuticals in Canada. The public reporting of this non-medical spending is a black hole of accounting, with publicly available data failing to properly assign costs or provide enough detail to allow for transparency and scrutiny.
Several provincial and local healthcare authorities have also been tainted with scandals related to the misappropriation of resources and procedural violations in tendering contracts for outsourced services. The nominal value of healthcare resources at stake in these cases ranges from the hundreds of thousands to the billions of dollars. Some cases have led to the dismissal of senior civil servants, investigations into fraud and the pursuit of criminal charges. This study reviews a few high-profile examples of poorly managed healthcare projects including eHealth and ORNGE in Ontario, McGill University Health Centre in Quebec, and STARS in Manitoba.
Less obvious, but still significant public costs are incurred from the systematic waste of health care resources owing to regulatory compliance costs and supply-chain “services” that act as redundant add-ons and toll-gating opportunities. Over the past several years there has been a proliferation of questionable administrative charges that add no clear benefit to patients. This study identified several examples of potential for redundant waste in the health system totalling millions in annual costs. An unknown but significant percentage of these expenditures probably represent wasted healthcare resources: i.e. money spent with no benefit to patients.
Policy Options
Given the financial challenges facing the Canadian healthcare system it is imperative that policy makers exhibit greater determination and diligence in reducing the amount of healthcare resources that are wasted: i.e. spent without clear benefit to Canadian patients. The evidence presented in this paper suggests that the public funds invested in rationing access to medical services and medical technology produce illusory savings compared to the substantial sums potentially wasted in the system due to a lack of scrutiny over non-medical spending. If governments refocused their cost containment efforts on non-medical expenditures, they could potentially save enormous sums that could instead be spent on medical goods and services that directly benefit patients.
All administrative policies, programs, regulations, requirements, processes and practices should be subjected to a rigorous and transparent economic evaluation of the associated costs imposed on the healthcare system, as well as proof of the net benefits to patients. All government funding for non-medical research and for non-clinical health-related organizations should also be subject to the same test.
An adversarial red-team/blue-team zero-based budgeting exercise utilizing opposing public-sector and private-sector analysts could be used to annually justify non-medical expenditures. Such an exercise could also be used to recommend accounting standards that would increase public accessibility, transparency and accuracy in government health spending data.
