Managing the monster

By Marcel Côté

Every country is facing the challenge of managing its healthcare system. Some have well-structured systems, such as France, which probably boasts the best system in the world and one of the least expensive. In contrast, the US has a system that is the most costly on the planet and far from the highest quality. And even though the Canadian system may be above average, we face the same challenges.

Healthcare is the most important activity in industrialized countries, outdistancing the leisure, housing, food and oil resources industries. According to The Atlantic Monthly, one-quarter of the US economic growth in the past decade has been due to rising healthcare costs, with no corresponding improvement in Americans’ well-being. As President Obama recently pointed out, in the US, better healthcare management is first and foremost an economic challenge.

Canada spends 10% of its GDP on healthcare, a figure that would be acceptable if it remained stable. However, if we don’t want to get bogged down in the same quagmire as the US, which allocates 17% of its GDP to healthcare, it’s time for serious changes.

Good healthcare systems are based on a universal public-health insurance regime, one of Canada’s major assets. But universal systems are often criticized for limiting the scope of private supplementary health plans. Defenders of the exclusivity of the public system argue that introducing supplementary plans would weaken political support for the universal plan. Unfortunately, their unsubstantiated contention carries weight in political circles. Yet our system’s main shortcoming lies elsewhere.

The two pillars of our healthcare system are medical clinics and hospitals and other healthcare institutions. And the way they are managed is a disaster. While our physicians are competent and devoted to patients, the fee-for-service compensation scheme they operate under is dysfunctional. It encourages abuse while discouraging teamwork and delegation of responsibilities. Fee-for-service has brought the frontlines of our system to the level of a cottage industry, a situation unique to this sector of the economy in 2009. That’s where our system fails, the same way as many other healthcare regimes around the globe.

Hospitals are in even worse shape. Despite the good that can be said about public administration, it isn’t designed to manage complex and intense operational activities. In fact, no private-sector activity could be efficient if it had to operate under the systemic constraints, which include the proliferation of employee perks such as job security, executive salary ceilings and the lack of modern management of capital spending budgets plaguing our hospitals. But we can’t blame administrations. It’s the constraints under which these institutions have to operate that are senseless.

Two years ago, I made a small investment in a private surgery clinic, which opened my eyes to the issues that undermine the efficiency of public institutions. One telling example is the regular cancellation of operations scheduled for the last hour of public-sector shifts because a Treasury Board rule prohibits overtime. As a result, hospital resources are regularly underutilized.

I could also point to healthcare technology. In every sector of the economy except hospitals, technology leads to lower costs. But poor management practices in the health-care sector endure because there are virtually no sanctions against inefficient managers. The problem is ongoing, especially since boards of healthcare institutions have no real authority. In a private one, lenders would take action.

Canada has to overcome the taboos paralyzing its healthcare system. This means ensuring our social values aren’t monopolized by an ideological clique that persists in maintaining in a state of mediocrity a sector that is critical for Canadian society as well as for our economy.

Marcel Côté is founding partner at SECOR Consulting in Montreal