Skip to content

Projected $9.6M deficit can be beaten, hospital says

CUPE Local 1623 president Dave Shelefontiuk said he fears Health Sciences North's plans to eliminate a projected $9.6-million deficit will mean bad news for his members.
160312_ap_new_hospital_name_1
Health Sciences North officials are sure the hospital's projected $9.6-million deficit can be fixed by the end of September. File photo.

CUPE Local 1623 president Dave Shelefontiuk said he fears Health Sciences North's plans to eliminate a projected $9.6-million deficit will mean bad news for his members.

The only way he can see the organization balancing the budget is cutting or contracting out services, “and cutting a whole lot of jobs.”

“We're concerned, because when they start thinking about cutting jobs, the first people they look at are our members,” Shelefontiuk, who represents roughly 1,200 support service workers at the hospital, said.

When Health Sciences North's 2011-2012 fiscal year began in April of last year, the projected deficit was $9.6 million.

The hospital's senior vice-president, Joe Pilon, said the deficit will definitely be less than that when the 2011-2012 fiscal year ends March 31.

“I know our current run rate is below that,” he said.

Health Sciences North has promised the North East Local Health Integration Network (North East LHIN) that it will balance its books by Sept. 30, something which Pilon said is “achievable.”

Starting last spring, the hospital compared the budgets of all of its departments to those of similar hospitals in the province, and saw where its own costs seemed to be higher.

“We then said to the programs, here's some savings that appear to be available to us if we perform like our peer hospitals,” Pilon said.

“Try to contact those hospitals and look at the way we might change how we're doing things to create some savings. That's what our staff have now been challenged to do They're going to have to come back to us with their plans in April.”

Right now, the hospital isn't looking at cutting services or beds to balance the budget. There's “potential savings in just doing things differently,” Pilon said.

“If there is some technology available to us to change a surgical procedure that requires a three-day length of stay into an ambulatory procedure that's a day procedure, there's that opportunity for savings,” he said. “That's the kind of thing we're looking at.”

Although he couldn't readily come up with an example, Pilon said some departments have already implemented changes to cut costs.

Pilon said the hospital won't have the final numbers for the 2011-12 financial year, which ends March 31, until May. The hospital's books first have to be reviewed by financial auditors next month.

The public will get a look at the state of the hospital's finances at its annual general meeting in June.

Because it was projected to be a in a deficit position, the North East LHIN invited the hospital to make a presentation about its financial state at one of its board meetings last fall.

“After discussing the presentation with the hospital, the North East LHIN board then directed the hospital to submit a Hospital Improvement Plan,” according to an email from North East LHIN spokesperson Lara Bradley.

“The plan was to clearly outline how the hospital would achieve a balanced financial position by Sept. 30, 2012. The hospital was also directed by the LHIN board to participate in monthly meetings with the North East LHIN to discuss methods to achieve a balanced financial position.”

If the hospital is unable to balance its budget by Sept. 30, it would have to undergo a peer review process, which would see a third party spend “considerable time at HSN to undertake a full review of the finances, operations and processes,” Bradley said.

The reviewer would then make recommendations on how the hospital could find efficiencies to balance their books.

However, Bradley said this seems to be a “moot point,” as the North East LHIN has been meeting with the hospital on a regular basis since last fall, “and the hospital appears to be on track to balance by the end of September.”

The hospital did actually post balanced budgets in 2005-2006, 2006-2007 and 2007-2008.

However, in 2008-2009, it posted a $4.2-million deficit, in 2009-2010, it posted a $4.8-million deficit, and in 2010-11, it posted a $5.1-million deficit.

These figures include not only the hospital's operating deficit, but amortization, otherwise known as depreciation.

Over the past few years, the North East LHIN allowed an operating deficit within one per cent of hospitals' overall revenue. The latest agreement between the North East LHIN and its hospitals requires them to balance their budgets, Bradley said.

Pilon blames the hospital's ongoing budget woes on a number of factors.

The new hospital, which officially opened its doors two years ago, was built to host more surgeries and other types of care than all three of the previous hospitals combined, he said. This has increased the hospital's costs.

To cover some of these costs, the hospital is negotiating with the government to receive more post-construction operating funding.

“When we were doing our negotiations, we had asked for an additional $45 million,” Pilon said. “We've only got about $20 million of that right now.”

There was also a $2.5-million funding gap between the money it received to run the ALC unit at the former Memorial Hospital site, and what it actually cost, he said.

It costs about $450 a day to run one of these beds, and the North East LHIN was only able to secure about $300 a day, so Health Sciences North had to make up the balance to keep the beds open.

The fact that there often aren't enough inpatient beds to go around is also putting a strain on the hospital's budget, he said.

Instead of being cared for in the 454 inpatient beds the hospital is funded for, these extra patients are being cared for in the emergency department, in the recovery room or in hallways, Pilon said.

In the meantime, Health Sciences North is learning about a new hospital funding formula being implemented by the Ministry of Health and Long-Term Care for this coming financial year.

Pilon and other hospital officials met with ministry officials about the issue in Toronto March 14.

He said he is unable to talk about what happened at the meeting because he had signed a non-disclosure agreement, adding that the province probably wants detials of the funding formula to be released with the budget March 27.

However, he did speak to Northern Life about the issue prior to the meeting.

In the past, hospitals were mostly funded by “global” budgets, or lump-sum payments from the province to cover all of their costs, Pilon said.

However, the province is planning to introduce the health-based allocation method (HBAM), where 40 per cent of hospitals' budgets would be based on demographics.

“It uses the Ministry of Finance's census data, and says 'These are the people that are living in northeastern Ontario, and based on their age and demographics, this is what they need for health care.' Hence, this is the health care we, at Health Sciences North, should be providing to that population.'”

Fifty-six per cent of the budget is still expected to be a global budget, Pilon said. The final four per cent will be based on how many surgical procedures a hospital performs.

“It goes to the government's intent that hospitals get paid for the work that they do,” he said. “So for every hip, knee and cardiac surgery we do, we're paid for it. If we're not doing it, we don't get the money.”

Posted by Arron Pickard


Comments

Verified reader

If you would like to apply to become a verified commenter, please fill out this form.




Heidi Ulrichsen

About the Author: Heidi Ulrichsen

Read more