Rebuking the Romanow Report

Newfoundland’s study finds for-profit nursing care beats the public sector

By Peter Fenwick, AIMS research fellow

This week Newfoundland Health Minister Gerald Smith released the results of a yearlong pilot study that compared the quality and cost of caring for high needs elderly in a not-for-profit government run home with a for-profit private home.

It was no contest.

The for-profit institution was 23% less expensive, provided equal medical care, and was as good, if not better, on quality of life indicators. The report strongly advocates expanding for-profit home care for high needs elderly in the province.

Furthermore the for-profit facility was much closer in cost to nursing care in four other provinces that were part of the study. By contrast the government nursing home was up to 50% more expensive than the least expensive homes in Ontario.

Predictably the unions representing government home care workers have condemned the report, and the government is studying the document further. There is no point angering several of the largest unions in the province in an election year. They argue the province should follow the Romanow report and stay away from for-profit health care.

The pilot project placed 30 level three and four patients in Chancellor Park a nursing home that had been restricted to level one and two patients in the past. (The levels roughly indicate the hours of nursing care needed each day by the patient. The higher the number, the more care.) Most of the patients in the pilot project were suffering from dementia, heart disease or arthritis.

Chancellor Park is a recently built investor-owned facility in St. John’s. It is the only large for-profit nursing home in the capital city. The pilot project was an attempt to secure additional high needs beds without expanding the government run facilities in the city.

Although studies had shown enough low level care beds were available in the province, high level care beds were both scarce and getting scarcer. Since Chancellor Park was operating at about 50% capacity it could accommodate additional residents.

The results were astounding. The study compared an unidentified government run nursing home with Chancellor Park on cost, quality of health care, and on the satisfaction of the respective residents.

Chancellor Park was able to provide care for a chronic needs patient for $1280 to $1426 a month less than the government institution. The government run (actually run by a government appointed nursing home board) institution cost over $6400 per bed, per month, while Chancellor
Park was able to do an equal job for $5100 per bed, per month. After user fees, the net cost to the government was reduced at both institutions by $1300 per month, but the differential remained the same.

While substantial in itself, the cost differential would have been greater if Chancellor Park had not needed to make payments on its mortgage, and to pay taxes to the city, the province and the federal government. The government institution paid water taxes, but no other taxes, and its capital costs were provided by government grant.

Yet the lower costs did not result in appreciably different outcomes.

Medical care was roughly equal, with more infections and mis-medications at Chancellor Park, but with less falls. In the survey of the residents, or more appropriately, the most frequent visitors to the residents since most residents could not answer the questions, Chancellor Park was equal or better in satisfaction ratings.

Opponents of for-profit health care argue simplistically that a profit, no matter how reasonable, will make for-profit care more expensive. In the case of Chancellor Park the profit was $450 per bed per month. It was a return of 10% on direct and indirect costs. It is about the average return earned by regulated utilities. But even with profits added-on, the for-profit home was still 23% cheaper.

Critics have also complained that Chancellor Park’s more extensive use of Personal Care Attendants instead of Licensed Practical Nurses (LPN), gave it an unfair cost advantage.

There is some validity to that criticism Although Chancellor Park exceeded its quota for Registered Nurses it had only half the number of LPNs recommended by government. However, it may be that Chancellor Park is ahead of its time. Prior to the report’s release the president of Treasury Board (herself a former nurses’ union head) argued that there were too many LPNs in Newfoundland nursing homes and some should be replaced by Personal Care Attendants who make less. That would bring Newfoundland’s nursing home costs more in line with other provinces.

And Newfoundland’s costs are way out of line with the rest of the country. The same report compared nursing home costs in four other provinces with the costs they found at Chancellor Park and at the government run home.

In Nova Scotia, New Brunswick and Saskatchewan the costs of comparable nursing home care was roughly on a par with the costs at Chancellor Park, but much lower than the Newfoundland government run facility. In these three provinces nursing homes are a mix of public and for-profit private facilities. In Ontario, the other province studied, costs were lower still. Even the more modest costs at Chancellor Park were above the norm in Ontario.

Which is probably why the St. John’s Nursing Home Board announced a series of layoffs in the weeks before the Chancellor Park report was made public. The administrator of the Board argued that their costs were out of line with similar institutions elsewhere and had to be brought down. Sparked by the public service unions, demonstrators protested the cuts.

But the use of Personal Care Attendants was not the only economy. Administrative costs were almost $13 per bed day lower at Chancellor Park, housekeeping and laundry costs were less, and overhead salary costs for standby, callback etc were significantly lower. In the past the government has repeatedly complained that its health care employees abuse their sick leave provisions. Evidently less abuse occurs at Chancellor Park.

So what will happen with the report and the pilot project?
With an election expected in the next six months it is unlikely the government will want to antagonize the unions that represent workers at government health homes. It will likely be shelved until after the election.

But something will have to be done soon. The head of the province’s Health Boards Associations claims there are 60 chronic care patients taking up even more expensive hospital beds who need high-level care. If the pilot project were made permanent and expanded to accommodate these extra patients, it would reduce the pressure on the acute care hospitals in the province.

In the meantime the Romanow Report notwithstanding, anyone who claims that for-profit nursing homes are too expensive will have to explain how Chancellor Park beat the not-for-profit home hands down.