Failing grade for public–private partnership hospitals

Erika Gilbert

doi:10.1503/cmaj.090065

Ontario could have saved hundreds of millions of dollars if the Brampton Civic Hospital had been built and operated publicly rather than under a public–private partnership (P3), Ontario Auditor General Jim McCarter says.

Ontario Auditor General Jim McCarter Image by: Ashley and Crippen Photography

The government could have saved almost $100 million on the cost of design, construction and provision of nonclinical services if it had followed traditional procurement methods. Because the government can obtain lower interest rates, another $200 million in savings could have accrued had the government, rather than industry, borrowed money for the project, McCarter wrote in his 2008 annual report (www.auditor.on.ca/en/reports_en/en08/303en08.pdf).

The Brampton Civic Hospital was the first built in Ontario using the P3 funding model, under which the government pays a private consortium to design, build and finance a hospital, and in some cases to provide nonclinical services such as laundry, food and security (CMAJ 2008;179[9]:883-5). Ontario has planned or started construction on more than 30 such health-related P3 projects, which have drawn considerable criticism (CMAJ 2008;179[10]:991-4).

McCarter's report, the most thorough review to date of a P3 hospital done by an auditor general, supports some of the criticism, saying that costs and benefits weren't adequately assessed.

The “value for money” assessment was overestimated by $634 million, while the cost of construction using the P3 model nearly doubled. The value of “risk transfer,” the estimate of what it will cost the consortium to deliver the project on time, was also overestimated by a wide margin, according to McCarter. Proponents of P3s say risk transfer is one of the major benefits of this funding model.

P3 opponents, such as Natalie Mehra, director of the Ontario Health Coalition, say they've been vindicated by the findings. Paul Moist, Canadian Union of Public Employees national president, adds that the report “confirms our worst expectations that this was a boondoggle.”

The government agency responsible for overseeing P3 projects says all problems have since been solved, while recommendations for improving transparency, accountability and value-for-money assessments have been adopted.

Infrastructure Ontario Manager of Corporate Relations Doug DeRabbie also says summaries of value-for-money assessments are available on the crown corporation's website, although full reports aren't posted because they contain sensitive material (www.infrastructureontario.ca/en/projects/index.asp).

But these summaries, which are short and have some information blacked out, indicate only a lack of openness and transparency, says Mehra, who says its disingenuous to claim that value-for-money assessments are publicly available. “All they do is compare the bottom lines. That is not a value-for-money audit.”

The Ontario Health Coalition is calling for a moratorium on P3s, pending a public review. The British Columbia chapter of the Canadian Union of Public Employees has renewed calls for the province's auditor general to closer scrutinize P3 projects. “We think it's an equally bad story,” Moist says.