It's ironic taxpayers have to bailout a private hospital, says David Eggen, executive director with Friends of Medicare

As Calgary’s population grew in leaps and bounds in the mid-1990s, the province shut down three inner-city hospitals. And shortly after blowing up the 960-bed General Hospital, the province sanctioned a private-care facility — one that was supposed to reduce surgical wait times and save taxpayers some money.

But that very same facility that, ironically, took over a shut-down hospital, is now in a bankruptcy dispute and is being bailed out by the province — temporarily, until the health-care system gets its massive overhaul — leaving taxpayers to pay millions toward bank loans, a creditor receiver and to continue performing surgeries until next February.

“The whole thing is absurd,” says David Eggen, executive director of Friends of Medicare. “Health Resource Centre was given a golden ticket to provide private delivery of public surgeries. How can you go broke on a sweet deal like that?”

That “golden ticket” was the tens of millions of dollars Alberta Health Services gave to the Networc Health Inc., which owns Health Resource Centre (HRC), for doing about 100 orthopedic surgeries per month. And after performing mostly hip, knee and ankle surgeries, the 37-bed HRC planned to expand into a larger, new health complex that started construction in 2008.

According to court documents, HRC claims the province promised the private health-care centre it would triple the number of annual patients —to 2,733 — who would otherwise get care in the public system. But HRC says the province pulled the carpet out from under them last July by reneging on the deal.

Even though HRC was told by the province it likely wouldn’t get as many surgeries, construction of the new facility continued. In a letter last December to confirm discussions and agreements, the construction company wrote to Networc Health Inc: “We understand that there have been delays in finalizing your agreement with Alberta Health Services as a result of internal reorganizations within the Alberta government, but that you expect it will be completed in January 2010,” wrote Brad Regier of Clark Builders.

The “internal reorganization within the Alberta government” is a mammoth restructuring of Alberta Health Services. In March 2009, Alberta Health Services hired Stephen Duckett from Australia to repair the province’s ailing health-care department and its $1-billion deficit. As well, in just two years the health department had three ministers — heads who had their own strong ideas of how to run the department, such as Ron Liepert, who dismantled Alberta’s nine health regions and created a “superboard.”

There was plenty of belt-tightening to do, says Richard Plain, a health economist. “The economic crunch forced the government to tighten the budgetary screws, required Alberta Health Services to borrow $750 million to meet payrolls, and enacted a hiring freeze.”

As for the number of future surgeries contracted between HRC and the province, the executive vice-president and chief financial officer for Alberta Health Services says Networc committed to expanding without having a deal in place with the province. Negotiations were ongoing when the matter hit the courts in April.

“No deal was ever finalized,” says Chris Mazurkewich, adding the two parties had talked about a maximum of 2,700 cases, but some types of medical procedures, including spinal surgeries, weren’t yet approved by the province.

“It wasn’t the services that they had been delivering up to that point. We were looking to expand the type of surgeries they could do,” he says, adding the province simply couldn’t give HRC many more patients needing knee, hip and ankle surgeries. “We didn’t have enough of the normal volume that they were doing.”

As well, the province claims in court documents that it could legally terminate the surgical agreement it had with Networc “without notice, costs, penalty or process of law if Networc becomes insolvent, bankrupt, is placed in receivership or commits any act of insolvency.”

The Alberta government plans to do in-house surgeries — ones that HRC has been doing for years — after February 2011 at the new McCaig Tower, an expansion of the Foothills Medical Centre, which is now under construction and slated to open in January.

“We’re doing these actions in order to protect patient care and ensure people receive timely services,” Mazurkewich says. “Nobody’s happy with the situation we find ourselves in, but we’re trying to do what we see as in the best interest of the patient.”

The province’s decision to do these surgeries in-house likely doesn’t bode well for HRC’s business tycoons. (In the year 2000, there were 65 Health Resource Group — Networc's former title — investors and now there are currently a handful of board directors making the major financial decisions.)

When contacted by Fast Forward Weekly, board director and entrepreneur Frank King, who spirited Calgary’s 1988 Winter Olympics, says he couldn’t comment because there is a “gag order.” As well, Networc Health CEO Tom Saunders says he couldn’t talk about the matter because it is in the courts.

Wendy Armstrong, spokesperson for Consumers’ Association of Canada, says a problem with relying on private companies is that they “come and go” through bankruptcies, takeovers and mergers. “So you have no control over their business decisions about what kind of risks they may take, which may lead to the disappearance of that clinic at the end of the day.”

Since HRG’s (now Networc) beginnings, Armstrong has witnessed some major events unfold. When HRG applied for accreditation, there was much debate, and criticism that the private hospital — the first in Alberta — was contravening the Canada Health Act. Former premier Ralph Klein’s government favoured privatization and the hospital was hailed as being the future of medicare. After HRG was approved, other provinces, including B.C. and Ontario, opened private hospitals.

“One of the things a lot of people don’t appreciate, because physicians tend to be the front-face of many of these clinics, but my research through the years shows that much of the impetus for these clinics comes from businessmen looking for opportunities for high returns on their investments,” Armstrong says.

Some others don’t appreciate entrepreneurs trying to profit from essential health care.

“It was a group of investors who saw the government’s ideological bent on privatizing health care, so they manipulated an opportunity for themselves,” says Eggen. “The government deliberately reduced the number for beds available in Calgary to soften the ground for this kind of thing and gave the businessmen a sweet deal on a public hospital — the same place we are now renting back for $114,000 a month.”