June 2004: Corporate "Sick Shops"

P3 hospitals are bad for patients, for care-givers, and taxpayers
June 1, 2004

Health care corporations push whenever they can for privatized health care, and the focus of their latest efforts are “private-public-partnership” (P3) hospitals. Currently, as many as 15 P3 hospitals are at various stages of pushing into Canada. Private corporations behind P3 hospital deals are part of a global movement of corporate “sick shops” that are waiting in the wings to reap profits from our health care system.

The governments of British Columbia, Alberta, Ontario, Quebec, New Brunswick, and Newfoundland, by considering P3 hospitals, are putting down the welcome mat for health care privateers. Such hospitals, once established, could lock-in the privatization of health care services under international trade and investment agreements, especially the General Agreement on Trade in Services (GATS).

Although the federal government claims that health care services have been exempted from these global treaties, in fact such exemptions apply only to services that are completely financed by government and run on an entirely non-profit basis. Clearly, P3 hospitals will not meet these strict exemption definitions. Can we really expect that health care corporations based in the United States will refrain from grabbing a big piece of Canada’s $90 billion health care market, once given the chance to do so?

Under P3 hospital scenarios, hospital management, construction, and support services like food, laundry, laboratory and maintenance will be wide open for transnational service providers. So if trucking lab tests, food or laundry between cities, or even across borders makes sense for a corporate service provider interested in maximizing profits—and if as a consequence it means poor food for patients, unclean linens, late or lost lab tests, or shoddy facilities maintenance—what are you going to do about it? Re-jig your performance requirements next time the 30-year trade agreement comes up for review?

Once P3 hospitals are allowed, health care corporations that provide services in P3 hospitals can arguably use GATS terms, such as National Treatment rules, to access the same public funding that is currently made available to medical service providers in public hospitals. Do Canadians really want to give more Medicare money to private health care corporations?

We need to take a close look at how these corporate “sick shops” have operated elsewhere—the lessons are very instructive.

Private Finance Initiatives (PFIs), which have financed hospitals in Britain, have cost up to 72% more than initial projections, and, as a result, cuts have had to be made in operating budgets. British medical journals report that, on average, 26% of hospital beds were cut and staff reduced by 30%. New user fees were added, with even volunteers charged rent for office space. Profits, of course, remained healthy, ranging from 15% to 25%.

One of the P3 players eager to win a P3 contract in Ontario is Carillon, a multinational corporation that specializes in the privatization of public programs. Carillon is behind the building of private hospitals in Britain, at Swindon and Dartford. It is involved in for-profit hospital proposals in Ottawa and Brampton.

The Carillon-built hospital in Swindon cost $720 million to build—more than double the original estimate of $330 million. The final tab paid to the company will be more than 1$ billion over the 30-year contract. Carillon’s new hospital had 80 fewer beds than the hospital it replaced. Soon after its opening, all beds were filled, surgeries had to be cancelled, and hospital administrators were notifying doctors they couldn’t accept any more patient referrals.

How bad can it get? Ask Tony Collins, who made the Guinness Book of World Records after he was left waiting on a trolley for 60 hours—a record that unfortunately was shattered soon afterwards by another patient who endured 144 hours waiting in a hospital corridor.

The U.K. government was left holding the bag for these chronic bed shortages and had to spend $27 million more for the construction of a new ward to accommodate the extra patients.

Although patients and the government were hard hit, Carillon is doing fine, with revenues of $4.5 billion in 2002 and profits of $95 million. The corporation and its partners reaped a windfall profit of $45 million from their U.K. PFI hospitals, thanks to a complicated debt refinancing scheme crafted by the international consulting firm PriceWaterhouseCooper (PWC). (PWC is a member of the corporate cartel that is pushing the GATS.)

Who benefits from P3 hospitals? Ask Sir Nevil Sims, the Group Chair of Carillon. Ask him how he feels about P3s moving into Canada and if he thinks he will get a raise in his 2002 pay package of about $1.02 million. Or ask Carillon CEO John McDonough if he is keen to see six or more P3 hospitals show up in Canada. In 2002, McDonough pocketed $1.4 million, and with more P3s coming, he may need deeper pockets.

The evidence is clear: P3s are good for the private health care corporations, but they’re not good for patients, not good for taxpayers, and not good for health care workers.

P3s are not the way to go.


(Karl Flecker is the Education Coordinator for the Polaris Institute. To learn more about corporate “sick shops” eager to profit from Canadian health care, check out www.polarisinstitute.org for the publication “Waiting in the Wings.” Research on Carillon courtesy of the National Union of Public and General Employees - NUPGE.)