Examining our financial health

While you can’t put a price on good health or quality healthcare, it’s a fact that healthcare costs have soared over the years and continue to rise. It’s the reality not just for hospitals but across the entire health service spectrum.

Since the mid-1990s, hospitals throughout Ontario have been challenged to deal with budget deficits and hold the line on expenses. Niagara Health’s financial health is one of the key factors affecting our ability to provide quality care.

The Hospital Improvement Plan

While Niagara Health has a yearly budget of approximately $380 million, it is not enough to cover all of the costs associated with the way we currently provide services.

This is one of the key reasons the NHS developed a Hospital Improvement Plan (HIP) in July 2008. The HIP is a framework for the Niagara Health System to enhance the quality of hospital care across Niagara over the long term while at the same time balance financial pressures, the needs of our aging population and the challenges of the ongoing shortage of doctors, nurses and other health professionals.

Hospitals must balance budgets

The HIP identified more than $28 million in savings to be achieved over the five-year period beginning in 2008 through to 2014.

Savings were identified by creating Centres of Excellence and improving quality and efficiency.

Through the HIP, we are also reducing costs by minimizing the unnecessary duplication of services. This eliminates the need to duplicate equipment and health professionals and infrastructure across our seven sites.

“Approximately $16 million has already been achieved in savings related to HIP changes that have gone into effect since 2008,” says Chief Financial Officer Angela Zangari. “These savings come mainly from the consolidation of surgical services, bed closures and conversion of acute care services to complex continuing care.

All hospitals in the province are obligated to balance their finances and cannot run a deficit. “We must continue to use our resources wisely and explore all possible cost saving and revenue generating strategies that do not have a direct impact on patient care,” says Angela.

While NHS is performing better than 85% of its hospital peers with respect to efficiency, cost pressures continue to out-pace funding due to increasing expenses.

All aspects of NHS’s operations have been reviewed compared to industry best practice guidelines. Since amalgamation in 2000, the NHS has demonstrated its operations are efficiently run. The 2007/08 operational review by an independent third party clearly documented that Niagara Health was leading the way compared to other Ontario hospitals when it came to cost controls.

What’s ahead

As Ontario’s economy recovers from the recession, hospitals can expect that government funding will not be enough to cover increasing expenses. Although funding planning targets for the next fiscal year 2010/11 have not yet been identified by the Ministry of Health and Long-Term Care, all indications are the HIP funding assumption of a 3% economic adjustment will not be received for 2010/11.

Hospitals have been asked to identify the impact of base funding increases of 0%, 1% and 2%. Each of these scenarios represents a funding shortfall for Niagara Health because our costs will continue to rise at a greater rate. The rising costs are largely due to negotiated increases in labour contracts (more than 75% of our budget goes to salaries) and ongoing increases in supply and utility costs.

“Niagara Health remains committed to working through the HIP changes and cost savings associated with this plan,” says Angela. “However, it is most likely that the HIP savings will not be enough to achieve our financial target for 2010/11 and other cost reductions will be required due to the economic climate in Ontario.” «