Hospitals Forecast Deficits

Hospitals forecast deficits
Half of Ontario's hospitals say without cuts, they'll break an Ontario law banning red ink.

Thu, March 13, 2008

Half of Ontario's hospitals are poised to operate in the red, a situation projected to get much worse next year despite a provincial law banning hospital budget deficits.

The tough times for the key health-care sector were disclosed to hospital executives and boards this week by the Ontario Hospital Association, which surveyed member hospitals on March 5.

Unless they cut services, 75 hospitals face a deficit for the fiscal year starting April 1.

That jumps to 104 hospitals — 68 per cent — the following year, the OHA survey warns.

The dire financial outlook for the province's hospitals comes less than two weeks before the Liberal government brings down its next budget.

Ontario prohibits hospitals from running deficits and, to end budget uncertainty, now tells the sector what its funding will be at least two years ahead of time. For example, it will get 2.4 per cent more money this coming year and another 2.1 per cent the next.

The multi-year funding was supposed to end an era of annual standoffs between the hospitals and the Health Ministry over money, with hospitals demanding more to cover their operating shortfalls.

Hospitals in Strathroy and Newbury have already drawn up plans for service cuts in the face of significant deficits.

The Strathroy hospital is facing a $2.2-million operating deficit out of a $30-million budget.

Newbury hospital, with a $10-million operating budget, is short $500,000.

In its report sent to hospital executives this week, the OHA said Ontario hospitals are already very efficient compared to others in Canada. “In fact, it would require $100 more per capita, or $1.2 billion, to bring Ontario hospitals up to the spending level of hospitals in the rest of Canada,” the OHA report said.

OHA president Tom Closson said the annual increases from the Health Ministry aren't enough for the province's hospitals to deal with significantly higher wage and energy costs.

“Just looking at inflation alone, it is a big challenge,” he said.

Hospital costs are also being pushed higher by increasing demands from the aging population and population growth.

“Hospitals are working hard to improve their efficiencies, but efficiency can only be improved so quickly,” Closson said.

Unlike in previous years, when Ontario's hospitals negotiated with the Health Ministry, they now are required to reach balanced budget deals with Local Health Integration Networks, health-care agencies set up by the government.

Closson said the OHA is advising hospitals in financial difficulty not to cut services, but to keep negotiating with their LHIN.

“We don't think the province wants us to cut services,” Closson said.

An OHA advisory on tactics for negotiating with the LHINs warns hospital boards not to sign any agreement unless they can meet their obligations.

Laurel Ostfield, spokesperson for Health Minister George Smitherman, said this is the first year the hospitals have negotiated budgets with the LHINs and it's a difficult process that requires a lot of hard work on both sides.

“We do have a lot of confidence in the Local Health Integration Networks and we feel very certain they will be able to come to a resolution with the hospitals on their budgets,” Ostfield said.


– Based on no service cuts, 75 Ontario hospitals (49 per cent) project deficits for 2008-09.

– For 46 hospitals (30 per cent), the deficits will be greater than two per cent in 2008-09.

– For 2009-10, 104 hospitals (68 per cent) project deficits.

– For 66 hospitals (43 per cent), the deficits will be greater than two per cent in 2009-10.