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Mega-mergers in healthcare don’t save money or improve health outcomes

A version of this commentary appeared in the Montreal Gazette and the Huffington Post

Quebec’s proposed health reform ignores best evidence

Quebec’s Bill 10 has as its objective improvement to the access and quality of health and social services in the province, while diminishing bureaucracy and increasing efficiency. To accomplish these objectives the proposed law merges all public health and social service institutions in a given region into an integrated center of health and social services (CISSS). The Montreal region, due to its size, will be divided into five new distinct regions.

As professors in the Department of Health Administration in the School of Public Health at the University of Montreal, we are in agreement with these objectives; however, we seriously question the ability of this reform to achieve them. Scientific evidence has shown that mergers of institutions in the healthcare sector do not generate economies of scale nor do they reduce bureaucracy — and they have had little or no effect on the integration of services or an increase in accessibility. The centralization that will result from this reform will not allow for the stated objectives to be achieved and will likely have important negative consequences.

Mergers and their cost: Bigger is not better nor less expensive

The debate surrounding the optimal size of a healthcare institution has been going on for decades. This debate reached a crescendo during the 1980s in the United States and Great Britain. Experience shows that there are no cost savings in increasing the size of an acute care hospital over 200 beds. Hospitals with over 600 beds cost more to run than those hospitals of smaller size. Evidence also indicates that not only are costs not reduced with bigger institutions, but that there are unexpected and negative effects on the offering of services, most notably in the delays in the development and improvement of those services. There was even a national conference held in 2001 in the U.S. on the theme of “The Failure of Mergers.”

Many studies, both in England and the U.S., as well as Quebec, have looked to explain the impact of integration on health and social institutions and their missions. These studies show very positive effects on the integration of care but that they were achieved through contractual agreements between autonomous organizations and not through mergers. Contracts between autonomous institutions to share the provision of services by implementing corridors of care achieve much better results than do mergers.

Less bureaucracy: Not true

We could ask: are there too many bureaucrats? The question is complex and difficult to answer without objective data. Instead one can observe the evolution of administrative expenses as a portion of government expenses in health and social services in Quebec in the past and compare them to like expenses in other provinces.

In Quebec, according to the data from the Canadian Institute on Health Information (CIHI), the portion of administrative expenses in healthcare spending has decreased since 1975 from a 4% rate in the seventies to 1.3% into 2011, and then started slowly increasing to 1.6% in 2014. General administrative expenses in other provinces have followed the same tendency. From 2.6% in 1975, they were reduced to 1.1% in 2014. In fact, these expenses were more significant in Quebec than Canada between 1975 and 2004 and very comparable from 2005 onward.

General administrative expenses in Quebec were similar to other Canadian provinces after the Couillard reform when the role of regional agencies was reinforced. However, between 2011 and 2014, the portion of general administrative expenses in Quebec’s healthcare system did not follow any development in regionalization. In this context, it is difficult to associate regionalization with an increase or a reduction in administrative expenses. It is also difficult to imagine how the abolition of regional agencies would lead to a reduction in these expenses.

Centralization is not a guarantee of efficiency in our public healthcare system

Scientific data show clearly that a decentralized system is closer to the centers of decision- making and allow for health and social services to be better adapted to populations needs, especially those of the underprivileged or those living in rural or outlying communities. Contrary to industry, which seeks the production of uniform and standardized services at the best price, health systems need to be able to adjust services to the needs of the populations being served.

The disappearance of local institutions risks standardizing services throughout a regional territory, hence diminishing access to more marginal populations while increasing the inequalities of health. The creation of regional mega structures will result in an important loss of linguistic, cultural and community identity. Those institutions that have been serving their community for many years and are essential for their role in maintaining community ties and supporting community development will be lost.

Scientific evidence does not support the presumption of Bill 10 that there will be a reduction in bureaucracy with the centralization of decision-making. National and international experience has shown time and time again that the proposed reform will not have the desired effects and, in fact, will make healthcare delivery more complex. We should learn from these experiences instead of increasing the centralization of decision-making in our healthcare system.

Unfortunately we have the peculiar trait of trying the same solutions over and over again even when they have been already shown not to work.

The following professors in the Department of Health Administration in the School of Public Health at the University of Montreal have signed this letter : Nicole Leduc, Régis Blais, François Champagne, François-Pierre Dussault, Lambert Farand, Marie-Josée Fleury, Mireille Goetghebeur, Mira Johri, Lise Lamothe, Nicole Leduc, David Levine,  Michèle Pelletier, Louise Rousseau, Claude Sicotte, José Carlos Suarez Herrera.

November 2014

This work is licensed under a Creative Commons Attribution 4.0 International License.