Canadian Health Coalition

Shouldice Hospital: Backgrounder

Rabble.ca (September 19, 2012)
Follow the money: The growth of private health care in Canada
By Colleen Fuller

Toronto Star (September 28, 2012)
Shouldice sale tests McGuinty’s commitment to public health care
By Thomas Walkom

Toronto Star (September 18, 2012)
Shouldice Hospital sale poses threat to health-care system
By Dr. Danielle Martin

Canadian Doctors for Medicare (September 17, 2012)
Media Release: Reject sale of Shouldice to for-profit U.S.-controlled company, say doctors

Registered Nurses’ Association of Ontario (September 25, 2012)
Media Release: RNAO asks Minister to reject sale of Shouldice Hospital to US conglomerate
 


 
Rabble.ca (September 19, 2012)
Follow the money: The growth of private health care in Canada
By Colleen Fuller

Health care reform has been on the agenda of every level of government in the country for the past two decades, not to mention every health and academic institution and think tank. Citizens have been bombarded with messages that the public system is not sustainable without “meaningful” system change. A common theme heard from elected officials is how hard it is to push change, there is just so much public resistance.

However, profound change is happening. It just isn’t the subject of debate in provincial, territorial or federal legislatures. There is no discussion about whether these changes are good or bad, will improve our overall health, what the evidence says about the direction we’re moving in or what the impact will be on what Canadians refer to as “the five principles of medicare”: universality, comprehensiveness, accessibility, portability, public administration.

These changes are mainly happening in corporate boardrooms — which is why the public isn’t at the table.

Centric Health

One such corporate boardroom belongs to Centric Health, a Canadian company based in Toronto but controlled by a venture capital firm in California called Global Healthcare Investments & Solutions (GHIS).

Known as Alegro Health until 2009, Centric is different from other private health corporations in Canada, which have tended to expand in “silos” and within provincial or even municipal boundaries. Instead of sticking to surgical clinics or physiotherapy or home care, Centric is sucking it all up, expanding across the entire spectrum in the health services sector: surgical clinics, rehabilitation, dental, home care, pharmacy, disability management, diagnostic services, medical equipment and third-party medical assessors.

This is known as “vertical integration,” an investment strategy that could enable Centric to control multiple levels of care — primary, secondary and tertiary — under its corporate roof, mirroring, in effect, the public health care system (which is and should continue to be vertically integrated).

In 2007, GHIS — which assures investors it is focused on “shareholder wealth creation” –formed a “strategic alliance” with Alegro, acquiring over two-thirds ownership of the Canadian company and changing its name to Centric. A 2012 Centric report outlined plans to significantly increase its size and position as an integrated health services business. An important part of that strategy is the development of a nation-wide Preferred Provider Network — an arrangement in the U.S. known as managed care. In such a system, subscribers pay a fee to access hospitals, physicians and other providers who are all part of the same “network.”

Nearly 1000 locations across the country

Centric’s GHIS-backed buying spree brought 14 new health companies in seven provinces under its corporate roof between 2009 and early 2012. These include Surgical Spaces, Inc. (owner of Vancouver-based False Creek Surgical Centre and Maple Surgical Centre in Winnipeg) and Calgary-based LifeMark, Canada’s largest rehab company with (so far) 120 clinics. On September 7, the company announced it was acquiring Shouldice Hospital, a private hospital established in 1945 in Thornhill, Ontario.

In 1973, private hospitals were “grand-parented” by Ontario’s Private Hospitals Act, which specified that only those hospitals whose licenses were issued by the Ministry of Health before 1973 could continue to stay in existence. Further, the sale of Shouldice shares or transfer of license requires prior approval of the Minister of Health. Canadian Doctors for Medicare have called on Ontario’s health minister, Deb Matthews, to reject the sale of Shouldice to Centric but whether she will agree remains to be seen.

In 2005, Centric — then Alegro Health — purchased Don Mills Surgical Unit, which also needed — and got — the approval of then health minister, George Smitherman. With the purchase of some of the heavy hitters in the private surgical market, it appears that Centric is well on its way to achieving another unfortunate Canadian first, the establishment of a private “Surgical Centre of Excellence in 2012.”

Today Centric is established in 980 locations across the country, including ownership of 19 surgical operating rooms. It is heavily invested in long-term care, with over 60,000 beds under the corporation’s umbrella. It employs over 3400 health professionals, consultants and other staff. About 51 per cent of the company’s revenue in physiotherapy, where it has the strongest market presence, comes from public payers, including workers’ compensation, while another 26 per cent comes from auto insurers (both public and private).

Follow the money

Centric’s aggressive merger and acquisition strategy is supported by GHIS, founded in 2006 by Dr. Jack Shevel, currently the chair of the Centric board of directors. Shevel is known internationally as the owner and former CEO of Netcare, a company he took from being a relatively minor player in South Africa to the third largest healthcare services company in the world. Netcare has been credited with transforming South Africa’s fragmented private health services to a consolidated market in which Shevel’s company played the lead role.

In 2006, Netcare acquired General Healthcare Group GHG), the largest private hospital company in the UK, for £2.2 billion, a deal described by the Financial Times as “the largest of its type in Europe.” That same year, Netcare was awarded a five-year, £2.5bn contract by the NHS to provide a range of diagnostic and surgical services across the UK. Netcare now owns more than 120 hospitals in the UK, with 11,500 beds, 510 operating theatres and 37 pharmacies.

Centric’s growth and expansion mirrors that of Netcare, not surprising given that both companies share a common mentor. In 2005, GL Faber, then-Vice President of GlaxoSmithKline, described Shevel as a kind of magician who turned Netcare into a global corporation.

Shevel’s growth strategy for Netcare included very rapid expansion through acquisitions, specific incentives to enlist the support and loyalty of physicians and nurses, and the sale of shares in the company to employees, a move helped counter “labour unrest” among union activists. In 2003, Netcare spearheaded the introduction of managed care to South Africa.

Shevel’s other key players on the Centric board include Darren Youngleson, a fellow South African, chief financial officer at GHIS, and the person credited with Netcare’s successful acquisition of GHG in Britain. Also part of the team is Robert Wardell who sits on the boards of several gold mining companies, including Katanga, Elgin and Allied Nevada Gold Corporation.

Aggressive growth strategy

There is no doubt that the investments in Centric by GHIS are fuelling the growth of its Canadian company and supporting an aggressive acquisition strategy. This is a worrying development given the rights that U.S. investors can realise under NAFTA and the WTO.

An important aspect of Centric’s growth strategy is to ensure it has access to “the necessary professional medical and support staff to support its expanding operations.” Taking a page from Netcare, its first public offering was, in fact, “strategically focus[ed] on staff and healthcare professionals.”

Similarly, the development of preferred provider networks is designed to attract health professionals and to this end it is developing relationships with insurers, workers’ compensation boards and employers. Centric has negotiated over 30 PPN agreements with these groups, providing 3750 assessors, including 600 physicians. Under these agreements the company provides “independent evaluations to insurers, workers compensation boards and employers across Canada”.

Centric’s 2011 Prospectus describes its own review of legislation, regulations and ethical codes in Canada’s provinces. It found that “applicable legislation, regulations, standards of professional practice, professional codes of conduct, guidelines, ethical rules and protocols…governing healthcare professionals do not prohibit the purchase or ownership of securities of the Company by such persons”.

A study done by the Independent Medicare Payment Advisory Commission in the U.S. found that “physician-owned hospitals tend to be more costly, treat healthier and more profitable patients, increase the number of surgeries, and treat fewer Medicaid patients than community hospitals.”

This led the United States Congress in 2010 to pass the Affordable Care Act which prohibited physician referrals to hospitals in which they were invested, a move that would save U.S. Medicare an estimated $500 million over 10 years. There are no similar conflict of interest laws anywhere in Canada.

What is to be done?

Canadians have very little experience dealing with an aggressive and acquisitive private health sector. Most of the companies in the Canadian health care market — for example, Cambie Surgery Centre in Vancouver — are privately-held and access to information about who invests in them, how much money they make, and where the money is going is hard to come by. But compared to Cambie Surgery, Centric Health is an open book. That’s not because Centric is necessarily a “nicer” company, but rather is due to the fact that it’s publicly traded and so different rules apply. That provides health activists with a lot more information — and as Francis Bacon said, knowledge is power.

We are facing a new landscape in health care, a landscape that has been shaped, in part, by years of governmental failure to enforce laws to uphold not only the public interest, but also the public will. Such failures have created an environment in which medicare in Canada is shrinking and fragmenting, while the private sector is expanding and consolidating.

Health activists and researchers — both academic and non-academic — need to focus more of their skills on the corporate health and insurance sectors so we can better understand the companies and investors who are playing a larger role in the health care system. We need to understand how such companies operate in Canada, as well as the legislation that governs — or more accurately fails to govern — both the companies that are set to “grow the market” and the physicians who do double duty as investors. And we need to unite across the 49th parallel with American activists who are fighting against many of the same companies and investors that we now are confronting in our own country.

If it survives the debt load it is carrying as a result of its acquisition strategy, Centric will be a force to be reckoned with.

Colleen Fuller is an activist, researcher and writer who focuses on health and pharmaceutical policy. She is a co-founder of PharmaWatch and is a policy consultant with Canadian Doctors for Medicare.

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Toronto Star (September 27, 2012)
Shouldice sale tests McGuinty’s commitment to public health care
By Thomas Walkom

Ontario’s government must decide whether to let a U.S.-controlled firm buy Shouldice Hospital, the province’s marquee — and private — hernia clinic. If Premier Dalton McGuinty’s Liberals keep to their own standards, the answer can only be no.

Private hospitals are contentious in Ontario. New ones are banned by a 1973 law — reflecting the mistrust that much of the public has for what it sees as U.S.-style health care.

But a handful of private institutions in place before 1973 live on. Among these, Thornhill’s Shouldice Hospital is the most famous. Started in 1945 by path-breaking surgeon Edward Shouldice, it performs only hernia operations.

Medical fees at Shouldice are covered by OHIP. Semi-private accommodation fees are not. The government used to limit any profits made from charging ancillary fees. But as Shouldice business development director Daryl Urquhart explained in an e-mail Wednesday, that restriction has been removed.

For years it operated under the radar. Even the most ardent medicare fans didn’t bother complaining. Jack Layton, the late federal New Democratic Party leader, pronounced himself one of many satisfied Shouldice customers.

The reigning assumption was that if the founder’s family ever decided to get out of the hospital business, Shouldice would quietly become a public institution.

Certainly, that’s what precedent would suggest. In 1969, when the family that owned Toronto’s private Doctors Hospital tried to sell it to the U.S.-controlled corporation Extendicare, the Conservative government of the day said no.

The government’s policy, as an official told the Star then, was that all acute care hospitals in the province should eventually become publicly owned. In the end, Doctors was sold to the government — for less than Extendicare had been willing to pay

That was under the Tories. Liberal and New Democratic governments took a similar approach. Existing private hospitals could continue to operate. But expansion of the private, for-profit system would not be countenanced.

In 2007, then-Liberal health minister George Smitherman vetoed a scheme that would have had the province contract out OHIP-funded orthopedic operations to the Don Mills Surgical Unit, another grandfathered private hospital.

He explained that such a scheme would contradict Premier Dalton McGuinty’s iron-clad commitment to public care.

In fact, the Don Mills clinic already did some OHIP-funded surgery. But the government’s position then was that while it would accept existing private hospitals, it would not encourage their growth.

Interestingly, the Don Mills Surgical Unit has been owned since 2005 by Centric Health Corp., the same outfit that now wants to pay $14 million for Shouldice. The 2005 purchase was made when Centric, then known as Alegro Health Corp., was still Canadian-controlled.

The Liberal government’s official position, as outlined in February by Health Minister Deb Matthews, has changed little since Smitherman. Matthews says she welcomes clinics that focus on specific surgeries.

But she also says the government prefers that such clinics be non-profit.

Her model is Toronto’s not-for-profit Kensington Eye Institute, which (a further irony here) is the latest version of Doctors Hospital.

Certainly Centric can’t be described as non-profit. Listed on the Toronto Stock Exchange, it’s controlled by California-based Global Healthcare Investment and Solutions, a company headed by South African physician and entrepreneur Jack Shevel.

An aggressive player on the private health-care front, Centric currently makes most of its money from physiotherapy services. But over the last few years it has bought up small private clinics in Ontario, Vancouver, Calgary and Winnipeg.

Snagging the prestigious Shouldice would represent a coup for Centric. But it would also make a mockery of the Liberal government’s already complicated approach to public health care.

Matthews has the legal authority to veto the deal and insist that the Shouldice owners seek a non-profit buyer. If, as she claims, the McGuinty government is truly committed to public care, this is exactly what she will do.

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Toronto Star (September 18, 2012)
Shouldice Hospital sale poses threat to health-care system
By Dr. Danielle Martin

There’s a health-care giant in our midst, and it’s growing.

On Sept. 7, a company called Centric Health announced that it would be acquiring the operations of Shouldice Hospital in a $14 million deal. Because Shouldice is one of a very few private hospitals grandfathered into our public health-care system, this deal requires the approval of the Ontario minister of health and long term care.

Health Minister Deb Matthews committed in the last election and in her recent Action Plan on Health Care to developing health-care delivery in non-profit community settings, rather than expanding the for-profit footprint in health care. Rejecting the sale of Shouldice to a publicly traded corporation is an opportunity to demonstrate that commitment. Allowing the sale to go ahead would raise red flags about quality, accessibility and accountability to Ontarians.

The Shouldice Hospital, a private hernia hospital still owned by the family of the surgeon who founded it, has long had a reputation for delivering high-quality care (albeit at a price to patients, who have to pay for a hotel-style hospital stay in order to get access to its successful surgical interventions).

Global Healthcare Investments and Solutions (GHIS), a venture capital firm based in the United States, is the biggest shareholder in Centric, effectively controlling the company. GHIS was founded by Dr. Jack Shevel, who grew a small South African company called Netcare into the third largest provider of for-profit health care in the world.

Recently, Centric has been buying up market share across Canada, acquiring surgical centres, diagnostic clinics, medical equipment companies, and Lifemark, the largest rehabilitation company in the country. It’s a vertically integrated company that looks to rival our public health-care system with its array of services and products.

Why should anyone care if a small, family-run, for-profit surgical hospital passes from the hands of its current owners into those of Centric?

For one thing, if this sale goes through, the acquisition by U.S. investors of a provider of insured health-care services could expose Canadian governments to sanctions under the investment provisions of NAFTA. Most problematic is the right that Centric would have to claim damages should the province of Ontario regulate the services provided by Centric in a manner that diminishes the profitability of its investments. These are rights that do not exist under Canadian law, but which have been successfully invoked in claims brought against Canada for the recovery of tens of millions, in circumstances that are analogous to ones that can be foreseen in the case of health-care services.

A company like Centric can’t be responsible both to its shareholders and to the Ontario government — at some point, accountability to the government will clash with the need to increase profits.

Furthermore, there is a lack of transparency and accountability when for-profit companies like Centric open up shop because unlike publicly delivered or not-for-profit care, we don’t get to see the books and we don’t have proactive regulatory inspections. It particularly matters in this case because the Ontario government provides an annual budget to Shouldice through its local LHIN. We simply don’t know if we’re getting value for Ontario taxpayers’ money when we engage for-profit providers to deliver care, because they don’t have to tell us.

Just ask Dr. Wayne Hildahl of the Pan Am clinic in Winnipeg, a clinic that was previously for-profit but now operates publicly through the Winnipeg Health Authority. Hildahl has publicly said that when the clinic was for-profit, he had the advantage over government officials negotiating contracts to provide medical services because he knew his costs and they didn’t. And under its investor-based ownership, the Pan Am clinic cut corners, with outdated medical equipment — including dull scalpel blades! — to increase profit margins. His clinic now charges the government $700 for a cataract procedure instead of the $1,000 it charged when Pan Am was a for-profit facility.

Centric is also pushing for physicians to invest in the company, which can create conflicts of interest, and some unhealthy incentives when it comes to who doctors will treat, and how.

Recent research illustrates this point. Researchers in Arizona found that those doctors with a financial interest in their facilities treated more patients whose conditions were least severe and would bring in the most money. In other words, they treat those who are least in need and most able to pay — the exact opposite of the principles underlying Canadian medicare. These conflict-of-interest problems led the U.S. Congress to deny medicare reimbursements to doctors for procedures done in hospitals in which they are shareholders.

It is presumably for these reasons that the Ontario government committed to keeping care provision out of the hands of for-profit companies as it moves forward with health-care reform. Matthews needs to make good on that promise.

Dr. Danielle Martin is chair of Canadian Doctors for Medicare.

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Canadian Doctors for Medicare (September 17, 2012)
Media Release
Reject sale of Shouldice to for-profit U.S.-controlled company, say doctors

TORONTO – The Ontario government should keep its promise of non-profit delivery of health care and refuse to approve Centric Health’s acquisition of the Shouldice Hospital, said physicians from across the country today.

Centric Health, a for-profit company, recently announced that it intends to purchase assets of Shouldice Hospital, effectively becoming the new operator of Shouldice. Under the Private Hospitals Act of Ontario, the sale requires the approval of the Minister of Health and Long-Term Care.

“Earlier this year, we were happy to see Minister Matthews commit to non-profit delivery of health care in Ontario’s Action Plan for Health Care,” said Dr. Danielle Martin, chair of Canadian Doctors for Medicare. “We’re calling on the Minister to uphold that commitment, and reject this sale.”

Centric Health is a publicly-traded company controlled by the U.S.-based Global Healthcare Investments & Solutions. Centric is rapidly gaining market share in surgical facilities across Canada, acquiring 14 new companies in seven provinces between 2009 and 2011 alone.

“No matter the terms of this sale, Centric is a for-profit operator with a profound incentive to find ways to profit from Ontario’s patients,” said Martin. “As the ORNGE crisis taught us, bringing for-profit operators into the publicly funded health care system is rarely in the public interest.”

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Contact: Alissa Von Bargen, Project Manager
Cell: 647-230-9164, Office: 416-351-3300
Email: alissa@canadiandoctorsformedicare.ca

BACKGROUNDER:

Centric Health and Shouldice Hospital

Centric Health Corporation is a new player in Canada’s private health services sector. Centric is integrating its range of investments to cover not only one or two segments of the market, but rather a number of important components of the health system from rehabilitation to surgery to home care. On September 7, 2012, Centric announced its intention to acquire the operating assets of Shouldice Hospital, a private hospital in Ontario that focuses on hernia operations.

Centric Health Corporation

Centric is established in 980 locations across the country, including 19 surgical operating rooms. It operates over 60,000 long-term care beds, and employs over 3400 health professionals, consultants and other staff.[1]

Between 2009 and 2011, Centric acquired 14 new companies in seven provinces[2], including Surgical Spaces, Inc. (owner of Vancouver-based False Creek Surgical Centre and Maple Surgical Centre in Winnipeg) and LifeMark, Canada’s largest rehab company with (so far) 120 clinics.

Centric Health is a Canadian corporation based in Toronto, Ontario. It was known as Alegro Health until 2009.

In 2007, US-based Global Healthcare Investments & Solutions (GHIS) formed a “strategic alliance” with Alegro, acquiring over two-thirds shareholder ownership of the Canadian company and changing its name to Centric.

GHIS is a venture capital firm founded in 2006 by Dr. Jack Shevel, currently the chair of the Centric board of directors, as well as the company’s interim CEO.

Shevel is the founder and former CEO of Netcare – originally a minor player in South Africa, Netcare is now the third largest healthcare services company in the world.

The financial investments in Centric by GHIS are fuelling the growth of the company and supporting an aggressive acquisition strategy. This is a worrying development given the rights GHIS shareholders are granted under NAFTA.

Centric has acquired a broad range of services including surgical clinics, rehabilitation, dental, home care, pharmacy, disability management and diagnostic services. It also sells a range of medical equipment and other medical products and provides third-party assessments.

Centric uses a “vertical integration” model – an investment strategy that Centric hopes will enable it to establish a complete spectrum of care – mirroring, in effect, the public health care system.

Centric claims that its goal is to provide an opportunity for employees and health professionals “to invest in an industry in which they work, understand and are passionate about”. Over the long term, Centric physicians and employees will own between 30% and 40% of the Company” allowing “Centric Health to offer patients an integrated, multi-disciplinary, personalized unique brand of care”. [3]

Centric has developed “preferred provider networks,” designed to attract health professionals. To this end it is developing relationships with insurers, workers’ compensation boards and employers.

Centric has negotiated over 30 PPN agreements with these groups, providing 3750 assessors, including 600 physicians. Under these agreements the company provides “independent evaluations to insurers, workers compensation boards and employers across Canada”. [4]

Shouldice Hospital

Shouldice Hospital is a private hospital established in 1945 in Thornhill, Ontario. It is one of the world’s leading hernia repairs facility and approximately 7500 hernia procedures are performed there each year.[5] It is renowned for its high-quality care and success rate.

In 1973, private hospitals were “grand-parented” by Ontario’s Private Hospitals Act, which specified that only those hospitals whose licenses were issued by the Ministry of Health before 1973 could continue to stay in existence.

Under the Act, the sale of Shouldice shares or transfer of license requires prior approval of the Minister of Health.[6]

Shouldice is funded by the Ministry of Health and Long Term Care with annual funding. Patients are able to receive their medically-necessary procedures through OHIP. However, Shouldice recommends a three-day stay at the hospital following a procedure, which is not covered by OHIP.

References:

[1] Centric Health, Management’s Discussion and Analysis For the Three Months Ended March 31, 2012 and 2011. Dated May 14, 2012.

[2] The provinces are British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia and New Brunswick. Approximately 66% of Centric’s revenue is derived from Ontario, followed by Alberta (16%) and BC (12%).

[3] Centric Health, Management’s Discussion and Analysis For the Three Months Ended March 31, 2012 and 2011. Dated May 14, 2012.

[4] Management Discussion and Analysis, op.cit.

[5] Centric Health. “Centric Health to Acquire Renowned Shouldice Hospital.” Press release, September 7, 2012.

[6] Shouldice Hospital Ltd.: An Anomaly in Health Care Delivery. Canadian Union of Public Employees (Ottawa), March 2000.

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Registered Nurses’ Association of Ontario (September 25, 2012)
Media Release
Ontario’s top professional nursing organization asks Health Minister to reject sale of Shouldice Hospital to for-profit U.S. conglomerate
Private company buying for profit Toronto clinic donated $17,000 to Liberals

TORONTO — The NDP is raising questions about thousands of dollars in donations made to the governing Liberal Party by a healthcare company that’s buying an Ontario clinic.

Centric Health Corp., which recently announced the purchase of the private Shouldice Clinic, donated nearly $17,000 to the Liberals this year, according to Elections Ontario.

Health Minister Deb Matthews must still approve the $14-million sale of the Toronto clinic, but says the donations will not influence her decision.

Centric Health made the donations in March and August, during two byelection campaigns.

NDP health critic France Gelinas is questioning whether it’s appropriate for the Liberals to take money from a company that could directly benefit from their decision on the clinic.

The company was not available to talk about the donations and the purchase of the clinic after more than a week of repeated requests for comment.

The donations fall within provincial rules. Centric did not make any financial contributions to the Progressive Conservatives or the NDP in 2011, 2012 or during the recent byelections.

Ontario outlawed for-profit hospitals in 1973, but exempted existing facilities like the Shouldice Clinic which specializes in hernia operations.

It’s one of the few private, for-profit medical centres in the province that receives government funding.

The Registered Nurses’ Association of Ontario is calling on Matthews to block the sale to Centric Health.

“Ontarians do not need care that cuts corners to maximize returns for shareholders or companies that provide faster access for those who can afford it while leaving others behind in the queue,” Doris Grinspun, the RNAO’s chief executive officer, said in a statement.

Grinspun says the sale will open the door to private healthcare.

Both Grinspun and Gelinas say the government is passing up an opportunity to convert the clinic to a non-profit facility.

RELATED: RNAO Action Alert: Ask Health Minister to reject selling Shouldice

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