Market Competition in

Ontario’s Homecare System:

Lessons and Consequences

Ontario Health Coalition

15 Gervais Drive, Suite 305

Toronto, Ontario

M3C 1Y8

March 31, 2005

Introduction

The Ministry of Health and Long Term Care has announced a review of the competitive bidding process in homecare. In our meeting with Elinor Caplan, appointed to conduct the government’s review, Ms. Caplan made clear to the Ontario Health Coalition that her mandate is limited to a review of “procurement procedure”. The system of “managed competition” or competitive bidding, as it has become known, will not be reviewed and will remain in place. However, our research on the managed competition experience in Ontario has yielded several important conclusions that justify a thorough review of competitive bidding itself and the structures and procedures required by it. A summary of our main findings follows:

1  Competitive bidding has changed the culture of the sector.

Prior to the introduction of competitive bidding, the homecare sector was served predominantly by not-for profit agencies with deep roots in the community and a long tenure of operation, in some cases lasting more than a century. The introduction in 1996 of competitive bidding has transformed the culture of the sector resulting in an influx of the for-profit homecare industry. Over time, small, community-based agencies have lost contracts to larger for-profit as well as non-profit companies.

The culture of the homecare sector has changed due to the expansion of for-profit companies and the consolidation of the “market” in the hands of a few large providers creating a market oligopoly. Now, large companies, for-profit as well as not-for-profit, travel around the province making bids to secure market share. These corporations often do not exist in any tangible way in the communities they seek to serve. Not-for-profit providers have been forced to emulate for-profit providers in order to compete and have adopted a number of negative practices. The most reliable and recent figures show that the percentage of homecare nursing market share provided in Ontario by for-profit service providers increased from 18% in 1995, two years prior to the introduction of competitive bidding to 48% in 2001.

There is some evidence that claims that the competitive bidding process favours larger companies (both for-profit and not-for-profit) over small local agencies are true. In a survey of the status of contracts with forty out of forty-two CCACs we found that the overwhelming majority of contracts for both nursing and personal support services are now held by large, for-profit providers or large not-for-profit providers (see Appendix). Our data indicate that 6 corporations held 76% of the contracts last fall, compared to 8 agencies holding 66% of the contracts in 1995. The market concentration figure would be even higher if it was based on volume of services delivered. The big corporations focus on the high volume contracts and the smaller agencies have a larger representation in the specialty areas.

Competitive bidding has also had a destabilizing impact on small agencies that do not serve the entire province. While a large corporation or not-for-profit will not go out of business because it’s lost a contract in one region, a local not-for profit or for-profit will have its existence threatened by the loss of what may be its sole contract. This dynamic reduces competition and removes whatever benefit the market is supposed to produce.

Our survey, conducted September 2004, also revealed that in the recent round of bidding, several remaining small community based agency contracts were lost leaving those providers virtually unrepresented in the nursing and personal support sectors. The Ontario Community Support Association reports that prior to the introduction of competitive bidding there were 24 small, non-profit agencies servicing local markets in Ontario; only three are left today.

Thus, small, local agencies with depths of experience and respect in the community are being displaced by large, often multinational shells with no standing office, local presence or staff (and thus no local track record) who can afford to hire teams of consultants to write a better sounding bid.

The introduction of market modalities into the homecare sector has resulted in homecare providers becoming or behaving more like large corporate entities at the expense of excellent, community-based homecare.

The competitive bidding regime has resulted in a destabilization of working conditions for nurses and support workers. Both job security and working conditions have been negatively affected. Instability makes home care a less attractive career option for both potential and existing staff and has resulted in a migration of staff from the homecare sector to sectors that are seen as more desirable.

In a snapshot picture of eight recent months alone, we have seen the dislocation of over 1,050 workers.

1)  In Haldimand-Norfolk, the nursing contract was lost by the VON to Comcare resulting in the lay off of 140 full and part time nurses and nurse practitioners by the time the contract ended in October 2004.

2) In Brant, in the summer of 2004, a contract held by the Red Cross for more than 50 years was lost to Comcare resulting in 115 full and part time workers being laid off.

3) VON and SEN have lost contracts in Niagara Falls to Care Partners and St Elizabeth Healthcare with at least VON 110 nurses and an estimated 50 SEN nurses being laid off by the contract’s end in September 2004. VON had provided service in the area for 85 years .

4) Visiting Homemakers Association (VHA) Health and Home Support laid off 200 nurses and home workers, in Ottawa August 2004, when they lost their contract. They had been providing services for nearly 50 years.

5) In August, Community Care East York lost its contract to VHA Healthcare and Spectrum affecting 50 to 70 staff. They had been providing service for 20 years.

6) Kingston VON lost its nursing contract to Paramed, All-Care and Red Cross forcing it to lay off at least 70 staff in April 2004. VON has provided community nursing in the area for over 100 years. In the same community, Allcare staff was laid off when their contract was lost to the Red Cross and Paramed.

 7) Not-for-profit SEN Community Care in Hamilton lost its Halton and Niagara contracts in March to Windsor-based for-profit Care Partners, which has no history in the Niagara/Halton region.

8) VON in Manitoulin-Sudbury closed its homecare division in June 2004 forcing the layoff of 300 to 350 employees blaming its loss at the end of 2002 of a $13 million contract to rovide home care to seniors.

9) In December 2004, Community Home Assistance to Seniors (CHATS) lost their personal

                    support contract in York Region forcing the layoff of 350 home care workers.

Competitive bidding has created extraordinarily high levels of staff turnover. One study has shown that from 1997 to 2002 turnover among nurses in the homecare sector has ranged from a high of 73% in 1999 to a low of 24% in 2001 . According to another study that followed former VHA staff in Hamilton following the agency’s loss of its contract in 2002, 9.5% of former homecare workers moved to jobs in long term care facilities. The Red Cross estimates that where it has lost contracts, up to 35% of its former workers leave the homecare sector .

Managed competition has also resulted in increased absenteeism and fears of job loss, increased burnout and stress and decreased health and job satisfaction by homecare workers . In Cornwall, workers who had been employed by the Red Cross with a long tenure have had to reapply for their jobs at least three times since the introduction of competitive bidding and have, in the same period, lost their holiday pay and other benefits . In East York, according to our interviews, the change of contract from Community Care East York to VHA and Spectrum has resulted in a loss of benefits and guaranteed minimum hours and seniority for workers. In Kingston, VON workers had their pensions capped when their jobs ended and lost their seniority based extra vacation time. There is no reason to believe that these specific instances are not to be repeated in other instances when contracts are lost. As a result of these events, a number of workers have decided to retire, seek work in another field or in an institutional setting.

This phenomenon prompted Linda Brown, vice-president of the Ontario Community Support Agency, to say “We already don’t have enough nurses in the system. Because community nursing is so unstable, they’ll leave nursing completely or get jobs in the hospital

sector. The 2003 Canadian Home Care Resources Study found that the top three reasons home care workers were planning on laving their jobs were lack of job security, low wages and low benefits. .

 In East York, according to our interviews, the change of contract from Community Care East York to VHA and Spectrum has resulted in a loss of benefits and guaranteed minimum hours and seniority for workers. In Kingston, VON workers had their pensions capped when their jobs ended and lost their seniority based extra vacation time.

sector." The 2003 Canadian Home Care Resources Study found that the top three reasons home care workers were planning on leaving their jobs were lack of job security, low wages and poor benefits. .

At a time when demand for homecare services has increased due to offloading from the hospital and long term care sectors the need to attract and retain care providers has increased. The problem of deteriorating working conditions repelling nurses from the homecare sector is exacerbated by trends in the nursing profession as a whole - 6,000 nurses (in all fields) are expected to retire in Ontario this year but only 3,000 nursing students are expected to graduate and half of those are expected to leave the province to work . With a shortage of nurses in the province, the homecare sector cannot afford to become a less attractive work environment.

There are few industries that would consider turnover rates of 24% to be acceptable, let alone 73%. However, collective bidding necessitates regular and massive dislocation of staff with all the attendant problems created by such an extraordinary rate of turnover.

The impact of competitive bidding on the continuity of care for users of the system cannot be overstated. Each time a contract is lost, clients face a change of caregivers and the manner in which their services are delivered. Instability in the sector contributes to poor working conditions and means care workers are leaving the sector exacerbating poor continuity of care. Competitive bidding has a disruptive and turbulent impact on the continuity of care received by care recipients.

                 In recent months over 22,000 clients have been affected by the loss of contracts through competitive bidding:

                   ·           600 clients in East York

                   ·           At least 1,700 clients in the Niagara region

                                  ·           1,300 clients in Ottawa

                                  ·           15,000 clients in York region

                                  ·            1,200 clients in Kingston

                   ·           2,700 clients in Manitoulin-Sudbury

                   ·           >1,000 clients in Wellington-Dufferin

 In the case of Manitoulin-Sudbury, the VON withdrew from its remaining contract with the CCAC after not being able to recover from the loss of an earlier $13 million contract for in-home care for seniors. The dislocation of service creates stress among clients. Anne-Marie Bedard, a client affected by the VHA’s contract loss in Ottawa, told the Canadian Press “I’ve had the same home-care provider since I started because I need help with my bath… I’ve learned to trust her… and now if I’m going to get somebody else or if I get no one at all, what do I do?” Carework is intensely personal and unique to each individual. The impact of changing providers on quality of care has been reported upon in a number of studies, showing that turnover in caregivers impacts clients in many clinical and emotional ways.

The interruption of service and reassignment of care workers creates a major disruption in the lives of those who rely on homecare, with all the attendant consequences for quality of care it causes.

Competitive bidding has created a climate in which agencies and staff fear criticizing policy and clients fear criticizing practices. Agencies in the market model are competitors and face disincentives to share information and resources with each other. Bill 130 has stunted CCACs' accountability to communties as they are now appointed by government rather than by communities. They are reticent to discuss the impacts of government funding changes and public policy decisions. Some CCACs are even refusing to divulge basic information about who has contracts and on what basis.

Many CCACs prohibit agencies from publicly criticizing homecare policies on penalty of forfeiting their contract or the implied threat of not having their contract renewed (in fact, this provision is in the template RFP provided by the Ministry ).  The CEO of one CCAC phoned a contracted agency to find out what an employee of that agency was going to say at a public meeting on homecare. The agency lost the contract in the next round of bidding. Comcare, a for-profit agency contracted for homecare services in Kenora-Rainy River region, demanded that its employees sign an oath of confidentiality that is so broad that it prevents homecare workers from telling the public about problems with homecare services. Clients regularly report to us that they are unwilling to make complaints for fear of having their service reduced. CCACs are allowed to cut off service to a client if they complain about their service provider. Under General Conditions, Section 3.1.6 (5) of the Ministry’s template RFP document, “the CCAC may, in its sole discretion, withdraw Services from an individual Client for any reason the CCAC deems necessary, including due to Client complaints about the Service Provider.” Additionally, numerous service recipients have informed us that they fear publicly speaking out about problems with their homecare out of fear of being denied service.

Real innovation and responsive public policy relies on an open and frank sharing of information on practices and outcomes. The climate of fear and outright secrecy stifles accountability, public debate and input essential to the checks and balances in the health system. Competitive bidding raises one more, very strong bar, reinforcing fear in the system.

Part of the argument for ushering for-profit providers into the sector and implementing “managed competition” is the claim that competition can introduce innovations. However, we have been able to find no evidence of bona fide innovation in care methods or administration. Instead, innovation has been limited to finding ways to drive down working conditions in order to allow bidders to outbid competitors while making room for profit. Changes that have been introduced by both for-profit providers and by not-for-profit providers trying to emulate their competitors, include piecework, split-shifts, strict time limits on care services, the elimination of travel pay for workers as well as benefit reductions. Costs are increasing with no public accounting of outcomes. The culture of volunteerism in the non-profits is being sacrificed as for-profits take over. The implementation of these so-called innovations either directly reduce the quality of service received by the client or indirectly do so by impairing the ability of the homecare sector to attract and keep quality workers.

Contrary to claims of greater efficiency, there is, in fact, evidence that the agency “markup” portion of the rate charged by for-profit companies to CCACs is higher in than not-for-profit providers. The mark-up is the difference between the rate charged to the CCAC and the wage paid out. In Hamilton, in 2000, the agency “mark-up” by for-profit providers on personal support work is an average of $8.12 per hour while the mark up by not-for-profit providers averaged at $7.37, a difference of more than 11%. However, the hourly wages paid by the for-profit providers averaged $11.08 an hour while the wages paid by not-for-profit providers averaged $12.09. The for-profit providers offered lower wages, while taking a greater portion in profit and administrative fees (see chart below). In the Algoma region the Red Cross pays its workers as much as $1.70 more an hour than Comcare . Further research on this is crucial, but is stunted by the lack of public access to information. For-profit providers are not required to make wage and mark up information available as they consider it proprietary.

Another way in which for-profit providers have won bids while maintaining their profit margins is the introduction of strict time limits per service and piecework. Homecare workers, for example, refer to homecare as “dip and skip”, a reference to the scant amount of time personal support workers have to bathe clients. Hourly wages are being replaced with fee-for-service piecework, which results in homecare workers trying to squeeze as many clients as they can into one day in order to maintain their level of pay. In Kingston homecare workers who used to be compensated for their travel expenses are now only being paid $1 per visit for travel time and nurses are now required to provide and pay for their own work related cell phones and fax machines . All of these so-called innovations have a deleterious effect on quality of service. Those not-for-profit providers, which have been able to do well in the competitive bidding environment, such as St. Elizabeth Nursing in Kingston, have done so by emulating the for-profit providers by, for example, moving to a modified piecework system. Ross Sutherland, a nurse and co-chair of the Kingston and Area Health Coalition describes this as “paying these nurses to work faster rather than working better.”

Sandra Willard, a homecare worker, says that almost all of the homecare workers in Kingston have been hired as “elect-to-work” employees. In Kingston, after the for-profit company Allcare recently lost their contract at least 75% of their former employees went to work for the new provider or other existing providers in the area. The transferred employees lost their benefit packages as well as vacation time and pay. Continuity of care was impacted as many of the transferred workers were assigned to new clients rather than the ones they had previously provided care for.

Comcare Health Services will soon be taking over a homecare contract in Norfolk from the VON. The CCAC executive director states that Comcare will hire many of the current VON employees. The executive director of the VON noted that Comcare bid at a lower price for services, “The bid was put in to win it. Good luck to them. I don’t know how they will do it at that price.”

Regarding access to information, Haldimand-Norfolk CCAC executive director Megan Allen claimed, “We’re a publicly run agency of the government so if somebody requested information on what is paid per home visit we can give it out”. The OHC contacted Allen to request that information and she said she would consider it however the information has not been released to us. VON Executive Director Linda Parkhill said that Comcare was able to outbid the VON by offering lower wages and travel compensation to Personal Support Workers.