False Positive in Lab Business

False Positive
Private Profit in Canada’s Medical Laboratories

By Ross Sutherland  

Ross Sutherland first discovered that something was wrong with the medical laboratory system in the 1990s. As a nurse, Sutherland was responsible for administering intravenous antibiotics to homecare patients. The private lab contracted to test blood for Sutherland’s patients couldn’t deliver results before the end of the day, when Sutherland would have to decide whether the patient was too toxic for a second dose. So Sutherland took his samples to the public hospital lab. The public lab produced the results on the same day. So why was a private lab contracted to perform the work? Sutherland’s answer is False Positive: Private Profit in Canada’s Medical Laboratories, released in March by Fernwood Publishing. This provocative book illuminates the role private medical laboratories have played in shaping Canada’s public healthcare system and concludes that private interests have, on the whole, produced a slower, more expensive healthcare system. LAB Business spoke to Sutherland over the phone about his research.

What is the central thesis in your book?

The central thesis is that we’ve evolved over the last 40 years in Ontario–and I’m going to focus mostly on Ontario because I think it’s the worst case example in Canada–to using a private system of delivery for core services, in this case medical laboratories, which is more expensive and less accessible than a public sector option using hospital labs. This is an option that doesn’t have to exist. In the book, I go back and look at how we created a market for these laboratories, how that happened, and how we had very viable public sector options, which were cheaper and provided a similar service, and how we lost them.

You said we created a market for labs. How did we create a market for these labs and why did that happen?

When I say we created a market, what we did in Ontario was, after Medicare came in the 1970s, we allowed private labs to change regulations in Ontario to allow the labs to have direct access to OHIP money. They no longer had to go through a doctor. It was a conscious effort from the organized medical community, the Ontario Medical Association and some of the private labs. It was kept as a fee-for-service arrangement, so as long as they could get more samples, they could make more money from OHIP. And at the same time, we created situation where the public sector labs in hospitals came under tighter and tighter budget control and moved to global budgets.

The argument is usually that the public sector is inefficient. How do you square that with your critique?It seems like it’s either/or. It’s public or it’s private.

One thing that’s different about health care is that we have a single payer system. And there are lots of reasons why that works well, and most people who are more market-oriented support a single payer healthcare system, too, because it’s actually fairly efficient. When you’ve got a single payer, the dynamic changes. The unit cost comparison is not the crucial one because we have a single payer. The real crucial question is from the purchaser’s point of view, which in this case is the healthcare system. How do they make the best use of the money? If you’ve got efficiencies which are significant that can be gained by using hospital laboratories, you’re now working at marginal costs. You can have structural efficiencies in terms of getting lab results quicker. If you use your hospitals as access points for patients, which we’ve now stopped doing in Ontario, that creates more access points without actually having to have a new facility. Those all become system savings. We have at least two significant long term examples where that structure, even under different formats, worked for thirty years, the Hospital In-Common Laboratories and the Hamilton Health Sciences Laboratory Program. These two examples have been fairly well-studied and the cost results are pretty unequivocal for both of them. The most unequivocal is Hospital In-Common Laboratory, in the sense that their fee-for-service rates were a percentage of what were paid to the private labs for doing the same services. So some of that money was kept in the system, whereas the hundred per cent paid to the private labs [left the public system].

Talk about worker shortages in labs. How can a system that everybody relies on not have enough people to do the work?

I think I would move it to the question of integration, especially when you’ve got a shortage of personnel. There are all the questions about training and how you retain people and how you pay people, but when you’ve got two labs in town, both of which have staff shortages and idle equipment, it just makes sense to move the labs together. Have one lab where you can use the equipment and the staff. That would address some of the problems. We’ve created the problem by having multiple systems delivering laboratory services. It doesn’t happen in every province, so obviously there’s a bigger question than just generalized staff shortages in Canada.

Your book addresses problems with conflict of interest, as they exist within the public sector. What do these conflicts look like?

The conflict of interest comes about in numerous ways. One is the simple way that corporations have an interest in paying their investors a return, which may conflict with delivering the best public policy. They want to provide only the simplest test, or the most profitable test, and I think that’s historically true. They don’t want to locate into rural regions where there are small population centres so we have less access to people in marginalized situations because it’s not as profitable. The second kind of conflict which is evident in laboratory services is that some professionals are paid by a hospital at the same time they make money in the private labs. In terms of negotiating contracts and attracting patients to the various facilities, this is a potential conflict that they want to move work to their private company where they can make the most money. And there are many examples of that where, in fact, lab directors of public hospitals have tried to move lab work into a private company that they have an interest in. The third level of conflict is a political conflict of interest. There is an exchange of people between the ministries of health and the private laboratories. So when they get involved in the ministry of health, are they shaping public policy to favour those businesses over shaping public policy to provide the best public policy? A fourth level, I think of what happened in Ottawa with the Eastern Ontario Regional Laboratory. They hired a private company to oversee the amalgamation and formation of a regional laboratory service for the public hospital. If they structure it so there is a limited surge capacity–surges happen all the time in health care–is that structuring of the tightness in the system conscious so that it forces that work to go to the private labs, because that’s where the overflow takes place? Or would they be better off to structure some surge capacity into the public laboratory, which they wouldn’t have an interest in doing because it would limit the overflow into the private lab. Those kinds of conflicts of interest exist when you start to use private corporations to provide a public service, especially within a single payer system.

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