The Fraser Institute

The Fraser Institute

May 09, 2005 05:00 ET

Ontario's high earner hospital payrolls up 18 percent but no boost to outcomes

TORONTO, May 9 - Ontario hospital payrolls for high earners - those
making at least $100,000 - rose more than 18 percent last year, according to
Buying Health Change? The 2005 Survey of High Earner Pay in Ontario's
Hospitals, released today by The Fraser Institute.
At the same time, hospital deficits grew to $600 million, staff positions
have been eliminated, and waiting times between specialist appointment and
hospital treatment increased by 15 percent. The study finds no statistical
relationship between pay increases and nine measures of hospital performance.
It appears that the extra pay did not buy better health care.
This job market distortion - higher pay without better outcomes -
reflects a public sector health system that lacks competition and rations
patient care to control costs. The study argues that it is impossible for the
public sector health system, as it is currently structured, to solve these
access and cost control issues at the same time.
"The average salary for high earners rose 6.6 percent last year," said
Mark Mullins, the Institute's Director of Ontario Policy Studies. "That
compares to inflation under two percent and an average wage gain in the
overall economy of 1.2 percent. The number of high earners has more than
tripled since 1996, with average pay rising by two-thirds. These are signs of
misallocated taxpayer funds."
The study also finds that although SARS may have impacted payrolls in
2003, there were no savings in 2004 under the "new normal" situation. And as
more and more public money was given to hospitals, high earner pay actually
rose faster. Thus, greater health transfers are seemingly driving wage
inflation. The study outlines market-based policy reforms that can deal with
the twin problems of misallocated spending and inadequate patient access to
care. The hospital funding model can be changed so that funding follows
patients and their needs, rather than being allocated in a lump sum by the
health ministry. Patients can take on a portion of payment responsibility
through co-payments, allowing their demands to direct a better allocation of
care. Delivery and financing of hospital services can be opened to provider
competition, thus encouraging efficiency and better service quality.
"Our public sector health system produces higher pay without better
performance, the exact opposite of what taxpayers and patients demand," said
Mullins. "The experience of other countries proves that hospitals can better
allocate funds and increase access and quality of care if we break up the
state health care monopoly."

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Established in 1974, The Fraser Institute is an independent public policy
organization with offices in Vancouver, Calgary, and Toronto.

The media release and study (in PDF) are available at
www.fraserinstitute.ca

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