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Ontario's High Earner Hospital Payrolls Up 18 Percent But No Boost to Outcomes

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Release Date: May 9, 2005
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."