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"The bottomline is that the problems, like those the Auditor General found with the management of ambulance service, are a product of privatization."
Ottawa (28 Oct. 2020) — The Auditor General of New Brunswick was highly critical of New Brunswick’s privatized ambulance service in her report released earlier last week. Many of the concerns she raised in her report are typical of the problems that can occur with the lack of accountability and secrecy that comes with privatization.
According to the report, it is likely that service has suffered because the private company managing the ambulance service is able to increase its profits by leaving paramedic positions vacant. The Auditor General also found that a conflict of interest exists when senior executives of the ambulance service are employees of the private company that is managing the ambulance service. This conflict is likely to result in the needs of the ambulance service taking a back seat to the interests of the management company.
Medavie has contract for privatized ambulance service management
When the management of ambulance service in New Brunswick was privatized in 2007, the contract was given to a subsidiary of Medavie. The subsidiary, Medical Health Services New Brunswick (MHSNB), now manages both ambulance services and the Extra Mural Program that provides home health care.
Medavie runs ambulance services and other medical services in 5 other provinces and in Massachusetts, as well as providing health insurance through Medavie Blue Cross. While Medavie’s original involvement in health care was taking over privately owned ambulance companies, since 2007 Medavie has been involved in privatizing health care services.
Privatization scheme means ambulance service management face conflict of interest
With the privatization of ambulance service management, the president of Medavie subsidiary MHSNB became the CEO of EM/ANB, the crown corporation operating ambulance service and the Extra Mural Program in New Brunswick. The CEO/President is hired by and employed by MHSNB. Similarly, senior executives at EM/ANB are also employees of MHSNB.
In both cases the Auditor General concluded that the result is likely to be that the interests of Medavie come ahead of the needs of the ambulance service.
The Auditor General expressed concern that this situation means that the CEO of EM/ANB will be “inclined to act in the interest of their employer” (MHSNB). When discussing the conflict faced by senior executives, the Auditor General stated that when those drafting the corporate strategy for EM/ANB are MHSNB employees, “they may be inclined to develop EM/ANB’s strategies toward maximizing MHSNB’s financial award under the contract.”
Vacant paramedic positions increased Medavie’s revenue by $8 million
According to the Auditor General, “paramedic shortages created over $8 million in surplus payments to MHSNB, providing an incentive to maintain low staffing levels.” This happened because of 2 problems with the MHSNB contract.
The first problem was that the contract allowed MHSNB to take half of any funds left over from the funding the New Brunswick government provides each year for EM/ANB (since 2017 this payment has been capped at $1.1 million a year) and there were no conditions on things like staffing levels. As the Auditor General put it, “Not placing restrictions in the contract on targeted savings provided opportunity for MHSNB to neglect filling vacant positions and maximize the budget surplus payments.”
A second problem was that MHSNB could use exemptions to get many of the calls where service standards were not met excluded from the calculations of whether it was meeting performance standards.
Problem is privatization
When serious problems with the privatization of public services are exposed, the privatization industry attempts to dismiss them as isolated examples that can be corrected. But the bottomline is that the problems, like those the Auditor General found with the management of ambulance service, are a product of privatization.
When a service is privatized, the main objective of the operator is to maximize profits. If it is possible to increase profits by cutting corners, operators of privatized services will do that. To make it easier to maximize profits, companies running privatized services put a lot of resources into negotiating contracts that allow the operator to cut corners without suffering a financial penalty.
Even when problems are uncovered, it is not easy to fix them. Medavie’s contract to manage EM/ANB doesn’t expire for another 7 years. That means that, unless ambulance service in New Brunswick is brought back under public control, it will be difficult to make changes. And, if the management of the ambulance system is not brought back under public control, when the contract is renegotiated, Medavie or any other private operator will have some very good lawyers working on more contract language that puts private profit ahead of public good.