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Bill 36, Local Health System Integration Act, 2005 - Analysis

Published: 11/28/2005

**Notice of Public Hearings for Bill 36, Local Health System Integration Act, 2005

The Standing Committee on Social Policy will meet to consider Bill 36, An Act to provide for the integration of the local system for the delivery of health services. The Committee will hold public hearings in Toronto, London, Ottawa and Thunder Bay on January 30, January 31, February 1 and February 2, 2006.

Interested people who wish to be considered to make an oral presentation on Bill 36 should contact the Committee Clerk by 5:00 p.m. on Friday, January 13, 2006. The Clerk's contact information is:

Anne Stokes
Room 1405, Whitney Block
Queen's Park, Toronto ON M7A 1A2
Telephone : 416 325 3515
Facsimile : 416 325 3505

Those who do not wish to make an oral presentation but wish to comment on the Bill may send written submissions to the Committee Clerk at the address above by 5:00 p.m. on Monday, February 6, 2006.

Bill 36, Local Health System Integration Act, 2005 - Analysis

The Ministry of Health and Long-Term Care (the “Ministry”) proposes to give itself and Local Health Integration Networks (“LHINs”) far greater powers under Bill 36 (“Bill 36”) than were previously granted to the Ministry under either the Savings and Restructuring Act, 1996 (Bill 26) or the Commitment to the Future of Medicare Act, 2004 (Bill 8 - “CFMA”) to restructure the publicly funded healthcare system without cabinet approval.

These proposed powers would allow LHINs and the Minister of Health and Long-Term Care (the “Minister”) to restructure the publicly funded healthcare system in the goal of achieving a co-ordinated system that is more accessible, effective and efficient. LHINs will exercise their authority through the development of integrated health service plans, entering into service accountability agreements (“SAAs”) with health service providers (“HSPs”) to fund the HSPs and to tie such funding to the performance goals and objectives set out in the SAA (section 21 CFMA) and by making integration decisions.

One of the ways the Minister would exercise his authority is by issuing integration orders (section 28). If necessary, court orders could be sought to enforce LHIN integration decisions or Minister’s orders. LHINs and the Minister could require HSPs to integrate services horizontally, vertically or by outsourcing the delivery of these services to the private sector (section 26(1)(4)).

The Lieutenant Governor in Council’s regulation-making authority will be limited to prescribed non-clinical services (e.g., payroll, purchasing, inventory, food, maintenance, etc.) (section 33). This will allow the Minister to unilaterally expedite the integration of a hospital’s non-clinical services by transferring non-clinical services to a prescribed person or entity on a prescribed date.

The Ministry’s first recent major attempt at restructuring the healthcare system was in 1996 through the introduction of Bill 26 and the creation of the Health Services Restructuring Commission (“HSRC”). We see this as another round of restructuring efforts and we believe that the healthcare industry should prepare itself for even greater activity than we saw under the HSRC restructuring if Bill 36 is passed in its current form.

What follows is an overview of the top issues we have identified as being of concern for HSPs followed by a summary of the key concepts contained in the legislation.

Top Issues (in the order in which they appear in Bill 36)

What will community engagement look like? The actual extent to which communities will be involved and consulted with respect to decisions about local health systems is referenced in Bill 36, but the details of that engagement are left to be addressed by regulation at a later date. Given that the Ministry’s stated purpose for introducing Bill 36 is to move towards community-based care and to enable communities to determine local priorities, we believe this matter should be dealt with in the legislation and not left to the less scrutinized regulation-making process.

For example, in our view, who makes up the community and what community engagement would look like should be front and centre in Bill 36. HSPs should be included in the community that LHINs are required to consult in preparing their HSPs.
The end of deficits: The governance framework for volunteer boards of HSPs established under the CFMA would not be materially affected by the passage of Bill 36. As was expected, SAAs will be between the HSP and the LHIN rather than directly with the Ministry, and the SAAs will continue to be governed by the CFMA. However, we believe that the often-debated issue of whether an HSP, such as a hospital, should run a deficit in the best interests of its community will finally be put to rest by Bill 36. Unlike the Ministry, LHINs will have a finite amount of money and will not be able to borrow money or encumber the LHIN’s property without the approval of the Lieutenant Governor in Council (section 6(3)). The LHIN, in turn, will be allocating its finite money amongst the HSPs in the LHIN’s geographic area in accordance with the terms of an SAA. As a result, it will be much more difficult for a hospital to run a deficit and simply be “bailed out.”

The LHIN’s ability to fund HSP deficits will be limited to the LHIN having a reserve in place or (if a regulation is passed under paragraph 36(1)(i)) allocating savings from other HSPs to the HSP which accrued the deficit. Leverage such as threatening to cut services, which was sometimes successful in the past to obtain additional funds should, in theory, be much less effective as the Ministry will have shielded itself from such pressures by the introduction of LHINs.

We believe this new reality will drastically affect the way HSPs are governed and underscores more than ever the need for good governance and financial accountability at the HSP level.
Interference with contractual rights: Section 19(3) will allow the Minister to assign his rights and obligations to LHINs under all or part of agreements between the Minister and HSPs, including agreements to which non-HSPs are parties. In the case of such an assignment, the Minster could terminate all or part of the agreement prior to the date set out in the agreement. This provision will give the Minister the statutory authority to interfere with the contractual rights contained in the assigned agreements by terminating the agreements in a manner that may be contrary to the termination provisions agreed to by the parties.
HSP obligation to identify integration opportunities: Bill 36 will impose a positive statutory obligation on HSPs to identify integration opportunities both separately and in conjunction with LHINs (section 24). This means that HSPs will have an active role to play in identifying ways of increasing efficiencies in service provision and could not simply rely on LHINs to take care of this. While there are no penalties under Bill 36 for failing to identify integration opportunities, it is unclear whether there could be any financial repercussions (e.g., through funding) for HSPs that fail to do so. HSP decisions to integrate funded services are subject to a notice requirement to the LHIN and a 60-day waiting period prior to proceeding with the integration (section 27(3)).
Ceasing to operate as a public hospital: One of the restrictions on LHINs’ powers to make integration decisions under Bill 36 is that they would not be able to require an HSP to cease operating or carrying on business, dissolve or wind up its operations (section 26(2)(c)). However, Part VIII (Consequential Amendments) would amend section 44 of the Public Hospitals Act (“PHA”) to reflect a LHIN’s ability to make an integration decision “under which a hospital will cease to operate as a public hospital.” Does this mean, for example, that while an LHIN will not have the power to order the hospital to “cease operating or carrying on business,” it will have the power to make an integration decision that could change the hospital’s role to something else such as a community health centre or a long-term care facility?
The provision of services contrary to religion: It seems that the deference previously shown to restructuring religious healthcare organizations may be eroded under Bill 36’s provisions. LHIN integration decisions and Minister’s orders are restricted from “unjustifiably” requiring an HSP that is a religious organization to provide a service that is contrary to the religion related to the organization (sections 26(2)(f) and 28(2)).

The use of the phrase “unjustifiably” suggests that LHINs and the Minister may be entitled under Bill 36 to require HSPs to provide services that are contrary to the organization’s religion when it is justifiable (for example, where a religious HSP is the only hospital in a community, it might be argued that in order to improve access in the community it is justifiable to require it to provide family planning services). We anticipate that religious HSPs will take the view that the word “unjustifiably” must be deleted from paragraph 26(2)(f).
Devolution of powers, duties and functions: The Lieutenant Governor in Council may devolve any of the Minister’s (or person appointed by the Minister or the Lieutenant Governor in Council) statutory powers, duties or functions under any statute or regulation to an LHIN.
Short timeframe for reconsideration requests: A very short timeframe will be afforded to HSPs for requesting reconsideration of LHIN integration decisions and Minister’s orders – HSPs will only have 30 days to request reconsideration and make submissions about the decision. There would be no extensions to the 30-day period and there is only one “kick at the can.” Once the decision had been reconsidered, if a decision was amended, there would be no further right to ask for reconsideration of the decision.

The procedural rights afforded under the Statutory Powers Procedures Act will not apply to either integration decisions or Minister’s orders (sections 25(7) and 28(3)). Essentially this means that there would be no requirement for procedural fairness, such as the right to demand to see the evidence the LHIN is relying upon in making its decision. Applications for judicial review of integration decisions and orders could be brought under the Judicial Review Procedure Act (section 35). These applications will provide only a very limited scope of challenge.
Scope of Minister’s Powers: Under the Public Hospitals Act, the Minister already has the power to make directions ordering hospitals, which were issued directions or notices of intention by the HSRC, to cease operating as a public hospital or to cease to provide services. (Since 1999, however, the Minister has had the ability to issue directions only to hospitals that had previously received a direction, whether final or notice.) Bill 36 goes a step further by proposing to apply these powers to all HSPs, even for-profit nursing homes. This will be a significant extension of governmental powers over HSPs.
Repayment of excess funding: Under the regulation-making authority, the Lieutenant Governor in Council could make regulations requiring HSPs to institute a system for reconciling the funding they receive from LHINs, including requiring HSPs to pay any excess payments of funding and allowing the LHINs to recover excess funds by deducting the excess amounts from subsequent payments to the HSP. If such a regulation were made, it would overturn the Ministry’s 1982 (revised in 1999) Business Oriented New Development (“BOND”) Policy, which allows hospitals to retain any net income or operating surplus of income over expenses earned in a fiscal year.
CFMA: In accordance with the Consequential Amendments, LHINs could step into the Minister’s shoes and could issue compliance directives (section 25(1) CFMA) and orders (section 27(1) CFMA) under the CFMA. LHINs could also recommend to the Minister (who may then recommend to the Lieutenant Governor in Council) that an exceptional circumstances order be made affecting CEO compensation.
PHA: Bill 36 will amend the regulation-making authority under the PHA to allow the Minister to require hospital subsidiaries and hospital foundations to provide financial reports and returns to the Minister and LHINs, and to prescribe the accounting principles and rules to be followed in making and providing those financial reports. The Ministry tried to do this once before and was successfully challenged.
Labour issues: The most fundamental labour relations implication of Bill 36 is the proposed extension of the application of the Public Sector Labour Relations Transition Act, 1997 (“PSLRTA”) to LHIN integration decision. As per Section 9 of the current PSLRTA, it now occurs only in the following circumstances (with respect to hospitals):
1. the merger of all or part of the operations or administration of two or more employers who operate hospitals, or
2. a substantial restructuring of two or more employers who operate hospitals.

As per Bill 36, it appears that the PSLRTA will also apply in the event of integration decisions between hospitals, HSPs and other persons or entities whose primary function is the provision of services within or to the health care sector.

The implication of the foregoing will be that the Ontario Labour Relations Board ("OLRB") will potentially have vast discretion to combine bargaining units, order votes amongst the constituencies of such bargaining units, and require the dovetailing of seniority among separate bargaining units. Moreover, unlike under the Ontario Labour Relations Act, which affords the OLRB discretion to order the foregoing only where there has been the intermingling of employees, this will require only that a health services integration has occurred. Hence, bargaining units may be restructured radically even where the employees have remained separate and apart.

A further change effected by Bill 36 will be to extend the application of PSLRTA indefinitely. Hence there will not be a “transitional period.”

Also of concern are the provisions relating to the integration of local health systems. The LHIN and Minister’s proposed power (section 29(3)) to have their integration decision or orders apply to have them enforced by court order will afford them vast powers to amend or even potentially rescind bargaining rights, if such a power was necessary for any of the objectives set out in Section 28. While this outcome may not be contemplated currently, the open-ended language will seem to allow this outcome. It will appear that the LHIN or Minister will be empowered to make this order even in the absence of an application from an interested party.

Key Concepts

HSPs and Service Accountability Agreements:

Bill 36 will require HSPs (which include public and private hospitals, certain psychiatric facilities, the University of Ottawa Heart Institute, charitable homes for the aged, municipalities that maintain homes for the aged, nursing homes, community care access corporations, community services providers, community health centres, community mental health and addiction service providers and others which may be specified by regulation) to enter into SAAs with their LHINs (section 2(1)). Excluded from the list of HSPs are chiropodists, dentists, physicians and optometrists (including professional corporations). Other important healthcare stakeholders, such as independent health facilities (“IHFs”), have been omitted from the list. However, IHFs will still be subject to LHINs’ authority under the CFMA. The Minister will also have the ability to extend the list of HSPs by regulation.

SAAs are defined in Part III of the CFMA, replacing accountability agreements. This will extend the Minister’s, and now LHINs’, powers to include HSPs that were not previously subject to the CFMA and accountability agreements (including the University of Ottawa Heart Institute, a provider of community services approved under the Long-Term Care Act, community health centres operated by not-for-profit corporations, and mental health and addiction services provided by not-for-profit entities).

Services

The term “service” is very broadly defined and includes direct services or programs, support services or programs, and functions that support the operations of the person or entity that provides a direct or support service or program. Services appear to include everything from patient programs to clinical support (laboratories, pharmacies) to non-clinical support (laundry, dietary) to back-office administration and operations.

Integration

Integration is broadly defined in Bill 36 as including coordinating services and interactions; partnering for services or operations; transferring, merging or amalgamating services, operations, persons or entities; and starting or ceasing to provide services and ceasing to operate, dissolving or winding up the operations of a person or entity (section 2(2)).

Integrated Health Service Plans

Each LHIN will be required to develop an IHSP for the local health system and make copies of it available to the public. An IHSP will have to include a vision, priorities and strategic directions and set out the strategies that the LHIN will use to integrate the local health system. IHSPs will be required to be consistent with provincial strategic plans, the funding received by LHINs and any requirements contained in regulations made under Bill 36.

LHIN Integration Decisions and Restrictions

LHINs will be able to integrate the local health system in four ways: (1) by providing or changing funding to an HSP; (2) by facilitating and negotiating the integration of persons, entities or services between HSPs or between an HSP and a non-HSP; (3) by issuing an integration decision requiring an HSP to proceed with the integration described therein; or (4) by issuing an integration decision ordering an HSP not to proceed with the integration described therein (section 25(1)). Integration decisions will be required to be issued for all integrations by LHINs except funding decisions (section 25(2)).

LHINs could require funded HSPs to provide or cease to provide all or part of a service; change the level of the service provided; transfer all or part of a service to another location, person or entity; receive a service from another person or entity; integrate services; and take other steps necessary to achieve any of the above, including transferring or receiving property.

There will be a number of restrictions on LHINs’ powers to require integration, including that they could not require HSPs to cease operating or carrying on business, dissolve or wind up (this issue is discussed in greater detail above under issue 5). Additionally, they could not require an HSP to change the composition or structure of its membership or board of directors, and they could not require two or more HSPs to amalgamate (section 26(2)).

Integration by the Minister

If the Minister considered it to be in the public interest (which is not defined) to do so, the Minister will have the authority to order funded HSPs to cease operating, dissolve or wind up; to amalgamate with one or more HSPs; to transfer all or substantially all of their operations to not-for-profits; and to take any other necessary actions to carry out the above, including the transfer of property (section 28(1)).

Requests for Reconsideration, Enforcement

HSPs could request the reconsideration of LHINs’ integration decisions and Minister’s orders within 30 days of receiving the decision (sections 26(3) and 28(3)). LHINs and the Minister could enforce integration decisions and ministerial orders by applying to the Superior Court of Justice for an order directing the party to the integration order to comply (section 29(3)). We believe these orders will allow the LHINs and HSPs to override existing collective agreements (e.g., where a collective agreement prevents outsourcing).

CCACs

Under Part VII (Complementary Amendments) of Bill 36, we note that corporations designated as community care access corporations (“CCACs”) before Bill 36 comes into force will be continued as CCACs under the same name. However, the letters patent issued to these CCACs will be extinguished, and the Lieutenant Governor in Council will have the power to incorporate one or more corporations without share capital as a CCAC by regulation. The members of the board of directors who held office immediately before the day that Bill 36 comes into force will continue to hold office until replaced. This will return CCACs to a corporate structure similar to pre-2001: non-share corporations governed by the Corporations Act with the corporate power to select their own directors and to hire their own executive director.

Indemnity

Other than applications for judicial review discussed under issue 7 above and claims for compensation for losses resulting from transfers of property pursuant to integration decisions or Minister’s orders (section31(3)), no proceedings for damages or otherwise could be commenced against the Crown (or its employees), the Minister, LHINs (or their members or directors) with respect to any decisions, orders, or acts done or omitted under this Bill which are done in good faith in executing a power or duty under this Bill.

Bill 36 also contains some housekeeping amendments to the PHA that are not related to LHINs but are overdue (e.g., admission of patients (section 20), refusal of patients (section 21) and advice as to quality of professional work (section 34).

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