ANNUAL REPORT,
PROVINCIAL AUDITOR, 1991
TORONTO GENERAL DIVISION, TORONTO HOSPITAL
CONTENTS
Wednesday 19 February 1992
Annual Report, Provincial Auditor, 1991
Toronto General Division, Toronto Hospital
Alf Powis, vice-chair, Toronto Hospital board of trustees
Alan R. Hudson, president
Denise Arsenault, vice-president, finance
Naju Shroff, chair, audit committee
David Allen, assistant vice-president, public relations
STANDING COMMITTEE ON PUBLIC ACCOUNTS
Chair / Président(e): Callahan, Robert V. (Brampton South/-Sud L)
Acting Chair / Président(e) suppléant(e): Morin, Gilles E. (Carleton East/-Est L)
Vice-Chair / Vice-Président(e): Cordiano, Joseph (Lawrence L)
Conway, Sean G. (Renfrew North/-Nord L)
Haeck, Christel (St. Catharines-Brock ND)
Hayes, Pat (Essex-Kent ND)
Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND)
MacKinnon, Ellen (Lambton ND)
O'Connor, Larry (Durham-York ND)
Offer, Steven (Mississauga North/-Nord L)
Tilson, David (Dufferin-Peel PC)
Villeneuve, Noble (S-D-G & East Grenville/S-D-G & Grenville-Est PC)
White, Drummond (Durham Centre ND)
Substitution(s) / Membre(s) remplaçant(s):
Duignan, Noel (Halton North/-Nord ND) for Mr Johnson
Duignan, Noel (Halton North/-Nord ND) for Mr O'Connor
Drainville, Dennis (Victoria Haliburton ND) for Ms Haeck
Kwinter, Monte Wilson Heights L) for Mr Cordiano
Morrow, Mark (Wentworth East/-Est ND) for Ms Haeck
Morin, Gilles E. (Carleton East/-Est L) for Mr Conway
O'Neill, Yvonne (Ottawa-Rideau L) for Mr Offer
Ward, Brad (Brantford ND) for Mr O'Connor
Clerk pro tem / Greffier ou greffière par intérim: Carrozza, Franco
Staff / Personnel: McLellan, Ray, Research Officer, Legislative Research Service
The committee met at 1011 in room 228.
ANNUAL REPORT, PROVINCIAL AUDITOR, 1991
TORONTO GENERAL DIVISION, TORONTO HOSPITAL
The Acting Chair (Mr Morin): Good morning. My name is Gilles Morin. I am the Acting Chair. Mr Powis, I would like you to introduce the people who are accompanying you.
Mr Powis: Would it be appropriate for me to make an opening statement as I introduce them?
The Acting Chair (Mr Morin): Certainly.
Mr Powis: Thank you. My name is Alf Powis. I am vice-chairman of the Toronto Hospital board of trustees. On behalf of the board I am pleased to be able to respond to questions that have arisen as a result of the inspection audit of the Toronto General division, as outlined in the 1991 report of the Provincial Auditor.
Joining me today is Naju Shroff, a partner in the firm of Arthur Andersen and Co and a trustee of the Toronto Hospital. Naju currently chairs our audit committee. Along with Naju is Denise Arsenault, our new vice-president of finance, and Dr Alan R. Hudson, president and chief executive officer of the Toronto Hospital. Prior to his becoming president last July, Dr Hudson was a practising neurosurgeon and surgeon-in-chief at the Toronto Hospital.
Unfortunately Peter Crossgrove, our board chairman, is in Australia and is unable to be with us today. He did, however, want me to repeat what he wrote in his response to the receipt of the auditor's report. Let me quote:
"We acknowledge and thank you for the report covering your inspection audit. Your report has been reviewed with our audit committee, finance committee and with the full board of trustees. We appreciate the time taken by your staff in reviewing the inspection audit results, and particularly the comments made by your senior staff to our trustee representatives indicating the excellent cooperation by the hospital staff."
The inspection audit provided an excellent opportunity for both the hospital and the staff of the Provincial Auditor to review our policy and procedures in relation to the funds that flow from the provincial government to run what has become known as the flagship of Canadian hospitals.
With the support of both the Ontario government and the community we serve, the Toronto Hospital is today a 1,200-bed, university-affiliated teaching hospital, treating more than 4,200 inpatients and 550,000 outpatients on an annual basis. In addition to patient care, the teaching programs of the hospital are the largest in Canada and include specialties from nursing to neurosurgery and from chiropody to cardiovascular surgery. All in all, there are more than 150 such specialty teaching or academic programs based at the hospital. Not to be forgotten are the tremendous research accomplishments of the Toronto Hospital. The opportunity afforded our researchers by a "bench to bedside" approach to research has enabled the staff of this hospital to significantly change the practice of medicine here and around the world. As citizens of Ontario we have much to be proud of in the field of medicine, and much of that pride has emanated from the Toronto Hospital.
As you will know, there have been numerous changes in the hospital field in the past five years. Never before in the history of hospital care in Ontario have there been so many significant changes in the way health care is delivered. The amalgamation of the Toronto General Hospital with the Toronto Western Hospital in 1986 to form the Toronto Hospital was one such major change. Not without controversy at the time, the merger, now more than five years old, has created centres of excellence at both sites and has eliminated much of the duplication of services that existed pre-merger.
While we have not tracked the merger savings, nor did we ever set out to do so, I can tell you definitively that the merger has saved millions of dollars. These savings have been redirected into new programs and state-of-the-art equipment designed to meet the increasing demands on the health care system at a time when provincial health care dollars are shrinking and making it very difficult to manage.
One of the best examples I can use to demonstrate this point is in the area of AIDS treatment and research. In 1985, the treatment of patients with AIDS or AIDS-related illnesses was in its infancy. The total number of patients treated was small and the support services virtually non-existent. Today the hospital has two large, active AIDS clinics and is now following more patients than any other hospital across Canada. We are in fact the major referral centre in Ontario and diagnose more than a third of all new AIDS cases in this province. Each week of the year we see seven new patients, all of whom over time will become sicker and require increasing amounts of care and resources, with many of them having multiple admissions.
In addition to the treatment of these patients and the education of health care professionals with respect to this disease, the clinics are engaged in the development of investigative medication and have extensive participation in research studies. Both clinics now provide a unique environment in which the complex psychosocial and medical needs of these patients are cared for in one unit. They also have import links with inpatient units, the medical day unit, as well as community physicians and resources.
As I said earlier, the report of the Provincial Auditor has provided us with the opportunity to review many of our systems. Concurrent with that review, we have seen an almost complete staff turnover in the financial management areas. Since the audit, we have a new vice-president of finance, a new comptroller, a new manager of patient accounts, a new manager of the treasury, a new chief operating officer and a new president.
I should also point out that at the request of the provincial Minister of Health, a meeting was held on December 9 with the provincial auditors, the hospital's external auditors, our chairman of the board and the chair of the hospital finance committee. At that time the issues with respect to hospital financial systems and the restructuring of both the finance and internal audit departments were reviewed in considerable detail. I am told that at the end of that meeting all the parties were satisfied that any outstanding issues had been dealt with. We will be happy to be more specific about these during the question period.
As well as the question of merger savings, in the auditor's report questions arose regarding the hospital's position with respect to the acquisition of our new computer system. This was a major capital expenditure, a multi-year project, and highly innovative in that we were attempting to move the flow of patient information, including the ordering of tests and the results of those tests, directly to the bedside. Nurses, for example, were found to be spending up to 40% of their time moving paper at the nursing station rather than on direct patient care.
To include this computer project as part of the annual equipment acquisition budget would have eliminated any possibility of replacing needed equipment in other areas or implementing the system to our specification. Hence, we elected to fund the project using our own funds over a multi-year schedule. It was our agreement with the provincial audit staff, from the outset of the inspection audit, that the Provincial Auditor was looking at the use of funds flowing from the Ministry of Health and that therefore the acquisition of the computer system was outside the mandate of the auditor.
In a recent speech by the president of the Ontario Hospital Association, Dennis Timbrell noted that:
"Maximizing productivity through the use of computers is not something that has come easily to hospitals. General industry in the United States spends an average of 7% to 10% of their operating budgets on information systems. For hospitals, the figure is 2.5% to 3.5%. In Canada, the figure for many hospitals is 1% or less."
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We at the Toronto Hospital recently reviewed the entire computer project both internally and externally. The results of that review indicated that we are currently spending only 1.7% of the hospital's total operating budget on information systems. This percentage includes a number of applications totally unrelated to the new patient information system in question.
I am sure you will have a number of specific questions in these and other areas, so I will not take any further time. I just want to say that we are very proud of our institution and the difference it makes in each of our lives.
The Public Hospitals Act of the province of Ontario clearly states that the board of trustees is totally responsible for the administration of the hospital. The Toronto Hospital board of trustees has a unique configuration in that it is totally representative of the community we serve. We are confident that the institution is well managed, fiscally responsible and ready, willing and able to meet the challenges of health care in the years ahead. We thank you again for the opportunity to present the work of the hospital to this committee. We will be pleased to respond to your questions, and if we do not have the answers, we will find them.
Mr Villeneuve: Mr Powis, thank you very much. Yesterday I was questioning the deputy minister regarding the operation of your computer system. There appear to be some reports in the press -- first of all, is $80 million close to what was invested?
Mr Powis: Denise?
Ms Arsenault: No, the $80-million figure is a figure that covers many years and represents both capital costs and the operating costs as well. Any hospital of any significant size has operating expenses related to systems operation. The 1.7% of our budget Mr Powis was referring to that is required for the operation of both the patient care and financial systems is included in that $80-million figure and it covers an eight-year period. So it is really looking at apples and oranges and going over a very long period of time.
Mr Villeneuve: So it is both directly and indirectly revolving around the capital expenditure and many things that came prior to that in order to get at the --
Ms Arsenault: And not simply the patient care system.
Mr Villeneuve: Mr Powis mentioned that 40% of the nurses' time was shuffling paper. With the bedside computer replacing the chart, do you feel it is coming to pay dividends? Would you do it again? Are you satisfied? Have you saved lives with it? Your comments, please.
Mr Powis: I should say that we inaugurated the effort to install the system back in the days when I was chairman of the board of Toronto General. I think it was 1985 or 1986. I have had a lot of experience with computer systems that go wrong, that do not work the way they are supposed to, and I was extremely nervous about embarking on this, but I was persuaded that if we could do it and if we could make it work the way we hoped, it was going to be a very good investment for the hospital. I leave it to Alan Hudson to tell you how it has turned out.
Dr Hudson: We have just concluded both an internal and a very substantial external review of the entire system in terms of its function and the technological and financial aspects. The recommendation of both the internal review and the expert external review is that the entire project is working sufficiently well that we should keep the system and continue to refine it.
To answer your question more directly, there has been a clear-cut improvement in function, so although the system has not been perfect, the end users, who I think are probably the best judges, are now of the opinion that we should continue with the system.
Mr Villeneuve: Are you aware of any other similar system either here in Ontario, Canada, the United States or elsewhere?
Dr Hudson: As part of that review we have looked very carefully at alternative systems, because part of the review was to make a decision as to whether to continue with the system we currently have, change the system or develop a hybrid. We looked very carefully at alternative systems. From the beginning up till now there has been no comparable system. This is a unique system in terms of its comprehensive nature relating to patient care. So the answer is yes, we have done a very careful survey, but the specific feature of this -- its very comprehensive nature -- is not duplicable within any other system.
Mr Villeneuve: Dr Hudson, while you have the floor, I understand that there has been a mission statement pursuant to the auditor visiting the hospital. I understand -- I think it was referred to by Mr Powis -- that there has been, to some degree, a change in direction. Could you possibly advise the committee how this is happening and what you feel about the new mission statement and the direction you are going in now?
Dr Hudson: Yes, I would be pleased to do so. First, I would make a distinction between the new mission statement and the statement that went before. I will not go through the obvious features of our mission in patient care, teaching and research, because those are common to both the old and new statements. There are two very distinctly new features in the mission statement which has been accepted by the board of trustees, as you say, since the visit of the Provincial Auditor.
The first component is that the hospital will prioritize its activities so that, in the face of budgetary constraints, the hospital will not cut back across the board but will prioritize cardiac sciences, neurosciences, oncology, that is, cancer, and transplantation. This position of defining more specifically what the major programs of the hospital will be was discussed with the government and forwarded to Mr Decter. In fact, Mr Decter has publicly commended the hospital on this role of defining more clearly what the hospital's business is about.
The second component of the change in the mission statement is the reciprocal part of that, namely, that the hospital will work within a group of hospitals. It will no longer be the general hospital, but part of a group of hospitals which are part of the health science complex situated around the medical school. The specific point of that is twofold. One is that if the Toronto Hospital subsequently de-emphasizes a component of its function, that function obviously must be picked up by a sister hospital in that group, and vice versa.
The financial implications of the internal prioritization are that the financing of the hospital will be more and more directed to the items I have mentioned. With regard to the group component, the health science component, the financing of hospitals will change according to the shift of programs which may occur between hospitals. The ministry has already issued guidelines as to how that is to be accomplished and the way in which the money will go along with the program transfer. That issue will be discussed first at the Toronto Academic Health Science Council with regard to the particular group of hospitals I have referred to. Subsequently TAHSC will refer this to the district health council, which in turn will report directly to the ministry.
Mr Villeneuve: Dr Hudson, the deputy minister mentioned yesterday that there was not really a great deal of value for dollars in the health care system to this point. This is now starting to come to the fore. Do you feel that under the new mission statement and the way you have reorganized -- I know it is difficult to yardstick dollars and human lives and human health, but do you feel that you now have a more efficient and better working arrangement within the hospital and with the Ministry of Health?
Dr Hudson: Within the hospital we very clearly have a significantly better system both in terms of personnel and systems. We have a long way to go. We are committed to doing just that, following the point of financial efficiency and making certain that everyone gets the best return for the dollar. So that we are committed to that, we reviewed those changes, which are all directed in that line, with the Provincial Auditor at the December meeting very specifically so that the Provincial Auditor could get the flavour of the significant number of changes which occurred very shortly after his visit.
Mr Villeneuve: Quite obviously, a lot of hospitals are underfunded. I believe your hospital has been specializing in transplants. I think one example was cited, a liver transplant being remunerated by the Ministry of Health to the tune of some $60,000 when indeed the cost was somewhere in the area of $100,000. Could you, for the sake of the laypeople on this committee, explain how you arrived at the $100,000 cost of a liver transplant?
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Dr Hudson: Specifically to answer your question, we constructed what is called a care map, which is a critical pathway concept. For each of the numerous days that patient is in hospital or pre-hospital, the specific tests and the specific consultations are all written out in order. We constructed the algorithm of the treatment decisions. There is very careful mapping of what actually happens to a liver transplant patient, the tests and the consultations. Then each one of those of items was costed, and that eventually came to a total which we felt was significantly higher than what we were being paid.
We then worked very closely with the government over a period of months, because at the same time the government was coping with the problem of a new and expanded program. This is an issue which is different year by year. They were having to cope with the financing of a new and very expensive program. We worked very closely with the government, exchanging the information. We presented them with our costing mechanism. Eventually, after a very careful consideration of the province-wide issue and the hospital issue, they flowed additional funds to us on that specific line, namely, to cover the liver and lung transplants.
Mr Villeneuve: This is unique to the transplants of these organs. This is cost-plus compared to if another patient were using this particular hospital bed?
Dr Hudson: Absolutely. I believe the ministry and the hospital both are of the opinion that the ministry has already paid for the operating room and the ward. This is an additional cost.
Mr Villeneuve: The buzzword around the Ministry of Health is "managing beds out of the system." They used to call it something else prior to coming to power. That is politics, I guess. Within your particular hospital, Dr Hudson, I believe some downsizing has occurred, particularly since you have been at the helm. Could you just explain a bit what has happened here to personnel and to the managing of beds out of the system?
Dr Hudson: Yes, you are correct. We have downsized the hospital from July until now, and there are personnel components to that. In fact, the logic is the reverse. The hospital spends between 65% and 70% of its outflow on salaries, and when we are faced with the problem of managing a financial problem, which the Toronto Hospital had, and preparing ourselves for what we knew was coming down the pike -- which then I thought was going to be 2, 2 and 2; in fact it is slightly less -- it was clear we had to stem the flow of money. As I say, 65% to 70% of most hospitals' outflow is on salary, so one of numerous techniques we used to get the finances in order was to reduce the number of cheques we were cutting every month. That then resulted in a layoff of 159 people. That in turn meant that we did not have sufficient personnel to manage the beds, which resulted in the closure of those wards.
We were closing the hospital down around the practice, because the hospital was running in the neighbourhood of 75% occupancy on the wards. Certainly on the surgical wards we would aim for about an 85% occupancy as far more efficient. We hope that by reducing the beds we will not impact the care we can give to the patients of Ontario.
It was with very great regret that we laid off the people we did, but it was one of the key elements of numerous elements for straightening out the financial position, and the net result of that is that the MOH line at the end of this year will be flat. We have defined and managed the problem successfully.
Mr Villeneuve: Dr Hudson, we often hear complaints -- I have had them from my own constituents -- about elective surgery and the time process or the time element involved when elective surgery is the order of the day. Could you tell us what changes may have been precipitated to elective surgery in the Toronto Hospital?
Dr Hudson: As I mentioned, the question of downsizing of beds and reducing of personnel was just one item. Another item was the major transferral of operating room function to an outpatient basis. We just opened six new outpatient operating rooms last year. That is another policy of coping with the reality of this decade. Patients do not have to wait for an inpatient bed to come free if eye and knee operations and so on can now be done on an outpatient basis. This is a trend throughout Ontario, throughout North America, and we have been very much at the forefront of that. That is one aspect of the issue.
The next aspect of the issue is that we have made a very determined effort to do the testing of patients -- some of this is very complex because of the nature of the hospital that we are -- before the patients come into hospital. We have now developed, again as part of this overall plan, a major pre-entry testing system. Again that is in common practice across North America. The patient does not actually occupy the bed to have those tests done, hence delaying someone else coming in.
Another component is that we have moved very hard to shorten the length of stay, so that the patient who is in the bed does not stay there for an excessive time. We track that very carefully through the management process, using the care map to which I referred previously.
The net result of this, plus very careful discussions with the government on the loading across the province of, for example, cardiac surgery and how this is to be accomplished, to answer your question specifically, is that we are very hopeful that the waiting lists at present are not going to be excessively lengthened. They will be lengthened to some extent. Clearly we cannot cope with less money without some change. What we are attempting to do as the queues lengthen is to ensure that people who are acutely ill and require rapid admission to hospital do so. The queue for people requiring urgent treatment, medical or surgical, should not be affected. The queue for people who require non-urgent treatment will be slightly lengthened, and we will do everything we can to minimize that, but it is part of the plan.
Mr Villeneuve: This is my final question. It is my understanding that the Ontario Nurses' Association has been to some degree unhappy with some of the occurrences. ONA quite often is very vocal about its problems, as well it should be. The computer has, in your opinion, reduced the paper shuffling by your professional nursing staff?
Dr Hudson: Yes.
Mr Villeneuve: Has it reduced the number? Has it brought it to the point where you have been able to reduce your number of nursing professionals? If so, by about how many? What other areas that affect ONA and the nursing profession do you feel will come forth that have not already happened?
Dr Hudson: If I may respond to the several parts to your question --
Mr Villeneuve: I realize that.
Dr Hudson: -- with regard to the ONA issue, the labour-management relationships at the Toronto Hospital for the last few years have been very bad, and ONA is no exception. In fact, ONA has recently reissued a blacklisting on the Toronto General Hospital. I regret that very much because I regard that as a statement of lack of resolution of management-labour practices.
One of my main personal aims is to resolve that issue which is present. Specifically how I have been doing that has been meeting with the presidents of the two locals. Although we are one hospital, we have two nurses' unions. I have been meeting with them privately in my office. In addition to that, we paid for the senior union people to attend a two-day labour-management conference in January in this city. That group will subsequently continue meeting in a labour-management mode. That is in addition to ONA; there are other labour unions involved.
I have as of this year now constituted a labour-management advisory committee with cochairs, one from labour and one from management, and that includes ONA. As of yesterday, I was informed that the cochair of that labour-management committee is one of the presidents of ONA, so there will be a very direct impact.
I have introduced a number of initiatives to change that I hope will result in excellent labour-management relations, which certainly do not exist now. But we acknowledge that fact and are making a big effort to put that right.
With regard to the second part, to what extent have the computers impacted on the nurses' life, the fundamental aim is to have a paperless record. That is the goal. We are nowhere near there yet, for a variety of reasons. We are quite a long way there. For example, a nurse or a doctor can call up information on the screen from a pathology department or some other support service without paper transferring. That is quite well developed, but we have not got to 100% yet. We are at a phase where there are clear sections in terms of calling up, say, the biochemical results on the day's work on a ward for a series of patients; that will just come up on the screen at 3:30 that afternoon. That is clearly a significant improvement in the life of a nurse, and that is what we are aiming to continue to work on. We are not there yet, but we are a long way on the way.
Mr Villeneuve: Dr Hudson, thank you. I think you have certainly enlightened me very considerably.
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Mr Hayes: The auditor actually requested information from the hospital in regard to the savings and the merger. They are quoted as saying, "Senior management declined to provide it, stating that it was not an accounting record and was therefore beyond the scope of the inspection audit." Can you comment on the position that the financial information on the merger is beyond the scope of the inspection of the audit by the Provincial Auditor?
Miss Shroff: As we read the act it said that the inspection audit should look at the funds that were flowing to the hospital from the Ministry of Health and how they were expended. The Provincial Auditor has had full access to all the funds that came into the hospital via the Ministry of Health. The merger savings etc were not part of the funds that came from the Ministry of Health, and that is why we agreed ahead of time at a planning meeting before the audit process started that what they were looking at were the funds that came from the Ministry of Health. That was the position that was agreed upon with the Provincial Auditor when we started out.
Mr Hayes: There were two hospitals before the merger.
Miss Shroff: Right.
Mr Hayes: Did they not receive funds from the Ministry of Health? I mean, would this not be part of savings from some of the money that the Ministry of Health, for example, has given to the hospitals? Would that not be part of that? What I am saying is it is as if I gave you some money to help you on a project and you said, "Well, it costs less, so it is really not your business what I do with the savings that you loaned to me." Maybe I am being blunt.
Mr Powis: I do not think we ever said it was not anybody's business how much we saved in the merger. The problem was that we did not keep records of the savings. We can give you guesses, and I have seen one figure that we saved nearly $10 million simply in purchases since the merger happened. But we do not have a record saying, "We saved so much in the cardiac unit." In any case, it is a judgement call. There are savings that clearly flow directly from the merger and there are other ones that you do not know, partly from the merger and partly not. Anyway, we do not have any precise records on that at all.
Mr Hayes: Why would you not have precise records on that?
Mr Powis: "What is the use of it?" I guess is the attitude we took. There are certain specific things that we did and we said, "Good, we saved $5 million doing that." But that is only a small piece of the picture.
Ms Arsenault: I think it is important to understand that we did report very precisely how we spent the money. The issue here is that there were, as Mr Powis is saying, many judgements that get made as to whether or not something is a merger savings or is a result of good management or good luck. When we go out to tender on supplies, there is no doubt that as a result of the higher volumes, we achieved better prices. There was no doubt about that. But it becomes an academic question, and my guess and your judgement might be different, as to what I would have been successful in negotiating had I been just the Toronto General or just the Toronto Western.
In many respects the reason why we are saying there would have been so much judgement involved -- I mean, we could have had in the finance department an army of accountants pretending they could make these precise calculations, but you have been asking, "What if" kinds of questions. In other respects, they were costs that would have been incurred had we been two hospitals that we did not have to incur. For example, we did not need to develop two computer systems.
Mr Hayes: So actually, in a sense, by merging there would be less money spent by having one rather than two. Would that not be a savings?
Ms Arsenault: That is absolutely true, or we were able to do more, provide more services than we would otherwise have been able to provide.
Mr Hayes: I have one more question. What savings have really resulted from the sharing of the new patient care information system? Do you have an idea on that?
Ms Arsenault: I am not certain what you are asking.
Mr Hayes: What savings have resulted from that sharing of the new patient care information system rather than having it duplicated?
Ms Arsenault: You are saying if each hospital had had to develop its own computer system independently?
Mr Hayes: Yes.
Ms Arsenault: One of the problems with that question is that it assumes we would have access to information as to what this similar system would cost in a hospital that would be half the size of the Toronto Hospital. If I were to make an educated guess, I suspect that at least two thirds of the expenses would have been required for each hospital to develop independently the system it has, and probably more likely at least three quarters of the cost. So you would have at least 150% of what it has cost us.
Mrs Y. O'Neill: I am sorry I was late for the meeting. If these questions have been asked, please tell me. I am going back to the auditor's report. There were two items regarding control mechanisms I would like to ask questions about. With regard to the variances in the stock of the non-controlled drugs, would you like to say a little bit about what you have done in response to the comments by the Provincial Auditor?
Ms Arsenault: To provide you some background, subsequent to the merger, the hospital introduced new financial systems which are very good systems that enable us to manage things much better than we could with the old systems. To start with that we obviously had to first get the main, top-level reporting system in place, and subsequently we put in place the purchase ordering and the accounts payable system. Once that was in place we were able then to put in place a new inventory system, which we are in the process of doing. The problems we have right now are with the old systems. Within the hospital across the two sites with the many inventory areas we have many independent systems -- be it drugs or medical-surgical supplies or nutrition; the list goes on -- which are not well integrated into the purchasing system right now.
As a result of that, it is very easy for things to get out of sync. That is what the auditors found when they came in. It is important to understand, however, and the auditors did find this, that the hospital does have good controls to restrict access so that it knows people cannot go in and willy-nilly take supplies for their own use. They knew they were being properly controlled and being used by people or ordered by people who were appropriate.
Having said that, there were these very significant differences which the hospital had in its practice corrected at significant reporting times by actually going in and physically counting the goods and then adjusting its records. We have introduced a new position. This is a Band-Aid solution, until we get the new system in, of having a new staff person whose job it is to ensure period by period that the variances are not significant, and where they are, that they would be investigated and corrections would be made to the records.
Mrs Y. O'Neill: So this is a new employee on staff?
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Ms Arsenault: That is right. In period 8 we did a count of over 50% of the inventory areas. The results showed there were still some discrepancies but they were not nearly in the range of what the auditors found last time. We know we will continue to find these until we get the new systems in and working. So that is the state.
Mrs Y. O'Neill: Continuing on a little further regarding inventories, the auditor has also made a comment on the ceiling value of things that are categorized in inventory. Have you looked at that at all? That was on smaller items, I presume, very movable.
Ms Arsenault: Equipment.
Mrs Y. O'Neill: Yes, fixed asset kind of things.
Ms Arsenault: The hospital's policy is that obviously one always has to look at the cost of putting the system in place compared to the cost of the goods. The hospital's practice is very much in keeping with what the Canadian Hospital Association guidelines recommend. We are following the policies of the Canadian Hospital Association that had been endorsed by the Ontario Hospital Association and the Ministry of Health. Having said that, the hospital's policy is that it is the responsibility of the managers in the area who have the goods to manage them. I think at this point we have not extended that policy, although there are some smaller items for which it may be appropriate to consider.
Mrs Y. O'Neill: It is not possible for me, from the auditor's report, to know exactly the kind of items that we are speaking about. Do you have quite a high replacement rate in some of these items, the more portable kinds of equipment? What is your loss or vandalism statistic?
Ms Arsenault: I guess the main areas where we seem to have problems are in some of the public areas, where it would be easy -- we often have pictures on the wall that disappear, for example. These things are in fact donated by the volunteers; it is through their efforts that we get them and then they have to replace them. This despite, of course, having them well secured to the wall. I think it surprises people how these things can none the less disappear.
Mrs Y. O'Neill: Can you tell me if you are going to look at that? Having been in another area of experience, in the education field, where this is a very significant component of costs in education, I would imagine it is the same in hospitals. In a recession I think these things have a tendency to mountain rather than valley. I am just wondering if you should be looking at that recommendation of the auditor much more seriously. You do not seem to have put in place anything that would either make removal of these items more difficult or lower the value in the ceiling recorded.
Ms Arsenault: These items are items that are used by people day to day in their work, for the most part. The experience that we have from the losses that are reported for insurance purposes is that this is not a significant area of loss to the hospital.
Mrs Y. O'Neill: You have those statistics?
Ms Arsenault: I do not have them with me, but certainly from our loss reports. People work with a dictaphone every day; if my dictaphone left my office, I would know it, and I would report it through our incident reports.
Mrs Y. O'Neill: So you do not have large insurance claims in this area?
Ms Arsenault: No.
Mr Tilson: I would like to continue by asking a question on the line of questions that Mrs O'Neill was pursuing. The auditor was quite critical of the procedures with respect to acquisition of anything, I suppose. As I understand it from what you have been telling the committee this morning, you had an old system, a new system that is coming on and an interim system, with respect to the acquisition of anything, is that correct?
Ms Arsenault: No, not with respect to the acquisition of goods. That is with respect to the inventory aspect, those items purchased for inventory and then issued when people require additional supplies.
Mr Tilson: All right. I would like to deal specifically with the auditor's comments in his report, which I am sure you have read, in which the auditor has said they simply have not been able to find the documentation that substantiates what you have acquired. Specifically, they have said, for example, that:
"Documentation was not on file at the time of our audit to support acquisition decisions totalling $4.3 million, including the purchase of laundry services exceeding $3 million.
"In addition, senior management would not provide us with documentation on the selection process for other purchases totalling $3.2 million. They stated that these items were not funded by the Ministry of Health, and consequently were beyond the scope of our inspection audit."
There obviously was a dispute between your staff and the auditor's staff as to what could be produced and what could not be produced.
My question is going to deal with procedure, but I would like to refer to these comments made by the auditor. Dealing specifically with the inventories, they did say that: "Safeguarding of all drugs was satisfactory as was the recordkeeping for controlled drugs. However, recordkeeping for non-controlled drugs was unsatisfactory." The auditor then indicated that your response was that you felt competitive practices are followed for the acquisition of equipment and other supplies and services. That was your response. Can you be specific or indeed file documentation with this committee which indicates what your procedures are?
Dr Hudson: No.
Mr Tilson: You will not do that.
Dr Hudson: I do not know if I was answering your question. You said, would we file now as opposed to before.
Mr Tilson: Now or in the immediate future.
Miss Shroff: Let me answer that initially, and then I will turn it over to Denise. You can tell from the auditor's report that the hospital purchases about $93.8-million worth of stuff every year, out of which the auditor selected about 20% to look at, worth about $17 million or $18 million, and found that $10.4 million was very properly handled. So what was in question was about $7.5 million, or about 0.5%. Let me go through the list. Out of that, $3.2 million relates to the laundry --
Mr Tilson: Mr Chairman --
Miss Shroff: Let me go to the laundry question, since you asked the question.
Mr Tilson: All right, it is fine for you to tell me that. These figures will make me dizzy, quite frankly. What I am interested in --
Miss Shroff: That is all right. I just want to state that it is unfair to say our policies were inadequate on a blanket basis, whereas for a very large percentage of the purchases they were terrific. Going through the individual items you raised with respect to the laundry --
Mr Tilson: It is fair for you to defend those comments. I have no problem with that. What I am simply interested in -- and I do not really want to hear these figures because they are too big for me to understand.
Miss Shroff: That is all right. I am a bean counter, so I love figures.
Mr Tilson: What I am interested in, though, is the fact that the auditor is essentially suggesting -- in fact he is not suggesting, he is saying -- that he questions whether proper procedures are being followed, or that you have procedures that justify what you are doing.
Miss Shroff: Yes, we do.
Mr Tilson: That is really all I want to know.
Miss Shroff: We do have procedures which are followed most of the time. In fact, generally they are followed. There are a few exceptions, such as the laundry. That agreement was signed 20 years ago. It expired. All 13 hospitals that share that laundry are in the process of looking at an agreement and re-signing it, so it was just a matter of timing. I think at our last finance committee meeting we looked at the agreement. Is it signed by now, or is it still in the draft stage?
Dr Hudson: It has been passed and and it has been signed as well.
Miss Shroff: That is right. It was a rare situation where all 13 hospitals have to agree with signing the agreement and bringing it up to date. That is being done now. So the $3.2-million worth of purchases were taken care of for that one. The documentation that was missing for about $1.1 million -- it arose when the two purchasing departments, Toronto Western and Toronto General, were being put together. The stuff was in boxes, being shuffled from one place to the other. It was difficult and we were unable to satisfy the auditors and find the documents because they were still missing, I guess -- the boxes, wherever they were.
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Ms Arsenault: There are a couple of things that are important to understand. The comments the auditors made were not to suggest that our procurement practices were inappropriate, or rather that we had made bad procurement decisions. What they made their comments on were the documentation problems they had.
Mr Tilson: It simply says your recordkeeping is unsatisfactory. That is what they say.
Ms Arsenault: Okay, but this is very important. I arrived on the scene after this audit was done. Obviously this was very significant to me, to get my head around, because it has such implications to the hospital. The very first thing I did was to borrow their working papers in the areas where they had problems. I understand that with the move there were problems, that they put files in boxes. I do not know where all of them went to. I have since reviewed the documentation practices from now on. They are now in one location and they are appropriate, in my opinion.
In addition to that, there was a second issue. Quite rightly, as I think we would all agree, the hospital has as part of its policy a recognition that there are times when it is not appropriate to tender. For example, if you have a piece of equipment and you want to upgrade that equipment and buy a replacement part for it, you are obviously not going to tender. You are going to go back to the supplier of the original equipment. We did not have a practice previously that it was necessary for us to document in writing the reason we did not tender that item. Since the audit we have introduced a new form which is required to be signed off by the appropriate levels of management, to require that it be put in writing.
Mr Tilson: Have these procedures -- the old procedures, the new procedures, the interim procedures, whatever procedures you have -- been made available to the auditor?
Ms Arsenault: We certainly discussed with the auditors our intention to introduce these new policies. The practice --
Mr Tilson: What about the old procedures? Were they made available to the auditor?
Ms Arsenault: Yes.
Mr Tilson: The auditor has those procedures.
Ms Arsenault: Yes, and they, I think quite rightly, felt that the policy should be enhanced to require more explicit documentation of the reason things were not tendered. I agree with that. Having said that, however, I have reviewed the list of their sample and, frankly, I found that where things were not tendered there was legitimate reason.
Mr Tilson: Have they seen the new procedures?
Ms Arsenault: No, they have not, but they would be welcome to see them.
Mr Tilson: Is this a complicated document, these procedures?
Ms Arsenault: No.
Mr Tilson: I am sure there are only two sheets --
Ms Arsenault: Exactly, it is the new form with --
Mr Tilson: Would you make those available to the committee?
Ms Arsenault: I would be happy to.
Mr Tilson: Okay. With the response to the comments made by the auditor, you indicated, as I have stated, that competitive practices are followed for the acquisition of equipment. Can you elaborate on that? What does that mean?
Ms Arsenault: The hospital's policy, as I recall off the top of my head, is that any equipment over $25,000 must be tendered. There must be at least three competitive bids received. In some cases it is many more and in certain cases it is not possible that there be three. There may be only two suppliers, but wherever possible there would be three tenders.
Mr Tilson: Is that set forth in these procedures you are filing with the committee?
Ms Arsenault: In the policies.
Mr Tilson: It is set forth in the policies what you have to do.
Ms Arsenault: Correct.
Mr Tilson: In other words, you take necessarily the best offer to purchase equipment. You have three, or a number of offers, and you take the best. Is that what you are saying? Is that what your policies say?
Ms Arsenault: That is correct. Now best is not in all cases the lowest. Where it is not the lowest, there is a specific requirement that there be documentation. This was our policy previously as well and I think the auditors would have seen that. Wherever the hospital does not select the lowest bid, there must be specific signoffs and justification.
Mr Tilson: Could you elaborate on your thoughts where the auditor, dealing with inventories, states that -- and it is really getting back to what Mrs O'Neill was pursuing -- "Controls over equipment were satisfactory, however there had been no physical verification of easily movable equipment." You dealt with that somewhat with Mrs O'Neill, but I would like you to elaborate further on the auditor's comment -- not on what you do, but on the auditor's criticism.
Ms Arsenault: The hospital's policy is that whenever there would be a loss, it is the responsibility of the management in the area the equipment is in to report such a loss. We have that as an ongoing procedure. If you look at the nature of the hospital and much of the equipment we acquire, they are pieces of hi-tech equipment that fill rooms and equipment that gets used every day, which is absolutely required. So there is no major risk of significant loss in the institution.
Having said that, the audit committee has changed -- to some extent, has added a responsibility for the internal audit department to do, on a cyclical basis, test counts of fixed assets. That procedure was added as a result of the Provincial Auditor's work.
Mr Duignan: It is not often I agree with David across the way here, but I do agree with his line of questioning today. Some information for myself: What parts of the hospital operation are subject to the Freedom of Information and Protection of Privacy Act? Is there a possibility of getting that answer?
Dr Hudson: Sure. The answer is yes, I will look into it.
The Acting Chair (Mr Morin): Would you state your name?
Mr Allen: I am David Allen, the assistant vice-president for public relations for the hospital.
The Acting Chair (Mr Morin): Could you just take your seat. You have a microphone in front of you.
Mr Allen: It is my understanding at this point that the act you are referring to does not apply to the Toronto Hospital. That is based on a ruling, I believe, yesterday in relation to the financial statements, but we can doublecheck that for you.
Mr Duignan: That is, I think, my understanding as well. Another committee of this Legislative Assembly, in its comments and review of the freedom of information act, has made a recommendation to the government that basically anybody receiving more than $50,000 in government funding would be subject to this act. Do you have any comment on that?
Mr Powis: Sir, are you implying that if somebody comes to the hospital and gets more than $15,000 worth of treatment, we have to release the patient records?
Mr Duignan: No, what I am saying is that one of the recommendations of the committee was that anybody receiving more than $50,000 in public funding will be subject to the Freedom of Information and Protection of Privacy Act.
Mr Powis: Any institutions.
Mr Duignan: Any institutions, yes, that are exempt now.
Mr Powis: I do not really think I understand the implications of that, but it is certainly something we had better look into.
Mr Duignan: Maybe I can have a talk with you later about that. I would like to get back on the track in questioning you again, following Mr Tilson, and I want to zero in on the audit's scope. In the nine purchases of computer equipment valued at $3.2 million, for example, it was indicated that these purchases were not within the scope of the inspection audit, as the Ministry of Health's operating grants were not used for the purchase. Could you explain how it could be established that the computer purchases were not funded by the Ministry of Health? Are funds differentiated on the basis of source within the hospital's accounting system? I am just wondering how.
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Miss Shroff: Yes, the funds are separated within the hospital funds based on their sources. As Mr Powis said in his opening statement, since this was such a major expenditure for the computer system, spread over several years, if we took the ministry funds and spent them on the computer systems, we would be shortchanging some other areas. Therefore, since this was such a major undertaking, we chose to finance that out of the foundation and other funds, and we kept track of the computer purchases through those funds.
Mr Duignan: So the source of funding was through donations.
Miss Shroff: That is right. That came through other sources.
Mr Duignan: And that purchase, again, was done on a competitive basis?
Miss Shroff: For that particular computer system it was not done on a competitive basis, because it was the only game in town. We looked at several alternatives, and HDS was the only system that we thought was what we were looking for. So, having searched literally all of North America, we zeroed in on HDS and bought that system. There was nothing else available, and to date there is nothing else available.
Mr Duignan: What use have you made of the equipment? Could you explain that again?
Miss Shroff: Do you want to tackle that, the patient care system, which we already covered a little bit?
Dr Hudson: Fundamentally, there is a computer entry point between every two beds. That is basically how the data is captured by the system. So a doctor or nurse entering orders would enter them on the spot, at the patient's bed. This information is automatically transferred to the appropriate laboratory, X-ray department or whatever. In the later part of the day, when the doctors or nurses are making rounds, they can log back on to the system and call up the data they have ordered, the chest X-ray report or the blood gas report or whatever. That is the main function, just using that as an example of how the system works.
The system also, of course, works to generate reports so that we can start getting a handle on these various clinical problems and then put some numbers opposite them. So in the main, the system has a report-writing capacity. The system also needs to interact with other major systems in the hospital.
That is basically how the system works. It is linked between the two hospitals, so there is one system for the two hospitals. That is basically how it works and the way it works.
Mr Duignan: Has it eliminated some paperwork and has it resulted in cost savings?
Dr Hudson: It has eliminated an enormous amount of paperwork. That was the design. As I responded to a similar question earlier, perfection has not been reached; the goal is a paperless record. But certainly in radiology, in biochemistry, in bacteriology and several of the major areas, the transfer of information is by computer; there is no paper flow at all. It not only eliminated the work, hence the savings; it has also, of course, increased the accuracy. They are not copying off paper requisitions from one place to another; it stays in the system in the original form.
Mr Duignan: Getting back to the question asked earlier about downsizing your staff, have you laid off staff? How many staff has been laid off, and from where in the system?
Dr Hudson: As I responded earlier, in the period since I took over the job in July we have laid off 159 staff. If you ask for the breakdown, the first group we laid off were in fact 20 administrators. But the actual breakdown of the 159 is that 49 of these are non-union positions and 110 are union positions.
Mr Duignan: How many senior management personnel were laid off?
Dr Hudson: As I say, the very first thing I did was to lay off 20 administrators; the very first step I took one week after taking my job.
Mr Duignan: Senior personnel?
Dr Hudson: Including senior people.
Mr Duignan: Including senior personnel.
Dr Hudson: Including some of the most senior.
Mr Duignan: What were the cost savings being made on these administration cuts?
Dr Hudson: Cost savings on the original round of the downsizing, the downsizing we did in August, were in the neighbourhood of $5 million. Cost savings overall on the next set was in the neighbourhood of $8 million to $9 million.
Mr Duignan: I guess it has been a bone of contention of many people about how much dollar value has been paid to senior staff people. Again, I guess I may get a no to this one. Would you file with this committee the amount of salaries being paid to the senior management personnel?
Mr Powis: Sorry. To clarify that, in aggregate or individually?
Mr Duignan: Individually.
Mr Powis: No.
Mr Duignan: Any particular reason why not?
Mr Powis: Well, there is no particular requirement that it be done. It seems to me that somebody's salary is a private matter for him.
Mr Duignan: Would you be prepared to file a range of salaries?
Mr Powis: I would want to think about that. For how many people?
Mr Duignan: For senior staff, management. After all, it is public funds.
Mr Powis: Yes, it is public funds, but it is also private information at this point. If you folks want to go out and legislate that this be made public, that is fine. But why should we at the Toronto Hospital make it public when no other hospital does?
Mr Duignan: Let's not talk about the exact amount; let's just talk about the range of salaries. Would you be prepared to file that range of salaries you pay to senior management staff?
Mr Powis: Sorry. I want to take that under advisement and think about it. But instinctively I would say no, unless you want to have it done for everybody. It is nothing we are ashamed of particularly, but I do not think I have any mandate to come here and tell you what the executive vice-president of the hospital earns, or Alan, for that matter. But if you want to mandate it, it is fine; we are not ashamed of it. It is just, why should we do it when nobody else is required to?
Mr Duignan: Thank you. I would like to defer more questioning at this time.
Mrs Y. O'Neill: I would like to continue a little bit further with my questioning. When you had the recommendation from the auditor -- I understand, Ms Arsenault, that you have come in since that time, so I do not know whether you were part of the hospital's response to the auditor's report or not. But I have on record here that the Toronto Hospital's response to the auditor's report included improved computerized inventory system in 1991-92, and that there would be a check periodically by physical counts. When we were talking, I did not pursue that. You just said you did not have a lot of insurance claims. So will you tell me, if you have improved this, whether it is going to be part of the new system. Then I have one other question.
Ms Arsenault: The inventory systems are being developed right now, as a matter of fact, and the first one that is going to go on to the system live is the pharmacy area. So they are in progress right now.
Mrs Y. O'Neill: I have trouble, having been so closely connected with the school system for so long -- my mind is hung up, as I indicated to you earlier, about all kinds of things, whether they be lamps or trays or whatever, that are in and out of your rooms every day. You tend to think things are there, and they are big, physical equipment things, but I am talking about things that people put in their pockets or their briefcases. I have had a lot of experience in this in my past work in education, where you basically have this massive field with all kinds of small, enclosed areas where these kinds of things are much more easily taking place. That is why I want to pursue this questioning.
Ms Arsenault: At the hospital, probably not unlike most other hospitals right now, we are in the process of developing many different initiatives to cope with the 1% funding for next year. One of those initiatives is in the area of office supplies and things like that, which I think would be the area where things would be most susceptible because they would have a use to people outside of the hospital. In terms of medical-surgical supplies, much of this is specialized for particular purposes and would not be of great value to me at home, I am pleased to say.
Mrs Y. O'Neill: I have always found it strange what people think might be of value to them at home.
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Ms Arsenault: Well, that is sometimes true. Through these initiatives there are task forces being set up to explore ways in which to reduce our office supply usage by significant amounts. No doubt one of the things they will be exploring is the extent to which in a particular area they feel this may be an issue.
Mrs Y. O'Neill: So you are still doing this count physically at the moment, this inventory of equipment which the auditors, I think, very well describe as portable and attractive.
Ms Arsenault: Yes.
Mrs Y. O'Neill: But in an environment like a hospital, there is a lot of this stuff. I certainly am not questioning your professionalism, but I feel, both in the line of questioning that Mr Tilson had and my own, this is not one of your priorities for sure. I might be misinterpreting you, but to this point I have not been able to see that you think this is important or is a problem.
Ms Arsenault: That is good. I do think it is important that proper use be made of hospital assets. I do not think right now that the hospital is losing a lot of money through inappropriate use or theft.
Mrs Y. O'Neill: When you say "a lot of," have you got any percentages in your mind?
Ms Arsenault: I certainly know that our incidence reports would not suggest significant dollars. You have to understand that in the hospital -- what are the areas where we would be subject to significant loss? It would be in office supplies, perhaps in microcomputers, although microcomputers are of a dollar value; they are on our asset list.
Mrs Y. O'Neill: Right.
Ms Arsenault: So those things would be properly controlled. Through the maintenance programs that we have in the hospital, there are staff who have the list of this equipment and who are maintaining it on an ongoing basis. If they went in to maintain it and it was not there, you know --
Mrs Y. O'Neill: But you are not thinking of lowering the ceiling value of your inventory -- you have just brought that up now with the computers -- below $500 at the moment.
Ms Arsenault: My view right now is that the cost to implement such a system would exceed the benefits we would receive. I do not think we would achieve value for money in doing so.
Mrs Y. O'Neill: Okay. That is a judgement call.
Someone, in the questioning, has answered and suggested that this was the role of the internal auditor. Would you like to tell me a little bit about what your internal audit department does and what kind of responsibilities they have? How many staff are there and what kind of work they are assigned?
Miss Shroff: We have had a fairly substantial internal audit department until fairly recently. Somehow we have decimated that internal audit department, and we do not have a staff at the moment. What we have done recently is that along with the Hospital for Sick Children, we have appointed a director of internal audit who is joint director at the two hospitals. This is one way of sharing costs between the two hospitals, and he is in the process of hiring staff for the Toronto Hospital.
In the past we have had a good complement of about three to five people in our internal audit department, and they have always been very good in helping our external audit process etc. But somehow due to attrition, maternity leave etc, the people have gone away in the last few months. At the moment, we do not have any staff. That is correct, Denise?
Dr Hudson: I will respond to that. This whole issue of replacement of staff following the Provincial Auditor has included the entire internal audit department. You have heard of the new appointment, which has just been described. The first task that individual has is now to hire two or three permanent positions for the Toronto Hospital, and at the end of the year, jointly with Sick Children's Hospital, we would assess whether the individual who is now the internal auditor on the internal staff can continue to run both hospitals or whether he would have to move to a specific appointment at the hospital. So the rebuilding of our internal audit department has just begun, and that appointment was started the first of February.
Mrs Y. O'Neill: Would these people be designated accountants?
Dr Hudson: I think almost certainly.
Mrs Y. O'Neill: You have stated, I think, on a couple of occasions that they have a very direct relationship with the external audit. Do they have any other responsibilities, with the managers or department heads or whatever?
Miss Shroff: I have been around longer than Denise or Alan in dealing with the internal auditors. Every year at the audit committee meetings -- the audit committee meets about three times a year -- we set out a list of priorities for the internal auditor to carry out.
Mrs Y. O'Neill: The audit committee is an extension of the board, is it?
Miss Shroff: It is composed of members of the hospital board as well as drawn from the foundation board. One of the things the internal auditor does is help with the external audit in order to keep the audit fee down, so every year we agree on how many hours of internal audit staff we can give to the external auditor in order to reduce the audit fee.
In addition to that, throughout the year we give them a list of priorities as to which areas they should look at. They also come up with suggestions. The management gives us suggestions saying, "These are some of the areas that we would like the internal audit to look at." Based on that, the internal auditors go out and carry out their priorities and report back to the audit committee and also to the president. The director of internal audit is responsible directly to the president; he does not go via the vice-president of finance or anyone.
Dr Hudson: That is another new development, that the newly appointed head of internal audit reports directly to me.
Mrs Y. O'Neill: Does the audit committee also report directly to the board?
Miss Shroff: Yes.
Mrs Y. O'Neill: On an annual basis?
Miss Shroff: More than an annual basis. Every time we meet we submit a report to the board. We have a planning meeting and then we have a meeting to review the financials, and then we have a meeting to review the auditors' recommendations and how they are implemented, so about three times a year we report to the board.
Mrs Y. O'Neill: When you say they are trying to cut the expenses of the external audit, I find that different, but I guess some people do that. When you say that, are they then working on the notes and recommendations of the previous audit, or would they be doing what you would consider the minor auditing functions?
Miss Shroff: They are working essentially for the external auditor. They are working as staff of the external auditor, so the external auditor tells them to carry out a few procedures which normally the external auditors would have carried out.
Mrs Y. O'Neill: I see, okay.
Miss Shroff: They are working as an extension of the external audit team.
Mr Tilson: I just have one question with respect to the merger of the two hospitals, but before that, Mr Duignan commented with respect to salaries, and I agree wholeheartedly. I do not think we are entitled to that information, because of the legislation. I am interested that Mr Duignan, of course, chaired a parliamentary committee on the whole subject of freedom of information. There is no reason why we should see that information if we cannot even see the Ministry of Health's senior staff --
Mr Duignan: You will be glad to know that we recommended that all ministries would be subject to the act as well.
Mr Tilson: I am glad to hear that.
Mr B. Ward: We left nobody out.
Mr Tilson: I am sorry, Mr Chair. I think it is an important issue because it was raised. I do not mean to get into a debate with Mr Duignan --
The Acting Chair (Mr Morin): Yes, please continue.
Mr Tilson: I am pleased that the government will be considering introducing legislation dealing with that whole subject, because it certainly is a concern.
I would like to ask for your comments specifically on the auditor's report on the merger of the two hospitals. The auditor simply came out and said that it is expensive. I am referring to a newspaper report which I think partially quotes the report and is partially some reporter talking, I suppose, and I am sure you will correct me if I am wrong.
The report talks about the total expenditures of the two hospitals being $317 million in the fiscal year 1987, with the government funding being at $254 million. In the 1991 fiscal year -- and I appreciate we are talking several years later -- the merged hospital expenditures were $417 million, with ministry funding at $333 million, which is an increase in both of 30%. That may have something to do with, hopefully, the inflation rate, which was at 30% between 1987 and 1991. It may have been a factor.
The concern I have gets back to the making of information available to the auditor, because the auditor was very critical of senior management at the merged hospital for refusing to provide information on savings, if any, on those specifics. I have two questions. First, I would like you to comment on the allegations or criticisms with respect to the difference in the cost between the two hospitals prior to merger and after merger, and second, although it has been dealt with somewhat this morning, your comments with respect to not making information available.
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Mr Powis: I could start the response to that question, because I was around at the time of the merger. Specifically, the deal we made with the government of the day with respect to the merger is that, to the extent we saved money out of the merger, we could keep it and redirect it to new and improved programs within the hospital. That was the deal that was made.
I will ask Alan about this, but our spending at the Toronto Hospital has gone up in line with that of other hospitals. We have saved a considerable amount of money. I am not too sure that the auditors were being very critical over the fact that we did not create an accounting record to keep track of merger savings simply because it is impossible to do and it would have meant spending a lot of money for no good effect.
Mr Tilson: I assume the auditor looked at the figures that were made available and simply made the bold statement that it was expensive. Is that a fair statement?
Mr Powis: I do not think the auditors said anywhere it was expensive. The merger per se was not expensive. The merger per se saved real money, a lot of money; it is just that we cannot tell you with precision what it was. We can say, "Okay, in the purchasing area, we probably saved $6 million or $7 million," but we do not have a total record of that.
Mr Tilson: I think it is important. This was a question that was started this morning and I think it is relevant. If we are looking at the merger, I think it is useful to know, was the merger worthwhile or was it not? His question, I think, was a perfectly reasonable question.
Mr Powis: In my view, it was a good thing to have done, and if I had to do it all over again, I would do it again. But that is subjective, and I cannot give you something that says, "We were able to save $35 million since we merged, and we were able to redirect that into new" -- I would just be guessing. We could not have kept a real accounting record on that.
Dr Hudson: I guess the additional point I would make is that I can list for you a whole group of new programs that were put in and funded from savings resulting from the merger. While we cannot give you a dollar figure, I can name the spinal program, the new head and neck program and so on.
Mr Tilson: That is useful. I guess sitting on this committee, I am a little concerned when I look at the auditor comparing the 1987 figures and the 1991 figures and showing a 90% increase between the two hospitals and the merged hospital. That is a big increase.
Dr Hudson: May I respond to that and then ask Denise to carry on? I have added the numbers of the two hospitals apart and then subsequently tracked the increases. Those increases are approximately 11% throughout, for many years now, which is exactly the problem the province is facing, the cost of increasing health care, which we are all struggling to control. I would challenge that, and I believe that in fact when you add the two together and put them all in time, the increases are appropriate.
Mr Tilson: So you are saying this is no different from any other hospital in the system. Is that what you are saying?
Dr Hudson: Two hospitals before, add the two together and then continue as one; I think it is the same.
Ms Arsenault: The one difference that there may be is that over this period of time -- and you know this was a period of very significant inflation -- in addition to this 30% increase, although I do not have the figures with me today, the Toronto Hospital was given money for new programs that had started as well.
We manage at the Sheppard Centre mall an outpatient dialysis centre on behalf of a group of hospitals. That money to manage flows through the Toronto Hospital and that is part of this 30% increase, as one precise example. There are many other examples like that. There are many new programs in place in 1991 that were not there, or even contemplated, in 1987, so in many respects you are looking at apples and oranges, although this is a true statement that there has been a 30% increase.
Mr Tilson: Mr Chair, I would like to ask a question in a completely different area. May I do that?
The Acting Chair (Mr Morin): Do we have unanimous consent? Agreed.
Mr Tilson: One of the areas the committee was pursuing yesterday with the deputy minister who was here was the whole subject of hospital foundations and the funding that is in there, the confused area of public funds that end up in the hospital foundation through surpluses or otherwise.
I guess the concern of the committee -- and I would like to hear anyone's thoughts on this -- is that this committee, the auditor or the minister has no legal right to look at foundation moneys, even though surpluses from public moneys go from a hospital such as yours -- well, I do not know whether it came directly from yours. You are going to say no, of course; someone will correct me. In any event, that whole subject -- if it has not recently, I am sure it has in the past, because we have been told that this is a serious problem around the province.
If it does not apply to your hospital, congratulations, but it certainly is a serious concern, specifically with surpluses from public moneys that go into foundations which the public cannot look at. I would like your thoughts on that general question.
Dr Hudson: First of all, thank you. We receive the congratulations. The money is totally separate, and in fact the foundation is overseen by a board which is separate from the board of trustees and has itself a financial committee which reports to that board. The moneys in the foundation are primarily from fund-raising drives -- one was just concluded under the direction of Mr Crossgrove -- and there are moneys left in wills and other types of donations.
Most of these have a specific tag attached to them as to what use that money can be spent on. Specifically, it is usually directed towards various research activities, so the fiduciary responsibility of the foundation and of the hospital to maintain that desire of the donor obviously has to be kept. The main source of funds derived from the foundation into the hospital is to support capital projects basically related to research. We do not put operational funds back into the foundation. Do you want to discuss some of the details, Denise?
Ms Arsenault: I think there are a couple of things that are really important. The Toronto Hospital, for this most recent year, has submitted to the Ministry of Health, at its request, a copy of our foundation audited financial statements. It is important that public funds, through to the operational surpluses, not be transferred back, or if they are, for some reason, if it is ever felt to be appropriate, that it be done with the ministry's approval.
Mr Tilson: But it is not.
Ms Arsenault: As an external auditor and having specialized in provincial audits, I suspect that the perception of the problem is much greater than the problem itself. It would not be difficult for the Ministry of Health to change its reporting requirements to specifically require that this be reported upon and audited by the external auditors as part of their year-end submission. There are some easy answers which I think would address the concerns, which I think are more perception than reality.
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Mr Tilson: Why should the public or the auditor not have access to looking at what is done with foundation moneys?
Mr Powis: I do not know why.
Mr Tilson: I do not either.
Mr Powis: If you are asking what we do with foundation moneys, we are happy to tell you. We have no secrets.
Mr Tilson: You would let the auditor look at the foundation records? I doubt that.
Mr Powis: You mean the Provincial Auditor?
Mr Tilson: Yes.
Mr Powis: I would imagine the public auditor would regard that as beyond the scope of his responsibilities. It is audited by an internal auditor.
Mr Tilson: I do not doubt that. I am sure it is. I am sure your organization would do that. It was made quite clear to us what the law is. My question to you is the philosophical reason the public should or should not have access to looking at what is going on with foundation funds. It is all providing a health service, whether it is the acquisition of equipment, building a new wing, research, whatever; it is all performing a health service. Health in this province has gone wacko. I, as a layperson and admittedly knowing very little about the subject, find it amazing that the province of Ontario or the auditor cannot look at foundation moneys.
Ms Arsenault: I think right now this information is available through the public trustee. Certainly every year we are required as well to file this information with Revenue Canada in order to maintain our charitable status.
Mr Tilson: I am aware of that.
Ms Arsenault: I think there are appropriate review mechanisms in place.
Mr Tilson: The auditor cannot make the same type of inspection with the foundation moneys as he can with anything else as far as the health system is concerned. There is no question he cannot do that because the law does not allow him to.
Ms Arsenault: I am not certain what value it would have.
Mr Tilson: Because health has gotten out of control. Corporations and individuals are giving vast amounts of money to foundations. I think questions are being asked around the province as to what is going on with our health system.
Ms Arsenault: At the Toronto Hospital approximately $5 million a year is given to the hospital from the foundation to do some extraordinary good work on the research side.
Mr Tilson: I am not denying that.
Ms Arsenault: I suspect that many members of the foundation -- I think there is a great risk, if we are not careful here, of stopping a lot of good work.
Mr Tilson: Why, because the government might be looking at what is being spent?
Ms Arsenault: Not at all. I think over the past while the perceptions have been that there is something to hide. I honestly have not found that.
Mr Tilson: I made my point. Thank you.
Mr White: I have had the opportunity of visiting your hospital on several occasions recently with two aging parents who were not able to be served in their local community. Certainly the services at the Toronto General Hospital are exceptional, top of the mark. In my own community we are looking at a couple of hospitals merging, certainly hospitals of a much smaller scale than your own. I am curious in terms of the process and in terms of the effects of those mergers how effective they have been in terms of cost savings.
I have a note here in the report that says hospital policy requires that savings attributed to the merger are to be recorded. Ms Arsenault infers that those savings could actually be translated into direct new programs. I am curious whether that policy is an accurate one. Is that an accurate reflection of the hospital policy?
Dr Hudson: I am sorry, I do not understand the question.
Mr White: Is the statement that hospital policy requires that savings attributed to the merger be recorded an accurate reflection of the Toronto Hospital's policy?
Ms Arsenault: It is in your opening remarks, I think.
Dr Hudson: It has not been done.
Mr White: That is an accurate reflection of your policy, though?
Mr Powis: If that is meant to imply that we are going to keep a set of books that accurately record merger savings, that is not the policy of the hospital.
Mr White: We have heard that there are some savings that can be quantifiable, some that it would be speculative. Has there been an attempt to account for savings in either of those areas?
Dr Hudson: If I may respond in terms of $10 million that was mentioned earlier, there is an $8.5-million segment of that which in terms of savings is directly the result of contracts, $668,000 which we estimated were the result of consolidation of departments and the remainder of the savings were as a result of tendered services because of the question of scale. We have that type of breakdown within that amount of money, but the saving is significantly more than the $10 million to which we referred. Half of that at least has been rolled back into the formation of these new programs and approximately the other half was rolled into the capital redevelopment project, which was an inherent part of the original merger, specifically the rebuilding of the physical plant at the Western division. On my reading of the record, back to the original records surrounding the merger, that was one of the inherent concepts of the merger.
Mr White: Ms Arsenault said that there was an agreement with the ministry that those moneys that were saved could be translated into new programs. Has that occurred?
Dr Hudson: Yes. Do you want her to respond directly?
Mr White: Yes.
Dr Hudson: Go ahead.
Ms Arsenault: Yes, it has. That has been done.
Mr White: So that $10 million has been translated into a new program, a series of new programs --
Ms Arsenault: Or into expanding programs. It was before my time. I think Dr Hudson was there as some of these changes were actually being introduced.
Dr Hudson: What has happened is that programs have been consolidated on one or other of the sites. For example, all of cardiac surgery is done at one site and all of brain surgery is done at the other site. In addition, there has been a whole series of brand-new programs instituted. I mentioned before the head and neck program. This is now the largest head and neck program in North America, dealing with a segment of the population of Ontario that has very major cancer problems around the throat and the back of the mouth. The creation of that type of program was funded from money derived from the savings from the merger. To put it another way, we did not get additional moneys to float those programs. We referred to the additional money we did get in the expansion of the transportation program, but the other programs that have been put in place have not received additional funding from the ministry.
Mr White: The other new programs you talked about in terms of the $100-million increase over the last several years: How many of those are there? What is the extent of those new programs in terms of dollar cost?
Ms Arsenault: I indicated that I did not have the information with me. If you are referring to the 30% increase we had, much of that 30% increase was just straight inflation, recognizing the salary increases and things like that. But in addition, we did over that period -- I explained that we actually manage a program not just for the Toronto Hospital but on behalf of a number of hospitals and that money flows through us. Other programs were introduced and continue to be introduced for which additional moneys flow.
Mr White: I appreciate that part of the $100 million is inflationary costs increase, but you also mentioned that part of that $100 million was new programming.
Ms Arsenault: Yes.
Mr White: I appreciate you may not have those figures handy, but would it be possible for you to dissect that and to give that to the committee at a later date?
Ms Arsenault: Yes, very easily.
Mr White: Of course if a program was introduced in 1988, you would have additional inflationary-based cost increases in regard to that new program as well.
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Ms Arsenault: Exactly.
Mr White: It is a difficult thing when I look at two hospitals merging. We have talked about a savings of somewhere in the neighbourhood of $10 million, but with a combined budget of $417 million, $10 million is not a huge amount of money. That is why I am interested in those other issues. Certainly at a local level again, I would like to be able to reflect to those boards of governors that, "Yes, this has a very positive effect," and their endeavour probably will be a successful one.
Ms Arsenault: What it would be possible for us to do if you would like is to give a laundry list of the areas in which we found savings. Obviously in each case one has to translate that into what it would mean today and in your particular community. But certainly we have one senior management team; we do not still have two. I think Miss Shroff indicated that we did not need two external audits. Our insurance coverage was collapsed. It would be possible for us to provide a laundry list, I think, without taking an army of accountants, if you feel that would be helpful.
Mr White: Yes, I think so. Thank you very much. I have one other question in regard to my colleague's earlier question. Mr Powis, you probably have a very legitimate concern with regard to private corporations, but certainly with public bodies the salary levels and ranges of all public servants are public knowledge, and I believe my colleague was asking for a range, not a specific name-attributable salary. I appreciate your reservations, but if you are not able to respond to that, could you indicate that in later correspondence?
Mr Powis: I would be happy to do that.
Mr Duignan: I want to get back to the merger. In the auditor's report, the inspection audit, let's face it, you have a hospital policy stating that "savings realized from the merger are to be tracked." When the auditor requested this information from the hospital, "Senior management declined to provide it, stating that it was not an accounting record and was therefore beyond the scope of our inspection audit." Would you be prepared to file that information with this committee?
Mr Powis: The information relating to merger savings?
Mr Duignan: The savings realized from the merger.
Mr Powis: We can provide this committee with a series of numbers which will be guesses. They are no better than guesses. They are not an accounting record. They are not something the Provincial Auditor could verify. They are just guesses. If you think that would be useful, we can give it a whirl.
Mr Duignan: But your hospital policy states that "savings realized from the merger were to be tracked." Was that done?
Mr Powis: I am surprised to hear that was our policy, because if it was our policy, we did not follow it. We knew we were saving money, but we did not set up a special account entitled "Merger savings."
Mr Duignan: Again, when the auditor requested this information, the senior management declined to give it.
Mr Powis: The senior management did not have it as an accounting record.
Mr Duignan: In other words, the hospital did not follow its own policy?
Mr Powis: If that was the hospital's policy, we certainly did not follow it in terms of an accounting record, no.
Mr Duignan: I would be delighted to see whatever information you do have on the merger savings filed with this committee.
Mr Powis: As a matter of fact, you have raised a very interesting question. I would be interested myself. But recognize that we can say, "We think we've saved this," but nobody could verify it.
Ms Arsenault: If I might just give an example, I am in the process right now of computerizing an area that was not computerized before. We could have a lengthy debate as to whether or not if it had been the Toronto General and Toronto Western hospitals I would have made the same decision to computerize this area. If I would have, maybe I would have had two computerizations and I only have one now. So we could have quite an interesting academic exercise, but I am not certain what value it would have.
It is a real issue. It is a real problem to actually come up with numbers. They do not exist. They are not real. But no doubt in many cases we only had to do one conversion and hence we saved money. We did not have to buy the software twice; we did not have to put two implementation teams on it.
Mr Duignan: But nobody knows whether we saved money or not.
Ms Arsenault: There is no doubt we saved money and I do not think anything we have said should suggest otherwise. But the issue of how much it was when you did not have to buy a piece of equipment because only one of the two institutions needed it -- tracking decisions that you did not have to make is part of what we would have had to do to come up with the full picture.
Mr Duignan: In May 1990, I think you filed with the Ministry of Health a report detailing some of these savings.
Ms Arsenault: That is what the report says. I was not with the hospital in May 1990.
Mr Duignan: Mr Chair, I wonder if this committee could be provided with a copy of that report. It was the report filed with the Ministry of Health dated May 1990, which indicated various annual savings from the merger. Is it possible to get a copy of that report?
The Acting Chair (Mr Morin): The answer is yes. We could ask the ministry, sure. Are you through?
Mr Duignan: Getting back to it, obviously you had a policy in place which you did not follow. Why have the policy if you did not follow the policy?
Mr Powis: Sir, I would like to check back and find out in fact what the policy was. It may well have been that we had a policy that, for a period of time when the merger was first consummated, we would track savings. If we did have such a policy, I will find out.
Mr Duignan: I am just quoting from the auditor's report which states that you did.
Mr Powis: I understand and, as I say, I am surprised to see that as one of our policies, because if it was a policy, it was in place for a very brief period of time.
Mr Duignan: I will defer questions at this time.
The Acting Chair (Mr Morin): The next question is going to be asked by the Chairman. That is one of my prerogatives. It will be the last one also. I would like to ask the questions to you, Mr Powis. I would like to refer to an article that appeared in the Globe and Mail, November 28, 1991, and I will just read it.
"Provincial Auditor Douglas Archer reported on Tuesday that, among other problems, Ontario's $17-billion health care system is not monitoring closely enough the $6.4 billion it spends on hospital grants."
Further, the article says, "`The public sees our health care system as a public one. What the auditor's report has highlighted is that we do not have a public health care system. Rather, we have public payment for private practice.'" That was a statement made by one of your critics, I think, Dr Rachlis.
Then he states further on: "`More important however is that there is no way of assessing whether the money being spent on health care is being spent effectively,' he said. `There is virtually no quality assurance or audit, whatever you want to call it. There is virtually none of that anywhere in Ontario.'"
I look at the revenues for the hospital, $192 million from the Ministry of Health and $75 million from other sources. I also look at one of the main complaints that seems to emanate from the auditor's report, a lack of monitoring on the part of the ministry. They say, "Yes, there is a dialogue," but I think a dialogue is not sufficient to prevent errors, to prevent problems, to prevent omissions.
How would you react to this idea of having a permanent representative of the ministry in all hospitals? The idea of this of course is not to interfere. The idea is to provide you with the information which is directly available from the ministry so that you can have this rapprochement, this close rapport between the government and the hospitals. In my opinion, it would prevent a lot of mistakes and a lot of errors, because I know that when you produce your report you produce it as it appears, as what you have seen, and you will try to establish all kinds of new controls in order to answer the criticism brought in by the Provincial Auditor. How would you react to having a permanent representative from the ministry attached to every hospital?
Mr Powis: I am going to defer that one to the chief executive officer.
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Dr Hudson: To respond to that question, we very nearly do have that system right now. We have an area team composed of three members of the government that meets in the hospital on a monthly basis to discuss a wide variety of topics on the agenda.
We are in telephonic communication with the accountant and with the area team leaders virtually daily; certainly at least one call a day between us and one of them. We of course file very detailed financial statements on a quarterly basis. Whether the office is going to be occupied in this building or one of this complex of buildings or in the hospital is really not much different, but the answer is, if the area team leader wants to take up residence in the hospital, I would be very happy.
The Acting Chair (Mr Morin): You would not see any objection to that.
Dr Hudson: No. It is almost happening right now.
The Acting Chair (Mr Morin): With your contacts with other larger hospitals and smaller hospitals, I know you cannot answer for everybody, but how would you think they would react as a whole?
Dr Hudson: I suspect the very close concept of a partnership arrangement between the ministry and the major hospitals which now exists and which we have supported very strongly has been very useful. I just use the transplant example as one that we have had in the past. I suspect that same relationship occurs with other hospitals, certainly the ones I know of which are mainly the ones around my area. As I say, if the actual room in which they work is going to move from here to there, we would be very happy with that situation.
The Acting Chair (Mr Morin): Would you have a positive reaction if a recommendation was to be made by this committee to that effect?
Dr Hudson: Sure. It will save us the phone calls. What I was trying to get at is, the concept of a partnership with the government is one which we agree with and which we have promoted. They have certainly done so from their side. The question of my access to Mr Decter or to other senior members of the ministry is not a problem. I can speak to them whenever I wish and they can speak to me whenever they wish. As I say, we do not track the calls, but I know Denise is speaking with the financial people on a daily basis. So we have a very close working relationship since Denise and I started last July.
The Acting Chair (Mr Morin): Thank you very much. This meeting is adjourned until 2 o'clock this afternoon.
The committee recessed at 1204.
AFTERNOON SITTING
The committee resumed at 1400.
The Chair: We will resume. Unfortunately I was not here this morning as the Chairman, but I presume that you had made opening statements and that we were in the process of questions being asked by members of the committee.
Mr Powis: Yes, we were, but there are a couple of loose ends from this morning that we would like to clarify.
The Chair: By all means, give us those ends.
Mr Powis: Over lunch, we carefully collected for each of the members of the committee, and then brilliantly forgot to bring up here -- we are just in the process of going and getting them -- a number of documents which might help clarify matters that were discussed this morning. A question was asked by one of the members about the May 1990 memorandum that was given to the ministry with reference to savings on the merger. We have managed to find that. We have a copy of the Hansard of the course of the debate over the Toronto Hospital Act, which may help to clarify the understandings that were undertaken at the time. We have a copy of the purchasing policy. What else was there? A couple of letters from the ministry at the time the merger was approved, clarifying the understandings. I think that is it. We will have that in a few minutes; somebody has just gone back to the hospital to get it.
One other matter related to the policy of the hospital with respect to tracking merger savings. Denise, would you cover that, please.
Ms Arsenault: I have just had a discussion with the Provincial Auditor's staff to clarify why they thought the hospital had such a policy when we certainly were not aware of it, although we were not in administration at the hospital at the time these policies would have been written. The policy of the purchasing department was that merger savings achieved through tendering processes subsequent to the merger would be tracked. You will see in the May 1990 document that we have specifically listed the savings achieved through corporate tendering. Those savings were noted and are part of that document, the other savings that were not tracked in the same way.
The Chair: Anything further? Any further loose ends?
Mr Powis: Not at the moment.
The Chair: All right, if you get any more loose ends, just feel free to jump in. We will hear them.
Mr Powis: As I said, within the next few minutes we should have those documents. I do not know whether you want them distributed at the end of the session or right away.
The Chair: If they are given to the clerk, he will do with them what he considers appropriate, which will probably be to distribute them. In fact, I am sure he will distribute them.
I have a list from this morning and I think it is up to par, although Mr Duignan is not here. Miss O'Neill. Mrs O'Neill. Ms O'Neill.
Mrs Y. O'Neill: "Mrs." I have worked 32 years at that and I want to be called "Mrs."
I think, Ms Arsenault, that you made the statement that you could provide a laundry list of savings. I still find it somewhat confusing that you are not saying much about that laundry list. Could you give us some of the things that would be on such a list? You brought one forward.
Ms Arsenault: The May 1990 document that is going to be circulated does have some of the items. I think certain of the areas were mentioned this morning. Where previously we had two sets of auditors we only require one. We did not require the two hospitals any longer to be members of various associations that charge annual fees. We took our banking arrangements out for tender. There were all the economies of scale and the volume purchase discounts that we received through the purchase contracts. In addition, on the staffing side, we obviously had one senior management team, not two -- the heads of departments, the medical chiefs and managers. Over a period of time the departments were consolidated and there was only one chief of surgery and one chief of medicine; So on the clinical side as well.
Furthermore, there were what I would call all the opportunity costs that were saved. We did not have to develop and implement two computer systems, which we referred to this morning. That is on both the patient care side and the financial side. Obviously, our computer is larger than either institution alone would have required, but the software costs and a lot of the hardware costs were not required.
Mrs Y. O'Neill: That is certainly more complete than what we had this morning. Would you say that what you have listed and what you may be able to present later today on paper were the savings you expected, or were there unexpected savings, or were there savings that were expected that have not yet been realized? Could you say a little about that?
Ms Arsenault: I was not with the hospital at the time of the merger. I do believe, from some of the conversations I have had, that where there were merger savings expected they were achieved. I am not certain whether the magnitude had been precisely forecast in each case.
Mrs Y. O'Neill: I want to ask you another question that relates to a question I was going into this morning. Were any accounting procedures changed as a result of the merger or, may I ask, even as a result of the comments of the Provincial Auditor?
Ms Arsenault: At the time of the merger there were two totally separate accounting departments. Over time the departments have been merged and it has been necessary to bring in common policies, to develop Toronto Hospital policies. In fact, some changes in accounting took place in the year of the merger. The practice of the Toronto Western Hospital was that it did not record the expenses for sick time and vacation pay in the year the vacation was earned. They only accrued the expense when the vacation was actually taken. It had been the practice of the Toronto General Hospital to recognize the expenses as people earned the right to take the vacation. At the time of the merger, the accounting policies were changed to bring them in line, so that they were common to both sites. To my knowledge, that is the only accounting policy change that was necessary. That would have been because, in many respects, the hospitals followed policies because they were policies that were common from one hospital to another.
Mrs Y. O'Neill: So with the merger you went to one auditor, correct?
Ms Arsenault: Correct.
Mrs Y. O'Neill: Has the auditor made a lot of comments -- I am not privy to that document -- about the merger and about things that were expected? Are there a lot of notes to that effect? In your estimation, what would you say to that?
Ms Arsenault: The auditors' comments and focus have been on the expenses that were incurred.
Mrs Y. O'Neill: You mean the expenses that were incurred with the merger?
Ms Arsenault: No, generally, to run the hospital and for all the programs. Their focus has not been on the merger, although they would no doubt be aware of a number of the savings.
Mrs Y. O'Neill: I just want to go to one other thing, then, and that is the $65-million capital expenditure that was part of the merger agreement. Would you like to say a little about what that has meant and where those kinds of funds have gone?
Mr Powis: The big piece of the $65 million was the refurbishing of the Western division. That was to be funded $32.5 million by the government and $32.5 million by resources that the hospital would go out and find. We had a fund-raising campaign that did that. There was some money spent at the General site, I think, Alan.
Dr Hudson: There was some money spent on site consolidation of programs, which resulted from the merger. I mentioned this morning that all of cardiac surgery, for example, is now at the General. But essentially, the hospital's component of that deal is virtually complete. That is another of the examples we were giving this morning of people asking us to give finite examples of savings which occurred. The hospital's half of their deal has virtually been completed. In fact, that component is now being audited, so there is another finite example of a saving that resulted from the merger, because the hospital has now met, or virtually met, the government's half of that deal.
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Mr Powis: If I could just add, in the papers that we have given the clerk, you will see a letter dated December 10, 1987, from the ministry which outlines that arrangement.
Mr Tilson: I would like you to tell us a little about the laundry contract the auditor got into to some extent. You responded that there was an agreement in progress, which I assume is now completed. The auditor indicated that there was no evidence that the cost of the laundry services compared favourably with other suppliers. I would like you to comment on the general thrust of what the auditor was getting into, as far as the laundry contract was concerned.
Mr Powis: I think that was part of his undocumented or untendered purchases. I will pass that over to Alan.
Dr Hudson: I will start by making some general comments about this issue. The laundry is an example of what successive governments have encouraged; namely, the prevention of duplication of effort among the various hospitals. It is a collective arrangement between a number of hospitals to form a joint laundry. That is the basis of the arrangement. That contract, I believe, was of 20 years' duration. At the time the auditor came through the hospital the contract had run out and had not been re-signed. As I said this morning, that contract has subsequently been passed by the finance committee of the board and is about to be signed in its new form.
To get to your specific point, about the fact that the auditor was not satisfied that we could prove that the laundry was done at a cheaper rate there than, say, elsewhere, one of the difficulties is comparing that particular laundry with a laundry elsewhere in the city in which there may be different circumstances. For example, specifically if a hospital is sorting and packaging laundry in one circumstance vis-à-vis the central laundry and not in other circumstances, it is a little difficult to compare them exactly one to the other.
Mr Tilson: That was a criticism of the auditor. I guess that gets to the real question, which is, how do you determine whether you are getting the best deal?
Dr Hudson: I understand that that was the criticism. I will ask Denise to get into the specifics of the process we went through to look at the costs of other laundries.
Ms Arsenault: There are a couple of issues. In some respects the facilities cannot be compared and in other respects they absolutely can be. The age of the building, the way it is set up, the age and makeup of the equipment in some cases mean that you cannot directly compare one facility to another. We have none the less been working with the other central laundry that is in Toronto and have started a process whereby the two boards, which consist of either hospital employees or board members who are members of the central laundry corporations, work together to facilitate that kind of evaluation. Direct evaluations of dissimilar circumstances are difficult, but they are none the less looking, as we all are in all areas, at ways to reduce costs.
Mr Tilson: I am getting into the whole area of procedure. You talked about the figures, as you did this morning. I am interested in procedures, as to what input the board had, what information was given to the board, whether it was made aware of certain information that perhaps the staff had; in other words, the comparison of rates between similar suppliers, all of that. In making your comments, I would like you to direct them more towards procedure.
Ms Arsenault: I guess there are two things. Within the Toronto Hospital, it is our practice that the financial statements for the central laundry in which we participate are circulated through the finance committee to the board. That is part of our procedure. In addition to that, as part of our membership in the hospital community, there are statistical reports which show us our cost of laundry. It is actually done on a per-pound basis compared to other hospitals. That information we do have, and through our membership in our personal central laundry facility, comparisons are done there.
I do not know off the top of my head what our cost is but that information is available, and that productivity index is one which is used commonly in the industry.
Mr Tilson: What I am really looking at as a member of the committee is that I got the impression the auditor was not satisfied or not convinced that you were necessarily getting the best deal. What do you say to us as a committee, or to your board as a board, that you are indeed getting the best deal, again referring to procedure?
Ms Arsenault: We have information of what our productivity index is relative to other hospitals. That is one of the indices we would use. But the other question is, can we do better? We have a member on the board whose task is to ensure that we keep on trying to do better in our central laundry, and I just described one of the procedures we are using. One of the programs we are using to try to do that is to visit other central laundries and see what they are doing, what their costs are, and using that information to do better in our own.
Mr Tilson: What is the status of the agreement?
Ms Arsenault: The agreement was drafted, reviewed by the finance committee at the Toronto Hospital, needs to go through that same process for the other members of the central laundry in which we participate, and will be signed. It is expected that will take place within the next year. Just to be clear, the terms of the previous agreement are continuing. Everyone is continuing to operate under the terms of that agreement, even though it technically would have expired.
Mr Tilson: On what basis did you make that decision?
Ms Arsenault: The decision to continue with the terms of the agreement?
Mr Tilson: Yes.
Ms Arsenault: I am not certain. I know that those were the terms that were being adhered to. I am not certain what that process was.
Mr Tilson: Again, I am looking at procedure. Presumably someone was monitoring and seeing the time of the expiration of the agreement approaching. I mean, it is 20 years old. Therefore obviously there is going to be time for negotiation and all of that sort of business, and monitoring what is going on in other places. Again, it would be useful for us to know how you arrived at your decision to continue.
Dr Hudson: Both of us arrived, as you know, after the event. On looking back on those, it seemed to me that the decision was in fact a non-decision. I do not think people appreciated that this 20-year-old contract had in fact run out; the terms were regarded as satisfactory and the process was working very well and, as I say, avoiding duplicate laundries in all these hospitals. So I think it was when the Provincial Auditor looked at it that the realization came that in fact the contract had to be renegotiated.
Mr Duignan: I have just seen a copy of your criteria for buying capital items here, for example. Maybe you would go through this process with me here for a few minutes. Is it an open tender or is it a selective tender process?
Ms Arsenault: I do not know.
Mr Duignan: You do not know?
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Mr Powis: I can find out and get back to you with it. I suspect it is a mixture of all kinds of things, but I do not know.
Ms Arsenault: The number of suppliers on many of these items would not be in many cases a terribly long list. You are dealing with specialized medical equipment and things like that.
Mr Duignan: Would you just call for an open tender on the whole process, saying, "We require a piece of equipment," and you would advertise for that? Or do you just go to a specific short list of suppliers and ask them for a price?
Ms Arsenault: I do not know.
Mr Duignan: I would appreciate that information.
Ms Arsenault: Sure.
Mrs MacKinnon: Thank you for coming before us today. I must say I am in a bit over my head, but then I have been that way before. I understand the plans for the hospital, following the merger, were to provide a wide range of care in the two hospitals and also to bring in a comprehensive health organization. Can you tell us the current status of the comprehensive health organization proposal as it is today?
Mr Powis: I will ask Dr Hudson to answer that.
Dr Hudson: This process to develop the comprehensive health organization was of four years' duration and was led by a group at the Toronto Hospital working very closely with members of the previous government and members of this government. The process was due to open and in fact the whole scheme to be kicked off approximately a year ago. At that stage, there was a major disagreement on two issues between the current government and the hospital, one specifically related to governance and the other related to some method of transference of funds within the system.
I was very keen to proceed with this plan, because it seemed to me to emphasize care in the community and an opportunity for teaching medical students on a community basis. It seemed to me to give exactly what we wanted at the Toronto Hospital, which is to broaden our storefront away from the very expensive high-technology areas into the primary care area. I discussed this with Mr Decter, who was also very keen to pursue this, because the entire plan is totally in keeping with the government policy of care in the community specifically, as opposed to care in patient beds.
We came to a status that the board of the hospital felt we either had to get on with this plan or drop it, for a variety of reasons including funding of personnel who were evolving this plan. I discussed this with Mr Decter, and by mutual agreement between the government and the board of trustees, we put the matter aside. In other words, it is off the table; it is not dead. We hope within the next few months to take this up again with the government, because we are keen for a whole variety of reasons to pursue it. Second, we believe it is very strongly in keeping with the policies this government and this Ministry of Health are espousing.
So to answer your question directly, it is on hold by mutual agreement between the board of trustees and the deputy minister, and we are very hopeful this will be resuscitated within the next few months.
Mrs MacKinnon: Maybe my next question will not work, then. It was pertaining to the funding. How much funding and how many personnel are currently devoted to that particular program or that development? I guess it is obvious. Maybe you do not have anybody now.
Dr Hudson: No.
Mrs MacKinnon: Or maybe you will see when you resuscitate it, as you say.
Dr Hudson: Right, but to reply to that specific point, part of the arrangement I made with Mr Decter is that the key group of three or four people who had gone through this four years of very detailed work would be retained on salary for the purpose of bringing this to light if it happens. In fact, with Mr Decter's knowledge, as I reported this to him, we have also used one of those four -- Mr Vytas Mickevicius, the main person there -- for another major task in the hospital, which in fact was that of acting operating officer.
So the answer is the funding is there until basically July or thereafter, and we are very hopeful that we can in fact finalize a deal with the ministry at that point.
Mrs Y. O'Neill: I want to go back to the savings; I know I seem to be bringing this forward several times. You had an 1987 budget and a 1991 budget and there is the 30% increase, and I know that there have been inflation and many other factors taking place, but the merger took place between those two years. In your humble opinion, would that have been a greater difference? Do you really foresee in a general way -- and I am directing my question to Ms Arsenault at the moment and perhaps Dr Hudson. You would say that there has been a saving? As I say, my background is more in education, but certainly mergers in education do not always result in savings.
Ms Arsenault: Definitely. There is no doubt that there have been savings. They are real and they are tangible in many respects. In other respects they are not tangible, because they are costs that we did not have to incur as a result of the merger.
Mrs Y. O'Neill: You are suggesting that the result is that you have been able to put more money into services and service has improved. You are totally confident in making those statements?
Ms Arsenault: Definitely.
Mrs Y. O'Neill: If I may go back to the acquisitions, which was the line of questioning a few minutes ago, there is -- and we were talking to the ministry officials who were with us yesterday -- the cabinet document and directives on purchasing and supply management and there are definite requirements. I presume you are very familiar with that document?
Ms Arsenault: Not with the government's document.
Mrs Y. O'Neill: The management board document that deals with directives on supplies and purchasing. You are not familiar with that?
Ms Arsenault: Not with all of the specifics of it. I have some knowledge of it from previous work I have done, but it is not a document that relates directly to the hospitals.
Mrs Y. O'Neill: I would suggest that is not the opinion we had yesterday, and it is certainly not the opinion of the auditor. But anyway, that being said, it does give very clear directions about competitiveness or tenders or whatever you want to say, and a waiver being necessary.
Ms Arsenault: Yes.
Mrs Y. O'Neill: Would you have any knowledge of that process, and what I am talking about in relation to the cabinet document, even if you do not know the directive document?
Ms Arsenault: I think the practices that management board has are practices that would be --
Mrs Y. O'Neill: Across all ministries?
Ms Arsenault: I think generally followed in purchasing practices.
Mrs Y. O'Neill: Okay. But you said earlier, in reference to one of my colleague's questions, that you cannot say whether there were competitive or tendering processes or not, but you would find that out.
Ms Arsenault: I think the question was specifically as the details of how precisely we select the original list for who is on that supplier list, who is requested to submit a bid. It is with respect to that specific that I could not say.
Mrs Y. O'Neill: The waivers for the preferred suppliers: under what conditions would you be requesting waivers? Can you give us a couple of examples?
Ms Arsenault: Yes, I can. I gave one example this morning of a situation which would not be uncommon in the institution, where it is necessary to upgrade existing equipment. In those cases -- not always, but mostly -- you have to go back to the original supplier of the equipment, because it is only their upgrade that would work. We would call that, if you like, a preferred or a sole supplier situation. In those cases, it would not be necessary to tender; although in some cases we would tender just to ensure that we were right, that there was not a fit elsewhere.
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Mrs Y. O'Neill: The tendering: is it limited to Ontario? To Canada? Certainly your computer system was North America. Do you have any geographic limitations?
Ms Arsenault: No.
Mrs Y. O'Neill: So you go as broadly as you want, or do you discuss with your board how broadly you go? Especially in the kind of economy we are into now, I think we have to have some reasons for doing the things we do, particularly with the kinds of budgets we are talking about in your case. I guess I am back to the same question as my colleague: Is there any criterion that you can name off the top of your head where you would be able to determine how a tender is arrived at, or the people who are permitted to tender?
Ms Arsenault: In many cases there would not be a Canadian supplier in the area of high-tech equipment, for example. In that case there would not be a Canadian manufacturer, although there would be Canadian distributors, and obviously we would work with those groups. There is not a policy in the hospital right now. Our policy is to get the best price for the best equipment. That is what our policy is, and there is no geographic limit at the moment.
Mr Villeneuve: Right at the end of the morning session, the Chairman took the questioning and suggested to you that he may be looking to put an individual or a group of individuals from the ministry in your hospital to monitor or to advise or whatever. I understand there is a management team in place. Did I gather from your answer that even if Ministry of Health personnel were within the confines of your hospital, onsite, there would not be a great deal of difference in the administration of the operation?
Dr Hudson: As I responded to that question from the Chair, my answer was that we have a very close relationship right now. If physically that office of the area team leader was moved to our institution, we would clearly have no objection because in fact, in terms of policy, it is what we are pursuing right now.
Mr Villeneuve: So there would be very little difference even if ministry officials were onsite, in place?
Dr Hudson.: Exactly. Either way.
Mr Villeneuve: I tend to be a bit sceptical about these things, because sometimes when someone suggests a person, it winds up being a team of people that is on public payroll and at that point it becomes more expensive. That is a concern of mine.
Dr Hudson: Excuse me, if I may respond to that, the area team to which I refer has other hospitals besides ours, which I think is a point.
Mr Villeneuve: I realize that. Yesterday -- and you may not even want to comment -- but a question came from me regarding the problems St Mike's Hospital had experienced with a very large deficit. We were told by ministry officials that officially they did not know about it, unofficially they knew about it, and very little was done until such time as someone came forth. Do you get a lot of direction from the ministry? Are you totally autonomous? Does it put its finger on a raw nerve from time to time and say, "This is not the direction"? Are you getting sufficient directives from the Ministry of Health, I guess is what I am asking? Or do you get too much? What is your opinion?
Dr Hudson: We have a variety of ways of sensing the opinion of the ministry. The ministry has recently adopted as official policy of this government -- or the government has adopted -- a series of documents describing the broad parameters of directions of health care in this province, so we are very familiar with those documents.
Specifically, the ministry receives a series of reports; for example, the Orser report, which refers to the southwestern region of this province as a possible model of managing health care in a series of local boards and so on. Another example is the Wade report, which I understand is currently being reviewed by the government and refers to the concept of the health science complexes, which I referred to earlier on. As these reports surface and are reviewed by the government, they are immediately reviewed by us and we discuss them both formally and informally with members of the government at appropriate levels.
I think it is fair to state that we are very well aware of the general policy directions in which this government and this Ministry of Health wish to proceed. In fairness, I think we are also aware of the details. On that score, in terms of us being aware of what the Ministry of Health is trying to achieve and the direction it wants to go, we are very well informed. The board of trustees in turn is informed by way of its monthly meeting. As a matter of fact, at the board of trustees meeting that we had this week, just as an example, the Wade report in its entirety was included in the board package. Mr Powis happened to chair that meeting. Part of the meeting was a discussion of the principles involved in that document. That is not official government policy, but it is a report generated and being reviewed by them.
Mr Villeneuve: To get back to transplant surgery, your hospital had a --
The Chair: Mr Morin has a supplementary on that last point.
Mr Villeneuve: That is right. He was questioning this morning -- by all means; I yield.
Mr Morin: You say communications are good and the dialogue is good between your hospital and your representatives within the government, but I fail to understand and fail to see that the cooperation would not be better if you had somebody right on the spot. I am not only thinking about Toronto Hospital. We have 221 hospitals in Ontario. I can tell you cases where communication between the ministry and the hospital was nil. These are the hospitals I worry about; yours, of course, like any others.
But the proposal that I put on the floor this morning was to establish better cooperation and better understanding of what the procedures and the legislation are all about. Surely when you communicate better you prevent mistakes like we have seen, ommissions which we have seen, which have been reported by the Provincial Auditor.
Mr Powis, I direct that to you, a well-known and respected businessman. If I invest money with Noranda mines, I want to know that the directors are doing a good job; I want to know that I get a good return on my money. That is the purpose of it all. It is not to create a bureaucracy. We know too well that if you have too many people involved, you create more problems.
I think a well-qualified representative on the spot -- of course he would not stay there for years; I would be afraid that he would probably be brought in the system -- on a rotating basis could be brought from one hospital to another. It would not only be good for the hospital; it would be good for the ministry and it would be good for all institutions. I am not thinking of a system where you have Big Brother looking over your shoulder. I believe in freedom; I also believe in the freedom of trying out new systems. I would just like to know a little more about that. Is this an objection that you have stated or is it something you feel would not be necessary?
Mr Powis: If I understood what Alan was saying, you have to remember that we are just down the street from the ministry and that there is very close communication between the hospital and the ministry. In the case of the Toronto Hospital, I do not think you would gain very much by actually physically moving one or two people down the street into our place. In the case of some other institutions, where there has been a serious lack of communication or understanding -- I have not thought it through -- it might make some sense. Have I paraphrased you all right?
Mr Tilson: It is a question of who is watching the watcher.
Mr Morin: Can I interject, Mr Chair?
The Chair: Mr Villeneuve has given you the floor.
Mr Morin: It is not a question of watching; it is a question of having a system that works, a system where we know we get a good return on our investment. It is as simple as that. I am not aiming strictly at Toronto Hospital. I am not doing the whole report. Surely there must be a way where there is full cooperation between the ministry and the organizations. I know how the boards of directors are appointed and I will be careful what I say there, but it is not always the right person on that board. We know how they are appointed. The competence is not always there.
What I am recommending, and I am repeating myself, is more or less a system where there is closer cooperation. We make sure that the legislation is followed closely, that the regulations are followed and that the purchasing is done properly -- it is as simple as that -- so that when the Provincial Auditor comes in and there is a mistake made by the institution, the institution has followed our recommendations closely and that is the way the system works. It is to prevent problems. That is what it is in reality. It is not another bureaucracy; it is not Big Brother watching you. That is not what I am saying.
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Dr Hudson: Sir, through the Chair, maybe I could respond in two parts. When I say we have very close communication with the government presently, I am not referring to one person. My colleague here is phoning the financial people every day, and I may be discussing broad policy issues with Mr Decter and so on. If we were to replace that in the hospital, we would of course require a very large government team with which would we communicate every day to cover all these aspects.
I think the second part to which you may be referring is the statement, made by the auditor, about a lack of cooperation at the Toronto Hospital. As you heard this morning, there has been a major change in personnel and systems since that visit. Those changes in personnel and systems were in fact reviewed with the Provincial Auditor at the hospital in December. I would like to think that if the Provincial Auditor visited the Toronto Hospital today, he would not have cause to state that there was lack of cooperation. I am sure he would not.
Mr Villeneuve: Back to the transplant surgery. I think this morning you mentioned that in certain transplant surgery -- I think it is liver and lung -- your hospital stands to lose some $40,000 per surgery. If you were to increase that type of surgery, would that mean you would be having to reduce numbers of beds? What happens here? What sort of guidelines, if any, would the ministry have for you if your medical team decided that yes, for whatever reason, more transplant surgery is needed for the patients you serve? Would that create a major dilemma for the board?
Dr Hudson: Yes. But if in fact the province-wide load of patients requiring transplantation increases, as it will, the government will recognize this, because among other things we bring it to its attention. If they then feel that on a province-wide basis the University of Western Ontario in London, and Ottawa and Toronto need to develop a plan to cope with whatever segment you are referring to, then of course we would expect that along with the plan of increased volume would come increased funding to handle that load. That is how I would anticipate a plan being formulated on a provincial basis and funding flowing from the ministry to cover that increase.
Otherwise, as you say, first the board's position is that if the funding is not there we cannot do the work. Somebody just referred to the St Michael's document a minute ago where that point was made repeatedly. In that circumstance of course we get caught very badly. To some extent we reshuffle priorities within the hospital, but there is clearly a limit. In that circumstance we would not be able to accommodate the increase. This depends very directly on the combined plan between the hospital and the government in that very expensive type of expanding program.
Finally, now that the line item to transplantation has been increased by $5 million, the answer is that at the Toronto Hospital we are in the process of establishing a new budget. But included in that budget, of course, is a capping of the program; we will do X livers and X lungs and X hearts by agreement with the government and then we will come out on budget.
Mr Villeneuve: Now that is an interesting statement. It is a very informative statement you have just made. At the time of amalgamation, how many active beds did Toronto Western Hospital and Toronto General Hospital have? Do you recall that?
Dr Hudson: I think we were rated previously at 1,400. As I explained earlier today, we are down by over 200-odd. We are now in the high 1,100s.
Mr Powis: At the time of the merger the Western was 660 beds and the General was 1,000.
Mr Villeneuve: So 1,660.
Dr Hudson: I am talking about the recent downsizing. Mr Powis is correct, I think.
Mr Villeneuve: And you presently have approximately?
Ms Arsenault: Twelve hundred.
Mr Villeneuve: In total, 1,200 active beds. If I recall correctly from this morning's deliberations, I think your increase in costs since 1987 has been about 30% -- you have explained that in a number of ways -- and transplant surgery has certainly contributed to that in part. Would you want to add to that right now? Those are the figures.
Ms Arsenault: There have been some very significant changes in the delivery of health care as well. Through some of the new technologies that are available and through changes in the way we treat people, in many respects I think we need to understand that we send home patients who previously would have stayed in the hospital. They get cared for at home sooner than was historically the case. You know that women who deliver babies used to stay in for five days. It is now two or three days.
There have been many changes in the way health care is delivered. Some of this decrease is because things which previously had to be done on an inpatient basis can now be done, as a result of new technologies, on an outpatient or day surgery basis. In other cases, as a result of improved drugs and sometimes differences in philosophy, the length of stay is down as well. No doubt with the pressures on the system this will continue and we will move more and more this way.
Mr Villeneuve: As much as we are all very reluctant to equate dollars to health services, I think we have come to where we are going to have to yardstick one way or the other. You have just made the statement that certain surgeries are capped. That is an interesting one and I think it will help this committee to come up with some recommendations.
Miss Shroff: You might want to cover the new programs that came out of all these mergers. We have a laundry list of very successful new programs that came through without any funding from the Ministry of Health. They came about as a result of merger savings. You might want to laundry-list some of them.
Mr Villeneuve: That will probably be part of a presentation that I believe Denise will be providing or that someone will be providing us with.
The Chair: Mr White is up next, but I understand Mr Hayes had a supplementary.
Mr Hayes: I really want a clarification, Mr Chair, and I am responding to Mr Morin's question. I do not know if I heard you correctly. In several parts in the auditor's report, where senior management had declined to provide certain information, did you say there was a change in personnel or something there so that if the auditor were to go there now, some of the responses would be different?
Dr Hudson: I will not detail the list of the numerous changes again; I would be happy to do so if you would like me to. What I said was exactly that: I am sure you would not have reason to say that we were uncooperative. In fact, we have already had him back in December to review the changes in personnel and proceedings, and I asked him very directly, "Are you satisfied with what we have done to put right what the problem was in terms of systems?" I believe it is appropriate to state -- in fact I will say it right out -- that he agreed what we had done was appropriate. My statement now is just as I said, that I hope he would not find cause to repeat that statement.
Mr White: This is a question which is totally removed from some of the earlier ones. It comes about in my trying to reconcile some of the reports at the back of this document and the text of it. Your fiscal year is April 1 to March 31?
Miss Shroff: March 31.
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Mr White: So when we have the hospital's revenue expenditures as for 1991, $417 million, would that be 1990-91? That is right, okay. So in 1990-91, the budget was $417 million. Did you have a surplus or a deficit that year?
Ms Arsenault: Surplus.
Mr White: Surplus. In the area of how much?
Ms Arsenault: For Ministry of Health reporting purposes, I do not have the numbers laid out that way here, but I would venture to say that it would have been a small surplus.
Mr White: By "small" you mean $1 million?
Ms Arsenault: In that range perhaps, yes.
Mr White: The other information I have at the back here I find a touch on the confusing side. The present year which we are just coming to the end of, your budget for that year is how much, for the 1991-92 fiscal year?
Ms Arsenault: In the range of $450 million or $460 million.
Mr White: So it is $460 million budgeted for this year, and you have a projected deficit of $10 million?
Ms Arsenault: On the current year, as a result of the changes that have been implemented, we are hopeful, although it is going to be very tight, that we will break even for Ministry of Health reporting.
Mr White: I am sorry, you said what?
Dr Hudson: The Ministry of Health line will be a break-even budget at the end of this year, as a result of the issues we discussed this morning, which are the downsizing manoeuvres we put in place in August and the later part of last year. So the financial issue, we found, has been defined and controlled, and we will end on the Ministry of Health line with a flat budget.
Mr White: When you say, "the Ministry of Health line," you do not mean your total budget? So other moneys would be what?
Ms Arsenault: The Ministry of Health, for reporting to it. They expect that buildings, for example, will be separately funded and handled either through separate grants or through separate fund-raising by the board of trustees in the hospital. They measure, if you like, whether or not you have broken even by excluding certain depreciation and things like that.
Mr White: So basically, at $460 million, you are anticipating being able to break even this year. That would be a budgeted increase of something in the neighbourhood of 10% above last year's?
Ms Arsenault: Yes. I am hesitating a little bit because the numbers get reported differently. I am not certain what the source of these numbers was and where certain items appear. Certainly, the Ministry of Health awarded us a 6% increase at the beginning of the year and another 1%. I am not certain that it would be 10%. I think it would be less than 10% in fact, perhaps closer to 7%, but I do not have the numbers with me.
Mr White: When you were saying $460 million, it may be less than that?
Ms Arsenault: Yes.
Mr White: You are starting to experience financial difficulties, as I understand from reading these newspaper clippings. There are some statements in here that seem to me a little strange, but I have seen quotation marks in the paper around words I know I never uttered, so I am sure that was the case with Dr Hudson as well. But when you start to experience financial difficulties, how are you aware of being off-line?
Ms Arsenault: Pardon me?
Mr White: How do you become aware of becoming off target? This would have been about six months into the fiscal year?
Ms Arsenault: It is our practice on a quarterly basis, and in fact you may be pleased to know that it is a requirement by the Ministry of Health, if hospitals were not inclined to do it anyway, that we submit a forecast to it every quarter. So we had to submit a forecast to them. We have a practice at the Toronto Hospital that on a quarterly basis we undertake detailed reviews -- the people are required to forecast what their expected results are to year-end, and this is done on a department-by-department basis -- and have our team of accountants actually tally the results, and it is through that process.
Mr White: With these forecasts going back to October of this year, what you have been dealing with would have been the third-quarter forecast?
Ms Arsenault: The third quarter ended in December, so we have completed the third-quarter forecast, and it is on the basis of that forecast that we are now saying we will break even, although as I say it will be tight. I am not certain when that quote was, but it would have been on the basis of either the first quarter of the fiscal year or the second quarter of the fiscal year.
Mr White: So it would be the results of the figures from the --
Ms Arsenault: The June results or the September results, yes.
Mr White: Seeing as these statements are in October, it is quite likely the results of the second quarter. At that point, if you had to make a $10-million adjustment for a full fiscal year, you would have been $20 million out. Had that not occurred?
Ms Arsenault: There were two parts to the problem that was identified there. One part was a problem with our operating costs and the second was a problem on the capital side, the equipment side. We took corrective actions on both fronts, one to put a virtual freeze on equipment purchases except where they were absolutely required for patient care or for employee safety, and we also took action to get the operating problems resolved, so there were the two sides to that problem.
Mr White: The operating problems would be overtime?
Ms Arsenault: There were a number of problems on the operating side. One of the big problems that we had was that we had been expecting some attrition which, as a result of the economy, did not occur. We had expected it. It had been the hospital's policy that it did not lay staff off, but with the change in the economy, we did not have the normal attrition rates. We realized that we could not wait, and I guess at that time as well we were aware, the rumours were circulating, that the economic increases for next year and the year after and the third year were going to be very small, such that we could not carry a problem into next year or we would just be magnifying the problem.
Mr Duignan: I am going to continue with my colleague's opening questions around the question of surplus money. Could you maybe follow through the process of this surplus money? What would happen to that money? Would it be returned to the ministry, be put into a special account to offset a deficit if there was one next year or would it go into the foundation account?
Mr Powis: I cannot remember a year when we had surplus money.
Ms Arsenault: The number, I believe, is in fact less than $500,000, but the surplus I am discussing is if you take all of our revenues, both from the ministry and from other sources, and deduct all of our direct operating expenses. I think that in the year in question the surplus was less than $500,000. However, we have many equipment purchases that are required either for new technologies or to replace existing equipment. There was all of the renovation that was being done, in particular at the Toronto Western division. So the surplus was not a cash surplus.
The current policy of the Ministry of Health is that the hospitals are responsible for managing within the funds they have available and that those funds are to be used not only for the direct day-to-day operating expenses but also they have to manage in such a way that they have available, through those funds, sufficient cash to replace equipment as it is needed. So this less-than-$500,000 surplus would have provided some cash that was available for those capital costs.
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Mr Duignan: The question I asked, though, was what you did with that. Did you set it aside in a special bank account for capital purposes? Where did it go?
Ms Arsenault: No, it was not set aside in a separate bank account. It was part of the main bank account and was used to finance equipment purchases.
Mr Duignan: In a later year?
Ms Arsenault: I do not know if it was in 1990-91 or in 1989-90. I am not certain what the time frame was.
Mr Duignan: But it would not have been used to purchase equipment approved in that previous year?
Ms Arsenault: Likely in the next year.
Miss Shroff: It is definite that we would not have known, by the time all the books are added up, that we would have a surplus to spend right away in that year.
Mr Duignan: I am just kind of curious as to how my surplus money is spent. That is taxpayers' money.
Ms Arsenault: I am not certain whether in fact at the beginning of the year the hospital was budgeting to generate the surplus. If they had budgeted to generate the surplus, then it is quite possible that they would also have budgeted to buy a piece of equipment with that money. If in fact they achieved a bit more of a surplus than they had budgeted, then likely they would not have planned to use that money.
Mr Duignan: I will defer questioning. I know it needs some more detailed questions, but I am running into Mrs O'Neill's time.
Mrs Y. O'Neill: I wanted to go to the policy manual, your "Assurance of Competitive Purchasing" page if I may, just to clarify. Point 1.0.1, "if any item is under $5,000, no formal tender process is necessary." How do you define the term "any item"?
Ms Arsenault: The process starts with a requisition that would be received from the department that would require the supply or the service, and that is what would have been meant by an item.
Mrs Y. O'Neill: Is it one single item or is it a group of items or is it a category of items?
Ms Arsenault: It would in some cases be a category of items. If you were tendering, if you were redoing an area and bringing in new beds, perhaps any one bed would cost under $5,000, but if there was a group of beds that in total would cost more than $5,000, formal tender would be required.
Mrs Y. O'Neill: So the term "any item," is that generally understood within the hospital?
Ms Arsenault: It certainly would be understood by the purchasing department, which are responsible for the tendering, yes.
Mrs Y. O'Neill: Okay, if I may go to point 5.0, "all regularly purchased items of significant dollars are to be checked for market competitiveness on a periodic basis." Could you tell me a little bit about how that is done?
Ms Arsenault: I am not certain. The purchasing area does not directly report to me so I am not certain what their process is there. We could find out.
Mrs Y. O'Neill: I think that is useful.
If I may, Dr Hudson, and I do not often question on newspaper articles, but we have been along this line of questioning earlier. This is not in quotations; part of it is and part of it is not. You might remember the article from the Globe and Mail of October 24, 1991. After you had assumed your position, you said an internal financial review disclosed there was "quite obviously a significant financial problem, which was news to me."
Could you say a little bit about the internal finance review you were referring to? I would like you to clarify for myself and generally the committee what you mean by, "it was news to me." You had not investigated the financial status of the hospital of which you were going to become the CEO? I just wanted to clarify what you were saying here.
Dr Hudson: I understand. If I may, just by background explain, I was functioning as surgeon-in-chief of the hospital, so I had no reason at that stage to look into the details of the finances of the hospital as a whole. When I took the position, I suspect I did what any other president taking a position would do, and that is to review the finances of the institution. So the variety of problems which came to light were news to me. I did not know about them before I got there.
Mrs Y. O'Neill: So you are really suggesting that this was not part of the interview process or whatever process you went through?
Dr Hudson: No, no. This was after I took the position.
Mrs Y. O'Neill: You did not deal with that during your interview process with the board and/or whoever else you were dealing with in the interview process.
Dr Hudson: Yes. During the interview process I did not ask for a detailed financial summary of the hospital. If I may explain a little further, the type of problem which came to light coincidentally with my appointment resulted from such things as major conversion in systems, in accounts payable, for example, where there was a glitch and a large number of accounts payable and invoices were not being processed properly. This was a large amount of money, and when this came to light, it showed very quickly on the financial transactions of the hospitals. When I assumed my new job, the first thing I did was to review the finances. It was that kind of thing which came to light. So it was news to me. I did not know those problems existed.
When I found that they did exist, and by that stage I had spoken to Mr Decter in terms of a general forecast of what was going to happen in the next three or four years, it was quite clear we had to straighten out our problems with regard to those problems I have just enunciated before we could come face to face with what I thought was going to be 2% but was in fact going to be less than that. That was the reason it was news to me. That is the reason we had to get moving to sort it out in a hurry, which we did.
Mrs Y. O'Neill: Was the internal financial review in process when you took your position or was it something you initiated?
Dr Hudson: What had happened is that Miss Denise Arsenault had just preceded me in her appointment as the chief financial officer, and between the two of us we were both feeling our way into our respective positions, so that review took place essentially between the two of us as we went through the structure of the finances. These issues came to light and I reported these personally to Mr Decter and told him that we now had to find the problem and that we would put it right, which is what we did.
Mrs Y. O'Neill: So this would have been part of the road to the deficit that was projected, I guess.
Dr Hudson: That is correct.
Mrs Y. O'Neill: In your taking of that position, those things came to light and you feel that you took immediate remedies. Was the internal auditor or the external auditor involved at all? Had any of this been discovered up to the time? Were there any notes?
Dr Hudson: When I am responding and say "I", I am using a bit of poetic licence. Obviously the report is from me to the board and hence the board's responsibility. But just to continue the line, immediately I met with the external auditors and subsequently met with the chairman of the board of trustees and the external auditors and met with the chairman of the internal audit committee to discuss the whole issue and, essentially, put it right.
Mrs Y. O'Neill: So you had basically their agreement in the way in which you had decided to proceed and --
Dr Hudson: Oh, absolutely.
Mrs Y. O'Neill: This internal auditor that is bridging these two hospitals now is quite involved in implementing the suggestions you were making.
Dr Hudson: Very much so. This is a senior and an experienced individual, which is the reason, of course, for the choice. This individual has had a lot of experience at the Hospital for Sick Children. The two hospitals share the same external auditor, so we are using this mechanism to build a very strong internal audit department.
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Mr Tilson: I would like to return to the subject of the merger. I think Mr White asked some questions of interest from his own riding on the possibility of mergers of boards. I have an interest in my riding as well, and there are probably other boards throughout the province that are watching your experiment, so the subject of the savings is certainly most important to us personally and to members of this committee personally.
Just so I am clear, I think the question was asked here this morning that there is hospital policy to keep records on the merger but you were not aware of that policy, or if there was such a policy, it was not adhered to. Is that what your comment was this morning?
Mr Powis: We sort of went back over it at lunch and tried to figure out where it came from. There was a policy in the early years of the merger for the purchasing group to keep track of savings arising out of the merger, but only in that one area. It certainly was not kept as an accounting record. They just I guess sort of jotted down when they made a cheaper purchase, "Okay, we saved this much." It is not a precise figure in any case, but that is the one area where they tried to keep track of how much they were saving as a result of the merger, and I think that number was the one I was throwing around this morning, which is around $10 million.
Mr Tilson: Presumably financial records have been kept by both hospitals in the past. Have analyses been made, now that the subject has surfaced, or are analyses being developed, comparing what existed with the previous boards and what is existing now?
Mr Powis: No analysis has been made. You know, you have raised an interesting question, and if we can figure out a way to do it, it might be quite interesting to take a shot at trying to figure out what those savings are. But I would caution you that they would be guesses. They would certainly not be subject to any audit verification; you would just have to take our word for it.
Mr Tilson: The reason I am asking the question is quite frankly not to analyse what you are doing, although that is obviously part of our role here today, but also just to consider the policy that appears to be going forward of the unification of more boards. If it is not paying, then why do it?
Mr Powis: I can assure you that in our case it did pay and it paid --
Mr Tilson: But you cannot tell us how. That is the trouble.
Mr Powis: I can tell you how; I cannot tell you how much. The consolidation of clinical services undoubtedly saved an enormous amount of money, but I cannot tell you how much.
Mr Tilson: The comments were made by the auditor that, "We requested this information from the hospital" -- this is with respect to the merger -- "but senior management declined to provide it, stating that it was not an accounting record and was therefore beyond the scope of our inspection audit." Is that a misunderstanding? Is that an accurate statement or was the information simply not available?
Ms Arsenault: We had a conversation before the meeting started again. I mean, this was a true statement. I think that technically this was beyond the terms, beyond the scope of the inspection audit. So while this was true and no doubt members of management made this statement, what would also have been a true and perhaps more helpful statement is that we do not have a detailed listing of the savings, for all the reasons we have discussed.
We have now provided this May 1990 document, which gives some sense of the nature of the savings. I do not think, however, it discusses the changes at the management level, the fact that you only needed one management team, not two. So it is not complete and I think we can certainly go back and try to round it out.
Mr Tilson: Again, I may be misinterpreting what you are saying, but can you explain why it is beyond the scope; why you feel -- not you personally, but why your hospital thinks it is beyond the scope?
Ms Arsenault: Naju, I do not know if you know. I do not have the actual terms of the inspection audits or what the scope of the Provincial Auditor's jurisdiction in hospitals is, but they have access to "accounting records," and these in fact were not official records, which was what the problem was. They could have and would have had access to information that would have shown the tendering practices, if there had been a way of actually flagging that the reduced price was the result of the merger. For example they could have sent in a team that I guess could have explored every time there was a reduced price, perhaps, for an item, and then come back to us and asked if this was the result of the merger.
Mr Tilson: You are saying the information or the analysis simply was not available, but you gave them everything you had. Is that what you are saying?
Ms Arsenault: No. I think that at the beginning of the audit the scope of the audit was agreed upon, and it was the view of those who had agreed upon the scope that this was beyond the scope. Is that --
Mr Tilson: I do not want to get the auditor involved in this, quite frankly.
Ms Arsenault: I think that is a fair representation. I am not trying not to --
Mr Tilson: One of the comments the deputy minister has made with respect to the redevelopment of the Toronto Western site was that there was a $65-million capital expenditure made and that this is in fact, perhaps because of the merger process, one half of the funding as opposed to two thirds of the funding.
Ms Arsenault: Exactly.
Mr Tilson: I would like you to comment on that, and if that is the case, how did you fund the remaining $11 million?
Mr Powis: I am not sure I really understand the question.
Mr Tilson: You got one half when normally you would have got two thirds. So you are short, you are short on your funding. I guess my question is, specifically, where did the remaining funding come from?
Mr Powis: Like merger savings?
Dr Hudson: Merger savings. That is the answer.
Ms Arsenault: That is right. That is what it was.
Mr Tilson: All you have to do is tell me; tell me where you got it and how you got it. Again, I am getting to the question. It is very crucial to this committee. There have been at least two members of this committee who have expressed an interest in merger savings and we are trying to find out more specifics.
Dr Hudson: That is the answer, that the half of the deal provided by the hospital was derived from merger savings.
Mr Tilson: Do you have documentation that says that?
Dr Hudson: No.
Mr Tilson: At one point you say you do not have records. At another point, in answer to a question, you say the $11 million came from savings from a merger. I am not trying to ask you trick questions.
Dr Hudson: No, I understand what you are getting at. I guess my response then would be that there is no line item flowing from the ministry identifying $11 million or $23 million that we put into it. So that is where the money has come from. In other words, it does not come from extra sources from the government that we could identify. I understand it is not answering your question directly, but looking at it from the corollary, there is no line item from the government to say that it has flowed our half of the deal to us. They have not. We have derived it from our own operations.
Mr Tilson: Somehow the Ministry of Health has come to the conclusion that there were savings, and with all due respect, I get the impression, "Trust me, there were savings." Maybe there were; I simply am looking for specific evidence as to what those savings are, for the reasons I have given. That is really all I am looking for, and I guess, if you have the information, fine. If you do not have the information, I must confess I am left with the question mark, what were the savings? How much were the savings? Is it worthwhile to have two boards merge, because in this merger they do not seem to be too clear as to what their savings were.
Ms Arsenault: But there is definitely only one president. I mean, some of these things are very tangible. There is definitely only one president. The audit definitely costs less than the sum of the two audits did before. We definitely only had to develop one computer system.
Mr Tilson: Did the Ministry of Health ask you specifically what the savings were? I cannot believe this question has popped up today, that someone has not come along specifically with your own funding. There must be some paperwork around that you have given to the Ministry of Health that tells what -- when you had meetings with the ministry --
Mr Powis: The only piece of paper we have given to the Ministry of Health that we know of is one we shared with you this afternoon, dated May 1990. There is no piece of paper we are hiding from you that says, "Okay, we saved $45 million."
Mr Tilson: Would you be prepared to give us the minutes of meetings you have had with the Ministry of Health officials on the subject of merger?
Mr Powis: I do not know that we kept minutes.
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Mr Tilson: You did not keep minutes?
Ms Arsenault: I was not there, but I suspect the conversations would have been along the lines that: "We are moving this service from here to there, that we are consolidating it in this way. As a result, we are going to be able to take the savings from doing that and redirect them into X,Y or Z" at the time. That is the problem. The problem is that at the time a decision was taken and it was reflected in things, but there was not a magic list that was kept that said, "This is a merger saving." In some cases, often it is not so clear as to whether it is merger, part merger, an opportunity cost that you --
Mr Tilson: One could speculate that the cost of merger could be expensive. In fact, the auditor said that. Costs have risen 30%. I do not want to repeat what we said this morning, but there are conflicting statements coming back and forth as to the whole subject of merger.
Mr Powis: I do not think the auditors were trying to say there were no merger savings. They just simply pointed out that in spite of the merger our costs went up 30%. That taken in isolation is --
Mr Tilson: I agree. That is unfair.
Mr Powis: I am not accusing you of being unfair.
Mr Tilson: In 1987 and 1991 on the inflation alone -- I have been around here a very short period of time, but long enough to know that hopefully decisions are made with some rationale. The merger decision must have had some rationale and there must have been some projection as to what the savings were going to be. There must have been some justification, when you are going back to the ministry and asking for more funding, of what those savings were. I cannot believe that does not exist. It is almost as if we are shuffling cards.
Mr Powis: I suspect it probably does not exist on a piece of paper anywhere. My recollection at the time we were considering the merger is that the statement was made and backed up by scratches on the back of an envelope more than anything else; that we would save up to $10 million a year administering the thing. That was known to be a totally imprecise number at the time. You knew you would save a lot of money. We never actually said, "Okay, we will save $9.85 million a year," or some number like that. It just was not there. You knew you would save money, though. I promise you we have saved money. The fact that we are merged does not mean the whole operation costs more. It does cost less.
We can take a shot, as I said earlier, at trying to produce a number, if that is what you are really interested in. You should understand that it will be just a total guess, but it will be an informed guess.
Mr Tilson: I do not want you to go spending half a million dollars to make another study either. I can only leave you with this question, and I am concerned that there are not specifics justifying the merger, that there were not some projections explaining why the merger should take place, because obviously this is what the auditor has said. The auditor has tried to find out this information and cannot find it. I have the same question the auditor has. Mr Chair, I will leave it at that. Whether any members wish to pursue this area, fine.
Mr Duignan: Let's get back to the purchase agreement for a little while. Item 2.0, capital equipment: You outline a number of areas for various dollar values and processes to follow, except there are some exceptions to that, and those are: "(a) a sole-source supply situation; (b) where a current contract exists; (c) where the use of a different supplier will void a warranty;" and "(d) when target pricing is used."
Under "(b) where a contract already exists," and then going back to the auditor's report, was that the reason you purchased new laundry equipment, because of that exception?
Ms Arsenault: We do not consider the Booth Avenue Hospital Laundry Inc to be a supplier. It is something we own and we are using our own laundry. We own 30% of that laundry. We would not have considered Booth Avenue Laundry to be a "supplier" to the hospital. I know the provincial auditors, in their report, did list the issue of Booth Avenue under the question of supplies because perhaps it did not fit in anywhere else, but really they are part of the hospital. We own one third of them.
Mr Duignan: Again, under appendix A it states in 1.0.4 that "preliminary market research is done by purchasing/technical support to identify potential suppliers and best estimated price." Is that how the price is determined, or is a tendering process part of that?
Ms Arsenault: No. This is up front. In order for us to go through the process, even before you get your piece of equipment approved for purchase it is necessary to take it through the approval process, either to the board of trustees or to the fiscal advisory committee. Up front what is necessary, in order to have a sense of the magnitude of the approval that is needed, is to do some preliminary work. That is what this is referring to.
Mr Duignan: So if you wanted a new piece of equipment, you would get your purchasing people to sort out what is available on the market. Because technology changes so rapidly these days, would you consider at all or do you put an ad in the trade magazines, for example, to indicate that you are looking for such and such piece of equipment and invite suppliers to submit a price quotation and/or use of that particular equipment to test it?
Ms Arsenault: The Toronto Hospital has, in most areas, the people who are leading clinicians and who know what is available. It would be unusual for there not to be the expertise within the hospital knowing what is happening. It would be different perhaps in a community hospital where you would not have the same sort of education commitments and things like that.
Mr Duignan: So that would actually vary from hospital to hospital.
Ms Arsenault: Yes.
Mr Duignan: That process you are talking about applies to clinical equipment, or is it to all equipment?
Ms Arsenault: Or the information systems group.
Mr Duignan: So you would apply that same criteria to purchasing the computer system you bought?
Ms Arsenault: I am talking about the computer hardware, generally, whether it would be microcomputers -- our information systems group would have a lot of knowledge because of the nature of that group.
Mr Duignan: I will defer further questions.
Mrs Y. O'Neill: I am going to go back to one of my colleague's questions again. Has the consolidation resulted in more efficiencies than you would have expected? Mr Powis mentioned $10 million was what the ministry thought and you thought when you went into it. I realize you are telling us you do not have any figures. Have you been able to consolidate more than you thought you could? Hopefully that may result in more efficiencies. I am not sure it directly does. I do not know whether you can answer my question, but I think it is really important that we pursue this, since you really are pioneers.
Dr Hudson: The overall plan for the benefits to be derived from the merger was known as Vision 2000. That was the title of the plan, meaning that these changes and the benefits would accrue through the decade. In fact, the vast majority of the changes took place before the end of last year. That whole process was extraordinarily speeded up, among other reasons, because of the tremendous change which has occurred in the health care environment in the province. Did it exceed expectations? The answer is yes. It exceeded expectations by about nine years, in that argument.
To further that argument, the hospital is having a major repeat planning exercise which will take place the beginning of June this year to give us a new framework for management decisions and implementation of systems and responsibility and reporting mechanisms. This time we will not attempt to forecast what is going to happen in the next decade, but we will attempt to forecast what will happen in the next three or four years.
Mrs Y. O'Neill: You mentioned earlier that you have two units of the Ontario Nurses' Association.
Dr Hudson: Yes.
Mrs Y. O'Neill: Is that resulting from the merger?
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Dr Hudson: What we hoped would result from the merger was one unit of the ONA. In other words, the single hospital, which receives a single cheque from the government, which will be accredited as a single hospital, would have a single union. In fact, that did not take place and did not take place at the time of the merger. The hospital's position is that, for the reasons among others that I have just given you, including the ability then to respect seniorities and transfers between the two institutions and so on --
Mrs Y. O'Neill: Have you done quite a bit of work on this merging of collective agreements? That is another area where I have had some experience. I would consider it one of the most difficult areas I have ever worked in.
Dr Hudson: But what transpired is that we lost the argument last year.
Mrs Y. O'Neill: What do you mean by that?
Dr Hudson: It was a hearing brought by the hospital to create one union. The union's position was that it preferred to have two unions for reasons of its own. The judgement was in favour of the union. So to this day we have two unions. There is one hospital with two unions.
Mrs Y. O'Neill: Where was the hearing? I am sorry, I missed that. Who did that hearing?
Dr Hudson: It took place in about June of last year in Toronto; the Ontario Labour Relations Board.
Mrs Y. O'Neill: If I may go to the document again that I was referring to earlier, the assurance of competitive purchasing; this is appendix A. In that document you refer to a budget committee. Could you say a little bit about the budget committee?
Ms Arsenault: The budget committee's name now is actually the fiscal advisory committee. That committee has membership from among nurses, physicians, administrative staff, and I guess union representation as well. With respect to the equipment, they actually receive the requests from the various areas in the hospital and they investigate the requests and then set priorities. They make a recommendation to the board of trustees as to what, given the limited amount of funding that is available, the purchases for the next fiscal year should be.
Mrs Y. O'Neill: Would they have anything at all to do with policy?
Ms Arsenault: Yes. They establish the process, if you like, or the policies surrounding the approval process.
Mrs Y. O'Neill: I am going to take this giant leap of information regarding this application here. Would they be the ones that would have been looking at the auditor's request for better documentation, whether that was in purchasing or inventory?
Ms Arsenault: No. The audit committee --
Mrs Y. O'Neill: Who would have been looking at that, then, and trying to attend to the suggestions?
Miss Shroff: The audit committee would look at such a recommendation and make sure it gets implemented.
Mrs Y. O'Neill: Okay. We have gone along those lines earlier this morning and I have reread the auditor's report on that. There seems to be some real difficulties with documentation both in the purchasing area and in the keeping of the inventories. Can you say a little bit about anything that has changed since the auditor's report?
Miss Shroff: Certainly. The new procedures are in place. Unfortunately, we did not manage to bring a copy of the latest procedures this afternoon. Denise, help me here.
Mrs Y. O'Neill: If you could give us a few examples just off the top of your head it would be quite helpful.
Ms Arsenault: One of the areas the auditors criticized was that we did not always clearly document the reasons why we had selected a supplier. So we have now expanded what used to be a requirement. We have now clarified and expanded it such that whenever there would seem to be any question as to why we have selected a specific supplier, we now complete a form which we call the basis of award. That now requires that it always be documented. It requires sign-off by the end users as well as by the purchasing department so there is agreement that this has been appropriate.
Mrs Y. O'Neill: That is new?
Ms Arsenault: Yes, that is right.
The Acting Chair (Mr Morin): Do you have a supplementary?
Mr Kwinter: Yes, Mr Chairman. I apologize, I am substituting on this committee and I have not heard the background, but I am curious, in the little that I have heard, how purchases are initiated. Who decides what is the global amount any particular department can spend and who triggers it? Is it something where anybody in the department calls up, particularly if it is $5,000 or less, and says: "I need this, buy it. I've checked it out; take my word for it. Here's what I need." How does that happen?
Ms Arsenault: You would start with a purchase requisition that requires approval, in some cases, of medical staff or administrative staff and sort of goes up the line through vice-presidents, depending upon the dollars, which then would go to the purchasing group. In certain cases, for example in the case of capital equipment, before purchasing would process the requisition it would actually come to the finance directorate to ensure there was funding for it.
Mr Kwinter: So there are controls from that point of view.
Ms Arsenault: Yes.
Mr Kwinter: If the limit has been reached for that particular category of expenditures, that is it?
Ms Arsenault: It depends upon the area. We have difficult issues sometimes, in that if you have a patient in the hospital who needs a certain drug, you cannot say, "That's it, you can't spend this dollar." But we would monitor that, in addition, through the monthly reporting process and variance analysis and, again, through the quarterly review process I described, which requires that people forecast things to year-end. In certain cases -- and we talked about the question of a transplant patient where the actual timing of one patient coming in, one more than you budgeted, could make things look distorted and you would always want to track how many; are you still on track for your patients over the year? So it is much more complex.
Mr Kwinter: You just touched on a point which is exactly the purpose of my question. It is a demand system, in many ways.
Dr Hudson: I agree with the point you are making. You can look at it from the other side, that in terms of major purchases of equipment, capital equipment and so on, there is essentially a freeze and that is a policy decision the board has approved. At the moment, unless something is life-threatening -- for example, a sterilizer breaks down and has to be replaced -- you cannot get anything. That is part of the control we put in place to get ourselves on line before we start next fiscal year at 1% increase. We have a very stringent control, and the fiscal advisory committee to which Ms Arsenault referred has a list of potential purchasing requests which are lined up but which are not going to get funded.
Mrs Y. O'Neill: Could you tell us a little about the membership of the fiscal advisory committee?
Ms Arsenault: As I explained, I am not certain with the numbers precisely, but there would be three or four physicians who represent different areas and different types of expertise. I think there are three nursing staff, four or five administrative staff, again, with different professional backgrounds, on that committee.
Mrs Y. O'Neill: That is not the budget committee.
Ms Arsenault: The fiscal advisory committee is the budget committee now, yes.
The Chair: Are there any further questions? We would like to thank you. We had scheduled for tomorrow the possibility of these people coming back, but if there are no further questions perhaps we can give them a day off, if that is possible.
Mr Hayes: Unless they want to come back.
The Chair: No, I do not think they would want to come back. We thank you very much.
Mrs Y. O'Neill: Mr Chairman, we have been promised further documentation, so that leaves the possibility that questioning could proceed. I do not know how you would deal with that. Will we be able to have the documentation you have suggested today? Where are we with that?
Dr Hudson: As I say, what we did at lunchtime was to lay our hands quickly on the documents in part that were requested and four have been given you. We need to take a fair hunt now for some of the other information. We will get to you as soon as we can, I would certainly imagine within a week.
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The Chair: On behalf of the committee, we thank you very much for taking time out of your busy schedule to be here. That will allow us to reorder our business for tomorrow as well, so thank you very much.
Committee, as indicated, we were scheduled to have these people before us again tomorrow. In view of the fact we are not going to, and we had closed session to take place at 2 to 4 tomorrow, perhaps we could move that ahead and deal with it at 10 until 12. If we need to spill over into the afternoon, fine; if we do not, then you all get out of class early tomorrow. Is there unanimous consent that we do that? Hearing no dissenters, I presume there is.
Clerk of the Committee: I take it we do not need the ministry people to come either.
The Chair: The clerk has indicated to me -- I gather there is no need for the ministry people to come either. Okay, 10 o'clock tomorrow morning.
Mrs Y. O'Neill: Mr Chairman, will we have something to work on from the research staff, from the result of --
The Chair: It would have already been given, Mrs O'Neill. It may be in your office.
Mrs Y. O'Neill: Will there be anything further?
The Chair: No, you should have a draft of the report which Ray will take us through in an overall scheme. We may get into it a little deeper than we discussed, Ray, because there are people on this committee who were not on the original area.
Mrs Y. O'Neill: So there will be a draft report?
The Chair: Yes.
Mrs Y. O'Neill: Basically including some of the things we have heard?
The Chair: Yes.
Mrs Y. O'Neill: And the answers to some of the questions we have posed.
The Chair: Let me explain. The draft report we are dealing with tomorrow, as you know, is the report on substance abuse. We travelled to the United States and --
Mrs Y. O'Neill: Okay, so that is very different. I am sorry.
The Chair: It will not be in reference to this issue here.
Mrs Y. O'Neill: When will this issue be coming back?
The Chair: Really, I guess it will not. We were only given one week to deal with this and we had to pick out some of the issues in the auditor's report we felt were appropriate. In terms of what we will do with that information, I guess it will be in Hansard and members can take appropriate action wherever it is appropriate in perhaps having the government respond if they feel the issue is still -- I think it is outstanding. I can tell you, Mrs O'Neill, this issue is equivalent to what we ran into with school boards, and with just about every transfer payment recipient, that there does not seem to be that ability of the auditor to get to the root of it. In fact, it is interesting that the Legislature of Ontario, historically being virtually without limit on its power, other than the Charter of Rights, does not have the power to get at those additional items. That is what the auditor has been asking for since time immemorial, from what I can gather.
We are told, in fairness to the government, that it is at a stage where we should be getting a report about the amendments being requested by the auditor to do a value-for-money audit, subject also to Mr Morin pursuing his motion. That makes a lot of sense.
Mrs Y. O'Neill: I think, as Mr Tilson said earlier in the day, that this is such a pioneer effort. It may be a direction all parties, and certainly this government, want to go, but we certainly have to examine it. We are talking about very large operations and my experience, very limited, in merging is that it is not always as one may expect and certainly does not always result in efficiencies. I am not convinced today, from what I have heard, that there have been extensive efficiencies developed.
The Chair: I would like to tell you, perhaps off the record, if that is possible -- we could perhaps adjourn and I will tell you.
Mr Duignan: On that point too, the standing committee on government agencies last week did the conservation authority. It is the exact same situation: Accountability needs to be looked at and examined. Hopefully too, along with the amendments, what we suggest when amending the Freedom of Information and Protection of Privacy Act also is that it too will open up the process; open up, for example, getting and having a look at the hospital books and administration practices. Maybe that will all be part and parcel of that whole package, where we need to do it.
Mrs Y. O'Neill: Everything we say in this building is recorded but minutes of meetings of very large, publicly funded institutions are not available.
Mr Johnson: Everything we say is not recorded. We are going to sample that shortly.
The Chair: Then I would like to say a few things off the record.
Mrs MacKinnon: I have to go on the record.
The Chair: You want to go on the record. All right.
Mrs MacKinnon: I am not the least bit content with what we have heard here today. I can well remember an amalgamation back home I was involved in that was an awful lot smaller than two hospitals. As Mrs O'Neill has said, every word was recorded, because I had to record it sitting on the floor in the corner of a classroom where there was no other furniture. I find it absolutely amazing that you can go back in Hansard five, almost six years ago, and find out --
The Chair: Which happens quite frequently, I might add.
Mrs MacKinnon: -- find out they expected to save $5 million and they cannot account for one penny of it six years after the amalgamation. I find that just absolutely incredible.
The Chair: Does anybody else want to hang out on the record? I appreciate your doing it on the record, Mrs MacKinnon. That is very admirable. All right, we stand adjourned until 10 tomorrow morning with a change in our schedule. If you could just stay for one second, I would like to say something else which you may or may not agree with.
The committee adjourned at 1547.