November 23, 1998

PUBLIC ACCOUNTS COMMITTEE

The Committee met at 9:30 a.m. in Room 5083.

CHAIR (J. Byrne): Order, please!

I thank you for coming out. My name is Jack Byrne.

I am the MHA for Cape St. Francis, and I am Chairman of the Public Accounts

Committee. To my right is Tom Lush, the MHA for Terra Nova, and he is the

Vice-Chair. What we will do in the beginning is call the hearing to order and we

will go around the table to introduce ourselves, starting to my left.

MS MURPHY: Elizabeth Murphy, Clerk.

MR. J. NOSEWORTHY: John Noseworthy, Deputy

Auditor General.

MS MARSHALL: Elizabeth Marshall, Auditor

General.

MR. LOVEYS: Wayne Loveys, Audit Principal.

SR. DAVIS: Sr. Elizabeth Davis, Chief Executive

Officer of the Health Care Corporation of St. John's.

MS YOUNG: Eileen Young, Chair of the Board of

the Health Care Corporation.

MR. CROCKER: Calvin Crocker, Vice-President,

Administrative Services of the Health Care Corporation.

MS S. OSBORNE: Sheila Osborne, MHA for St.

John's West.

MR. SMITH: Gerald Smith, MHA for Port au Port.

MR. WHELAN: Donald Whelan, MHA for Harbour

Main-Whitbourne.

MR. M. NOSEWORTHY: Mark Noseworthy, Executive

Officer, Public Accounts Committee.

MS THISTLE: Anna Thistle, MHA for Grand

Falls-Buchans.

CHAIR: Thank you.

This hearing is being recorded, by the way. What we

will do before we get into the hearing itself is have someone move a motion to

adopt the minutes of November 19, 1998.

On motion, minutes adopted as circulated.

CHAIR: First of all, have all of the Auditor

General's staff been sworn in?

MS MURPHY: Yes.

CHAIR: We have to swear in the witnesses.

Elizabeth, would you do that?

Swearing of Witnesses

Sr. Elizabeth Davis

Ms Eileen Young

Calvin Crocker

CHAIR: Thank you.

For this hearing, we have two mornings set aside. If

we do not get through it this morning we will continue on tomorrow morning, from

9:30 to noon, give or take a few minutes. From the previous hearings we have had

last week - we had Monday, Tuesday, Wednesday and Thursday. I am not quite sure

how long it can take, because once you get into it one thing leads to another.

What we have done in the past is we have asked the witnesses if they would like

to make any opening statements beforehand. If you do, feel free to do so at this

time.

MS YOUNG: Thank you, Mr. Chairman.

CHAIR: Sorry. Could you identify yourself for the

recording?

MS YOUNG: My name is Eileen Young, and I am Chair

of the Board of the Health Care Corporation. I was appointed in February 1994 by

government.

As you are aware, the Health Care Corporation of St.

John's assumed responsibility for eight health care facilities in the St. John's

region on April 1, 1995. These eight facilities, just to remind you, are the

General Hospital at the Health Sciences Centre, St. Clare's Mercy Hospital,

Salvation Army Grace General Hospital, the Waterford Hospital, the Janeway Child

Health Centre, the Children's Rehabilitation Centre, the Leonard A. Miller

Centre, and the Dr. Walter Templeman Community Health Centre on Bell Island.

As well, we assumed responsibility for three schools

of nursing: the school at the General, at the Grace, and at St. Clare's, which

we have since consolidated into one centre. We have also assumed responsibility

for Central Laundry and the Regional Ambulance Service. That is just an overview

of who we are.

One of our first tasks as the Board was to identify

seven principles which would guide our organization, and the sixth principle is

what I will refer to today, which is in your area of responsibility: To be

accountable to government and to the public for the quality of health care and

the appropriate and the efficient use of public funds. That is our mandate as

the Board, passed along to our operational people.

In following that principle we set for our

organization three strategic directions to be implemented in the first years of

our existence. Number one, we consolidated all of our administrative and support

functions. This meant bringing together the different systems which had been in

operation under six boards that we replaced, everything from our financial

services and information services to housekeeping and food services. It involved

consolidating the bargaining units of our five unions as well as our six

previously existing medical staff organizations.

We also set about the integration of our clinical

services - that is, our services related to patient care - into programs

bringing together similar services across all our sites. We also set about, and

it was announced publicly, the closure of three of our sites with a major

rebuilding program to accommodate the transfer of services from these sites to,

now, five.

In the implementation of these three directions we

have reduced the number of managers and support staff, but we have not reduced

any direct patient care staff. We have accrued considerable savings from the

consolidation of support services and all have been redirected into direct

patient care services.

The Auditor General's review was carried out over a

period of six months and covered the first eighteen months of our existence. The

Board, Mr. Chairman, was pleased with the outcome of the review which affirmed

the directions we had undertaken, and which confirmed that we had been

accountable for the use of public funds despite the incense changes faced by our

organization in our first two years.

We have provided the documentation you have requested.

As well, we have given you a status report on the actions we have undertaken

with a view to each of the recommendations and suggestions contained in the

Auditor General's report. Sister Elizabeth Davis is our Chief Executive Office,

as mentioned, and Mr. Calvin Crocker is Vice-President, Administrative Services.

They are with me here today to answer any questions you may direct us,

especially related to operations.

Thank you.

CHAIR: Thank you, Ms Young. Sister Davis, do you

have any comments?

SR. DAVIS: (Inaudible).

CHAIR: Okay, what we will do is get right straight

into the questioning by the board members. Again, it can go anywhere; we do not

know at this point. Who is first off? Mr. Lush.

MR. LUSH: I have a question for Ms Young. I think

it is probably fair to say that this present restructuring of health care

throughout Newfoundland but particularly the St. John's region, the area that we

are giving attention to today, probably is one of the largest restructuring,

largest reforms, that we see in the public health care system in this Province

and in St. John's. I have just a general question to get things going. I wonder

if, Ms Young, you would like to comment on what you think has been your greatest

success at this point in time and also, in retrospect, what have been the most

difficult and most challenging events during this restructuring process.

MS YOUNG: Thank you, Mr. Lush. You are right, it

is one of the biggest restructuring of health care - not in this Province, in

this country. I just want to let you know that we get letters constantly from

other restructuring going on in the country who are amazed that we were able to

do what we did in such a short time.

Some of the things that I think are very positive: we

have redirected monies that were spent, for example, six financial services, six

kitchens, six laundries - six, six, six - into patients, which is the purpose of

what this money is supposed to be about.

I feel that the new organization is patient-oriented,

more than staff-oriented, keeping in mind that staff are an important issue but

the major parts of our money that we saved in the consolidation of services went

to patients; not to books, not to paper, not to pencils.

Number two: I think with the redirection of programs

we have now, the patient in our new organization is followed from birth to death

because we have developed programs that allow the patient to be considered. He

is no longer at St. Clare's or at the General or at the Grace; he is a patient

that can be followed no matter which institution he is in, and that has been

part of the reason for a lot of our consolidation.

Another wonderful thing that has happened over time -

and this is thanks to Sr. Elizabeth Davis and her staff - I mentioned in the

beginning that there were five unions, five separate unions that have been

consolidated with very little fuss, very little demonstration, over the past how

many years now? We are heading into three years that this has been done. Six

medical staffs, some of which never spoke to each other before, are now all

working together for the patient.

From a board point of view we asked our staff, the

board, who gave them policy to go forward and to do these things; and they did

it with very little fuss and very little interruption and with a considerable

savings of public money.

Does that answer your question?

MR. LUSH: Yes. I just have two more, Mr. Chairman.

One is related to the integration or the bringing together of the three nursing

schools here. A general question on that, I suppose, is: At this point are you

able to comment on how that is working under the new restructured system?

Secondly, I am just wondering about the nursing

program now in view of the fact that Memorial offers the degree program; and how

do the numbers compare to the people entering - for the want of the umbrella

term - your nursing program as opposed to those that are taking the bachelor's

program at Memorial.

MS YOUNG: I just want to let you know, the board

did set direction for staff to again, because of funds, consolidate the three

nursing schools. I think that is an operational matter, and I will let Elizabeth

explain the operational part, but the board set the direction for staff because

of the environment today. We felt there was no longer a Grace, a General, and a

St. Clare's, and it was cost-efficient to form them under one school. I will

pass that along to Elizabeth, just to give you the operational part of it and

the numbers.

SR. DAVIS: I think the whole plan to bring the

three schools together really pre-dated our organization. It really started

around 1991-1992, so there was a definite direction set years before we came

into existence.

Three things happened at the one time, and all three

are incredibly important for the advancement of nursing education. The first

thing that happened is - the three schools had their own curriculum. Each school

had its own curriculum. These three schools were brought into one so that we

could have a single curriculum, that we could focus education for the whole

Province not just nurses for St. Clare's, or nurses for the Grace, or nurses for

the General, but nurses for hospitals, nurses for community programs, nurses for

occupational health, so the whole spectrum could be better focused.

The second thing we did, which is most significant, is

that we agreed that there would be one degree program. A student today who goes

through our Centre for Nursing Studies will graduate with a degree from Memorial

University. Even though they will do their four years in our school they will

have a degree from Memorial University because we teach a common curriculum. If

I am a student who goes to the Memorial school, and you are a student who goes

to Centre for Nursing Studies, we both graduate with a degree.

No longer in this Province will we graduate nurses who

just have a registered nursing diploma. That last group of nurses was graduated

this past June. Western Memorial School, our Centre, and Memorial University all

now graduate degree nurses. As of the year 2000, which is the first graduating

class, all new nurses coming into the health care system in this Province will

have a bachelor of nursing degree.

The third thing is equally important to those first

two thing. The third thing is by bringing the three schools together we were

able to create a better critical mass. We brought in the nursing assistants. As

you know, they are called licensed practical nurses now, since last year. The

nursing assistants had been taught at Cabot College and they were really

isolated there from the health care system. They are now taught within our

Centre. As well, we are teaching programs for nurses post their normal training.

Special programs in gerontology and in mental health are now being taught

through the Centre.

As well, since last year when the nurse practitioner

became a regulated professional in this Province, our Centre teaches the course

for nurse practitioners. As you know, in September we had the first graduation

of fourteen nurse practitioners from the program. What we have done, and this is

very much consistent with national trends, is we have brought together what they

call the whole nursing family: The licensed practical nurse, the bachelor of

nursing, and the nurse practitioner who is an advanced practice nurse. That

whole group are taught within that same Centre and the bachelors of nursing will

have the Memorial degree the same as the person who graduates from Memorial

University.

I am really pleased that you asked this question

because that is one of our quiet successes. That is not one of the things people

hear very much about, but in one activity, all of which began in September 1996,

we have considerably strengthened nursing education for this Province. In terms

of the numbers, Memorial's class would be approximately sixty students, Western

Memorial approximately sixty students, and the Centre for Nursing Studies brings

in 120 students each year. Altogether in the Province 240 students come in. The

fallout is not terribly high for nursing students so we would probably graduate

between 200 and 220 in the year 2000, which would be the first graduation from

our school.

MR. LUSH: Thank you. Mr. Chairman, I said I had

one more question. To use the Opposition technique in the House, this is a

supplementary, but a new question after that, my final question to Sr. Davis.

Since at the end of the four-year period all nurses receive a degree, what

factors would decide which course they would enrol in, whether they would go to

the Centre for Nursing Studies or whether they would go to Memorial?

SR. DAVIS: There is a central intake, which we

call it, which is a terrible term. Everybody applies to the general program.

They state their preference for which site they would prefer to go to. Would

they prefer to do it at Memorial campus, would they prefer to do it at our

Centre, or would they prefer to do it at Western Memorial? They state their

preference. We give people preferences to the extent we can, and then the final

numbers which would fill two of the three programs. Obviously, the people left

over have only that third choice. The students overall, with some minor

exceptions, have been able to get their first choice of site. It is a critical

issue because students are happier, obviously, studying in the site they want.

They will all graduate with the same degree but they have the preference. They

are all assessed through the same central office.

MS YOUNG: I do not know if you noticed, but if

there is an opening - a young woman I knew applied to the Centre for Nursing

Studies in St. John's, got accepted in Corner Brook, and there became an opening

in her third year, and she just transferred over to her third year here at the

Centre. It was exactly the same curriculum. There is a girl from St. John's who

did not get her first choice but when an opening became available was able to

transfer without any loss.

MR. LUSH: A final general question, Mr. Chairman.

With respect to the time line of restructuring,

relocating from the different sites, I just wonder if Ms Young would like to

comment on where we are in terms of total integration. I refer particularly to

the institutions. For example, I understand that the Salvation Army Grace

Hospital is still in operation. I believe the plan was it should be closed by

now, I think. Maybe I am wrong. Secondly, I know that the Janeway is presently

under construction. You probably have a better experience than most people

knowing what is going on in terms of the construction and this kind of thing. I

just wonder where we are in terms of meeting the time lines, the dates for the

full integration of all of these facilities.

MS YOUNG: Every board meeting we ask that same

question. You will be glad to know it is a question we ask staff at every board

meeting.

I can say, from a board point of view, and we study it

every month, that to date we are on time and on budget. You will be glad to know

we are on time and on budget. As you know, a couple of steps have already been

taken. The Children's Rehabilitation Centre was closed a year ago and the

rehabilitation program was moved to the Janeway site. So one building has

already been closed.

To run a hospital, as you know, you cannot wake up one

morning and close it, because you have equipment, you have patients, you have

staff. Right now it looks like spring 2000 is where we are, but Elizabeth now

can give you the details, or Cal, whichever you would like to speak to, about

where we are, why it is 2000.

MR. LUSH: Here is just a question I would like

addressed. How does that fit in with your original plan? How are we progressing

in terms of getting there?

SR. DAVIS: The very original date, when the board

had announced with the Minister of Health in June 1995, we had set an impossible

target of December 1998 for the closure. That was before any work had been done,

that was purely looking at the issue in the broadest terms. Once we brought

consultants in, and I think you have seen copies of the Nycum report - people

who did the master plan and functional planning with us -, we more realistically

set the date then for December 1999, with the information from the consultants.

We are still looking at December 1999 to complete the building of the new piece,

which is the Janeway Children's Health and Rehabilitation Centre, and the

completion of renovations both inside the General and inside St. Clare's.

We then need time in the early winter to commission

the new building, decommission the old buildings, and then we have the actual

relocation. As Ms Young pointed out, you cannot just close down the Janeway

today and open the new building tomorrow. Transfers of hospitals do not happen

that way. They generally take several months.

We are confident, unless something very unusual turns

up in the renovations, that by mid-2000 the transfers will have happened: so the

building to be completed the end of 1999 and the transfer the year 2000.

MR. LUSH: Thank you.

CHAIR: Thank you.

MS YOUNG: I think government and opposition have

been kept apprised of this all the way through. We have kept the public notified

of this as we went along.

SR. DAVIS: I think that is an important point. We

have been very aware of the ambitious nature. Nobody in Canada has built a new

hospital in less than three years, so to start with we set ourselves incredibly

high targets. We also knew, though, the kind of stress this would put on the

system and we have several communications media, several newsletters that we

send out, and we do make sure that the Leader of the Opposition as well as the

Minister of Health's office get copies of those communications. They are

available to people to keep up with the progress as we move through the

restructuring.

CHAIR: Thank you, Mr. Lush. I just have a couple

of quick questions along that line also. Sr. Davis, you mentioned that there

would be approximately 240 graduate nurses, give or take, in the year 2000.

SR. DAVIS: Yes.

CHAIR: In meantime, it is two years without any

graduates now. Over the past few years I have personally known a number of

graduates from the various schools and a lot of them are leaving the Province.

What impact will a two-year delay in graduates have on the nurse staffing at the

various hospitals?

MS YOUNG: It will only be a one year -

SR. DAVIS: It is just one year. The graduates of

June 1998 graduated this year -

CHAIR: In 1999 (inaudible).

SR. DAVIS: There will be some graduates. Memorial

School will still graduate sixty students. It is our other two schools, Western

Memorial and ours, which are going from the three-year program to the four-year

program. In 1999 they will not have graduates. Then the year 2000 would see the

next group.

The matter is complicated even further by the fact

that there is an expectation of a nursing shortage across the country. So there

are two issues that we are dealing with. When we looked at going to the

four-year program one of the things we thought about was maybe in that third

year we would still have a group who could graduate without the degree, kind of

a special stream, but we said that would not be fair to the nurses we are trying

to get ready for the next century. We are ready, finally, to go with a degree

based program and we really should not make one group of nurses continue to

suffer. We did think about having that stream but decided against it in the

final analysis.

We are working within our organization and with the

Nurses' Union, as well as with other regional boards across the Province,

looking at this very serious question of a nursing shortage. Obviously the nurse

practitioner program will strengthen nursing but the numbers will not be large

enough to compensate what we are looking at here.

Another major issue we are facing is the number of

casual nurses. Through the nurses' negotiations this time they are looking at

converting casual nursing positions to permanent positions. We are developing a

number of strategies to keep the nurses who are graduating here, with confidence

that they will have full-time permanent jobs. Obviously we are waiting the

outcome of the nursing negotiations now. We really do need to be looking at a

number of provincial strategies to recruit more and to keep more nurses in the

Province, there is no question about that.

CHAIR: Thank you, Sr. Davis. Just one more quick

question. When the merger is completed in the spring of 2000 -

SR. DAVIS: The buildings?

MS YOUNG: Yes, the buildings, the physical.

CHAIR: Yes, and when all the staff have been moved

- because the Janeway will be moving, and whoever -, do you foresee at that

point in time that there would be a reduction in staff because of the various

mergers? Will there be special early retirement packages for people and that

type of thing? Any plans that way?

SR. DAVIS: They are two major questions you are

asking in one there. If I might answer them separately? The first question

first. When we went to government with the plan to close the buildings there was

an important reason for that. We knew that we were not ready, as we were

constituted in 1995, to face the many changes that are coming in health care,

particularly in our areas of health care, which is tertiary care and

rehabilitation. Major changes are coming: new drugs, new kinds of technology,

new ways to keep people alive longer [technical malfunction] and our new - I

think when we all saw the sheep Dolly on the front of Time our whole

world view changed dramatically.

All of these changes said that we needed in St. John's

to consolidate, that we had to be putting more money and more energy into direct

patient care and into research if we were going to be ready to take this

Province into the next century. We could not be continuing to put money into

buildings that were old and very difficult to renovate. That plan as you know

had been talked about in St. John's since 1983.

That it needed to be done; there was no question. The

big question is: How do you finance that kind of a restructuring? Because we

were not restructuring to reduce service; we were restructuring to position

ourselves to better provide the service and expand service. There was no money

available provincially for capital. The number of dollars that had gone into

rebuilding in this Province had decreased over time in health care, so

government did not have the $100 million or $130 million we would have needed to

do this.

When we looked at both sides of the question, we said:

Why don't we go with a plan that has never been done in Canada before? That is,

in closing the hospitals, to use the money saved by closing these hospitals to

pay off the loan which we would get to build it. Now that has never been done

anywhere else in the country. Whenever other hospitals were built, new hospitals

were built, either government gave the capital funding necessary or there were

major fundraising campaigns to raise the money.

Obviously this Province does not have the capacity,

through fundraising, to raise $130 million. So we went to government and said:

We can foresee that we would save roughly $20 million a year by closing those

buildings, and that we would amortize whatever was needed of that over a twenty-

to thirty-year period to pay back the loan for the building. Government agreed

with that approach.

In our health care organization, 77 per cent of our

budget goes to salaries and benefits. So if we are saving $20 million, a

considerable portion of that has to come from salaries, there is no question.

What we have made a commitment to is that we will see a reduction in staff, in

support areas and in management. It began to happen in 1996 and will happen up

to the time the buildings are closed. As a matter of fact, at this point in time

we have saved about $6 million of that $20 million, and the other $13 million to

$14 million will be with the actual closures.

Now there are two ways we could do that. We could wait

until the closure to lay people off, and be very crass about it, or we could

prepare for this up front. Obviously, the decision we made was to prepare up

front.

When we started this whole process, if persons got

redundancies then they could not, at the same time, claim UI. So that was a

major deterrent for anybody to take an early retirement package because they

just would not have the financial means they needed. So thanks to the work,

primarily of NAPE but also supported by us, we finally got that changed - that

Revenue Canada piece changed.

What we did, starting in 1996, was we started to have

early retirement packages where people could go early if we knew for sure that a

job would be saved by them doing that. We have had two of those programs in

place since that time.

In those cases where we know somebody is going to go

but they are not going to go quite yet - if you want to retire early today, we

know in six months' time or eight months' time we will need your job for

somebody else - we have been filling these jobs in a temporary manner. We have

quite a number of our support staff, for example, who are in temporary positions

today. They get the positions knowing that when the buildings close in the year

2000 they will be obviously losing their jobs at that time. Thus far, in the

restructuring we have done using that kind of approach, we have been able to

prevent major layoffs of permanent staff. We have reduced numbers of positions.

We have temporary staff who are often not losing the full hours that they had

but are losing a portion of the hours they had. We do know that we are going to

see a significant number of reduced positions when we close in the year 2000. We

are still hopeful that many of those will be temporary positions that will be

lost, but there will be some permanent positions.

We are working with each of the unions, primarily

NAPE, given the areas we are talking about. NAPE and ourselves are struggling to

find the best ways to do this thing that has not been done before in our

Province. There are times we find good solutions for individuals and times we

are still struggling to find solutions.

One of the problems we have - and we and NAPE are

trying to figure this one out - is that we have a bumping system. When somebody

is laid off, they are rarely the person who goes. We traced one of our layoffs

two years ago and there were thirty-five bumps. There were thirty-five people

who were bumped out of their position into another position as a result of that.

We and NAPE both agree that is too destabilizing; you cannot continue that. We

are trying to find a way to amend the collective agreement to prevent that

happening. We are each trying to find a way that is fair to the union and fair

to the collective agreement but also does not let that happen.

We are currently reducing positions for our central

kitchen and we are struggling to find a way to (inaudible) that.

CHAIR: I will probably come back to that issue

later on, but I will move on to -

MS YOUNG: Just to let you know, Mr. Byrne, from a

board's point of view, even though you hear the word `casual', the board is

cognizant of the fact that a `casual' is a person -

CHAIR: That is right.

MS YOUNG: - a person in a job. It might be casual

on a piece of paper, but it is a person. We made some decisions over the years

to be cognizant of the fact, to be kind employers to these people. A lot of the

people, 40 per cent of our managers, are not in the system. They are not working

in our system any more. These people were able to go forward and get other jobs

in other positions. However, we also had to let go some of the lowest paid and

the lowest educated people who are in our food service and laundry area.

Everybody in the board has a heart to realize that these people will not find a

job in today's environment in Newfoundland.

CHAIR: Just a comment and I will move on, with

respect to the bumping. I am after hearing some horrific stories with respect to

bumping and people being moved into positions where they really should not be.

That is the collective agreement, I know.

Sheila Osborne, do you have a question?

MS S. OSBORNE: Yes, I would like to address middle

management. One of my constituents called me in August. I think two years prior

to that they had been reassessed, and they filled out forms. I think these forms

were sent to the minister and they are probably still sitting on the minister's

desk. This person called me again last week, or the week before last. I think

there is something in the paper today, although I have not seen it yet. These

people are in limbo at the moment in terms of they cannot apply for a new

position that may be posted because that may, in effect, pay less than what they

will get when they are reassessed, when the reassessment happens. Can you

elaborate on that and say what is the projected date that this will all be

finalized for them?

SR. DAVIS: I wish I could answer the last

question, Ms Osborne, which I cannot. I can tell you about the process. Really

it is rooted in the very first question Mr. Lush asked - or commented - and that

is that we are doing something here in this Province that has never been done in

the Province before. The magnitude of the shift that came with the creation of

regional boards at the same time as we have severe financial constraint in the

Province was unprecedented in this Province.

When we set up the regional structures we met - not

we, I, because I was the only employee at the time with the Health Care

Corporation, for the first five months - with the senior staff at Classification

and Pay and said: What do we do about classifying positions? They said: Well, we

do not have enough experience to be able to classify the positions. We both

agreed because regionalization, as you know, is relatively new in the country,

not just in our organization.

We made an agreement at that time that we would

temporarily classify people, get our first year's experience, and then go

through the proper classification procedure. We had staff who were trained to do

the classification process but, as you know, in this Province, the organization

can do the paper work but it is the provincial government, through Treasury

Board's Classification and Pay Division, that actually makes the final decision.

So, the final decisions are out of our hands.

When we began the temporary classification, we

recognized we were making two changes at the one time. We were consolidating all

of our administration. So, if a person was a Director of Finance at St. Clare's,

that person had a much smaller scope than they would have if they were Director

of Finance for the whole Health Care Corporation. That was the first thing.

The second thing, we brought in a programmed approach

to patient care, which is: We consolidated the patient - like the cardiac

program, for example, crosses St. Clare's, the Grace, and the General Hospital.

We did two things at the one time.

When we looked at the classification systems across

the country, there is really no classification system that is able to cope with

that. We all recognize - we and Treasury Board recognize - that down the road we

need new classification systems, but that does not help for today.

What we agreed was that after the first year's

experience we would put in classification, the paper work, the completed paper

work, to Treasury Board. We did the first group, a significant portion of our

managers, in January of 1997. The timing was terrible, from our point of view,

because there was a freeze then in mid-1997 in terms of management

classifications, then there was an unfreeze, and then I understand there was a

freeze again.

The board, as well as the Provincial Health Care

Association, has contacted Treasury Board on a number of occasions asking that

the classifications be reviewed. The President of Treasury Board in June

indicated that they would be looking at that issue. I can only assume that is

what they are doing at the present time. We are in a very difficult position in

that we have done the work that we had to do in terms of preparing the

documents.

When we gave the temporary classifications, we did it

to the best of our ability and possibly a little bit on the conservative side;

because one of the risks you take in a classification review is that your

classification will be lower and then you will be in a position of having to pay

back money. We did not want that to happen, but neither did we want to undermine

the actual work.

It is a complicated situation, but the final step is

really not within our control. Our board has made representation on this issue

to the Minister of Health. My understanding is that she is following up with the

President of Treasury Board.

MS S. OSBORNE: The first group that have been

reclassified are sort of waiting for the Minister of Health or the Minister of

Finance to sign (inaudible).

SR. DAVIS: Yes.

Now, we have the work finished but we did not submit

the others because it was nonsensical.

MS S. OSBORNE: (Inaudible) there.

SR. DAVIS: Yes.

CHAIR: Further, to make that point, I was in

contact with the Minister of Finance, I think, this past spring. I had the same

call - not from the same individual but the same issue. As far as I understood,

it was in his office at that time waiting for final approval and signature.

SR. DAVIS: It may be a timing issue because it is

not just our organization; it all the regional boards in the Province. As you

know, there are fourteen of us altogether. They may have wanted to do the

smaller boards first because ours would be the largest.

MS S. OSBORNE: It is really frustrating for these

individuals who have in many cases probably done the work of two people, because

(inaudible).

SR. DAVIS: Have expanded skills.

MS S. OSBORNE: Exactly. Their lives are really in

limbo. As I have said, they cannot apply for another position because they may

very well be taking a position which will give them a lower pay; but, then, when

will it happen in their minds? They cannot really get on with their lives from

the point of view of any permanency, or what their salary would be, or where

they will be.

SR. DAVIS: It does apply to every manager in our

organization except me. It is all managers, front-line, middle managers, and

senior managers.

MS YOUNG: Again, it is provincial. I think that is

where the problem lies. Maybe not everybody has their work done or they, the

Minister of Health and Treasury Board, are probably - because that is quite a

number of people to (inaudible).

CHAIR: Sheila, just before you go on, I think I

appreciate the task that was ahead of you people when you first started out in

1995. I do not know if I understand all of the complexities because I have not

been involved but I would appreciate, for time effect and to get through as much

as we can, if the questions could be as precise as they could be and the answers

would be as precise as they could be also; because we have two days set aside.

If we have to go further we will, but - personally I have about forty or fifty

questions I want to ask. There may be some overlap with the Committee members.

Anyway, just to make a note and make people aware.

MS S. OSBORNE: Okay.

I would like to deal with the nurses. I do not have

the exact figures but there are about 3,000 nurses and about 1,400 are casual.

SR. DAVIS: For the whole Province maybe.

MS S. OSBORNE: Yes.

SR. DAVIS: In our organization we have 2,000

nurses and 300 to 400 are casual or temporary.

MS S. OSBORNE: Sister, how many do you anticipate

will be made permanent in the restructuring?

SR. DAVIS: That is a very good question.

Remembering that 400 are not full-time workers, I would point that out.

We have looked at, as part of the negotiations, the

numbers. As you know, there have been numbers put on the table. I would

anticipate, in our organization, we would see a conversion of casual and

temporary workers to easily seventy-five full-time positions over the next

couple of years.

MS S. OSBORNE: Because a lot of the complaints

that I am getting, some of the nursing supervisors, and one in particular I had

from the Waterford, who has twenty-six or twenty-seven patients, it is really

difficult to get a casual to come in on weekends and things. Sometimes she is

the crisis nurse and she is attending twenty-seven patients. That is a for

instance, and other folks who are working more hours than they probably care to

work, even though they are casual.

What it does is affect the economy because if you are

casual and you go to apply for a mortgage, you are not permanent; therefore,

your salary cannot be factored in there. So it puts their lives on hold even

though they have been casual now for a couple of years, doing a permanent job.

SR. DAVIS: I do need to say, though, that we will

always need a good number of casual nurses for two reasons. One is, we have the

regular leave that nurses have to take; for example, sick leave, annual leave,

leave for other kinds of things in the organization. We will always need casual

workers for that.

Then, because of the nature of our business, there are

times we have peaks and times we have valleys, but with our times we have peaks

so we will always need to be able to bring in casual workers for those high peak

times.

We estimate a significant portion of our numbers of

casual nurses we will always need by virtue of the kind of business we run.

There are, I think, ways we can look at converting some of the temporary hours

to permanent, and that is what we have been doing.

MS S. OSBORNE: From what I can see it has an

effect on the health care, too, on the care given to patients; because, as in

the case - and I am just citing this one as an example of the many calls that I

receive, but in particular - this particular person has no other permanent

people so she operates and everybody else is casual. In that instance, I would

think, there are probably two or three permanent positions that (inaudible).

SR. DAVIS: That is a case of recruitment. One of

the good things that happened with our consolidation is that nurses had more

options for other kinds of jobs. One of the bad things is that nurses had more

options for other kinds of jobs, so that sometimes there is a catch-up time,

where you are recruiting a permanent position because somebody has moved to

another site or to another place within the existing site. Some of that is a lag

time issue as well.

MS S. OSBORNE: On page 20, in figure 4, the

estimated annual savings related to the restructuring, the salaries and benefits

there add up to about a $14.5 million saving per year. Giving an average of

$50,000 a year income - we know that the bottom end won't be that, so just

giving an average - that comes out to 290 jobs. How many people, do you think,

at the end of the day, will be not given early retirement but will be just told,

`Your job is no longer here.' when the buildings finally merge?

SR. DAVIS: We have actually no way of knowing

that. Because we will have a mixture of early retirements and temporary

positions lost, we cannot estimate the number of actual permanent layoffs.

We have found in every case thus far that we have

overestimated the number of permanent layoffs. When we actually got into it, the

numbers were much smaller, thankfully, because of the initiatives we had put in.

Say there are 290 positions. The success in getting

that to a small number of layoffs will depend on the continuing of Revenue

Canada's policy about unemployment insurance being able to be collected; it will

depend on the success of our negotiations with NAPE about ways to mitigate the

bumping; it will depend on how many temporary positions we are going to be able

to create in the coming year, before the year 2000 comes.

I could tell you it could be 150; I could tell you it

could seventy-five. I have no way of even giving you an order of magnitude. All

I have been able to say to staff is there will be a considerable number of

positions lost but we will do everything we possibly can to mitigate the number

of permanent layoffs that will result from that.

CHAIR: Can I just interject a question here before

I move on? If the board has calculated that they are going to save $20 million a

year - and I saw somewhere in the document $25 million - obviously, like you

mentioned earlier, the major part of that is going to be jobs.

WITNESS: Well, $14.5 million will be jobs.

CHAIR: You had to use some numbers to come up with

that figure.

SR. DAVIS: There is no question about the numbers.

The question is how many of these will actually be permanent layoffs. Because of

the work we have been doing for the past couple of years, we have been putting

temporary people in some of those positions. It is still very hard for a

temporary person to lose a job, but they know it is temporary.

CHAIR: It must have a major impact on morale.

SR. DAVIS: It does, there is no question. That is

one of the reasons we have pushed so hard to do this exercise in a much shorter

period of time than would be normal for hospital building. Because it is not

fair to force people to wait too long to find out. Maybe I am naive, but I am

hoping that we will soon come into some prosperity in this Province that we will

be able to expand the services we are offering people. Because we know there are

many areas where we need expanded or new service, and that many of the jobs will

be new jobs created, so we will be able to mitigate it a bit that way.

CHAIR: Sheila, do you have more questions on that?

MS S. OSBORNE: Yes. In May 1996 the cost of the

restructuring process was supposed to be $70 million and $90 million, then it

went to $100 million, and then $130 million. Has this amount been revised or is

it still a valid amount?

SR. DAVIS: We are today looking at probably $135

million, Cal? We have made know to government that we expect it will be an

additional $5 million, which primarily includes things we had not anticipated;

the annex, for example. The annex is a fancy term for a shared boiler plant

Memorial shares with the Health Sciences Centre. We found when we did more

detailed work in that area that we have to replace more equipment than we

expected. We also know the financing is going to be (inaudible). We were

anticipating now, and Cal may want to add to this that, the $130 million is

going to be more like $135 million.

MR. CROCKER: The latest projection are at $135

million. As Sister said, there were three or four areas that we hit to bring it

from $130 million to $135 million. The big one was the infrastructure at St.

Clare's and the General Hospital. Once we had engineers in and they started

tearing into walls in terms of looking at your infrastructure in terms of

ventilation and heating systems and things like that, it made sense for us to do

more work than we had previously anticipated doing when we started the project.

The tear up is already done, so once the tear up is done it is a lot cheaper to

do the work now verses repairing everything and then having to do the work down

the road.

The other one that we did hit was in terms of the

boiler plant, as Sister said. We have a major issue there now with the emergency

power. We thought we were fine on the emergency power, the generators. We now

have two reports from consultants that say we are not fine on it and that we

have to look at replacing the generators which we thought we did not have to

replace.

The other big one that did bring it up from $130

million to $135 million was when we started doing the excavation at the site

over there. Again, we are over on bog land, and the estimates that the engineers

had done were off in terms of once you start digging out bog you have to keep

going until you hit solid ground. We ran up some extra money there.

CHAIR: Sheila, can Mr. Lush ask a question for one

minute and then go back to you?

MS S. OSBORNE: Okay.

MR. LUSH: A supplementary. I want to preface the

question by saying that these changes in our estimated figures and projections

sometimes give the impression that nobody knows where they are going. We are

living in the world of real economics and we try to predict what problems there

might be. Following up from Ms Osborne's question, I think there was an original

projection of $300 million in an earlier study. There was a $300 million

projection.

Now, with the escalation that is going on the other

Board projected $100 million to do it. Now we are at $135 million. Is it

possible that we will reach the $300 million that was projected in the

beginning? Or in as much as we can predict, do we think we are pretty much on

target?

SR. DAVIS I wish we had $300 million, actually. I

could spend it tomorrow morning to make an even better situation than we have

today.

You are right. When the St. John's hospital council,

prior to our Board's coming into existence, did its estimates on the building

two different models were coming in at $300 million. What we are looking at here

is a considerably scaled-down version. When we talked about the $70 to $90

million figure that was before we had done any work, other than the overall

planning. We had brought no consultants, no engineers, into that discussion. The

$100 to $130 million was the first major jump when we brought the consultants

in.

We have now tendered almost all of the new building I

think, Cal? We have either that work officially done or tendered to be done. Our

degree of comfort there is very high that the numbers are accurate. The

renovations you can never be totally sure about. We were renovating Emergency,

for example, at the Health Sciences Centre, which is only twenty years old. The

St. Clare's building (inaudible) is a much older building and we expected

surprises at St. Clare's, but when we renovated this twenty-year-old building

that had all the plans, we thought, in our Emergency we ran into, not literally,

a medical gas line that wasn't shown on any of the drawings. Everything had to

be stopped because if we had cut that line obviously we would have done terrible

damage. We had to stop and work new plans to deal with that.

These are the kinds of surprises that come when you

are dealing with a new building. Cal pointed out the land. The engineers told us

we would need so much infill. When they actually got in there the bog was even

deeper than they had anticipated, and I didn't realize how expensive dirt was. I

guess I am naive about some things. It is expensive to cart away bog and

expensive to bring dirt to fill in.

These are the surprises. With the new building itself

- I guess you probably can see it from this building - we are almost finished

the tender process so we are very much on target there. The renovations to the

extent we have tendered were very much on target. Our fear always with

renovations though is the unexpected. It will certainly not go to $300 million.

What will happen from now on with any additional costs is we are going to have

to see where we can accommodate the new changes elsewhere.

Calvin, do you want to add to that?

MR. CROCKER: The only other uncertainty, in terms

of the $135 million, is the financing we have allowed for it. Because again, in

terms of the process that government allowed us to set up, we are capitalizing

the financing charges as we are building. What we have done in terms of

projections is say that over the time period that we are under construction we

will incur about $7.3 million in terms of finance charges for the bridge

financing.

As to whether that stays on that $7.3 million or it

changes by some figure, I guess we are still not sure, because we are also going

through a process with Treasury Board trying to determine: do we continue to use

short-term financing, which we are now - and it is good at this point because

the rates are really good - or do we at this point in the project probably tie

in up to $75 million for long-term financing? There are two issues for long-term

financing: one now at $75 million and the balance in the year 2000, or do we

stay on short-term financing. The interest of $7.3 million is still a bit

susceptible to change.

CHAIR: Sheila, do you have another question?

MS S. OSBORNE: It would have been nice if it could

have coincided with the civic centre (inaudible).

Each time that the estimate cost goes up I guess that

means that less of the savings, if there are any savings, will be put back into

the cost of restructuring, doesn't it?

SR. DAVIS: No. What it means is that we still have

a fair margin there. It means that we are getting closer to using all the

savings to finance restructuring, rather than have some monies to put into

health care.

MS S. OSBORNE: Go back into health care, yes. That

is unfortunate. What are the savings based on? Here on page 21 in the second

last paragraph the Auditor General says it is unclear what funding base is used

to measure the savings. The Corporation incurred an operational deficit of $5

million in 1996-1997, $6.8 million in 1997-1998 and $10 million in 1998-1999.

She says: "As a result, it is unlikely that the Corporation will realize any net

savings from restructuring at its current level to retire the capital cost of

restructuring, now estimated to be $130.1 million." It said $130.1 million there

but now it is $135 million.

SR. DAVIS: First of all, these numbers were

anticipated deficits and the government subsequently put money in, so as you

know this past year we did not have a deficit at all. We broke even. The year

before we had the $5 million deficit.

This is a very difficult question you are asking us.

What we are saying is that if we do not close the old buildings whatever amount

of money we had to operate would be $20 million more. We will save $20 million

by closing those buildings. Will that mean we will have enough to run the

buildings? That depends on what money government gives us. Whatever amount they

give us, if they give us x million dollars in the year 2004, if we had not

closed the buildings we would need x plus $20 million to do the same amount of

work. Now this does not resolve the question of the money that we get annually

for our budget but what it says is: no matter what we would have gotten

annually, we will need $20 million more than that to do what we could have done

with that same amount with the buildings closed.

It is complicated to understand. Myself and Ms

Marshall had many goes around trying to clarify this with each other. The point

is, no matter what we get, whether it is enough or not, we need $20 million more

if we did not close those old buildings. That's not counting the maintenance

costs of those old buildings. Purely salary costs.

MS S. OSBORNE: That $20 million savings, is that

being eaten into by the -

SR. DAVIS: Of that $20 million savings, $13

million or $14 million of it - well, it depends. Maybe $10 million or $12

million will be used for financing over the next thirty years.

MS S. OSBORNE: Okay, but each time it goes up

there is less for health care?

SR. DAVIS: Exactly.

MS S. OSBORNE: Okay.

MR. CROCKER: We started out saying that we would

save $20 million. In terms of the projections that we have given to government,

we have already used about $6 million out of that $20 million to finance our

ongoing operations. It has just gotten eaten up in our budget processes. We have

about $13.8 million of the $20 million that we still have to save. The long-term

financing of $135 million over twenty-five or thirty years will cost us

somewhere between $11 million and $12 million a year, depending on what the

interest rates are at that time. We will still have enough savings to pay the

long-term debt but there is another issue with our operating budget. We don't

have enough money in terms of our operating budget. We are saying that

government has to deal with that as a separate issue, but we will get that

savings that we committed to.

CHAIR: Just a reminder, could people identify

yourselves before you answer the questions, for recording purposes.

I think Ms Marshall wanted to say something on this.

MS MARSHALL: The concern I have with regard to the

Health Care Corporation is that whatever savings you are realizing now as a

result of restructuring are being eaten up by your operational costs. If the

corporation has to finance $130 million, looking at your bottom line for 1998,

1997 and 1996, there is really no funding there or very little funding, if any,

to finance $130 million. I am assuming the expectation is that government is

going to have to put additional monies into the Health Care Corporation, because

while you may be realizing savings you are not realizing net savings. It is not

showing up in your bottom line. That is the concern I have, that the money is

not there in the Health Care Corporation to finance that $130 million.

SR. DAVIS: Ms Marshall is saying on the other side

the same way that I am saying it. We will save that $14 million by closing the

buildings and reducing staff to support those buildings, but at the present time

the first $6 million that we saved has gone into keeping our deficits down. That

$14 million we will save and we will use, as Cal says, $11 million or $12

million of that to amortize the loan. That money will be there to amortize the

loan. It will not be there to go against deficits that we might be incurring

through operations.

That is a separate issue though. Because if we did not

close the buildings whatever deficit we would have would be an additional $14

million of deficit added on to it. She and I are saying the same thing, that

there is a concern about the net operating budget of the organization, but

without the closure that net savings would still be added to by another $14

million. If we were running a private operation the $6 million we have saved to

date would have been excluded out. What that would mean is our deficits would be

plus $6 million for each of the last three years. Whichever way you cut it, it

is a problem.

CHAIR: One more question for Sheila and then we

will move on.

MS S. OSBORNE: It is just a comment. I was

horrified by the effect that the HST has had. Before the extra $5 million went

on, it was estimated that $10.3 million will be HST. That is phenomenal, and I

guess the chickens are coming home to roost.

CHAIR: Just before I move on - because if we are

covering a topic I think we should try and cover it, not go back to it - I would

like to ask this. The first sentence on page 19 of Volume I that was sent out to

everyone reads:

"The Corporation advises the main reasons for these

variances are as follows:

An increase of $1.7 million in underground parking...;

An increase of $2.0 million in road and sewer

excavation...;

An increase of $3.0 million in renovation work to

accommodate the expanded Cardiac Surgery Program, approved by Government."

Mr. Crocker made a comment with respect to the fact

that when you got into the bog over there, there was so much extra because you

had to go so deep. I had a couple of notes made here: Who did the original

estimates? Proper estimates should have been included when they did all this

work. Now you explained earlier that in the $70 million to $90 million, they

were estimates the board had done itself. Then they got engineers involved and

what have you, but it seems to be creeping up.

When you are doing an engineering estimate, those

types of things - because I've been involved - they would go out and actually

test the depth of the bog. All that should be done. Do you want to comment on

that? Because I have questions further on with respect to the process used for

consultants. Are we getting the best bang for the buck from our consultants?

MR. CROCKER: I am certainly not an engineer so

this answer would have to be in terms of you getting it from a generalist. We

did have all the engineers that we would require on a project like this in terms

of the structural, electrical, mechanical and the companies that come in to do

the tests on the bog and everything else. We did have all that in place.

As part of that process we also have George Greenland

who is our project manager that came down from the Department of Works, Services

and Transportation and again, he has an engineering background. Our director of

facilities management who is also heavily involved in this, Keith Boland, is

also an engineer. From the engineering perspective we certainly had it all, but

I guess what we are told is that on any big project, even when you do testing,

it is not necessarily dead-on. The testing was done; we still ran into some

additional cost.

CHAIR: I can see (inaudible) a situation arose

like Sister Elizabeth said, when you went into the older building you had this

gas line going through it. That can create havoc, I can understand that, but in

the normal procedures you would think that type of thing certainly would be

covered.

MR. CROCKER: Yes. It was done but there was

(inaudible).

CHAIR: Mr. Smith.

MR. SMITH: Thank you, Mr. Chairman.

CHAIR: Before you go on, it is 10:45 a.m. now. Do

we want to take a ten or fifteen minute coffee break and then come back to you?

Would that be okay?

MR. SMITH: No problem with me.

Recess

CHAIR: I think we left off with Mr. Smith about to

ask a question.

MR. SMITH: Thank you, Mr. Chairman.

You spent some time looking at the capital (inaudible)

cost of the restructuring. I guess we have just alluded to savings that would be

included on the operational side. Right now, what is the current operational

budget for the Corporation?

SR. DAVIS: Two-hundred and ninety-five million

dollars of which government gives us $250 million, roughly.

WITNESS: Two hundred and sixty-seven million

dollars.

SR. DAVIS: Okay, $267 million.

MR. SMITH: Two hundred and sixty-seven million

dollars from government. (Inaudible) the remainder?

MR. CROCKER: I guess the breakdown of our budget

is this. We have out-patient revenue of about $4.7 million; in-patient revenue -

that is insurances and the like -, $11.2 million; other income, $14.7 million;

provincial plan revenue, $267.5 million. That gives $298.2 million for our total

budget.

MR. SMITH: What percentage of the current

operational budget will (inaudible)?

MR. CROCKER: In terms of the total, the

administration and support block is $82 million of the $298 million.

SR. DAVIS: Cal, will you just give a breakdown of

that?

MR. CROCKER: In terms of the administration

itself, it is $7.6 million annually. That is in the administration block itself.

MR. SMITH: Now I guess what is more relevant to

what we have been discussing here this morning is that in terms of where we are

coming from, obviously we are hearing this morning that this restructuring is

going to realize some real savings in terms of the operations. What will savings

be on the administrative side?

SR. DAVIS: Some of the $6 million we have already

gotten is because of that. When we began to restructure - we use the term

restructuring to mean more than the buildings. When we began to reorganize -

probably a better term - we decided we would not have site administrators. As

you know, at each of the sites prior to our existence there was an

administrative senior management team. The Janeway would have had one, St.

Clare's, the General and so on. We made the decision in our organization we

would not have that. We have only one senior team now, myself and five

vice-presidents. That replaces the six senior teams that were there before.

We also have consolidated our financial system. So

there would have been one director of finance for the Janeway, one for St.

Clare's and so on. We have consolidated our human resources. We have gradually

moved almost all of the administrative structures out of the individual sites

now and it is consolidated at the Waterford Hospital site.

MR. SMITH: Did each of the facilities, prior to

this consolidation, have foundations that were operating and actively raising

funds for those institutions?

SR. DAVIS: Yes. The two pieces we did not

consolidate were our auxiliaries and our foundation. There were six foundations.

There are now five plus a fund raising office. The General Hospital has its own

foundation still, St. Clare's has its own foundation, the Waterford has its own

foundation and the Janeway has its own foundation. There is a foundation called

the Newfoundland and Labrador Society for the Physically Disabled which gives

some money to the Children's Rehabilitation Centre. The Grace Foundation, which

was a very new foundation, at the request of the Salvation Army has just become

a fundraising office as opposed to a foundation.

Our board said to the foundation boards: You do what

you think will get us the most money, to be blunt, whether you come together as

a single foundation or stay as separate foundations.

There is some recognition that the Waterford Hospital

Foundation is different from the others. Its main purpose is not to raise money,

but as you know, it runs the Mill Lane operation for us, which is an incredibly

significant employment industry for people with mental illness. They also

support groups having plays around mental illness and so on, so they are not

into fundraising the same as the others are.

The children's foundations work closely together and

our three adult foundations are hoping to work more closely together.

MS YOUNG: We as the board meet on these

foundations four or five times a year. We have meetings and cross information

and set direction with them.

MR. SMITH: How much money are we talking? What is

being realized right now by these various foundations?

MS YOUNG: I know that the General Hospital, for

example, in the last ten or fifteen years has raised over $10 million. I will

give you that example. I do not know if we have facts or figures. In excess of

$25 million maybe in the last twenty years have been raised by the foundations

and auxiliaries.

MR. CROCKER: It tends to be, from all, around $2

million a year. Some years that is up a bit, some years it is down a bit.

MR. SMITH: Is that including the Janeway?

MR. CROCKER: That includes the Janeway. We get

about $700,000 to $800,000 a year from the Janeway for equipment purchases for

the child health program.

MR. SMITH: Now, you mentioned the Janeway -

CHAIR: Excuse me. If you are going back and forth,

we need, for the recording purposes, your names.

MR. SMITH: Thank you, Mr. Chairman. I would assume

by now they would recognize my name.

In terms of the Janeway you mentioned that the money

is being used for different purposes. Am I to assume the same thing would apply

with the monies coming from the other foundations, that that is where it is

going, into the area of purchasing equipment for the various facilities?

SR. DAVIS: Primarily, although not solely. For

example, the Janeway Foundation this past year has funded a telepsychiatry

project which has proved to be incredibly successful. Because there were no

child psychiatrists on the West Coast of the Province, the children on the West

Coast who needed access to psychiatry services, did it via telemedicine, with

the monitors and so on. The Janeway funded that as a pilot project, and the

evaluations on that showed the children themselves, the parents, as well as the

staff, were more than satisfied with it. So we are trying to find ways to

sustain ways that on an ongoing basis.

The Janeway and the General also give money for

research. Each of the foundations will also make contributions to our libraries,

for example. Although the majority of the money would go into equipment, it has

not all gone into equipment. Perhaps the biggest example is this current year.

The General Hospital Foundation, in partnership with the Hibernia unions, is

funding the renovation of the Miller Centre. That is the biggest departure we

have had from just buying equipment.

MR. SMITH: Okay, if I could just switch gears for

a couple of minutes. From the Auditor General's Report, there are a number of

specific instances that have been in question in terms of the expenditure of

corporation funds. On page 45 of the briefing document were references to salary

levels established. It says, "The approval of the Department of Health is

required if the Corporation wishes to appoint the successful candidate of a job

competition at a salary level in excess of Treasury Board's policy. Our review

identified five instances where the Corporation recruited individuals for

management positions and appointed these individuals at a salary level in excess

of Treasury Board's policy without obtaining the approval of the Department of

Health."

I would point out that the Auditor General points out

in the report there was a significant difference in terms of the salaries that

were eventually paid and the levels that had been previously established. How

could this happen?

SR. DAVIS: Well, this comes back to Ms Osborne's

question about the classification of managers. We do not know what the true

classification of any of our managers is, except me. Every other manager in the

organization has a tentative classification, and very clearly because we needed

to have experience with the new organization. What has happened, and I think our

explanatory note says that probably too briefly, is, we have had to make a guess

at what should be the appropriate level. In the five instances noted, for those

five positions, there were no permanent classifications already identified; they

were still temporary classifications.

MR. SMITH: Were these people who were already

within the system?

SR. DAVIS: No, these people came in from outside.

I think three of the five were.

Again, we made estimates based on the classification -

the same that we have done with all of our classifications to date, Mr. Smith.

We have made estimates of what the appropriate level would be.

Now, compared to the former level, in those instances

we said the estimates should be higher. We said that for most of our

classifications.

MR. SMITH: Was this done in consultation with

anyone within government, or was it strictly a decision of the corporation?

SR. DAVIS: It wasn't strictly a decision of the

corporation in a sense. For those five positions, we did not discuss them with

the Department of Health or Treasury Board. Our position, as I said from day one

when I met with the senior officials in Classification and Pay, was that we

would set tentative classifications pending permanent classification being made

by Classification and Pay.

Despite our attempts, as early as January of 1997, we

have not been able to get permanent classifications. So for those five we saw it

well within my purview, since we are still on in a temporary status, that I

could set the temporary level.

It all comes back to the fact that all of our

management positions, except mine, are temporarily classified and we have not

been able to yet get permanent classifications.

MR. SMITH: Okay. Just continuing on with that, we

could, looking at this reference to termination and annual leave as well - this

is page 46.

SR. DAVIS: I am sorry, Mr. Smith, which reference?

MR. SMITH: This is page 46. We are talking about

the Voluntary Termination Program and payments for annual leave.

Again, these are two instances that have been flagged

by the Auditor General's Report. It pointed out that in both these instances the

procedures, as we understand them, had not been strictly followed and adhered

to. What would have happened in both of these instances?

SR. DAVIS: That was our first (inaudible) program.

I am happy to say that government then adopted the program after we had it.

We made a decision to go with the redundancy policy

that was in accordance with government policy. I guess the first time we did it,

we did it in the way that we thought would be best for our employees. It

predated government's change in policy and they were waiting, I would assume,

for the change in the relationship with Revenue Canada and the unemployment

insurance. We probably did it more quickly than we should have, but we felt it

was critical at that point, the first year of our history as an organization.

MR. SMITH: What about the annual leave?

SR. DAVIS: Is that in B section?

MR. SMITH: Yes.

SR. DAVIS: These were individual payments that

were made by our predecessor organizations, not by our organization. But

remember the first year, which is what the review covered, we were still

honouring the agreements that had been made by the previous organizations. Some

of the payouts actually were in our first year of existence but they were

decisions made by our predecessor organizations.

MR. SMITH: So you inherited this from the -

SR. DAVIS: Yes, I think there were five persons

altogether, and their previous organizations had made these arrangements.

MR. SMITH: Thank you.

CHAIR: Mr. Whelan?

MR. WHELAN: Thank you, Mr. Chairman. I have just a

few questions.

The Auditor General made some mention of

inconsistencies in data submitted to the Department of Health. There was also

some mention made of information or data that was not available. I was

wondering; you mentioned before that you changed from a function-based,

site-oriented approach, as was mentioned here, to a program-based approach. I

can understand the upset and the confusion that often comes with a transition

such as this. Could you just run us by some of the things you had to go through

in this transition, and how it may have affected things like data information

inconsistencies and probably loss of some information?

SR. DAVIS: I do not think we lost any information.

I think there are two issues here. One is the way we report data to the

Department of Health. The second is what happened within our own organization.

As you know, we are grappling, as a Province, with

ways of reporting to the Department of Health when different organizations have

different levels of computerization and different ways of structuring their

information. Going to two new systems - going to the regional system and going

to the program system - meant changes in that. The Department of Health could

not keep up with the changes that we were making as regional boards because we

were all making them at different levels. That is one issue.

Within our own organization, I have a very high

comfort level that we did not lose any data. What we did not do, and we have

since corrected, as we pointed out in our document, was that every time we made

a specific change we did not get specific board approval for that change in the

budget.

The easiest example: in 1995, we would have had a

department of physiotherapy - we have had six departments of physiotherapy - so

all of the physiotherapists in our organization would be in departments. When we

went to programs in 1996, we took out our department of physiotherapy altogether

and we put physiotherapists in the medicine program or the cardiac program or

the child health program.

We moved around the budget out of the department of

physiotherapy, to zero that budget out, and we put bits and pieces, depending on

how many physiotherapists or parts of physiotherapists, in the programs. We did

not get board approval for every one of those changes. We kept the finance and

audit committee aware of where we made the changes but we were not tracking

individual amounts. The Auditor General's staff rightly pointed that out.

Subsequently, we are doing that. The magnitude of the change in the first

eighteen months, well, we would have probably needed a lot of additional staff

to enable us to do it step by step like that. What we did do though, in

recognition of the Auditor General's concern, is we tabulated every single

financial change. Cal, I think we collected that in a manual tracking every

single policy change for those first two years. Now, since the Auditor General

has been in, for each financial change we actually formally make a motion at the

board level to make the change.

In addition to our own internal changes though we also

have other external changes. For example, the community homes that have mental

health patients in them in Conception Bay South, that had been previously paid

out of the Department of Health directly. That was put under our budget. There

were changes like that as well that compounded other things that were happening.

Cal, do you want to just give them more detail on some

of that?

MR. CROCKER: Yes. Just in terms of the financial

statements, as the Auditor General pointed out we did go through a lot of

changes that we did not have officially approved. What we also did is this. Our

finance and audit committee meets monthly. At every audit and finance committee

we take a copy of our audited and financial statements for the previous month,

or our unaudited financial statements. That shows the annual budget for the

Corporation and then the monthly allocations under variance analysis. The

changes were certainly discussed at the audit committee and the audit committee

were certainly aware of what we were doing, but there was no formal approval of

every change that we made.

What we found that first year is that we were making

so many changes that we found it easier not to be trying to track it, because

all we were doing was transferring from within the clinical components. The

clinical block in our financial statement, we were taking it from a department

of physiotherapy, which was a clinical component, and putting some cost in the

cardiac program, the re-hab program and the medicine program, which were also

clinical blocks. I guess our comfort level, from an operational side, was that

the costs were all in the clinical block. We knew what the financial situation

for the Corporation was in the clinical block.

SR. DAVIS: I think the magnitude of what we did in

that first year - anybody else combining six companies whose operating budget

was anywhere from $10 million, our smallest one, to our largest one which was

$125 million, would have had an extra group of people doing this kind of thing.

We not only did not have an extra group of people but we had cost reduction in

our budget for restructuring. We did not get the kind of one-time costs that

companies merging can bring extra people in to do this. We were operating within

our existing structure, going from six financial systems that were not

compatible with each other to one financial system. At the same time we were

moving. We not only consolidated six financial systems but we moved staff from

six finance offices into a seventh office at the Waterford site. That was one

example.

The kinds of complications you would expect to happen

happened but through it all our finance and audit meetings were very stringent

meetings. Cal and I are held very much to task at those meetings. They were

constantly tracking, in an informal sense, everything we were doing. Since that,

as I said, we have done the actual detailed tracking just to make sure that the

accountability was there, and it has proven to be so.

MR. WHELAN: With regard to the transition to a

program based structure, what is the status on that now? Has the transition

complete or is it still ongoing?

SR. DAVIS: The transition is complete. We made a

decision that we would take the first year to plan this because it was so major

for us. We put in the program leaders in June 1996. We now really have two good

years behind us with the program structure. I can honestly say some programs

were, from the beginning, easier: women's health for example.

Because St. Clare's had transferred obstetrics in the

early 1990s, women's health was already pretty much functioning as a program.

Something like medicine, on the other hand, which had three distinct groups at

the Grace, St. Clare's and the General, took longer. Right now those programs

are much more cohesive.

The two very good things that have come out our

program base are these. The first thing is we are including people from the

community in advising those programs. Individuals from the community are helping

us look at our cardiac program, or look at building of the re-hab centre, or

whatever. That has been a benefit. The second good thing that has happened is we

are starting to be able to do some good research. The last

section of Ms

Marshall's report talks about that fact. In health care we do not do a very good

job at evaluating the outcome of the patient care. We do a good job of

evaluating other kinds of outcome, financial. We are part of a couple of

national projects now looking at how to evaluate how well we provide care. We

could not have done that while we were all separate in the city. These are two

good things that have come out of this.

The bad thing that has come out of it all is that

there is a lot of stress on staff. If you have been used to being part of the

physiotherapy department, for example, and now are just a member of a program,

that is a major change to make, even for professionals. That has taken some

time. If you have never talked to critical care nurses at the General and you

have been at St. Clare's for twenty-five years, now being part of the same

program takes a bit of getting used to. There have been the growing pains of the

magnitude of that kind of change, but I am more comfortable today, two years

later, that we are better positioned now to improve the kind of health care we

are delivering than we have ever been before in this city, which is good news.

CHAIR: Excuse me. Ms Marshall, do you want to make

a comment?

MS MARSHALL: Yes, please. Could I just go back and

talk about the financial information that I had trouble accessing or had

problems with? What I was trying to do is take the deficit that the Corporation

had in 1997 and compare it to the budget and try to determine exactly why they

had a deficit. Because originally when they submitted their budget they thought

it was going to be a balanced budget, and as the year wore on actually it became

a deficit.

The problem we had was that the budget numbers kept

changing. If you will look at figure 6 on page 32, I have tried to demonstrate

the problems I had. The budget numbers kept changing almost every month. The

numbers that caused the budget to change - there were, I would say, literally

hundreds if not thousands of transactions. I think Mr. Crocker would be more

familiar with it. The frequency of the changes to the budget - there were so

many changes there that I had quite a lot of problems trying to work back and

try to reconcile their deficit with what they started out with as a balanced

budget.

After spending several days working with the numbers I

could not reconcile the numbers. I had discussions with Mr. Crocker and also

with the Department of Health. The Department of Health also expressed an

interest in reconciling the numbers. Sometime around that period they put in

place a committee to look at the numbers and I think that they were going to

reconcile the numbers. Whether they did I do not know, but I was very interested

in trying to narrow down exactly what gave rise to the deficit. That is

basically the purpose of the review that I tried to carry out.

CHAIR: Mr. Crocker.

MR. CROCKER: Yes. In that first year, I guess, we

did go through a lot of changes in terms of trying to get a handle on the

budget, because as Sister said what we did was basically bring together five or

six organizations, and try to get a good handle on their exact financial

position. Because all we basically did was government told us that on such a

date (inaudible) have a regional organization. We were put in place as the

senior team, and my personal experience was the Waterford Hospital. Now all of a

sudden it is the six facilities of which we did not have any background in. I

guess bringing those budgets together and making them reasonable in terms of the

circumstance that we were in caused the changes.

Government did set up a budget review committee and

there was a final report that was done in November 1997. That committee did not

concentrate too much on all the budget changes. I guess what the committee

concentrated on was looking at our five year projection for the Health Care

Corporation: was that consistent and was it realistic? The report that came in

from the budget review committee is that: Yes, the projections were good, and

they agreed with the projections that we had made for the five year projection

for the Health Care Corporation. They also looked at: Does the Health Care

Corporation need some additional money in the base budget to help with those

deficit projections?

Again, the budget review committee agreed with the

recommendations that we had made personally to government that we were certainly

underfunded for the types of activity we were carrying out in the Corporation.

That report did get done. It did not go into detail in terms of trying to

reconcile the numbers because at that point we said: That was history. In terms

of your future, do you have a good handle on your budget projections? Again,

from that process they did not change any of the numbers that we had, and they

went through it in detail in terms of our department and programs to make sure

that our projections were consistent.

CHAIR: Mr. Whelan.

MR. WHELAN: I have no further questions at this

time, Mr. Chairman, but maybe a little later.

CHAIR: Thank you.

Just before I move on, a couple of quick statements

that I would like to get your comment on, because I don't know if this is

accurate or not.

The board has gone through a program directed type of

service rather than departmental. I remember, maybe two years ago, speaking to

someone and they were saying that within the health care service, not the board

but within the operations of it at that time, that other provinces had gone to

the program directed service a number of years ago, and in actual fact they were

trying to get back to what they had left.

Is there any truth to that statement whatsoever,

because it seems strange?

SR. DAVIS: There is really no truth to the fact

that anybody who has gone to program base is going back to function base. That

has not happened across the country. What has happened across the country is

that some people who have gone to programs are changing their approach to that.

For example, in St. John's, New Brunswick, they

decided to phase in their approach to program, so instead of going all at once,

which is what we did, they said we will go with a couple of programs first. So

they are in a situation now where they are half program and half not and they

don't know how to get untangled. As recently as Friday I was talking to a senior

physician from there who expressed a concern about that.

Sunnybrook Hospital, for example, in Toronto had gone

to program base based on one model, but really felt that was not adequate

because they were about to become merged, you know, with the Women's College

Hospital there. So they changed the kind of approach to programs.

However, across the country, as well as in the United

States, there is a recognized management direction today called Integrated

Delivery Services which is the today standard for how you deliver tertiary care,

and that is the generic term for what we are using in our organization.

Did we use the right approach? I don't know. Because

one of the problems we face across the country is that despite the fact we are

all going program based, there is not one recipe that we are all comfortable

with which will work for us. That is why, when moving into programs, we said two

things: One, we would take a whole year to do it; and we involved many, many

people in the planning that year, including the people we call consumers, people

from the public. Secondly, that we would adjust it over time if it was not

working.

I went through the spring meetings with all of the

directors of our programs, including physicians, and in the fall we have had a

review of all our physicians in charge of programs. There is not one of them who

would want us to go back to the way it was. They all think we are not going fast

enough in the new direction, but none of them would argue that the way it was,

was better than the way it is today, from a management point of view.

It is modern thinking that says you should integrate

health care services. That is the new management thinking, and that is all we

are doing here.

It is also helping us, though, link with long-term

care and community care because we could not do that the way we were. We were so

fragmented we did not, as we say colloquially, have our act together. Now, when

we talk about mental health, we are talking about all mental health we provide.

So when we talk to a community about mental health, we can talk with one voice

and that is better.

You may have heard, you would have known, last month

we got approval for a senior's care program so that we can focus that kind of

care and link better with the nursing homes in the city. I cannot even imagine

how we could possibly deliver health care in a regional structure and not have

programs. It is beyond my understanding.

CHAIR: Thank you.

On page 123 of volume 2, the Statement of Revenue and

Expenditure, I will ask just one question and get back to the funding of the

restructuring, the $135 million, and the savings.

Under the 1998 column, you have revenues,

expenditures, and at the bottom you have a deficit, basically, of $1.9 million.

Is that correct? You can set me straight on this one if I am assuming something

wrong here. You say already you have saved $6 million and that the Province put

in, was it $7 million extra this year?

WITNESS: (Inaudible).

CHAIR: That is over $14 million. I don't think

those figures are shown. Shouldn't that be a plus of $12 million now?

MR. CROCKER: What you are looking at there is the

consolidated financial statement. This is the first year under the new

not-for-profit reporting requirements that we have a consolidated statement.

What you have there is the operating fund of the hospital, the board fund of the

Health Care Corporation, plus our foundations. The general foundation, the

Janeway, everything that we basically control.

In terms of the figures you are looking at there, you

are not only looking at the hospital operations. In terms of the actual

corporation for last year we had about a break-even financial position,

whereas

on a consolidated basis we had a $3.2 million surplus because you are bringing

the foundations, the hospitals, the board fund and everything into the

statement.

MS MARSHALL: That is 1998?

MR. CROCKER: Yes.

CHAIR: Do you have a comment on that, Ms Marshall?

MS MARSHALL: Okay.

The operating fund, that would be on page 97. I think

this goes back probably to an earlier comment that I made with regard to

financing the $130 million. If you look at - I was using the consolidated

statement, but you can also use the operating fund. If there is already savings

- I think you said of $6 million - that means that there would have probably

been a $10 million deficit if you had not realized the savings. The concern that

I have is that your bottom line is such a large deficit that there is going to

be no money there to finance the $130 million.

The question I would have is: Where is the money going

to come from to finance the $130 million? If you look at page 96 you will see

that the bank indebtedness is already $7.3 million and there are also other

liabilities there. So if the corporation is already owing the bank money, where

is the money going to come from to finance the $130 million? That is where I was

concerned.

SR. DAVIS: That is a major concern but I want to

put it in perspective that if we never built anything, if we had left all our

buildings as is, we would still have to finance the $130 million. It is just

that there would be an extra $20 million a year on the current operating. The

problem would not be any less. It would be slightly more, actually, a couple of

million dollars more.

The question is a very real question, a very important

question, but the buildings are not the issue here in terms of that because if

we did not close the buildings we would have to find $20 million more anyway

every year just to operate what we were operating.

CHAIR: If I am reading you right, what you are

saying is the savings of $20 million is not really going to be there to take the

$13 million out to finance the $130 million?

SR. DAVIS: Well, that is what Ms Marshall is

afraid of.

MS MARSHALL: Yes.

SR. DAVIS: All I am saying is, if we had done no

building we would still have to find that extra $20 million every year that we

will save because of the new buildings.

CHAIR: Thank you. Anna?

MS THISTLE: This is certainly a complex

arrangement. From the very first time that this idea started out in 1989, demand

for service has certainly changed during that period, and the initial outlook

for $300 million.

I was kind of intrigued with Ms Young. In your opening

remarks you mentioned that this system would be looking after patients or

individuals from the cradle to the grave. That approach has been very successful

for financial institutions for marketing purposes. For the health care system,

do you have a sophisticated computer system in place now that would actually do

that tracking?

SR. DAVIS: It is being put in place.

MR. CROCKER: I guess it is like everything. It is

like the rest of the systems out there. When we took over there was some

computerization in all of our sites in St. John's but none of it tied together,

and everyone was developing systems basically as they saw their operations

develop.

What we have been doing - the first year we spent

consolidating all of our administrative systems: the general ledger, the

payroll, the materials management, and human resource systems, I guess the basic

things that you need to do to be able to run a business of any type.

The process that we are currently going through is

consolidating our clinical systems so that when we admit a patient into the

system, the patient will be able to be tracked no matter what building you are

in. We are going through that process now. It will be June of 1999 before that

process is completed.

Eventually what we want to get to, in terms of all of

our systems, whether it is the clinical, the labs, the pharmacies, or the

(inaudible), is that there will be one consolidated system. The buildings will

not matter in terms of the St. John's system. We will actually get to a point of

having an electronic patient record, and at that point we can trace you through

the system. At this point we can do it but we do it manually and there is a

paper chart. If you go from the St. Clare's building to the General building,

the chart follows you. Under the new system there will be no need to do that. It

will be an electronic transfer.

MS THISTLE: Are you saying that for people out

around the Province even, once you are hooked up to all areas of the Province -

you know, if Jane Doe comes in from Grand Falls-Windsor her whole chart will be

available to you. One of the benefits would be that you would have her history

right from day one, and it would also benefit you for duplication,

over-prescribing drugs and whatever. Is that the initial idea once you are done

with that system?

SR. DAVIS: There are two levels happening at the

same time. In our own organization we are concentrating on ourselves, on getting

our system like that exactly. So, if you go to St. Clare's tomorrow with a heart

attack and then the next day you go to The General to get heart surgery, we are

able to track you electronically.

However, the provincial connection we couldn't control

because we are just one of fourteen boards, but we have been a major advocate in

the sytsem for the creation of the Newfoundland and Labrador Centre for Health

Information. That body which was created two years ago by government is actually

under our board but it is a provincial body, and it is the responsibility of

that body to do what you are talking about. So while we do our own in-house,

Central West does it own in-house and Labrador does it own in-house, this centre

for health information which link all of our boards together.

If you are in a car accident in Corner Brook and you

have to be airlifted to the Health Sciences Centre, you will be able to send the

electronic information from Corner Brook Hospital to the Health Sciences Centre.

We can't do that today, and one of the reasons we can't do it is because we

don't have a unique number, for example. In Corner Brook you have one number and

in St. John's you have a different number. So this Centre for Health Information

which is provincial will be starting by creating a unique number for all of us

and then will gradually help us link to each other, what we are doing inside our

own organizations today. That is a major step.

I will tell the group here, but you probably already

know, that that has not happened yet anywhere else in Canada. Nearly every other

province now in Canada has a centre like that created - they call them by

different names - to try to do that in their own provinces. So it is not like we

can buy is off the shelf somewhere; it does not exist. We are all kind of

developing them at the same time.

I think the ultimate goal is that we will be able to

do that right across Canada. So if I am visiting Ontario on holidays and have an

accident and am airlifted back to St. John's, the electronic transmission of my

record can happen. At the national level there are political problems that are

greater than just the technical problems.

So it is happening at three different levels, within

our organization as Cal described, within the Province through the Newfoundland

and Labrador Centre for Health Information and at the national level through a

body called the CIHI, the Canadian Institute of Health Information. So it is at

three different levels that it is happening.

You are right, Ms Thistle, that is really essential -

back to the question about integrated delivery systems - that we have that kind

of integration of information. The biggest concern with that is confidentiality

and privacy. That is why in this Province we are working with SmartHealth

because SmartHealth was created by the Royal Bank and we know we trust a lot of

our information to banks and they have the capacity to keep that confidential,

they have those kinds of systems developed.

So, working with those kinds of groups, I think we

will be able to develop the confidentiality issue. To strengthen that, though,

when our board set up a board to handle the Centre for Health Information we

actually had the President of the Human Rights Association named as a member of

that board so he could keep us accountable on the confidentiality and the

privacy side.

MS THISTLE: I could imagine that in future there

would be a big cost savings realized from just that system, when you go from a

paper based to an electronic system. The savings will be realized throughout the

Province, not only here in St. John's.

SR. DAVIS: The savings are going to be a bit down

the road though, because while we are doing all of this the international level

has decided to change the way they name diseases. The system we use now is

called ICD-9. The international world is changing that to ICD-10. So there are

going to be costs upfront to help us change to those systems, the costs of

implementing computer systems. So while there will be better care, I think we

are going to be a number of years, as well, amortizing loans for that kind of

initiative.

MS THISTLE: This that you are working on as local

issue, will that be complete once you restructure the actual buildings?

SR. DAVIS: Yes. Our goal is June of 1999 to have

what we call clinical consolidation completed, but that will only help us within

our own walls; we won't be able to link. However, what we have done in St.

John's is we have put in a link with the community health board because of the

common people we serve and we also have full linkages with Memorial University's

medical school because we share staff there. We are also piloting a link with

Gander to see if we can start to do that outside. So there are some very

creative things happening in that area, because that is the one area that is

absolutely essential if we are going to make major new directions in improving

the quality of health care.

MS THISTLE: Thank you.

Looking over the Auditor General's Report,

particularly on Page 37, related to cash management, the Auditor General has

outlined a couple of the problems that are created for the Health Care

Corporation of St. John's, and mostly it is the deficit and the difficulty

collecting the amount owing.

I am wondering: Since the collection agency has been

engaged by the corporation what has been the impact or the success rate in

collecting?

SR. DAVIS: The good news is, in all our

non-patient areas we are up-to-date with our receivables. The bad news is we are

still facing challenges collecting money from patients. We don't have one

agency, I think we have five working for us now.

Cal, I am going to ask you to speak to the specifics

of that.

MR. CROCKER: Okay. In terms of our accounts

receivable, I guess, in March of 1997 we were owed about $15.5 million. That is

probably around the figure when the Auditor General was in at our site. In

October of 1998 we had that brought down to about $8.9 million. All the

improvements have been in terms of money that the provincial government, the

federal government, the nursing homes, the community health, the Newfoundland

and Labrador Health Care Association, the cancer foundation, all those groups

that we do accounting functions for or supply services to, are basically up to

date and we have managed to get our money.

The one area that we are still having trouble with is

under the federal government HST. We are owed about $1 million. Again the

federal government process takes us about three months. We file claims on a

monthly basis and it takes us about three months to get our money. We don't seem

to be able to improve that even with the discussions we have had with the

federal people.

On the accounts receivable patient area, I guess, as

Sister said it is the area that we constantly have trouble with. We had about

$5.2 million outstanding when the Auditor General visited our site. We now have

about $4.6 million. So we have had some limited success but again it is a very

difficult area. We do have five collection agencies that we use in St. John's.

What we have done is picked all of them to see if any one group is having better

success that another group. We also rotate the claims between the collection

agencies in terms that if one company is unsuccessful in getting the money we

turn it over to another collection agency. So we are doing all the things that

we should do.

In terms of our admitting procedures, we now ask for a

deposit. If you come into our facilities there is a sign at the admission area

saying that if you have insurance I think it is a $200 deposit, if you don't

have insurance we want $300 from you in terms of, give us your credit card or

something. Everything that we have done is to sort of try to get the money

before the patient leaves the building. That is our most success. Once the

patient is out the door we sort of can't say we will take the service back or we

can't say we won't let you come into the hospital the next time because you owe

us money.

So we are trying. We are doing some unpleasant things

in terms of collection agencies. We constantly get complains that clients are

being phoned and we are looking for money. I guess it is the thing that we have

to do as the business part of the organization, to try to get the receivables

down.

MS YOUNG: The board has grappled with this too

because, remember, we are led by politicians, federally and provincially, to

believe that our health care is free, and to tackle a man or woman on a sick bed

and ask them for $200 or $300 - the board has asked management to be very

careful how they handle this knowing there is a $5 billion deficit and a lot of

these people are dead. It is kind of hard to get money from the families of the

dead.

CHAIR: I was going to ask the question: How much

is going to have to be written off?

MR. CROCKER: We have an allowance for doubtful

accounts of $1.2 million on the total receivables. Most of that is with respect

to the patient component. We took over some very old accounts when we

consolidated the system. So again we know that there is a fair amount of money

that we are going to have to write off and $1 million will cover it. We are

comfortable, our auditors are comfortable, that that will cover any writeoffs.

SR. DAVIS: I think we should, if I might, Mr.

Byrne, explain what we charge patients for. The patient charges are for things

like semi-private and private rooms and the ambulance costs. As you know an

ambulance trip is a subsidized cost, but there is still a charge and we run the

regional ambulance service. If you use an ordinary cast you don't pay, if you

use a fibreglass cast which is lighter you would pay. So certain things like

that. Then if you are out of province or out of country you pay other costs.

Cal, is that pretty must the

summary?

MR. CROCKER: Yes, and there are all kinds of

miscellaneous charges, for example if you had crutches, you took a supply, you

needed an extra X-ray from our lab department or you wanted something

photocopied from our health records department. So there are incidentals all

over the place in terms of the types of things that you ask for once you are in

our facilities.

MS THISTLE: I guess what it is is we have been

used to the best system in the world, and patients at the time of entering

hospital are probably saying: Why would they be asking this question? Again, if

you are looking for services other than those that are free - I guess maybe it

is an education program that needs to go to the public.

Another problem, I guess, that has been highlighted by

the Auditor General was the manner in which the funding is obtained from the

Department of Health. I note that your funding is always in advance monthly and

the big crunch comes at budget time in March. You have instituted a line of

credit to alleviate that problem. How has that worked out?

MR. CROCKER: Our funding again from health is we

receive funding for November back around October 20. So we are really given our

funds in advance. The only month that that does not happen is in March month

which is, I guess, the government's fiscal year in budget issues. We receive

March's advance in April. Actually in April we receive March and April's

advances, so we get two advances. There is about a twenty-five to thirty day

period there when we have not received our advance and that is where we use our

line of credit. In order for us to use that line of credit we have to go to our

finance committee in February or early March and say: Here is what we project

that we are going to go overdraft on our bank. They will approve that amount and

then we can use our line of credit. When the advance comes in in April, we just

pay off the line of credit.

MS THISTLE: Still on the money issue, I noted that

you mentioned people can use their Visa card if they so desire. The account that

you have at the bank for accepting these Visa deposits, do you carry much of a

balance in that now? It was noted by the Auditor General that there was a

significant balance in some of these accounts while she was doing her check. Is

there much of a balance left there now or has that been cleared up?

MR. CROCKER: What is after happening is this.

Again, when we went through our consolidation process we basically took over

everyone's business, everyone's bank accounts and all the special accounts that

the different facilities had. Since that time we have closed out all the access

bank accounts and basically have set bank accounts for the Health Care

Corporation which are mainly our operating account, our capital account, the

foundation account and the credit card accounts, I guess. Because you have to

have that in terms of the machines we have in the system. We keep all the

accounts cleaned out as of now. We keep our banks reconciled on a monthly basis

so that the things that came up through the Auditor General's report we are

certainly doing now.

MS THISTLE: In other words, there are no

significant cash balances on hand in any bank accounts just sitting there. On

the other hand, you will be paying interest on a line of credit.

MR. CROCKER: The other thing that we have is this.

We tendered our banking services for the first three year period and now have

another five year one in place. The Bank of Montreal is our official bank. What

they did was looked at the Health Care Corporation as one entity and said:

Whatever kind of bank accounts you have there, they combine all those on a

monthly basis in terms of looking at our interest charges. So if one account has

a balance and another one has less, it really does not matter in terms of

interest charge calculation because they combine all of our accounts and just

use that as one balance.

MS THISTLE: Right.

MR. CROCKER: Again, during the year we do not run

into overdraft over the last twelve months so there have been no interest

charges. We are still managing to achieve some interest revenue.

MS THISTLE: Who will be your banker for your $130

million loan?

MR. CROCKER: We don't know. In the short term we

are using the Bank of Montreal and Toronto Dominion for our lines of credit in

terms of short-term financing. Again, both of which were approved by our finance

and audit committee, and the fact that we have a line of credit approved by the

Minister of Health.

In terms of the $130 million, we and Treasury Board

will go to the market and whoever gives the best deal in the market will get the

$130 million loans. At this point we do not know.

MS THISTLE: At what point will you be tendering

for those services?

MR. CROCKER: We are not sure. There are two

options. One we are looking at is to go to the market now for $75 million and do

the balance of $55 million when the project is completed. The other option is to

stay with short-term financing for the whole construction period and go to the

market in the spring of 2000, when all your costs are in. That is a decision

that will be made by a committee that we have set up with the Health Care

Corporation, the Department of Health and Treasury Board.

MS THISTLE: Thank you, Mr. Chairman.

CHAIR: Thank you. Mr. Lush, you have a question.

MR. LUSH: I just wanted to follow-up, Mr.

Chairman, on the question that Ms Thistle raised a little while ago with respect

to collectibles, and with respect to Ms Young's remark about free medicare. I

find that people are surprised by the fact that they have to pay for certain

things, and I expect that since I get so many calls on it, it must be

Province-wide. People get a bill for a pair of crutches or (inaudible) set. I

was not aware of this. The client is telling me: I thought it was free medicare.

The question arising from that is: This is not new, is it? We have always had to

do that. This is not something that is a new policy.

MS YOUNG: You always had to pay for a semi-private

or a private room. Twenty-eight years ago when I had a child, if I wanted a

semi-private room or a private room I had to pay extra. I got a bill and it came

in the mail from the Grace Hospital or St. Clare's, and I sent the $32 or

whatever it was. That has been as long as I have been a patient.

MR. LUSH: Yes. I have noticed your (inaudible) Mr.

Crocker about the insurance, I have noticed that, and I must say I have found

that a little baffling, in that sense that - I mean, there may be something I am

misunderstanding here - if people are under insurance, is this suggesting that

there is a problem? If you have insurance, obviously the obligation is on the

insurance company to pay the bill. I have insurance and I fully expect that if I

go to the hospital the company under its obligations have to pay whatever

expenses I incur that are legitimate expenses under the policy. I take it from

that you are asking me to have $200 up front?

MR. CROCKER: I will use our government insurance

policy as a typical one. The situation is that at one point the insurance

policies that were in effect basically covered your cost of a semi-private room

or even in many cases a private room. What is after happening with the insurance

companies now is that they will cover up to a maximum of - and I take our

government policy one - $60 a day for a semi-private. Now our semi-privates, in

terms of our rates now, are $75 a day. My plan will cover $60. I am personally

responsible for another $15.

That is the situation with the insurance company,

because their rates are all over the place depending on what insurance company

you are with now. Basically, with an organization the size of ours we had to

come out with a set policy in terms of collection. We could not be looking at

everyone's insurance policy to see if we are going to be fully covered or

partially covered, or what they are going to require and what they are not going

to require. That is why that policy was put in place.

MR. LUSH: So there is no problem with the

insurance as such. It is the (inaudible) -

MR. CROCKER: It is the fact that the insurance

policy now, in most cases, does not cover the full range. That is why we ask for

I think it is $200 if you have insurance, $300 if you do not. It is just to say

that we have protection for a significant portion of the fee from the insurance

company.

MR. LUSH: I have just as a follow up, the final

one to the things that patients have to pay for. Is this sort of standard right

across Canada?

SR. DAVIS: I am hesitating. There are medically

insured services under medicare which are standard across the country. If you

come in and have heart surgery in one of our hospitals, that is the standard. It

is a medically insured service. However, there are many services a hospital

provides that are not medically insured.

Some provinces cover some things and other provinces

do not. For example, home care is not medically insured yet in this Province it

is paid for by the provincial government, up to a certain level. The

non-medically insured pieces are flexible across the country. The rates, though,

for example the rate for a private or semi-private room in this Province would

be set by the Province, but Nova Scotia would set a different rate probably, or

Ontario a different rate.

The problem always comes back to truly what is

medically insured under medicare. There is no consistency across the country in

what is covered there.

MR. LUSH: I was thinking more particularly about

the items not covered by insurance, for example: prostheses, casts, crutches,

and that kind of thing. The arrangement that we have, where we charge these

costs back to the patient, is that what is happening in the rest of the country?

SR. DAVIS: Very much so. We tend to charge for

less of that than you would pay in Toronto or Vancouver, for example, but pretty

much the same kinds of things.

CHAIR: It is 12:00 now, but I have a few questions

while we are on this topic so we can possibly clue up on it before we break for

the day. The issue with the credit card, about the $300, and the rooms - you are

saying it is $75 per day.

WITNESS: That is semi-private.

CHAIR: Semi-private or whatever, and you charge a

certain amount for casts, if you want the lighter cast or if you want the

heavier cast, and all of that. What would you say to the person who might make

the accusation that if you have the bucks you will get better health care?

SR. DAVIS: I think it is well recognized in Canada

that 72 per cent of the funding for health care is provided by government, 28

per cent is provided by the private sector, and that percentage is shifting. In

other words, we have gone - when we were at our best in Canada we were about 80

per cent public and 20 per cent private. Since 1957, when medicare came in, we

have gradually increased the amount the private sector pays. What the medicare

system in Canada provides is basic health care provided by hospitals and

doctors.

We can say, I think, without being contradicted, that

basic medical care, basic hospital care, is provided to every citizen regardless

of their ability to pay or not; there is no question about that. If I am richer,

can I afford a private room? Yes. If I am poorer, can't I get a private room?

Definitely not. We would argue that whether you are in a private room or not

might help you personally, but it does not add to or take away from the basic

hospital care that we provide.

You cannot, in this Province, jump the line for

cardiac surgery because you are richer; but you can in this Province, if you

have tons of money, go to Texas and get your heart surgery done in the best

heart institute in the world. Some people who have been able to go out of

Province to get medical care have had to come back to get it looked after. That

does not necessarily mean better or worse care, but if you have money you can go

outside of Canada and get faster care for some areas.

One of the prices of having a publicly funded system

is that there will be more waiting lists for everybody than in a privately

funded system that will only have waiting lists for poor people. Canada has made

that philosophical choice. We would rather everybody wait than only poor people

wait. I would never argue that and, having had occasion myself to visit health

care facilities all around this world, I have not found one that would compare

with Canada, with or without money.

CHAIR: I would not argue the case there at all.

Over the past eight years, personally speaking, I have been in hospital in this

Province a number of times. Let me tell you, they have files over there that

thick on me now. I wanted to ask another question on that.

When you are in hospital - since I have been there -

and you are put in a room with three other patients versus in a private or

semi-private room, in my mind it does impact on an individual with respect to

the length of time it will take for that person to heal or to feel that he or

she is well enough to leave the hospital or what have you. That is just a

comment in my mind.

With respect to the charts - Ms Thistle and you

mentioned the Canadian Institute of Health Information - at a certain point in

time, I think Mr. Crocker mentioned that it would all be included in the chart.

Will the corporation be looking at the patient's previous history and trying to

put every piece of information they have electronically in the system? To my

mind it would cost an awful lot of money.

SR. DAVIS: Yes, we live so long. What we are doing

now, in all past records, we put them on microfilm.

CHAIR: Yes.

SR. DAVIS: We are now investigating the

possibility of putting them on optical disc. Optical disc is obviously the

storage mechanism of the future. We are looking at the cost of going to optical

disc starting from this moment on. Once we have found money to do that, and we

really do need to do that, then we would look at where we would microfilm in the

past with optical disk in the past, and once we catch up to ourselves then we

would be able to integrate everybody's record. That is not going to happen for

another five to eight years (inaudible).

MR. CROCKER: The normal process would be, you

would start at a specific date of collecting all information electronically and

make the call at that point that if you are in our system we will scan your

previous records so that we have an up-to-date system.

If you come back into our system at some point in the

future, we will then take your old paper chart, scan what is medically necessary

for the physician, and from there on in go. We have hundreds of thousands of

charts of people who are deceased, people who will never come back to the

system. They will always stay paper; unless you come back in we will keep it

paper. After thirty years, legislation allows us to destroy the records.

CHAIR: Thank you.

The House of Assembly is open at 2:00 p.m. so we do

not have a lot of time, but I have one more question concerning the $135 million

for restructuring. Does that include the cost of purchasing the Grace and St.

Clare's?

SR. DAVIS: The purchase of the Grace and St.

Clare's, from those two religious organizations, were private agreements between

them and government. Our board was not involved in those agreements.

CHAIR: With that, thank you.

I think what we will do is probably adjourn for today

and meet again on Tuesday, November 24, at 9:30 a.m. to continue on. I do not

know how many other questions the Committee has, but hopefully we will get

through them tomorrow. We may have to extend it