October 28, 1992 (Afternoon)

PUBLIC ACCOUNTS COMMITTEE

The Committee met at 2:00 p.m. at Colonial

Building.

MR. CHAIRMAN (Windsor): Order, please!

Ladies and gentlemen, first of all I'd like to

welcome the witnesses who are here, particularly those who are here for the

first time. Just by way of

preamble these meetings are meetings of the Public

Accounts Committee of the House of Assembly so in fact it's an arm of the House

of Assembly. Information will be given under oath, of course, but we're here

simply to take evidence, not to act as judge and jury. We're here to hear your

views and your side of the story as it relates to, in this particular case,

several items referred to us through the Auditor General's report.

News media are present, and others may be present,

are entitled to take the sound footage but not film during proceedings. If there

were any cameras here we'd let them go through now for some silent film.

Basically the same rules as the House of Assembly.

For the benefit of witnesses I'd ask you to speak

clearly into the microphones. The Hansard people are trying to transcribe this,

the same as they would the House of Assembly proceedings. I will identify each

of you before you speak again for their benefit, but if I fail to do so I'd

appreciate it if you would identify yourself before you speak. Speak clearly

into the microphones, and fairly loudly so that we can hear you, because the

acoustics in this ancient building are not great.

First of all I should introduce the Committee

members. To my immediate right is Mr. Tom Murphy, the Vice-Chair, MHA for St.

John's South; Mr. Alvin Hewlett, MHA for Green Bay; Mr. Art Reid, MHA for

Carbonear; Mr. Bill Ramsay, MHA for LaPoile. There are two other members. Mr.

Dumaresque, MHA for Eagle River, was here with us this morning but is tending to

his mother, who's just coming out of hospital. So you'll appreciate the

importance of those things I'm sure. Mr. Garfield Warren, MHA for Torngat

Mountains, is in Labrador I believe today, and he'll be back with us tomorrow.

The Auditor General is absent so Mr. Drover then is

chief spokesman this afternoon. Perhaps, Mr. Drover, you'd introduce the people

who you have with you this afternoon.

MR. WILLIAM DROVER: Thank you, Mr. Chairman.

I'd like to note that the Auditor General is leaving the Province just about now

to go to a meeting with the other Auditors General in Charlottetown, so she

sends her apologies.

On my immediate left is George White, an Audit

Manager with the office. Seated next to him is Don Boyles, an Audit Senior, and

next to him is Debbie North, also an Audit Senior.

MR. CHAIRMAN: Thank you very much. Again I

welcome Mr. Wells who I assume is spokesperson for the hospital board. Perhaps

you, sir, would like to introduce the people who are with you today.

MR. WILLIAM WELLS: Thank you, Mr. Chairman. My

name is Bill Wells, I'm the chairman of the board of trustees of the General

Hospital Corporation. With me to my left is Mr. Donald Keats, who's the

executive director and CEO of the General Hospital Corporation; to my right is

the Medical Director, Dr. Eric Parsons; and Mr. Albert Croke, at the end of the

table, who's the Chief Financial Officer. We have other members of staff in the

background. Our Director of Purchasing, Mr. Norman Pardy, and Mr. Brian Gorman,

who's the Manager of Stores. So between us all we hope to be able to provide a

very positive response to any of the questions that might arise.

MR. CHAIRMAN: Thank you very much. I also

recognize the presence of the Assistant Deputy Minister and other officials of

the Department of Health who are here to observe, I guess, and also in the event

that we may need to call on them for their advice as well. The first thing we

have to do is ask the Clerk to swear in the witnesses. Perhaps Miss Murphy would

like to proceed with that now.

SWEARING OF WITNESSES

Donald Boyles

Debbie North

Albert Croke

Bruce Gorman

Donald Keats

Norman Pardy

Eric Parsons

William Wells

MR. CHAIRMAN: Thank you very much. Our Clerk

being very efficient has presented me with minutes of the meetings of yesterday

at 10:00 a.m., yesterday at 2:00 p.m., and this morning at 10:00 a.m.

On motion, minutes adopted as circulated.

MR. CHAIRMAN: Well the purpose of the hearing

this afternoon is to look into particular items referred to us through the

Auditor General's report dealing with the financial management of the Health

Sciences Complex, matters relating to fixed assets, purchasing procedures and so

forth.

I will first of all ask Mr. Drover, to make an

opening statement on behalf of the Auditor General's Department.

MR. DROVER: Thank you, Mr. Chairman.

The Health Sciences Centre together with the

Leonard A. Miller Centre, is operated by the General Hospital Corporation.

During 1991, the office of the Auditor General carried out an audit of the

Health Sciences Centre. At that time the hospital had 341 acute care beds and

provided a comprehensive range of in-patient and out-patient services.

Our audit was designed to review the areas of

financial management, fixed assets, inventory and purchasing at the Health

Sciences Centre. This review was designed to assess whether the policies and

procedures were adequate to ensure proper control over fixed assets and

inventory; the financial management system was adequate to provide information

to management and to the board for decision making and control over the boards

revenues and expenditures and to ensure compliance with the General Hospital

Management Act and related regulations; and the purchasing system was adequate

to ensure monitoring and control of the purchase function and compliance with

the statutory requirements.

As a result of our review, we report the following:

In general we found most aspects of financial management at the hospital were

adequate; under fixed assets, we found that adequate physical and accounting

controls over fixed assets do not exist. In relating to inventory, we found that

the accurate records of inventories are not maintained for management control

purposes and finally, under purchasing system, we found that the policies and

procedures are in place to ensure control over the acquisition of materials,

however, several instances were noted of non-compliance with the Public Tender

Act.

MR. CHAIRMAN: Thank you very much, Mr. Drover.

Mr. Wells, would you like to respond by way of an opening statement to those

comments?

MR. WELLS: Thank you, Mr. Chairman.

Well on behalf of the board and the General

Hospital Corporation, I would like to say that we welcome the report of the

Auditor General and the recommendations contained therein. I think that they

serve to improve or assist in the making of improvements to the overall system,

and the corporation has approached these recommendations and the report in a

very positive manner. I should also say that we have addressed the

recommendations outlined in the report, that systems are in place or being put

into place with respect specifically - I can think of, inventory, which was just

mentioned and there are many new checks and balances and overall improvements

and we welcome the review once again, of the financial accounting systems within

the hospital corporation.

I should say, Mr. Chairman, to you and the members

of the Committee, in terms of accountability and with respect to the

corporations operations generally, if you look at it, in 1991 we have external

auditors to the corporation who report to the board, we also had a supplementary

audit of the board which we agreed to at the request of the Department of

Health, we also had the Auditor General's report in addition, so there were

three functions of independence from the management and the board with respect

to auditing the affairs of the corporation.

In addition to that, we have our own internal audit

function. We have initiated review of inventories, stores, pharmacy, dietetics

all of which is an internal; we have an audit committee of the board in place

chaired by a board member, and two of the board members on that audit committee

have professional accounting designations and I should like to make it clear to

the committee, that the General Hospital Corporation over its existence, has

never refused to provide any information requested by the Department of Health

and the Department of Health has complete access to the operations of the

hospital.

We provide significant information on a routine

basis, it is just part of the doing of the business of the corporation and

everything is available to the Department of Health when officials visit the

corporation, so that in terms of making sure that the accounts of the

corporation and the manners and processes involved in expenditures, we really

profess that this is an open book, that we are open to the suggestions of either

the Department of Health, or in cases when the Auditor General's department does

review the systems, and as well as with our own external auditors to ensure that

a fairly significant budget, some $112 million this year, that the expenditures

are in accordance with the requirements of statute from the Province. Now in

anything of this nature and of this extent there are areas where there always

can be improvement, and there are systems that can be improved upon. These

things, as an ongoing process, as a board and as a management, we will endeavour

to cooperate with each and every entity that can assist us in that regard.

With respect to specific questions I think it best

that they be directed to Mr. Keats and then he will field them amongst the

staff. Thank you.

MR. CHAIRMAN: Thank you very much, Mr. Wells. I

appreciate your comments and your cooperation with the Department of Health. As

you've said, you are responsible for spending a significant chunk of taxpayers

dollars, and the taxpayers of course have an interest in how that is spent. The

process that we're involved in now, this is a final accountability process in

the auditing, accounting and answering to the department officials and so forth.

We're not here as much to find fault as to help improve and see what has taken

place in the past, and what could be done perhaps more effectively and

efficiently in the future.

We welcome this opportunity to discuss these issues

with you. Perhaps as a result of this there may be some suggestions we can make

as to how to improve and perhaps, as we've found with many - particularly Crown

corporations and agencies that are somewhat at arm's length from government -

quite often as it relates, particularly to the Public Tender Act, there is not a

complete awareness of the importance of the act and how strictly it has to be

applied, and some of the ramifications of not complying with the act.

These are the sorts of things that the Committee

members I'm sure will want to discuss with you as we proceed on. Perhaps we can

start this afternoon - Mr. Ramsay, would you like to get it started?

MR. RAMSAY: Yes, I would.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Thank you, Mr. Chairman. I welcome

the people here from the General Hospital Corporation. The main thing I'd like

to focus on initially is with regard to the Public Tender Act and compliance

with the Public Tender Act.

I note reference to a letter from a supplier that

in the audit was noted in the files specifically referring to the setting of

specifications or the description of specifications for an argon laser piece of

equipment used, I suppose, in the ophthalmology department. I've also noted in

here as well a response from the General Hospital Corporation to that situation,

stating that it was probably... any allegations concerning that were improper as

there was no benefit to be gained by any person at the hospital from such a

direct purchase or tender, because it's so specific.

I just wanted to get some comment on that. I note

if that was what the intent was, I suppose, as far as getting a specific piece

of equipment, I don't think anyone on the Committee has any problem with that.

Albeit as long as it's a level playing field for other companies to bid. Now

there were no other companies bidding, but the information that came through the

audit would lead one to believe that it was... you know: make sure that we got

this one specific piece of equipment, because there was a preference or

otherwise for it. I suppose for it to be stated specifically as such in internal

documentation that: we have a preference for this piece of equipment, we would

invite quotes from other companies. If they come up with a similar or equally as

good a piece for this similar amount of money then that would be sufficient to

do so.

In the way that it was done - according to the

information we're provided with anyway - it would lead someone to put up a red

flag and say: there's something wrong here, and therefore I think an auditor

would question it. I just want to get a comment on that, and then I have some

other things about that to Mr. Wells or the Executive Director.

MR. CHAIRMAN: Mr. Keats, do you wish to respond

to that?

MR. DONALD KEATS: Yes sir. As a general

comment, we have a fairly detailed policy and procedure manual for public

tendering within the Corporation. I think we have a fairly good understanding of

the public tendering legislation within the organization. On a given year we

invite public tenders around 500 times a year. We go to public tender 500 times

and we invite 500 different tenders so that is about 1000 tenders. That is in

addition to the tendering work that is done through the Newfoundland Hospital

and Nursing Home Association for some 3000 different items, the central

purchasing agency as well as the government purchasing agency, so we tender

through a variety of mechanisms. As you would appreciate in the health care

environment developing specifications for sophisticated equipment requires the

assistance and advice of a lot of technical people.

I suppose there are a number of things that I could

comment on with respect to the argon laser. I guess one of the comments I would

make upfront is that this laser was purchased out of private funds given to the

organization by an outside organization specifically to purchase an argon laser

for the area where it was intended to go. Be that as it may we said we will

follow the public tendering procedure. We asked for some specifications. We put

the thing out to tender and we included some of the information that was

included in the letter that was received through the Department of

Ophthalmology. All of the ophthalmologists within the organization use this

particular piece of equipment so it is not just one individual using it and

having a preference for it. This laser which cost around $38,000 is not

something that comes off the shelf. It is a custom made laser so any of the

other companies that supply lasers could have had access to the materials to

provide this laser. It is a custom made thing. Only one company bid on it but

that does not mean to say that other companies did not pick up the

specifications. There were other companies who picked up the specifications. One

company bid on the thing but we received no complaints or comments from any of

the other companies that said: look, this is too specific, you are gearing this

too close to one of the other companies. There were no complaints of those

natures. The other thing I guess I should mention generally is that we use three

different types of lasers at the hospital and between the time the specification

was developed for this particular laser and the time it actually went to tender,

which was an eighteen month time frame, we developed tenders for other types of

lasers and bought lasers from other companies, but not this particular type. Our

lasers, depending on whether they are in the OR or in the ambulatory care area,

would probably be different types. They might be a (inaudible) laser or they

might be a fixed laser, or whatever, so they would require different

specifications.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: I note also there was a comment

with respect to the documentation surrounding the opening of tenders and the

evaluation forms. I have not come across as to whether that has been improved or

not. Has that aspect of your evaluation of public tenders been improved?

MR. KEATS: Yes, we have improved the amount of

documentation that now goes into a file on the evaluation of tenders. Before

what was done was the comments were made directly on a specification sheet and

if we received a bid from a supplier, that essentially did not meet the

specifications, that was just noted on that specification sheet and kept in the

file. We now have a separate form which is kept in the file that says: these are

the bases on which we made the evaluation and it repeats some of the things on

the specification sheet so there is a new form there.

MR. RAMSAY: And a cross evaluation of other -

MR. KEATS: Yes.

MR. RAMSAY: I note that on Page 164 of the

Committee document here there is a copy of the advertisement used for the argon

laser and others. I refer this to you by virtue of our examination this morning

of a school board here. Your ad does state that sealed tenders clearly marked

will be received up till 4:00 p.m. on the date stated above and will be publicly

opened in the director of purchasing's office immediately following the

closing.... has it always been your policy to advertise this as being available

to the public to attend these openings or is it generally just to provide the

opportunity for those that are bidding to attend?

MR. KEATS: I will get clarification on that.

MR. RAMSAY: Can the public attend any opening

bid or just the companies?

MR. KEATS: Any member of the public can attend.

MR. RAMSAY: I just wanted to be clear on that.

It does say publicly but I just wondered as to that. Do you often have other

than the individuals who are involved in the bidding attend, or is it very rare

for other people to attend?

MR. KEATS: Mostly the bidders.

MR. RAMSAY: Alright. That's all I have for

right now, Mr. Chairman. I'll let someone else start a line of questioning.

MR. CHAIRMAN: Mr. Ramsay. Mr. Reid, would you

like to carry on from there?

MR. REID: All of you do have this Auditor's

report. Pages 195-196: I want to go to the bottom of page 195. Would you explain

to the Committee what, in the breakdown that's there - other income. Just

explain to us what Health Care Supply is. I don't know what that is, "C C". Is

that "C C" there or is there something missing from that?

MR. KEATS: Health Care Supply Centre.

AN HON. MEMBER: (Inaudible).

MR. REID: Pardon me?

MR. KEATS: Oh, that's another item. Workers'

Compensation.

MR. CHAIRMAN: WCC.

MR. KEATS: WCC.

MR. REID: Would you want to go through that

Health Care Supply? What exactly is that?

MR. KEATS: I'll let Mr. Croke, our Chief

Financial Officer, respond to that.

MR. ALBERT CROKE: The Health Care Supply Centre

is a distribution centre where we procure and distribute medical, surgical or

drug supplies used by other hospitals that they normally don't get through the

hospital association purchasing contract. We provide special programs on behalf

of the Department of Health. We supply to homes that are administered by the

department or funded by the department.

MR. REID: That's payment for these programs?

MR. CROKE: Pardon?

MR. REID: Is that payment for these programs?

MR. CROKE: No, this is a billing system. We

issue the supplies and we bill either the user of the supplies or Department of

Health. Whoever is responsible for paying.

MR. REID: To the tune of $358,576.

MR. CROKE: Yes.

MR. REID: School of Nursing tuition. You get to

keep that, do you? The School of Nursing tuition, I'm assuming that "TUTI" is

tuition, is it?

MR. CROKE: Yes it is.

MR. REID: Is that $61,400?

MR. CROKE: It is.

MR. REID: Sale of Equipment - what's

Miscellaneous Income?

MR. CROKE: It's a combination of smaller

amounts of income that come in from the various departments of the hospital.

MR. REID: Up here, page 196, Salaried Medical -

M. What does that mean?

MR. CROKE: In 1990-1991 the MCP, Medicare

Commission, took over the funding of hospitals for salaried physicians. This was

a payment on behalf of that. We bill MCP for a salaried physician.

MR. REID: What do you rent that can realise a

$366,901 revenue for the hospital?

MR. CROKE: Located at the Leonard Miller Centre

is Southcott Hall. It's made up of twelve floors, I think, some of which is

rented out, either to students. There's a hostel down there. Workers'

Compensation clients stay at the hostel and we charge that accordingly.

MR. REID: Your $4,481,402 is basically the

total of monies that you make over and above, I suppose, outside your regular

budget. I'm not sure how to express myself here. I'm trying to find out if those

funds are your board funds.

MR. CROKE: No they're not.

MR. REID: They're not your board funds. Where

can I find in your budget your board funds?

MR. CROKE: The hospital is a corporation that

is funded partially by the Department of Health and partially by offset revenue

generated by the hospital from these other sources as you see here. The board

funds are not included here.

MR. REID: You are not compelled to include your

board funds into your financial statement, is that what you said? You did not

say that?

MR. CROKE: No, not in this particular

statement, no.

MR. REID: May I have a statement on your board

funds?

MR. CROKE: We do not have a statement here, but

certainly I have no problems with getting you a statement of our board funds.

MR. CHAIRMAN: Can you just clarify this for me,

Mr.Reid, (inaudible) -

MR. REID: I am sorry, Mr. Chairman, but this

goes back to some years ago and I apologize to you because you are not familiar,

but I think the rest - no, maybe Mr. Murphy is not either.

MR. CHAIRMAN: For those who are not would you

tell us what we are getting into here. It is an interesting area but

(inaudible).

MR. REID: I think my friends across the table

know what I am getting into. I just wanted to know because I have gone through a

number of audits with some other health care institutions in the Province, and

there are other funds that are not recorded in government audits. There is

nothing wrong here, this is not a derogatory comment, I would just like to know

what the board funds of the General Hospital Corporation are. That is basically

all and I did not want to go any further than that.

MR. CHAIRMAN: Mr. Keats, would you like to tell

us the distinction between board funds and hospital funds?

MR. KEATS: Yes. As the Chairman indicated

earlier this year our budget is about $112 million. About 85 per cent of that is

an operating grant from the government in terms of what they provide in our

budget, another 15 per cent or 16 per cent is income that is generated that is

noted on this page that you have been talking about that we get from D.V.A. or

from Workers' Comp or from other sources and all that goes in as an offset

revenue against our budget. The health department gives us our money in advance.

We take that money and we invest it, and the money that comes out of that

investment goes into our board funds, as well as, donations that we may get from

people, will go into board funds. We then use those board funds primarily to

supplement the equipment purchases for the organization.

MR. CHAIRMAN: So where is the accounting for

the board funds and why would that not be included in the general statements

here of the hospital?

MR. CROKE: Well first of all, we produce a

number of statements, alright. There is the hospital itself, which is an

accounting of the operations of the hospital, which, if you turn back to 194, is

a

summary of where the revenues come from and as you can see, most of the

revenue, $91,710,370, is provided by the provincial Department of Health. The

remainder of the revenue is generated by agencies, paying agencies like Workers'

Compensation Commission, other provinces, non-resident and so on as identified

on pages 195 and 196.

There is a separate accounting of board funds.

Board funds are specific funds as Mr. Keats just said, that are not required to

offset the operating expenditures of the hospital.

MR. CHAIRMAN: I am not clear on the distinction

between them though. You are saying that you are operating two sets of books,

one of which you are saying is basically government money and that you think

that you are accountable for, but then board fundings that you feel no

obligation to account for, is that what you are saying?

AN HON. MEMBER: No. All of the funds at the

hospital are duly audited and provided to the department. I guess we operate on

what we call 'fund accounting', I mean, we have a central laundry that we do the

accounting for and public health lab, again, they are all audited and submitted.

MR. CHAIRMAN: Is there any public money in the

board accounts?

AN HON. MEMBER: No.

AN HON. MEMBER: Interest, I guess.

MR. CROKE: Interest. It is not considered

public money.

MR. REID: Mr. Chairman, every hospital, and I

will not go as far as to say every home, a number of them, operate on a strict I

suppose operating budget and account for every dollar that government provides

to them, but because of a number of factors hospitals and boards have funds that

they call their own. Those funds are generated through wills, deaths and

burials, and this sort of thing, through people donating money through burial

funds and different things, you know what I'm talking about. Instead of flowers

you send your money to the hospital foundation. There are all kinds of other

things. And through generated interest on money that government and other

people, I suppose, or other groups, provide the hospital.

There's nothing wrong with this. This has been

going on for years. We brought it up some years ago when we were doing another

hospital. We found out to our surprise that there were large sums of money - I'm

talking in the hundreds of thousand of dollars - in smaller hospitals then the

one that's represented here today. These monies are taken at the discretion of

the board and spent on, in some cases, equipment and seminars, travelling at

some times, various other things. They are controlled solely by the board

chairman and maybe the financial administration officer.

I just wanted to know - and maybe I shouldn't have

asked it because the media is here - but I was just interested, gentlemen, in

finding out how much money that the General Hospital Foundation - being the

largest one in Newfoundland - would have in board funds. Now if you don't wish

to answer me that's quite alright, maybe you can tell me later on, but that's up

to yourselves.

MR. CHAIRMAN: Mr. Wells.

MR. WELLS: I think, Mr. Chairman, as has been

stated, that all hospitals operating within Newfoundland and where there are

boards appointed by government, have board funds which are not within the

statements of the general operation and expenditures of the hospital in

providing medical services and other things, where you generate revenue aside

from grants and from government for operations.

In that sense the money is distinct from the

regular operation of the hospital. In the case of the General Hospital

Corporation - this is not the Health Foundation - these board funds are audited

each year and the Department of Health would know exactly what would be in the

board funds, as it varies. My brief experience with the hospital - I haven't

been there a full year yet - but that account would vary, it could be upwards of

a half a million dollars or $700,000, and then down. These funds will be

expended mainly for the purchase of equipment or to facilitate the installation

of equipment, these types of things.

They are totally - they're in the control of the

board, but not this chairman. It would be the board at a meeting of the board

which would vote on the expenditure of these funds. That's the only way they

could be disposed of. They're really not part of the general operating accounts

of the hospital. They would appear in a separate set of financial statements

that are audited. Correct me if I'm wrong. I'm sure that the Department of

Health is privy to it. Now I'm not sure. I don't think the Auditor General would

think these board funds would be in the purview of the public accounts of the

Province. Probably. That's why it's not mentioned.

MR. CHAIRMAN: Mr. Drover, do you want to

comment on that?

MR. DROVER: I think I attended the same

meetings Mr. Reid is referring to, and I think it was on the Clarenville

Hospital. First of all, we haven't tested the area of foundation funds,

foundations are a recognized charity and we haven't deliberately, and it may

involve some legal opinions at a later date. Foundation funds to one extent may

not fit the definition directly of public money as such.

I can't speak for the former Public Accounts

Committee at the time, but I think the view that the Committee took at the time

was rather strong, now these are board funds, okay?... aside from the

collections and raising by going out to the public and getting that, okay, take

that one to one side. If for instance there is a fair bit of funds raised as a

result of interest payments - in other words like, for instance, the Department

of Health gives them, in the case of this one here, somewhere in the

neighbourhood of $9 million or $10 million in advance per month, and you deposit

it - then I think that the former Public Accounts Committee took a view, and Mr.

Reid was on it, that that was in fact public money, because it was generated

from public money. It started with the public money.

The other ones dealing with the incentive program

there, those types of funds, I think the former Committee took the view that was

public money. I think they left on the table, at least in my mind and in the

mind of our office right now, the issue of dealing with another area which is a

benefit to all society right now, the foundation funds. I do not think we have

received any direction as to looking at those and really to tell you the truth

in the four or five hospitals that we have looked at we have not directly gone

at the foundation funds right now.

Mr. Reid may wish to comment, Mr. Chairman. I think

that gives a brief update as to what the gist of the meeting was at that time.

MR. CHAIRMAN: Mr. Reid.

MR. REID: The only reason I raised it, Mr.

Chairman, was because at that time with Clarenville I was sort of disturbed over

the fact that there were public documents in the hands of the Department of

Health that were not being made available when we were doing a presentation on a

particular board, and here was the Department of Health sitting on information

that should have been included in our report. I am not blaming it on the Auditor

General's office and I am not blaming it on the hospitals in question. I am

blaming it on the Department of Health because this audited report and financial

statement is not complete. That is the reason I brought it forward and that is

the only question I have right now.

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: I have only one comment I would

make. In my time with the government this was a contentious issue all the time.

Government would say: do we want hospitals to provide this information and

should they be allowed to keep the interest they generate on our funds and so

on, so it a thing that is back and forth. It does not apply only to

Newfoundland. It is in every province in the country where hospitals get

government funding. We use the board funds, as the chairman said, primarily for

equipment. The other major reason we use these board funds, since government

does not fund any deficits we might incur in a year - they say: you run a

deficit, you find the money. If we have money in a board fund and we have a

deficit we take that money and we apply it to the operating grant to fund the

deficit.

MR. WINDSOR: So it becomes a grant from the

foundation to the hospital.

MR. KEATS: Not the foundation. The foundation

money is solely for equipment, capital, and so on.

MR. WINDSOR: So that is another one again.

MR. WELLS: That, Mr. Chairman, is a distinct

board of directors of the General Hospital, in our case, health foundation,

which is a complete entity onto itself raising money to supply equipment that is

required in the hospital. In our case we have been very fortunate. We have

certainly helped the hospital in the amount of monies that are raised. These

issues of grants to hospitals specifically, and I know going back into the early

70s when I was on the Waterford Hospital Corporation, the then St. John's

Hospital Council which was funded partly by government, it has always been the

practice, whether right or wrong, that if you made some money on interest of

monies advanced for your operating budget, that gave some flexibility to the

entity to deal with things, as Mr. Keats expressed, but it would not be shown up

in the statements here. It is a fairly common practice across Canada. I have

been familiar with it for about twenty-odd years, involved in various boards,

hospital boards or hospital councils, the general hospital, but there is a full

accounting of those monies, but you will have to look for another set of

financial statements.

MR. REID: The reason why I brought it up, Mr.

Wells, was that we did find one particular institution in Newfoundland that was

spending the board funds on - I am afraid to say the word but I will say it

anyway, 'perks' for salaried employees, and that is what disturbed the Committee

at the time because these funds were, number one, generated through interest on

government money and, number two, it was monies that had been collected in good

faith from people, memorial funds and different other things. These funds were

in this particular case being spent on vacations in Florida. Do I have to go any

further? There are cases and there have been. I hope there is not now. I think

some of your colleagues will know who I am talking about here and what I am

talking about. That is why we questioned it because we are suppose to be the

Public Accounts Committee and I think most of us feel if it is public accounts

then it includes all the public accounts and not just a portion of the public

accounts.

MR. CHAIRMAN: Thank you, Mr. Reid. Mr. Hewlett.

MR. HEWLETT: Thank you, Mr. Chairman.

When I was going through the documentation here,

the letter from the laser company and what-not - I am just looking at it out of

the blue or as someone who has a paranoid mindset, lets say, it looks god-awful

and so on and so forth. I read some of the explanation included in the

documentation as well. I would ask anyone from the Hospital Corporation, if I

were an ophthalmologist and I trained in such-and-such a school and I learned to

use the Smith laser and so on, for the want of a better phrase, and then I go

work in a hospital and they obtained some block funding to obtain a laser, is it

fair to say that the department concerned would be inclined to get a Smith

laser, especially if the people employed by the department had all trained on a

Smith laser might not be able to use a Jones laser? But given that

predisposition that would sort of put you in trouble vis--vis The Public

Tendering Act. Is that a fair comment?

MR. KEATS: No, prior to The Public Tender Act

you would probably have had a lot of personal preferences that people may have

brought to an organization, and you can understand that, as you say. If you are

in the OR and you work an anaesthetic machine that is a Greiger(?) anaesthetic

machine which has controls and certain systems and so on, and is the one you

feel comfortable with, you are not going to be too anxious to bring in a German

machine that has controls in totally different locations.

But what happens with public tendering, if our

director of purchasing is going to tender for a fairly sophisticated piece of

equipment then obviously there is a number of people in the organization

involved in that, the technical services people from the university have some

input, our maintenance people will have input for electrical considerations and

so on. The physician group involved would also have some involvement. But by the

fact that you develop the specifications and go to tender and then you accept

the company that meets the specifications with the lowest price, then sometimes

you might say it is a fine line that you cut out all the other companies. But

generally what happens, if we went for a tender that was so detailed that only

one company could meet that, all the other suppliers would be the check and

balance on that and they would come in and say: look, we cannot meet the

specifications, and they would put a complaint in. So we would go back to

retendering.

MR. HEWLETT: So presumably if the good doctors

put out these specs and expected bids from only the Smith Company and,

presumably the Jones Company thought that it could manufacture such a device at

a cheaper price if it met the general specifications, then I presume the good

doctors would have to go to school again or adjust and accommodate to the new

laser. Presumably there is no danger in the human health or whatever is

involved.

MR. KEATS: Unless there is a significant reason

why we could not go with that. And in some cases you might go to tender as an

example for surgical gloves, and surgical gloves are a pretty common thing but I

know of a surgeon who has allergies to most surgical gloves. There is a certain

kind that individual needs, so you make an allowance in that exceptional case.

But unless there is some really significant public safety consideration as to

why you shouldn't accept that piece of equipment then you don't do it.

MR. HEWLETT: I also note in the documentation

there, to my amazement, because I have never run a hospital - thank God for that

- in the Dietetics Department there was a tremendous amount of documentation on

control. I guess when you are in an organization as large as the General

Hospital you get into feeding hundreds and hundreds of people. There is a matter

of wastage. You know, you do not cook 5,000 potatoes if you only need 3,000 and

so on, and it went into a rather elaborate scheme and description of

computerizing and so on the meals and freezing them beforehand and having them

on hand. Is that as indicated in the documentation well underway to be

mechanized or computerized, the dietetic stuff, because it seems to allow itself

for tremendous error factors if not very closely controlled, when you get into

volumes involved?

MR. KEATS: The inventory control generally has

been a priority in the organization for a couple of years. In dietetics, for

example, we have a fairly good idea of what load you would produce on a daily

basis, and you could eliminate your wastage. We know on an average day that we

are going to produce 2,000 meals. There is a cyclical menu that is produced so

the people know what kinds of foods they need to produce this menu, and you know

that 40 per cent, 50 per cent or 60 per cent of your patients who are coming in

are going to require special diets. So you can get a pretty good feel to know

that.... Just as I couldn't tell you which people might get pregnant next year,

but I can tell you that there might be 2,500 people who have deliveries at the

General Hospital. So we do the same thing with the dietetics.

MR. HEWLETT: There was another

section in there

on the inventory of physical assets. I had occasion to be at the Health Sciences

in the last couple of days, and just out of curiosity I looked at a couple of

long tables like this one here. I noted on the corners there appeared to be

something like an engraving gun or something or another, and there were all

kinds of numbers written on the corner of each table. I'm wondering, having seen

the documentation I saw here with regard to inventory of physical assets and

getting a thorough inventory and keeping it updated, is this empirical evidence

that I found of your organization attempting to meet the deficiencies pointed

out by the Auditor General's department?

MR. KEATS: Yes. In the past the General had a

process of keeping track of fixed assets. Up to 1989 there were some lapses in

that. We've now gone back and we've started to implement the process in

accordance with the recommendations of the Auditor General of tagging all of our

fixed assets, of keeping control of those, and then marrying it up through

purchasing with the actual count of fixed assets and where they are.

MR. HEWLETT: Has that reached completion yet?

MR. KEATS: No, it hasn't reached completion. We

set a date of - we said March 1993 would be the date that we would finalize this

process. We still are aiming to finalize this process in March of 1993. On

occasion we have changes in staff or staff problems that delay certain things,

so we would like to have that full recommendation in place by March of 1993.

With one possible exception. We don't know if it's

feasible or practical to do a full physical count of all assets on a yearly

basis. We're looking at the value of doing that versus doing partial random

audits of physical assets, spot checks, on a periodic basis.

MR. HEWLETT: That's it for me right now, Mr.

Chairman, thank you.

MR. CHAIRMAN: Thank you. Mr. Murphy, would you

like to continue?

MR. MURPHY: Yes, thank you, Mr. Chairman. I

have a few comments and a few general questions that I'd like to start with. I

notice in the Auditor General's report that when they talked about financial

management the word "adequate" is used. I don't have Webster here and I'm not

sure what "adequate" means. I suppose if we look at it from the standpoint of a

layman's terminology, "adequate" probably means acceptable but certainly not

polished. Again picking up on what my colleague had to say about fixed assets,

and I was glad to hear your response, Mr. Keats, that things are going... not

gung ho, but certainly in place, to the best of your ability to try and do

things to control them. From my past experience I know how difficult it must be.

However, I also think that it has to be done, and

I'm sure a lot of other people here do. We deal with different corporations and

school boards and what have you, and there's a tremendous amount of public money

spent on all kinds of fixed assets. If we don't have some control on those then

obviously we're not guarding the taxpayers' dollars.

I also notice on page 186 that the revenue under

Provincial plan for 1992 is in excess of $91 million, which is a little better

than 10 per cent I think of the total budget for health care in the Province. I

think our health care is probably somewhere close to $900 million. When you

mentioned earlier in some of your remarks that you receive these monies up front

are you saying that you receive it once a month, or quarterly, or semi-annually,

or annually? How do you receive the Provincial plan of revenue?

MR. KEATS: Basically it's on a monthly advance.

MR. MURPHY: So what you're saying to me is that

probably at the first of every month that you're receiving somewhere in the

vicinity of $8 million from government.

MR. KEATS: Yes.

MR. MURPHY: Back to my colleague's question. Is

it the interest from those particular monies that you would transfer into your

board account as such?

MR. KEATS: Yes.

MR. MURPHY: Just as a point of clarification.

If I could just go back to some of the remarks made by the Auditor General and

some of the responses just to find where we are today. I notice that on Page 29

of the report that was given to you and that the Committee has: in

non-compliance with the General Hospital Management Act, that is

an act of

legislation, they talk about an annual report and they talk about the

non-submission, I think, of three reports. I notice again in your response, that

you talked about annual reports.

MR. KEATS: Yes, that is the annual report

responses on Page 29.

MR. MURPHY: Okay, fine. That is your response.

MR. KEATS: Yes, Sir.

MR. MURPHY: I left the Auditor General to go

and talk about the $91 million. It is on Page 18 actually where the Auditor

General discusses, in their findings, non-compliance and actually quotes

Section

14 (1) of that Act. Perhaps you might want to comment on what you mean when you

say in Paragraph 2 on Page 29, this is your response: while a public relations

type annual report has not been prepared since 1987. What does that mean?

MR. KEATS: Generally hospitals in the past have

produced a glossy report that they have distributed around the Province to

various people which says: this is our audited financial statement and this is

some statistical information, numbers of admissions, number of patient days and

so on, and that type of report the General Hospital has had for financial

reasons. The benefit of that to us is minuscule and we are not going to produce

it anymore.

MR. MURPHY: But if you removed yourself from

the glossy type of report you are talking about, and I am sure we have all seen

them not only from private industry who are trying to make an impact or what

have you on their shareholders, we also see it from Crown corporations, but

surely heavens a report that contains information - I do not care if it is on

recycled foolscap, I find that to be a remark that is certainly not acceptable

to me when you consider the amount of monies that we just discussed. I notice in

the last paragraph you said it should also be noted that as of July 1, 1991 the

General Hospital falls under the provisions of the Provincial Hospital Act

rather than the General Hospital Management Act but that still does not relieve

you.

MR. KEATS: No, that point was only there

primarily for clarification, primarily for the Auditor General, to let him know

that we are now back under the Provincial Hospitals Act and not under a separate

act but we do not produce an annual report. A lot of people do not produce an

annual report but that does not mean to say we do not provide a lot of

information. We produce an annual report of hospitals,

Part 1 and

Part 2 of

which provides far more information than an annual report. It includes our

audited financial statements. We also produce a lot of other information that is

available. We also produce four to six times a year a newsletter called the

General Happenings Newsletter.

MR. MURPHY: Is that a glossy newsletter?

MR. KEATS: It is an internal thing, it is not

really a glossy thing and it has more generic information as opposed to saying

this is our financial statement today and our financial statement last week or

so. That would contain general interest information.

MR. MURPHY: I certainly accept that explanation

because if you look on Page 21 you will see the Auditor General's concern on

inventory and her remarks. I see here that the report is done monthly almost.

Concerning the deficiencies from the actual physical count to the adjusted

amounts, perhaps you might want to talk about that because to me it looks like

somebody is playing catch-up and there is a fair amount of monies here.

MR. KEATS: The inventory control as I indicated

earlier is an area that has been a priority for the organization and in 1990 the

organization asked the internal auditors to do some reviews on its inventory

procedures and controls as an internal process and determine where we could make

some changes and some corrections, so those reports were initiated in these

three areas with a number of recommendations being introduced.

Our management engineering department this year has

taken on inventory control and changes to inventory as a top priority, and

basically what this says is: look, when you have reconciled your physical count

with your general ledger, there has been some adjustments, and if you take a

look at some of those, stores for example, the adjustments, and these

adjustments take place for a variety of reasons, I mean, there might be data

entry errors, there might be costing errors, there might be some double counting

or there might be people making offsetting adjustments, so there is a variety of

reasons and they are primarily systems problems and in some cases, for example,

stores in January, 1991 had an adjustment of $70,000 negative but in March when

it was done it was a $72,000 positive, so they kind of cancelled out one another

over a period of a year.

Now, what we have done in the last period of time,

our own twenty-one recommendations that were listed for the stores area by our

internal auditor, we have implemented nineteen of those and we are working on

the other two. In our pharmacy area, where we had a unit dose system and we had

a six digit number for all of our pharmacy stock items, we have now implemented

a computerized system, we have made significant improvements in our pharmacy

inventory and our turn overs in pharmacy. The last variance we had in our

pharmacy for example, was $1,400 and when you are looking at -

MR. MURPHY: Correct me if i'm wrong, but is

that a discrepancy of $135,000 in pharmacy?

MR.CROKE: That was the difference between what

we had in the general ledger in the accounting department and what was in the

physical count when pharmacy did its actual count at that time, and as Mr. Keats

has just said, there is a variety of reasons why this happens -

MR. MURPHY: Yes, I understand, but if you are

looking at a half-a-million dollars, even for the reasons that Mr. Keats gave,

you know, when you did the count and then the adjustment there was a $135,000

discrepancy, it would seem quite a bit on just human error. You know I realize

the human factor comes into play, mistakes and errors, then again, it would seem

that because of that you got involved the 31st of January, 1991, which was only

six months after, you reduced your amount of deficiency down to $70,000 which is

less than half of what you did before, and then if you look at the 31st of

March, which is only three months later, why am I not seeing parentheses around

the $77,000? Are you telling me that that is an upward adjustment?

MR. CROKE: Yes, in the opposite direction, yes.

MR. MURPHY: So what you are telling me is that

this discrepancy that was identified by the Auditor General, and brought to your

attention, and that you have become involved in, in essence, in less than nine

months it went from $135,000 negative to a $77,000 positive, which is in excess

of $200,000?

MR. CROKE: Well, first of all, I think it

should be noted that the hospital began its own look through its internal

auditor at our inventory because we knew it had some weaknesses and we wanted to

make changes and improvements to the system, because we were getting some

adjustments when we did physical counts. It was not the result of the Auditor

General picking it up. I mean, he is quoting the internal auditor at the

hospital where we did initiate all of these improvements that were necessary.

MR. MURPHY: Yes, but then that begs the

question of if we back this up far enough what would we see, because what I see

here is a tremendous improvement in a nine-month period and we are only dealing

with 30th of September, 1990?

So what this tells me is that it was because of

either the Auditor General or your own initiative, and I'll take it that it was

your own initiative, although this is in the inventory appraisal of the Auditor

General. I notice that Mr. Keats' response is basically talking about that type

of thing which is contained on page 30. So I just wanted to get some

clarification for my own benefit. I remember when somebody hit me with a hockey

stick, and I'm sure the Chairman remembers equally as well -

MR. CHAIRMAN: I remember you hit me.

MR. MURPHY: Yes, I hit him one time and he

never forgot it. As a matter of fact, I may have even tapped the Director of

Purchasing occasionally. However, you'd go in there and there'd be another

Elastoplast bandage that somewhere down the road you knew you were going to need

for your knee so you found a place probably to put an extra one in and said:

I'll use this down the road and I won't have to come back to the hospital. I

understand all of those things, and I understand the difficulty in a hospital of

trying to maintain a control. But when I look at these kinds of figures it is

rather startling, and perhaps I'm not getting the explanation I'm looking for.

When I see a deficiency in nine months, an adjustment, from September 1990, to

March 31 1991, in excess of $200,000, that is mind boggling. Perhaps the

chairman would like to respond.

MR. CHAIRMAN: Mr. Wells?

MR. WELLS: I'm probably the least qualified.

But don't assume - these are not losses or profits. This is just a system at a

particular point in time, and that'll vary in periods. What you don't want is

your discrepancy path to be too wide in terms of the adjustments. We're neither

making nor losing here.

MR. MURPHY: It's still uncontrolled, Mr. Wells,

isn't it?

MR. WELLS: Yes. But we're not making or losing

money on this proposition.

MR. MURPHY: No, I'm not disputing that. It's

still uncontrolled in the system.

MR. KEATS: Yes. There is no doubt that there is

some control that needed to go in in pharmacy. From September 1990 to March 1991

when those adjustments were made it wasn't because there was a new system put in

place at that particular time. The new system was put in place after this. So

we're using the same system. They are adjustments between your general ledger

and the physical count, not profit or losses.

MR. HEWLETT: Do these variations occur now?

MR. CHAIRMAN: Let me just interrupt for a

second here. Mr. Keats, maybe I'm reading this incorrectly. Am I to presume from

this that on September 30 you did a physical count and you found that you had

$135,000 less inventory in the pharmacy than you thought you had, so you made an

adjustment at that point in time? January of 1991 you did another physical count

and found you had another $70,000 less than you should have. In other words, I

would assume somewhere you lost that $70,000 worth of inventory during that

time. Three months later you did an account and found you had $70,000 more. Am I

reading it incorrectly? That these are really cumulative. I'm at page 21.

MR. CROKE: This is not saying that we lost

inventory. If you look at the actual inventory balances on these dates, the

balance on hand is the same on January 31 and on September 9. Okay? We had the

same amount of inventory - generally inventory should stay the same.

MR. CHAIRMAN: Yes, because you're ordering some

and you're using some.

MR. CROKE: Yes.

MR. CHAIRMAN: But you can't account for $70,000

worth, this tells me.

MR. CROKE: Well, no. What this is saying is

that the transactions that took place from September 30 on didn't all get either

entered properly or didn't get entered at all through the pharmacy system, and

didn't make its way into the general ledger accounting system. That's basically

what it's saying. It's not cash, it's the value of the inventory at one time

compared to what was in the general ledger at the same time.

MR. HEWLETT: So these aren't things gone

missing, for want of a better phrase? That's what we're getting at.

SOME HON. MEMBERS: No.

MR. MURPHY: I'm not suggesting that.

MR. CHAIRMAN: That's what I was asking about.

MR. MURPHY: Yes. If you move over into stores,

the figure again is deceiving here, it looks like all of a sudden it was gone

and now it's found, and that's why I ask the question.

MR. KEATS: As I said, there may be a variety of

systems problems. Somebody may have entered the wrong costing information on a

particular product, somebody may have reversed the digit on a particular

product. They were systems problems, and that's what we concentrated on at that

point in time.

MR. CHAIRMAN: If I could just ask a quick

question, Mr. Murphy?

MR. MURPHY: Sure.

MR. CHAIRMAN: Could you give us an idea here?

When you did your physical counts did you find any difference in what you

thought would be in the inventory and what you actually had? In other words, is

there any evidence of any product disappearing and what percentage would you be

losing, because you are seeing adjustments here of anywhere from 20 per cent to

35 per cent, and you are telling me now that this does not mean that the product

is not there, it is just in your accounting and your financing, it is paper

work?

MR. CROKE: Actually, it is mostly paper work,

it is not recorded in the right place at the right time and you know, while you

see $105,000 there on $826,000 worth of inventory, that probably came as a

result of six months worth of transactions that went through the hospital.

MR. CHAIRMAN: Not in the second one, within

three months you have a variance of $69,000.

MR. CROKE: Yes, okay, on $910,000 worth of

inventory at the time, okay, so we have four months worth of transactions and we

do $13 million worth of transactions throughout the stores department in a year

which is over $1 million a month, so we have an adjustment of $70,000, not on

$910,000 worth of inventory, but on $4 million worth of transactions at the

time.

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: It is a record keeping process, not

a loss of inventory or gain of inventory or somebody walking away with things in

the organization.

MR. CHAIRMAN: The question I asked a moment ago

was: Do you have a feel for how much you may be losing, how much is walking out

of the hospital unescorted?

MR. KEATS: It is very difficult to say. We know

there is no system that is foolproof and I would not be able to say to you that

some things do not leave the hospital that we do not want to leave the hospital,

and we picked up a number of people leaving the hospital through security with

things they should not have had, but by and large, in the stores, the stores

items, pharmacy and so on, I would think the theft or the pilferage is

minuscule, given the nature of the organization.

MR. MURPHY: Are you telling me Mr. Keats, now,

that there is a policy or procedure to do these counts and make these

adjustments; have you satisfied yourself with that or are they just done

periodically?

MR. CROKE: One of the controls that we have for

inventory is the periodical count of the inventory -

MR. MURPHY: (Inaudible).

MR. CROKE: Oh yes. - right now we are doing it

generally four times a year, every three months but we certainly do it every

four months.

MR. MURPHY: Okay, that is why I am asking you

the question because it is not clear on the books. Just let me ask one other

question, Mr. Chairman, before I move on and that is, on the appointment of

consultants. I think our friends at the Auditor General's department indicated

that there were no guidelines and policies in place for hiring consultants, as a

result the hospital has selected the same auditor after a three-year appointment

had expired without a call for proposals of tenders.

I suppose this might be said also of banks and

other consultants who may fall under the jurisdiction or the need that the board

may feel appropriate. I see that the recommendation is to develop and implement

guidelines, and I refer you to your response on page 29. Again you said: you do

not agree that this is a financial management issue, but your recommendation is

well taken and guidelines will be considered. Have you an update on that or are

you still considering?

MR. KEATS: We do have guidelines for the hiring

of consultants for a variety of things that may take place in the organization,

and traditionally, hospitals and other organizations have not gone the public

tender route for professional services. The Public Tender Act does not require

you to go to tender for professional services. At the General we have tendered

for banking services, we tendered our insurance services; we have gone to tender

for our audit services, this year we have gone to tender for a fixed three-year

audit program, we have done that and within the very near future you will see a

proposal in the paper for legal services, so pretty well all of our professional

services now are being tendered.

MR. MURPHY: Are you telling me, Mr. Keats, that

you have an unwritten guideline and policy system?

MR. KEATS: No. We have as a matter of a board

policy right now, or board practice, that for professional services - although

there's nothing that says you must go to tender or you must do that - but as a

matter of routine, for professional services such as banks, insurances and legal

services we will go to public tender.

MR. MURPHY: Let me ask you this question then,

which would probably confirm where the auditor may be coming from. In your

course of doing that have you found a marginal difference from banks and

auditors, et cetera, in tendering? Have you seen some good dollar savings?

MR. KEATS: Yes sir, in some areas there's been

some good dollar savings. There's no doubt about that.

MR. MURPHY: Thank you. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Murphy. It's

probably a -

MR. KEATS: That may not be totally because we

went to tender. That may be a total reflection of where we are in the economy.

So I have no way of saying to you, for example -

MR. MURPHY: Especially with the banks.

MR. KEATS: - that, no, not with the banks. I

have no way of saying to you that our legal services, which are extremely

difficult to tender and to select - and I'm not sure how that's going to come

out yet - that we might be getting a better rate because we went to a proposal

versus what might be going on (Inaudible).

MR. MURPHY: If I might make a suggestion, it

might be prudent to sign a five-year contract with somebody at the same price

that they'll give you in 1991, 1992.

MR. CHAIRMAN: They'll get you one way or the

other anyway, Mr. Keats. We'll take a five minute break for a coffee now, I

think.

Recess

MR. CHAIRMAN: Order, please!

Not to dwell on this laser piece of technology, but

just to clarify the procedures here, and the timing on it. We have evidence on

page 25 of the report that on March 14 a letter was received from the company

that supplied it, Carl Zeiss. Basically stating that: (Inaudible) specifications

that we've suggested to you. "The specifications that only Zeiss can fulfil are

as follows...."

Strictly to clarify that for me, because this was

March 14, the tender didn't close till July 29. So clearly that company had a

large input into suggesting to you -

MR. REID: Different year, Mr. Chairman.

MR. CHAIRMAN: - the specifications -

MR. REID: Different year, don't forget, now. March

14, 1989.

MR. CHAIRMAN: I realize that. That's right.

There's a year in advance.

MR. REID: Yes.

MR. CHAIRMAN: Yes. So the company had input -

which is not abnormal. You will go to a supplier and say: would you help us

right a set of specifications? Let me qualify that by saying you normally write

a set of specifications that can be filled by any number of suppliers. You might

ask two or three suppliers: what are your specifics? Or you might look at

literature that's made available by them.

In this particular letter it says: "The specifications

that only Zeiss can fulfil are as follows...," and they list down four

particular specs that they can only fulfil. My first question would be: would

other suppliers have been able to meet those specs? This suggests they couldn't.

Are these specs so specific that other suppliers couldn't meet them? For

example, the 50 micron fiber cable. By specifying the 50 micron are they the

only ones that produced one? Or somebody else have a 60 that they could have

supplied, or a 40 that might have done anyway. I'm being hypothetical but I

think you understand my line of questioning.

It also concerned me that on page 180 we have evidence

that the equipment was actually installed for evaluation well in advance of the

tender. So you had an idea of what the equipment was. Dr. Val Conway was using

the equipment, satisfied himself that this was an adequate piece of equipment,

that it was a piece of equipment that did what he wanted it to do, and it was

perhaps the best available. The doctor may well have been satisfied: this is the

piece of equipment I want. The concern here is that this letter from March 14

indicates that the specs were specific to this piece of equipment that nobody

else could meet with, even though you've told us that it's custom built. Yet

Zeiss themselves are saying: these four items only we can fulfil. Could you

clarify that for us?

MR. REID: Can I add something before they have a

chance to -

MR. CHAIRMAN: Mr. Reid, yes.

MR. REID: Because that was one of the ones I

questioned - and also, while there was a tender in the paper calling for that

piece of equipment, that piece of equipment was at the Health Sciences Complex.

MR. CHAIRMAN: Yes.

MR. REID: It was already installed at the Health

Sciences.

MR. CHAIRMAN: It was installed for evaluation,

that's right.

MR. KEATS: Only for evaluation.

MR. CHAIRMAN: The question that would

automatically follow is: why didn't we install three for evaluation and see

which one is the best? Obviously that's not practical. I'll give you an

opportunity to explain.

MR. KEATS: There may have been another piece of

equipment, another laser piece of equipment, somewhere else in the hospital for

evaluation. So it's not uncommon to have a variety of pieces of equipment in

that organization for evaluation before you purchase that equipment.

MR. CHAIRMAN: I accept that. Can you explain to

me, though, why Zeiss would say, almost a year in advance of the tender call -

more than a year in advance of the tender call - that these are the specs that

only we can fulfil. Why therefore would you write a set of specs, assuming you

did, that included these particular items, knowing that only Zeiss could fulfil

it? Was it not possible to write a set of specs on which others could have

competed?

MR. KEATS: I cannot explain to you the differences

in this and why Zeiss would say these are the only specs that we can fulfil.

MR. CHAIRMAN: No, they said: These are specs that

only Zeiss can fulfil.

MR. KEATS: Yes.

MR. CHAIRMAN: In other words, nobody else can do

this.

MR. KEATS: Fifty micron fiber cable, you can go

out and purchase that. These other pieces of equipment, you can go out and get

those. The telephone company can go out and buy them. So if you are in the

business of putting together a laser, as I understand it, you can get the stuff

to custom make a laser, because none of these lasers are put together and left

on a shelf waiting for someone to order them.

MR. CHAIRMAN: Except that you specified a 30 SL\L

slit lamp made especially for the Zeiss Argon Laser. Obviously if you are going

to have a Zeiss Argon Laser you have to have that slit lamp. I do not have a

problem with that so much, if that is what you are buying, but did we actually

specify that particular lamp? Are there other lamps that are comparable or

equivalent, produced by other persons? I realize we are getting pretty technical

here, but what I am trying to establish is, did we make this so specific that

nobody else could bid on it?

I could specify I want to buy a car, and I can call

tenders for a 1992 Chevrolet Caprice. Now Ford is going to have trouble bidding

on that.

MR. KEATS: Sure.

MR. CHAIRMAN: But if I specify a 6 cylinder

automatic, minimum 4.0 litre engine, with automatic transmission and the rest of

it, then I am going to get five or six bids on it; but I can make it most

specific.

I know when we called tenders for government cars we

could only specify two or three things - automatic transmission, floor mats, and

the colour of the vehicle. I remember saying: I do not care what colour it is as

long as it is blue - and I got a blue car.

AN HON. MEMBER: And do you know something? They

still have not changed the colour.

MR. CHAIRMAN: Anyway, I do not mean to make light

of it. I think you understand my question and the purpose of my question. Doctor

Parsons, are you going to answer that for us?

DR. PARSONS: Yes. When we set out to purchase any

equipment that is, let us say a little bit higher technology than us normal

people can understand, and do not really know how to tender it out - once the

equipment has been accepted as a prioritized need within the institution - we

will normally go to one of the specialists who will use the equipment, and ask

them: What do you suggest the specs for, in this instance, a laser should be

that would suit your department?

In this instance I really cannot explain the letter

being on our file, but I would suggest that the physician has contacted a laser

supplier - one or two laser suppliers, whichever - and asked them for

specifications for a laser that suits a particular purpose. We would then use

these specs that are given to us to send out a tender for a particular laser,

using the general specifications that it needs to be functional; it needs to be

110 volts; it needs to be et cetera, et cetera, plus there are other more

technical specifications that we would need. This tender would then be issued to

the public. It is a public tender and would be picked up by multiple other

suppliers.

If there were, within this tender, a specification

that the only piece of equipment had to be three by ten, and they were the only

ones that made something that was three by ten, the other company, if it was

three by eleven, would complain that the specifications are too specific and

therefore you are directing your tender to a specific item.

That is one of the safety gates that we have to assure

us - us being The General Hospital - that we do not have individuals who work

within the institution who have a certain degree of power in order to direct

purchases to a particular area.

With this particular tender, for a laser that was

dated in March of 1989, there was a laser purchased subsequent to this but was

not of this brand. We actually purchased a laser that was made by a competitive

company for Zeiss on another tender. The following tender was issued, Zeiss - or

the type of laser that's mentioned in this document, was purchased, but it was

purchased because it suited the need of the area where it was going. I.e., to

our Outpatients Department, where we have a room where the machine is isolated

and is not mobile. As you'll notice there's a reference within this letter to a

machine that being mobile tends to be damaged, et cetera. This machine would be

appropriate to go in a fixed area. The one we bought previously needed to go

into the operating room where it would be pulled from one room to the other.

This machine was not able to do that.

We try to avoid, in all instances, to send out tenders

as specific as possible for the needs we require them for. Indeed, on some

occasions there are needs of which only one supplier can supply. However, in all

tenders we try to be as specific as possible but not to design the tender to

suit a particular supplier.

As far as the other item, of having instruments

installed for evaluation, I don't know where the reference is within the report

that the instrument was already in.

MR. REID: The reference is on page 180.

MR. CHAIRMAN: Which is actually the tender

document.

AN HON. MEMBER: Laser already installed for

evaluation.

MR. REID: That's the tender from Medco, which was

withdrawn by the looks of things. Was that withdrawn, by the way? Because

there's "No Bid" written across on it here and I'm just assuming "No Bid" would

be a withdrawn bid, would it? On page 177. Then in their tender, page 180, III

J, it says: "Laser already installed for evaluation." Then

Part IV, A, says: "Do

you provide a unit for in-house demonstration...? If yes, specify and state any

terms: already on site."

DR. PARSONS: We do from time to time request,

before we submit tenders, because tenders have to be specific, we may bring

equipment in for trial evaluation. It may in fact be that this one was in on

trial evaluation before the tender went out. Before we do that we invariably,

through our purchasing department, require a purchase order to be signed for:

a) a limited basis, and

b) that this equipment is not to be kept within the

institution, and at the end of the evaluation period has to be taken out of the

institution or another purchase order is made, again to avoid the ability of

individuals to bring things into the institution on so-called evaluation, and

then find three months later that we can't live without it. Then we're forced to

purchase it.

So we do bring things in sometimes for evaluation but

it's for a short period of time and it is not unusual. We do it for anaesthetic

machines and so on.

MR. REID: Can I pick up on that, Mr. Chairman -

MR. CHAIRMAN: Mr. Reid.

MR. REID: - to follow your line of thought?

MR. CHAIRMAN: On this same topic?

MR. REID: Yes. I don't have any problems with a

doctor recommending to the board or to the administration that: this is the best

piece of machinery, and this is the piece of machinery that I want as a doctor.

I don't have any problems with that. You don't have any problems with it either.

If that is the case then, why not go back to the minister and ask for permission

to purchase, without going to tender, that particular piece of equipment?

Quite often the minister will allow you to do that, if

it's a case where there's a possibility that there's only going to be one person

bid, if you did go to tender; and that maybe there is something within that

piece of equipment that can't be supplied by someone else. There's nothing wrong

with doing that. I really don't think there's anything wrong. The only thing

that's wrong here is the principle is wrong, you see? That's what irritates I

guess us as members of the Public Accounts.

MR. CHAIRMAN: I'm not sure that the minister would

agree to that. If there were other suppliers that could (Inaudible) -

MR. REID: If there were. But because there were no

other bids on the piece of equipment then I'm assuming that there couldn't have

been anybody else fulfil the necessary requirements. So I'm accepting the fact

that the doctor who was mentioned there, Dr. Conway, picked that piece of

equipment out and said: look boys, this is the best piece of equipment that we

can possibly purchase. I don't have any problems with that.

MR. HEWLETT: Could anybody else have bid?

MR. KEATS: Just let me clarify that for a moment.

If you were to look in The Evening Telegram on Saturday you would find twelve,

fifteen, twenty things going to public tender for the General Hospital

Corporation. Traditionally what people will do as a matter of practice on Monday

morning, if you're in the city, you will go to our purchasing department and you

will say: let me take a look at the specifications for this piece of equipment.

There may be ten companies that appear to take a look at the specifications for

the equipment. Two of those companies may follow through with a bid. The other

eight may say: no, we're not even interested, we can't do it, it's not worth our

while, or we're doing something else. For whatever reason they may not.

So because only one company or two companies may bid

on something that doesn't mean to say that it's not available for a wide variety

of companies to make a bid on. There could have been three or four companies

that looked at the specifications and for whatever reason may have said: we're

not interested. In this particular case the companies that did take a look at

the specification, one of them said: yes, we're going to make a bid on it, The

other says: we're not going to make a bid on it, we can't supply it, or for

whatever reason. That's the thing we generally use. If those companies think the

specifications are such that they're locked out we will get a complaint about

that. That's when we follow back and do the investigation.

MR. REID: Yes, but you know. That's true of

anything. With reference to the cars and trucks, you know, Dr. Conway knows, and

that company that he dealt with knows if there's another company out there which

can compete with this one for that piece of equipment.

MR. KEATS: Yes.

MR. REID: He knew that. Dr. Conway knew that it

was only that company that could probably supply that. You follow what I'm

saying?

MR. KEATS: Yes, I'm following what you're saying -

MR. REID: So you should know it as the

administrator. If you're looking for a Ford motor you're not going to buy a GMC.

MR. KEATS: Right. But if -

MR. REID: You follow what I'm saying.

MR. KEATS: - I put out a specification for a car,

for example, if you follow through on that, and there was only one bid that came

in on that car, then you don't assume that the specification was so detailed

that only one company could bid on that. Because all the other companies besides

Ford may have said: we've either missed the tender, we missed the bid, we looked

at the specifications, and we're not interested in providing the product. That

was my sole point. One bid doesn't mean to say there was only one company

available. One bid -

MR. CHAIRMAN: Unless you specify a 4.3 litre

engine and everybody else builds a 4.0.

MR. REID: That's right.

MR. KEATS: Exactly. But if you did that, then you

went out to a car company -

MR. CHAIRMAN: That's what we're trying to get at

here, to ascertain whether -

MR. KEATS: If you did that, then went out and

said: okay, I want a 4.3 litre engine, there's a good chance the other car

companies will put in a complaint and say -

MR. CHAIRMAN: There is a good chance, unless that

guy is bidding for ten more down the hall and doesn't want to (Inaudible), so:

let him have that one, I want to get those ten.

MR. KEATS: Sure.

MR. CHAIRMAN: What we're looking at here is the

potential for any abuse, that's all.

MR. KEATS: As a matter of principle, the General

Hospital Corporation is interested, and by and large follows the Public Tender

Act of the Province. We're not interested in finding ways to get around that

Public Tender Act. We don't want to do that.

MR. MURPHY: In the real world, Mr. Keats, I can

see, with all kinds of justifications, especially today with the technology that

you alluded to doctors associated with medicine, it's not beyond anybody's scope

- I pick up on what my colleague said - that doctors share information. I can

hear a doctor saying to another doctor: look, for heaven's sake, don't buy

Product X, it doesn't do what needs to be done. The other unit is a much more

efficient unit, it does what needs to be done, we don't have the same kind of

breakdowns. I talked to our friends in Halifax and Montreal, they had a similar

unit. If you buy that you're buying this, that and the other thing.

But that Product X that all that exchange is

associated with may very well meet the specs. This is why I think that my

colleague makes a good point. With that kind of experience and that kind of

documentation or somebody saying the problems that they had with that particular

product, and I know Mr. Pardy can give me a dozen cases of things he bought. I

know it myself in Scott air packs that I can relate to Mr. Wells, and different

other air packs that were on the go at the time. They were cheaper but in the

end, for what we wanted them for, they were a bad buy.

That's why I think what Mr. Reid is saying is correct.

It makes sense to me for physicians to go to the Department of Health and say:

we need Unit B. Because in the long run it's going to be a much more effective

and better unit. Surely to heavens that takes place. What happens is that you

write a set of specs now, you want Unit B, you don't want Unit A, and you write

a set of specs to keep Unit A out of the picture. We all know that goes on.

AN HON. MEMBER: (Inaudible).

MR. MURPHY: We all know it goes on. I think a much

more honest and appropriate way to do it would be to first approach those people

who are providing the funding, in this case the government, and say: here's a

letter of explanation. Because in many cases you have senior physicians who will

go to Montreal at the invitation of a supplier to look at an installed MRI or

CAT scanner, whatever the case may be, and show the working functions of that

particular unit. The same situation would exist I guess with a laser. I'm not so

sure on this one that it would be worth the company's while.

I find no fault with that. The only thing I do find

fault with is drawing a set of specs to eliminate the rest of the competition.

I've seen that. I'm not suggesting that this is what applies here. However, it

was on site before purchase, and it looks like everybody was geared up and it

was used and so forth and so on. It leaves us with some skepticism, I'm sure. I

hope you understand that.

MR. CHAIRMAN: If there's no response to that, just

before we leave this particular item, you made a statement earlier, and I was

wondering if you could clarify it for me, you said it was purchased with funds

from outside sources.

MR. KEATS: Yes.

MR. CHAIRMAN: Are you suggesting therefore that

because it was private funding, donation, fund-raiser or whatever, that the

Public Tender Act should not be followed to the same degree? I'm just asking,

what were you suggesting by that comment?

MR. KEATS: It's a moot point. Somebody might argue

that if I'm a private individual who goes to the General Hospital or the Janeway

and says: I'm going to give you $30,000 provided you buy a piece of equipment,

A, and no other piece of equipment, does that organization turn around and say:

no, we're not going to accept the money until we go to public tender. What we

did was said: we're going to go through the public tendering process with this

piece of equipment.

MR. CHAIRMAN: I think that's the correct

procedure. I would say that if the person wanted to donate a particular piece of

equipment he could bring in that piece of equipment. Wouldn't have to go to

tender.

Mr. Ramsay, did you want to...?

MR. RAMSAY: Yes, I have a few questions. I note in

the documents there are references to inventory and the reference gets into the

specifics of the amount of inventory on hand at any given time. In industry, I

suppose the health care industry, we should look at it that way. Possibly

similar to any other area, noted in the automotive industry and many others,

they have adopted a policy of 'just in time' inventory now, versus the

stockpiling of inventory, which was the common practice in the past. There are

references in here in a document that was prepared for you, I guess, a review of

the inventory practices - I'm not sure if it was at the Miller Centre or at your

own - as to what the pharmacy would have on hand at any given time, and a way

for you to effect savings in that area by virtue of cutting back on the volume

of inventory on hand.

I just wanted to ask you if that kind of thing has

been considered, as to whether you will implement that sort of cost-saving

measure in the future. Not only for that, I suppose, but also for other items,

nonpharmaceutical items, the supplies and other consumables that are used in the

institution.

MR. KEATS: Yes, Mr. Ramsay, that is part and

parcel of our inventory control system. If I can just follow up on the example

of pharmacy: based on a review that was done on September 3 1992, at the Miller

Centre there was a $120,000 reduction in the inventory on hand and an

improvement in the inventory turnover. Not as much as we want to improve it. The

Miller Centre Pharmacy will be integrated with the Health Sciences Centre

pharmacy on the new computer system, so that will be another change, another

control process.

For the Health Science Centre itself there has been a

significant reduction in the inventory on hand, and the associated turnover rate

is now thirteen times per year which incidentally is twice the industry norm. So

we are turning over the inventory significantly more and reducing the cost of

doing that.

MR. RAMSAY: Okay. I am going to take you to a

variety of different places here. These are just some questions that I noted as

other questions came up. I was speaking to the Sir Thomas Roddick Hospital

people at our last meeting, and I am pleased to comment that they will be

receiving a new institution since our last visit with them which is badly needed

and just to put that on the record.

MR. CHAIRMAN: The engineering of it.

MR. RAMSAY: Yes. Well apparently they got a

process established as to how it is going to proceed. I wanted to get into the

area of patient stay.

AN HON. MEMBER: It must be a Liberal district, is

it?

MR. RAMSAY: This is something which we discussed

with them and they spoke of the length of patient stay as being a key factor in

lowering the costs associated with operating the institution that they have

there. And they pointed out that they were moving towards the new norm of

ambulatory care and home care programs for in-patients to get them out of the

institution as quickly as possible, to cut down on the cost. At your

institution, even though it is at a different level, of course, being the key

central hospital I suppose for a lot of the procedures that are performed here

in the Province, but is this an area which you are striving for as well?

MR. KEATS: Yes, Sir, I think over a period of

years there have been a lot of changes made in in-patient versus out-patient

services. We run a significant out-patient service in volume. I doubt if there

are very many teaching hospitals in the country that has a better or a more

comprehensive ambulatory care program than the General Hospital Corporation.

The terms of your average length of stay, I mean there

are a variety of factors that will impact on the average length of stay.

Two-thirds of our out-patients come from outside of the eastern Avalon.

Sometimes we have a length of stay for patients because we cannot get them back

to their homes or back to other hospitals once they have been in to the Health

Sciences Centre and got the things done that needed to be done. As well, well

over 50 per cent of our patients are called outliers when you look at norms,

like average lengths of stay and so on. So they are not the normal patients you

would look at. And I can argue with you that the quicker we get the patients out

the more expensive the system becomes. You know, if I wanted to say to you our

cost per patient day is the lowest in the country, there are two ways we can do

that. We can bring in people who do not need to be in the hospital, bring in

unnecessary admissions; and we can keep people there for long periods of time.

One of those two things or both of those things would substantially decrease our

cost per patient day.

So to say we are going to get patients out in eight

days instead of nine day may actually increase the cost because the patients you

are bringing in to replace the person who was in the bed on the ninth day is

getting significant. So you do not necessarily move to ambulatory care as a way

of saving your operating dollars. You move to ambulatory care because that is

the preferred way and the technology is now there to provide those services. We

have done significant work in that area.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: All right. I have a few more. One

concerning the area of salaried physicians versus fee for service physicians and

their effect on the cost associated with the institution. How many salaried

physicians would you have on a percentage basis who utilize the facility versus

fee for service physicians? What would be the ratio?

DR. PARSONS: We have very few. We have

approximately 250 medical staff of which four or five are salaried. An

insignificant number as far as the General Hospital is concerned.

MR. KEATS: If I can add to that.

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: Bearing in mind as the primary teaching

hospital our physicians have a significant role in teaching as well as patient

care.

MR. RAMSAY: Okay.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: There is I suppose a commentary now to

the effect that salaried versus the fee for service often will cut the cost

associated with medical care. Albeit in a speciality hospital like your own

where you are getting into surgeries and, I guess, salaried physicians would be

very difficult to keep If they were unable to earn an amount of income related

to the fee for service versus the salaried amount. Would that be one of the

situations or because most of these physicians use the facility on a fee for

service basis?

MR. CHAIRMAN: Dr. Parsons.

DR. PARSONS: Most of the physicians in the General

Hospital are fee for service physicians and they work within the institution and

charge MCP on the unit of service. The argument or the thought that salaried

physicians will save the health care system money is - there are two sides of

that and I do not think there have been any genuine studies done to prove one or

the other. The individual who is pro fee for service will say: if you went

salaried you would need twice as many physicians to get the same volume of work

done and would not save any money, so we have not dealt or looked at the

cost-savings and certainly it is something that possibly lies in a higher arena

than just one institution.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Thank you. The Canadian Association of

Public Accounts Committees and the Auditors General throughout the country

participate in a group - I am trying to think of the group that deals with

effectiveness reporting -

MR. CHAIRMAN: Mr. Drover.

MR. DROVER: Canadian Comprehensive Auditing

Foundation.

MR. RAMSAY: Yes, the Comprehensive Auditing

Foundation; they have dealt with a matter called effectiveness reporting quite

substantially over the last number of years. They have developed a process

whereby the effectiveness of given methods of operation, management systems et

cetera have been utilized and it is being developed I suppose as a discipline, a

management discipline and an accounting discipline. I just wonder, because I

know you have done very many internal reviews et cetera here, and a good

analysis has been done on a lot of different areas of your institution.

I am just wondering, the idea of effectiveness

reporting and dealing with things that you implement, is this a standard

practise that you would follow? Now I know I might have gone off on a bit of a

tangent there in speaking about the Comprehensive Auditing Foundation, but it

seems like you are dealing with the intent of what is being suggested by them in

health care institutions and others. I know the Queen Elizabeth Hospital in

Toronto was singled out in the last one as a case in point, and they had done an

effectiveness reporting exercise on their operations and the balance of how

their operations dealt with the variety of patients they had coming in from a

long-term care basis versus an acute care basis et cetera. I am just wondering,

is it a standard practice at the institution to dig into the effectiveness of

given programs and that are sometimes things left and after they are tried, are

they not evaluated, I just wonder if it is a point that the management of the

hospital keep very firm track of?

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: I suppose over a number of years, given

the fiscal capacity of the Province, hospitals in the Province have been looking

at what programs they are providing and whether or not they should be providing

those programs, and every year we take a look in detail at what we are doing and

what we should be doing and why we are doing it and if indeed we should be doing

it and if not we should be doing it, so that goes on.

If you are saying, do we fully evaluate the efficacy

of some of the things we do, I mean that is not done to the extent that it

should be done anywhere in the country, and that is not something that is in the

sole purview of the General Hospital. I mean that is a societal, ethical

question: do you provide renal dialysis to somebody who is ninety years old or

to somebody who is going to die with cancer next year anyway? You know, some of

those things take place across the country -

MR. RAMSAY: Then you are getting into the

rationing of medical services.

MR. KEATS: - and that is a different question. In

terms of how detailed a program evaluation program do we have, I can tell you

that we do not have a significant program evaluation program, nor does any other

hospital in the country have a detailed program evaluation because it is very

difficult to determine in some areas like cardiovascular surgery. If we did 350

cardiovascular surgery cases last year on people who needed surgery and ten of

them died, did we have a poor program and all those sorts of things? I mean, it

is very difficult to do a program evaluation but those are the areas we are

getting into. Eric, I do not know if you have any other comments you would like

to make on this?

DR. PARSONS: Not really. I mean we do look closely

at utilization issues, making sure that we utilize our beds appropriately; we

look at antibiotic usage which is an area of utilization and sort of I guess

falls within the question. As Mr. Keats, said, program evaluation is something

that we have started to look at in most hospitals and have been unsuccessful in

really developing a scheme in which we -

MR. RAMSAY: Methodology seems to be now being

developed to a point for the sake of auditors and others to bring back to

government. Just one final point I want to make, Mr. Chairman. It is a question

I asked our other guests whom we had at the hearing with Sir Thomas Roddick, and

I would ask it individually to the four of you, and it was along the lines of

just basically, what one thing do you feel could possibly be done differently in

the area of health care that would effect the most gain in the provision of

services to the people of the Province? You know, if you could come down to one

possible area, would it be increased funding, would it be more effective use of

the dollars that are available, et cetera, et cetera?

If each of the four of you, as witnesses, would have

one thing that you can think of - and this is you know, almost like the man on

the street type of thing, but as elected officials, I think we would like to

know, people on the inside looking out, what their feelings are on what would be

one specific area that you think could really give a really good improvement in

the overall efficiency and effectiveness of health care in the Province.

MR. CHAIRMAN: It sounds like a blank cheque to me,

who wants to try and respond to that? Mr. Keats.

MR. KEATS: You would get a wide variety of

opinions as you say about who you would ask. When I was with the provincial

royal commission as we went around the Province this was a question we asked

people. If you had $1 million and three programs that were $1 million each and

were very good how would you select amongst those programs? Surprisingly out of

the eighty-eight people we asked this question to eighty-eight per cent of them

said, that is a government decision and we are glad we do not have to make it. I

don't think you would get the same response today as we got in 1983-84.

MR. CHAIRMAN: That is a bureaucratic answer.

MR. KEATS: I agree with a lot of people who have

written that the most significant thing we can do for health care generally are

the things that we do to ourselves or against ourselves. We have an extremely

booming cardiology practice at the Health Science Centre. We are running 120,

130, or 140 per cent occupancy consistently and if you said to our cardiologist,

what can we do to prevent this, they would say if people stopped smoking, if

people monitored their diets a little better and kept their blood pressures

down, probably half the people who come to us we would not need to see at all,

so I think it is your lifestyle considerations. It is not more technology, not

more physicians, not more of this, it is your lifestyle considerations.

MR. MURPHY: Wellness programs and preventive

medicine.

MR. KEATS : In the long-term it has the most

significant impact on health care.

MR. CHAIRMAN: Mr. Reid, are there any final

questions? I assume, Mr. Ramsay, you are finished.

MR. KEATS: Does anyone else have a question?

MR. MURPHY: Just a quick question. It is important

to me after discussing health care on the west coast of the Province, at

Roddickton, and at some of the other hospitals, I think we have heard a lot

about the health care throughout the Province, in your opinion, and I know this

has nothing to do with the documents in front of us, but for the money that is

available today do you feel the health care at the General Hospital right now is

as good as it has been or is it deteriorating?

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: You will get a different answer again

depending on who you ask. I do not think there has been any deterioration in the

quality of care at the General Hospital. I would counter that though with saying

the General Hospital because of the nature of the organization has not received

the tightness that some of the other organizations may have had around the

Province. Most of our programs are 'one off' programs for the Province.

We run the only cardiovascular surgery program, we have the neurosciences, we

have the oncology programs, the infectious diseases programs. You cannot get

them anywhere else so we probably have not been as squeezed as an institution as

much as some of the other ones. I would venture there has been no deterioration

in the quality of care. I would also be careful to say though that because of

changes in technology and because of changes in society we cannot continue with

- I mean, if you look at other teaching hospitals across the country they have

been going up at this rate and we have been going up at that rate and the gap is

getting further, and further, and further every year, and we are not going to be

able to continue with that. I think Newfoundland makes better use of its health

care dollar than any other province in the country.

MR. MURPHY: I am just glad to hear that you are

consistent with what I have heard throughout the Province. That was why I asked

the question.

Thank you, Mr. Chairman.

MR. WINDSOR: Let us get back to the Public

Accounts, if we could, as important as that question was. Mr. Reid do you have

any final questions?

MR. REID: No, other than just to make a request of

you, Sir. Would you ask the Department of Health to provide you with the audited

statements for the board account for this General Hospital so that we can review

them?

MR. WINDSOR: The Deputy Minister is present and

will take that as notice.

MR. REID: Thank you. They are not for public

viewing but just for our own personal viewing.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Mr. Chairman, I have just one quick

question. We spent a lot of time on this laser business and it was said it was

paid for out of other funds. Now, the Hospital Corporation per se comes under

the tendering act. I suppose the Auditor General is the best one to ask. Are

public funds and various other funds, apart from the regular operating budget of

the hospital, are they by law subject to the tendering act, or is it by

convention or niceness that it is done?

AN HON. MEMBER: I look around for the Auditor

General who is quite an expert in the Public Tender Act.

MR. DROVER: That is a difficult one because I do

not know if it has been tested. Someone mentioned earlier about if you want to

get a specific piece of equipment out of a will and then turn it over. Really

what it says is that anything purchased by a government funded body must go

through the Public Tender Act so I think we would take the position that the

items must go through the Public Tender Act. Now later maybe someone might come

down with a group of lawyers afterwards and give different

interpretations. The

interpretation that we would give, that if something is purchased for use in the

hospital that the Public Tender Act applies.

MR. HEWLETT: Regardless of the source of funds.

MR. DROVER: We would use that, yes. I think that

would be our view.

MR. HEWLETT: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Murphy, any final questions?

MR. MURPHY: No thank you, Mr. Chairman.

MR. CHAIRMAN: There are probably a few more areas

that we could get into but we're just about out of time, and I really don't

think there's enough time to get into any detail. I don't think there's enough

left untouched here that - and I ask the direction of the Committee - I think we

can dispense with the hearing tomorrow. I think we can reasonably assume that

we've covered enough here that we won't come back tomorrow. Is that agreed?

MR. RAMSAY: No further questions, Mr. Chairman.

MR. CHAIRMAN: So rather than try to get into

something that we can't finish, because we do have to be out of here very

shortly, let me conclude on behalf of the Committee -

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Yes, the Vice-Chairman advised me

that we can always recall people, if we decide we want to have further hearings

we can do it at another time. I don't think at this point in time it appears to

be necessary.

On behalf of the Committee let me thank the witnesses

for coming forward today and giving us the benefit of their advice and their

evidence, and their candid responses. We appreciate the manner in which you

responded to our questions today. Did you want to make a final statement, Mr.

Wells, of any kind before we conclude?

MR. WELLS: Just very briefly. I think that some of

the things that were noted in the Auditor General's report we would expect to be

noted. That's the proper thing. The argon laser had a lot of significance. The

letters, when you read it on the face of it, it's a bit startling. I think it's

a sales pitch. The thing was so open that I think the interest of the hospital

and the public money in terms of the purchase of that piece of equipment - in

the end everybody was well served. One would expect to pick up and question some

of the language there. It was done so openly that in the process - you'll see

another letter there from the same company on another issue of equipment saying:

we can't tender at this time because we don't have -

We would expect these things, and I think that

reasonable. I suppose the only thing I can say, because Mr. Murphy did bring it

up, he said that the preface to the Auditor General's report about the statement

of our accounts, that they were adequate. You know how drab and dull these types

who are in the accounting profession are, and they very seldom use superlatives.

Because I read that and I said: my goodness, what have I gotten myself into?

Then I realised of course that that's exactly what the profession uses when it

describes these types of things.

MR. CHAIRMAN: You're lucky to get that. The two

letters "I-N" in front of that would have made a different picture.

MR. MURPHY: Actually, it turns out to A+.

MR. CHAIRMAN: Just to respond to that, Mr. Wells.

We think that just about the best interests were served. In spending taxpayers'

dollars or in politics it's not enough to be right, you must also appear to be

right. We often get unfortunately tarnished with that not appearing to be right,

even though what we've done has been quite correct. In the expenditure of public

funds the same can happen. We again thank you for your information today.

Mr. Drover, do you -

MR. WELLS: If I might, Mr. Chairman, I'd just -

MR. CHAIRMAN: Sorry, Mr. Wells, I didn't mean to

cut you off.

MR. WELLS: Because when the discussion was on the

variances in the inventory, which is just a question of when the paper trail

catches up with the fact, so it should be neither too positive nor too negative,

the differences in the figure, but I was looking at the budget

summary. I take

no credit for this - within that hospital, on over $31 million worth of

medical-surgical drugs and other supplies, and I look at their 1991-1992 budget,

and the actual expenditure, the differential in the end was so negligible on

that kind of spending that the controls must be pretty good.

You follow this from year to year, and the projections

and the actual expenditures are so tight that there can be very little

tomfoolery in the piece, when you look at that. It sort of re-fortifies your

opinion that while - and as the hospital has acknowledged, certain procedures

should be in place and certain things followed - you can always tighten up. I'm

not too worried about it. I still feel, on behalf of the board, that if the

board has any function to serve in these hospitals that they are accountable for

the activities of management in the corporation. The report from the Auditor

General is not taken lightly by the board. We're into it ourselves to find the

answer as to what went on long before we get in front of the Public Accounts

Committee.

MR. CHAIRMAN: I think the Committee appreciates

that, Mr. Wells. We recognise that in a corporation as large as the General

Hospital Corporation, particularly as it relates to inventories, with the broad

range of inventories that are available, particularly as my colleague, the

Vice-Chair, pointed out, in emergency rooms that must be available, can't be

under lock and key. They must be available for those who need them instantly,

sort of thing. Very difficult to control every item within the hospital.

I guess the Committee's role is to determine on the

advice of the board that measures are in place and to be satisfied on behalf of

the House of Assembly and the taxpayers that indeed proper measures are being

taken, and with the advice of the Auditor General and the people who do audits

to ensure that every step is being taken to safeguard the public purse.

MR. RAMSAY: I move, Mr. Chairman, that we adjourn.

MR. CHAIRMAN: Before we do that, I'd like to give

Mr. Drover one opportunity to just respond -

MR. RAMSAY: Oh, okay, my apologies.

MR. CHAIRMAN: - and then have a final word if he'd

wish to do so.

MR. DROVER: Thank you, Mr. Chairman. On behalf of

the profession at large, in some of the other provinces they have a value for

money area. I think some of those Auditors General might say too you that if the

system was more than adequate you would be wasting money, because you were

making it stronger than it should be. I think that explains the adequacy. So I

think it's the strongest word we can use, that it is adequate.

Seriously though, I'd like to thank the officials, on

behalf of Ms. Marshall, at the Health Sciences and the General Hospital. Mr.

Keats and his predecessor Mrs. Dobbin, in particular, and the two board chairmen

and their staff, and Albert Croke, the Chief Financial Officer.

What we've done now is, we've brought the Committee

down through four large institutions - the two hospitals, and the two school

boards. When the House of Assembly passed the Act October 31 of last year, the

Auditor General's Act, it gave access to I think it's 120, 125, entities in the

Province. So you'll probably over the next five to ten years start to see an

awful lot more of these entities coming to you.

I'd like to thank you, Mr. Chairman, on behalf of the

staff. We're always available to answer any questions. Thanks again.

MR. CHAIRMAN: Thank you very much. We also want to

thank the witnesses from the General Hospital. I thank the Auditor General and

staff for your assistance in this. You do point out quite rightly that many of

these areas are new ground for the Public Accounts Committee. It's only with the

introduction of the legislation really that we've had a full mandate to deal

with it. Perhaps in future we'll have further legislation which will give the

Public Accounts Committee more teeth. It's an area that we're looking at.

There's no legislation in Canada that gives full legislative authority to the

Public Accounts Committee. It's an area that we'd like to look at. Nevertheless,

we do have of course the authority of the House of Assembly.

I thank my colleagues, the members of the Committee,

for their diligence in these hearings, and to the staff as well. I think this

pretty well rounds off this round of hearings for us. The House of Assembly will

open on Monday. Mr. Drover, I assume we can expect the new Auditor General's

report fairly soon? Am I correct in that?

MR. DROVER: The Auditor General's report is - Ms.

Marshall may shoot me - but the Auditor General's report is being edited and

being worked on now, the final view of it. I guess by legislation we have to

table it by January 31.

MR. CHAIRMAN: I was under the impression that she

would like to table it during this sitting of the House but prior to Christmas

so that we would have new, fresh, more current information to get our teeth into

after Christmas.

I think I might say to the Committee that it has been

a satisfying round of hearings we have had. I think we have accomplished the

purposes of the Committee in protecting the public purse and the taxpayers as

best we can. This final process of accountability, we believe, is important and

we will be no doubt reporting to the House in due course.

Thank you all once again.

On motion, Committee adjourned.