Managing through a financial crisis: the Canadian experience

Blog post

Published: 27/06/2011

A massive public sector deficit brings an abrupt end to a period of growth in health care spending, which brought new technology and better access to services but skewed the health system towards hospitals: too many of them soaking up too much of the health care budget. Money needs to be saved urgently, but services also need to change, move out of hospitals and keep people well. Sound familiar? Ring any bells?

These were some of the problems that confronted policymakers and politicians across Canada in the 1990s when a three year recession precipitated a crisis in public finances that led to unprecedented change in the health service. Over a short period of time in the 1990s, provinces across Canada were forced to close, merge or reconfigure hospitals to save money in the short run, while attempting to preserve the quality of care and improve services over the longer term.

Some of the Canadian ministers, managers and senior policymakers who had been in the eye of the storm offered their insights into the process of managing crisis and change at a recent Nuffield Trust masterclass. Their visit was organised as part of a project we are running into the experiences of international health systems that have had to make efficiency savings on the scale of those now facing the NHS in England.

From the province of Saskatchewan (with a population of 1 million scattered across a large area), former health minister Louise Simard described how her government had ‘converted’ (changed the use of the facility towards more active treatment and rehabilitation) or closed 52 rural hospitals, following a budget crisis that had nearly brought the IMF to their door. 

Regional planning bodies were simplified and merged, then given strict deadlines to convert the rural hospitals (which meant losing services and staff) while provincial government ministers spent an intensive few months on the road attending town hall meetings to explain the purpose of reform. Although communities were bitter about losing services, Simard believes that the lead taken by politicians to present a vision for change and argue the case locally made a significant difference.

By contrast, politicians took something of a back seat in Ontario (population 13 million) and delegated authority to the Health Services Restructuring Commission, which operated between 1996 and 1999, with a mandate to make binding decisions on the restructuring of hospitals. The financial imperative was powerful: at one point Ontario was spending more servicing its debt than on its hospital budget.

The Restructuring Commission’s former CEO Mark Rochon explained how they embarked on an equally intensive process of consultation with local stakeholders and the media and worked on a case by case basis, their decisions bolstered by data analysis and service modeling and, crucially, backed by the politicians. At the end of the process there were 150 hospital corporations (down from 225 in 1989/90) and a process of investment had begun into long term care and other alternatives to hospital.

During this period, there is no doubt that Canada succeeded in bending the cost curve, at the expense of jobs and wage increases. The main casualties were waiting times, which rose and public satisfaction with health services, which plummeted.

The veterans of Canada’s health austerity were clear about what’s needed in the short term: politicians need to be honest about the need for cuts to health services and articulate a clear message and purpose for change (something we have called for in our response to the Government’s NHS ‘listening exercise’). They need to either lead or take direct responsibility for unpopular local decisions.  The really difficult part is sustaining reform over the longer term.

As Canada’s economy improved, spending on hospitals has gone back up, and many feel that the goal of a more primary care focused, preventative health service continues to elude them.

Suggested citation

Thorlby R (2011) ‘Managing through a financial crisis: the Canadian experience’. Nuffield Trust comment, 27 June 2011.