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

CHAIR (J. Byrne): Order, please!

I thank you for coming out. My name is Jack Byrne. I am the MHA for Cape St. Francis, and I am Chairman of the Public Accounts Committee. To my right is Tom Lush, the MHA for Terra Nova, and he is the Vice-Chair. What we will do in the beginning is call the hearing to order and we will go around the table to introduce ourselves, starting to my left.

MS MURPHY: Elizabeth Murphy, Clerk.

MR. J. NOSEWORTHY: John Noseworthy, Deputy Auditor General.

MS MARSHALL: Elizabeth Marshall, Auditor General.

MR. LOVEYS: Wayne Loveys, Audit Principal.

SR. DAVIS: Sr. Elizabeth Davis, Chief Executive Officer of the Health Care Corporation of St. John's.

MS YOUNG: Eileen Young, Chair of the Board of the Health Care Corporation.

MR. CROCKER: Calvin Crocker, Vice-President, Administrative Services of the Health Care Corporation.

MS S. OSBORNE: Sheila Osborne, MHA for St. John's West.

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

MR. WHELAN: Donald Whelan, MHA for Harbour Main-Whitbourne.

MR. M. NOSEWORTHY: Mark Noseworthy, Executive Officer, Public Accounts Committee.

MS THISTLE: Anna Thistle, MHA for Grand Falls-Buchans.

CHAIR: Thank you.

This hearing is being recorded, by the way. What we will do before we get into the hearing itself is have someone move a motion to adopt the minutes of November 19, 1998.

On motion, minutes adopted as circulated.

CHAIR: First of all, have all of the Auditor General's staff been sworn in?

MS MURPHY: Yes.

CHAIR: We have to swear in the witnesses. Elizabeth, would you do that?

Sr. Elizabeth Davis

Ms Eileen Young

Calvin Crocker

CHAIR: Thank you.

For this hearing, we have two mornings set aside. If we do not get through it this morning we will continue on tomorrow morning, from 9:30 to noon, give or take a few minutes. From the previous hearings we have had last week - we had Monday, Tuesday, Wednesday and Thursday. I am not quite sure how long it can take, because once you get into it one thing leads to another. What we have done in the past is we have asked the witnesses if they would like to make any opening statements beforehand. If you do, feel free to do so at this time.

MS YOUNG: Thank you, Mr. Chairman.

CHAIR: Sorry. Could you identify yourself for the recording?

MS YOUNG: My name is Eileen Young, and I am Chair of the Board of the Health Care Corporation. I was appointed in February 1994 by government.

As you are aware, the Health Care Corporation of St. John's assumed responsibility for eight health care facilities in the St. John's region on April 1, 1995. These eight facilities, just to remind you, are the General Hospital at the Health Sciences Centre, St. Clare's Mercy Hospital, Salvation Army Grace General Hospital, the Waterford Hospital, the Janeway Child Health Centre, the Children's Rehabilitation Centre, the Leonard A. Miller Centre, and the Dr. Walter Templeman Community Health Centre on Bell Island.

As well, we assumed responsibility for three schools of nursing: the school at the General, at the Grace, and at St. Clare's, which we have since consolidated into one centre. We have also assumed responsibility for Central Laundry and the Regional Ambulance Service. That is just an overview of who we are.

One of our first tasks as the Board was to identify seven principles which would guide our organization, and the sixth principle is what I will refer to today, which is in your area of responsibility: To be accountable to government and to the public for the quality of health care and the appropriate and the efficient use of public funds. That is our mandate as the Board, passed along to our operational people.

In following that principle we set for our organization three strategic directions to be implemented in the first years of our existence. Number one, we consolidated all of our administrative and support functions. This meant bringing together the different systems which had been in operation under six boards that we replaced, everything from our financial services and information services to housekeeping and food services. It involved consolidating the bargaining units of our five unions as well as our six previously existing medical staff organizations.

We also set about the integration of our clinical services - that is, our services related to patient care - into programs bringing together similar services across all our sites. We also set about, and it was announced publicly, the closure of three of our sites with a major rebuilding program to accommodate the transfer of services from these sites to, now, five.

In the implementation of these three directions we have reduced the number of managers and support staff, but we have not reduced any direct patient care staff. We have accrued considerable savings from the consolidation of support services and all have been redirected into direct patient care services.

The Auditor General's review was carried out over a period of six months and covered the first eighteen months of our existence. The Board, Mr. Chairman, was pleased with the outcome of the review which affirmed the directions we had undertaken, and which confirmed that we had been accountable for the use of public funds despite the incense changes faced by our organization in our first two years.

We have provided the documentation you have requested. As well, we have given you a status report on the actions we have undertaken with a view to each of the recommendations and suggestions contained in the Auditor General's report. Sister Elizabeth Davis is our Chief Executive Office, as mentioned, and Mr. Calvin Crocker is Vice-President, Administrative Services. They are with me here today to answer any questions you may direct us, especially related to operations.

Thank you.

CHAIR: Thank you, Ms Young. Sister Davis, do you have any comments?

SR. DAVIS: (Inaudible).

CHAIR: Okay, what we will do is get right straight into the questioning by the board members. Again, it can go anywhere; we do not know at this point. Who is first off? Mr. Lush.

MR. LUSH: I have a question for Ms Young. I think it is probably fair to say that this present restructuring of health care throughout Newfoundland but particularly the St. John's region, the area that we are giving attention to today, probably is one of the largest restructuring, largest reforms, that we see in the public health care system in this Province and in St. John's. I have just a general question to get things going. I wonder if, Ms Young, you would like to comment on what you think has been your greatest success at this point in time and also, in retrospect, what have been the most difficult and most challenging events during this restructuring process.

MS YOUNG: Thank you, Mr. Lush. You are right, it is one of the biggest restructuring of health care - not in this Province, in this country. I just want to let you know that we get letters constantly from other restructuring going on in the country who are amazed that we were able to do what we did in such a short time.

Some of the things that I think are very positive: we have redirected monies that were spent, for example, six financial services, six kitchens, six laundries - six, six, six - into patients, which is the purpose of what this money is supposed to be about.

I feel that the new organization is patient-oriented, more than staff-oriented, keeping in mind that staff are an important issue but the major parts of our money that we saved in the consolidation of services went to patients; not to books, not to paper, not to pencils.

Number two: I think with the redirection of programs we have now, the patient in our new organization is followed from birth to death because we have developed programs that allow the patient to be considered. He is no longer at St. Clare's or at the General or at the Grace; he is a patient that can be followed no matter which institution he is in, and that has been part of the reason for a lot of our consolidation.

Another wonderful thing that has happened over time - and this is thanks to Sr. Elizabeth Davis and her staff - I mentioned in the beginning that there were five unions, five separate unions that have been consolidated with very little fuss, very little demonstration, over the past how many years now? We are heading into three years that this has been done. Six medical staffs, some of which never spoke to each other before, are now all working together for the patient.

From a board point of view we asked our staff, the board, who gave them policy to go forward and to do these things; and they did it with very little fuss and very little interruption and with a considerable savings of public money.

Does that answer your question?

MR. LUSH: Yes. I just have two more, Mr. Chairman. One is related to the integration or the bringing together of the three nursing schools here. A general question on that, I suppose, is: At this point are you able to comment on how that is working under the new restructured system?

Secondly, I am just wondering about the nursing program now in view of the fact that Memorial offers the degree program; and how do the numbers compare to the people entering - for the want of the umbrella term - your nursing program as opposed to those that are taking the bachelor's program at Memorial.

MS YOUNG: I just want to let you know, the board did set direction for staff to again, because of funds, consolidate the three nursing schools. I think that is an operational matter, and I will let Elizabeth explain the operational part, but the board set the direction for staff because of the environment today. We felt there was no longer a Grace, a General, and a St. Clare's, and it was cost-efficient to form them under one school. I will pass that along to Elizabeth, just to give you the operational part of it and the numbers.

SR. DAVIS: I think the whole plan to bring the three schools together really pre-dated our organization. It really started around 1991-1992, so there was a definite direction set years before we came into existence.

Three things happened at the one time, and all three are incredibly important for the advancement of nursing education. The first thing that happened is - the three schools had their own curriculum. Each school had its own curriculum. These three schools were brought into one so that we could have a single curriculum, that we could focus education for the whole Province not just nurses for St. Clare's, or nurses for the Grace, or nurses for the General, but nurses for hospitals, nurses for community programs, nurses for occupational health, so the whole spectrum could be better focused.

The second thing we did, which is most significant, is that we agreed that there would be one degree program. A student today who goes through our Centre for Nursing Studies will graduate with a degree from Memorial University. Even though they will do their four years in our school they will have a degree from Memorial University because we teach a common curriculum. If I am a student who goes to the Memorial school, and you are a student who goes to Centre for Nursing Studies, we both graduate with a degree.

No longer in this Province will we graduate nurses who just have a registered nursing diploma. That last group of nurses was graduated this past June. Western Memorial School, our Centre, and Memorial University all now graduate degree nurses. As of the year 2000, which is the first graduating class, all new nurses coming into the health care system in this Province will have a bachelor of nursing degree.

The third thing is equally important to those first two thing. The third thing is by bringing the three schools together we were able to create a better critical mass. We brought in the nursing assistants. As you know, they are called licensed practical nurses now, since last year. The nursing assistants had been taught at Cabot College and they were really isolated there from the health care system. They are now taught within our Centre. As well, we are teaching programs for nurses post their normal training. Special programs in gerontology and in mental health are now being taught through the Centre.

As well, since last year when the nurse practitioner became a regulated professional in this Province, our Centre teaches the course for nurse practitioners. As you know, in September we had the first graduation of fourteen nurse practitioners from the program. What we have done, and this is very much consistent with national trends, is we have brought together what they call the whole nursing family: The licensed practical nurse, the bachelor of nursing, and the nurse practitioner who is an advanced practice nurse. That whole group are taught within that same Centre and the bachelors of nursing will have the Memorial degree the same as the person who graduates from Memorial University.

I am really pleased that you asked this question because that is one of our quiet successes. That is not one of the things people hear very much about, but in one activity, all of which began in September 1996, we have considerably strengthened nursing education for this Province. In terms of the numbers, Memorial's class would be approximately sixty students, Western Memorial approximately sixty students, and the Centre for Nursing Studies brings in 120 students each year. Altogether in the Province 240 students come in. The fallout is not terribly high for nursing students so we would probably graduate between 200 and 220 in the year 2000, which would be the first graduation from our school.

MR. LUSH: Thank you. Mr. Chairman, I said I had one more question. To use the Opposition technique in the House, this is a supplementary, but a new question after that, my final question to Sr. Davis. Since at the end of the four-year period all nurses receive a degree, what factors would decide which course they would enrol in, whether they would go to the Centre for Nursing Studies or whether they would go to Memorial?

SR. DAVIS: There is a central intake, which we call it, which is a terrible term. Everybody applies to the general program. They state their preference for which site they would prefer to go to. Would they prefer to do it at Memorial campus, would they prefer to do it at our Centre, or would they prefer to do it at Western Memorial? They state their preference. We give people preferences to the extent we can, and then the final numbers which would fill two of the three programs. Obviously, the people left over have only that third choice. The students overall, with some minor exceptions, have been able to get their first choice of site. It is a critical issue because students are happier, obviously, studying in the site they want. They will all graduate with the same degree but they have the preference. They are all assessed through the same central office.

MS YOUNG: I do not know if you noticed, but if there is an opening - a young woman I knew applied to the Centre for Nursing Studies in St. John's, got accepted in Corner Brook, and there became an opening in her third year, and she just transferred over to her third year here at the Centre. It was exactly the same curriculum. There is a girl from St. John's who did not get her first choice but when an opening became available was able to transfer without any loss.

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

With respect to the time line of restructuring, relocating from the different sites, I just wonder if Ms Young would like to comment on where we are in terms of total integration. I refer particularly to the institutions. For example, I understand that the Salvation Army Grace Hospital is still in operation. I believe the plan was it should be closed by now, I think. Maybe I am wrong. Secondly, I know that the Janeway is presently under construction. You probably have a better experience than most people knowing what is going on in terms of the construction and this kind of thing. I just wonder where we are in terms of meeting the time lines, the dates for the full integration of all of these facilities.

MS YOUNG: Every board meeting we ask that same question. You will be glad to know it is a question we ask staff at every board meeting.

I can say, from a board point of view, and we study it every month, that to date we are on time and on budget. You will be glad to know we are on time and on budget. As you know, a couple of steps have already been taken. The Children's Rehabilitation Centre was closed a year ago and the rehabilitation program was moved to the Janeway site. So one building has already been closed.

To run a hospital, as you know, you cannot wake up one morning and close it, because you have equipment, you have patients, you have staff. Right now it looks like spring 2000 is where we are, but Elizabeth now can give you the details, or Cal, whichever you would like to speak to, about where we are, why it is 2000.

MR. LUSH: Here is just a question I would like addressed. How does that fit in with your original plan? How are we progressing in terms of getting there?

SR. DAVIS: The very original date, when the board had announced with the Minister of Health in June 1995, we had set an impossible target of December 1998 for the closure. That was before any work had been done, that was purely looking at the issue in the broadest terms. Once we brought consultants in, and I think you have seen copies of the Nycum report - people who did the master plan and functional planning with us -, we more realistically set the date then for December 1999, with the information from the consultants. We are still looking at December 1999 to complete the building of the new piece, which is the Janeway Children's Health and Rehabilitation Centre, and the completion of renovations both inside the General and inside St. Clare's.

We then need time in the early winter to commission the new building, decommission the old buildings, and then we have the actual relocation. As Ms Young pointed out, you cannot just close down the Janeway today and open the new building tomorrow. Transfers of hospitals do not happen that way. They generally take several months.

We are confident, unless something very unusual turns up in the renovations, that by mid-2000 the transfers will have happened: so the building to be completed the end of 1999 and the transfer the year 2000.

MR. LUSH: Thank you.

CHAIR: Thank you.

MS YOUNG: I think government and opposition have been kept apprised of this all the way through. We have kept the public notified of this as we went along.

SR. DAVIS: I think that is an important point. We have been very aware of the ambitious nature. Nobody in Canada has built a new hospital in less than three years, so to start with we set ourselves incredibly high targets. We also knew, though, the kind of stress this would put on the system and we have several communications media, several newsletters that we send out, and we do make sure that the Leader of the Opposition as well as the Minister of Health's office get copies of those communications. They are available to people to keep up with the progress as we move through the restructuring.

CHAIR: Thank you, Mr. Lush. I just have a couple of quick questions along that line also. Sr. Davis, you mentioned that there would be approximately 240 graduate nurses, give or take, in the year 2000.

SR. DAVIS: Yes.

CHAIR: In meantime, it is two years without any graduates now. Over the past few years I have personally known a number of graduates from the various schools and a lot of them are leaving the Province. What impact will a two-year delay in graduates have on the nurse staffing at the various hospitals?

MS YOUNG: It will only be a one year -

SR. DAVIS: It is just one year. The graduates of June 1998 graduated this year -

CHAIR: In 1999 (inaudible).

SR. DAVIS: There will be some graduates. Memorial School will still graduate sixty students. It is our other two schools, Western Memorial and ours, which are going from the three-year program to the four-year program. In 1999 they will not have graduates. Then the year 2000 would see the next group.

The matter is complicated even further by the fact that there is an expectation of a nursing shortage across the country. So there are two issues that we are dealing with. When we looked at going to the four-year program one of the things we thought about was maybe in that third year we would still have a group who could graduate without the degree, kind of a special stream, but we said that would not be fair to the nurses we are trying to get ready for the next century. We are ready, finally, to go with a degree based program and we really should not make one group of nurses continue to suffer. We did think about having that stream but decided against it in the final analysis.

We are working within our organization and with the Nurses' Union, as well as with other regional boards across the Province, looking at this very serious question of a nursing shortage. Obviously the nurse practitioner program will strengthen nursing but the numbers will not be large enough to compensate what we are looking at here.

Another major issue we are facing is the number of casual nurses. Through the nurses' negotiations this time they are looking at converting casual nursing positions to permanent positions. We are developing a number of strategies to keep the nurses who are graduating here, with confidence that they will have full-time permanent jobs. Obviously we are waiting the outcome of the nursing negotiations now. We really do need to be looking at a number of provincial strategies to recruit more and to keep more nurses in the Province, there is no question about that.

CHAIR: Thank you, Sr. Davis. Just one more quick question. When the merger is completed in the spring of 2000 -

SR. DAVIS: The buildings?

MS YOUNG: Yes, the buildings, the physical.

CHAIR: Yes, and when all the staff have been moved - because the Janeway will be moving, and whoever -, do you foresee at that point in time that there would be a reduction in staff because of the various mergers? Will there be special early retirement packages for people and that type of thing? Any plans that way?

SR. DAVIS: They are two major questions you are asking in one there. If I might answer them separately? The first question first. When we went to government with the plan to close the buildings there was an important reason for that. We knew that we were not ready, as we were constituted in 1995, to face the many changes that are coming in health care, particularly in our areas of health care, which is tertiary care and rehabilitation. Major changes are coming: new drugs, new kinds of technology, new ways to keep people alive longer [technical malfunction] and our new - I think when we all saw the sheep Dolly on the front of Time our whole world view changed dramatically.

All of these changes said that we needed in St. John's to consolidate, that we had to be putting more money and more energy into direct patient care and into research if we were going to be ready to take this Province into the next century. We could not be continuing to put money into buildings that were old and very difficult to renovate. That plan as you know had been talked about in St. John's since 1983.

That it needed to be done; there was no question. The big question is: How do you finance that kind of a restructuring? Because we were not restructuring to reduce service; we were restructuring to position ourselves to better provide the service and expand service. There was no money available provincially for capital. The number of dollars that had gone into rebuilding in this Province had decreased over time in health care, so government did not have the $100 million or $130 million we would have needed to do this.

When we looked at both sides of the question, we said: Why don't we go with a plan that has never been done in Canada before? That is, in closing the hospitals, to use the money saved by closing these hospitals to pay off the loan which we would get to build it. Now that has never been done anywhere else in the country. Whenever other hospitals were built, new hospitals were built, either government gave the capital funding necessary or there were major fundraising campaigns to raise the money.

Obviously this Province does not have the capacity, through fundraising, to raise $130 million. So we went to government and said: We can foresee that we would save roughly $20 million a year by closing those buildings, and that we would amortize whatever was needed of that over a twenty- to thirty-year period to pay back the loan for the building. Government agreed with that approach.

In our health care organization, 77 per cent of our budget goes to salaries and benefits. So if we are saving $20 million, a considerable portion of that has to come from salaries, there is no question. What we have made a commitment to is that we will see a reduction in staff, in support areas and in management. It began to happen in 1996 and will happen up to the time the buildings are closed. As a matter of fact, at this point in time we have saved about $6 million of that $20 million, and the other $13 million to $14 million will be with the actual closures.

Now there are two ways we could do that. We could wait until the closure to lay people off, and be very crass about it, or we could prepare for this up front. Obviously, the decision we made was to prepare up front.

When we started this whole process, if persons got redundancies then they could not, at the same time, claim UI. So that was a major deterrent for anybody to take an early retirement package because they just would not have the financial means they needed. So thanks to the work, primarily of NAPE but also supported by us, we finally got that changed - that Revenue Canada piece changed.

What we did, starting in 1996, was we started to have early retirement packages where people could go early if we knew for sure that a job would be saved by them doing that. We have had two of those programs in place since that time.

In those cases where we know somebody is going to go but they are not going to go quite yet - if you want to retire early today, we know in six months' time or eight months' time we will need your job for somebody else - we have been filling these jobs in a temporary manner. We have quite a number of our support staff, for example, who are in temporary positions today. They get the positions knowing that when the buildings close in the year 2000 they will be obviously losing their jobs at that time. Thus far, in the restructuring we have done using that kind of approach, we have been able to prevent major layoffs of permanent staff. We have reduced numbers of positions. We have temporary staff who are often not losing the full hours that they had but are losing a portion of the hours they had. We do know that we are going to see a significant number of reduced positions when we close in the year 2000. We are still hopeful that many of those will be temporary positions that will be lost, but there will be some permanent positions.

We are working with each of the unions, primarily NAPE, given the areas we are talking about. NAPE and ourselves are struggling to find the best ways to do this thing that has not been done before in our Province. There are times we find good solutions for individuals and times we are still struggling to find solutions.

One of the problems we have - and we and NAPE are trying to figure this one out - is that we have a bumping system. When somebody is laid off, they are rarely the person who goes. We traced one of our layoffs two years ago and there were thirty-five bumps. There were thirty-five people who were bumped out of their position into another position as a result of that. We and NAPE both agree that is too destabilizing; you cannot continue that. We are trying to find a way to amend the collective agreement to prevent that happening. We are each trying to find a way that is fair to the union and fair to the collective agreement but also does not let that happen.

We are currently reducing positions for our central kitchen and we are struggling to find a way to (inaudible) that.

CHAIR: I will probably come back to that issue later on, but I will move on to -

MS YOUNG: Just to let you know, Mr. Byrne, from a board's point of view, even though you hear the word `casual', the board is cognizant of the fact that a `casual' is a person -

CHAIR: That is right.

MS YOUNG: - a person in a job. It might be casual on a piece of paper, but it is a person. We made some decisions over the years to be cognizant of the fact, to be kind employers to these people. A lot of the people, 40 per cent of our managers, are not in the system. They are not working in our system any more. These people were able to go forward and get other jobs in other positions. However, we also had to let go some of the lowest paid and the lowest educated people who are in our food service and laundry area. Everybody in the board has a heart to realize that these people will not find a job in today's environment in Newfoundland.

CHAIR: Just a comment and I will move on, with respect to the bumping. I am after hearing some horrific stories with respect to bumping and people being moved into positions where they really should not be. That is the collective agreement, I know.

Sheila Osborne, do you have a question?

MS S. OSBORNE: Yes, I would like to address middle management. One of my constituents called me in August. I think two years prior to that they had been reassessed, and they filled out forms. I think these forms were sent to the minister and they are probably still sitting on the minister's desk. This person called me again last week, or the week before last. I think there is something in the paper today, although I have not seen it yet. These people are in limbo at the moment in terms of they cannot apply for a new position that may be posted because that may, in effect, pay less than what they will get when they are reassessed, when the reassessment happens. Can you elaborate on that and say what is the projected date that this will all be finalized for them?

SR. DAVIS: I wish I could answer the last question, Ms Osborne, which I cannot. I can tell you about the process. Really it is rooted in the very first question Mr. Lush asked - or commented - and that is that we are doing something here in this Province that has never been done in the Province before. The magnitude of the shift that came with the creation of regional boards at the same time as we have severe financial constraint in the Province was unprecedented in this Province.

When we set up the regional structures we met - not we, I, because I was the only employee at the time with the Health Care Corporation, for the first five months - with the senior staff at Classification and Pay and said: What do we do about classifying positions? They said: Well, we do not have enough experience to be able to classify the positions. We both agreed because regionalization, as you know, is relatively new in the country, not just in our organization.

We made an agreement at that time that we would temporarily classify people, get our first year's experience, and then go through the proper classification procedure. We had staff who were trained to do the classification process but, as you know, in this Province, the organization can do the paper work but it is the provincial government, through Treasury Board's Classification and Pay Division, that actually makes the final decision. So, the final decisions are out of our hands.

When we began the temporary classification, we recognized we were making two changes at the one time. We were consolidating all of our administration. So, if a person was a Director of Finance at St. Clare's, that person had a much smaller scope than they would have if they were Director of Finance for the whole Health Care Corporation. That was the first thing.

The second thing, we brought in a programmed approach to patient care, which is: We consolidated the patient - like the cardiac program, for example, crosses St. Clare's, the Grace, and the General Hospital. We did two things at the one time.

When we looked at the classification systems across the country, there is really no classification system that is able to cope with that. We all recognize - we and Treasury Board recognize - that down the road we need new classification systems, but that does not help for today.

What we agreed was that after the first year's experience we would put in classification, the paper work, the completed paper work, to Treasury Board. We did the first group, a significant portion of our managers, in January of 1997. The timing was terrible, from our point of view, because there was a freeze then in mid-1997 in terms of management classifications, then there was an unfreeze, and then I understand there was a freeze again.

The board, as well as the Provincial Health Care Association, has contacted Treasury Board on a number of occasions asking that the classifications be reviewed. The President of Treasury Board in June indicated that they would be looking at that issue. I can only assume that is what they are doing at the present time. We are in a very difficult position in that we have done the work that we had to do in terms of preparing the documents.

When we gave the temporary classifications, we did it to the best of our ability and possibly a little bit on the conservative side; because one of the risks you take in a classification review is that your classification will be lower and then you will be in a position of having to pay back money. We did not want that to happen, but neither did we want to undermine the actual work.

It is a complicated situation, but the final step is really not within our control. Our board has made representation on this issue to the Minister of Health. My understanding is that she is following up with the President of Treasury Board.

MS S. OSBORNE: The first group that have been reclassified are sort of waiting for the Minister of Health or the Minister of Finance to sign (inaudible).

SR. DAVIS: Yes.

Now, we have the work finished but we did not submit the others because it was nonsensical.

MS S. OSBORNE: (Inaudible) there.

SR. DAVIS: Yes.

CHAIR: Further, to make that point, I was in contact with the Minister of Finance, I think, this past spring. I had the same call - not from the same individual but the same issue. As far as I understood, it was in his office at that time waiting for final approval and signature.

SR. DAVIS: It may be a timing issue because it is not just our organization; it all the regional boards in the Province. As you know, there are fourteen of us altogether. They may have wanted to do the smaller boards first because ours would be the largest.

MS S. OSBORNE: It is really frustrating for these individuals who have in many cases probably done the work of two people, because (inaudible).

SR. DAVIS: Have expanded skills.

MS S. OSBORNE: Exactly. Their lives are really in limbo. As I have said, they cannot apply for another position because they may very well be taking a position which will give them a lower pay; but, then, when will it happen in their minds? They cannot really get on with their lives from the point of view of any permanency, or what their salary would be, or where they will be.

SR. DAVIS: It does apply to every manager in our organization except me. It is all managers, front-line, middle managers, and senior managers.

MS YOUNG: Again, it is provincial. I think that is where the problem lies. Maybe not everybody has their work done or they, the Minister of Health and Treasury Board, are probably - because that is quite a number of people to (inaudible).

CHAIR: Sheila, just before you go on, I think I appreciate the task that was ahead of you people when you first started out in 1995. I do not know if I understand all of the complexities because I have not been involved but I would appreciate, for time effect and to get through as much as we can, if the questions could be as precise as they could be and the answers would be as precise as they could be also; because we have two days set aside. If we have to go further we will, but - personally I have about forty or fifty questions I want to ask. There may be some overlap with the Committee members. Anyway, just to make a note and make people aware.

MS S. OSBORNE: Okay.

I would like to deal with the nurses. I do not have the exact figures but there are about 3,000 nurses and about 1,400 are casual.

SR. DAVIS: For the whole Province maybe.

MS S. OSBORNE: Yes.

SR. DAVIS: In our organization we have 2,000 nurses and 300 to 400 are casual or temporary.

MS S. OSBORNE: Sister, how many do you anticipate will be made permanent in the restructuring?

SR. DAVIS: That is a very good question. Remembering that 400 are not full-time workers, I would point that out.

We have looked at, as part of the negotiations, the numbers. As you know, there have been numbers put on the table. I would anticipate, in our organization, we would see a conversion of casual and temporary workers to easily seventy-five full-time positions over the next couple of years.

MS S. OSBORNE: Because a lot of the complaints that I am getting, some of the nursing supervisors, and one in particular I had from the Waterford, who has twenty-six or twenty-seven patients, it is really difficult to get a casual to come in on weekends and things. Sometimes she is the crisis nurse and she is attending twenty-seven patients. That is a for instance, and other folks who are working more hours than they probably care to work, even though they are casual.

What it does is affect the economy because if you are casual and you go to apply for a mortgage, you are not permanent; therefore, your salary cannot be factored in there. So it puts their lives on hold even though they have been casual now for a couple of years, doing a permanent job.

SR. DAVIS: I do need to say, though, that we will always need a good number of casual nurses for two reasons. One is, we have the regular leave that nurses have to take; for example, sick leave, annual leave, leave for other kinds of things in the organization. We will always need casual workers for that.

Then, because of the nature of our business, there are times we have peaks and times we have valleys, but with our times we have peaks so we will always need to be able to bring in casual workers for those high peak times.

We estimate a significant portion of our numbers of casual nurses we will always need by virtue of the kind of business we run. There are, I think, ways we can look at converting some of the temporary hours to permanent, and that is what we have been doing.

MS S. OSBORNE: From what I can see it has an effect on the health care, too, on the care given to patients; because, as in the case - and I am just citing this one as an example of the many calls that I receive, but in particular - this particular person has no other permanent people so she operates and everybody else is casual. In that instance, I would think, there are probably two or three permanent positions that (inaudible).

SR. DAVIS: That is a case of recruitment. One of the good things that happened with our consolidation is that nurses had more options for other kinds of jobs. One of the bad things is that nurses had more options for other kinds of jobs, so that sometimes there is a catch-up time, where you are recruiting a permanent position because somebody has moved to another site or to another place within the existing site. Some of that is a lag time issue as well.

MS S. OSBORNE: On page 20, in figure 4, the estimated annual savings related to the restructuring, the salaries and benefits there add up to about a $14.5 million saving per year. Giving an average of $50,000 a year income - we know that the bottom end won't be that, so just giving an average - that comes out to 290 jobs. How many people, do you think, at the end of the day, will be not given early retirement but will be just told, `Your job is no longer here.' when the buildings finally merge?

SR. DAVIS: We have actually no way of knowing that. Because we will have a mixture of early retirements and temporary positions lost, we cannot estimate the number of actual permanent layoffs.

We have found in every case thus far that we have overestimated the number of permanent layoffs. When we actually got into it, the numbers were much smaller, thankfully, because of the initiatives we had put in.

Say there are 290 positions. The success in getting that to a small number of layoffs will depend on the continuing of Revenue Canada's policy about unemployment insurance being able to be collected; it will depend on the success of our negotiations with NAPE about ways to mitigate the bumping; it will depend on how many temporary positions we are going to be able to create in the coming year, before the year 2000 comes.

I could tell you it could be 150; I could tell you it could seventy-five. I have no way of even giving you an order of magnitude. All I have been able to say to staff is there will be a considerable number of positions lost but we will do everything we possibly can to mitigate the number of permanent layoffs that will result from that.

CHAIR: Can I just interject a question here before I move on? If the board has calculated that they are going to save $20 million a year - and I saw somewhere in the document $25 million - obviously, like you mentioned earlier, the major part of that is going to be jobs.

WITNESS: Well, $14.5 million will be jobs.

CHAIR: You had to use some numbers to come up with that figure.

SR. DAVIS: There is no question about the numbers. The question is how many of these will actually be permanent layoffs. Because of the work we have been doing for the past couple of years, we have been putting temporary people in some of those positions. It is still very hard for a temporary person to lose a job, but they know it is temporary.

CHAIR: It must have a major impact on morale.

SR. DAVIS: It does, there is no question. That is one of the reasons we have pushed so hard to do this exercise in a much shorter period of time than would be normal for hospital building. Because it is not fair to force people to wait too long to find out. Maybe I am naive, but I am hoping that we will soon come into some prosperity in this Province that we will be able to expand the services we are offering people. Because we know there are many areas where we need expanded or new service, and that many of the jobs will be new jobs created, so we will be able to mitigate it a bit that way.

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

MS S. OSBORNE: Yes. In May 1996 the cost of the restructuring process was supposed to be $70 million and $90 million, then it went to $100 million, and then $130 million. Has this amount been revised or is it still a valid amount?

SR. DAVIS: We are today looking at probably $135 million, Cal? We have made know to government that we expect it will be an additional $5 million, which primarily includes things we had not anticipated; the annex, for example. The annex is a fancy term for a shared boiler plant Memorial shares with the Health Sciences Centre. We found when we did more detailed work in that area that we have to replace more equipment than we expected. We also know the financing is going to be (inaudible). We were anticipating now, and Cal may want to add to this that, the $130 million is going to be more like $135 million.

MR. CROCKER: The latest projection are at $135 million. As Sister said, there were three or four areas that we hit to bring it from $130 million to $135 million. The big one was the infrastructure at St. Clare's and the General Hospital. Once we had engineers in and they started tearing into walls in terms of looking at your infrastructure in terms of ventilation and heating systems and things like that, it made sense for us to do more work than we had previously anticipated doing when we started the project. The tear up is already done, so once the tear up is done it is a lot cheaper to do the work now verses repairing everything and then having to do the work down the road.

The other one that we did hit was in terms of the boiler plant, as Sister said. We have a major issue there now with the emergency power. We thought we were fine on the emergency power, the generators. We now have two reports from consultants that say we are not fine on it and that we have to look at replacing the generators which we thought we did not have to replace.

The other big one that did bring it up from $130 million to $135 million was when we started doing the excavation at the site over there. Again, we are over on bog land, and the estimates that the engineers had done were off in terms of once you start digging out bog you have to keep going until you hit solid ground. We ran up some extra money there.

CHAIR: Sheila, can Mr. Lush ask a question for one minute and then go back to you?

MS S. OSBORNE: Okay.

MR. LUSH: A supplementary. I want to preface the question by saying that these changes in our estimated figures and projections sometimes give the impression that nobody knows where they are going. We are living in the world of real economics and we try to predict what problems there might be. Following up from Ms Osborne's question, I think there was an original projection of $300 million in an earlier study. There was a $300 million projection.

Now, with the escalation that is going on the other Board projected $100 million to do it. Now we are at $135 million. Is it possible that we will reach the $300 million that was projected in the beginning? Or in as much as we can predict, do we think we are pretty much on target?

SR. DAVIS I wish we had $300 million, actually. I could spend it tomorrow morning to make an even better situation than we have today.

You are right. When the St. John's hospital council, prior to our Board's coming into existence, did its estimates on the building two different models were coming in at $300 million. What we are looking at here is a considerably scaled-down version. When we talked about the $70 to $90 million figure that was before we had done any work, other than the overall planning. We had brought no consultants, no engineers, into that discussion. The $100 to $130 million was the first major jump when we brought the consultants in.

We have now tendered almost all of the new building I think, Cal? We have either that work officially done or tendered to be done. Our degree of comfort there is very high that the numbers are accurate. The renovations you can never be totally sure about. We were renovating Emergency, for example, at the Health Sciences Centre, which is only twenty years old. The St. Clare's building (inaudible) is a much older building and we expected surprises at St. Clare's, but when we renovated this twenty-year-old building that had all the plans, we thought, in our Emergency we ran into, not literally, a medical gas line that wasn't shown on any of the drawings. Everything had to be stopped because if we had cut that line obviously we would have done terrible damage. We had to stop and work new plans to deal with that.

These are the kinds of surprises that come when you are dealing with a new building. Cal pointed out the land. The engineers told us we would need so much infill. When they actually got in there the bog was even deeper than they had anticipated, and I didn't realize how expensive dirt was. I guess I am naive about some things. It is expensive to cart away bog and expensive to bring dirt to fill in.

These are the surprises. With the new building itself - I guess you probably can see it from this building - we are almost finished the tender process so we are very much on target there. The renovations to the extent we have tendered were very much on target. Our fear always with renovations though is the unexpected. It will certainly not go to $300 million. What will happen from now on with any additional costs is we are going to have to see where we can accommodate the new changes elsewhere.

Calvin, do you want to add to that?

MR. CROCKER: The only other uncertainty, in terms of the $135 million, is the financing we have allowed for it. Because again, in terms of the process that government allowed us to set up, we are capitalizing the financing charges as we are building. What we have done in terms of projections is say that over the time period that we are under construction we will incur about $7.3 million in terms of finance charges for the bridge financing.

As to whether that stays on that $7.3 million or it changes by some figure, I guess we are still not sure, because we are also going through a process with Treasury Board trying to determine: do we continue to use short-term financing, which we are now - and it is good at this point because the rates are really good - or do we at this point in the project probably tie in up to $75 million for long-term financing? There are two issues for long-term financing: one now at $75 million and the balance in the year 2000, or do we stay on short-term financing. The interest of $7.3 million is still a bit susceptible to change.

CHAIR: Sheila, do you have another question?

MS S. OSBORNE: It would have been nice if it could have coincided with the civic centre (inaudible).

Each time that the estimate cost goes up I guess that means that less of the savings, if there are any savings, will be put back into the cost of restructuring, doesn't it?

SR. DAVIS: No. What it means is that we still have a fair margin there. It means that we are getting closer to using all the savings to finance restructuring, rather than have some monies to put into health care.

MS S. OSBORNE: Go back into health care, yes. That is unfortunate. What are the savings based on? Here on page 21 in the second last paragraph the Auditor General says it is unclear what funding base is used to measure the savings. The Corporation incurred an operational deficit of $5 million in 1996-1997, $6.8 million in 1997-1998 and $10 million in 1998-1999. She says: "As a result, it is unlikely that the Corporation will realize any net savings from restructuring at its current level to retire the capital cost of restructuring, now estimated to be $130.1 million." It said $130.1 million there but now it is $135 million.

SR. DAVIS: First of all, these numbers were anticipated deficits and the government subsequently put money in, so as you know this past year we did not have a deficit at all. We broke even. The year before we had the $5 million deficit.

This is a very difficult question you are asking us. What we are saying is that if we do not close the old buildings whatever amount of money we had to operate would be $20 million more. We will save $20 million by closing those buildings. Will that mean we will have enough to run the buildings? That depends on what money government gives us. Whatever amount they give us, if they give us x million dollars in the year 2004, if we had not closed the buildings we would need x plus $20 million to do the same amount of work. Now this does not resolve the question of the money that we get annually for our budget but what it says is: no matter what we would have gotten annually, we will need $20 million more than that to do what we could have done with that same amount with the buildings closed.

It is complicated to understand. Myself and Ms Marshall had many goes around trying to clarify this with each other. The point is, no matter what we get, whether it is enough or not, we need $20 million more if we did not close those old buildings. That's not counting the maintenance costs of those old buildings. Purely salary costs.

MS S. OSBORNE: That $20 million savings, is that being eaten into by the -

SR. DAVIS: Of that $20 million savings, $13 million or $14 million of it - well, it depends. Maybe $10 million or $12 million will be used for financing over the next thirty years.

MS S. OSBORNE: Okay, but each time it goes up there is less for health care?

SR. DAVIS: Exactly.

MS S. OSBORNE: Okay.

MR. CROCKER: We started out saying that we would save $20 million. In terms of the projections that we have given to government, we have already used about $6 million out of that $20 million to finance our ongoing operations. It has just gotten eaten up in our budget processes. We have about $13.8 million of the $20 million that we still have to save. The long-term financing of $135 million over twenty-five or thirty years will cost us somewhere between $11 million and $12 million a year, depending on what the interest rates are at that time. We will still have enough savings to pay the long-term debt but there is another issue with our operating budget. We don't have enough money in terms of our operating budget. We are saying that government has to deal with that as a separate issue, but we will get that savings that we committed to.

CHAIR: Just a reminder, could people identify yourselves before you answer the questions, for recording purposes.

I think Ms Marshall wanted to say something on this.

MS MARSHALL: The concern I have with regard to the Health Care Corporation is that whatever savings you are realizing now as a result of restructuring are being eaten up by your operational costs. If the corporation has to finance $130 million, looking at your bottom line for 1998, 1997 and 1996, there is really no funding there or very little funding, if any, to finance $130 million. I am assuming the expectation is that government is going to have to put additional monies into the Health Care Corporation, because while you may be realizing savings you are not realizing net savings. It is not showing up in your bottom line. That is the concern I have, that the money is not there in the Health Care Corporation to finance that $130 million.

SR. DAVIS: Ms Marshall is saying on the other side the same way that I am saying it. We will save that $14 million by closing the buildings and reducing staff to support those buildings, but at the present time the first $6 million that we saved has gone into keeping our deficits down. That $14 million we will save and we will use, as Cal says, $11 million or $12 million of that to amortize the loan. That money will be there to amortize the loan. It will not be there to go against deficits that we might be incurring through operations.

That is a separate issue though. Because if we did not close the buildings whatever deficit we would have would be an additional $14 million of deficit added on to it. She and I are saying the same thing, that there is a concern about the net operating budget of the organization, but without the closure that net savings would still be added to by another $14 million. If we were running a private operation the $6 million we have saved to date would have been excluded out. What that would mean is our deficits would be plus $6 million for each of the last three years. Whichever way you cut it, it is a problem.

CHAIR: One more question for Sheila and then we will move on.

MS S. OSBORNE: It is just a comment. I was horrified by the effect that the HST has had. Before the extra $5 million went on, it was estimated that $10.3 million will be HST. That is phenomenal, and I guess the chickens are coming home to roost.

CHAIR: Just before I move on - because if we are covering a topic I think we should try and cover it, not go back to it - I would like to ask this. The first sentence on page 19 of Volume I that was sent out to everyone reads:

"The Corporation advises the main reasons for these variances are as follows:

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

An increase of $2.0 million in road and sewer excavation...;

An increase of $3.0 million in renovation work to accommodate the expanded Cardiac Surgery Program, approved by Government."

Mr. Crocker made a comment with respect to the fact that when you got into the bog over there, there was so much extra because you had to go so deep. I had a couple of notes made here: Who did the original estimates? Proper estimates should have been included when they did all this work. Now you explained earlier that in the $70 million to $90 million, they were estimates the board had done itself. Then they got engineers involved and what have you, but it seems to be creeping up.

When you are doing an engineering estimate, those types of things - because I've been involved - they would go out and actually test the depth of the bog. All that should be done. Do you want to comment on that? Because I have questions further on with respect to the process used for consultants. Are we getting the best bang for the buck from our consultants?

MR. CROCKER: I am certainly not an engineer so this answer would have to be in terms of you getting it from a generalist. We did have all the engineers that we would require on a project like this in terms of the structural, electrical, mechanical and the companies that come in to do the tests on the bog and everything else. We did have all that in place.

As part of that process we also have George Greenland who is our project manager that came down from the Department of Works, Services and Transportation and again, he has an engineering background. Our director of facilities management who is also heavily involved in this, Keith Boland, is also an engineer. From the engineering perspective we certainly had it all, but I guess what we are told is that on any big project, even when you do testing, it is not necessarily dead-on. The testing was done; we still ran into some additional cost.

CHAIR: I can see (inaudible) a situation arose like Sister Elizabeth said, when you went into the older building you had this gas line going through it. That can create havoc, I can understand that, but in the normal procedures you would think that type of thing certainly would be covered.

MR. CROCKER: Yes. It was done but there was (inaudible).

CHAIR: Mr. Smith.

MR. SMITH: Thank you, Mr. Chairman.

CHAIR: Before you go on, it is 10:45 a.m. now. Do we want to take a ten or fifteen minute coffee break and then come back to you? Would that be okay?

MR. SMITH: No problem with me.

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

MR. SMITH: Thank you, Mr. Chairman.

You spent some time looking at the capital (inaudible) cost of the restructuring. I guess we have just alluded to savings that would be included on the operational side. Right now, what is the current operational budget for the Corporation?

SR. DAVIS: Two-hundred and ninety-five million dollars of which government gives us $250 million, roughly.

WITNESS: Two hundred and sixty-seven million dollars.

SR. DAVIS: Okay, $267 million.

MR. SMITH: Two hundred and sixty-seven million dollars from government. (Inaudible) the remainder?

MR. CROCKER: I guess the breakdown of our budget is this. We have out-patient revenue of about $4.7 million; in-patient revenue - that is insurances and the like -, $11.2 million; other income, $14.7 million; provincial plan revenue, $267.5 million. That gives $298.2 million for our total budget.

MR. SMITH: What percentage of the current operational budget will (inaudible)?

MR. CROCKER: In terms of the total, the administration and support block is $82 million of the $298 million.

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

MR. CROCKER: In terms of the administration itself, it is $7.6 million annually. That is in the administration block itself.

MR. SMITH: Now I guess what is more relevant to what we have been discussing here this morning is that in terms of where we are coming from, obviously we are hearing this morning that this restructuring is going to realize some real savings in terms of the operations. What will savings be on the administrative side?

SR. DAVIS: Some of the $6 million we have already gotten is because of that. When we began to restructure - we use the term restructuring to mean more than the buildings. When we began to reorganize - probably a better term - we decided we would not have site administrators. As you know, at each of the sites prior to our existence there was an administrative senior management team. The Janeway would have had one, St. Clare's, the General and so on. We made the decision in our organization we would not have that. We have only one senior team now, myself and five vice-presidents. That replaces the six senior teams that were there before.

We also have consolidated our financial system. So there would have been one director of finance for the Janeway, one for St. Clare's and so on. We have consolidated our human resources. We have gradually moved almost all of the administrative structures out of the individual sites now and it is consolidated at the Waterford Hospital site.

MR. SMITH: Did each of the facilities, prior to this consolidation, have foundations that were operating and actively raising funds for those institutions?

SR. DAVIS: Yes. The two pieces we did not consolidate were our auxiliaries and our foundation. There were six foundations. There are now five plus a fund raising office. The General Hospital has its own foundation still, St. Clare's has its own foundation, the Waterford has its own foundation and the Janeway has its own foundation. There is a foundation called the Newfoundland and Labrador Society for the Physically Disabled which gives some money to the Children's Rehabilitation Centre. The Grace Foundation, which was a very new foundation, at the request of the Salvation Army has just become a fundraising office as opposed to a foundation.

Our board said to the foundation boards: You do what you think will get us the most money, to be blunt, whether you come together as a single foundation or stay as separate foundations.

There is some recognition that the Waterford Hospital Foundation is different from the others. Its main purpose is not to raise money, but as you know, it runs the Mill Lane operation for us, which is an incredibly significant employment industry for people with mental illness. They also support groups having plays around mental illness and so on, so they are not into fundraising the same as the others are.

The children's foundations work closely together and our three adult foundations are hoping to work more closely together.

MS YOUNG: We as the board meet on these foundations four or five times a year. We have meetings and cross information and set direction with them.

MR. SMITH: How much money are we talking? What is being realized right now by these various foundations?

MS YOUNG: I know that the General Hospital, for example, in the last ten or fifteen years has raised over $10 million. I will give you that example. I do not know if we have facts or figures. In excess of $25 million maybe in the last twenty years have been raised by the foundations and auxiliaries.

MR. CROCKER: It tends to be, from all, around $2 million a year. Some years that is up a bit, some years it is down a bit.

MR. SMITH: Is that including the Janeway?

MR. CROCKER: That includes the Janeway. We get about $700,000 to $800,000 a year from the Janeway for equipment purchases for the child health program.

MR. SMITH: Now, you mentioned the Janeway -

CHAIR: Excuse me. If you are going back and forth, we need, for the recording purposes, your names.

MR. SMITH: Thank you, Mr. Chairman. I would assume by now they would recognize my name.

In terms of the Janeway you mentioned that the money is being used for different purposes. Am I to assume the same thing would apply with the monies coming from the other foundations, that that is where it is going, into the area of purchasing equipment for the various facilities?

SR. DAVIS: Primarily, although not solely. For example, the Janeway Foundation this past year has funded a telepsychiatry project which has proved to be incredibly successful. Because there were no child psychiatrists on the West Coast of the Province, the children on the West Coast who needed access to psychiatry services, did it via telemedicine, with the monitors and so on. The Janeway funded that as a pilot project, and the evaluations on that showed the children themselves, the parents, as well as the staff, were more than satisfied with it. So we are trying to find ways to sustain ways that on an ongoing basis.

The Janeway and the General also give money for research. Each of the foundations will also make contributions to our libraries, for example. Although the majority of the money would go into equipment, it has not all gone into equipment. Perhaps the biggest example is this current year. The General Hospital Foundation, in partnership with the Hibernia unions, is funding the renovation of the Miller Centre. That is the biggest departure we have had from just buying equipment.

MR. SMITH: Okay, if I could just switch gears for a couple of minutes. From the Auditor General's Report, there are a number of specific instances that have been in question in terms of the expenditure of corporation funds. On page 45 of the briefing document were references to salary levels established. It says, "The approval of the Department of Health is required if the Corporation wishes to appoint the successful candidate of a job competition at a salary level in excess of Treasury Board's policy. Our review identified five instances where the Corporation recruited individuals for management positions and appointed these individuals at a salary level in excess of Treasury Board's policy without obtaining the approval of the Department of Health."

I would point out that the Auditor General points out in the report there was a significant difference in terms of the salaries that were eventually paid and the levels that had been previously established. How could this happen?

SR. DAVIS: Well, this comes back to Ms Osborne's question about the classification of managers. We do not know what the true classification of any of our managers is, except me. Every other manager in the organization has a tentative classification, and very clearly because we needed to have experience with the new organization. What has happened, and I think our explanatory note says that probably too briefly, is, we have had to make a guess at what should be the appropriate level. In the five instances noted, for those five positions, there were no permanent classifications already identified; they were still temporary classifications.

MR. SMITH: Were these people who were already within the system?

SR. DAVIS: No, these people came in from outside. I think three of the five were.

Again, we made estimates based on the classification - the same that we have done with all of our classifications to date, Mr. Smith. We have made estimates of what the appropriate level would be.

Now, compared to the former level, in those instances we said the estimates should be higher. We said that for most of our classifications.

MR. SMITH: Was this done in consultation with anyone within government, or was it strictly a decision of the corporation?

SR. DAVIS: It wasn't strictly a decision of the corporation in a sense. For those five positions, we did not discuss them with the Department of Health or Treasury Board. Our position, as I said from day one when I met with the senior officials in Classification and Pay, was that we would set tentative classifications pending permanent classification being made by Classification and Pay.

Despite our attempts, as early as January of 1997, we have not been able to get permanent classifications. So for those five we saw it well within my purview, since we are still on in a temporary status, that I could set the temporary level.

It all comes back to the fact that all of our management positions, except mine, are temporarily classified and we have not been able to yet get permanent classifications.

MR. SMITH: Okay. Just continuing on with that, we could, looking at this reference to termination and annual leave as well - this is page 46.

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

MR. SMITH: This is page 46. We are talking about the Voluntary Termination Program and payments for annual leave.

Again, these are two instances that have been flagged by the Auditor General's Report. It pointed out that in both these instances the procedures, as we understand them, had not been strictly followed and adhered to. What would have happened in both of these instances?

SR. DAVIS: That was our first (inaudible) program. I am happy to say that government then adopted the program after we had it.

We made a decision to go with the redundancy policy that was in accordance with government policy. I guess the first time we did it, we did it in the way that we thought would be best for our employees. It predated government's change in policy and they were waiting, I would assume, for the change in the relationship with Revenue Canada and the unemployment insurance. We probably did it more quickly than we should have, but we felt it was critical at that point, the first year of our history as an organization.

MR. SMITH: What about the annual leave?

SR. DAVIS: Is that in B section?

MR. SMITH: Yes.

SR. DAVIS: These were individual payments that were made by our predecessor organizations, not by our organization. But remember the first year, which is what the review covered, we were still honouring the agreements that had been made by the previous organizations. Some of the payouts actually were in our first year of existence but they were decisions made by our predecessor organizations.

MR. SMITH: So you inherited this from the -

SR. DAVIS: Yes, I think there were five persons altogether, and their previous organizations had made these arrangements.

MR. SMITH: Thank you.

CHAIR: Mr. Whelan?

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

The Auditor General made some mention of inconsistencies in data submitted to the Department of Health. There was also some mention made of information or data that was not available. I was wondering; you mentioned before that you changed from a function-based, site-oriented approach, as was mentioned here, to a program-based approach. I can understand the upset and the confusion that often comes with a transition such as this. Could you just run us by some of the things you had to go through in this transition, and how it may have affected things like data information inconsistencies and probably loss of some information?

SR. DAVIS: I do not think we lost any information. I think there are two issues here. One is the way we report data to the Department of Health. The second is what happened within our own organization.

As you know, we are grappling, as a Province, with ways of reporting to the Department of Health when different organizations have different levels of computerization and different ways of structuring their information. Going to two new systems - going to the regional system and going to the program system - meant changes in that. The Department of Health could not keep up with the changes that we were making as regional boards because we were all making them at different levels. That is one issue.

Within our own organization, I have a very high comfort level that we did not lose any data. What we did not do, and we have since corrected, as we pointed out in our document, was that every time we made a specific change we did not get specific board approval for that change in the budget.

The easiest example: in 1995, we would have had a department of physiotherapy - we have had six departments of physiotherapy - so all of the physiotherapists in our organization would be in departments. When we went to programs in 1996, we took out our department of physiotherapy altogether and we put physiotherapists in the medicine program or the cardiac program or the child health program.

We moved around the budget out of the department of physiotherapy, to zero that budget out, and we put bits and pieces, depending on how many physiotherapists or parts of physiotherapists, in the programs. We did not get board approval for every one of those changes. We kept the finance and audit committee aware of where we made the changes but we were not tracking individual amounts. The Auditor General's staff rightly pointed that out. Subsequently, we are doing that. The magnitude of the change in the first eighteen months, well, we would have probably needed a lot of additional staff to enable us to do it step by step like that. What we did do though, in recognition of the Auditor General's concern, is we tabulated every single financial change. Cal, I think we collected that in a manual tracking every single policy change for those first two years. Now, since the Auditor General has been in, for each financial change we actually formally make a motion at the board level to make the change.

In addition to our own internal changes though we also have other external changes. For example, the community homes that have mental health patients in them in Conception Bay South, that had been previously paid out of the Department of Health directly. That was put under our budget. There were changes like that as well that compounded other things that were happening.

Cal, do you want to just give them more detail on some of that?

MR. CROCKER: Yes. Just in terms of the financial statements, as the Auditor General pointed out we did go through a lot of changes that we did not have officially approved. What we also did is this. Our finance and audit committee meets monthly. At every audit and finance committee we take a copy of our audited and financial statements for the previous month, or our unaudited financial statements. That shows the annual budget for the Corporation and then the monthly allocations under variance analysis. The changes were certainly discussed at the audit committee and the audit committee were certainly aware of what we were doing, but there was no formal approval of every change that we made.

What we found that first year is that we were making so many changes that we found it easier not to be trying to track it, because all we were doing was transferring from within the clinical components. The clinical block in our financial statement, we were taking it from a department of physiotherapy, which was a clinical component, and putting some cost in the cardiac program, the re-hab program and the medicine program, which were also clinical blocks. I guess our comfort level, from an operational side, was that the costs were all in the clinical block. We knew what the financial situation for the Corporation was in the clinical block.

SR. DAVIS: I think the magnitude of what we did in that first year - anybody else combining six companies whose operating budget was anywhere from $10 million, our smallest one, to our largest one which was $125 million, would have had an extra group of people doing this kind of thing. We not only did not have an extra group of people but we had cost reduction in our budget for restructuring. We did not get the kind of one-time costs that companies merging can bring extra people in to do this. We were operating within our existing structure, going from six financial systems that were not compatible with each other to one financial system. At the same time we were moving. We not only consolidated six financial systems but we moved staff from six finance offices into a seventh office at the Waterford site. That was one example.

The kinds of complications you would expect to happen happened but through it all our finance and audit meetings were very stringent meetings. Cal and I are held very much to task at those meetings. They were constantly tracking, in an informal sense, everything we were doing. Since that, as I said, we have done the actual detailed tracking just to make sure that the accountability was there, and it has proven to be so.

MR. WHELAN: With regard to the transition to a program based structure, what is the status on that now? Has the transition complete or is it still ongoing?

SR. DAVIS: The transition is complete. We made a decision that we would take the first year to plan this because it was so major for us. We put in the program leaders in June 1996. We now really have two good years behind us with the program structure. I can honestly say some programs were, from the beginning, easier: women's health for example.

Because St. Clare's had transferred obstetrics in the early 1990s, women's health was already pretty much functioning as a program. Something like medicine, on the other hand, which had three distinct groups at the Grace, St. Clare's and the General, took longer. Right now those programs are much more cohesive.

The two very good things that have come out our program base are these. The first thing is we are including people from the community in advising those programs. Individuals from the community are helping us look at our cardiac program, or look at building of the re-hab centre, or whatever. That has been a benefit. The second good thing that has happened is we are starting to be able to do some good research. The last section of Ms Marshall's report talks about that fact. In health care we do not do a very good job at evaluating the outcome of the patient care. We do a good job of evaluating other kinds of outcome, financial. We are part of a couple of national projects now looking at how to evaluate how well we provide care. We could not have done that while we were all separate in the city. These are two good things that have come out of this.

The bad thing that has come out of it all is that there is a lot of stress on staff. If you have been used to being part of the physiotherapy department, for example, and now are just a member of a program, that is a major change to make, even for professionals. That has taken some time. If you have never talked to critical care nurses at the General and you have been at St. Clare's for twenty-five years, now being part of the same program takes a bit of getting used to. There have been the growing pains of the magnitude of that kind of change, but I am more comfortable today, two years later, that we are better positioned now to improve the kind of health care we are delivering than we have ever been before in this city, which is good news.

CHAIR: Excuse me. Ms Marshall, do you want to make a comment?

MS MARSHALL: Yes, please. Could I just go back and talk about the financial information that I had trouble accessing or had problems with? What I was trying to do is take the deficit that the Corporation had in 1997 and compare it to the budget and try to determine exactly why they had a deficit. Because originally when they submitted their budget they thought it was going to be a balanced budget, and as the year wore on actually it became a deficit.

The problem we had was that the budget numbers kept changing. If you will look at figure 6 on page 32, I have tried to demonstrate the problems I had. The budget numbers kept changing almost every month. The numbers that caused the budget to change - there were, I would say, literally hundreds if not thousands of transactions. I think Mr. Crocker would be more familiar with it. The frequency of the changes to the budget - there were so many changes there that I had quite a lot of problems trying to work back and try to reconcile their deficit with what they started out with as a balanced budget.

After spending several days working with the numbers I could not reconcile the numbers. I had discussions with Mr. Crocker and also with the Department of Health. The Department of Health also expressed an interest in reconciling the numbers. Sometime around that period they put in place a committee to look at the numbers and I think that they were going to reconcile the numbers. Whether they did I do not know, but I was very interested in trying to narrow down exactly what gave rise to the deficit. That is basically the purpose of the review that I tried to carry out.

CHAIR: Mr. Crocker.

MR. CROCKER: Yes. In that first year, I guess, we did go through a lot of changes in terms of trying to get a handle on the budget, because as Sister said what we did was basically bring together five or six organizations, and try to get a good handle on their exact financial position. Because all we basically did was government told us that on such a date (inaudible) have a regional organization. We were put in place as the senior team, and my personal experience was the Waterford Hospital. Now all of a sudden it is the six facilities of which we did not have any background in. I guess bringing those budgets together and making them reasonable in terms of the circumstance that we were in caused the changes.

Government did set up a budget review committee and there was a final report that was done in November 1997. That committee did not concentrate too much on all the budget changes. I guess what the committee concentrated on was looking at our five year projection for the Health Care Corporation: was that consistent and was it realistic? The report that came in from the budget review committee is that: Yes, the projections were good, and they agreed with the projections that we had made for the five year projection for the Health Care Corporation. They also looked at: Does the Health Care Corporation need some additional money in the base budget to help with those deficit projections?

Again, the budget review committee agreed with the recommendations that we had made personally to government that we were certainly underfunded for the types of activity we were carrying out in the Corporation. That report did get done. It did not go into detail in terms of trying to reconcile the numbers because at that point we said: That was history. In terms of your future, do you have a good handle on your budget projections? Again, from that process they did not change any of the numbers that we had, and they went through it in detail in terms of our department and programs to make sure that our projections were consistent.

CHAIR: Mr. Whelan.

MR. WHELAN: I have no further questions at this time, Mr. Chairman, but maybe a little later.

CHAIR: Thank you.

Just before I move on, a couple of quick statements that I would like to get your comment on, because I don't know if this is accurate or not.

The board has gone through a program directed type of service rather than departmental. I remember, maybe two years ago, speaking to someone and they were saying that within the health care service, not the board but within the operations of it at that time, that other provinces had gone to the program directed service a number of years ago, and in actual fact they were trying to get back to what they had left.

Is there any truth to that statement whatsoever, because it seems strange?

SR. DAVIS: There is really no truth to the fact that anybody who has gone to program base is going back to function base. That has not happened across the country. What has happened across the country is that some people who have gone to programs are changing their approach to that.

For example, in St. John's, New Brunswick, they decided to phase in their approach to program, so instead of going all at once, which is what we did, they said we will go with a couple of programs first. So they are in a situation now where they are half program and half not and they don't know how to get untangled. As recently as Friday I was talking to a senior physician from there who expressed a concern about that.

Sunnybrook Hospital, for example, in Toronto had gone to program base based on one model, but really felt that was not adequate because they were about to become merged, you know, with the Women's College Hospital there. So they changed the kind of approach to programs.

However, across the country, as well as in the United States, there is a recognized management direction today called Integrated Delivery Services which is the today standard for how you deliver tertiary care, and that is the generic term for what we are using in our organization.

Did we use the right approach? I don't know. Because one of the problems we face across the country is that despite the fact we are all going program based, there is not one recipe that we are all comfortable with which will work for us. That is why, when moving into programs, we said two things: One, we would take a whole year to do it; and we involved many, many people in the planning that year, including the people we call consumers, people from the public. Secondly, that we would adjust it over time if it was not working.

I went through the spring meetings with all of the directors of our programs, including physicians, and in the fall we have had a review of all our physicians in charge of programs. There is not one of them who would want us to go back to the way it was. They all think we are not going fast enough in the new direction, but none of them would argue that the way it was, was better than the way it is today, from a management point of view.

It is modern thinking that says you should integrate health care services. That is the new management thinking, and that is all we are doing here.

It is also helping us, though, link with long-term care and community care because we could not do that the way we were. We were so fragmented we did not, as we say colloquially, have our act together. Now, when we talk about mental health, we are talking about all mental health we provide. So when we talk to a community about mental health, we can talk with one voice and that is better.

You may have heard, you would have known, last month we got approval for a senior's care program so that we can focus that kind of care and link better with the nursing homes in the city. I cannot even imagine how we could possibly deliver health care in a regional structure and not have programs. It is beyond my understanding.

CHAIR: Thank you.

On page 123 of volume 2, the Statement of Revenue and Expenditure, I will ask just one question and get back to the funding of the restructuring, the $135 million, and the savings.

Under the 1998 column, you have revenues, expenditures, and at the bottom you have a deficit, basically, of $1.9 million. Is that correct? You can set me straight on this one if I am assuming something wrong here. You say already you have saved $6 million and that the Province put in, was it $7 million extra this year?

WITNESS: (Inaudible).

CHAIR: That is over $14 million. I don't think those figures are shown. Shouldn't that be a plus of $12 million now?

MR. CROCKER: What you are looking at there is the consolidated financial statement. This is the first year under the new not-for-profit reporting requirements that we have a consolidated statement. What you have there is the operating fund of the hospital, the board fund of the Health Care Corporation, plus our foundations. The general foundation, the Janeway, everything that we basically control.

In terms of the figures you are looking at there, you are not only looking at the hospital operations. In terms of the actual corporation for last year we had about a break-even financial position, whereas on a consolidated basis we had a $3.2 million surplus because you are bringing the foundations, the hospitals, the board fund and everything into the statement.

MS MARSHALL: That is 1998?

MR. CROCKER: Yes.

CHAIR: Do you have a comment on that, Ms Marshall?

MS MARSHALL: Okay.

The operating fund, that would be on page 97. I think this goes back probably to an earlier comment that I made with regard to financing the $130 million. If you look at - I was using the consolidated statement, but you can also use the operating fund. If there is already savings - I think you said of $6 million - that means that there would have probably been a $10 million deficit if you had not realized the savings. The concern that I have is that your bottom line is such a large deficit that there is going to be no money there to finance the $130 million.

The question I would have is: Where is the money going to come from to finance the $130 million? If you look at page 96 you will see that the bank indebtedness is already $7.3 million and there are also other liabilities there. So if the corporation is already owing the bank money, where is the money going to come from to finance the $130 million? That is where I was concerned.

SR. DAVIS: That is a major concern but I want to put it in perspective that if we never built anything, if we had left all our buildings as is, we would still have to finance the $130 million. It is just that there would be an extra $20 million a year on the current operating. The problem would not be any less. It would be slightly more, actually, a couple of million dollars more.

The question is a very real question, a very important question, but the buildings are not the issue here in terms of that because if we did not close the buildings we would have to find $20 million more anyway every year just to operate what we were operating.

CHAIR: If I am reading you right, what you are saying is the savings of $20 million is not really going to be there to take the $13 million out to finance the $130 million?

SR. DAVIS: Well, that is what Ms Marshall is afraid of.

MS MARSHALL: Yes.

SR. DAVIS: All I am saying is, if we had done no building we would still have to find that extra $20 million every year that we will save because of the new buildings.

CHAIR: Thank you. Anna?

MS THISTLE: This is certainly a complex arrangement. From the very first time that this idea started out in 1989, demand for service has certainly changed during that period, and the initial outlook for $300 million.

I was kind of intrigued with Ms Young. In your opening remarks you mentioned that this system would be looking after patients or individuals from the cradle to the grave. That approach has been very successful for financial institutions for marketing purposes. For the health care system, do you have a sophisticated computer system in place now that would actually do that tracking?

SR. DAVIS: It is being put in place.

MR. CROCKER: I guess it is like everything. It is like the rest of the systems out there. When we took over there was some computerization in all of our sites in St. John's but none of it tied together, and everyone was developing systems basically as they saw their operations develop.

What we have been doing - the first year we spent consolidating all of our administrative systems: the general ledger, the payroll, the materials management, and human resource systems, I guess the basic things that you need to do to be able to run a business of any type.

The process that we are currently going through is consolidating our clinical systems so that when we admit a patient into the system, the patient will be able to be tracked no matter what building you are in. We are going through that process now. It will be June of 1999 before that process is completed.

Eventually what we want to get to, in terms of all of our systems, whether it is the clinical, the labs, the pharmacies, or the (inaudible), is that there will be one consolidated system. The buildings will not matter in terms of the St. John's system. We will actually get to a point of having an electronic patient record, and at that point we can trace you through the system. At this point we can do it but we do it manually and there is a paper chart. If you go from the St. Clare's building to the General building, the chart follows you. Under the new system there will be no need to do that. It will be an electronic transfer.

MS THISTLE: Are you saying that for people out around the Province even, once you are hooked up to all areas of the Province - you know, if Jane Doe comes in from Grand Falls-Windsor her whole chart will be available to you. One of the benefits would be that you would have her history right from day one, and it would also benefit you for duplication, over-prescribing drugs and whatever. Is that the initial idea once you are done with that system?

SR. DAVIS: There are two levels happening at the same time. In our own organization we are concentrating on ourselves, on getting our system like that exactly. So, if you go to St. Clare's tomorrow with a heart attack and then the next day you go to The General to get heart surgery, we are able to track you electronically.

However, the provincial connection we couldn't control because we are just one of fourteen boards, but we have been a major advocate in the sytsem for the creation of the Newfoundland and Labrador Centre for Health Information. That body which was created two years ago by government is actually under our board but it is a provincial body, and it is the responsibility of that body to do what you are talking about. So while we do our own in-house, Central West does it own in-house and Labrador does it own in-house, this centre for health information which link all of our boards together.

If you are in a car accident in Corner Brook and you have to be airlifted to the Health Sciences Centre, you will be able to send the electronic information from Corner Brook Hospital to the Health Sciences Centre. We can't do that today, and one of the reasons we can't do it is because we don't have a unique number, for example. In Corner Brook you have one number and in St. John's you have a different number. So this Centre for Health Information which is provincial will be starting by creating a unique number for all of us and then will gradually help us link to each other, what we are doing inside our own organizations today. That is a major step.

I will tell the group here, but you probably already know, that that has not happened yet anywhere else in Canada. Nearly every other province now in Canada has a centre like that created - they call them by different names - to try to do that in their own provinces. So it is not like we can buy is off the shelf somewhere; it does not exist. We are all kind of developing them at the same time.

I think the ultimate goal is that we will be able to do that right across Canada. So if I am visiting Ontario on holidays and have an accident and am airlifted back to St. John's, the electronic transmission of my record can happen. At the national level there are political problems that are greater than just the technical problems.

So it is happening at three different levels, within our organization as Cal described, within the Province through the Newfoundland and Labrador Centre for Health Information and at the national level through a body called the CIHI, the Canadian Institute of Health Information. So it is at three different levels that it is happening.

You are right, Ms Thistle, that is really essential - back to the question about integrated delivery systems - that we have that kind of integration of information. The biggest concern with that is confidentiality and privacy. That is why in this Province we are working with SmartHealth because SmartHealth was created by the Royal Bank and we know we trust a lot of our information to banks and they have the capacity to keep that confidential, they have those kinds of systems developed.

So, working with those kinds of groups, I think we will be able to develop the confidentiality issue. To strengthen that, though, when our board set up a board to handle the Centre for Health Information we actually had the President of the Human Rights Association named as a member of that board so he could keep us accountable on the confidentiality and the privacy side.

MS THISTLE: I could imagine that in future there would be a big cost savings realized from just that system, when you go from a paper based to an electronic system. The savings will be realized throughout the Province, not only here in St. John's.

SR. DAVIS: The savings are going to be a bit down the road though, because while we are doing all of this the international level has decided to change the way they name diseases. The system we use now is called ICD-9. The international world is changing that to ICD-10. So there are going to be costs upfront to help us change to those systems, the costs of implementing computer systems. So while there will be better care, I think we are going to be a number of years, as well, amortizing loans for that kind of initiative.

MS THISTLE: This that you are working on as local issue, will that be complete once you restructure the actual buildings?

SR. DAVIS: Yes. Our goal is June of 1999 to have what we call clinical consolidation completed, but that will only help us within our own walls; we won't be able to link. However, what we have done in St. John's is we have put in a link with the community health board because of the common people we serve and we also have full linkages with Memorial University's medical school because we share staff there. We are also piloting a link with Gander to see if we can start to do that outside. So there are some very creative things happening in that area, because that is the one area that is absolutely essential if we are going to make major new directions in improving the quality of health care.

MS THISTLE: Thank you.

Looking over the Auditor General's Report, particularly on Page 37, related to cash management, the Auditor General has outlined a couple of the problems that are created for the Health Care Corporation of St. John's, and mostly it is the deficit and the difficulty collecting the amount owing.

I am wondering: Since the collection agency has been engaged by the corporation what has been the impact or the success rate in collecting?

SR. DAVIS: The good news is, in all our non-patient areas we are up-to-date with our receivables. The bad news is we are still facing challenges collecting money from patients. We don't have one agency, I think we have five working for us now.

Cal, I am going to ask you to speak to the specifics of that.

MR. CROCKER: Okay. In terms of our accounts receivable, I guess, in March of 1997 we were owed about $15.5 million. That is probably around the figure when the Auditor General was in at our site. In October of 1998 we had that brought down to about $8.9 million. All the improvements have been in terms of money that the provincial government, the federal government, the nursing homes, the community health, the Newfoundland and Labrador Health Care Association, the cancer foundation, all those groups that we do accounting functions for or supply services to, are basically up to date and we have managed to get our money.

The one area that we are still having trouble with is under the federal government HST. We are owed about $1 million. Again the federal government process takes us about three months. We file claims on a monthly basis and it takes us about three months to get our money. We don't seem to be able to improve that even with the discussions we have had with the federal people.

On the accounts receivable patient area, I guess, as Sister said it is the area that we constantly have trouble with. We had about $5.2 million outstanding when the Auditor General visited our site. We now have about $4.6 million. So we have had some limited success but again it is a very difficult area. We do have five collection agencies that we use in St. John's. What we have done is picked all of them to see if any one group is having better success that another group. We also rotate the claims between the collection agencies in terms that if one company is unsuccessful in getting the money we turn it over to another collection agency. So we are doing all the things that we should do.

In terms of our admitting procedures, we now ask for a deposit. If you come into our facilities there is a sign at the admission area saying that if you have insurance I think it is a $200 deposit, if you don't have insurance we want $300 from you in terms of, give us your credit card or something. Everything that we have done is to sort of try to get the money before the patient leaves the building. That is our most success. Once the patient is out the door we sort of can't say we will take the service back or we can't say we won't let you come into the hospital the next time because you owe us money.

So we are trying. We are doing some unpleasant things in terms of collection agencies. We constantly get complains that clients are being phoned and we are looking for money. I guess it is the thing that we have to do as the business part of the organization, to try to get the receivables down.

MS YOUNG: The board has grappled with this too because, remember, we are led by politicians, federally and provincially, to believe that our health care is free, and to tackle a man or woman on a sick bed and ask them for $200 or $300 - the board has asked management to be very careful how they handle this knowing there is a $5 billion deficit and a lot of these people are dead. It is kind of hard to get money from the families of the dead.

CHAIR: I was going to ask the question: How much is going to have to be written off?

MR. CROCKER: We have an allowance for doubtful accounts of $1.2 million on the total receivables. Most of that is with respect to the patient component. We took over some very old accounts when we consolidated the system. So again we know that there is a fair amount of money that we are going to have to write off and $1 million will cover it. We are comfortable, our auditors are comfortable, that that will cover any writeoffs.

SR. DAVIS: I think we should, if I might, Mr. Byrne, explain what we charge patients for. The patient charges are for things like semi-private and private rooms and the ambulance costs. As you know an ambulance trip is a subsidized cost, but there is still a charge and we run the regional ambulance service. If you use an ordinary cast you don't pay, if you use a fibreglass cast which is lighter you would pay. So certain things like that. Then if you are out of province or out of country you pay other costs.

Cal, is that pretty must the summary?

MR. CROCKER: Yes, and there are all kinds of miscellaneous charges, for example if you had crutches, you took a supply, you needed an extra X-ray from our lab department or you wanted something photocopied from our health records department. So there are incidentals all over the place in terms of the types of things that you ask for once you are in our facilities.

MS THISTLE: I guess what it is is we have been used to the best system in the world, and patients at the time of entering hospital are probably saying: Why would they be asking this question? Again, if you are looking for services other than those that are free - I guess maybe it is an education program that needs to go to the public.

Another problem, I guess, that has been highlighted by the Auditor General was the manner in which the funding is obtained from the Department of Health. I note that your funding is always in advance monthly and the big crunch comes at budget time in March. You have instituted a line of credit to alleviate that problem. How has that worked out?

MR. CROCKER: Our funding again from health is we receive funding for November back around October 20. So we are really given our funds in advance. The only month that that does not happen is in March month which is, I guess, the government's fiscal year in budget issues. We receive March's advance in April. Actually in April we receive March and April's advances, so we get two advances. There is about a twenty-five to thirty day period there when we have not received our advance and that is where we use our line of credit. In order for us to use that line of credit we have to go to our finance committee in February or early March and say: Here is what we project that we are going to go overdraft on our bank. They will approve that amount and then we can use our line of credit. When the advance comes in in April, we just pay off the line of credit.

MS THISTLE: Still on the money issue, I noted that you mentioned people can use their Visa card if they so desire. The account that you have at the bank for accepting these Visa deposits, do you carry much of a balance in that now? It was noted by the Auditor General that there was a significant balance in some of these accounts while she was doing her check. Is there much of a balance left there now or has that been cleared up?

MR. CROCKER: What is after happening is this. Again, when we went through our consolidation process we basically took over everyone's business, everyone's bank accounts and all the special accounts that the different facilities had. Since that time we have closed out all the access bank accounts and basically have set bank accounts for the Health Care Corporation which are mainly our operating account, our capital account, the foundation account and the credit card accounts, I guess. Because you have to have that in terms of the machines we have in the system. We keep all the accounts cleaned out as of now. We keep our banks reconciled on a monthly basis so that the things that came up through the Auditor General's report we are certainly doing now.

MS THISTLE: In other words, there are no significant cash balances on hand in any bank accounts just sitting there. On the other hand, you will be paying interest on a line of credit.

MR. CROCKER: The other thing that we have is this. We tendered our banking services for the first three year period and now have another five year one in place. The Bank of Montreal is our official bank. What they did was looked at the Health Care Corporation as one entity and said: Whatever kind of bank accounts you have there, they combine all those on a monthly basis in terms of looking at our interest charges. So if one account has a balance and another one has less, it really does not matter in terms of interest charge calculation because they combine all of our accounts and just use that as one balance.

MS THISTLE: Right.

MR. CROCKER: Again, during the year we do not run into overdraft over the last twelve months so there have been no interest charges. We are still managing to achieve some interest revenue.

MS THISTLE: Who will be your banker for your $130 million loan?

MR. CROCKER: We don't know. In the short term we are using the Bank of Montreal and Toronto Dominion for our lines of credit in terms of short-term financing. Again, both of which were approved by our finance and audit committee, and the fact that we have a line of credit approved by the Minister of Health.

In terms of the $130 million, we and Treasury Board will go to the market and whoever gives the best deal in the market will get the $130 million loans. At this point we do not know.

MS THISTLE: At what point will you be tendering for those services?

MR. CROCKER: We are not sure. There are two options. One we are looking at is to go to the market now for $75 million and do the balance of $55 million when the project is completed. The other option is to stay with short-term financing for the whole construction period and go to the market in the spring of 2000, when all your costs are in. That is a decision that will be made by a committee that we have set up with the Health Care Corporation, the Department of Health and Treasury Board.

MS THISTLE: Thank you, Mr. Chairman.

CHAIR: Thank you. Mr. Lush, you have a question.

MR. LUSH: I just wanted to follow-up, Mr. Chairman, on the question that Ms Thistle raised a little while ago with respect to collectibles, and with respect to Ms Young's remark about free medicare. I find that people are surprised by the fact that they have to pay for certain things, and I expect that since I get so many calls on it, it must be Province-wide. People get a bill for a pair of crutches or (inaudible) set. I was not aware of this. The client is telling me: I thought it was free medicare. The question arising from that is: This is not new, is it? We have always had to do that. This is not something that is a new policy.

MS YOUNG: You always had to pay for a semi-private or a private room. Twenty-eight years ago when I had a child, if I wanted a semi-private room or a private room I had to pay extra. I got a bill and it came in the mail from the Grace Hospital or St. Clare's, and I sent the $32 or whatever it was. That has been as long as I have been a patient.

MR. LUSH: Yes. I have noticed your (inaudible) Mr. Crocker about the insurance, I have noticed that, and I must say I have found that a little baffling, in that sense that - I mean, there may be something I am misunderstanding here - if people are under insurance, is this suggesting that there is a problem? If you have insurance, obviously the obligation is on the insurance company to pay the bill. I have insurance and I fully expect that if I go to the hospital the company under its obligations have to pay whatever expenses I incur that are legitimate expenses under the policy. I take it from that you are asking me to have $200 up front?

MR. CROCKER: I will use our government insurance policy as a typical one. The situation is that at one point the insurance policies that were in effect basically covered your cost of a semi-private room or even in many cases a private room. What is after happening with the insurance companies now is that they will cover up to a maximum of - and I take our government policy one - $60 a day for a semi-private. Now our semi-privates, in terms of our rates now, are $75 a day. My plan will cover $60. I am personally responsible for another $15.

That is the situation with the insurance company, because their rates are all over the place depending on what insurance company you are with now. Basically, with an organization the size of ours we had to come out with a set policy in terms of collection. We could not be looking at everyone's insurance policy to see if we are going to be fully covered or partially covered, or what they are going to require and what they are not going to require. That is why that policy was put in place.

MR. LUSH: So there is no problem with the insurance as such. It is the (inaudible) -

MR. CROCKER: It is the fact that the insurance policy now, in most cases, does not cover the full range. That is why we ask for I think it is $200 if you have insurance, $300 if you do not. It is just to say that we have protection for a significant portion of the fee from the insurance company.

MR. LUSH: I have just as a follow up, the final one to the things that patients have to pay for. Is this sort of standard right across Canada?

SR. DAVIS: I am hesitating. There are medically insured services under medicare which are standard across the country. If you come in and have heart surgery in one of our hospitals, that is the standard. It is a medically insured service. However, there are many services a hospital provides that are not medically insured.

Some provinces cover some things and other provinces do not. For example, home care is not medically insured yet in this Province it is paid for by the provincial government, up to a certain level. The non-medically insured pieces are flexible across the country. The rates, though, for example the rate for a private or semi-private room in this Province would be set by the Province, but Nova Scotia would set a different rate probably, or Ontario a different rate.

The problem always comes back to truly what is medically insured under medicare. There is no consistency across the country in what is covered there.

MR. LUSH: I was thinking more particularly about the items not covered by insurance, for example: prostheses, casts, crutches, and that kind of thing. The arrangement that we have, where we charge these costs back to the patient, is that what is happening in the rest of the country?

SR. DAVIS: Very much so. We tend to charge for less of that than you would pay in Toronto or Vancouver, for example, but pretty much the same kinds of things.

CHAIR: It is 12:00 now, but I have a few questions while we are on this topic so we can possibly clue up on it before we break for the day. The issue with the credit card, about the $300, and the rooms - you are saying it is $75 per day.

WITNESS: That is semi-private.

CHAIR: Semi-private or whatever, and you charge a certain amount for casts, if you want the lighter cast or if you want the heavier cast, and all of that. What would you say to the person who might make the accusation that if you have the bucks you will get better health care?

SR. DAVIS: I think it is well recognized in Canada that 72 per cent of the funding for health care is provided by government, 28 per cent is provided by the private sector, and that percentage is shifting. In other words, we have gone - when we were at our best in Canada we were about 80 per cent public and 20 per cent private. Since 1957, when medicare came in, we have gradually increased the amount the private sector pays. What the medicare system in Canada provides is basic health care provided by hospitals and doctors.

We can say, I think, without being contradicted, that basic medical care, basic hospital care, is provided to every citizen regardless of their ability to pay or not; there is no question about that. If I am richer, can I afford a private room? Yes. If I am poorer, can't I get a private room? Definitely not. We would argue that whether you are in a private room or not might help you personally, but it does not add to or take away from the basic hospital care that we provide.

You cannot, in this Province, jump the line for cardiac surgery because you are richer; but you can in this Province, if you have tons of money, go to Texas and get your heart surgery done in the best heart institute in the world. Some people who have been able to go out of Province to get medical care have had to come back to get it looked after. That does not necessarily mean better or worse care, but if you have money you can go outside of Canada and get faster care for some areas.

One of the prices of having a publicly funded system is that there will be more waiting lists for everybody than in a privately funded system that will only have waiting lists for poor people. Canada has made that philosophical choice. We would rather everybody wait than only poor people wait. I would never argue that and, having had occasion myself to visit health care facilities all around this world, I have not found one that would compare with Canada, with or without money.

CHAIR: I would not argue the case there at all. Over the past eight years, personally speaking, I have been in hospital in this Province a number of times. Let me tell you, they have files over there that thick on me now. I wanted to ask another question on that.

When you are in hospital - since I have been there - and you are put in a room with three other patients versus in a private or semi-private room, in my mind it does impact on an individual with respect to the length of time it will take for that person to heal or to feel that he or she is well enough to leave the hospital or what have you. That is just a comment in my mind.

With respect to the charts - Ms Thistle and you mentioned the Canadian Institute of Health Information - at a certain point in time, I think Mr. Crocker mentioned that it would all be included in the chart. Will the corporation be looking at the patient's previous history and trying to put every piece of information they have electronically in the system? To my mind it would cost an awful lot of money.

SR. DAVIS: Yes, we live so long. What we are doing now, in all past records, we put them on microfilm.

CHAIR: Yes.

SR. DAVIS: We are now investigating the possibility of putting them on optical disc. Optical disc is obviously the storage mechanism of the future. We are looking at the cost of going to optical disc starting from this moment on. Once we have found money to do that, and we really do need to do that, then we would look at where we would microfilm in the past with optical disk in the past, and once we catch up to ourselves then we would be able to integrate everybody's record. That is not going to happen for another five to eight years (inaudible).

MR. CROCKER: The normal process would be, you would start at a specific date of collecting all information electronically and make the call at that point that if you are in our system we will scan your previous records so that we have an up-to-date system.

If you come back into our system at some point in the future, we will then take your old paper chart, scan what is medically necessary for the physician, and from there on in go. We have hundreds of thousands of charts of people who are deceased, people who will never come back to the system. They will always stay paper; unless you come back in we will keep it paper. After thirty years, legislation allows us to destroy the records.

CHAIR: Thank you.

The House of Assembly is open at 2:00 p.m. so we do not have a lot of time, but I have one more question concerning the $135 million for restructuring. Does that include the cost of purchasing the Grace and St. Clare's?

SR. DAVIS: The purchase of the Grace and St. Clare's, from those two religious organizations, were private agreements between them and government. Our board was not involved in those agreements.

CHAIR: With that, thank you.

I think what we will do is probably adjourn for today and meet again on Tuesday, November 24, at 9:30 a.m. to continue on. I do not know how many other questions the Committee has, but hopefully we will get through them tomorrow. We may have to extend it an extra half-hour or so to get through it; if not, we may have to reschedule.

Do you want to give me the (inaudible) of when we are sitting?

MS MURPHY: Tomorrow morning at 9:30.

CHAIR: Tomorrow morning at 9:30, here.

Thank you, and we will see you later.

Committee adjourned.