Early Days (Pre-Medicare): Hospitals and non-profit labs provide in-patient and community patient testing.
In Ontario, initially lab services were housed in hospitals which had been formed as non-profit institutions. Not surprisingly, the labs themselves evolved as non profits. By the 60’s, with Universal hospital insurance in BC and Saskatchewan, Ontario had a wide network of non-profit labs for in patients and community patients. Many in the medical profession opposed “outpatient services” in public facilities which they saw as an obstacle to their authority. Private testing facilities began to appear to accommodate doctors who aligned with private insurance companies to fund their lab networks.
Universal Healthcare Arrives: Now covered by Government insurance, a network of private labs, most often led by physicians, grew to 500 labs providing 60% of testing.
The advent of National Medicare in 1966 led to all medical services, including laboratory ones, being covered by Government insurance. The expanding private lab networks were strengthened under universal healthcare and soon went about growing their business. In 1973, to control costs, the Ontario Government amended the Health Insurance Act to allow licensed labs to bill OHIP directly for work as long as it was ordered by a physician. By year’s end there were more than 500 labs in Ontario. 214 were located in hospitals, and 296 were privately owned. There was also a growing number of requests for new lab licences. The Ontario Government decided to act to deal with runaway growth in the sector. Indicating that “public need” was being replaced by “public interest,” the Government deemed that “no new private labs should be licensed.” Consequently, the last laboratory licence was issued in 1973.
Private for-profit community labs grow and consolidate.
The decision not to issue any more lab licences has remained in effect to this day. It set in motion, a path to reduced competition and enhanced growth and profitability for the large labs. Larger labs bought up smaller players to increase their market share. By 1983, more than half of all community lab payments were now being made to just five companies, with half of that work being done by one company alone.
NDP Caps Spending on Laboratory Testing: 1993.
The Ontario Ministry of Health (1993) estimated that payments to community lab companies increased by 12% per annum in the 1980’s, with most of the money finding its way to the dominant players. In 1993, the Rae Government placed a hard cap on funding to private laboratories to contain costs. The action, at least in the short term, successfully curtailed public spending. Subsequently, the larger private lab companies cut services by dropping service to smaller doctor’s offices to maintain profitability. Further, many lab collection sites were closed. In many cases, the smaller, more nimble, community lab companies began providing service to those who were dropped. The combination of hard caps and service provided by the smaller laboratories began to threaten the profitability of the larger for profits.
Harris Government Retroactively Fixes Market Share and Remuneration: 1998
In 1998, the Harris Government, yielding to pressure from the lab companies’ industry association, the Ontario Association of Medical Laboratories (OAML), introduced an amendment to the Health Insurance Act which retroactively fixed the division of the funding cap between labs based on market share from 1996. This all but put a halt to innovation and ensured the big community lab companies would maintain their hold on the Ontario market. Secure in their position as dominant players, the large labs shifted from increasing services to cutting costs and merging as a means to increase their bottom lines. Ontario was on its way to becoming the most tightly controlled community lab market in Canada.
Today: The Need for Reform
In 2012, the Ontario Coalition for Lab Reform (OCLR) was formed. The Coalition is made up of smaller owner-operated community labs, including Ontario’s third largest, Alpha Laboratories; Bio-test Laboratory of Ottawa; non-profit In-Common Laboratories, which works as a broker with hospital labs in Ontario and across Canada; MedEx Health Services, which provides personalized specimen collection in the GTA and Niagara regions, and pathologists, family physicians, technologists, community patients and patient advocacy groups concerned about diminishing service to Ontario patients.
In September of 2013, CML shareholders approved a $1.2 billion take-over by LifeLabs. The latter now has nearly two-thirds of the lab test marketplace in Ontario. Gamma-Dynacare is the only remaining large competitor in the community lab space and between the two, they control over 90% of public spending on lab testing. There have been no significant reforms to Ontario’s community-based medical laboratory services in more than 15 years.
OCLR today is pushing for medical laboratory reform in Ontario to:
- Establish greater public transparency and stronger oversight of Ontario’s community lab system
- Achieve health care savings through the adoption of newer testing procedures and a modernized payment model for community labs
- Embrace non-profit service providers and Ontario’s community hospitals as partners in the delivery of laboratory testing to patients, as they are elsewhere in Canada
- Deliver the highest standard of care and access to prescribed medical testing to Ontario patients at no increased cost to the Ontario Health Care system.
Source material: False Positive – Private Profit in Canada’s Medical Laboratories, Ross Sutherland, Fernwood Publishing