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In a bombshell move reminiscent of Peter Lougheed’s 1974 takeover of Pacific Western Airlines, Rachel Notley’s NDP government moved decisively yesterday to cancel a planned $3-billion, 15-year contract with a private Australian multinational to take over all medical lab testing in the Edmonton region.
Even strong supporters of Premier Notley’s government were gobsmacked when the news broke in the afternoon that the plug was about to be pulled on the incomprehensible deal announced by Alberta Health Services on October 17, 2014, with Australia’s Sonic Healthcare Ltd.
When yesterday’s announcement was made, it wouldn’t have been that much after 5 a.m. in Sydney, where the $6.7-billion multinational private pathology and lab services company is based, but you can count on it the CEO’s BlackBerry started buzzing anyway. Presumably BlackBerries belonging to Sonic’s lawyers and lobbyists in Australia and Canada also started buzzing soon thereafter.
Alberta Health Minister Sarah Hoffman said in a short statement she’d directed AHS to immediately cancel the Request For Proposals process that was quickly leading toward the takeover by Sonic of all Edmonton-area lab services from Dynalife DX, an Alberta company, as well as some public lab services. About 1,100 Dynalife employees and another 500 public employees would have been impacted. Unions representing both groups have strongly opposed the deal.
“I do not feel that I have enough evidence telling me that this plan was in the best interests of Albertans, or that there is a strong public benefit,” was about all Hoffman had to say in her very short initial statement announcing the decision. “Therefore, I have directed AHS to cancel its RFP process.”
However, Hoffman elucidated her position in a news conference later, explaining that the Sonic takeover would have put about 30 per cent of medical lab tests in the province in private hands, but that the figure would have been almost 75 per cent in Edmonton and Alberta’s north.
She characterized handing over that much of an essential public service to a private, for-profit, foreign company a dangerous experiment.
But she could — and possibly should — have also argued, just as Lougheed did in 1974 when he took over PWA to protect Alberta’s plans to develop its north, that she was protecting Alberta jobs, keeping money in the province and looking out for the economic interests of the province and its citizens.
To borrow the words Lougheed used at the time, with only a couple of changes, she would have been within her rights to say, “We wanted to assure that such a vital part of the health care system in our province would continue to reflect the needs and interests of the people of Alberta.”
Naturally, the Wildrose Party, heavily motivated by market fundamentalist ideology, assailed the move. “Health minister playing ideological games with our health system,” squawked the headline on the Wildrosers’s quickly cobbled-together press release.
The decision to shut down the deal, never mind that it had been made behind closed doors by the previous Progressive Conservative government and its appointed bureaucrats at AHS, “was driven by ideology and not evidence-based decision making on what’s best for Edmonton and northern Alberta patients,” the Wildrose release said.
“The rejection of successful private health delivery within a publicly funded and administered system that leads to lower costs and stronger outcomes is bad news for our health care system,” Medicine Hat MLA Drew Barnes was quoted as saying in the Opposition party’s release — a statement that can be argued with based on how one interprets the underlying facts, but which usefully clarifies the Wildrose position on privatization of health care.
No sooner had the Conservative Outrage Machine, Wildrose Division, gone into overdrive on the Internet about how much the inevitable lawsuits were going to cost than the other shoe dropped.
Alberta Health Services CEO Vickie Kaminski, hired last year by the PC government, published a news release of her own admitting the just-completed report of an appeal panel demanded by Dynalife had “determined that AHS breached its duty of procedural fairness in the RFP process in a substantial manner.”
So while Kaminski defended the process notwithstanding its shortcomings, lawsuits were a strong possibility anyway because of the way the previous government did business.
As for Sonic, Australian news organizations last night quoted CEO Colin Goldschmidt sounding like a man who might still have hopes of salvaging the deal. “Sonic’s stakeholders can remain proud that Sonic was chosen by Alberta Health Services as the preferred proponent ahead of some of the largest and best known laboratory companies in the world,” The Australian quoted him saying mildly.
According to the paper, known for its business coverage, investment analysts called the news “disappointing as the cancelled contract had been set to deliver Sonic a nice boost to earnings, and help its credentials for winning further public contracts.”
On the face of it, the Sonic deal never made sense to many Albertans. As blogger Susan Wright wrote last November, under the deal cooked up by former health minister Stephen Mandel, Alberta taxpayers would be subsidizing Sonic’s 25 per cent Australian corporate taxes (compared to the 12 per cent tax that is far too high for the Wildrose Party and the federal Conservatives here in Canada), financing the corporation’s $2 billion in debt, padding its huge profits, and paying for multimillion-dollar executive salaries plus bonuses and stock options enjoyed by the company’s top dogs.
In addition, she noted, “while the Alberta government is desperately trying to reduce the cost of health care (and its tax burden on Albertans) Sonic wants to increase the cost of health care with higher fees and more tests because these increase revenue which in turn increase profits.”
So on behalf of Albertans, Wright concluded, she had a question for Mandel: “This is a good idea, why?” Mandel never provided an answer. By the sound of it, no one else could either.
Moving back to the present, Hoffman will need to move fairly quickly to decide how to proceed, since the current Dynalife contract is scheduled to expire in March 2016.
This post also appears on David Climenhaga’s blog, AlbertaPolitics.ca.
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