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Alberta Health Services' latest restructuring an implicit admission of past errors

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Alberta Health Services CEO Chris Eagle

Whatever the elevation of Prime Minister Stephen Harper's Conservative-Reform-Alliance Party Coalition to a Parliamentary majority means for the future of public health care in Canada, probably nothing good, the news clutter surrounding the federal election has definitely benefited Alberta Health Services.

The day after the election, when the professional punditariat was still hard at work sorting out what the heck the federal election results mean, AHS President and CEO Dr. Chris Eagle quietly announced a "realignment" of the massive province-wide health "board" that would transfer decision-making to Alberta's regions.

The distraction of the media and the blogosphere provided by the election's unexpected outcome saved Alberta Health Minister Gene Zwozdesky and Eagle, whose permanent appointment on April 14 was first revealed in this space, the embarrassment of being laughed at out loud for the implicit admission in their announcement that the creation of AHS in has been a gong show from the get-go.

In May 2008, AHS was hastily formed by amalgamating Alberta's nine semi-autonomous health regions plus the Alberta Cancer Board, Alberta Mental Health Board and Alberta Alcohol and Drug Abuse Commission into a single massive entity.

The regions had been set up under premier Ralph "Kalamity" Klein's leadership to deflect away from the government criticism bound to arise from the premier's planned health care privatization schemes.

But the "Third Way" flopped, and over time the regions became too big for their britches, politically speaking, for Klein's replacement, Premier Ed Stelmach. In response, the hugely expensive amalgamation was embarked upon by then-health minister Ron Liepert, apparently with precious little serious thought.

From Day 1 the creation of this massive 90,000-plus-employee organization was touted as a money saver. Stelmach promised in a news release that consolidation would "make Alberta's publicly funded health care system more effective and efficient." He claimed the change represented a "move to a 21st century health care system" and vowed it would move money "out of administration into health-care delivery."

Alas, the result of Liepert's creation of a structure eerily reminiscent of the public administration model used in the Soviet Union was not the discovery of new "economies of scale," but unrelenting misery.

This continuing sense of crisis was exacerbated by the appointment as CEO of AHS, and later the firing, of the spectacularly undiplomatic Australian economist Stephen Duckett. But it has barely abated to this day, even with the appointment of the well-regarded Eagle.

Alberta Health Services and the government may be tempted to deny it, but the "realignment" announced Tuesday is clearly an attempt to undo some of the grave damage done by Liepert's failed reorganization effort. As the news release quoted Eagle saying, "people in both our health system and our communities have told us these changes are important for AHS today." Well, no kidding!

The five "zones," the release said, "will be much more directly connected to their local health system and care providers." You know, sort of like the health regions were…

The statement also tacitly recognized that the appointment by Liepert of Duckett -- who was a PhD, not a physician -- was an error. "Physicians and other clinical leaders want and need to be part of planning and decision-making from beginning to end."

As it happens, this was not the first implicit recognition that Liepert's decision to blow up the health regions was never going to work as advertised or save provincial taxpayers a dime.

Back in January -- when the media was focused on the provincial Conservative leadership race -- figures uncovered by Alberta Liberal MLA Hugh MacDonald revealed that all those press releases promising big administrative savings from the amalgamation were not worth the newsprint they were repeatedly printed on.

MacDonald showed that in its first year of operation, AHS administrative costs jumped $46 million. In January 2011, they were up $83 million from 2006-2007, the last fiscal year in which the old health regions still functioned.

For his part, AHS Chief Financial Officer Chris Mazurkewich insisted at the time that with transitional costs out of the way, administrative savings could start and would continue to grow.

Unfortunately, Liepert's scheme to create a massive single health board never recognized that that in economics there is also such a concept as diseconomies of scale.

Never mind the cute economists' charts and mathematical formulae. What this boils down to is that such factors as growing duplication of effort, the inevitable isolation of decision makers, an overly complicated administrative structure required by the scale of the operation, glacial response times, province-wide skilled labour shortages, late recognition of potentially costly local problems, seniority complications stemming from amalgamated labour contracts, the cost of buying out redundant middle managers, bureaucratic inertia and many other factors inevitably contributed to higher administrative costs.

Moreover, loss of local responsiveness, lost potential savings from delivering health services that reflect regional demographics, the inability to quickly solve the province's Emergency Room crisis while everyone awaited a plan from Headquarters, and the inevitable decline in rural services as high-cost technologies and the people who operate them concentrate themselves in urban centres all stemmed from this planning disaster.

Tuesday's announcement indicates AHS's executive suite has recognized that at least the latter problems must be addressed.

It seems unlikely, however, that the catastrophe wrought by Mr. Liepert and Mr. Stelmach can be undone without years of effort and expense.

This post also appears on David Climenhaga's blog, Alberta Diary.

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