Wednesday, August 10, 2005

Maximus problems show privatization risks

VICTORIA - You should be concerned that the private company hired to take over MSP and Pharmacare administration is already running into problems.
Maximus Inc. got the contract last year, a deal that will see the government pay the U.S. company $320 million over 10 years.
Now news has leaked out that the government has imposed penalties under the contract, because Maximus wasn’t coming close to meeting performance targets. The contract says calls should be answered in three minutes. People are waiting five times that long. New applications are supposed to processed in 20 days; more than a third took longer than 40 days. The good news is that the contract has penalty clauses, and the government has used them. (The amounts are secret, says Health Minister George Abbott. Apparently Maximus didn’t want the information known, and the government agreed to the secrecy.)
The bad news is that things have gone wrong so soon after the company’s April 1 take-over. The penalties involve service failures in April and June, when you would have expected Maximus to be pushing to show what good job it could do.
Some start-up pains are normal, the load has been heavier than expected and service was not great when the work was done in-house. Maximus says it will hire up to 40 extra people to clear the backlog, and Abbott is confident things will get better.
There is merit to the argument that it makes sense to contract out some work to specialized companies. They can spread the costs of developing computer systems over different clients, and - theoretically - become experts in the field.
The Liberal government has been keen on the idea, signing more than $1.5 billion worth of deals to contract out work once done by government employees, with more to come. They maintain the work will be done better, and cheaper.
The Maximus problems are a useful warning that things do not necessarily work out as planned. And the potential consequences are worrying.
Penalties are useful short-term weapons, and Maximus is no doubt keen to protect its reputation (despite, or perhaps because of, problems in other jurisdictions).
But ultimately the corporation needs to make money on this deal. Maximus took in $725 million last year, and made $48 million in profit. The B.C. contract is a significant piece of business for the corporation.
If penalties hurt the profitability of the B.C. operations, or the extra staff needed to meet the commitments cost too much, managers will be expected to fix the business problem. Since revenue is limited by the contract, the only option is to cut costs. (I speak from experience as a former corporate guy.)
And while the 27 performance standards in the contract are intended to protect service levels, operators will find shortcuts not covered by the contract.
When it comes to this deal, that's an acceptable risk. Even if there are problems, the consequences are manageable.
But that's not true for all contracting out efforts.
Take the BC NurseLine service, currently slated for privatization, with Maximus considered the front-runner to win the $135-million, 10-year contract.
The NurseLine is valuable. Nurses are available around-the-clock on a toll-free line to answer health questions. They can reassure a worried parent, promote prevention and head off unnecessary emergency room visits. It provides better, cheaper healthy care, fielding about 700 calls a day.
The service has been managed by E-Comm, the non-profit agency that provides 911 services in southwestern B.C. Abbott says E-Comm turned down a government offer to continue the service, leading to the privatization plan.
But the consequences of performance problems are much more serious with NurseLine, and many other services. A corporate operator under pressure to cut costs could compromise the line's value in fundamental ways.
Privatization often makes sense. But not always.
And given the sensitivity of the issues with NurseLine and the problems with the existing Maximus contract, it's hard to see why the government is prepared to sign a 10-year contract with a private operator.
Footnote: It's puzzling that the government hasn't worked harder to expand NurseLine's use. Emergency rooms could all have phone banks to let visitors call the line as an alternative to waiting for service; non-urgent cases could be required to show they had called the service before receiving treatment.

Monday, August 08, 2005

Children and families failing, says the front line

VICTORIA - The people at the front end, locked in the daily struggle to help children, families and troubled teens, they say the government has messed things up.
Child and Youth Officer Jane Morley talked to them to prepare the "Asking Questions" review. It's not, she says, her report. The message is based on more than 100 interviews and meetings across the province with the people and agencies who do the work.
It's grim. Families who need help to avoid tragedy can't get it, because there's no money or time. Scared teens who want to kick their addictions are turned away, because there's no treatment programs. Young adults suffering from fetal alcohol effect are launched alone into the world at 18, to become criminals, addicts, prey. A little continued support and their lives would be saved (and taxpayers would be spared the far more costly consequences of their later disasters).
There are successes, and these people are proud of what do. But they say the wins come despite the government's role, which has been to drive budget cuts and a mismanaged re-organization.
This is a testing time for Children and Families Minister Stan Hagen.
The government line has maintained that everything is fine, the resources are in place and the situation is well in hand.
Now the people on the front line say that is not true.
“Service providers described a chronic lack of funds sufficient to provide quality, consistent, timely and necessary services,” Morley reports. “Many service providers expressed a belief that the government's agenda is simply to reduce spending, rather than ensuring that the needs and interests of children are met.”
Yes, these people - some ministry staff, some from contract agencies - have their own interests. But Morley says they spoke from the heart, and the message needs to be heard.
The reality is that the ministry budget is seven-per-cent lower this year than it was when the Liberals were elected. Figure even a small amount for inflation, and you find it would take $250 million in extra funding to get back to the former commitment.
Money spent is not a measure of effectiveness.
But the reforms that were supposed to allow the reduced spending have not, for the most part, been put in place.
Clients, workers and almost anyone else involved with the system have warned that the cuts were hurting children and families.
And now the people who do the terribly difficult work say we've cut the budget so much that people can't be helped. (The Liberals acknowledged that the ministry was underfunded before they made their cuts. In opposition Gordon Campbell said the budget was inadequate, and urged the NDP to increase it. )
The government could argue that better support and protection for children and families is not affordable, or a priority.
But there's an economic problem with that argument. The report raises the idea of a vicious circle. The government doesn't provide enough support to deal with problems when they're small, which leads to much greater future costs, further reducing the money available for prevention. There is nothing more expensive than responding to each new crisis, instead of dealing with the causes.
And there's a moral problem. These people - the young addict, the neglected child, the scared mother - have one thing in common. They need help that we can provide.
None of this should be about politics. The NDP mismanaged the children and families ministry badly, and so have the Liberals. The ministry has had eight ministers in the last nine years, including three different political masters in the Liberals' four years.
Right now, Hagen faces a challenge. He can dismiss the observations and analysis of the people doing the work, using whatever justification.
Or he acknowledge the serious problems, and explain what he will do to begin to deal with them.
Children and families across the province are waiting on the decision.
Footnote: Morley confessed to some nervousness in releasing the report, fearing that the negative assessment may encourage cynicism and reduce hope about the prospects for improvement. She concluded, rightly, that the problems have to be raised, and that the people on the front lines are the core strength of the system.