Ontario Long-Term Care: Caring for the Future
To improve resident health outcomes in LTC homes, the Ontario Government should implement a value-based care system that incentivizes private operators to invest in improving care.
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
A Care-Less Model
With more than 70 percent of all COVID-19 deaths in Ontario occurring in long-term care (LTC) homes, the pandemic has exacerbated many of the issues that the sector has faced for years. Recent attention towards staff shortages, lack of adequate resources, and extensive waitlists are only the symptoms of a much larger ongoing challenge facing the LTC sector. For decades, Ontario’s LTC residents have experienced subpar standards of care and poorer health outcomes compared to international standards, mainly as a result of numerous structural and funding challenges. Over 38,000 individuals in Ontario are currently waitlisted for an LTC bed, with wait times averaging 152 days. In addition, studies show 85 percent of LTC homes have routinely violated health care standards with nearly no repercussions. This data illustrates the limitations of Ontario’s LTC sector and raises concerns regarding safety, access, and quality of care under the current funding model.
The Ontario government has publicly recognized that the LTC sector is facing a crisis and requires urgent change. However, COVID-19 has led to all-time high government debt levels, restricting its ability to sustainably fund improvements. Consequently, to ensure the long-term success of the LTC sector, governments will need the support of privately operated LTC homes. Currently, 58 percent of LTC homes operate under a private, for-profit ownership model, supported by public funding. Under this model, LTC homes receive funding from the Ministry Of Health And Long-Term Care (MOHLTC) for essential care services on a per-day basis, broken down into three categories: nursing and personal services (NPS), personal support services (PSS), and raw food. To supplement the additional costs of operating the property, such as building and equipment maintenance, insurance, and mortgage payments, private operators charge residents for a portion of their room and board in the form of a copay. After accounting for all funds spent on care services, LTC homes are required to return any unspent funds to the government.
When examining the current funding model, it is clear that the goals of private LTC operators and the Ontario government are fundamentally misaligned. Private operators have no incentive to invest in improving care services because any cost savings must be returned to the government; there may even be a direct disincentive to improve care. As a result, private operators invest in providing non-value-added healthcare services so they can charge residents a larger copay. Private operators achieve net operating income margins only of 10 to 20 percent, compared to industry benchmarks of 35 to 45 percent; this significantly restricts private operators’ ability to invest in improved care. This lack of alignment between the government’s goal of improved care and private operators’ need for profits has been the driving force behind poor care in LTC homes.
Symptoms of Long-Term Problems
Canada had 33 percent lower levels of nurses and 57 percent lower levels of personal support workers per 100 LTC residents than the Organisation for Economic Co-operation and Development (OECD) average. This has undermined the quality of care, exemplified by the high incidence of preventable morbidities, such as falls and pressure ulcers, that are directly a result of inadequate staff services.
One of the key structural challenges perpetuating poor care standards in LTC homes is the poor quality of existing facilities. Built to standards established in 1972, these facilities are approximately 50 years old with poor infection prevention control infrastructure. For example, according to the Ontario LTC Act, LTC facilities are not required to have air conditioning, rather only a designated cooling area for every 40 residents. In addition to being a source of preventable mortality among LTC residents, communicable infections cause additional costs associated with caring for infected residents. The failures in the LTC sector during the pandemic demonstrate a clear need to modernize existing LTC facilities to make them safer and more resistant to communicable diseases. Currently, Ontario is home to ~78,000 LTC beds. According to the construction estimates from past renovation projects, replacing 30,000 existing LTC beds would amount to a total cost of C$2.1 billion.
Bed Supply Shortage
The poor quality of existing LTC facilities is not the only challenge; there is a huge deficit in the supply of LTC beds in Ontario. Delayed admission to LTC homes can potentially result in health complications, and prolonged stays in acute-care settings cost the government upwards of C$900 on average per day. Demand is expected to grow rapidly due to a major demographic shift, with the 75-plus age segment growing approximately 3.5 percent annually for the next 20 years. Meeting demand would mean adding 2,651 LTC beds per year, equivalent to an estimated investment of C$477 million annually or approximately C$9.5 billion in the next 20 years.
The aforementioned challenges highlight that Ontario’s LTC system is extremely underfunded. Although Canada’s seniors’ population as a proportion of the total population is in line with the OECD average, Canada spends 24 percent less on seniors care in proportion to GDP. Given governments’ inability to increase funding, addressing LTC’s significant challenges will require alternative funding. The government should therefore adopt a funding model which will incentivize private operators to invest capital.
A Long-Term Plan for Long-Term Care
To align all the stakeholders within Ontario’s LTC sector, a value-based incentive system should be implemented to offer monetary incentives to LTC homes based on resident health outcomes. This performance-based system would offer LTC homes higher potential for revenues, which would motivate private operators to invest in staffing, quality improvement projects, and technology to improve resident health. The short-term cost of developing and implementing the incentive system will be offset by the cost savings from reduced acute care usage, ultimately lowering the total funding required by the government for LTC in the long run. Through this new funding system, the government can effectively align its goals with those of the private operators. This revamped funding approach could improve the profit potential for private operators, which would attract more players into the LTC space and address the shortage of beds in Ontario.
Old Practice, New Application
The first step to implementing a value-based incentive system requires the adoption of data collection and reporting processes that accurately represent quality of care. Data has already been collected for decades, with Health Quality Ontario (HQO) tracking resident outcomes and metrics such as access, safety, and quality of care in LTC homes. Currently, HQO utilizes eight metrics to evaluate the quality of LTC at the individual home level in Ontario:
- Wait time for LTC placement: the median number of days people waiting for admission into an LTC home
- Unnecessary use of antipsychotic medication: the percentage of LTC residents without psychosis given antipsychotic medication in the last seven days before a health care assessment
- Worsened depression since last health care assessment: the percentage of LTC residents experienced worsening depression since last health care assessment;
- Potentially avoidable emergency department visits: number of emergency visits for avoidable accidents, such as falls
- New or worsened pressure ulcer: the percentage of LTC residents with new or worsened pressure ulcer since last health care assessment
- Pain incidence: the percentage of LTC residents experiencing either daily moderate pain or any severe pain in the last seven days
- Falls in last 30 days: the percentage of LTC residents who experienced a fall in the last 30 days before a health care assessment
- Use of physical restraints: the percentage of LTC residents who were physically restrained in the last seven days before a health care assessment
HQO establishes benchmarks for these metrics by combining best observed and theoretical performance, expert opinions, and summaries of current performance. Not all metrics, however, have a benchmark, and HQO should develop benchmarks for those which currently do not have them.
The government should utilize HQO’s pre-existing data collection infrastructure and benchmark development processes to measure LTC resident health outcomes. Using this data, the government can develop a model for assessing and rewarding home operators who are meeting or exceeding provincial targets. When implementing this model, it is critical that these outcomes are risk-adjusted for a resident’s age, existing health conditions, and additional health determinants for variability. Risk adjustment will mitigate the bias of LTC homes toward prioritizing healthier and younger residents to craft an image of strong health outcomes.
Relieving the Pressure: A Case Study on Pressure Ulcers
Pressure ulcers, caused by sustained pressure against the skin that limits blood flow, often result in recurrent hospitalizations, surgeries, and clinic visits. Although most pressure ulcers are preventable with frequent repositioning and adequate skincare, 2.6 percent of Ontario LTC residents develop one, or report that one has worsened, between health care assessments. When compared to the Health Quality Ontario (HQO) provincial benchmark of one percent, over 90 percent of LTC homes in Ontario are currently operating below the optimal standard of care. Beyond perpetuating poor outcomes, the high incidence of pressure ulcers is extremely costly for the Ontario government. Based on the average reactive care costs associated with pressure ulcer management, pressure ulcers result in C$27 million in avoidable annual costs to the Ontario health care system.
Under the proposed value-based system, the government would offer monetary incentives to LTC homes that are effectively able to reduce the incidence of pressure ulcers among their residents. If all LTC homes in Ontario decrease the incidence of pressure ulcers from their current average of 2.6 percent to ~1.0 percent, the current HQO provincial benchmark, they could achieve government savings upwards of C$17 million per year. In practice, this means that the government could offer an annual incentive payment of C$20,000 per home and still ultimately save over C$4 million—just from achieving one metric. Given the recent pressure of COVID-19 on government funds and the capital-intensive struggles of LTC homes, value-based incentives can lead to improved health for residents with limited government investment.
What is in it for Private Operators?
For profit-focused private operators, the additional revenue from incentive payments offers an opportunity to improve their net operating income margins, creating more room for capital investments into novel technologies, infrastructure, and staffing. To translate this revenue into profit, private operators would have to pursue innovative and cost-effective solutions that improve resident outcomes. This would offer private operators the autonomy to create solutions that are beneficial to patient outcomes, instead of limiting their options with stringent regulation.
Increased profitability will also draw new entrants into the LTC segment, increasing the supply of beds and infusing capital to renovate obsolete homes. Furthermore, having incentives tied to resident outcomes will ensure private operators are cognizant of resident health when developing future LTC homes. This will reduce structural problems for future LTC infrastructure.
Out with the Old, in with the New
By adopting a value-based incentive system, the Ontario government has an opportunity to improve subpar health outcomes and lower the funding required for LTC homes. By aligning the goals of the private and public sector, the value-based model will ensure that governments and private operators are both working in the best interest of Ontario’s elderly population.