Canada: Proposed Regulation Changes Could Have Significant Implications For Future And Existing IHFs In Ontario

Last Updated: August 30 2013
Article by Lynne Golding, Kathryn L. Beck and Laurie M. Turner

The Ministry of Health and Long-Term Care (the "Ministry") has proposed regulatory changes that would permit local health integration networks ("LHINs") and Cancer Care Ontario ("CCO") to fund independent health facilities ("IHFs").

The proposed changes are intended to advance the Ministry's plans to move certain procedures out of hospitals and into 'Community-Based Specialty Clinics', as set out in the Ministry's January 2012 'Ontario's Action Plan for Health Care'.  The Ministry has indicated that it is considering a model whereby such clinics would be IHF licensees and would be funded by local LHINs (and/or CCO in the event that the licensee is providing cancer-related services) instead of the Ministry directly, and pursuant to which all IHFs would become health service providers ("HSPs") under the Local Health System Integration Act, 2006 (the "LHSIA")[i] (the "IHF Model").  While the current legislative regime only authorizes the Ministry to fund IHFs in respect of services rendered to persons insured under the Health Insurance Act[ii] (Ontario), if the proposed changes are adopted, LHINs and CCO will also be permitted to provide such funding.[iii]  Summaries of the proposed regulatory changes were posted to the Regulatory Registry on August 12th, 2013 and will remain open for public comment until October 11th, 2013.[iv]

In light of the Ministry's statement that the IHF Model is, "one model being contemplated"[v] for the establishment of Community-Based Speciality Clinics, it is unknown whether this model will be adopted.  However, while the stated intent of the proposed changes is relatively narrow, the changes that would be brought about by the IHF Model could have potentially much broader and more significant implications for existing IHF licence holders.  This bulletin provides a summary of the potentially significant implications of these changes for future and existing IHF licence holders.

Overview

The LHSIA provides that LHINs only have the authority to fund HSPs.  The definition of HSP under the LHSIA currently includes (among others): persons or entities operating public and private hospitals, persons or entities operating most psychiatric facilities, Community Care Access Centres, not-for-profit, non-share capital corporations incorporated under Part III of the Corporations Act[vi] that operate community health centres, and not-for-profit entities that provide community mental health and addiction services.[vii]  If the proposed regulatory amendments are accepted, and the IHF Model is applied, this list would be expanded to include IHFs,[viii] effectively making IHFs subject to various: (i) requirements and obligations under the LHSIA; and (ii) powers of LHINs and the Ministry vis-à-vis HSPs.

Many of the LHSIA provisions will only be triggered if an HSP is actually receiving funding from the LHIN (such as the requirement of HSPs to enter into service accountability agreements).  Any new Community-Based Specialty Clinics that are funded by the LHIN would be subject to these requirements.  Existing IHFs that are funded directly by the Ministry would not immediately be subject to all of these provisions.  Significantly though, the LHSIA gives the Minister of Health and Long-Term Care (the "Minister") the power to assign to a LHIN its rights and obligations under all or part of an agreement for the funding of services with any HSP.  As such, an HSP's existing funding agreement with the Ministry can be assigned unilaterally, at any time, to a LHIN without any need for further legislative or regulatory amendment (or, for that matter, prior consultation with the other parties to the agreement).  If such an assignment occurs, the provisions under the LHSIA that apply only to HSPs who receive funding from a LHIN would be triggered.  This could have potentially significant implications for existing IHFs if the Ministry determines, now - as a part of the proposed amendments - or in the future to shift its management of IHF funding to the LHINs.

Key Provisions of the LHSIA

In the paragraphs that follow in this section, we have set out some of the provisions of the LHSIA which would be particularly relevant for IHFs if their funding source is shifted from the Ministry to the LHINs.   

Service Accountability Agreements

In order to receive funding from a LHIN, an HSP must enter into a service accountability agreement with the LHIN.  We expect that, like other current non-hospital HSPs, IHF HSPs would be required to enter into a 'multi-sector service accountability agreement' ("M-SAA") or a similar form of agreement.  The current template M-SAA for 2011-2014[ix] sets out funding for specific services, on specified terms and conditions. The current template M-SAA also sets out numerous requirements that generally apply to HSPs including:

  • the submission of an annual operating plan and budget (together, the HSP's "Service Plan") and annual follow-up reporting on this Service Plan;
  • other reporting obligations such as Community Accountability Planning Submissions and semi-annual M-SAA compliance declarations;
  • the linkage of a compensation plan for an HSP's CEO to his or her performance; and
  • the development and maintenance of a written procurement policy that requires a competitive process for purchasing certain goods, equipment and services.

The termination provisions set out in the template M-SAA are drafted heavily in favour of the LHIN.  They provide that a LHIN may terminate the M-SAA (and thereby, the funding provided under same) for any reason (i.e. without cause) on 60 days' notice to the HSP.  Moreover, the LHIN may terminate the agreement immediately on notice to the HSP: (i) if the LHIN does not receive necessary funding from the Ministry[x]; or (ii) for cause - for example, if the HSP has materially breached a term or condition of the M-SAA.  On the other hand, if an HSP wishes to terminate the M-SAA, it must give 6 months' notice to the LHIN and develop a transition plan acceptable to the LHIN indicating: (i) how the needs of the HSP's current patients will be met following termination; and (ii) how the transition to new service providers will occur in a timely way.

Community Engagement

HSPs are required under the LHSIA to partake in certain community engagement while developing their plans and setting priorities in the delivery of its health services.[xi]  More specific community engagement obligations are built into the M-SAA and are imposed as a matter of LHIN policy.  For example, community engagement will generally be required in connection with a voluntary integration  proposal (see below for an explanation of "voluntary integration") and other submissions by the HSP to the LHIN.

Integration

One of the fundamental aims of the LHSIA is to promote the integration[xii] of health services across regions.  The LHSIA requires HSPs and LHINs to seek to identify integration opportunities.  Actions taken to transfer procedures out of a hospital and into a Community-Based Specialty Clinic would fall within the definition of an integration for the purposes of the LHSIA. 

(a) LHIN Integration Powers

LHINs are empowered to "integrate" the local health system by,

  1. providing or changing funding to an HSP;
  2. facilitating and negotiating the integration between HSPs or between an HSP and non-HSP;
  3. issuing a decision requiring an HSP to integrate; or
  4. issuing a decision directing that an HSP not proceed with a proposed voluntary integration.[xiii]

Subject to certain restrictions, the LHSIA enables LHINs to compel HSPs to take part in certain types of integrations if the LHIN considers it in the public interest to do so; for example, LHINs may compel an HSP to provide a service, cease to provide a service, or to transfer a service to another person or entity (although it is noted that a LHIN cannot compel such an integration where it does not or does not propose to provide funding (in whole or in part) for the affected service(s)).  Any person - including the affected HSP, may make submissions to the LHIN about a proposed decision of a LHIN to an integration.  The LHIN must consider the submissions and may vary the proposed decision before issuing its final decision.

(b) Minister's Integration Powers

Upon receiving advice from the relevant LHIN(s), the Minister can order certain types of integrations if she considers it to be in the public interest to do so.  For instance, subject to certain exceptions set out in the LHSIA, the Minister has the power to order an HSP that receives funding from the LHIN to cease operating, dissolve or wind-up operations or transfer all or substantially all of its operations to another person or entity.[xiv]

(c) Voluntary Integrations by HSPs

Where an HSP wishes to take steps or enter into any transaction that is captured within the definition of an 'integration' in respect of any services that are funded in whole or in part by the LHIN, such integration is subject to numerous requirements set out in the LHSIA.  For instance, the LHSIA requires that an HSP give 60 days' notice of its intention to integrate such services to the LHIN (where the integration relates to services funded in whole or in part by a LHIN).  During this time, the LHIN can render an integration decision to stop the proposed integration from occurring if it considers it in the public interest to do so.[xv]

(d) Compensation for Losses Arising from an Integration

Of particular note for IHFs are the provisions of the LHSIA that provide that an HSP is not entitled to any compensation for loss or damages (including loss of revenue or loss of profits) as a result of any action, direct or indirect, that the Minister or LHIN takes under the LHSIA, including any integration decision or a Minister's integration order.  The LHSIA further provides that no person or entity (including an HSP) is entitled to compensation for any loss or damages arising from a transfer of property under an integration decision or a Minister's order for integration.[xvi]  The LHSIA does, however, provide for an exception to the "no compensation" rule where a person suffers a loss as a result of an integration decision or Minister's order directing an HSP to transfer or receive property.  In such instances, a person who has suffered losses may be entitled to compensation "as prescribed" in relation to the portion of the value of the property (if any) that was not acquired with government funding.  At present, however, there is no compensation prescribed in the regulations.

Application of the Public Sector Labour Relations Transition Act, 1997[xvii] ("PSLRTA")

PSLRTA regulates the resolution of labour relations issues arising from restructurings and amalgamations of prescribed parties including hospitals and in certain circumstances, integrations within the health sector.  According to the Ministry of Labour, PSLRTA, "encourages negotiation between employers and unions on reconfiguration of bargaining units, and addresses union representation following an amalgamation and the application of existing collective agreements."[xviii]

The LHSIA states that PSLRTA will apply to various types of integrations, although the application of the vast majority of the provisions of PSLRTA[xix] can be avoided in certain prescribed circumstances. For instance, the LHSIA enables the Ontario Labour Relations Board to declare that PSLRTA does not apply to an integration upon the request of certain prescribed parties, subsequent to the Board's consideration of certain factors set out in PSLRTA. Accordingly, HSPs will be subject to the processes set out in PSLRTA in respect of labour relations issues arising from an integration unless the integration meets the criteria for an exemption.

Conclusion

It is clear that the implications of the regulatory amendments are potentially broad-reaching for existing and future IHFs.  If the IHF Model is adopted, it appears that some or all Community-Based Specialty Clinics will become IHFs and will become HSPs for the purposes of the LHSIA and will receive funding from a LHIN (unless the Community-Based Specialty Clinic is providing cancer-related services and is therefore funded by CCO).  Accordingly, unless the LHSIA is otherwise amended, each of these requirements will apply to such Clinics.  Moreover, if the Minister chooses to transfer her rights and obligations under existing funding agreements with IHFs to a LHIN(s), the IHFs that are parties to such agreements will become HSPs for the purposes of the LHSIA and will, unless the LHSIA is otherwise amended, also become subject to each of the requirements outlined above.  On account of the potential implications of the proposed regulatory amendments, many of which have been addressed in this Bulletin, entities that would be affected by such amendments should consider whether it is in their interest to submit comments on the proposed amendments to the Ministry.[xx]

This bulletin is the 2nd in a 3 part series regarding regulatory changes affecting Community-Based Speciality Clinics. Please stay tuned for the final part.

Footnotes

[i]       S.O. 2006, c. 4.

[ii]       RSO 1990, c H.6.

[iii]      For more information, see the Fasken Martineau Health Law Group bulletin, "Proposed Regulation Changes would Permit LHINs and Cancer Care Ontario to Fund Community-Based Specialty Clinics" available at: http://www.fasken.com/en/proposed-regulation-changes-would-permit-lhins-and-cancer-care-ontario-08-14-2013/

[iv]      Summaries of the proposed regulatory changes are available at: http://www.ontariocanada.com/registry/view.do?postingId=13782&language=en and  http://www.ontariocanada.com/registry/view.do?postingId=13783&language=en.

[v]       Service Ontario, Regulatory Registry, Proposed amendment to O. Reg. 264/07 made under the Local Health System Integration Act, 2006,  online: http://www.ontariocanada.com/registry/view.do?postingId=13783&language=en.

[vi]      R.S.O. 1990, CHAPTER C.38.

[vii]     In certain circumstances, particular health professionals and health professional corporations are excluded from the definition of HSPs.

[viii]     It is not clear whether all IHFs - or just Community-Based Speciality Clinics, would be subject to LHSIA. However, based on the summaries of the proposed regulatory changes posted on the Regulatory Registry, it appears that al IHFs would become HSPs and thus, subject to the LHSIA, if the amendments were adopted.

[ix]      A copy of the template M-SAA for 2011-2014 can be found online at: http://www.torontocentrallhin.on.ca/uploadedFiles/2011-14%20M-SAA%20Template%20v1%200(1).pdf. See the Commitment to the Future of Medicare Act, 2004, S.O. 2004, CHAPTER 5, for the entire list of matters that may be addressed in a service accountability agreement.

[x]       Where the LHIN does not receive necessary funding from the Ministry the LHIN may also reduce the funding provided under the M-SAA and, in consultation with the HSP, change the services to be provided by the HSP thereunder. 

[xi]      Community Engagement is part of a broader process whereby LHINs engage persons and entities (including HSPs) involved with the local health system about that system on an ongoing basis.

[xii]     The concept of "integration" in the LHSIA is very broad and includes co-ordinating services and interactions between different persons and entities, partnering with another person or entity to operate or provide services, any transfer, merger or amalgamation of services, operations, persons or entities, starting or ceasing to provide services, ceasing to operate or to dissolve or wind up the operations of a person or entity.  The term "service" is also defined broadly to include direct delivery as well as any related support services.

[xiii]     An "integration decision", i.e. a written decision in a form prescribed by the LHSIA, must be issued if the LHIN is exercising its powers under (c) or (d).  In the case of (b), an integration decision is only required if the parties have reached an agreement with respect to the integration.  The LHIN is not required to issue an integration decision if it is simply providing or changing the funding of an HSP under (a).  On account of this exception, decisions to simply re-allocate funding from a hospital to a Community-Based Speciality Clinic would not necessarily require an integration decision to be issued.

[xiv]     One such exception is Ministerial that an order made by the Minister shall not unjustifiably (as determined under Section 1 of the Canadian Charter of Rights and Freedoms) require a HSP that is a religious organization to provide a service that is contrary to the religion related to the organization.

[xv]     In determining whether or not to stop the proposed integration, a LHIN is required to consider the extent to which the integration is inconsistent with its integrated health services plan and any other matter that the LHIN deems relevant.

[xvi]     The LHSIA further provides that nothing done or not done in accordance with the LHSIA will constitute an expropriation or "injurious affection" for the purposes of the Expropriations Act (Ontario) or otherwise at law.

[xvii]    S.O. 1997, CHAPTER 21, SCHEDULE B.

[xviii]   Ontario Ministry of Labour, Laws - Labour Relations, online: http://www.labour.gov.on.ca/english/lr/laws/.

[xix]     The LHSIA stipulates that certain provisions of PSLRTA will still apply to an integration (if applicable to the integration) regardless of whether an exemption set out in the Act is relied on. Specifically, Sections 12 (which limits the scope of Section 36) and 36 (which relates to seniority of employees following the sale of a business) of PSLRTA will continue to apply to an integration.

[xx]     Comments can be submitted online at: http://www.ontariocanada.com/registry/view.do?postingId=13782&language=en and  http://www.ontariocanada.com/registry/view.do?postingId=13783&language=en.

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