Hospital funding falls short: legislation, demands of an aging population drive up costs.

• Author: Krejlgaard, Chris

The following is the second instalment of a three-part series which puts Ontario's health-care sector under the microscope. This month Northern Ontario Business staff writer Chris Krejlgaard examines the reasons for the sector's funding shortfall. Next month: some potential solutions to the crisis.

The crisis facing the province's health-care system is no secret. There are daily accounts in the media of hospitals faced with funding shortages and doctors threatening to leave for greener pastures.

Faced with this news, the public is becoming increasingly concerned about the availability of quality health care and the distances which it must travel for treatment.

There are few options for hospitals attempting to cope with the cash crunch. The bulk of their operating revenue comes from the province, and most of their operating expenses are tied to staffing and government-legislated costs.

Ontario's hospitals receive about 85 per cent of their operating funds from the province, with the balance provided through fees charged for private- and semi-private rooms, technical services, out-patient services and parking.

Ontario Hospital Association president Dennis Timbrell has told the health ministry that at least $200 million is needed for the hospitals to balance their books for the 1991/92 fiscal year which ends in April.

If the funding is not provided, then many hospitals will likely start closing beds and reducing staff - something which has already happened in Sturgeon Falls.

The OHA has requested an 8.6-per-cent ($630-million) increase in funding for the 1991/92 fiscal year.

However, it is unlikely that the province will meet the request while facing a burgeoning deficit, reduced transfer payments and a substantial drop in income tax revenue.

According to a report released last spring by the Canadian Medical Association, Ontario will likely receive $1.2 billion less in federal transfer payments than it had anticipated.

The province spends $17 billion - a third of its annual operating budget - on health care, and yet it appears that the money is not enough to support the system.

The lion's share of the support - $8 billion - goes to the province's hospitals. However, 149 of the 224 hospitals belonging to the Ontario Hospital Association (OHA) are in the red, according to the association.

Hospital administrators attribute much of the funding crisis to double-digit wage settlements - which set the tone for future contract talks - as well as to...