Province can cancel Medavie deal — at $1M cost to taxpayers

A future New Brunswick government could cancel the controversial extramural contract with Medavie for up to $1 million, according to the terms of the agreement released Monday.

Liberal government releases contract that turned management of extramural, Telecare over to private company

The province released on Monday the anticipated Medavie contract that sees management of extramural care and Telecare programs change hands. (Jacques Poitras/CBC NEWS)

A future New Brunswick government could cancel the controversial extramural contract with Medavie for up to $1 million, according to the terms of the agreement released Monday.

That opens the door for the Opposition Progressive Conservatives to promise to tear up the deal in an election campaign that begins in less than eight months.

A clause in the 28-page agreement says the province can cancel it without cause — meaning for any reason — and pay Medavie a penalty of up to $1 million.

One reason could be Medavie's failure to hit five performance targets contained in the contract.

"If, at some point in the future, a government determined that for whatever measure they wanted to use or whatever assessment they wanted to use … the service levels here had deteriorated and 'we need to try something different,' government can exercise the 'without cause [clause],'" said Tom Maston, the deputy minister of health.

"So government's not tied to this for 10 years, locked in."

Deputy health minister Tom Maston says the government isn't locked into the 10-year contract, although it would have to pay a penalty for walking away from it. (Jacques Poitras/CBC)

'With cause' clause

In November, PC leader Blaine Higgs said he would try to scrap the agreement if he wins the Sept. 24 election. But he refused to commit to the move because he didn't know what the penalty would be.

"I guess it depends on the contract," he said at the time. "It may be locked up so that you can't. … You may be stuck with it."

The contract, signed at the end of December by the Brian Gallant government, also allows the province to walk away "with cause" — and pay no penalty — if Medavie commits "a major breach" of the agreement.

That is defined as including a "chronic failure" to fulfil the terms of the agreement.

But Maston told reporters at a technical briefing that a simple failure to meet the five key targets would more likely trigger a "without cause" cancellation.

"In any contract, you want to be able to have the 'out' clause for whatever reason," he said.

Progressive Conservative Leader Blaine Higgs has opposed the privatizing but said he needs to study the deal before he can promise to cancel it. (CBC)

Higgs didn't comment immediately Monday.

"We will be examining the information the Gallant government released today and will be commenting further once we have completed our examination," he said in an email statement.

The agreement will see Medavie Inc., a private, not-for-profit company based in Moncton, take over management of the extramural care program and the Telecare program. Medavie will merge them with Ambulance New Brunswick, which it already runs.

The stated rationale for the outsourcing is that the province's aging population will require more efficient, better-integrated home care services that the government believes only Medavie can provide.

But the deal, announced last August and signed Dec. 31, has sparked anger and opposition from groups who call it a step toward privatization of the health-care system.

Contract details

The agreement is worth $74 million over 10 years, an amount that covers the cost to the province of salaries and other expenses. Extramural staff remain provincial employees under the deal.

On top of that amount, the province will pay $2.6 million per year in Medavie's administration costs, and the company can earn additional performance bonuses of up to $1.8 million annually if it hits several targets.

The targets are outlined in a 36-page appendix to the contract:

  • Cutting the median time it takes to refer a patient to extramural from three days to one day.
  • Reducing the ratio of emergency room visits to extramural patients by 15 per cent.
  • Increasing referrals to extramural care by 20 per cent.
  • And increasing extramural visits to patients by 15 per cent.

There are also penalties if Medavie slips below baseline numbers in each of those categories starting in 2018-19. A fifth indicator will see Medavie pay a penalty if patient satisfaction ratings for extramural fall below 95 per cent.

The appendix includes schedules that establish the benchmarks for all five targets and specific formulas and payment amounts for each year.

The PC Opposition demanded release of the contract before it was signed, but the Liberal government said it could not make it public while it was still being negotiated.

Health Minister Benoît Bourque and other Liberals defended privatizing home care management, saying it could be more efficient in an aging province, but they won't say why they went after a widely valued part of the New Brunswick health system. (Jacques Poitras/CBC)

Health Minister Benoît Bourque promised to release it promptly after the signing. It was reviewed by Integrity Commissioner Alexandre Deschênes first.

The version released has only two redactions: a few lines about Bourque's authority are blacked out under a cabinet-confidentiality exemption, as is a breakdown of $2 million in Medavie salaries that the province will pay.

About the Author

Jacques Poitras

Provincial Affairs reporter

Jacques Poitras has been CBC's provincial affairs reporter in New Brunswick since 2000. Raised in Moncton, he also produces the CBC political podcast Spin Reduxit.