As hospitals struggle, corporate spending at health authorities skyrocketed last year

BC’s largest health authorities presided over a $500 million surge in corporate spending last year.

But despite spending hundreds of millions of dollars at a time when the hospitals they administer are struggling to care for patients in a timely fashion, the three organizations can’t say what that money has been spent on.

Corporate spending at BC’s three largest health authorities—Fraser Health, Vancouver Coastal Health, and the Provincial Health Services Authority—increased by nearly 30% in just 12 months, according to financial statements from the three massive organizations.

And the increase in corporate spending goes well above system-side investments. An analysis of six years of financial records by The Current shows the three health authorities are now spending a significantly greater share of each dollar on corporate needs than in 2018.

When asked for comment, only Fraser Health attempted to provide an explanation. But its public relations staff claimed the increase in spending was linked to pandemic-related costs, even though the financial statements clearly showed that the corporate splurge only started in 2022, just as COVID-linked public health spending began to decline.

The corporate bill

Nearly seven years ago, BC’s auditor general trained her eyes on British Columbia’s health care authorities, taking a close look at each organization’s financial statements.

Most health care in BC is provided by five arms-length organizations called health authorities that are responsible for services in different parts of the province. A sixth health authority—the Provincial Health Services Authority—oversees provincewide facilities and services like BC Emergency Health Services (the organization in charge of BC’s ambulances), the BC Cancer Agency, and BC Children’s & Women’s Health Centre.

In general, it is the health authorities that turn health dollars into health care by building, staffing, and running hospitals, long-term care facilities, and a massive array of different health-focused programs.

None of that work is cheap or easy. At the time of the auditor general’s inquiry, health care spending amounted to nearly 40% of the total provincial budget. Given BC’s aging population, few were expecting costs to decrease or remain stable.

And all that health care work inevitably takes a legion of administrators to keep everything working smoothly.

The 2017 auditor general’s report listed corporate expenses as including “human resources, financial services, capital planning, communications, technology and information and risk management, medical administration, and emergency services planning.”

In 2015/16, Fraser Health and Vancouver Coastal Health spent about 7% and 8%, respectively, of their total budgets on corporate needs. Combined, the spending amounted to about $460 million. The PHSA spent another half-billion dollars.

By last spring, though, corporate spending had more than doubled in the three health authorities and was eating up a significantly larger share of BC’s health care dollars. And much of the increase came over a span of just 12 months in 2022 and 2023.

Health spending of all types has increased dramatically in recent years. What makes the corporate spending figures stand out is the fact that it has risen faster than most other sectors of health care spending in BC.

When the auditor general examined health care spending in 2017, she found about 10% of money went to corporate needs. Last year, that figure was about 12%. And the big health authorities are mostly to blame. While corporate spending is just 7% of the Interior Health budget (largely unchanged in the last five years), corporate spending accounts for 9% of Fraser Health spending and 10% of Vancouver Coastal Health spending.

That shift may not sound like a lot, but it means that for every billion dollars spent today, about $20 million less is making its way to patients than if corporate spending was consuming the same share of spending as in 2017.

The Current asked Fraser Health—BC’s largest regional health authority and the organization in charge of hospitals from Burnaby to Hope—why its corporate spending had increased.

In an email, a spokesperson pointed to the COVID pandemic.

“As the largest of the five regional health authorities in B.C., Fraser Health has significantly increased resources over the past five years to recruit more health professionals, implement new and innovative technologies, to improve patient care across the region,” the email said. “There was a significant commitment to these resources after March 31, 2020, to support our efforts to respond to the COVID-19 pandemic. By mobilizing quickly, we were able to devise and implement solutions to support the overall health and well-being of the communities we serve.”

They said 560 employees were hired “to enable our response to the COVID-19 pandemic,” and that the health authority also invested in “clinical technology upgrades” like equipment and software to allow for remote work stations.

But that reasoning doesn’t match the organization’s own financial statements.

Between 2020 and 2022, spending on public health more than tripled. Corporate spending increased by 28%. But in 2022/23, pandemic-related spending was dialed back significantly. And yet corporate spending increased by more than $100 million, a jump of 30% and more than the two previous years combined.

More spending on equipment and technology also isn’t the cause of last year’s increase: a secondary breakdown of health care spending in Fraser Health’s financial statement shows that almost all the organization’s spending increases were attributable to increased compensation and employee benefits. Spending on equipment did increase, but only by about $18 million—a relative drop in the corporate spending bucket.

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The bigger picture

Each health authority posts its audited financial statements on its website. The Current collected expense figures from each health authority’s operating statement—one of the most important parts of that document.

Readers can view the year-by-year breakdown of Fraser Health’s spending over the last six years here. Fraser Valley Current Insider Members can view figures for the province’s five other health authorities, and see how they compare to Fraser Health’s spending amounts, below.

The numbers show how anomalous last year’s corporate splurge in Fraser Health and Vancouver Coastal Health was. Over the last five years, only short-term pandemic-related investments in population health—illness-prevention work like vaccine distribution—have exceeded the one-year jump in coastal spending in the two health authorities.

Corporate spending has risen at Interior Health, Northern Health, and Vancouver Island Health, but those three organizations continue to spend about the same share of their budgets on administration as they did five years ago. (Northern Health spends considerably more as a share of its budget than the two others.)

In Fraser Health and Vancouver Coastal Health, however, the corporate sector has been the biggest winner of the last five years when it comes to spending.

That fact is particularly damning in light of the health struggles of many people served by both organizations. In Fraser Health, spending on Mental Health & Substance Abuse consumed 7% of the annual budget in 2022/23. That figure is the exact same as five years ago, before thousands of residents had died after consuming toxic drugs. In Vancouver Coastal Health, the share spent on mental health and substance abuse rose from 8.8% of the budget to 9.2%.

By contrast, corporate spending rose from 7.2% of the Fraser Health budget in 2017/18 to 8.8% last year. In Vancouver Coastal Health, that share rose from 8.2% to 10.1% over five years.

Over the same five years, the share of the budget devoted to acute care—largely hospitals—shrunk by about 5% in each health authority.

One possible explanation

Although none of the three largest health authorities offered an innocent explanation for the spending rise doesn’t mean one doesn’t exist.

One of the most plausible reasons for the spike in corporate spending would be tied to major capital projects that are in the planning process in the Fraser Health and Vancouver Coastal Health regions.

The provincial government is spending billions of dollars building or rebuilding new hospitals in Burnaby, New Westminster, and Surrey. Those massive projects—all located in the Fraser Health region—will require huge teams to make sure they proceed as planned—and so the facilities have the staff and resources needed to welcome patients when they open.

Vancouver Coastal Health, meanwhile, is overseeing the redevelopment of hospitals in Vancouver and Richmond. The other health authorities have fewer large capital projects, though Northern Health is building a new hospital in Dawson Creek.

It’s unclear exactly how much of the splurge in administrative expenses is attributable to those new projects because communications staff from the two regional health authorities—despite being given more than three weeks each to provide an answer—did not cite those capital projects as reason for the increase in corporate spending.