BC health authorities overspent budgets by $3 billion last year

As BC’s health system struggles to treat patients, its health authorities have spent billions more than expected, leaving a massive hole in the provincial budget that gets larger by the year.

British Columbia’s six health authorities collectively spent $3 billion more last year than they had budgeted, according to an analysis of dozens of financial statements by The Current. The unforeseen spending—which are operating costs, not capital expenditures like the construction of new hospitals—was largely covered by the provincial government, which quietly provided $2 billion in unplanned funding. But as it did so, the size of the provincial deficit ballooned.

Last month, when the province announced it had ended the year with a $5 billion deficit, Finance Minister Katrina blamed lower corporate tax revenues and higher wildfire costs on the shortfall. But unforeseen spending by health authorities accounted for more than half of the $3.5 billion in above-budget expenses.

Among BC’s fiscally challenged health authorities, none has failed quite so badly at sticking to its budget as Fraser Health. In each of the last three years, it planned to cut expenditures only to spend vastly more. Last year, it sought to cut costs by about $200 million. Instead, it spent $900 more than budgeted. And according to one expert, one potential reason for the rapidly escalating costs is the province’s increasingly congested hospitals, which The Current reported on yesterday.

Missing the mark

Health care is always expensive. Costs have been rising for years as the country’s population ages, and BC’s health care spending is rising even faster than the national average.

A recent analysis estimated that health care spending across Canada was rising at an annual rate of around 6.5%. In BC, costs have been rising twice as fast, at an annual rate of roughly 13%. Health authority spending has been increasing even more than that, rising by 15% just last year.

It would be one thing if the increased spending was a planned response to the difficulties faced by patients trying to access care. But the health authorities’ budgets suggest that is not the case.

Instead, each year the province’s health authorities have handed their budgets to the Ministry of Health only to dramatically overshoot them.

Since 2019, only one health authority managed to hit its annual spending budget—and that only happened once. But the cost overruns hit a new peak last year, with the health authorities overspending their collective $25 billion budget by 12.5%. The province has stepped into the gap, providing more than $2 billion in additional funding last year for the health authorities. (The rest is covered by insurance fees, MSP premiums and other revenue sources tied to patient volumes.)

No one health authority, and no one type of health care, is to blame. Instead, the cost increases are spread across the province and across health care facilities.

Last year, spending on hospitals, which accounts for more than half of all costs, increased by 17%. But spending on public health, mental health and substance abuse, long-term care, and community care all rose more than 13%. The only category of spending that was kept in check was corporate spending—the one type of spending that gets the most flak from those hoping to reform health care on the cheap. (It rose by 3% after years of increases. We reported on increasing corporate spending in January.)

But no health authority has missed the mark quite so widely as Fraser Health, BC’s largest regional health services provider.

Last year, the health authority spent $1.1 billion more than planned, going a remarkable 20% over budget. No health authority in British Columbia has missed its budget by anywhere close to that figure over the last six years. Over the last six years, Fraser Health has progressively gotten worse at meeting its budget. In 2019, it missed its targeted expenses by just 3%. Every year since that figure has grown.

(Because of the current election campaign, public agencies are not responding to media requests that don’t involve public safety information.)

The health authority desperately wants to spend less, the financial statements show. Entering each of the last three completed fiscal years, Fraser Health’s accountants have budgeted fewer expenses than the previous year. But each year it has spent dramatically more, leaving a wider and wider gap between its plans and reality.

BC’s other health authorities have had similar challenges, but only the Provincial Health Services Authority—a wide-ranging organization that runs BC’s ambulances, BC’s Children’s Hospital, and a mishmash of other health agencies—has come close to Fraser Health’s penchant for overspending.

Like Fraser Health, its finance officers have budgeted for a spending increase each of the last three years, only to see costs head in the opposite direction. Over each of the last two years, the PHSA has missed their budget by 16%. In 2023/24, that resulted in the organization spending $800 million more than it had budgeted.

Across six years and six different health authorities, only one organization one year has managed to come in under budget. In the 2022/23 fiscal year, Northern Health spent $23 million less than it had budgeted.

Indeed, Northern Health has easily been the best at keeping its books in order. Across the last six years, it has only spent 2% more than its total budgeted expenses. Fraser Health, by contrast, has spent 13% more than its planned expenses across the last six fiscal years.

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Patients and patience

The increase in costs aren’t because there are more patients.

Between 2019 and 2023 health authority spending rose 42%. But the number of patients admitted to BC’s hospitals didn’t budge. The patients did stay longer in hospital, but total inpatient days still only rose by 8%.

Markus Delves, the former audit chair of Fraser Health’s board of directors, said higher acute care spending—the largest single expense for the health authorities—could reflect BC’s increasingly crowded hospitals.

“Whenever you start hitting 100% [occupancy], that’s when costs just shoot up,” Delves told The Current in late August. “If you run it at 98%, things are moving. As soon as you start getting above 100, everything gets jammed up. Getting a few extra patients that have nowhere to go really hurts.”

The other likely culprit is the dire shortage of health care workers that has pitted agencies and facilities across the world against one another to recruit staff.

In June, CTV reported that Fraser Health was offering doctors as much as $4,000 to take a single shift in Mission’s emergency department. Health authorities facing dire staffing shortages have also turned to private nursing agencies to find short-term workers—often paying those “travel nurses” a massive premium.

Between 2021/22 and the 2022/23 fiscal years, the amount the province was spending on nurses employed by for-profit agencies more than doubled, reaching $163 million, according to a different CTV story.

“The more that we continue to rely on them, the more that they overcharge for the basic staffing that we need in our public hospitals, the more that it becomes unsustainable financially to deliver public health care,” SFU health policy researcher Andrew Longhurst told CTV at the time.

The budget sheets of BC’s health authorities reveal the depth of the challenge facing a system in crisis. The current pace of spending increases appears unsustainable—especially given the fact that BC’s population will get progressively older over the next decade. But although reducing spending or finding efficiencies can help control the impact on the provincial budget—they could also further impact the care and services available for patients.

For Delves, a former BC United candidate who had planned to focus on health care this election, the situation suggests the need for a larger rethink of how services are delivered in public systems.

“I think our health care is getting to the point where change is possible,” he said. “Oftentimes, political parties are hesitant to touch; everyone wants to tweak and not actually make big [changes].”

Delves said the cost and care challenges underscore the need to explore different ways to deliver health care, and pay physicians, and explore models used in places like the United Kingdom and other European countries. And although he isn’t an NDP supporter, he gave credit to Health Minister Adrian Dix for creating primary care clinics and tweaking pay models for physicians. And he noted that up-front spending is often needed to find efficiencies elsewhere in the health system.

“If you can invest in primary care, it ultimately reduces your acute care costs, but it’s not immediate,” he said. “If you can keep people out of hospital, it saves the hospital system a lot of money. But it’s not like you spend the money on Day One and the acute budget goes down on Day One.”

But Delves said much more needs to be done, and that BC is reaching a point where large-scale change might be not just needed but politically feasible.

“It’s really hard to make change so governments have been very cautious,” he said. But the scale of the challenge and the everyday consequences of our creaking system could finally provide room for larger reforms. I think we’re getting to this point in the country where political parties may have license to make more serious changes. “

Fraser Valley Current members can find a link below to a spreadsheet with much more detailed budget information for all six provincial health authorities.