Gift CT scanner produces profits, not public savings

September 19, 2014
Dr. David Howe, The Chronicle Herald

The provincial government has announced plans to provide a new computerised tomography (CT) scanner for Inverness in Cape Breton at a cost of about $1.5 million. Unfortunately, just as the community was set to obtain its long-awaited scanner, a private, for-profit company has offered to “donate” a $3 million scanner.

Even if the extra bells and whistles on the more expensive machine actually would benefit the health of the people in the area (and there is some doubt about that), this particular “gift” is worth careful scrutiny. A closer look shows how this kind of public-private partnership can waste huge amounts of health care dollars under the guise of lowering costs.

The company proposed that in exchange for a fee of $670 per scan, it would donate the machine and pay the technicians to run it. This would spare the government the upfront capital cost of the machine. However, figures presented at a public meeting by the Cape Breton District Health Authority estimated the operating costs per scan would be only $193, in which case the private company would make a profit per scan of $477.

The health authority estimates there will be 5,000 scans a year. Over two years, with 10,000 scans, the company makes $4.7 million, far more than the cost of the machine, but Nova Scotians would keep on paying.

The really disturbing fact is that under this proposal, the company would continue to receive $670 per scan for the life of the machine. When you do the math, the cost of this “gift”is astronomical.

Let’s consider the first five years as an example of how this sort of arrangement would play out.

If the government bought the scanner outright, it would pay capital costs of $3 million (excluding interest). Operating costs for five years would equal $4,825,000 (193 per scan x 25,000 scans). So the combined total cost ($3 million capital and $4.8 million operating) is $7.8 million.

If the private company “donates”the scanner and receives $670 per scan to cover the operating costs over five years, it would cost the taxpayers $16.75 million ($670 per scan x 25,000 scans), or just about $9 million more than the price if Nova Scotians pay up front.

So what might seem an attractive deal for the government because it avoids the upfront cost of buying the machine turns out to be more than twice as expensive after only five years. And in a public-private partnership like this, the costs to the taxpayer just keep climbing over the life of the machine.

Health Minister Leo Glavine has announced that, in principle, he would consider more partnerships with private companies to provide health services. Let us hope he will also carefully consider the figures.