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This article was published 30/1/2009 (3859 days ago), so information in it may no longer be current.
The funds are part of the Winnipeg Regional Health Authority's "value-added" policy — a practice that some experts say falls in an ethical grey area and which states that WRHA senior management may accept cash and other bonuses given out by medical suppliers awarded contracts.
WRHA CEO Dr. Brian Postl said equipment suppliers, joint suppliers and drug companies have tried to influence health organizations for a long time, and the WRHA's bid system tries to limit that relationship. Postl said they want the best product at the best price, and that keeping any extras sealed in a brown envelope keeps added benefits separate.
Postl signed off on the policy in 2007, which states he has the sole authority to access and authorize funds flowing from medical suppliers.
Critics slammed the policy, saying the practice is ripe for abuse and creates a perception of impropriety.
"I've never heard of that, where they open it up, and 'Oooh, extra surprises,' " said Rob Warren, director of the Asper School of Business. "If I win the tender and I turn around and give someone unrestricted monies, that to me is definitely not ethical."
Most public organizations require that any extras a contractor offers are outlined, in detail, as part of the bid proposal.
But WRHA's policy states that these benefits aren't to be disclosed in the bid, and that suppliers that offer them should be informed that "unrestricted" funds that can be used at the discretion of health administrators are preferred.
Documents show the WRHA received more than $2.2 million in unrestricted money from suppliers that was allocated to other accounts as "an extra source of funding" — including the regional corporate department, which accepted more than $1.1 million.
Officials will not provide a detailed breakdown of how the money was spent or the name of the suppliers. Health officials told the Free Press to file an access to information request for that information.
Postl said money from suppliers has essentially dried up since the WRHA has moved to limit those relationships — although he thinks some doctors may still be taking money directly from companies.
"The truth is, I still think there's some potential that physicians, without system knowledge, can be having relationships with the companies — certainly that's the experience in the United States," Postl said.
"It's my personal preference that we don't have any of these relationships, and that's what we've been moving towards."
Health Minister Theresa Oswald said she was aware of the entrenched relationship between health organizations and drug and equipment suppliers, and called Postl's move away from accepting gifts "courageous." She said she'll probe further to find out exactly how the money has been spent and will continue to work and support WRHA officials as they change their practices.
"I think it's a matter of doing further analysis and righting any wrongs that are happening with the value adds, and I think that's what the WRHA is endeavouring to do," Oswald said. "If there's money going to corporate, going to conferences, we'll want clarification going forward."
Although the policy states that unrestricted funds are preferred, the WRHA has also accepted more than $17.9 million in other funds put towards research, equipment and hospital programs at the discretion of the medical supply company, including thousands of dollars that went towards equipment and operating costs of critical care, cardiology and surgery.
WRHA chief financial officer Paul Kochan said there is anything ethically wrong with the policy, and said what's inside the brown envelope doesn't influence who gets a contract. Officials know if suppliers have included a brown envelope in their bid, but Kochan said the envelope remains sealed until a winning supplier is selected.
"We open a brown envelope after and it could be nothing, it could be cash," Kochan said, adding that taking extra benefits from medical suppliers is commonplace in health care.
Accounting and business critics have never heard of such a practice.
Barb D'Avignon, manager of materials for City of Winnipeg, said the city requires that any "value adds" are outlined in the bid proposal and that she's never heard of contractors offering up cash after they've been awarded a contract.
"If I did that, I wouldn't have a job," she said. "I don't think that would cut it in a public environment at all. No brown envelopes for us."
Dave Rubel, WRHA director of internal audits, said the policy is "poorly worded" and that no employee or board members pocket the money directly. He said all funds flow through a strict centralized process and are evaluated by a WRHA logistics team. Cheques are deposited in the WRHA's general coffers.
Rubel said at least four people are present when the brown envelope is opened to ensure the policy isn't being abused.
He said the WRHA stopped accepting restricted monies two years ago so all extra funds coming from successful bidders can be directed to health-care needs in the region — not other initiatives dictated by medical suppliers. Rubel said since then, suppliers haven't offered any unrestricted monies.
"It's got nothing to do with employees, nothing to do with board members, that policy, that definition is a poorly worded definition. "Obviously it's not cash, as in a bunch of $1,000 bills. If you are going to be given a cash value-added benefit then we're to ensure the cheque is made payable to WRHA finance, forwarded to logistics, and then it'll be deposited."
One forensic accountant, who wanted to remain anonymous, said the policy could be perceived as a "kickback scheme," and that it's hard to believe that money in brown envelopes wouldn't influence who is awarded a contract.
"If it's not buying influence, why would any contractor provide value-added cash?" the accountant said. "Most people just don't give money away. It just doesn't work that way."
Brian Schoonbaert, Brandon Regional Health Authority vice-president of finance, said Brandon officials discourage vendors from including any extras in their tender bid, and instead ask them to lower the price. He said the only time BRHA has accepted cash from vendors, the money has gone towards the region's charitable foundation.
"They're really discouraged, so vendors know enough not to go there," Schoonbaert said. "We won't even allow the vendor to buy pizza for the staff. We're quite strict."
The bidding process
How do competitive bids normally work?
Institutions posts requests for proposals, and will say if "value added" will be considered. For example, a contractor bidding on a tender for the Floodway Authority may offer to build a park after construction is finished — something that would add to the value of the bid and give back to the community.
What is WRHA doing?
Accepting cash and other gifts from medical suppliers who win a competitive bid contract. The funds are enclosed in a brown envelope and some of the money goes into the health authority's general revenue stream. Other funds are put towards the operating costs or equipment purchases for publicly funded programs like critical care and surgery.
Officials will not provide an exact breakdown of how the money has been spent. They will also not disclose which suppliers are giving them money.
How does that differ from other health authorities?
Vancouver Coastal Health requires that any added benefits that suppliers offer are outlined and disclosed in a transparent way in the bid proposal. If money is included in a bid proposal, Coastal Health uses it as a rebate to lower the price of the contract. Funds are not used as extra income.
What are people saying about WRHA's policy?
The concept of value-added benefits gives rise to a perception of influence — particularly since it is not transparent.
Summary of total amount WRHA accepted from medical suppliers
2002-2003: $177, 068
2003 -2004: $566,569
Source: Winnipeg Regional Health Authority