Medavie won't profit from takeover, CEO says

Privatization and profits usually go hand in hand: government signs a contract for a private company to take over a public service, and that company gets to make money from it.

But Moncton-based Medavie says it isn't just any private company.

It's a little understood anomaly, a unique corporate entity now taking over the running of the province's extramural nursing and Tele-Care programs.

"We don't believe Medavie should be involved," said seniors' advocate Cecile Cassista this week. "They're there to make money, and there's no question about it."

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There are many objections to the deal, but the idea that Medavie has a profit motive in the sense that owners or investors will get rich from the deal is wrong.

Medavie has no shareholders or investors. It makes no profit that is paid out to owners or investors.

"The non-for-profit relates primarily to the fact there are no outside shareholders," CEO Bernard Lord said. "No one is paid dividends. That structure does not exist."

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Lord has repeated that in multiple interviews, as have the members of Premier Brian Gallant's Liberal cabinet who have been defending the deal.

Assumptions being made

Despite that, there's been a frequent assumption that someone will reap the profits.

NDP leader Jennifer McKenzie said last week on a CBC political panel that the deal includes "bonuses and profits that go back based on a number of indicators."

She was referring to what she and others have called a $4.4 million bonus.

In fact, the province says it will pay $2.6 million a year to cover administrative costs, and $1.8 million more if Medavie can hit targets such as more extramural visits and fewer trips by New Brunswickers to emergency rooms.

But that money doesn't represent a profit for Medavie. It doesn't go to Medavie shareholders, because they don't exist. It goes back into operations or to charity.

"I've been in some of these battles before," Lord said, "and some of the statements are just wrong."

Lord was New Brunswick's Progressive Conservative premier from 1999 to 2006. He was hired as Medavie's CEO last year, and unveiled the new agreement with then-Liberal Health Minister Victor Boudreau on Sept.1.

• New Brunswick privatizes management of extramural nursing and Tele-Care

Another Medavie company, Medavie Health Services, will take over management of the extramural and Telecare programs and integrate them with Ambulance New Brunswick, which it already operates.

'It just evolved this way'

Staff such as nurses will work for a new government-created company, with the same seniority and union contracts, but the company's managers will be Medavie employees.

Medavie Blue Cross and Medavie Health Services are both subsidiaries of parent company Medavie, which is also a not-for-profit company. It has 5,500 employees across Canada.

"I wish I could tell you this is a simple structure, but it isn't," Lord said. "It just evolved this way."

The organization started as the Maritime Hospital Service Association in 1943, before government-funded health insurance existed.

No one put up capital. No one owns the capital.- CEO Bernard Lord

The non-profit organization provided prepaid hospital stay coverage, funded by premiums. After the advent of Medicare, it shifted its focus to coverage to other areas, such as medication.

It adopted the Blue Cross name, used by similar organizations in the U.S., in 1986.

Medavie Blue Cross, headquartered in Moncton, now runs group health benefit plans for employers and offers prepaid health insurance for self-employed people without workplace plans.

It also manages some government programs. For example, it processes claims and payments for Veterans Affairs Canada and for the basic health coverage provided to refugees.

'Another level'

There are similar not-for-profit Blue Cross organizations across Canada, "but we at Medavie Blue Cross have maybe taken it to another level," Lord said.

Medavie Health Services started running provincial ambulance services in Prince Edward Island in 2006 and in New Brunswick in 2007. It now runs the service in Nova Scotia as well as in some regions of Ontario, Saskatchewan, and Alberta.

All along, there has been no private investors in the organization and no profits being paid out.

"No one put up capital," Lord said. "No one owns the capital."

Executives including Lord earn competitive salaries, but that also happens at government-owned Crown corporations such as NB Power and NB Liquor, which return their profits to the province to fund programs or pay down the deficit.

Medavie's revenues are called "retained earnings" that are re-invested into operations and used to pay out benefit claims. If there's revenue left over, it goes to the Medavie Health Foundation.

The foundationis a charity that makes donations to organizations working in the areas of youth mental health, Type 2 diabetes, and post-traumatic stress disorder.

So excess "profit" by Medavie isn't going back into government programs, or into paying down the deficit, but, Lord said, it's not making anyone wealthy, either.

"We give that 'dividend' to the foundation," he said.