How province kept rein on health contracting, despite what Danielle Smith says

The provincial government has for years kept a hand in the contracting-out of private surgeries through Alberta Health Services, despite repeated comments by the premier and health minister that any potential issues with procurement are AHS's own responsibility.

Multiple documents obtained by CBC News show direct interventions by Alberta's health minister into AHS contracting matters, as well as entities specifically set up to give the health ministry more oversight and influence in recruiting and dealing with private contractors.

The RCMP, auditor general and the government itself have launched investigations into AHS contracting in the wake of allegations made by former AHS CEO Athana Mentzelopoulos, including those in a wrongful dismissal lawsuit.

Statements of defence from both Health Minister Adriana LaGrange and the agency say Mentzelopoulos was terminated not because she was investigating contracting issues, but because she was failing to carry out her duties.

Both Premier Danielle Smith and LaGrange have insisted several times in recent weeks that any improper procurement decisions made regarding chartered surgical facilities would fall to the health agency instead of government.

"This is all internal to AHS. This is all AHS procurement," the premier told reporters on Feb. 19.

"They were the ones who drafted the directives. They were the ones who went out and received the bids. They were the ones who chose the proponent. And then they were the ones who were charged with the task of negotiating the terms of the agreement. The only role that the minister or government had was saying, 'Are you done yet? Have you got to the finish line yet?'"

But four months before the premier's remark, LaGrange issued a ministerial directive that specifically ordered AHS to extend a contract with an Edmonton private surgery clinic, and laid out the specific surgery volumes as well as the prices Alberta Surgical Group (ASG) would be paid per procedure — up to $10,500 for each knee or shoulder surgery.

According to a copy obtained by CBC News, LaGrange's directive on Oct. 18 also allowed her department to "direct and lead any negotiations that AHS is having, or will have, with respect to any agreements or possible agreements touching on or concerning CSFs."

In late December — weeks before Mentzelopoulos was terminated — an Alberta Health senior official wrote to the then-CEO that based on the directive, the ministry would take over all "due diligence" regarding proponents of proposed chartered surgery centres in Lethbridge and Red Deer, according to a letter CBC News obtained. 

According to LaGrange's statement of defence, the minister took action because the ex-CEO was "dragging her heels" on health reforms and the contract with Edmonton's ASG was set to expire at month's end.

With the directive, the minister "intervened and expedited the removal of the contract with ASG from AHS's oversight" and "to mitigate the obvious adverse effects on patients" due to there being no alternative surgical capacity if ASG's contract expired.

In LaGrange's legal statement and during question period, she's said she had to issue several directives during Mentzelopoulos's tenure at AHS to get the CEO to carry out provincial reforms.

But over the same period, the province was making structural reforms to assume control over AHS procurement.

In November 2023, when LaGrange announced the dismantling of AHS into four different oversight agencies (and before Mentzelopoulos became CEO), the province launched a Procurement and Systems Optimization Secretariat to manage contracting for those agencies and AHS.

"As part of the stand-up of the secretariat, certain functions from contracting, procurement and supply management have transferred from Alberta Health Services to Alberta Health," LaGrange spokeswoman Jessi Rampton said in an email. This transfer has been occurring incrementally since late 2023, she added.

LaGrange's procurement secretariat and directives are not the full extent of the minister's or government's interventions into AHS's contracting with private vendors. It's gone back several years, and even several health ministers, to the earlier days of the UCP government.

In 2020, when Tyler Shandro was health minister, the department created a different secretariat. This one, called the Health Contracting Secretariat, had a stated mandate to "advise on the design and implementation of innovative procurement approaches, contracts and funding models for clinical services with independent providers."

CBC News has learned the ministry's secretariat was overseen by a steering committee, composed of senior officials from the ministry and AHS. Several committee briefing presentations and action logs obtained by CBC News detail the various occasions on which a minister or the ministry influenced the contracting process.

In fact, decisions from the secretariat required approval from both the AHS board and minister until March 2021, at which point the minister only needed to be "consulted as needed."

But even weeks after that, a "decision by minister" led to expand the scope of services for a chartered orthopedic surgery contract.

The document mentions several "minister requests." Among them for the secretariat to discuss contract bidding opportunities with the then-chief of Enoch Cree Nation — where one contracted facility is slated to be located — to craft procedure cost comparisons, and to explore the feasibility of a short-term contract for surgeries in Lethbridge. 

In a written statement, Shandro confirmed the secretariat gave "advice and oversight" on contracted surgical facilities, which the UCP had intended to bring in to help lower surgical wait times.

"In particular, the secretariat provided market research to help advise on business terms that would bring predictability and stability to ensure that multiple proponents bid on RFPs," said Shandro, who was health minister from 2019 until fall 2021.

But according to one former AHS executive who was on the secretariat's steering committee, its role was more extensive and wide-ranging. "The government was very involved with the whole contracting-out process, and the health contracting secretariat was their vehicle to move that along," said Braden Manns, interim vice-president for provincial clinical excellence until he left AHS in 2023.

"One of its main jobs was to manage and increase surgical contracting to for-profit surgical facilities. What kinds of services would they contract out? How would the process of review happen? What information would the reviewers see?"  

Manns, who has been critical of AHS restructuring since leaving the agency, calls Smith's assertion that procurement is all internal to AHS "absolutely false."

The ministry's contracting secretariat continued when Jason Copping took over the health portfolio after Shandro. It would help guide AHS as it contracted out home-care services and some diagnostic procedures.

"Pause potential endoscopy procurement based on minister direction — prioritize and focus on completion of regional CSF procurement(s)," stated a July 6, 2022 briefing to the secretariat's steering committee.

The following week, another steering committee got a debrief of a meeting with the minister which confirmed what sort of chartered surgical facility AHS would procure in Red Deer and Lethbridge, and that it wouldn't pursue a private provider for the health zone north of Edmonton.

Copping did not reply to a request for comment.

After Smith replaced Jason Kenney as premier in late 2022, the health contracting secretariat continued to oversee AHS procurement.

An internal AHS report in late November 2022 updated officials on bids for the proposed Red Deer chartered surgery centre. Included in "next steps" recommended before selecting a developer: "Informing Health Contracting Secretariat."

Although it does not appear the contracting secretariat had a hand in AHS's procurement of Turkish ibuprofen and acetaminophen in 2022, Copping had issued a ministerial directive on Dec 1, 2022. It ordered AHS to secure the medication, and guaranteed the ministry would fund the purchase.

Smith and LaGrange have both declared they want the investigations to reveal if anything went wrong with procurement.

"If there is a problem with procurement, it is a problem internal to AHS. This health minister is trying to get to the bottom of it," Smith said during question period last month.

LaGrange called AHS "a big black box that we have not been able to look into for a very long time, and that has to end."

Alberta Health decommissioned the Health Contracting Secretariat in mid-2023, shortly after LaGrange became health minister, Rampton confirmed last week.

This was months before the minister would set up a new secretariat to gradually assume all contracting responsibilities from AHS.

Rampton did not directly answer a question about how to reconcile the various directives and secretariat-related activities with statements by the minister and premier that the procurement process is internal to AHS.

"By the letter of the law, that's the way it ought to be, though not necessarily the way that it is," said Tom Noseworthy, professor emeritus in health policy and management at University of Calgary.

A former AHS executive himself from 2011 to 2015, Noseworthy said in an interview that government interference in the agency's operations predates the UCP coming to power, and that he believes most of his past colleagues would agree.

"If they're ever honest with you, they'd say hardly a day would pass without some sort of interference, intervention, a phone call or some sort of problem associated with Alberta Health riding herd on Alberta Health Services," said Noseworthy, who was an associate chief medical officer.

He was disheartened that it's going on in procurement, "where objectivity and high-quality due diligence and non-interference from political sources is quintessential," he said.

"You risk having political choices rather than evidence-based choices that are in the best public interest."

A government's best role is to set broad goals for procurement or other functions of a hospital agency, and systems to keep an agency accountable, but they should avoid deeper involvement, said Rosalie Wyonch, lead of the health care policy initiative at the C.D. Howe Institute.

But politics cannot be fully removed because it's the provincial government's responsibility to administer the public health system. "Eventually the buck stops with the health minister," Wyonch said.

Edmonton AM10:39A warning from a former Alberta Health Services CEO

Leadership at Alberta Health Services has been in the spotlight after the former CEO filed a wrongful dismissal lawsuit. The auditor general is investigating the matter and Alberta Premier Danielle Smith says she will launch a third-party investigation as well. Stephen Duckett has experience leading that large and complex organization. He served as the CEO of AHS from 2009 to 2010, and is currently a senior health policy expert at the University of Melbourne.

In last October's directive on chartered surgical centres, LaGrange notes that the Provincial Health Agencies Act allows the minister to "do any thing the minister considers necessary to carry out the minister's responsibilities for the strategic direction of the health system." 

That directive came after her frustration with the pace of progress of chartered surgical contracts whose successful bidders were confirmed years earlier, before she was minister.

"All of these contracts are pre-me," LaGrange said in question period last month. "But, again, I want to notify everyone that I had to submit 18 directives to AHS to get information and co-operation."