Two more nursing home contracts awarded to Shannex: Is the future of our not-for-profit nursing homes under threat?

On June 18, Bruce Fitch, Minister of Social Development, announced the award of contracts to the for-profit corporation, Shannex RLC of Halifax, to build and manage two new nursing homes in Saint John and Moncton.

This announcement is the long-awaited outcome of a call for proposals put out by the New Brunswick Opportunity Agency (NBON) three years ago and the first awards since the Higgs government came to power.

Since 2008, only Shannex has been awarded new nursing home contracts in the province, including the replacement of two not-for-profit nursing homes in Miramichi. This will be 12 contracts for Shannex since 2008. Prior to 2008, all nursing homes in the province, 60 in all, were community-based, not-for-profit ones.

It appears that our nursing home sector is gradually being taken over by a for-profit corporation, a phenomenon I refer to as the “privatization” or “corporatization” of nursing homes in New Brunswick.

I have been trying to raise the alarm about this situation since 2018 by writing to both Premier Gallant (May 31, 2018) and Premier Higgs (June 4, 2020) and their respective Social Development Ministers, Lisa Harris and Dorothy Shephard.

I have also been following closely the procurement process for awarding nursing home contracts by attending information sessions given jointly by Social Development and the Strategic Procurement Division of Service New Brunswick, and registering on the NBON website to track the process as it enfolded.

The tender for these two recently awarded nursing home contracts came out of Social Development’s 2011-2016 Nursing Home Renovation and Replacement Plan, put out by the Alward Conservative government. Posted in June 2018 under the Gallant Liberal government and after the first April 2018 information session, the tender called for three 60-bed nursing homes in Saint John, Moncton and Florenceville. At the same time, a tender was put out for a 190-bed nursing home in Shediac, a replacement for the not-for-profit Villa Providence.

In August 2018, in the first part of the two-tier procurement process, three “qualifiers” were announced for the first tender: NB Partners in care, Montreal, P.Q., a bidder that I have not been able to identify; Rocmaura, Saint John, a not-for-profit nursing home; and Shannex, Halifax, the for-profit corporation. On the same date, NB Partners in care was announced as the qualifier for the Shediac nursing home tender. All of these qualifiers were then invited to proceed with the second tier of the awards process which required putting forward a full proposal.

Since the fall of 2018, there had been total silence on these awards. It was becoming questionable whether there were going to be any awards at all for nursing home contracts under the Higgs government. Despite there being 705 seniors currently on the waiting list for nursing home beds, as recently as this fall, Higgs was making comments to the effect that nursing homes were too expensive, that they wouldn’t be needed once the baby boom generation had passed, and that home care was a much better option anyway.

Since those comments, Higgs seems to have relented somewhat. Based on the 2018-2023 Nursing Home Plan which had been put out by the Gallant government, two tenders were issued in late 2020 and early 2021. One is a re-tender for the Shediac nursing home. The other is a new tender for a 60-bed nursing home on the Acadian Peninsula.

Finally, when the June 2021 announcement was made, the awards were for only two of the four nursing homes which had been tendered and both of the awards were made to just one of the three “qualifiers.” This was Shannex, the for-profit corporation. Obviously my alarm had not been heeded.

Although the first three Shannex nursing home contracts were given outright in 2008, amid great controversy, to Shannex by the Shawn Graham government, after that all of the awards to Shannex have been under the RFQ/RFP (Request for Qualifications/Request for Proposals) procurement process.

I have suggested that the Shannex monopoly of new nursing homes is a result of the post-2008 adoption of this procurement process for the awarding of nursing home contracts.

Sociologist and health care system researcher Pat Armstrong has argued that the same thing happened in Ontario in the mid-1990s under the Mike Harris Conservative government. The privatization of long-term care happened when the Harris government adopted a procurement process for the awarding of long-term care contracts similar to the one being used in New Brunswick since 2008.

In these processes, all applicants, for-profit and not-for-profit, are eligible to bid but the outcome in both Ontario and New Brunswick has been that for-profit corporations get the awards. In Ontario, for-profit corporations got two-thirds of the initial awards while in New Brunswick, the for-profit corporation, Shannex, has received all of the awards since 2008.

Based on my observation of the process in operation and the experience in Ontario, I tried to point out to the premiers and ministers in my letters that the demanding RFQ/RFP procurement process which they are using inherently favours for-profit corporations. They have far greater administrative resources than not-for-profits for dealing with it.

There does seem to have been an attempt by Social Development and Service New Brunswick to get more bidders for the nursing home tenders. The April 2018 Nursing Home Procurement Information and Networking Session was one example where all were invited to participate and the formation of new teams for the submission of bids was encouraged.

But I observed that Shannex didn’t send any representatives to the session. And, as I explained in my May 2018 letter to Gallant and Harris:

“…although others were given a chance, during the networking part of the day, to form teams of project managers, designer-builders, contractors, facility service providers and financial institutions, this would be very difficult and very risky. In making a bid, these new teams would be at a huge disadvantage to Shannex which already had a team in place- a team all under one umbrella. The design-build-run approach that you call for under these RFQ/RFPs greatly favours Shannex.”

More recently, there has been a New Brunswick First provision put on the two new tenders posted for nursing homes in Shediac and the Acadian Peninsula. In addition, in these tenders, some points in the evaluation criteria, 23/230, are given for having New Brunswick suppliers.

The NB First provision on the first page of the tender document says that “non-New Brunswick suppliers will be rejected.” However, later in the document, it is explained that the way that NB First is to be applied is that only those from outside the province “who do not have a place of business in New Brunswick” are excluded from bidding.

Unfortunately then, despite these attempts by Social Development and the Strategic Procurement Division of Service New Brunswick, little may change. Such weak measures are unlikely to end Shannex’s monopoly on new nursing home contracts.

The fact that Shannex, the for-profit corporation, has been awarded these 12 nursing home contracts does nothing to convince me that they can provide better nursing homes for the province than the not-for-profit ones that they are crowding out. The evidence from Ontario shows the opposite. Instead, the for-profits lead to higher costs, less access and lower quality care, according to Armstrong and her co-authors.

Studies of those same Ontario for-profits during the pandemic showed their performance in terms of deaths, outbreaks and failures in care, compared to not-for-profits, to be a lot worse.

In Canada, we believe strongly in not-for-profit healthcare. Why should we allow healthcare for older Canadians in the form of nursing homes to be any different?

I was shocked and dismayed that, after all of my efforts to give warning, two more contracts went to Shannex. Is there any chance that the Shediac and Acadian Peninsula tenders could be awarded to not-for-profits and finally turn the tide? Or is it more likely that the whole procurement process for nursing homes will have to be seriously reconsidered?

Joan McFarland is a retired professor of economics at St. Thomas University.