Want a new nursing home? Finance it yourself!

Under New Brunswick’s Public-Private Partnership (P3) regime for building new and replacement nursing homes, it has become increasingly difficult, almost impossible, for a community to keep control of their local nursing home.

The boards of aging nursing homes are learning that if they want to keep the control of a new or replacement nursing home in their community, they will have to develop, construct and finance the home themselves. They are told, “you get the building, and we will lease it from you.” Not only that, but the government must put your community in their plan as in need of a new or replacement nursing home. If you get into that plan, then they will put out a tender for the contract. However, anyone can bid on the contract. In other words, you are quite unlikely to get the contract. Under the current P3 regime, probably a corporation will.

All of this has become crystal clear to me in examining recent nursing home contracts that I got hold of through Right to Information requests. Although the actual dollar amounts in these contracts are redacted, the terms of the contracts are clearly spelled out.

Under the P3 regime, first used in New Brunswick in 2008 and officially adopted in 2016, a new or replacement nursing home is responsible for designing, building and financing the new facility (2022 Shediac contract, Articles 4.2, 6.1). The government then leases the facility from the nursing home to provide nursing home services. The government pays back all expenses, including designing, building and financing costs, in the form of per diems. These payments per day per resident to the nursing home are spread out over the course of the 25-year leasing contract (Article 4.3). This P3 regime has brought corporations and corporate funds, most notably Shannex Inc., into the industry.

The Passamaquoddy Lodge in St. Andrews is 50 years old and in need of replacing. Their board has offered to fundraise $20 million for the design and construction of a new facility. They have asked the government “to negotiate new per diems with them down the road- like the arrangement Shannex has.” However, if they fundraise for the design, construction and financing of the new facility, then they may not be able to get those funds paid back in the per diems. The contracts specify that “lenders” are to be the source of those funds (2022 Shediac contract, Article 6.1). This creates a situation where a nursing home is only partially publicly funded, not totally funded as it is supposed to be. This doesn’t seem to be fair to the community.

Under the pre-P3 regime, all costs were borne by the government and all nursing homes in New Brunswick were community-based, not-for-profits. There were 62 of these in 2009. There were no corporations in the industry. In 2009, Premier Shawn Graham described the funding arrangement in a news release: “Projects will be funded through bank loans to individual nursing homes as authorized by Social Development. Cost recovery for the new and upgraded facilities will be calculated into the provincial funding provided for nursing home services each year.”

Under the P3 regime, all new nursing homes have been corporate financed. The first three contracts were awarded in 2008 to Shannex Inc., a Nova Scotia corporation, in a pilot project. After that and up to 2022, 11 more contracts were awarded to Shannex. It is only since 2022 that contracts have also been awarded to non-Shannex bidders. However, these bidders have been able to put up corporate funds to design, build and finance their new nursing homes.

There have been all kinds of objections to the P3 regime. After the objection that the Shannex contracts under the pilot project were not tendered, there have been tenders for all subsequent contracts. Bidders have to go through an elaborate bidding process called Request for Qualifications/Request for Proposals. This process also favours corporations like Shannex which have administrative offices to handle such work. Community-based nursing homes have no such capacity.

The community-based nursing homes were further disadvantaged when Shannex won a 2018 court case launched by David Coon, Fredericton South MLA, who from an early point had objected to the P3 regime for nursing homes. The court case challenged the government in its keeping of the financial aspects of Shannex’s contracts and bids secret despite a previous decision by the Information Commissioner that this should not be the case.

Premier Brian Gallant, in a 2018 Daily Gleaner interview (June 11, 2018), said about the Request for Qualifications/Request for Proposals process that: “anyone can bid, of course. These Boards (of community-based not-for-profit nursing homes) are all allowed to put bids forward, and frankly, it’s encouraged.” However, Jodi Hall, Executive Director of the New Brunswick Nursing Home Association took strong objection to the P3 regime and the Request for Qualifications/Request for Proposals process in a commentary in the Daily Gleaner (June 12, 2018). Hall pointed out that small not-for-profit nursing homes “can’t possibly compete with larger businesses because they don’t have the money or building expertise to do so.”

For Hall, the bidding process would mean the end of community-based homes in the province. “These traditional homes are our community, shaped by our residents, families and staff. This is what defines us,” wrote Hall.

The New Brunswick Nursing Home Association asked for non-profit nursing homes to be given “a first right of refusal on the construction or replacement of homes.” The request was not granted.

Before becoming premier, Blaine Higgs, who was with the opposition Progressive Conservatives in 2018, expressed concern over the P3 push and the future of community-based nursing homes. He told the Daily Gleaner (June 11, 2018) that “It’s spelling an end to community-based nursing homes because it seems that they are going to the private sector, with the community taken out of the picture.”

Why has the government adopted the P3 regime for the funding of new nursing homes? In 2008, when Mary Schryer, Social Development Minister in the Shawn Graham government, announced the contracts for the three pilot project Shannex nursing homes, she proudly added that “there will be no up-front costs for the government” and “the Shannex nursing home will just receive the per diem government payments for care just as it does with the not-for-profit nursing homes.”

A 2021 study, Public Money, Private Profit, by the Ontario Health Coalition, examined the problem of P3 regimes for financing health care. The report links the problem to the government’s surplus/deficit position. Under P3s, with the offloading of the provision of the facility to the private sector, there is no spending on the government’s capital account. The report states, “This questionable approach involves treating provincial capital lending subsidies as payment made on account of operating leases, rather than as capital expenses to be accounted for as such in the budget.”

In more specific terms for New Brunswick, infrastructure spending on nursing homes which appears in the capital account of the government budget has been reduced to virtually zero. This contrasts to 2009, for example, when there was over $400 million infrastructure spending on nursing homes in the budget’s capital account.

The Ontario Health Coalition study points out that although the P3 regime makes nursing home spending look better in the budget, it doesn’t make the funding of nursing homes any cheaper for the government. Rather, there are reasons to think that the costs are more. The Ontario Health Coalition argues that “the cost of borrowing is significantly higher for the private sector (0.5 per cent to 2 per cent) than it is for the government.”

There is another reason in the New Brunswick case for why the P3 regime makes the funding of nursing homes more costly for the government. This involves the funding for repairs and renovations. In the pre-P3 regime, repairs and renovations were funded by the government as the need arose. I have been told by a nursing home executive that, in the P3 contracts, there is a “special allocation for capital purchases and unforeseen expenses” over and above the per diems, believed to be in the range of half a million dollars annually. This is a costly addition to the government’s funding.

The Board of Passamaquoddy Lodge has taken an approach outside of the P3 regime in getting a replacement nursing home. They have not been part of the government’s plans for new and replacement nursing homes. Consequently, no tender has been put out.

In 2018, the Gallant government, just before the election in which they were defeated, offered Passamaquoddy Lodge $2.2 million for renovations. Fredericton’s Pine Grove Nursing Home and eight other aging nursing homes were offered similar sums for renovations.

Pine Grove Nursing Home did not take up the offer. The renovations would not have been sufficient given the space limitations in their facility and new COVID standards for private rooms and bathrooms. They identified the need for a replacement facility. However, they gave up on that when they were told that this would require a tender that anyone, including corporations, could bid on. They feared losing control of their not-for-profit community-based home.

Likewise, Passamaquoddy Lodge did not take the government up on the renovation offer. The Lodge was also too cramped and not up to COVID standards in terms of private rooms and bathrooms. What they needed was a whole new building. They also wanted a new design, one that had a household style rather than institutional.

In a November 2020 letter published on Facebook to the staff, residents, families and volunteers of Passamaquoddy Lodge, President of the Board of Directors Carolyn Davies describes their project of replacing the nursing home. Earlier in the year, they had engaged Aimée Foreman of Silvermark to work on a plan and a vision. They chose a Green Home Project design with five houses each having twelve beds. Later, Claire Lucas, a Green Home Project guide, led focus groups with staff, residents, family and volunteers. In January 2024, open houses on the project were held. Meanwhile pledges from donors have been received, land secured from the city to be sold to them for $1, and an architect chosen. The renewed Passamaquoddy Lodge would be part of a Community Care Complex with a community activity hub for seniors and 100 childcare spaces. There are even plans for the old Lodge to be used as a residence for students.

After the initial offer by Passamaquoddy Lodge, the government made no commitments and kept the board and the community waiting for several years. Finally, in March 2024, a new Minister of Social Development, Jill Green, in conjunction with the Minister for Seniors at the time, Kathy Bockus, gave the board a letter of support. However, there is a new government with new Ministers. The board of Passamaquoddy Lodge has been told that their proposal will have to get Cabinet approval before they can go ahead to secure their funding and start negotiations on per diems with the government.

Hopefully, St. Andrews will get its new nursing home soon. However, the community is giving a lot by funding the construction by fundraising. Had they been a corporation or a group of private investors, they would have been able to recover those costs in their per diems.

The government would appear to be getting a real deal, but it is not living up to its obligation of publicly funding nursing homes. The St. Andrews model would set up an unfortunate precedent. How will less prosperous communities be able to keep their nursing homes out of the hands of corporations?

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