Privatization has left Ontario with growing need for publicly funded medical testing

LifeLabs was a private company even before it was sold to Quest Diagnostics, an American company based in Secaucus, New Jersey. In August 2024, OMERS, the pension plan manager for Ontario municipal employees, sold LifeLabs to Quest Diagnostics for approximately $1.35 billion.

Under Quest Diagnostics, LifeLabs has closed its Sudbury processing laboratory for testing in the spring of 2026 and instead will centralize testing in Toronto and Mississauga to reduce costs. While the loss of 40 local jobs affected the community, the greater impact was the loss of local processing of community lab work ordered by family physicians and other community health professionals.

For gain testing

At one time, most medical diagnostic laboratory tests took place in hospitals. However, that changed under conservative Prime Minister Mike Harris (1995 – 2002). Private laboratories really proliferated after Harris passed legislation that would limit hospital billing to zero dollars for outpatient lab tests, while allowing private entities to bill 50 percent more than public facilities receive for outpatient lab tests.

That meant Ontarians who required lab tests could only use hospital labs if they were inpatients. Outpatients are forced to use profitable private labs. Effectively, Ontarians lost over 225 access seats.

According to Sara Labelle, OPSEU Hospital Professionals Division Chair, “When you work in a public not-for-profit model, do you think about the patients you care for, are these operating hours convenient to provide the service? Can people access that service? When you look at the for-profit model, do you look at how do we maximize the money we can get?”

She added, “We have these for-profit lab companies now that advertise that you can pay $40 so you don’t have to wait in line at a public entity. That’s not covered by OHIP because it’s a booking fee to draw your samples.”

This extra bill means that companies life LifeLabs earn money on the back of necessary services.

Labelle points to the shortage of general medical laboratory technologists and the burden placed on public and hospital laboratories when they have to compete with private for-profit labs. Meanwhile, LifeLabs competes with public hospitals for highly skilled lab personnel such as genetics technologists. This is a real problem because only two schools in Canada graduate these specialists – the Michener Institute in Toronto and the British Columbia Institute of Technology.

Generally, LifeLabs wants to process the simpler, high-volume tests rather than cancer or cytogenetics, which take several days to diagnose. It all comes down to profitability rather than patient care.

LifeLabs charges an average of 50 percent more for each test it processes. This profit model seems to see Ontario Health Insurance Plan (OHIP) as a bank from which private labs can profit handsomely without ever investing back into the public health system.

When we got here

LifeLabs established itself as a large conglomerate by acquiring competitors to expand its profit model. American-owned Dynacare is the leading for-profit alternative to LifeLabs for community lab and blood work services in Ontario.

Kathleen Wynne’s Liberal government conducted an overview and review of laboratory services in 2018, which brought together experts from across the country, including the Hospital Professionals Division of OPSEU.

Even though the hospital infrastructure was in place, Health Minister Deb Matthews allowed the mandate that small community laboratories be acquired by for-profit companies instead of examining how the provincial government could help hospitals increase their volume.

Before Matthews, Health Minister George Smitherman (Dalton McGinty Liberals) carried out a 10-year pilot project that allowed 12 small rural and northern hospitals to conduct all outpatient laboratory tests. In some cases, these hospital laboratories performed tests on samples collected from private laboratories within the community.

When the project was evaluated in 2008, it was clear that these small hospitals processed the work with an average cost of $ 22 per community patient compared to $ 33 for private profit laboratories.

Labelle says Smitherman’s injection of global funding has given hospitals the ability to increase staff to run internal tests 24 hours a day, seven days a week.

“They could justify night shifts. And, so, they offered a way better service because they invested in the public hospital laboratories. So, there is an opportunity for us to go back to a completely not-for-profit model of care. The hospitals and public health could do all this. They just have to take up the mantle of some of the esoteric tests that LifeLabs said could be done now.

Tests are also carried out directly by public health. However, Labelle points out that esoteric tests, which are not as high volume, are currently sent to private labs with centralized hubs.

“But it can happen in the not-for-profit world. Those labs could absolutely all be rolled back into the public sector,” Labelle said rabble.ca.

Retract privatization

What is needed is the political will to roll for-profit laboratories back into the public sector like when Ontario’s Hospitals In-Common Laboratory Inc. (HICL) had. Founded in 1967, the non-profit entity even has contracts in the United States, which generate money that goes directly back to the expansion of public services in smaller Ontario communities, where it would not otherwise be like a laboratory.

“[HICL] would redistribute these samples, which helped hospitals have consistency. Small hospitals would have consistency in the work that comes into them. So, it allowed them to keep their staffing levels up. It allows them to have night staff. It was a really good model of care,” Labelle explained.

In 2010, the Ministry of Health under Matthews forced HICL to sell its remaining public collection center, despite HICL labs having a 25 to 30 percent cost advantage over private for-profit laboratories.

“With 450 customers in Canada and the United States – and even without community-based patients in Ontario – HICL has returned $100 million in dividends to its member hospitals over eight years. All this money has helped to finance public health care,” Labelle said.

In 2012, approximately 179,800 Ontarians walked out of for-profit laboratories without receiving service because wait times were extremely long. During that same period, public hospitals had the capacity to do this community work. However, restrictions limiting them to inpatient testing meant that almost all hospital laboratories were and still are underutilized.

In 2014, HICL officially transitioned to In-Common Laboratories (ICL) to reflect a broader Canadian not-for-profit scope and handles the more difficult or complicated tests, including the Ontario Colon Cancer Check – the tests LifeLabs and Dynacare don’t want to do simply because they take longer, which reduces profits.

What the current health minister, Sylvia Jones, should do is start preparing public hospital laboratories and public health to absorb the volume of tests that are currently being done by private for-profit laboratories. She also needs to allow hospital labs to bill OHIP for these tests while helping public labs with recruitment and retention.

Once that is underway, Ontarians will be able to access public hospital laboratories and public health laboratories that are well equipped to absorb the increased volume.

Labelle says there is evidence that this can be accomplished in very short order because during the pandemic Ontario went from zero COVID testing to about 100,000 tests per day through public labs.

Ontario spends about $700 million a year on private lab testing. Returning laboratory tests to the public commons would see a cost savings of between $175 million and $233 million annually. The 25 percent savings are based on the HICL model, while the 33 percent figure is based on a report by the RPO Management Consultant. Neither figure takes into account efficiency gains that hospitals could see as a result of processing higher volumes.

With the cost savings for taxpayers, improved access for Ontarians and increased employment opportunities creating good, united, public service jobs, the Ford government must recognize that it can cut bread and deliver current fiscal responsibility by placing a moratorium on the renewal of contracts with LifeLabs and Dynacare.

Time for the Ford government to fight for public labs that invest in Ontarians instead of profits for American companies and dividends for their shareholders.

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