This Web page has been archived on the Web.

1997 October Report of the Auditor General of Canada

Main Points

13.2 The management of community health programs through separate contribution agreements needs improvement. Health Canada does not monitor contribution agreements effectively. Clear and detailed descriptions of the programs to be undertaken in specific communities were often not available. In about two thirds of the agreements we examined, the Department did not have the required information on the activities carried out in the communities.

13.3 A sound framework for the transfer of health programs to community control has been developed and has allowed First Nations to start managing their own health programs. However, this framework has not yet been fully implemented. Required reports seldom provide performance information related to health, and requirements for program audits were not adequately met. In addition, the evaluation of the transfer initiative did not include any measures of changes to health.

13.4 Significant weaknesses exist in the management of pharmacy benefits under the Non-Insured Health Benefits program, allowing clients to access extremely high levels of prescription drugs. Although the Department has been aware of the problem of prescription drug misuse for almost 10 years, we found no evidence that the ease of access to prescription drugs has changed in any significant way. Despite the seriousness of the problem and numerous reports of prescription drug addiction and prescription-drug-related deaths in First Nations communities, action to intervene has been slow.

13.5 In an attempt to address program weaknesses, Health Canada is currently testing a point-of-service system that is to be fully implemented in the fall of 1997. Such a system has the potential to be a key mechanism in the control of drug use and the administration of pharmacy benefits. However, the Department needs to provide a clear protocol to guide intervention and will need to closely monitor pharmacists' overrides of warning messages.

13.6 Dental care providers tend to provide services up to the established frequencies and limits rather than based on needs, resulting in overservicing of some First Nations clients. The Department has piloted a predetermination process and plans to implement this needs-based model for the dental benefit nationally.

13.7 The Department has successfully implemented some cost management initiatives, resulting in a reduction in the rate of increase in direct program costs for non-insured health benefits from 22.9 percent in 1990-91 to 5.6 percent in 1995-96. However, further savings can be achieved in other areas, including dispensing fees and medical transportation. In addition, management needs to strengthen verification of claims and audits of providers.

Introduction

13.9 A multitude of factors influence the health of a population, including the First Nations. The availability of high-quality health care is one important factor in determining health status. Many players are involved in the delivery of a variety of health services and programs.

First Nations health is significantly worse than the general Canadian population's

13.11 There are glaring differences in health status between the First Nations population and the Canadian population overall ( Exhibit 13.1 ). The 1996 Report of the Royal Commission on Aboriginal Peoples refers to the health status of Aboriginal people as both a tragedy and a crisis. The National Forum on Health recently concluded that the health of Aboriginal people continues to be significantly at risk. Some of the gaps identified have narrowed over the past several decades; however, significant disparities remain. For example, the First Nations infant mortality rate dropped from 2.5 times the overall Canadian rate in 1979 to 1.7 times in 1987 and has remained at that level since then.

Delivery of health services to First Nations presents considerable challenges

13.13 The health status of the First Nations population is affected by socio-economic conditions that, in many cases, are very poor. Exhibit 13.2 displays some of the important factors affecting First Nations health, according to Health Canada, the Royal Commission on Aboriginal Peoples, and the National Forum on Health. Those who deliver health services have no control over these factors that nonetheless impact on their ability to achieve desired results.

13.14 There are a number of governments involved in the delivery of health services to the First Nations population, including the provincial and territorial governments, the federal government through Health Canada, and the First Nations local governments. There is a lack of a common view on their respective roles and responsibilities.

13.15 The provincial and territorial governments are primarily responsible for the delivery of health care services to the residents of their jurisdictions, including the provision of hospital and physician services. Some provinces have included First Nations in programs beyond basic services while others have not. The provincial and territorial governments consider that the federal government should accept full responsibility for all health programming for First Nations living on and off-reserve.

13.16 The federal government views health care as primarily a provincial responsibility. It considers that all residents of a province are entitled to provincial health services, including First Nations. It maintains that the federal government's provision of health services to status Indians and Inuit is based on policy and not on treaty or other legal obligations.

13.17 Most First Nations generally consider that all necessary health services must be provided to them under Aboriginal and treaty rights and, as such, represent a fiduciary obligation owed by the Crown.

Medical Services Branch delivers health services to First Nations

13.19 The objective of the Branch is to assist status Indians, Inuit and residents of the Yukon to attain a level of health comparable with that of other Canadians living in similar locations. The health services are provided through two programs: Non-Insured Health Benefits (NIHB); and community health programs. Expenditures for these services amounted to approximately $1 billion in 1995-96 ( Exhibit 13.3 ).

13.20 As a result of the 1994 federal Budget, program expenditures are required to be managed within a fixed financial envelope. Annual growth rates have been set at 6 percent in 1995-96, 3 percent in both 1996-97 and 1997-98, and approximately 1 percent in 1998-99. The Department has established regional envelopes, and there is flexibility for each region to move resources among programs within its allocation.

Community health programs are delivered in various ways

13.22 The delivery mechanisms for community health programs have changed over time. Initially these programs were delivered directly by Medical Services Branch. Now they are delivered mostly through arrangements with First Nations organizations. The Branch uses three basic types of agreements that give First Nations varying degrees of flexibility, control and responsibility to design programs. In increasing order of flexibility, these are separate contribution agreements, Integrated Community-Based Health Services agreements and transfer agreements (see Exhibit 13.5 for details).

13.23 The ultimate objective is to improve the health of First Nations through good programs and services at the community level. The type of arrangement chosen is not the end - it is only the means to achieve the end. Departmental data show that, as of 31 March 1997, approximately 27 percent of First Nations had signed a transfer agreement and 13 percent an integrated agreement. The remaining 60 percent were delivering programs under separate contribution agreements. Expenditures on community health programs and transfer agreements amounted to $450 million in 1995-96 (see Exhibit 13.6 for a breakdown).

13.24 In March 1994, Health Canada directed Medical Services Branch to continue the devolution of its Indian health resources to First Nations control within a time frame to be determined in consultation with First Nations and Inuit communities, and to move out of health care service delivery. The Branch projects that approximately 60 percent of First Nations will be under transfer agreements by 1999-2000.

13.25 The Branch's delivery of community health programs is decentralized. Responsibility for the delivery of the programs rests mainly with the regional directors. The vast majority of staff involved in community health programs and the transfer process are in the regions.

A variety of non-insured health benefits are provided to First Nations people

13.27 The objective of the program, as indicated in a renewed policy mandate proposed by the Department in April 1997, is described in Exhibit 13.7 . The program is not recognized in any legislation, but is provided by the federal government as a matter of policy. Parliament is asked each year through appropriation acts for the authority and resources to provide these services. Exhibit 13.8 shows 1995-96 NIHB expenditures by benefit category.

13.28 While the Non-Insured Health Benefits program is not subject to transfer at this time, some pilot projects aimed at examining future management options have been considered. Planning is under way with a view to obtaining appropriate authority to transfer the program to First Nations control.

Focus of the audit

Observations and Recommendations

Community Health Programs Delivered through Separate Contribution Agreements

Balancing the need for flexibility with fulfilment of obligations is a challenge

13.31 The expectation is that officials will work more closely with First Nations under separate contribution agreements than with those who have transfer agreements. We expected that Medical Services Branch would know how a First Nation intends to spend program money and what it expects to achieve, would gather and review community reports on what has been accomplished, and would work constructively with the First Nation to help build capacity and improve programs and services.

13.32 We observed that although these elements are indeed reflected in the structure of most of the arrangements, the relationship in practice is quite different.

Overlapping of programs makes them difficult to administer

13.34 The Department recognizes the need to manage the programs so that they complement each other. Branch officials in the regions have encouraged First Nations to consider related programs together, so that the various activities are co-ordinated in the community. In one region, the funds available from two programs were merged together in the agreements and Branch officials were prorating the reported expenditures. Nonetheless, these programs are delivered and accounted for separately. The overlap makes it confusing and difficult for both First Nations and Medical Services Branch to administer them as separate programs.

13.35 The Department is accountable for the programs it delivers, whether directly or indirectly through arrangements with third parties; it has to report to Parliament every year on program performance. Overlaps in programs increase the difficulty of attributing results to a specific program.

13.36 The Department should review its program structure and ensure that it reflects the manner in which the programs are actually delivered.

Department's response: Agreed. This recommendation will be discussed with Treasury Board officials.

Specific expectations and activities under agreements are often not clearly stated

13.38 We found clear and detailed descriptions of the programs to be undertaken in specific communities in approximately 60 percent of cases for Brighter Futures and Building Healthy Communities and in less than 20 percent of cases for National Native Alcohol and Drug Abuse Program and Community Health Representatives (see Exhibit 13.10 ). In the latter cases, the only description available was often a generic one used for all communities in a given zone; it did not specify what a particular community was going to undertake. In about a third of the cases, for all programs, there were no clear descriptions of objectives and activities.

13.39 When we did find a specific program description, it usually included some health-related objectives and a list of activities to be conducted. About 80 percent of the cases gave no indication of how the community would know whether the activities were successful. Indicators such as participation rates for workshops or number of visits to elders were not specified.

13.40 The Department should ensure that the contribution agreements are clear about specific objectives and activities that the First Nation will undertake. It should encourage First Nations to define measures of success.

Department's response: Agreed.

Activity reports are not provided consistently

13.42 For about 67 percent of the agreements we examined, the Department did not have the required activity reports (see Exhibit 13.10 ). In other words, the Department had none of the required information on the activities carried out under two thirds of the agreements. Departmental officials told us that they obtain knowledge of community activities more informally, through their periodic contacts with the health workers and visits to the communities.

13.43 We found that when activity reports had been produced they were mainly lists of activities. Some included information on services provided, such as the number of people visited or counselled and the rates of participation in activities. A small number also noted positive effects of the activity, such as the creation of a support group, and assessments that could be used to improve the activity in the future, such as providing for day care when information sessions are targeted to parents. This type of assessment needs to be encouraged.

13.44 The Department should ensure that it receives the activity reports required under contribution agreements. It should work with First Nations to improve these activity reports so that they provide information on results achieved.

Department's response: Agreed.

Management of contribution agreements needs improvement

13.46 However, we found that Medical Services Branch does not monitor contribution agreements effectively. As we have already noted, a clear description up front of what is to be done and achieved and a report on performance at the end of the year were often not available. The Branch rarely took steps to clarify descriptions and obtain the required activity reports. Often, even when it has received these documents it has not reviewed them with a view to improving them in the future and improving the health services provided. Departmental officials mentioned that they visit communities and discuss issues with community workers, which allows them to know and influence what is being done. It is interesting to note that the good program descriptions and activity reports we saw were from the regions or zones where the Branch has asked for the required reports, thus reinforcing their importance, and where it has helped to produce them by providing a predeveloped reporting form.

13.47 The level of responsibility undertaken by a community is supposed to depend, in part, on the extent to which it has demonstrated its ability to manage that responsibility. However, the Branch has not taken the opportunity to build capacity by ensuring that management practices are in place in the communities to deliver these important programs.

13.48 Departmental officials are aware of cases where the provision of good-quality health services in the communities is hampered by inadequate management:

• In some cases, there is little or no supervision of band employees.
• In some cases, community workers delivering related services are working in isolation from each other.
• In some communities there are indications that the expected services are not being provided, given that some band-employed health workers are not working the required number of hours or are on extended leave and have not been replaced.
• In some cases, the competency or qualifications of some community workers have been questioned.

• The 1989 evaluation of projects in the National Native Alcohol and Drug Abuse Program noted that the majority of workers said they were not supervised and there were few prevention activities conducted at the community level, such as education sessions in school.
• A 1993 review of the Community Health Representatives Scope of Practice noted the lack of adequate training or of adequate numbers of trained personnel.

Transfer of Health Programs to Community Control

A sound transfer framework has been developed

13.52 Under the transfer initiative, the Department encourages greater accountability by First Nations toward their communities, recognizing at the same time that the Minister of Health retains accountability for the use of public funds and for overall results. In order to meet the transfer objectives and also fulfil these accountability obligations, the Department in 1989 developed a transfer framework for specific agreements (see Exhibit 13.12 ). In addition, an evaluation of the transfer initiative was conducted jointly in 1995 by the Department and the First Nations involved.

13.53 We reviewed the transfer framework and found it to be basically sound. However, the take-up for transfer has been slow. In Alberta, for example, only one First Nation had signed a transfer agreement at the time of our audit. The evaluation of transfer noted that certain concerns of First Nations have presented real barriers to negotiating transfer agreements. These include concerns about the recognition of treaty rights and questions about the future roles and responsibilities of Health Canada.

Transfer has allowed First Nations to start managing their own health programs

13.55 More clarity is required in describing what the programs are intended to achieve. Consistent with the requirement of the transfer framework developed by Medical Services Branch, we expected that the community health plans would define the objectives of the programs and would indicate the health status data and results measures to be collected. We found that most plans defined broad objectives and included a corresponding list of activities. However, many did not clearly specify what was to be achieved, or how this was to be measured. This is an area that needs to be continually developed and improved.

13.56 During the negotiation phase, Medical Services Branch reviewed the majority of community health plans and discussed with First Nations various matters that were not covered in the plans. In that way, it encouraged First Nations to establish good practices. The transfer agreements stipulate that the health services are to be guided by the community health plan. We therefore expected that once the concerns had been resolved, adjustments would be reflected in the community health plans. However, we found that the community health plans were rarely updated to reflect the negotiated adjustments.

13.57 The transfer framework makes it clear that the community health plan, as a key planning document, should be updated regularly to keep it current. We expected that when renegotiating an agreement, usually after five years, Medical Services Branch officials would request and review the most recent update of the plan and use it as the basis of the renewed agreement. We observed that about three quarters of the renewed transfer agreements were based not on updated plans but on the community health plans developed at the beginning of the transfer process, more than five years earlier.

13.58 The Department should ensure that updated community health plans that meet the basic requirements are prepared, and that they form the basis of both initial and renewed transfer agreements.

Department's response: Agreed.

A transition period is important

Performance reporting needs to focus on results

13.61 We believe it is important for managing and for accountability that the results of programs be measured to the extent possible and reported in sufficient detail. We expected that achievements would be reported in terms of services provided (such as immunization rates, attendance at particular workshops and events or number of clients counselled) and in terms of desired changes to health (such as reductions in the incidences of diseases, injuries, suicides or alcohol abuse). Both aspects are important, because some activities may appear to be successful without producing the desired change in health. For example, diabetes is a known problem in many communities; some First Nations are trying to prevent and control diabetes by providing information on the importance of factors such as nutrition and fitness. Such activities might be judged successful based on the number of people reached by the information. However, if this does not contribute to a reduction in the number of people with diabetes or an increase in the number of people controlling their diabetes, then the activities may need to be refocussed. More individual counselling, or more participatory activities such as walking clubs, might be considered.

13.62 The transfer agreements require First Nations to prepare an annual report to their communities summarizing the programs undertaken and providing data on services and their results. We found that most First Nations have prepared the required reports. Our examination of these reports showed that information on what has been done is given in terms of a description of the programs and, sometimes, measures of the services provided. However, the reports seldom include performance information related to health - that is, whether the desired changes to health are taking place.

13.63 The transfer framework requires that an evaluation of effectiveness be conducted by the First Nation every five years, and funds are provided for that purpose. Only four of the 24 agreements we reviewed had been in place for more than five years; two of those had not been evaluated. Three other First Nations conducted an evaluation much earlier than the end of the five-year period.

13.64 The transfer framework also requires these evaluations to assess whether the programs have achieved their objectives and produced the intended effects. We found that evaluations that have been undertaken have rarely measured the changes to health resulting from the programs. They typically reviewed the operations and the management of health programs. For example, some evaluations noted that the prevention and promotion activities were not conducted to the extent planned. This is useful information that can serve to improve operations. However, it does not satisfy the requirements of the transfer framework. We recognize that this is not easy. But there is a need to start working in that direction to see some practical progress in the short term and further progress over time.

13.65 The Department should work with First Nations to improve measurement of the services provided and of expected changes to health. These measures should be included in the annual reports. In addition, the Department should ensure that First Nations conduct the required evaluations of the achievement of program objectives.

Department's response: Agreed. It is important that a balance be achieved between reporting mechanisms designed so that First Nations program managers can be accountable to community membership while ensuring that information necessary for departmental accountability is provided. Work is currently under way to develop a new Accountability Framework for the Program, which will be appropriate for the increased control by First Nations through transfer and self-government. Associated performance and outcome measures will have a results orientation. This work will be done in conjunction with First Nations. It is expected that the work will be completed during the 1998-99 fiscal year and that it will be reflected in agreements signed after that.

The audit requirements were not adequately met

• fairness of the financial statements;
• adequacy of financial controls in place;
• compliance with the terms and conditions of the agreement; and
• provision of mandatory programs.

13.68 For most First Nations, we found that an auditor's report concluding on the fairness of the financial statements was available; about half included all the financial operations of the First Nations and half were related specifically to health programs. However, only one of the agreements we examined had an audit opinion covering the other required aspects: adequacy of financial controls, compliance with the terms and conditions of the agreement, and provision of mandatory programs.

13.69 Some departmental officials told us that they were not clear on what the comprehensive audit is supposed to examine and what type of audit opinions are expected.

13.70 The Department should clarify the nature and scope of the audit requirements under transfer agreements and ensure that the required audit opinions are provided.

Department's response: Agreed. The Program will work with the Internal Audit Directorate of the Department to ensure that the audit requirements reflect the new accountability framework, emphasizing First Nations control, and that these are well understood by departmental officials and transferred communities.

The evaluation of the transfer initiative did not measure changes to health

13.72 Although it was expected to assess the impact of transfer on the health of First Nations, it did not include any measures of changes to health. We believe that such measurement, while difficult, is possible and should have been conducted. Without this information, it is not possible to determine whether transferring programs to First Nations control will in fact contribute to improved health, as is generally believed.

13.73 One of the difficulties is the absence of indicators of health that could be used in such an evaluation. One departmental official advised us that the joint evaluation committee will meet again in 1997 to determine how to measure changes to the health of First Nations after transfer, and that these measures will be used in the next evaluation.

13.74 The Department should ensure that future evaluations will determine the extent to which the transfer initiative contributes to improving the health of First Nations.

Department's response: Agreed. The development of measures to determine the impact of any one program or activity on health status has proved difficult for all health systems. Recent improvements in both methodology and technology will assist the Department to work with First Nations to produce useful and meaningful measurements.

13.75 In summary, we observed that the management of the transfer process has had some strengths; it has allowed First Nations to put in place management practices for their own health programs. However, some key reports have not been produced as required under transfer agreements and, in many cases, reports have not included the required information on performance.

Non-Insured Health Benefits

Risks associated with the program

• some doctors may overprescribe medications to patients, using program resources;
• the costs of the program may escalate to an unsustainable level;
• some clients may access excessive levels of benefits;
• some clients may abuse or misuse prescription drugs;
• some dentists may overservice clients; and
• some providers may overbill for services provided to clients.

Departmental concerns about physicians' prescribing practices

13.80 The Department does not control or regulate the prescribing practices of doctors. However, departmental officials have raised the issue by communicating directly with some doctors. In some of those cases, departmental data show a subsequent reduction in prescriptions by the doctors. However, management is concerned that these changes may be temporary, and is frustrated by the limited success of this approach.

Cost savings are being realized

13.82 While direct program benefit costs rose by more than 64 percent from 1990-91 to 1995-96, the annual increase was in fact down from 22.9 percent in 1990-91 to 5.6 percent in 1995-96. This was largely due to a number of ongoing departmental cost management initiatives, including a revised dental schedule and improved management of mental health counselling. In 1996-97, the Department was also successful in negotiating reduced premium costs in Alberta. Management has predicted a 3.2 percent decrease in direct program costs in 1996-97.

13.83 Savings have been realized in some areas but more needs to be done. The potential for savings exists in many other areas.

13.84 For example, a 1995 study by the Department estimated potential savings of $5.7 million if dispensing fees paid by Health Canada for prescription and over-the-counter drugs were more in line with private sector plans. In most provinces, Health Canada pays a dispensing fee for over-the-counter drugs such as aspirin because NIHB clients require a prescription to obtain these drugs. In 1995-96, dispensing fees for over-the-counter drugs amounted to $9.9 million, representing 44 percent of the total expenditures for these drugs.

13.85 Progress has been slow in negotiating dispensing fees with provincial pharmacy associations in some regions. As of March 1997, Health Canada continued to pay higher dispensing fees for prescription drugs than other plans in most provinces (see examples in Exhibit 13.13 ).

13.86 As described in other parts of this chapter, improvements in monitoring the use of prescription drugs and medical transportation, audits of providers, and a system for predetermining dental benefits also have the potential to achieve savings. Given that funds are allocated by regional envelopes, savings realized in various areas represent an opportunity to redirect funds into other areas where they are needed most.

Significant weaknesses exist in the management of pharmacy benefits

13.88 Program directives and guidelines specify that prescription drug benefits are available free to First Nations members if the item is not available to the client under other health plans and is considered medically necessary, that is, prescribed by a qualified physician or dentist. Over-the-counter drugs also require a prescription to be eligible under the program. The Department does not require a co-payment or deductible for the benefit.

13.89 As described in Exhibit 13.14 , NIHB clients are required to obtain a prescription from a physician or, in some cases, a dentist in order to obtain free prescription drugs and over-the-counter drugs. Physicians have to rely on the NIHB patient to disclose drug use and visits to other doctors when they prescribe the medications.

13.90 Pharmacy providers dispense prescription drugs based on either a written or verbal prescription. Unless otherwise preauthorized, Medical Services Branch has established a three-month supply as the maximum quantity that can be dispensed at a time. Before a prescription is dispensed, the patient has to tell the pharmacist his or her name, date of birth and a client identification number. The client identification number can be an Indian registration number, a band number and family number, or a number issued by the Branch. However, the patient does not have to provide a complete address.

13.91 Currently, pharmacy providers are not connected to a system or network that provides information on the prescription drugs obtained by the NIHB client. They cannot tell whether the patient has gone to different doctors or visited other pharmacies to obtain prescription drugs. However, pharmacy networks do exist and are being used by several provinces to administer their drug benefit programs.

13.92 In 1987, the Department entered into a contract with a private sector firm to develop and operate a claims-processing system for dental accounts. Since April 1990, the Department has had a second contract under which the contractor has developed and operated a similar automated system to process claims for the pharmacy component of the program. The Department assures us that the system was developed by the contractor to be consistent with industry standards and practices comparable with other drug benefit plans.

13.93 Pharmacy providers submit their claims (approximately 5.8 million transactions in 1996) directly to the contractor to be reimbursed for pharmacy benefits dispensed to NIHB clients. These claims contain details on the NIHB client, the identification of the prescriber, and the date and description of the drug dispensed. However, the claims are not accompanied by supporting documentation, such as copies of prescriptions. The contractor advises us that this is consistent with industry practice. Thus, the contractor is not able to review any supporting documentation before reimbursement to verify that there is a valid prescription or that the client has received the benefit.

13.94 Health Canada pays the contractor for services rendered and provides funds to cover anticipated claim payments to providers. It does not verify documentation supporting the claims before paying the contractor.

13.95 The process contains a number of weaknesses. The claims filed do not include addresses of the individuals to whom services have been provided. The Department sees this as a hindrance to contacting the individuals directly to confirm that they have received the benefits. Pharmacists do not have access to information on patients' prescription drug use, the contractor does not receive and verify supporting documentation before paying providers, and the Branch does not review supporting information before paying the contractor. Further, as described in a later section, the audit regime is weak.

13.96 In addition, no thresholds have been established at which management could intervene in a timely way and query claims that indicate potentially inappropriate drug use patterns. The Branch does maintain detailed information, but this is reviewed retrospectively and anomalies are identified after the fact.

13.97 These flaws have contributed to an environment where abuses of the prescription drug benefit occur, as the following section explains.

The program allows clients to access excessively high levels of prescription drugs

13.99 Prescription drug abuse refers to the use of a drug in a manner that deviates from use generally accepted by the medical community as appropriate in the circumstances in which it is prescribed. It includes the inappropriate prescription of drugs by physicians, the misuse of prescribed drugs by the patient, and the practice of visiting different doctors to get prescriptions and "shopping" pharmacies to obtain prescription drugs.

13.100 The Department has been aware of the problem for almost 10 years. However, we found no evidence that the ease of access to prescription drugs has changed in any significant way. Departmental data showed cases where individuals had accessed extremely high quantities of mood-altering drugs over short periods of time.

13.101 In fact, some of the amounts were so high that departmental reviews of individual drug use profiles raised serious questions about whether the individuals were actually taking the prescription drugs obtained or were using them for other purposes. This is because the amounts obtained were several times the recommended maximum dosage limits. In some cases, a medical officer noted that the patients concerned would likely be unconscious or non-functioning if the drugs were taken as prescribed. Yet these individuals continue to claim, and the Department continues to pay, for excessive amounts of prescription drugs.

13.102 We performed an analysis of departmental data on prescription drug use for a three-month period, analyzing not only the number of prescriptions that individuals received but also the numbers of different drugs received and doctors and pharmacies visited. Because Health Canada had developed few criteria to monitor prescription drug use, we used criteria established by some provincial bodies.

13.103 The data for the three-month period showed that over 15,000 NIHB clients went to 3 or more pharmacies to obtain prescription drugs. Nearly 1,600 NIHB clients obtained more than 15 different prescription drugs and over 700 clients got 50 or more prescriptions. The results of our analysis are shown in Exhibit 13.15 .

13.104 As mentioned earlier, information systems allow management to review data retrospectively. However, the system does not use thresholds indicating what levels of drug use are reasonable, what levels require further explanation, or what levels the Branch would consider to be excessive.

13.105 The Department acknowledges that a contributing factor is "doctor shopping" - individuals visit a number of doctors, enabling them to obtain a large number of prescriptions. Departmental data showed that some individuals obtained similar prescriptions from several doctors within a short period of time. However, the field identifying the doctor, which can be a name or a number, is not subject to any edits and accepts anything that is input. Due to the existence of many anomalies, inconsistencies and errors, it was not possible to accurately determine the extent to which doctor shopping occurs.

Serious implications for First Nations health

13.107 Between 1986 and 1996, there were numerous reports of prescription drug addiction and prescription-drug- related deaths of First Nations individuals in several provinces. In Alberta, for example, the Medical Services Branch regional office identified a total of 42 prescription-drug-related deaths in First Nations communities during 1986-88. Subsequent media reports indicate that serious problems still exist. This includes one community of 500 people where 15 such deaths were reported to have occurred in four years.

13.108 We reviewed Branch data and found that the prescription drugs most frequently obtained by NIHB clients are central nervous system drugs, such as acetaminophen with codeine and benzodiazepines. A number of medical studies have found that excessive use of certain mood-altering drugs causes serious side effects and withdrawal reactions. They include sedation, impaired memory, decreased cognitive agility, insomnia and visual disturbances. Although these studies are not specific to First Nations, they point to the consequences of excessive use of these drugs.

Action to intervene has been slow

13.110 According to the Department, a major reason for its inability to take prompt action was that systems were not sufficiently developed to analyze the pharmacy claims database. A departmental interdisciplinary working group on prescription drug abuse recommended in September 1988 that the prescription drug claims-processing system be automated and screening criteria be developed to monitor prescription drug use.

13.111 However, Health Canada's automated claims-processing system was not fully operational in all regions for the pharmacy component until July 1993. As the system was designed mainly to process claims, some Branch regional officers noted their repeated frustration that the NIHB program had been able only to pay bills rather than to help provide solutions to the prescription drug abuse problem.

13.112 Not until 1996 did Health Canada start to develop software to analyze prescription drug use. Drug use review activities were piloted in three Medical Services Branch regions in 1996 and confirmed the nature of the problem. However, these reviews have been retrospective and have not facilitated timely intervention.

13.113 Health Canada's intervention is primarily in the form of notification to physicians, pharmacists and professional bodies; it does not contact the NIHB client at all. Some NIHB clients continue to have access to large amounts of prescription drugs. We believe that contacting the client could have a deterrent effect and could potentially encourage changes in the client's behaviour. It would also present an opportunity to provide help and information to those faced with addiction problems.

13.114 In cases where it identifies a significant pattern of inappropriate use of prescription drugs, the Department should perform a more rigorous follow-up with NIHB clients, physicians, pharmacists and professional bodies.

Department's response: Agreed. A protocol has been developed to guide departmental staff to follow up on patterns suggestive of prescription drug misuse.

Need for comprehensive solutions

13.116 Point-of-service systems for prescription drugs or pharmacy networks have been implemented by some provinces as a key mechanism to control drug use and administer benefits. Such a network can enhance patient care through more-informed decision making by the pharmacist, reduce fraud and the overconsumption of prescription medications, and improve claims adjudication.

13.117 In such a network, when a pharmacist enters the details of a prescription on an in-store computer, the information is transmitted electronically to a central system that assesses the prescription against the patient's recent medications. The system generates warning messages such as drug-to-drug interactions, overmedication, visits to several doctors and pharmacy shopping. Some systems also provide a full profile of all recent medications dispensed to an individual during, for example, the previous 14 months. Pharmacists are required to respond to warning messages and decide whether intervention is necessary. Some provinces offer an incentive for this, such as paying a double dispensing fee to compensate providers for professional services in cases where they have not filled a prescription for valid reasons.

13.118 The system being tested by Medical Services Branch will provide a set of system-generated messages and warning codes. It will also provide the dates of the last three prescriptions of the NIHB client. Pharmacists are expected to make dispensing decisions in response to warning messages, and the system will allow overrides.

13.119 The planned system will not provide a patient's full drug profile or complete information on doctors visited at the time of dispensing. Management notes that there are difficulties that would delay implementation of this feature nationally; however, it intends to strengthen the warning messages issued to pharmacists. Because the system will allow pharmacists to override warning messages, Health Canada will need to monitor this closely. The Department also needs to consider providing incentives to pharmacists to encourage appropriate intervention.

13.120 In implementing the point-of-service system for prescription drugs, the Department should ensure that the system will facilitate timely intervention where potentially inappropriate prescription drug use is identified. The Department should provide a clear protocol to guide intervention and should closely monitor pharmacists' overrides of warning messages.

Department's response: Agreed. The real-time pharmacy point-of-service system will be installed nationally by the end of 1997. A systematic audit of overrides will be used to gauge compliance and follow-up measures will be developed to deal with situations where compliance problems are identified. Payment incentives for pharmacists who decline to fill prescriptions in response to the alerts will be discussed during fee negotiations with provincial pharmacy associations. Despite the complexities associated with developing a fully portable, national system, the Department believes that this system will be superior to that of almost every other comparable provincial or private plan in the country.

13.121 Full implementation of a point-of-service system will not in itself solve prescription drug misuse problems. Tightening up controls is only one aspect. Health Canada will need to be concerned about additional problems potentially generated by controlling access to prescription drugs under this program.

13.122 Health Canada needs to examine the implications and resource requirements for community health programs with respect to treatment, community education and prevention of prescription drug addiction in First Nations communities. Prescription drug addiction has created other health problems, and the Department is concerned that many First Nations individuals have a combined drug and alcohol problem. Treatment in one area may aggravate the problem in the other. In addition to detoxification, patients may require further treatment and aftercare. Training community health workers to deal with prescription drug abuse is also important.

13.123 The Department should build on its existing strategies to address the combined problem of prescription drug and solvent and alcohol abuse, and increase efforts in community health programs relating to prevention, community education, and treatment of prescription drug addiction.

Department's response: Agreed. The Department is developing educational materials to inform First Nations and Inuit people of the correct use of prescription drugs and to alert them to the problems of prescription drug misuse. An educational video on this subject will be distributed to all First Nations and Inuit communities by the end of 1997-98.

Overservicing by dental care providers

13.125 We found that the dental care providers tend to provide services up to the established frequencies and limits rather than based on needs, resulting in overservicing of some NIHB clients.

13.126 In 1995-96, one Medical Services Branch regional office set up a joint quality assurance committee with a provincial dental body. The committee analyzed the profiles of a number of dental care providers and believed that overservicing by certain providers was occurring. Departmental data showed that levels of dental services by these providers were often many times above those of an average practitioner in that province. Some examples are shown in Exhibit 13.16 .

13.127 In January 1996, Health Canada introduced changes to its benefit schedule by establishing revised frequencies and limits, in an attempt to control costs while maintaining the provision of high-quality dental care. Some of these changes were made in response to concerns about overservicing. The changes were implemented nationally. However, the Manitoba regional office indicated that the changes had been proposed unilaterally with little input from First Nations, and that they were contrary to common means of controlling costs used by other dental plans.

13.128 A predetermination process based on needs was piloted in Manitoba in April 1996. It requires prior approval and a treatment plan for performing dental services above a prescribed threshold amount. The needs-based approach is to ensure that First Nations clients receive the dental care they require. Preliminary results showed substantial cost savings. Management estimates that these savings, combined with those generated by the changes to the benefit schedule, will result in a 15 percent reduction of dental costs in 1996-97.

13.129 In January 1997, the departmental Dental Care Advisory Committee, which includes representatives from the First Nations and professional bodies, recommended that senior management approve the use of the predetermination model nationally by the end of 1997 as an intermediate solution. The Committee believes that this would provide the stability and time required for the Department to consider further improvements. Branch senior management subsequently agreed to implement such a model in all regions except Ontario, where the issue is still being discussed.

13.130 In our view, a predetermination process requiring prior approval and a treatment plan provides a good control framework for dental benefits. We noted that it has been used by other dental plans and endorsed by the profession in some provinces. In 1996, we reported that Veterans Affairs had implemented such a process for its dental care program and achieved significant savings.

Overbilling of services by providers

13.132 Claims for prescription drugs and dental services submitted by pharmacy and dental care providers are processed using an automated claims-processing system managed by Health Canada's contractor. The contract, implemented in 1990, expires in June 1998.

13.133 According to the statement of requirements in the contract, the contractor is required to "provide audit control on health service providers for the purpose of detecting and dealing with billing irregularities." Also, the contract states that there must be a method of verifying the integrity of the process to ensure that prescribers and providers are legitimate and that services paid for by Health Canada have in fact been received by NIHB clients. However, the contractor does not perform any procedures to confirm that benefits have been received by clients.

13.134 Edits are in place to identify apparent duplicate claims. Management believed that these edits were designed in such a manner that they would identify and alert management to any potential duplicate payment. However, we identified over 5,500 claims that appeared to have been paid twice (with a potential overpayment of $166,510) in the year 1996. We also identified 160 transactions in a three-month period that suggested that the same prescription was filled at more than one pharmacy on the same day. Management recognizes these weaknesses and is now attempting to have the contractor strengthen these systems controls and edits.

13.135 Although the contract was initiated in 1990, no audits of providers were undertaken before the summer of 1995. Of approximately 6,500 pharmacies and 18,000 dental care providers, only 47 pharmacy audits and 13 audits of dental providers were performed over 18 months in 1995 and 1996. Some planned audits of dental care providers were not carried out because of providers' concerns about the contractor's right to audit them.

13.136 All audits of dental care providers found questionable billings. One audit, which found that a dentist had inappropriately charged for tooth extractions and other procedures, resulted in a repayment of approximately $20,000 to Health Canada. Another provider repaid the Department over $15,000, billed for a specific or emergency examination along with routine procedures such as preventive cleaning. In addition, a review by one Branch regional office led to the conviction of a dentist for billing both the Department and a provincial plan for dental treatment to NIHB clients covered under both plans. This resulted in a repayment of more than $30,000 to Health Canada.

13.137 Approximately 90 percent of the pharmacy audits performed found errors and discrepancies such as duplicate claims, lack of documentation for verbal prescriptions and questionable record-keeping practices. Some cases involved suspected fraudulent practices that were referred to the appropriate authorities for investigation. One case resulted in restitution of more than $77,000 from the provider.

13.138 We found that the audits of providers did not provide a reasonable degree of assurance that expenditures were made for the purposes intended. The audit strategy was not based on an appropriate assessment of risks. Audits were targeted mainly at a small number of high-volume providers. The Department believes that it is very difficult to require the contractor to increase the audit effort, due to the vagueness of the contract's wording. Because of the limited audit coverage, it is not possible to determine the full extent of errors and overpayments. However, the findings raise serious questions about the potential loss of public money.

13.139 Audits of providers are intended to be a key control relied on by Health Canada to ensure that payments are properly made for benefits and services received by its clients. Therefore, it is important that the requirement in the contract is clear, that the Department knows what is being done and what errors are being found, and that, as appropriate, it adjusts its reliance on the work of the contractor.

13.140 Health Canada should clarify, and enforce, the contract requirement for audit of pharmacy and dental care providers by the contractor. The Department should take appropriate steps to improve claims-processing system controls and edits and strengthen verification of claims and audits of providers.

Department's response: Agreed. In common with other plans, there must be an assessment of the risk in order to strike a balance between ensuring client access to necessary therapies and control of potential abuse. Improvements have been made to the audit portion of the new claims-processing contract, to be in place by July 1998. The Department is investigating the claims-processing errors identified by the Auditor General and is instituting immediate corrective measures. Efforts are under way to improve verification of claims and provider audits under the existing contract.

Opportunities to improve efficiencies in medical transportation

13.142 There are many grey areas in the national directives on transportation, which have led to different interpretations and applications by Branch regional offices. We found inconsistencies in the requirement for certification of attendance at a doctor's appointment and in payment for similar items in different regions.

13.143 Ambulance costs accounted for substantial expenditures in some regions. At the time of our audit, there was no rigorous ongoing monitoring of these expenditures. Departmental officials in some regions have undertaken ad hoc reviews of ambulance costs, the results of which confirm the need for tighter control.

13.144 For example, one region paid about $8 million in 1995-96 for services to approximately 125 ambulance companies. A regional internal review of invoices submitted by three ambulance companies found many cases of inflated distances, invoices received for individuals not eligible for coverage, an inappropriate surcharge of $100 being levied on First Nations members living off-reserve, and ambulances used as taxis rather than for emergencies.

13.145 Another regional office also performed a limited review of ambulance costs, which identified cases of potential abuse that had gone undetected. In one such case, a client had taken 150 ambulance trips costing over $21,000 during a five-month period. No one had questioned the trips until they were identified by the internal review.

13.146 While expenditures administered by First Nations communities under contribution agreements are often audited, transportation expenditures paid directly by Medical Services Branch to transportation providers have not been subject to any departmental audits in recent years.

13.147 Management is aware that improvements are required in management practices and in the control of medical transportation costs. For example, some regional program managers agreed that there is a need for better co-ordination of trips to achieve efficiencies.

13.148 Health Canada believes that transportation efficiencies can best be achieved at the community level. It has proposed moving medical transportation funding from the NIHB program to community health budgets. Such a change will require clear program criteria and mandatory elements, standards and audits.

13.149 Health Canada should establish clear program criteria and minimum standards for medical transportation benefits. It should also undertake audits of medical transportation expenditures based on an assessment of risks.

Department's response: Agreed. The Department is pursuing a course of action to address these problems. Cabinet has approved the move of medical transportation from NIHB to community programs. The requirement to establish program criteria and minimum standards will be addressed as the management framework is developed. This will be done in consultation with First Nations and Inuit groups. The Department will also increase the audit activity with regard to medical transportation.

Need to resolve systemic problems before transfer of NIHB program

13.151 As already described, significant systemic problems and weaknesses exist in the program, particularly relating to prescription drugs and dental benefits. There are also other important issues that need to be addressed, including concerns of off-reserve clients and small communities, sustainable funding and the impact of the delisting of provincial insured services. In addition, Health Canada needs to evaluate the results of the transfer pilots.

13.152 As noted earlier, planning to transfer the NIHB program to First Nations control is under way. In our view, any transfer initiative must recognize the weaknesses identified and assign responsibility for fixing them.

Important concerns remain from previous audit

13.154 We reported that the absence of specific enabling legislation for the program left a gap in the definitions of purpose, expected results and outcomes of program benefits. We recommended that the Department seek from the government a renewed mandate for the program to clarify the authority base, purpose and objective of the program.

13.155 We also noted that the Department had problems in implementing the principle of "payer of last resort". Health Canada paid for benefits that it should not have because First Nations clients involved were not fully obtaining the benefits available from other plans. This section contains our observations as a result of the follow-up.

13.156 Program mandate. The renewed policy mandate proposed in 1997 defines the nature of the program, including its purpose and objective as well as the principles governing it. However, it does not address the need to clarify the authority base for the program. There is still no specific legislation recognizing non-insured health benefits. Further, the Department has yet to identify expected results of program benefits.

13.157 Principle of payer of last resort. The Department has noted that the principle is difficult to enforce in the absence of enabling legislation and given that provincial and private health insurance plans also claim to be payers of last resort. In practice, declaration of third-party coverage by NIHB clients is entirely voluntary and it is left to the service provider to identify any such coverage. A recent departmental audit suggested that there is a significant gap between the number of NIHB clients who have other coverage and the two percent of clients who actually declared other coverage when they received NIHB benefits.

13.158 A departmental working group has proposed several recommendations with a view to addressing our 1993 concerns. A number of them are currently being implemented. However, the working group is of the opinion that substantive improvements in the co-ordination of benefits with other insurance plans will be realized only when issues relating to treaty rights have been resolved.

13.159 The new program mandate proposes that where a benefit is covered under another plan, Health Canada will act as the "primary facilitator", co-ordinating payment to ensure that the other plan meets its obligations and that clients are not denied service. However, the Department indicates that the proposed principle does not detract from its position that NIHB is the payer of last resort. Nor does it expand or limit different understandings of federal responsibilities under the "fiduciary relationship".

13.160 Management information systems. In 1993, we reported that the NIHB program lacked the information systems and capabilities necessary to monitor and analyze patterns of benefit expenditure and use. The Department has applied considerable effort to improve its ability to monitor patterns of use of pharmacy and dental benefits. However, we found that the Department still did not have adequate systems to monitor and analyze these patterns for medical transportation and allied health care benefits.

Department's comments: Over the past three years, the Department has commissioned three separate evaluations of the program and has drawn on the recommendations of these studies to design its current cost management approach. In the past six years, the Department's cost management measures have achieved a total saving of more than $1.3 billion. This has been achieved without diminishing in any significant way the level or quality of the benefits, despite the upward pressure of a client base growing at twice the rate of the Canadian population and the increasing costs of such benefits as prescription drugs.

Since 1993 the Department has taken a number of very important steps in order to address the problem of prescription drug misuse. These include the development of a fully automated claims-processing system, authorization to exchange information on possible irregularities with professional disciplinary bodies, establishment of a Drug Utilization Review Committee, which, among other things, has developed a protocol to identify patterns of possible misuse, and development of a software system to analyze patterns of prescription drug usage. We believe that the Department has been at least as active, and in some cases more active, than the managers of similar programs in taking advantage of new technology to improve the management of the system.

The Department has addressed all three of the recommendations from the 1993 audit. Work continues on ways to improve co-ordination with provincial and other third-party payers. In 1993 we stated that we would seek Cabinet approval of the program's mandate and this was obtained in April 1997. It is the Department's view that, through Cabinet, the authority base of the program has been clarified.

Conclusion

13.162 Community health programs. Based on our examination of programs delivered under separate contribution agreements, we found that once the contribution agreements are signed, the link between the Department and the community tends to disappear. The contribution agreements are viewed primarily as a means of transferring funds and, to a lesser extent, as an agreement between the two parties on the provision of health services to the First Nations population, for which the Department remains accountable. The Department is not fulfilling its responsibilities to manage in a way that helps First Nations establish programs and services likely to improve their health. There is a need to monitor contribution agreements in a way that will give First Nations flexibility and control to tailor programs to meet community needs and, at the same time, fulfil the Department's obligations.

13.163 Transfer agreements. We found that a sound framework for transfer has been developed but not yet fully implemented, leaving some gaps and deficiencies. More focus on achievements related to health is needed, in both the planning and reporting phases. Sound monitoring is needed to make sure that the management practices put in place in the pretransfer stage continue to evolve, and that the required reports are produced and provide the necessary information. These are needed to meet the accountability obligations of First Nations and the Department and also to improve the programs and services.

13.164 Non-insured health benefits. We found that NIHB program expenditures are not well managed and, in most areas, not properly controlled. Benefits are subject to abuse by users and providers, and systems and controls, including verification of claims and audits of providers, are inadequate. In particular, the Department needs to deal with the serious implications for First Nations health and the consequences of not having a properly controlled system in place.

13.165 It is vital to put proper controls in place to ensure appropriate use of the benefits and prudent use of public funds. There is also an urgent need for comprehensive solutions to address the abuse of the prescription drug system, through better use of information technology and concerted efforts with physicians, pharmacy providers and First Nations. Before any consideration is given to transferring NIHB to First Nations control, these systemic problems will need to be resolved.

13.166 A final note. The current trend in Health Canada is to continue devolution and to move out of health care service delivery. Many First Nations members are concerned about a "dump and run" approach: they are worried that First Nations will be left on their own without having acquired the needed capacity to design and manage these important programs and without support from Medical Services Branch.

13.167 Improving the health of First Nations is a complex task. There are many governments involved and many factors that affect health outside of the health care services. This audit examined only the programs that the Medical Services Branch of Health Canada delivers either directly or in partnership with First Nations organizations. The chapter therefore presents only a part of the total picture. We believe that improving the programs in the ways we have recommended would contribute to improving the health services and thereby the health of First Nations.

Department's comments: The Department is aware that some First Nations people are concerned that we intend to take a "dump and run" approach to devolution and transfer. The mission statement of Medical Services Branch states that "First Nations and Inuit people will have autonomy and control of their health programs and resources within a time frame to be determined in consultation with First Nations and Inuit people." The approach of Health Canada has been, and will continue to be, one of caution and assurance that First Nations communities feel, and are, ready to take on responsibility for their health programming before transfer occurs.

About the Audit

• To determine whether Health Canada manages First Nations health programs in an efficient and effective manner.
• To determine whether an appropriate accountability framework is in place for the transfer of health services to community control.

The audit covered Health Canada's health programs directed at First Nations, including community health programs delivered through separate contribution agreements, transfer of health programs to community control and Non-Insured Health Benefits (NIHB).

With respect to community health programs delivered to First Nations using separate contribution agreements, we performed a detailed analysis of a sample of agreements involving 40 communities. We reviewed the transfer framework and a sample of 24 transfer agreements. The selection in both cases was made to reflect communities of different regions, sizes and degrees of isolation. We reviewed systems, controls and management practices relating to the delivery of non-insured health benefits and undertook a follow-up of recommendations reported in Chapter 19 of our 1993 Report, on the NIHB program. We carried out extensive interviews with program managers at Medical Services Branch headquarters and selected regional offices and with selected representatives of First Nations communities and professional bodies. In addition, we reviewed program documentation and related health literature.

We did not examine the management of hospitals and other health facilities and environmental health, nor did the audit cover activities in the two territories. We did not audit the integrated agreements because they were developed in 1994 and only a small percentage of First Nations had signed such agreements at the time of our audit.

The quantitative information in this chapter that has been drawn from government sources or departmental databases has been checked for reasonableness but has not been audited.

Criteria

• The community health programs should be designed to facilitate the achievement of objectives in an efficient and effective manner.
• Agreements with First Nations communities for the delivery of community health programs should clearly specify the objectives and activities to be undertaken and the corresponding reporting requirements. There should be monitoring of the implementation of these agreements to ensure compliance and that departmental obligations are met.
• There should be an adequate framework for the transfer of health programs to community control to:
  • ensure that clear health objectives and expected results to be achieved are established;
  • ensure that capacity is aligned with responsibilities;
    
  • ensure compliance with requirements of the agreements;
  • monitor performance reporting; and
  • report results of transfer in terms of changes to the health of First Nations.
• The Department should have taken action in response to the recommendations contained in the 1993 chapter relating to Non-Insured Health Benefits.
• The Department should have systems, controls and strategies in place to identify, assess and respond to major risk areas in the Non-Insured Health Benefits program.

Christina Brooks
Sylvie Cantin
Gerry Chu
Joanne Moores
Jean Petitclerc

For information, please contact Ronnie Campbell, the responsible auditor.