PROPOSAL TO RENEW AND EXPAND THE IMMEDIATE EXPENSING INCENTIVE TO ENCOURAGE PRIVATE INVESTMENT IN HEALTHCARE DIAGNOSTICS AND DELIVERY INFRASTRUCTURE (2024)

Issue

As the Immediate Expensing Incentive program expires, two competing national crises overlap within healthcare to reduce capacity and harm productivity across all sectors. Introducing new private capital investment within healthcare will go a long way towards resolving this bottleneck. We encourage all levels of government to incentivize private investment for capital expenditures like diagnostic imaging systems, operating theatres, and mobile clinic infrastructure. And while eligible businesses are currently able to claim up to a total of $1.5 million in tax depreciation via the Immediate Expensing Incentive, the average cost for new MRI and CT machines is ~$2 million. It is not unusual for clinics to operate multiple diagnostic imaging systems.

Background

Canadian productivity is tanking. As The Globe and Mail recently reported, “Per capita GDP, after adjusting for inflation, is now below where it was in the fourth quarter of 2014, nine years ago.”[1]

_{Chart 1 – GDP per capita, Canada as a percentage of U.S.}

^{Source: The Globe and Mail, OECD}

Healthcare wait times are bad and getting worse. The median wait time from GP referral to treatment has increased by 198% since 1993 to 27.7 weeks.[2] Healthcare spending represents 12.1% of the 2023 nationwide GDP[3], but that’s not enough; our surging/aging population is driving the country toward a massive investment deficit in healthcare diagnostics and delivery facilities.

Private clinics deliver essential, publicly funded medical services across Canada. Rather than disrupting the single-payer system, private investment facilitates flexible and timely responses to evolving healthcare demand. For example:

• OHIP-funded MRIs, CT scans, GI endoscopies, orthopedic surgeries, and cataract surgeries are offered at more than 900 private clinics in Ontario.[4]
• 4% (13,000) of publicly funded surgeries in BC are performed at private clinics.[5]
• Among private clinics in Canada, public funding supports 29.5% of MRI scans and 64.7% of CT scans[6] (MRIs have fewer private-pay constraints in some provinces).
• Although more than half of all long-term care homes in Canada (54%) are privately owned,[7] ~75% of the beds they contain are publicly funded.[8]

In 2021, the Federal Government introduced the Immediate Expensing Incentive to “…provide a temporary accelerated deduction to encourage investments by small and medium-sized Canadian businesses and thereby accelerate the economic recovery while supporting productivity growth in the longer term”[9] to a limit of $1.5 million. This temporary incentive expired December 31, 2023, for Canadian Controlled Private Corporations, and will expire December 31, 2024, for individuals and Canadian partnerships, all the members of which are individuals.

Canada’s Drug and Health Technology Agency indicates the country has experienced a net “1.5% decrease in the total number of medical imaging units over the last ten years…” which leads “…to delays in patient diagnosis and treatment.”[10]

Dr. Gilles Soulez, president of the Canadian Association of Radiologists (CAR), estimates “…the economic impact of longer medical imaging wait times (are) in the range of $3.5 billion in terms of lost GDP, due in part to people ending up in need of more urgent, more invasive care or not being able to work while they wait.”[11] The CAR projects that an investment of $1 billion for new medical imaging equipment will be required over the next three years.

According to the European Coordination Committee of the Radiological, Electromedical and Health IT Industry (and cited by the Canadian Agency for Drugs and Technologies in Health), there are three “golden rules” used to assess the capacity of medical imaging stock to meet the demands of a health care system:

• At least 60% of imaging equipment should be five years old or less.
• No more than 30% of imaging equipment should be between six and ten years old.
• No more than 10% of imaging equipment should be older than ten years.

_{Chart 2 – Canada’s Aging Medical Imaging Fleet}

^{Source: The Conference Board of Canada}

Encouraging Investment

More investment is required to reduce wait times, improve outcomes, and streamline productivity not only among healthcare delivery organizations but also among the patients they serve, insofar as eliminating bottlenecks will allow patients to be diagnosed and treated more promptly so they can get back to work. As Dr. Daniel Jenkin, past president of the General Surgeons of BC, explained in 2023, “People cannot even access a surgical waitlist until they get off a radiology waitlist; it’s a huge bottleneck.”[13]

Financial Impact of the Immediate Expensing Initiative

The Parliamentary Budget Office (PBO) provided a Legislative Costing Note for the Immediate Expensing Incentive program in 2021, the cost of which to date is indicated in Table 1.[14]

_{Table 1 – Cost of Immediate Expensing Initiative ($ millions)}

^{Source: Parliamentary Budget Office}

The extent to which this program has been leveraged in BC since 2021 is estimated to be $370,694,400 on a per capita basis, given that BC’s population (5,609,870) constitutes 13.76% of the national total (40,769,890).[15]

New capital investment will not solve all the factors contributing to the bottleneck, but it will help. Acquisition and retention of skilled human resources is a challenge. Additional technologists and support staff are and will be needed. Burnout is a persistent threat aggravated by aging equipment and overtaxed technology platforms. Providing technologists with new equipment that reduces downtime, improves efficiency, and facilitates better/more timely patient outcomes will enhance workplace satisfaction, thereby improving opportunities to acquire and retain skilled technologists.

THE CHAMBER RECOMMENDS

That the Federal Government:

1. Recommit to the Immediate Expensing Incentive for the healthcare sector for a minimum of five years.
2. Expand the Immediate Expensing Incentive to $5 million in total per year when used to purchase new diagnostic imaging systems, operating theatres, and mobile clinic infrastructure.