In October of last year, we embarked on an 18-month process to get all of this province's hospitals into a balanced budget situation by March 31st, 2006. We've reached the end of the first phase of that process, and I wanted to give you an update on the progress we've made.

The short version of what I want to tell you is this :

While we have accomplished a great deal, we have a lot more to do.

We have made it clear from the earliest days of our mandate as a government that hospital costs cannot keep growing at the rate of 10 percent per year.

At $11.3 billion, hospitals are the single largest line item in the government's budget.

In fact, one out of every seven dollars spent by this government goes to hospitals.

We recognized early on that a huge part of the problem is that hospitals have had to shoulder almost all of the burden for the health care system…they've been almost a one-stop shop for every kind of care.

This was neither sustainable from a cost point of view, nor was it sensible from a medical point of view.

We responded by making unprecedented investments in community-based care - more than $600 million this year - in public health, primary care, home care and mental health, midwives, long-term care and palliative care.

These investments are easing pressure on hospitals while freeing them up to provide the kind of acute care that only they can.

In addition, we undertook the balanced budget process that I am here to report on today…a process that will see all Ontario hospitals balance their budgets by March 31st, 2005.

The process involved hospitals working with one another, peer to peer, as well as with representatives from the community and my ministry to find ways of reducing cost pressures while planning for the health needs of their patients.

Hospitals were compelled to look for efficiencies rather than immediately looking to clinical cuts.

As a result, hospitals have learned a great deal about how to find savings in non-clinical areas, and as a government we have learned more about where our hospitals are at financially than any government before us.

I want to take this opportunity to recognize and salute the leadership that has been shown by so many of our hospitals, by the Ontario Hospital Association, and by our Ministry.

Weekends have turned into just another work day for many of our ministry staff, and I'm very grateful for their dedication.

There is a cultural and behavioural change sweeping across the health care system in Ontario, and it is an extremely positive sign.

Hospitals are being challenged, and given incentive, to become more efficient, and they are responding.

As of today, nearly half our hospitals - 73 - will be in balance by March 31st, 2006.

When you consider that this is an 18-month process…when you consider also that this is a process that both sides have acknowledged will take a lot of work, and both sides have signaled that they are prepared to do that work…

…I'd say there are grounds for optimism.

Through the balanced budget process to date, Ontario hospitals have identified $174 million in savings this year, $459 million in 2005/2006, and the process of reducing costs is ongoing.

They found these savings by consolidating programs, by sharing services across different hospital sites, by reducing duplication and waste, cutting spending on management and administration, and by ensuring that some non-acute patients can receive the services they need in the community.

Now this hasn't been easy. There were difficult decisions that had to be made.

While this has been a process unique in Ontario's history in that it specifically emphasizes administrative and non-clinical efficiencies instead of immediately resorting to cutting nursing jobs, the fact is that jobs will be lost.

In addition to the estimated 1,145 administrative Full Time Equivalents, or FTEs, that will be eliminated, it is projected that up to 757 nursing FTEs will be eliminated, as well as 453 non-nurse clinical FTEs.

Many of these will happen through reductions in overtime, attrition and early retirement.

As a government we are committed to protecting and promoting full-time nursing jobs, and this year alone we have created some 2,800 of them.

Now it is a fact that while most hospitals are moving in the right direction, there are some that still face serious challenges. We understand this, and will continue to work with them to find the savings they need - the savings, let me be clear, that they must find - without compromising patient care.

We have asked our hospitals to do a great deal of work, and to make a fair number of very tough decisions. Most have stepped up to the plate, and I want to salute them for that.

I also want to say that we acknowledge that there are significant costs associated with making these kinds of cultural and institutional change.

At the annual convention of the Ontario Hospital Association last November, I told Ontario's hospital leadership that we would be open to the idea of one-time transitional funding.

I said "We remain open to ideas about so-called 'transformation funding'" …but any such funds would be one-time funds."

"Otherwise", I said, "we are simply propping up an unsustainable system. And that we will not do. We are out to change the system."

Today I am announcing that we are going to invest in the change being undertaken by our hospitals, with a one-time $200 million transition fund.

It will be allocated in the following ways :

• All of Ontario's 154 hospital corporations will be eligible to apply for part of $91 million, that will cover severance and other labour adjustment costs.
• $65 million will be used to reward the 32 hospitals who, while they are still showing deficits, are moving in the right direction, demonstrating efficiency and participating fully in the balanced budget process.
• There is $5 million for hospitals that are balanced, including the most efficient hospitals we consider to be "pacesetters".
• $20 million will be used as bridge funding for hospitals that are experiencing large deficits and still need a great deal of work before they can bring their budgets under control. These hospitals will be receiving intensive help from the Health Ministry, possibly including "turnaround teams" of experts to help them determine the appropriate plan to bring their books into balance.
• Finally, $19 million will go to small rural hospitals. These are hospitals where there are no alternatives in the community to core hospital services. This makes integration impossible. They also have a smaller base in which to find efficiencies. In these cases, the transition funding will be used to help level the playing field, with $16 million going to the province's 53 small rural hospitals, and $3 million to the rural locations of multi-site hospitals.

As I said at the outset, we have only completed the first phase of our balanced budget plan process. And as I hope I've made consistently clear, we have a long way to go.

But we are accomplishing what we set out to do, and in terms of health care in Ontario, we are literally making history.

Hospitals are reducing costs and finding efficiencies in non-clinical areas that not only don't compromise patient care, but in fact hold the promise of the kind of long-term stability that will protect and enhance patient care.

And this government is doing what no previous government has done before :

Rewarding efficiency, and in so doing preparing hospitals for the transition to the kind of stable, predictable multi-year funding they want and need, while freeing up the money necessary to invest in change - shorter wait times, more doctors across the province, and more and better community-based health services of the kind that are critical to the future of health care.

In these respects, we are making history, and we are going to continue.

Thank you.