EXECUTIVE SUMMARY:
IO Research conducted a comparative analysis of hospital costs across jurisdictions. The key research question is: “Is Ontario paying more for hospitals than other provinces?”. This research leverages the existing study performed by the Transaction Structuring team, comparing the construction costs of social-purpose projects across Ontario, British Columbia, and Quebec; the study concluded that IO’s construction costs are comparable to other provinces.
This study focuses only on hospital projects in Ontario and British Columbia from 2013 to 2023 (34 projects combined). The choices of geographies and timeframe reflect data availability. The analysis combines a top-down general construction market review and regression analysis of hospital costs to inform our findings.
KEY FINDINGS:
Main findings of this research work include:
- ON construction prices have been rising faster than BC since Covid. Regional differences and material price inflation drive this.
- Despite Ontario’s higher generation construction cost inflation, ON hospital costs have been consistently ~20% lower than BC.
- Since Covid, material price inflation explains 80% of hospital cost escalation. Reduced bidder participation explains 13% while interest rate increases explain 6%.
- Modelling suggests contractors exhibit strong recency bias in their bids; high construction costs today lead to high bids for future construction projects.
- There is insufficient evidence to conclude whether IO managed cost escalation better or worse than BC.