Alberta surgical company's fees double public costs, according to AHS documents

Alberta Premier Danielle Smith speaks during a news conference in Calgary, Alta., Wednesday, Feb. 19, 2025. THE CANADIAN PRESS/Jeff McIntosh

A private surgical company at the heart of allegations the Alberta government interfered to secure overpriced medical contracts was billing taxpayers more than twice as much per procedure than it would cost in a public hospital, according to Alberta Health Services documents.

An internal chart included in an email sent by the former head of Alberta Health Services to a Health Ministry bureaucrat, obtained by The Canadian Press, indicates estimates for hip replacements in Edmonton at the public health agency’s hospitals was just over $4,000 as of last fall.

The chart says the firm Alberta Surgical Group was charging the government $8,300.

The cost listed for another private competitor was just over $3,600.

Rose Carter, a lawyer for the company, said its contract prohibits it from discussing details, so “ASG is unable to publicly defend itself.”

She pointed to numbers from a 2021-22 Canadian Institute for Health Information report listing the average cost for a hip replacement in Alberta at $10,700.

The AHS chart notes that its pricing does not include costs covered by the agency, including implant devices, diagnostic imaging and clinical lab services.

In a wrongful dismissal lawsuit filed last week, former AHS head Athana Mentzelopoulos alleges the premier’s then-chief of staff, Marshall Smith, repeatedly put pressure on her to sign deals with the Alberta Surgical Group, despite concerns about costs and who was benefiting.

Alberta’s auditor general, Doug Wylie, has since initiated an investigation into contracting and procurement at both AHS and Alberta Health, and the United Conservative Party government said it would also conduct an internal review alongside a probe by an unnamed third party.

The email containing the pricing chart, sent by Mentzelopoulos in October, indicates Alberta Surgical Group proposed slightly reduced rates for hip, knee and shoulder surgeries as part of a six-month contract extension it sought for November through to April 2025. But those rates were still significantly higher than AHS internal costs.

Premier Danielle Smith on Wednesday made reference to many of the prices but did not provide the cost for hip surgeries under AHS as listed in the chart.

She instead offered an average cost for hip surgeries, citing the Canadian Institute for Health Information.

“We also want to understand why there are differences, and we hope that the (auditor general) is able to shed some light on that,” said Smith.

Alberta Surgical Group’s existing two-year contract expired at the end of October, and AHS was in the process of negotiating the extension when Health Minister Adriana LaGrange issued a directive stripping the health authority and Mentzelopoulos of their authority to approve contracts.

LaGrange’s directive also required AHS to issue the extension for Alberta Surgical Group at rates set by the minister.

Those rates are slightly less for hip and knee procedures listed in the chart as first proposed by the Alberta Surgical Group -- at about $7,000 -- although the shoulder surgery rate is higher than what the group proposed at $10,500.

Mentzelopoulos alleges in her lawsuit that she had undertaken a review of the Alberta Surgical Group’s first contract after a meeting with company representatives last summer left her with significant concerns.

“I have identified provisions that materially differ from similar arrangements between AHS and other contract surgical providers,” Mentzelopoulos wrote in a letter to then-deputy health minister Andre Tremblay in August.

In that letter, Mentzelopoulos said Alberta Surgical Group was under the impression that its contract included a provision promised by AHS representatives that the firm didn’t need to “adhere to the terms of the contract.”

According to the chart, the group’s contract also guaranteed it would be paid for patients to stay for two nights after surgery, which Mentzelopoulos’s letter says was not required and was unique compared to other private surgical providers.

Mentzelopoulos wrote that she initiated an external review of AHS procedures that led to the contract being awarded in the first place.

Her lawsuit alleges Mentzelopoulos was pressured to sign off on the contract extension at rates the company proposed, as well as new contracts for two new private surgical facilities in Red Deer and Lethbridge.

The chart also contained proposed rates for the new facilities, which are labelled as being owned by Alberta Surgical Group. The proposed rates are identical to rates given to the group as part of its contract extension.

“(Chartered surgical facilities) continue to demand higher pricing than the equivalent comparable cost within AHS and with other surgical providers,” Mentzelopoulos wrote in October.

According to the chart, the Red Deer and Lethbridge facilities are owned by two separate numbered companies under the Alberta Surgical Group name. Corporate records show Sam Mraiche, CEO of MHCare Medical, is a 25 per cent stakeholder in both companies.

MHCare Medical secured a $70-million contract with the province to import pain medication in 2022.

Alberta received about 30 per cent of the order, despite paying the full cost.

Following that contract, Mraiche provided multiple cabinet ministers and government staff with luxury box tickets to Edmonton Oilers playoff games. The lawsuit says AHS estimates Mraiche-related firms have completed $614 million in government contracts for goods and services.

MHCare’s lawyer has said any allegations of wrongdoing on the part of the company are “unwarranted and unjustified.”

The premier, LaGrange, Alberta Surgery Group and Marshall Smith have also denied any wrongdoing.

The premier said Wednesday she and LaGrange weren’t involved in awarding the contracts at the centre of the allegations. Danielle Smith instead accused AHS leadership of stymieing the government’s mission to expand publicly funded, private surgical delivery.

Smith said AHS would rather keep all surgeries in its hospitals, “either because of ideology, or to protect their interests.”

She also said the decision to strip AHS of its responsibility to negotiate surgical contracts was to prevent the agency from being in a conflict of interest by drafting contracts for competitors.

Lawyer Dan Scott, who represents Mentzelopoulos, rejected the implication that she opposed private surgical facilities and expanding role the facilities are to play the health system.

He said concerns Mentzelopoulos raised last year were about making sure there was proper due diligence before finalizing the contracts.

This report by The Canadian Press was first published Feb. 21, 2025.

Jack Farrell and Lisa Johnson, The Canadian Press