Analysing Shared Service Contracts: The Case of Food Services for Winnipeg Hospitals

In November 1994, Winnipeg’s nine urban hospitals announced that they agreed to pursue opportunities to share four common support services - food services, material management, biomedical waste disposal and laundry to determine the potential for improving efficiency, reducing duplication and increasing buying power. A new non-profit organization called the Urban Shared Services Corporation (USSC)was created to manage the shared functions. Given that a majority of hospitals have chosen to retain their cafeteria services for non-patients, the proposed savings from Shared Food Service system depends on the number of hospital cafeterias that need renovating, the cost of refurbishment, as well as the expected economies of scale of the single plant operation. Given the range in estimates on the respective costs of renovation versus the cost of the central facility, savings on financing costs may not be realized. Evidence of economies of scale for central food services remains unclear, implying that additional savings from the central facility might not materialize. The Shared Food Service contract also brings with a number of contractual issues that might undermine the goals that are sought in the contract. Finally, the central issue of the respective quality of meals in the two systems remains unresolved. Given all these factors, there is considerable doubt whether the proposed change in hospital food service delivery will yield real benefits to Manitobans.