Seeking new ways to pay for care

CIHI working with provinces to find ways to take health dollars further

With costs on the rise and dollars increasingly scarce, the search is on for new ways to fund health care in Canada. More than ever, provinces are focusing on efficiency, accountability and value for money. As wait times and access still make headlines, several provinces are assessing whether funding model changes can address some of their concerns.

Currently, most provinces fund hospitals through global budgets. This means hospitals receive a set amount of money at the beginning of a fiscal year to pay for all the services they provide in that year. That amount is based on historical spending patterns and may not account for differences in the type and complexity of patients treated. Challenges can also arise when demand shifts and the hospital's expenditures exceed its allocated budget.

These are among the reasons that several provinces have been looking at whether activity-based funding  (ABF) has a role to play. Under ABF, the province pays hospitals for each patient treated, meaning patients no longer incur expenses but rather generate revenue.

Reimbursement is based on the approximate costs associated with treating a specific case. Determining that amount relies heavily on case-mix systems, which condense patient episodes into groups with similar clinical characteristics and resource consumption. They determine what the average case should look like and cost.

CIHI created a team to support any jurisdiction that wants to move ahead with ABF and use our case-mix systems as the basis of payment prices. We're also providing expertise on the design, monitoring and evaluation of new funding models, while sharing knowledge across provinces.

Because ABF pays what a typical patient with a particular ailment costs, there's motivation to use best care practices.

"And if you pay for every patient treated, there's also an incentive to try to get more patients through to reduce waiting lists," says Jeff Hatcher, a senior CIHI consultant and ABF unit lead.

But if there's money to be made by admitting more patients, will other areas suffer? Is there a risk of moving patients through too quickly? Will this affect the quality of care? Will the benefits of improved access and increased efficiency be realized?

"There are a lot of considerations here, but it's certainly worth experimenting to see where it can be beneficial. It's about going cautiously, learning as you go," Hatcher says.

Canada is late to implement ABF—Germany, England and Australia have been using it for 10 to 15 years—but Hatcher says that's not a bad thing, as we can learn from their experiences.

"The extent to which it's used in any province remains to be seen, but with all the pressures on health care budgets, jurisdictions are definitely thinking about opportunities to change the way we do things and bend the cost curve."