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A version of this commentary appeared in the Globe and Mail, iPolitics.ca and the New Brunswick Telegraph Journal

Many people are willing to pay more for higher quality products.  For example, you will be confident that a high quality, brand-name TV will work when you get it home. If it doesn’t, the TV will be replaced free-of-charge.

The same is not true of hospital care in Canada, where there is no relationship between quality and spending.

Obviously surgery and TVs are radically different: you don’t need to replace your TV in quite the same way that you need to replace your kidneys. But while there is a financial incentive for companies to deliver a high quality experience with manufactured goods, for hospitals, they are paid the same amount to treat patients regardless of the quality of care they provide.

Hospital quality isn’t a trivial worry. Many people know friends or relatives who have been made sicker by visiting a hospital, either through a hospital acquired infection or by receiving the wrong type or dose of medication. Although the rate of adverse events and medical mistakes has been going down since 2000, patients and health practitioners alike remain sceptical about the safety of our hospitals: over half of Canadians feel they will experience a serious medical error while in hospital and 74% of nurses feel likewise.

By and large, hospitals in Canada are paid one lump sum of money for the year to provide care to their patients.  The payment is the same if a patient dies, goes home healthy, or if they experience complications and end up right back in the hospital or their doctor’s office.  Investments in infection control, changing hospital layout or purchasing new equipment to reduce opportunities for accidents are all viewed as additional burdens to fixed budgets — not opportunities to improve quality.

Recently, B.C. and Ontario have made reforms to the way they pay hospitals. The new policies pay hospitals, in part, based on the amount and type of work they do.  However, neither the current or new ways to pay hospitals provide incentives for them to improve quality of care.

While additional spending does not always buy better health, some countries are now penalizing hospitals for providing low quality care. For instance, re-hospitalizations attributable to preventable errors are not reimbursed in the U.K., or by Medicare (the largest insurer of seniors in the U.S.). In Germany, re-hospitalizations within 30 days for the same condition are not reimbursed.

Ideally, we would like to reward hospitals for discharging healthy patients.  But should Canada follow international trends and align hospital funding with quality?

Reports on hospital quality and spending are publicly reported and could provide the basis to enable these policies; the Canadian Institute for Health Information (CIHI) reports these statistics routinely.

In B.C., the 30 day re-hospitalization rate for the Surrey Memorial hospital is 7.7 per 100 hospitalizations. The same rate at the Chilliwack General hospital is 9.9 per 100 hospitalizations, or an additional two re-hospitalizations per 100 patients.

In the U.K. or German healthcare systems, Chilliwack General hospital would see some reduction in its funding owing to some portion of the re-hospitalization costs of patients.

The figures show how hard this adjustment would be.  Surrey Memorial spends $4,630 per hospitalization and Chilliwack spends $5,220 (each is adjusted for patient’s age and disease burden), but how much of this amount could be withheld for poorer quality care?  There is no evidence to guide how much penalty would be a deterrent for hospitals.

Too little, and the penalty is considered too small to affect hospital behaviour.  Too much, and hospital’s quality could be jeopardized further.  Until the evidence becomes clearer regarding the link between financial penalties and quality, maybe these statistics can only offer a window on opportunities to improve quality of care.

Health care is fundamentally different from purchasing consumer goods; you can return your faulty TV, but you can’t return your faulty surgery.  The reforms in B.C. and Ontario demonstrate that there is an appetite for changing how hospitals are funded, but if we are to reward high quality hospital care, a key question is how to do so.

Jason M. Sutherland is an expert advisor with EvidenceNetwork.ca and Assistant Professor at the Centre for Health Services and Policy Research, University of British Columbia.  Nadya Repin is a research coordinator with the Centre for Health Services and Policy Research, UBC.

April 2013

This work is licensed under a Creative Commons Attribution 4.0 International License.