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Moving Ontario hospitals into the 21st Century

Funding approaches that integrate care can improve access, costs and quality

A version of this commentary appeared in the Globe and Mail, Waterloo Regional Record and Guelph Mercury.

SutherlandandHellsten_OntarioHospitals21stcentury_000021449572SmallWhen it comes to the way we fund our hospitals, Ontario is only now moving beyond the 8-track era. The government is modifying its outdated payment systems to try and change the same old tune that has played for decades: long wait lists, bed blockers and cancelled surgeries.

Ontario pays for most of its hospital care using the same global budget “lump sum” approach it has used since the late 1960s. Meanwhile, the rest of the industrialized world has spent the last thirty years moving to funding models that pay hospitals based on the types and quantities of patients they treat.

At the same time as these kinds of long overdue hospital funding reforms are being contemplated in Toronto, forward-thinking countries are already shifting to the next generation in healthcare funding: paying for care that stretches beyond the walls of the hospital.

Ontario should take note. We may be showing up late to a party where the guests have already moved on.

There are good reasons for provinces to break away from their traditional reliance on global budgets. Global budgets are essentially annual entitlements that are largely based on legacy and don’t keep pace with changing patient demographics or community-based models of care. Worst of all, they can drive hospitals to ration care and prolong wait times in order to keep costs down, rather than improving their efficiency.

These sorts of issues have pushed countries like Sweden and England to move from global budgets to a per-patient funding approach that pays hospitals through fixed prices for each type of patient based on the complexity of treatment required. Per-patient funding motivates hospitals to treat each case more efficiently and to increase the number of cases they treat in order to increase their revenue.

Under this approach, hospitals begin to admit more patients and discharge them more quickly. More patients are treated for the same number of beds.

But as wait lists shrink, many countries also see rises in their total hospital spending driven by the increased numbers of admissions. For some countries, per-patient funding was implemented during fiscal booms to tie new cash influxes to tangible results.  Despite making similar cash infusions over the same period, patients in many parts of Ontario still struggle with wait lists.

The government of Ontario has finally had enough and is now slowly introducing per-patient funding in a cash-strapped climate.  Only a few types of patients are funded with the new ‘Quality-Based Procedures’ policy, with little cash to spare for buying additional volumes of care.

Elsewhere, countries that have used per-patient funding for years, like the US and England, are now wondering if it’s time to move on. Traditional hospital-focused patient funding does a good job of buying more surgeries, but it doesn’t do much to address the challenge of coordinating care across healthcare providers.

Our hospitals, doctors and community providers are badly fragmented. We pay each provider using a different payment model, with no financial incentives for providers to work together. New models of funding healthcare that use shared incentives to motivate communication and safe transitions between providers are needed for today’s complex patients.

There are now some promising experiments with new integrated payment models that attempt to bridge these gaps in care. In the US, the Obamacare reforms have launched a wave of projects to manage populations of patients. These next generation payment models reward hospitals for their ability to prevent the admission of people with chronic illnesses like diabetes, where a hospital admission is a sure sign of failure.

Ontario faces a tough challenge ahead: do they expand traditional hospital-focused per-patient funding to try and reduce stubborn wait lists?

Arriving late to this party has a silver lining. Instead of pouring money, time and effort into upgrading our 8-track funding models to cassettes, we can learn from what others have done and skip a generation in payment reform.

By introducing per-patient funding approaches that also integrate payments across hospitals, physicians and community care providers, Ontario can begin to tackle the triple challenge of access, cost and quality rather than passing the buck from one healthcare sector to the other.

Jason Sutherland is an expert advisor with EvidenceNetwork.ca and Assistant Professor, Centre for Health Services and Policy Research, School of Population and Public Health, University of British Columbia. His and Erik’s C.D. Howe Institute publication, “Paying for Hospital Services: A Hard Look at the Options”, can be found at www.cdhowe.org.

June 2013

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