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A version of this commentary appeared in the Huffington Post, Vancouver Province and the Hill Times

Canada has over 70,000 hospital beds and spends more than $47 billion a year on hospital care, yet accessing these beds when they’re needed most remains an important public health concern.  Patients regularly experience long emergency room waits and canceled surgeries as a result of the health system’s inability to make hospital beds readily available.  Understandably, frustrations run high.

Changing the way health care is funded can be an important solution to this problem.

Many hospital beds are being used by patients who no longer require the specialized equipment or nursing care provided by a hospital.  These patients are often approved for discharge by their doctor and are awaiting placement in a continuing care facility — either hospital-based rehabilitation, residential or home care.  They remain hospitalized simply because there are no appropriate continuing care settings that can accommodate their medical and social needs.

Most of these patients don’t want to be in hospital, yet they use over 7,500 hospital beds each and every day in Canada — a stunningly inefficient use of hospital services that is unparalleled in other developed countries.

Siloed funding models create perverse financial incentives

In a recent report published by the Canadian Health Services Research Foundation (CHSRF), we target the complex underlying factors that have made effective solutions to Canada’s ‘hospital bed problem’ difficult to implement.

First, there is a disparate mix of stakeholders with different objectives, including publicly-funded physicians and hospitals, and a mix of publicly- and privately-funded continuing care providers.  They all need to work together to empty the beds currently occupied by patients who no longer need to be in hospital, and to divert future unnecessary hospital-based care.  This is a tall order when financial incentives are not aligned among providers to achieve these fundamental goals.

Second, health care providers are funded in ‘silos’: one silo funds hospitals, one funds doctors, and still others fund rehabilitative, residential and home care.  These silos can create perverse financial incentives that don’t optimize scarce health care dollars.

For example, hospitals are paid one lump sum to cover the care of all their patients, creating little incentive to discharge a less expensive patient and, in return, admit a new, expensive patient without any change in revenue.

In continuing care — with the exception of recent, and tentative, steps in Alberta and Ontario — providers are not remunerated based on the complexity of patients, an effect which makes it challenging for these providers to look beyond the additional costs of providing care to complex patients stuck in hospital beds.

Expanding acute hospital capacity is unappealing for multiple reasons.  While this might resolve the problem temporarily, it fails to address the underlying problem of transitioning patients to continuing care.  Few patients would want to live in a hospital setting.  This is also the most expensive option that has been tried in the past with no success — except to increase hospital expenditures.

Expanding continuing care capacity is another option.  However, the care and social needs of waiting patients are so varied that unmanaged expansion of continuing care, of the right kind, in the right amount, in the right geographic area could also prove unsuccessful over time.

Financial incentives don’t undermine medicare

So what’s the solution?

Research has shown that financial incentives have been effective at motivating changes in health care provider behavior.  To date, the use of financial incentives has not been pursued in Canada, in part, because of its association with privatized health care.  But cost effective methods that free hospital capacity, and don’t undermine Canada’s public health system, should be viewed positively, and as a step forward.

One potential solution is to change the way continuing care providers are funded and align their financial incentives with those of hospitals.  We should give continuing care providers the financial tools to strengthen care coordination with hospitals and to be fairly reimbursed for accepting the most complex patients.

A potential arrangement might take the form of a one-time, per-patient, payment to continuing care providers that accept patients who would otherwise remain waiting in hospitals.

Creating this incentive would accomplish two things.  First, it would reward continuing care providers for ‘pulling’ patients to appropriate lower intensities of care.  Second, it would free-up the current stock of hospital beds and is well worth the expenditures.

Clearly our current system undermines the provision of effective and safe care when Canadians need it most.  Creating necessary financial incentives and investing in home-based care may be just what we need to improve hospital efficiency, free-up hospital beds, reduce waitlists and improve patients’ experiences with the health care system.

Jason Sutherland is an expert advisor with EvidenceNetwork.ca and an Assistant Professor, and Trafford Crump, post doctoral fellow at the Centre for Health Services and Policy Research, University of British Columbia.  They are the authors of Exploring Alternative Level of Care (ALC) and the Role of Funding Policies with the Canadian Health Services Research Foundation (CHSRF). 

February 2012


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