There’s been a seismic shift in health policy taking place in Canada that has been largely ignored by the mainstream media and gone unnoticed by the general public.

Provinces are starting to change the way they fund hospitals. This is no small change and will directly affect the care patients receive — potentially improving access to hospital care.

Ontario and British Columbia, for example, have announced initiatives to fund hospitals partially based on the services they provide and the characteristics of the patients they treat.

It seems intuitive to pay hospitals for what they do, but our rural-urban divide, how we arrange specialty care in big cities, and limits to the amount we want to spend on hospital care, complicate the issue.

Under the current ‘global budget’ approach used in all provinces, hospitals receive a fixed funding amount, regardless of the types of patients they treat. The value of this approach is the power to restrain growth in hospital spending.

So what’s the problem? In a word, inertia.

Since exceeding budgets is penalized in the traditional hospital funding model, hospitals typically avoid adding services that increase costs, which means hospitals don’t aggressively attack wait times for fear of running up a deficit.

The belief was that, in order to improve care and reduce wait times, we needed to increase staff and hospital beds. This is the most expensive option and such a move would empty provincial coffers quickly.

It’s also unnecessary.

We now have good data that indicates we are not using our current hospital beds effectively. We have too many patients in beds that can be safely discharged home — in some regions, above 15 per cent of beds are currently occupied by those who no longer need to be in hospital - translating into thousands of “extra” hospital beds.

The changes to hospital funding in Ontario and B.C. tackle inertia head-on and employ approaches used around the world.

Known as activity-based funding (ABF), hospitals are paid for the kind of care they deliver and the complexity of the patients that are cared for. This approach is ‘equal pay for equal work,’ and creates incentives for hospitals to discharge patients more quickly, since new patients generate additional revenue for the hospitals.

There are legitimate concerns among stakeholders that under the ABF model patients will be discharged “quicker and sicker.”

This particular phrase was borrowed from early evaluations in the U.S. that indicated that elderly patients were discharged sooner under the ABF model. The same concerns are now echoing across the Canadian health care landscape in response to ABF policies in Ontario and B.C.

First, do the financial incentives of ABF shorten patient hospital stays?

While not all patients stay a shorter time in hospital under this system, there is good evidence from many countries that, on average, the duration of hospitalization shortens, resulting in more patients treated per bed. This is measured as improved access to hospital care.

A panel study of 28 countries that moved from global budgets to ABF reported a reduction of 3.5 per cent in average length of hospital stay.

The evidence regarding the effectiveness of ABF is consistent — health systems that implement ABF for hospital funding tend to experience shorter lengths of stay which lowers wait times in the system.

That’s ‘quicker,’ but what about ‘sicker’?

A criticism leveled against ABF is that it creates incentives for hospitals to shorten lengths of stays to the point where patients’ safety and quality of care are jeopardized. In other words, patients being discharged from hospital before they are healthy enough to go home.

Canada, as a late comer to this type of hospital funding, can learn from the evidence from other countries that have adopted similar policies.

Evidence from the U.S. indicates patients in ABF hospitals are discharged in less stable condition, but that processes of care have improved and mortality rates are unaffected.

Findings from the U.K. and other European countries are more positive: there is no association with increased mortality in the ABF model, and even some reports of lower mortality.

Recent work is even suggesting that ABF may encourage hospitals to provide higher quality care to reduce costly complications or readmissions.

So, while some patients are discharged earlier and possibly in less stable condition, patients do not appear to return to hospital more often (readmissions) or die prematurely.

“Quicker,” yes, but “not sicker.”

Hospitals provide the most expensive type of care in our health system and are hungry for new sources of funding. While this change is one successfully used elsewhere to expand access, in Canada we will still have to make sure that quality of care doesn’t suffer — nor should priority access be granted to ‘profitable’ patients.

Other provinces are vigilantly watching the experiments in Ontario and B.C.

It’s been decades since the status quo has been challenged. If access improves, quality is unaffected, and cost growth is moderate, other provinces will surely be tempted to follow a similar path.

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.