Adopting an activity-based funding formula for Alberta hospitals could shorten wait times, improve productivity and reduce hospital costs, according to an Alberta researcher with the Montreal Economic Institute.
With activity-based funding, hospitals receive a fixed payment from government for each treatment delivered, instead of receiving a pre-set amount of funding to pay for a specific number of services based on previous budgets.
Krystle Wittevrongel, MEI senior public policy analyst and Alberta project lead, said Quebec has greatly benefited from incorporating activity-based funding.
“We can see in Quebec after very short periods of time that they have increased the number of procedures quite dramatically. They’re constantly adding more surgical programs to those that are part of activity-based funding,” Wittevrongel said.
A MEI study shows the average procedure costs in Quebec’s radiation oncology sector has fallen seven per cent while productivity has increased 33 per cent. The colonoscopy and digestive endoscopy sector saw a 14 per cent increase in productivity and a 31 per cent decrease in the case backlog. The unit cost of imaging procedures dropped four per cent and the number of magnetic resonance imaging tests increased more than 22 per cent.
She said with activity-based funding a hospital is paid for what it’s actually doing, and incentivizes hospital administration to serve more patients.
“It makes sense financially and in terms of access. Our current hospital funding model incentivizes treating the fewest patients possible, as each new patient represents an additional cost.”
The only hospitals where the funding model would not work would be smaller rural and remote hospitals that do not have a high volume of patients.
She said some argue that activity-based funding could lead to unnecessary treatment, or impacting the quality of care by cutting corners, but medical ethics and standards of practice remain. Rules can also be developed to penalize a hospital when patients are re-admitted or there are hospital-acquired complications, for example.
Right now hospital departments are overrun with patients and operating rooms are sitting empty in Alberta. But financial incentives can be aligned to improve outcomes, she added.
Wittevrongel said activity-based funding has been in use in almost all OECD countries since the 1990s, and was on Alberta’s radar between 2010 and 2014. Hopefully the province will reconsider the benefits.
“I think this is a government that would be willing to take a chance on this because it makes sense. The business case for it is just so clear.”
The report Activity-Based Hospital Funding in Alberta: Insights from Quebec and Australia, by Krystle Wittevrongel, is available at www.iedm.org.
Ashley Stevenson, UCP government press secretary, said at this time the province is not considering the activity-based funding approach.
“We are refocusing Alberta’s publicly funded healthcare system to ensure that Albertans have access to more effective care and improved front-line service delivery when and where they need it. This refocused system will be a fully integrated health care delivery system that centres around four priority sectors: primary care, acute care, continuing care and mental health and addiction,” Stevenson said.