Activity-based Funding Models in Canadian Hospitals

Activity-based funding is a payment model based on the volume and type of services provided to each patient for hospital care. Its main objectives are to increase efficiency and reduce wait times. Canadian hospitals currently receive block funding or lump sum payments from the government based on previous spending patterns. Ontario was the first province to adopt activity-based funding as part of their Wait Times Strategy and has been successful in selected hospital services, such as cataract surgery, joint replacement, and cardiac bypass.

In 2008, four Vancouver hospitals enrolled in the Emergency Department Improvement Initiative, through which hospitals receive additional payments for treating patients within a specified time frame. The Vancouver Coastal Health Authority affirms that the overall health care delivery has since improved. Other provinces have the support from their health ministry to move ahead with activity-based funding. For example, Alberta will start to implement the new model in their province in April 2010. New Brunswick also may be headed in this direction, and Quebec has received recommendations from its former health minister, Claude Castonguay, to adopt this approach as a way to sustain its health care budget.

Numerous countries, including Australia, the United Kingdom, and the United States, are already using some form of activity-based funding. Critics of the proposed model argue that the focus would be shifted from the quality of patient care to volume of service, hospitals would be inclined to treat simple cases over complex cases, and rural and small health care facilities would be negatively impacted. Some health care financial experts recommend adopting a hybrid model that incorporates both activity-based and block funding. With this system, hospitals can benefit from pay for performance if they meet their targets and still continue to control costs.

Activity-based Funding Models in Canadian Hospitals

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