Paying for hospital services

Hospitals hold a special place in the hearts of Canadians as the most visible representation of provinces' commitment to publicly funded healthcare. As pillars of medicare and the centrepieces of provincial healthcare systems, hospitals are expected to be accessible when Canadians have healthcare crises, illnesses or injuries, irrespective of a patient's ability to pay. Hospitals are also the most costly form of care, to the tune of over $58 billion per year across Canada. While the appropriate reforms will vary by province, the status quo of near total reliance on global budgets for funding hospitals is not well aligned with the current policy imperatives of improving access stated by many provincial governments. Activity-based funding (ABF) - hospital payments based on the volume of care provided - is a viable complement to global budgets for rebalancing the financial incentives for Canadian hospitals. The dismal performance of Canada relative to other OECD countries on measures of access suggests this is an area with huge room for improvement across provinces, and where the introduction of ABF for partial funding of hospitals would have a good chance of driving meaningful change. Further, ABF for acute care should be complemented with funding policies for other sectors to align incentives across settings, and to promote the delivery of care in the most appropriate place, capturing as broad a range of activity as possible.