Paying for Hospital Activity

B.C. considers radical shift in hospital funding, based on patients treated

This is something that I just recently learned about the Canadian health system — you don’t get paid more (as a hospital) for treating more patients.

That’s really shocking, considering the notion of medical “piecework” traces back through a long history. Piecework has it’s flaws — getting paid for “what you do” instead of outcomes can lead to unnecessary testing, medications, or surgeries. But just paying a pre-planned amount, regardless of volumes, doesn’t seem like the answer either.

So, British Columbia is looking to move away from that:

Health Minister George Abbott said Canada is pretty much the only jurisdiction in the world where hospitals receive a block of annual funding, regardless of how many patients they treat. Many European nations use so-called activity-based funding.

Abbott said a continuing pilot project at four Vancouver emergency departments has shown patients were assessed 10 per cent quicker when the facilities were given financial incentives to provide speedier service.

Abbott said results show that activity-based funding presents a promising opportunity for patients because wait times would be reduced as hospitals increase productivity and compete for business.

“We will continue to do what I think will be a gradual shift from block funding to more activity-based funding,” he said, adding the current system doesn’t reward facilities that are innovative.

A Canadian surgeon is a loud critic of the current approach:

Handing hospitals a chunk of money every year is “foolish,” Day said, because it doesn’t encourage productivity or provide managers with any incentive to fill spots when procedures are cancelled.

The lack of incentive might seem pretty obvious, wouldn’t it? In healthcare, we count on people being caring and being aligned around wanting to treat more patients — at least there’s more alignment on that note than there often is in manufacturing. Being able to care for more patients should be rewarding and should feel good. So it’s interesting to wonder why an institutional laziness might occur where people won’t work harder unless they’re paid more.

A critic of the potential change says:

“Activity-based funding formulas, for instance, don’t reward regions for keeping people healthy and engaging in health promotion activities as opposed to interventional activities,” said Noseworthy, a member of the board of directors for Doctors for Medicare.

No easy answer, is there?

Noseworthy advocates funding based on population size, as is the case in Alberta.

But Alberta has had a rapidly growing population, thanks to the oil boom, so the budgeting process might not keep up with the population growth.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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3 Comments on "Paying for Hospital Activity"

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  1. Jennifer Eliuk says:

    I’m from BC and I’ve seen this dysfunction. My father had a herniated disk and could not even sit up, he was completely laid out and in pain, and was told it would be ONE YEAR for surgery. We had to find a loophole in the system to get him in, which worked, but he was still in the hospital much longer than he would have been in the States or Ontario. What many people don’t know is that each Province has its own system, it isn’t the same system Canada-wide. Ontario is far better than B.C. Michael Moore’s film Sicko is depressingly accurate in that regard. Who wants to move to France? I do! I do!

  2. Matthieu says:

    Actually, France has recently (2-3 years if I’m correct) moved from block funding to activity-based funding, at least in some parts of its healthcare system. I don’t know the mid-term results, but it was heavily criticized at first as leading to less attention to patient with “long” treatment, as opposed to a focus on quick, profitable operations.

    It’s still way better than in US but I don’t understand why France is abandoning the principles that made it the best (and most fair) healthcare system in the world.

  3. Anonymous says:

    I sure wish we could pay for wellness instead of paying for sickness-related activity. I’d rather pay for someone to be my partner in keeping me healthy rather than paying them piecework for WHAT they do.

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