Media Releases

Alternative hospital funding proposal risky says study

October 27, 2014

TORONTO, ON – A new study says Canadian federal and provincial policymakers should be wary of funding hospitals through an activity-based funding (ABF) model.

This study is the first systemic review of worldwide evidence on ABF. It involved 19 researchers at several Canadian, Swiss and Australian universities, including Dr. Danielle Martin, a physician at Women’s College Hospital and professor in the Department of Family and Community Medicine at the University of Toronto.

Under ABF, hospitals receive a predetermined fee for each episode of care. The fee is intended to cover the bundle of services and products ordinarily provided to patients with particular diagnoses, such as appendicitis, pneumonia, traumatic injury or childbirth. The aim of ABF is to increase efficiency and reduce wait times.

However the study, which was published in PLOS ONE, reveals that discharges from hospitals to post-acute services increased 24 per cent after implementing ABF. Instead of recovering in hospitals, patients were moved to community-based providers, such as convalescent care, long-term care, inpatient rehabilitation facilities, skilled nursing facilities and homecare.

“The message emerging from this comprehensive systematic review of the worldwide evidence available is that governments may not necessarily get the benefits they are expecting with activity-based funding,” warns Karen Palmer. The Simon Fraser University adjunct professor in both health sciences and science is the study’s principal investigator and lead author. “There may be adverse consequences for which governments are unprepared.”

British Columbia, Ontario and Quebec are among the Canadian provinces actively pursuing ABF following its adoption in the United States in 1983. ABF has since spread elsewhere, including England, Australia, Switzerland and Germany.

The study’s international research team screened 16,565 articles produced during the last 30 years, finding 65 relevant studies from Australia, Austria, England, Germany, Israel, Italy, Scotland, Sweden, Switzerland and the United States.

The researchers conclude that ABF encourages a “sicker and quicker” discharge of patients from hospitals. Compared to other hospital-funding mechanisms, study results show that ABF puts far more pressure on delivering post-acute care in the community and may also increase readmissions to hospital.

“In Canada, some hope that ABF will reduce waiting times through faster patient turnover. Our systematic review found no consistent improvements in the volume of hospital care with ABF, particularly in the number of acute admissions,” says Thomas Agoritsas, one of the study’s Swiss medical investigators and a researcher at McMaster University.

The authors point out that although Canada has publicly funded hospital and physician care, there is comparatively little public funding for home care, rehabilitation care and other forms of post-acute care.

“We don’t understand what precise combination of ingredients makes ABF work better or worse. That means that things could go badly wrong, including increases in death rates and increased administrative costs—wasteful spending our system cannot afford,” says Martin, who notes that the results varied across hospitals and jurisdictions.

The study was funded by the Canadian Institutes of Health Research.

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