Jason Sutherland

Exploring Activity-Based Funding in British Columbia

In 2014, spending on healthcare in Canada was estimated to be $214.9 billion, or over $6,000 per Canadian. Hospitals are the largest and most costly segment of the Canadian healthcare system, representing over 40% of public healthcare expenditures on health and over 47% of provincial government’s budget. Historically, this funding has been provided to hospitals using global budgets, or specified blocks of funding that pay for all the services delivered by the hospital. The limitations of global budgets are well documented; as hospitals do not gain additional funding from serving additional patients, they incent hospitals to restrict access and delay the discharge of patients. Given global budgets’ failure to slow growth of spending on Canada’s hospitals, with the rate of hospital funding increases averaging approximately five percent per year over the past decade, there has been an increasing recent interest and experimentation in Canada in alternative funding models for hospitals. In 2010, BC implemented an activity-based funding (ABF) mechanism, which provide a fixed funding amount to the hospital for the bundle of services provided to a patient with a particular diagnosis during their stay. To inform this debate, we took advantage of the natural policy experiment created in British Columbia (BC) when ABF was introduced in April 2010 and studied the policies’ impact. This talk will explore hospital’s response to the new financial incentives for increasing the volume of hospital care.