Hospital funding system called into question at North Island forum

Reports that health care is in crisis is renewing questions about the system for funding hospitals in B.C.

During a public forum in Campbell River last week, Union Bay resident Liza Schmalcel described overcrowded conditions and poor treatment faced by her 83-year-old mother at the Comox Valley hospital, as reported by the Mirror.

Schmalcel argued that hospitals should receive revenue based on the spaces provided to patients, with no money being provided for care in hallways as an incentive to prevent overcrowding.

“It would be better for Island Health, and the public, if hospitals billed according to rooms, making distinctions according to medical overflow rooms, private rooms and shared rooms, and not be allowed to bill for unconventional spaces,” said Schmalcel, who began researching hospital capacity and funding issues after seeing the problems faced by her mother.

Asked about its funding system, Island Health said it doesn’t receive any extra funding when hospitals are overcapacity.

“Funding for our hospitals is population based, not care space based,” said Island Health spokesperson Cheryl Bloxham in an email.

Schmalcel isn’t the only one raising questions about how hospitals are funded.

UBC professor Jason Sutherland, who specializes in health care funding, says that alternative models include so-called activity-based systems used in several European countries.

In B.C. and other provinces, ministries of health provide a fixed amount of funds annually to acute care hospitals, a system known as global budgeting.

According to a 2011 report by Sutherland, hospitals account for upwards of 28 per cent of health care expenses, the largest part of health-related spending. Health care accounts for about 11 per cent of Canadian gross domestic product.

“They’re given an annual budget, and they work within that to provide the service that they feel the community needs,” said Sutherland in an interview on Monday. “So the incentive is for the chief executive officer and for the board to make sure their budget doesn’t exceed that target.”

But research suggests that global budgeting has mostly been ineffective in slowing the growth of spending, according to a 2016 paper co-authored by Sutherland in the journal Health Policy. And the spending caps tend to result in restrictions on hospital services.

In contrast, England, Australia and several European countries use a system called activity-based funding, which funds hospitals based on the services they provide. Ontario has also implemented activity-based funding for 40 per cent of revenues, Sutherland said.

Prof. Jason Sutherland of the UBC Centre for Health Services and Policy Research

These activity-based systems provide hospitals with an incentive to operate more efficiently and are linked to shorter hospital stays and more patients treated per bed, according to Sutherland’s research. B.C. introduced a pilot project using activity-based funding in 2010, but later cancelled it.

There are drawbacks to activity-based funding. Examples include a trend towards increasing the volume of patients receiving services that bring profits to the hospital, as opposed to services for those most in need, Sutherland said.

However, that money goes back into the hospital system, he said. The system can also be costly, but he noted the Ontario model involves caps to control spending.

Changing the funding model isn’t a silver bullet for overcrowded hospitals, he said. Activity-based funding might result in higher volumes of patients going through hospitals, but many people still have nowhere to go for less acute medical services when they’re discharged.

These patients are known as “alternative level of care” or ALC patients, meaning they need care in a more appropriate setting outside of the hospital.

“We need a much more robust post-acute care setting or community care setting,” Sutherland said.

Island Health officials have said they’re implementing various community care programs in Campbell River, and 18 long-term beds were recently opened at the Discovery Harbour care home.

As for the kind of care space-based funding system proposed by Schmalcel last week, Sutherland said it hasn’t been implemented anywhere.

“However, in some provinces, alternate level of care patients have to pay a co-pay to the hospital for the bed they’re occupying,” he said in an email.

Asked if the real problem is simply a shortage of funding for health care, he said it’s an open question. But he noted that service delivery could likely be optimized.

“Is money always the answer here? I think we have plenty of examples where we could change things, and it’s an open question whether more money is needed.”

Sutherland also called for more public debate about what people want from their hospitals.

“Do we mind that 30 per cent of the beds are filled with long-term care patients? If that is okay as a society, then it’s fine,” he said. “And then we’ll have to build more hospitals, because we’re putting our long-term care patients in there.

“But if we want them to run efficiently and effectively and provide high-quality care, and not have patients in there who don’t need to be there, then we need big changes.”

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