Evidence-informed options for hospital funding

Are hospital funding mechanisms in Canada designed to provide efficient care?

CHSRF staff
November 2010

Full Paper (PDF, 602KB)    

Canadian governments are spending more on healthcare than ever. Driven by technological innovation, population aging, inflation and other factors, public healthcare expenditures are forecast to continue to increase, causing concern about the sustainability of Canada’s publicly funded systems. The hospital sector accounts for over 28% of total healthcare expenditures in Canada. Although this share has fallen considerably over the past few decades, hospitals continue to represent the largest single component of healthcare expenditures. Hospital expenditures are projected to exceed $55 billion in 2010.

Evidence suggests that provinces differ in terms of healthcare spending efficiency, which implies that there should be an opportunity for improvement. An often-cited source of inefficiency in the Canadian hospital sector is the reliance on ‘global budgets’ as the primary source of hospital funding. Global budgets can perpetuate inefficient care because they offer little incentive to reduce costs or foster innovation.

Based on a paper commissioned by CHSRF, this brief provides a summary of the available evidence on promising hospital funding options and their impact on the following goals: timely and equitable access, optimal volume of care, quality, efficiency and constraining future cost increases.

HIGHLIGHTS

  • Hospital funding through a global budget does not provide incentives to improve access, quality or efficiency of care.
  • Global budgets can be an effective cost-control instrument and can be combined with other funding mechanisms to accomplish various policy goals.
  • At the regional level, provinces could reduce funding inequities by applying principles of population-based funding.
  • At the hospital level, combining activity-based funding and global budgets would likely improve healthcare spending efficiency.