CHSRF Series of reports on cost drivers and health system efficiency: Paper 6
Don Husereau, BSc Pharm, MSc
Adjunct Professor, Depa rtment of Epidemiology and Community Medicine
Faculty of Medicine, University of Ottawa
Chris G. Cameron, MSc
Health Economist, Canadian Agency for Drugs and Technologies in Health
Health technology assessment (HTA) is becoming an increasingly prominent policy tool in response to concerns about rising healthcare costs driven by the use of technology. HTA is a multi-disciplinary process of policy analysis that aims to bridge the world of research with the world of decision-making by examining the medical, economic, social and ethical implications of the use of a health technology and their associated interventions. HTA seeks to define and measure (i.e., capture) the value of new products and services. It is currently being used in Canadian hospitals to decide what technologies to adopt and by some health jurisdictions to decide whether to create new provider fee codes. However, decisions to adopt a new technology are also driven by the need to provide consumer choice, provider autonomy, and patient access, underlying the principles of Canada’s Health Act. Additionally, not funding a new technology may provide disincentives to service providers to practice in health systems where services are not reimbursed, threatening the ability of the health system to reliably provide care and leading to additional costs if specialty services are not available. This, in turn, may harm the relationship between payers and providers.
In Canada, new codes for provider fees are developed in each jurisdiction using separate approaches and with very little coordination. This makes the Canadian health system susceptible to perceived inequities across jurisdictions and can lead to the phenomenon known as “whipsawing”—pressure to fund a service in other jurisdictions if only one province or territory is funding the service. There may also be pressure to pay the same amount of money for similar services without considering the social and economic context in which it will be delivered. This can result in unnecessary growth in health system costs.
The prices of new provider fees in Canada are largely based on costs to deliver the service and do not consider the relative value-for-money of the new service. This approach means providers have little incentive to perform high-value services compared to low-value services. HTA can play an important role in linking the price of a provider fee with a tangible value. This means that service prices can be modified upward for high-value services and downward for low-value services, averting unnecessary growth in health system costs.
- The rate of spending on health in Canada is rising faster than the rate of economic growth, creating concerns about the sustainability of Canada’s publicly funded healthcare systems. Costs for hospital and physician services continue to comprise the bulk of healthcare spending.
- Currently, provider fees are largely based on the costs to deliver the service, not the relative value-for-money of the new service. This approach means providers may have little to no incentive to perform high-value services compared to low-value services.
- Health technology assessment (HTA) examines the medical, economic, social and ethical implications of the use of medical technologies, services and procedures. Because it has the capacity to capture value, HTA is considered an effective tool in making policy decisions to develop professional fees in response to the availability of new health technologies. In theory, using HTA to inform the price of a provider fee can lead to reductions in net expenditures while increasing payments to providers.
- Given the successful Canadian capacity to conduct HTA, negotiating provider fees using HTA input is considered to be a feasible and desirable option, as it provides an opportunity to better align incentives for consumers, providers, producers and payers.
- Canada would benefit from a coordinated approach to price determination. This can be built on existing provincial processes, providing increased benefits for providers while potentially avoiding unnecessary costs by payers and reducing inequities across provinces.
- The use of value-based pricing of provider fees could be applied, in principle, to mixed models of provider financing and alternative arrangements in the future.