HomeTopicsResearchProvinces should work together on new funding models: C.D. Howe report

Provinces should work together on new funding models: C.D. Howe report

By Neil Fraser

The time is ripe for the provinces to collaborate on integrated healthcare payment reforms, according to a report from the C.D. Howe Institute, which also suggests the federal government could play a strong role in facilitating and supporting this collaboration.

Current payment models in Canadian healthcare, such as global budgets for hospitals and fee-for-service reimbursement of physicians, have resulted in a fragmentation of healthcare delivery that contributes to poor patient outcomes and high costs, argue Jason M. Sutherland and Erik Hellsten, authors of the commentary, Integrated Funding: Connecting the Silos for the Healthcare We Need.

“Once held in high esteem worldwide,” they state, “Canada has taken a drubbing in recent international comparisons,” faring poorly relative to its peers on healthcare performance measures such as access to services and co-ordination of care, despite being one of the highest-spending countries on health. Provincial healthcare systems that were structured to address the needs of past generations have not kept up with the evolving demands of an aging population that requires care for multiple chronic diseases.

The report highlights that much of this failure to change with the times can be traced back to the way provinces pay for healthcare services. Fixed global budgets for hospitals are associated with low productivity and long wait times for elective surgeries, while fee-for-service compensation for doctors results in overutilization of services and a lack of accountability for patient outcomes throughout the continuum of care.

Other countries have been experimenting with various funding reforms that address these issues by going beyond the traditional healthcare “silos” — such as hospitals, specialists, primary care, and community and home care — to create new payment mechanisms that cross sectors and settings to follow the patient’s entire care pathway.

The report urges Canadian policymakers to look at these international solutions, although it warns that funding reforms being tried elsewhere are untested in Canadian healthcare, so the federal and provincial governments would need to work together to decide on the best way forward.

The report describes two funding models that merit consideration — bundled payments and population-based integrated payments, also referred to as capitated models — and reviews the experience of certain countries in implementing these funding reforms.

Bundled payments are single payments made to groups of provider entities involved in delivering a defined “episode” of care for a condition or procedure, providing financial incentives that encourage greater co-ordination of care. Population-based integrated payments, on the other hand, involve single, time-defined payments to groups of providers for a population of enrolled patients. Payments are made whether services are used or not, an approach that rewards improved performance.

In the United States, experiments with bundled payments have been going on for 30 years and have resulted in closer co-ordination among health services as well as significant cost savings while maintaining or improving care quality. A large-scale program, Bundled Payments for Care Improvement (BPCI), was introduced in 2013 under the Patient Protection and Affordable Care Act, also known as Obamacare. BPCI reimburses providers on a fee-for-service basis, then checks them against an annual target price. The providers share in the costs if they are above the target and share in the savings if they are below it. This sharing of financial risk gives providers more incentive to deliver quality care.

Forms of bundled payments have been implemented in two separate pilot projects in Ontario, the authors note: by Cancer Care Ontario for renal care and systemic treatments, and by St. Joseph’s Health System in Hamilton, where providers of acute care have been integrated for a limited number of patients.  According to an article in the Toronto Star, early results indicate both the healthcare system and patients are benefitting from bundled payment initiatives at St. Joseph’s Health System.  In a presentation at HealthAchieve in 2016,Trillium Health Partners shared similar results for its cardiac surgery bundled payment pilot.

The C.D. Howe report also provides an example of population-based integrated payment — U.S. accountable care organizations offer services across the continuum of care for an entire population in a specific region. As with BPCI, the providers are reimbursed for their services and measured against a target. The result has been lower costs and moderate improvements in patient satisfaction.

In Germany, the healthcare management company Gesundes Kinzigtal provides care for 70,000 people and is paid by health insurers based on shared savings and achieving quality targets. This program has reduced costs and improved quality of care.

These and other international initiatives offer lessons for Canada’s provinces, which should begin collaborating on integrated payment reforms rather than going their own ways as in the past, the report advises. Federally, Health Canada and agencies such as the Canadian Institute for Health Information can encourage provincial collaboration through transitional funding, analytic tools to generate insights across the continuum, and information brokering.

For these efforts to be effective, the federal government, the provinces and physicians must all be engaged and take leadership roles in their own areas of expertise. A clear national vision needs to be articulated, along with an end goal for integrated payment models.

Sutherland and Hellsten conclude with a reminder that “payment models for health services are never silver bullets in themselves” — their success depends on how well they enable organizational and clinical reform. The role of policymakers is to create the right environment and support the right systems to allow healthcare organizations and providers to deliver optimal care.

Neil Fraser is Chair of MEDEC and President, Medtronic Canada. He was a member of both the Ontario Health Innovation Council and the federal Advisory Panel for Healthcare Innovation and is a frequent speaker on health system reform and innovation adoption.



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