Commission on the Reform of Ontario's Public Services

Chapter 5: Health
Despite variations in how health care is provided across the country, all provinces and
territories face the same challenge of controlling health care cost increases without sacrificing
excellent care. Much can be learned by discussing and understanding what each jurisdiction is
doing and there is an opportunity to conduct cross-jurisdictional studies to determine the best
approach. The federal government is unlikely to play the role of facilitating such a dialogue;
however, Ontario should convene with the other provinces and territories and invite the federal
government to participate.
Hospitals
At present, the payment hospitals receive is based on average costs across the province so
there is no incentive to increase efficiency. There is little understanding of the true costs of
hospital procedures and, as such, estimations of value for money are difficult to ascertain.
Both MOHLTC and LHINs need to take a hard look at the variability in the costs incurred by
hospital procedures from region to region and hospital to hospital, and take steps to ensure
that Ontario is getting the best value for its money when allocating funds to hospitals.
Recommendation 5-50: Use data from the Health-Based Allocation Model (HBAM) system to
set appropriate compensation for procedures and cease the use of average costs to set
hospital payments (see Recommendations 5-17 and 5-73 for more details on HBAM).
Recommendation 5-51: Create a blend of activity-based funding (i.e., funding related to
interventions or outcomes) and base funding managed through accountability agreements.
Indeed, a shift to activity-based funding should be applied as well to other parts of the health
system. Currently, hospital budgets are mostly determined by a percentage increase from the
previous year’s budget, regardless of whether a hospital’s activities are increasing or
decreasing. Under activity-based funding, a hospital would get a set amount for a specific
intervention. For example, a hospital might get $2,000 for each cataract surgery, $400 to set a
broken arm and $8,000 for a hip replacement. An activity would shift to the hospitals that can
perform it profitably, while hospitals that cannot meet that standard would either become more
efficient or reduce their efforts in this area, ideally by focusing on activities that they can do
well. The result would be a general reduction in the cost of each procedure.
Recommendation 5-52: Create policies to move people away from inpatient acute care
settings by shifting access to the health care system away from emergency rooms and
towards community care (i.e., walk-in clinics and Family Health Teams), home care and,
in some cases, long-term care.
This alone should reduce the number of people who end up being admitted to hospital beds
even though that is not appropriate for the nature of care they need.
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