What’s the hurry? ‘Activity-based funding’ for hospitals raises too many questions

AHS CEO Stephen Duckett: heavy on the promises, light on the details.

According to a recent media report, Alberta Health Services is on the verge of “radical changes” to the way it funds nursing homes and hospitals.

That is to say, next April Fool’s Day the so-called “health superboard” (which is in reality a branch of the Alberta government and nothing more) will begin to move toward what is termed “activity based funding” for nursing homes. A year later, the same financing model will be “rolled out” for public hospitals and emergency medical services.

This scheme was touted by Alberta Health Services CEO Stephen Duckett in a speech to a friendly audience at the Edmonton Petroleum Club as a way to persuade private sector and not-for-profit nursing home operators to take patients with higher needs. The claim was also made that when it is applied to public hospitals, activity-based funding will reduce waiting times for patients.

However, the news story about Mr. Duckett’s remarks provided few details of how this would actually work.

Now any promise that comes from Alberta Health Services these days needs to be taken with the proverbial grain of salt. This is, after all, an organization that last Tuesday announced “administrative savings initiatives,” solemnly stated that it “has made a commitment to avoid layoffs,” and then somehow managed to avoid mentioning in its news release that the cost saving initiative involves well over 100 layoffs!

To say that any AHS news release or speech come with a certain amount of spin hardly does justice to the achievements of these documents’ anonymous authors. Gyroscopes and tops have less spin on them!

So while I am not persuaded that the activity-based funding model is in every case a bad thing, I think it needs a more serious and cautious appraisal before it is rolled out holus-bolus across the province.

Any reasonably alert layperson who has spent the past three decades listening to the sales pitches by corporations, right-wing politicians and privatizing senior health bureaucrats for “market based solutions” will agree that skepticism under these circumstances is justified. These guys hardly have an impeccable record of delivering on their promises!

That is it being advocated by the likes of Mr. Duckett, who is on record as wanting to close our world-class psychiatric hospital and whose organization can’t deliver a mass immunization campaign to a generally healthy population, is not reassuring.

I am willing to bet that there is more than one approach to “activity based funding,” and that some approaches work better than others. Some may even work well. But it shouldn’t make us feel comfortable that the news report of Mr. Duckett’s speech is so lean on facts about how the scheme will actually work. Given his record to date, how likely is it he’ll pick an approach that is not designed to subvert public health care?

The theory behind this managerial fad is that handing out lump sum payments to facilities based on their size, their programs or their number of patients encourages inefficiency. Instead, financing should be based on results, its advocates say – for example, the speed at which patients are processed.

Depending on how you define results, of course, (and it seems to me that’s a pretty big “depending”) this should almost certainly have the effect of reducing waiting times. If achieving shorter waiting times was your only objective, adopting activity-based funding might be an easier decision.

However, from a common-sense perspective, several other questions need to be answered before we are pushed into this particular market nostrum. These include:

  • How are results measured? For this idea to work, hospitals must seriously monitor patient outcomes. How is that to be done? Who would do it? Or is it being proposed that we just take Mr. Duckett’s word for it that everything’s ducky?
  • What is the cost of measuring outcomes in a meaningful way? It doesn’t take a doctorate in medicine – or economics – to know that a properly run monitoring effort will require manpower, technology, time and resources. The implication of the report on Dr. Duckett’s remarks is that activity-based funding will save money. I am highly skeptical about this claim. Even if waiting times are reduced, it seems likely that the monitoring necessary prove it will increase costs, not lower them.
  • Can activity-based funding reduce waiting times in hospitals already operating at capacity? I say this is doubtful. Most urban hospitals in Alberta are already at or near capacity. Where is the benefit in such circumstances? Albertans deserve a respectful answer to this question. They don’t deserve to be blown off as “whingers,” or with whatever the nasty Australianism of the week happens to be.
  • What is the impact of this formula on rural hospitals? It seems likely that hospitals in areas with a low density of population are not going to do well with activity-based funding. This doesn’t mean these hospitals aren’t required in their regions. Will this formula be used as an excuse by Alberta Health Services to close or downgrade rural hospitals? You read it here first: It will be.
  • What “perverse incentives” are built into this system? Isn’t “activity-based” funding an invitation to game the system? What do you want to bet that if we adopt activity-based funding, hospitals will try to increase the number of measurable procedures performed on patents – especially ones that can be done quickly – so they can get more funding? How many of those procedures will have no sound medical justification? Will hospitals race to specialize in swift procedures – say, laparoscopic surgeries versus major surgery? I also think it is safe to assume there will be an incentive to send patients home far too soon, again to demonstrate measurable results. (Plus, it’s demonstrably better from a “results” standpoint if they die somewhere else! You can always claim they had “an underlying medical condition.”) Activity-based funding is rife with the potential for perverse incentives.
  • Does activity-based funding take medical decisions from physicians and give them to bean counters? That’s pretty well a given, don’t you think, unless the docs are going to be given a share of the incentive payments? In that case, see “perverse effects” above.
  • Can a new funding formula become an excuse for cutting funding to all hospitals? If we don’t understand the underlying assumptions, or have the details of the model of activity-based funding being proposed, I’m not optimistic this won’t be the case. Wait for the refrain, especially with regard to rural hospitals, that your under-funding is not our fault, it’s yours, because you’re inefficient.
  • Will activity-based funding for emergency medical services make paramedics drive like pizza deliverymen? Get to hospital in less than 20 minutes or your next hernia operation is free? Sheesh! So, why are emergency medical services being included in this scheme?

All these questions, except maybe the last one, deserve serious answers before we’re stampeded into a funding formula for public health facilities that may well come with a hidden privatization agenda.

Proponents of change at any cost – especially change that involves market mechanisms – can be counted to whinge with frustration (sorry) that the time for talking is long past and the time for action is upon us.

I’d have more faith in this claim if they weren’t usually pushing ideas supported only by ideology, not a foundation of facts, the goal of which is to irrevocably dismantle our public health care system.

The fact that this particular idea is being pushed so hard by people who have no stake in our Alberta health care system, and who may derive a financial bonus from making harmful cuts to it, is cause for additional concern.

Whenever Mr. Duckett and his ilk pressure us to adopt the latest “community options” or “market solutions” brainwave, I think “What’s the hurry, Murray?”

The hurry, one suspects, is that they don’t want us to have a chance to think too much about the impacts on public health care before they present us with a fait accompli.

I think we should tell our MLAs that when it comes to a whole radical new funding formula for public health facilities, “trust us” isn’t good enough.

Where are the facts? Where are the numbers? What’s the hurry?

One Comment on "What’s the hurry? ‘Activity-based funding’ for hospitals raises too many questions"

  1. sarah says:

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