Good concept – now the hard part – doing it right
By John Aldis, vice-president, corporate and post acute services, chief financial officer, RVHS
As part of the Minister of Health’s Action Plan for Healthcare, the Ontario government is introducing health system funding reform. The new funding approach, which will be phased in starting in fiscal 2012/13, is a paradigm shift in how the government will fund and hold hospitals accountable for the services they deliver.
Health Minister Deb Matthews recently summarized it this way: “We have to shift spending to where we get the highest value. Our funding models need to be updated, to accelerate the transition from a provider-centred funding model towards a patient-centred funding model, where funding is based on the services provided.”
This funding reform is the most significant change in the way Ontario hospitals are funded in over 25 years. The changes will present challenges and opportunities for hospitals which are used to a mostly fixed funding stream, with annual increases to partially offset inflation. Over the next three years, 70 per cent of hospital funding will be variable, compared to three per cent currently, and change from year to year based on a hospital’s volume of services, level of cost efficiency, and quality of care. This is a very dramatic change over a short period of time and has the potential to be disruptive as hospitals adjust their plans in response to funding shifts. Some hospitals will get more money, while some may even get a funding cut. There will be significant pressure to integrate services within and among hospitals which will impact patients, physicians and staff.
Since details of the formula have not yet been released, the impact on individual hospitals is not yet known. What we do know is that starting in fiscal 2012/13, 46 per cent of hospital funding will be variable, increasing to 70 per cent within three years. Part of the variable funding will be based on the volume of key services and associated costs. Hospitals with the capacity to provide more services, to better match demand for those services in their communities, will attract funding. And hospitals that deliver these services most cost-effectively will also benefit under this funding method. The rest of the variable funding will be for specific services which the Ministry will target for quality improvement and cost rationalization. Funding for these, so called “Clinical Quality Groupings” will be provided at a set price, for a specified volume of procedures. Hospitals that can deliver these services with high quality outcomes, at low cost, will have the opportunity to attract more revenue. The first three Clinical Quality Groupings to be funded this way are cataracts, joints, and chronic kidney disease.
So what does this mean for RVHS? We need to build on the good work we have begun over the last few years to enhance the quality of care, become more productive, and drive down the cost to deliver our services. It means we have the opportunity to be rewarded financially for being a high quality, low cost provider and to grow services which our community needs. We must redouble our efforts to deliver the highest quality care using evidence based order sets and care pathways, better understand and manage our costs, and apply our Lean approach to continually eliminate waste and become more productive. In other words, we need to be "the best at what we do." And in areas that we cannot, we must be prepared to divest and do so responsibly, being respectful and minimizing the impact to our patients, staff, and physicians.
RVHS has embarked on a journey of continuous, positive change over the last few years. We have embraced change and we have outperformed. Funding reform will challenge us all to do even better.
