Ontario Leads and Alberta Lags on Healthcare: But All Provinces Have Much to Learn from Europe

Commentary, Healthcare & Welfare, Ben Eisen

Today (December 14), the Frontier Centre for Public Policy will release its third annual Canada Health Consumer Index, which evaluates provincial healthcare systems in Canada from the consumer’s perspective. The study showed meaningful variation, especially in terms of wait times. Whereas Ontario, British Columbia and New Brunswick outperform the national average, residents of Alberta and Nova Scotia endure especially long waits for several procedures including orthopaedic surgery and cancer radiation treatment. 

These gaps are significant, but the most striking finding in our comparative evaluations is the extent to which even top-performing provinces fall short of the standards set by many European countries.  For our healthcare research, we cooperate with the Health Consumer Powerhouse, a think-tank based in Brussels. Each year our European partners are dismayed by Canada’s wait times. When informed that our national wait time target for hip replacement surgery is six months, the president of the Health Consumer Powerhouse was stunned, remarking that in his native Sweden, a three month wait is considered unacceptable. Waits for several other procedures are also longer in Canada. The median wait time for an MRI in Alberta is more than eight weeks. Ontario does better – the median wait is approximately six weeks. But in top European nations like the Netherlands, Switzerland and Germany the typical wait is between one and three weeks. And yet Canada has higher levels of per-capita healthcare spending than most European countries. Clearly, Canada is doing something wrong.
There are ways to close the gap. One straightforward reform to improve efficiency is changing our approach to funding hospitals. Currently, we fund most hospitals through “global budgets.” Under this system, provincial governments provide each hospital with a budget for the fiscal year. The budget is fixed, and unrelated to a hospital’s productivity or service quality.
This creates several perverse incentives. For starters, hospital administrators face a strong incentive to encourage patients who require intensive, costly care to go to a different care provider, and to discharge costly patients as quickly as possible. Conversely, it provides little incentive to quickly discharge a not-very-sick patient who could safely be sent home. Caring for such a patient is relatively inexpensive, and if her bed is vacated it may be filled by a sicker person who requires intensive care that would strain the hospital’s budget. A hospital gets the same amount of revenue no matter how many people they treat or how sick their patients are.
None of this is to disparage hospital administrators. The fact that our system functions as well as it does despite this system is a credit to the excellence of health care professionals and administrators in Canada. But incentives influence everybody and administrators can face disciplinary actions, removal and public embarrassment for overspending. The incentive to encourage the most expensive patients to seek care elsewhere is therefore powerful.  Any system that incents sub-optimal productivity will get just that.
Global budgets create further unhelpful incentives.  Administrators have little reason to devote time and money to researching potential innovations. If a new process will improve productivity over time but involves up-front costs, administrators will be reluctant to examine it. The costs must be incurred right away, and the capacity to treat more patients yields no additional revenues. Innovation and research are thus rendered essentially valueless.
Better models exist. European funding models in which money “follows the patient” have been shown to improve productivity. Under these systems, hospitals are paid by the government for the number and type of services they perform, or the number of individuals they treat with particular conditions. Of course, there are challenges involved in classifying individuals and ailments. But it is better to have a reasonable incentive structure and address implementation challenges than to work within a fundamentally flawed system that severs the link between productivity and revenue.
There are signs that reforms are coming. Ontario and British Columbia announced this year they will transition away from global budgets, and toward models in which money follows the patient. British Columbia’s decision was based on successful pilot projects that resulted in greater financial efficiency and more timely quality care for patients. The success of these pilot projects and the decision to implement patient-based funding province-wide will hopefully spur other provinces to consider reform.
The European experience shows that long waits are not a necessary trade-off for universality. By implementing proven reforms from Europe, all ten Canadian provinces can join the ranks of jurisdictions that provide prompt, consumer-centred healthcare without compromising on the core principle of universal access.