A new funding model coming to Ontario hospitals is a "wild card" that could create serious unintended consequences, say McMaster University researchers involved in a sweeping new study. 

The study focuses on a hospital funding approach gaining popularity, and that the Ministry of Health wants to implement here. It would institute new incentives for hospitals to decrease wait times and increase efficiency.

That approach, called "activity-based funding", would grant hospitals a predetermined flat fee for providing an "episode of care" to a patient, like an appendectomy, childbirth or pneumonia. That fixed fee is granted "regardless of length of stay or actual resources used," according to a definition in the study. 

Hospitals typically get funding through a variety of means, including per diem payments, or retrospective reimbursement based on their costs to provide certain care. Under so-called "global budgets," a common model, hospitals receive a fixed amount of funding to pay for all hospital services for a particular period of time, usually a year, usually based on historical data. With that model, it's feared hospitals don't have much financial incentive to foster innovation or increase efficiency.

'The basic message is this is something of a wild card, something of a shot in the dark.' - Gordon Guyatt, distinguished professor in the Department of Clinical Epidemiology and Biostatistics at McMaster University

The study, published Monday in the peer-reviewed journal PLOS ONE, is the first systematic review of studies conducted around the world about the results of activity-based funding, its authors say.

The 65 relevant studies consulted included research conducted in Australia, Austria, England, Germany, Israel, Italy, Scotland, Sweden, Switzerland and the United States. The U.S. implemented activity-based funding in 1983. 

A few provinces, including Ontario and British Columbia, are actively moving toward this model. 

The study found a wide range of effects and significant variability in the effectiveness of the approach, 

"The basic message is this is something of a wild card, something of a shot in the dark," said Gordon Guyatt, distinguished professor in the Department of Clinical Epidemiology and Biostatistics at McMaster University and a senior author on the paper. The study's principal investigator was Karen Palmer, a Simon Fraser University adjunct professor in health sciences and science.

Provincial and federal governments undertaking a shift to this mode of funding should know that they is doing so on a "theoretical basis," Guyatt said. "Things don't always work out in the way one is hoping."

David Jensen, spokesman for the Ministry of Health, confirmed that Ontario is developing the activity-based model of funding for hospitals. The ministry launched the model in the 2012-2013 fiscal year with procedures like knee and hip replacements. It's been phasing in more and more "episodes of care", including pneumonia, stroke and neonatal jaundice.

Ultimately, the province plans for 30 per cent of hospital funding to be under a version of the model. 

"The move to activity-based hospital funding will lead to improved patient outcomes through a more consistent use of best practices and a better distribution of resources across the health care system," Jensen said.

The model, which the province calls "Health System Funding Reform," is "focused on delivering better quality care and maintaining the sustainability of Ontario’s universal public health care system," Jensen said.

'It really is a question mark'

The study showed an increase in patients recovering in community-based facilities, like skilled nursing centres and home care, instead of recovering in the hospital. That may or may not be a bad thing, but the situation highlights a tension about medical decisions being made clinically versus financially. The model could lead to an increase in readmission to the hospital, the researchers found.

"It's not more efficient if they die when they would otherwise not have died," Guyatt said. "It's not a good thing if they get readmitted to hospital."

The researchers also warn policymakers about what could happen to tracking health data. "There is a financial incentive to code patients so they appear as sick as possible, thus maximizing reimbursement," according to the paper.

Guyatt and his fellow researchers aren't saying that the model categorically won't work. But the existing literature shows a program that has met with mixed success depending on context and implementation. 

"The advocates (of activity-based funding) have tended to carry the day," Guyatt said.

But the team's research has found the results aren't as clear-cut as advocates have suggested. "The expectations that have been sold may or may not happen," Guyatt said. 

Guyatt argues the provincial and federal governments should conduct initial studies of the model, in Canada, before implementing it more widely. 

"It really is a question mark," Guyatt said. "If they were going to say, 'OK, we're going to institute it in two communities, two hospitals,' I would be much more sympathetic."