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Mary Clare Egberts speaking to a gathering of the Prince Edward County Memorial Hospital Auxiliary.

What the new funding formula means

Currently QHC runs on about $190 million each year. Under the new hospital funding mechanism, QHC administrators figure they will lose about $10 to $15 million—or about seven per cent of their provincial funding.

But this is just an estimate. Part of the formula is so poorly understood, even by health care administrators, they must rely on ministry calculations to determine their impact.

Some have complained the formula is simply too opaque to be useful and that it has never been tested to determine if it will work—or that it won’t make matters worse.

Egberts acknowledges that her understanding of the Hospital Budget Allocation Model (HBAM) is only at a high level”, but says the premise of patientcentric rather than hospital-centric funding is the right approach. She has also concluded that pushing back against the growing financial realities staring at health care is useless.

Yet the HBAM appears to grossly underestimate the costs of operating a hospital in a widely geographically dispersed community, which negatively impacts QHC’s funding.

The HBAM, however, is just one component of the new funding formula. Of increasing significance in the next few years will by the Quality Based Procedures formula—wherein funding for a list of about 30 procedures and conditions will be based upon the most efficient provider of the service.

For example, it once cost QHC about $750 to perform a cataract procedure. Some hospitals in the province can provide the same procedure for about $400. Under the Quality Based Procedures funding mechanism, the Ministry of Health will, in time, cap the amount it will pay any hospital at about $450.

Hospitals that can’t deliver that service for $450 will be forced to choose—either cut back on other services to continue offering the procedure, or get out of the business altogether.

It imposes a financial rigour rarely found in health care in this province and perhaps, administrators suggest, it isn’t necessary that cataract removal services are available at Cobourg, Belleville, Napanee and Kingston.

However, this approach contradicts the Ontario government’s oft-repeated ambition: “quality health care as close to home as possible.” The high-volume urban hospital will always win that competition. Rural or even regional hospitals will be at a competitive disadvantage simply because they don’t perform enough procedures to wring out the efficiencies the large-volume centres can. Faced with further contraction of other services, more and more will opt out of the service. The effect will be that the list of Quality Based Procedures will likely gravitate to large centres—further diminishing the array of services in rural communities.

Egberts acknowledges the risks but understands even more clearly that health care inflation is unsustainable on its current trajectory. Further, she isn’t willing to concede that QHC won’t be able to compete on some if not all of the procedures on this list. She believes QHC staff will meet the challenges of this component of the new funding formula.

She does, however, admit to misgivings about the prudence of some non-elective medical procedures proposed to be included on the Quality Based Procedures list—treating conditions such as chronic obstructed pulmonary disease and congestive heart disease. These tend to be more complex conditions that don’t lend themselves to the structured patient processing contemplated under the Quality Based Procedures funding formula.

Nevertheless, she is convinced this is the right way to go, and the challenges created by these reforms can be fixed over “time. In the meantime she won’t compromise patient safety.

“I’ve already told the LHIN we can’t take $10 million out of our business in one year,” said Egberts. “They know this. We have to show we are working toward these objectives—but we won’t balance the budget if it means putting patient safety at risk.”