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Patient-Based Funding For Hospitals

Archived Backgrounder

Patient-Based Funding For Hospitals

Ministry of Health and Long-Term Care

Hospitals currently receive one lump-sum payment called a global budget, which is based on a hospital's previous budget, instead of on a hospital's performance. There are significant disadvantages to this funding model, including differences in the quality of care, how much a procedure costs at each institution, patient outcomes and specific community needs such as population growth.  

The new patient-based funding model would fund patients instead of the institutions, meaning families get the right health care, at the right time, in the right place. The new model is also more cost effective. There are two main components to patient-based funding.

1.    Health-Based Allocation Model

Health-Based Allocation Model is an evidence-based funding method that takes into consideration the population and clinical needs of the communities served by a hospital.

Population information includes age, gender and growth projections, as well as socio-economic status and geography. Clinical information measures how many complex patients are receiving care and the types of care being provided to the community.

For example, hospitals that serve growing and more clinically complex communities will see an increase in their funding over time.

2.    Quality-Based Procedures

Health care providers will receive funding for the number of patients they treat for select procedures, using standard rates that are adjusted for each procedure. Ontario will establish prices for hospital services based on efficiency and best practices.

Starting in April, Quality-Based Procedures will include:

  • Hip replacement
  • Knee replacement
  • Dialysis and other treatments for chronic kidney diseases
  • Cataract surgery

Other quality-based procedures will be added over time.

Global budgets will still be in place for activities that cannot be modeled. Small hospitals and forensic mental health services will continue to be funded through global budgets.

Patient-based funding will be phased-in over the next three years as follows:
April 2011 Phase 1 April 2012 Phase 2 April 2013 Phase 3 April 2014
Quality-Based Procedures 0% 6% 15% 30%
Health-based 1.5% 40% 40% 40%
Global 98.5% 54% 45% 30%

Educational materials, toolkits and other supports are being made available to all hospital administrators. All hospitals will be informed of their new patient-based funding levels over the next few weeks.

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