Healthcare delivery silos are impeding Canada's ability to adapt to changing demands. Experience abroad shows integrated payment models that distribute single payments or funding envelopes across providers add financial incentives to reduce costs and increase efficiency and effectiveness across a patient's entire journey through the system.
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Vice President, Research
The Study In Brief
Once held in high esteem worldwide, Canadian healthcare has taken a drubbing in recent international comparisons, posting repeated poor showings against similarly high-spending OECD peers. The erosion in the worldwide status of Canadian healthcare has been attributed to the failure of the provinces to adapt their aging health systems to the changing face of healthcare demand. Since the late 1950s, the provinces have only tinkered at the margins of the Canadian healthcare delivery silos--a system that is arbitrarily divided among hospitals, specialists, and the provision of prescription drugs, primary care, and home and community care.
This Commentary provides an overview of current payment models for provincial health services, focusing especially on areas where there is misalignment among the methods. Then, turning our attention beyond Canada, we examine a diverse range of international integrated payment reforms--defined here as models that distribute single payments or funding envelopes across groups of once disparately remunerated providers in order to foster shared financial incentives.
A series of emerging policy reforms in the United States, the Netherlands, England, and Germany has attracted attention from international policymakers for going beyond the silos of traditional payment reforms in healthcare to introduce new financial flows that bridge sectors and settings. New models such as bundled payments and accountable-care organizations disburse single payments across groups of provider entities, offering shared financial incentives to improve coordination, efficiency, and effectiveness across a patient's entire journey. Although still in their infancy, early evaluations have found compelling evidence of the potential for some of these models to reduce healthcare costs while maintaining or improving the quality of care.
With a still relatively new federal government and the recent success of the pan-Canadian Pharmaceutical Alliance in providing a potential template for cross-provincial collaboration, the time appears ripe for collaboration on integrated payment reforms and greater sharing of experiences and expertise. Federal players such as Health Canada and the Canadian Institute for Health Information can have a strong role in facilitating this Canada-wide collaboration, with funding to facilitate transition, analytic tools that generate insights across the continuum, and information brokering among provinces.
The Canadian provinces sit among the top healthcare spenders in the world, yet the results they achieve for this spending are disappointing.
Once held in high esteem worldwide, Canadian healthcare has taken a drubbing in recent international comparisons, posting repeated poor showings against similarly high-spending OECD peers on key dimensions of performance such as access to services and coordination of care. Only the United States--perennially holding last place saves Canada from occupying the bottom of the list (Davis et al. 2014; Commonwealth Fund 2011).
The erosion in the worldwide status of Canadian healthcare has been attributed to the failure of the provinces to adapt their aging health systems to the changing face of healthcare demand (Simpson 2013; Lewis 2013). Since the late 1950s, the provinces have only tinkered at the margins of the Canadian healthcare hodgepodge of funding and delivery silos--a system that is arbitrarily divided among hospitals, specialists, and the provision of prescription drugs, primary care, and home and community care (Weil 2016). These legacy structures were adequate for treating the relatively simple episodic conditions that dominated healthcare in past generations. Today, they are not adequate to serve the expanding ranks of Canadians living with multiple chronic diseases, dementias, and palliative-care needs. These complex patients frequently fall into the cracks between providers and care settings, resulting in avoidable emergency department visits and hospital admissions (Kristensen, Bech, and Quentin 2014). Poorly coordinated healthcare carries both human and economic implications: studies find that more fragmented care systems are associated with worse health outcomes and with substantially higher costs (Frandsen et al. 2015).
One important cause of this fragmentation is the way that the provinces pay for their healthcare services. A large and varied body of research confirms that different ways of paying for health services--such as salary, fee for service, and per case payments--have different effects on the way care is delivered (Gosden et al. 2000; Flodgren et al. 2011). The Canadian experience offers several examples of this phenomenon. The provinces distribute $58.5 billion to hospitals each year largely through fixed global budgets--a system closely linked in international studies with long wait lists for elective surgery and low productivity (Dredge 2004). Not surprisingly, Canada boasts longer wait times for elective hospital care and longer inpatient lengths of stay than many of its peers. Conversely, most of the $33.4 billion that the provinces pay annually in physician compensation has been disbursed on a fee-for-service basis--a system long associated with uncontrolled increases in the volume of services furnished. Accordingly, provincial governments frequently point to overutilization of some physician services as an argument for expanding salary or capitation-based remuneration models for physicians.
Provinces have recognized that payment reforms are among the most significant policy levers they hold for driving changes in the health system. During the past decade, British Columbia, Ontario, and Quebec have introduced the partial use of activity-based funding (or payment per case) as a complement to hospital global budgets in order to shorten wait lists for elective surgeries. Ontario has shifted some primary-care physicians from traditional fee-for-service payments to mixed capitation (per patient) payments, coupled with quality incentive bonuses. Both Ontario and Alberta have introduced similar reforms for long-term care homes, tying funding levels to the complexity of their residents' care needs.
Evaluations of these policy changes have shown mixed results (Glazier et al. 2012; Kantarevic, Kralj, and Weinkauf 2011; Li et al. 2011). Although implemented in different sectors, all these reforms share the common theme of modifying payment mechanisms within the pre-existing silos of funding and care delivery. Provinces have made no significant attempts so far to reform how these silos are organized or integrated with one another.
By contrast, a series of emerging policy reforms in the United States, the Netherlands, England, and Germany has attracted attention from international policymakers for going beyond the silos of traditional payment reforms to introduce new financial flows that bridge sectors and settings. New models such as bundled payments and accountable-care organizations disburse single payments across groups of provider entities, offering shared financial incentives to improve coordination, efficiency, and effectiveness across a patients entire journey. Although still in their infancy, early evaluations have found compelling evidence of the potential for some of these models to reduce healthcare costs while maintaining or improving the quality of care (Hussey et al. 2012; Brown 2012).
These developments have not been ignored by Canadian researchers and policymakers. They have generally been drawn to the prospect of integrated payment models offering a solution to the challenge of fragmented health systems. Most recently, Health Canada's Advisory Panel on Healthcare Innovation (also known as the Naylor Report) called for the provinces to pilot a variety of bundled payment models across healthcare settings. It proposed a new federal role to facilitate, support, and evaluate such reforms across Canada and to spread the results (Advisory Panel on Healthcare Innovation 2015). In Ontario, such reforms are actively being contemplated--clinical integration pilots are underway, with the expectation that payment integration will follow later (Wojtak and Purbhoo 2015)--while other provinces are also showing interest.
Notwithstanding their conceptual appeal, integrated payment models are complex,...