Thoughts about Alberta and activity based funding

After being home for a week from my trip to Alberta speaking on behalf of Friends of Medicare, I have a few reflections:

Activity-based funding

Alberta is moving to pursue a policy named “activity-based funding”. Essentially ABF is fee for service payment for hospital care. Hospitals would be paid a specific free for an episode of care such as a hip replacement. The United States government moved most of its hospital funding through their Medicare program into Diagnosis Related Groups or DRGs in 1983.

Hospitals are funded through a variety of different means across Canada. In fact, in most parts of Canada, hospitals are no longer independent organizations. Rather they are operational units of regional health authorities which receive integrated funding for acute care and publicly funded long term care, home care, mental health, and public health services. In Ontario, 14 the local health integration networks (LHINs) created in 2005, have regional funding envelopes but don’t deliver services. Services continue to be delivered by independent non profit hospitals and the previous array of other providers which include many for profit corporations who are heavily involved in the delivery of long term care and home care in Ontario.

The impacts of activity-based funding or DRGs or other types of prospective payment systems are heavily dependent upon the context of their implementation and their specifics. As always the devil is in the details. For example, if hospitals are paid on a volume basis but there is no accountability for quality, then clearly hospitals would have an incentive simply to discharge patients sicker and quicker. If patients suffer complications which bring them back, then an additional fee can be charged. and how do you assess the correct fee for every patient when some hip replacement patients like marathoners are good risks, will recover quickly, and cost relatively little and some like 80 year olds with emphysema and diabetes are poor risks, will take a long rehabilitation period, and whose care will likely be expensive. If the fee paid is the same or doesn’t properly account for extra social risks such as homelessness, then the new policy can really create bad disparities.

For more on ABF, DRGs etc. see: An analysis of Activity-Based Funding by Canadian Doctors for Medicare.

Stirring up a hornet’s nest: Blunt policy endangers health care reform

My biggest concern about what’s happening in Alberta is that it violates one of health care’s key precepts, primum non nocere, “first do no harm”. The most influential reports on quality in health care are the US National Institute of Medicine’s 1999 To Err is Human and the 2001, Crossing the Quality Chasm. Crossing the Quality Chasm has a nice section on the need to treat complex systems, like health systems with respect and make change gently and deliberately.

The authors of the report, including Dr. Donald Berwick, CEO of the Institute of Healthcare Improvement, suggested focusing on frameworks and “simple rules” to drive reform instead of relying upon so-called big-bang legislative and regulatory solutions. That’s because, big changes, like Alberta dissolving all the individual health regions in 2008 and putting in place a very complicated organizational structure for Alberta Health Services with different roles, responsibilities, and reporting relationships for hundreds of senior managers can wreck big havoc. I’m not an expert when it comes to complexity theory in health care (Google Toronto’s Brenda Zimmerman and Shalom Glouberman for more information), but here’s the essence. There are simple systems, like a pulley lifting a load over a river. Then there are complicated systems which are a series of simple systems like a bunch of pulleys, gears, and wheels, like a car. Then there are complex systems like ecosystems. 

We can know pretty much everything about complicated systems — even one as gigantic as sending a spaceship to the moon. But we can never know everything about a complex system because the second, third, and even tenth order interactions might be crucial but it’s almost impossible to predict these interactions in advance. For example, you might be bothered by some insects in your garden so you kill them off with pesticides. A few years later your oak trees start falling down because those pesky insects were part of a chain of life which controlled an oak tree parasite. You didn’t know that in advance and maybe you couldn’t have known it in advance.

The Institute of Medicine suggested ten simple rules that should guide health care re-engineering.

1. Care should be based upon continuous healing relationships instead of mainly in-person visits.
2. Care should be customized for individual patients’ needs and values instead of being dictated by professionals.
3. Care should be under the control of patients not professionals.
4. Knowledge about care should be shared freely between patients and providers and between different providers. This transfer should take maximal advantage of leading-edge information technology. Patients should have unrestricted access to their records.
5. Clinicians should make decisions on the basis of the best scientific evidence. Care should not vary illogically from clinician to clinician or from place to place.
6. Safety is the responsibility of the whole system not individual providers.
7. The content of care is made transparent instead of being held in secret. The health system should give as much information as is required to patients and families to enable them to fully participate in clinical decisions, including where to seek care.
8. Patients’ needs should be, as much as possible, anticipated and not treated in a reactive fashion.
9. The health care system should continually decrease waste (goods, services, and time) instead of focusing on cost reduction.
10. Providers should cooperate and work in high-functioning teams instead of attempting to work in isolation. Concern for patients should drive cooperation among providers and drive out competition based upon professional and organizational rivalries.

I think these would be good rules to follow, especially in Alberta. There is so much innovation within the public system; the question should really be why is the government making such drastic changes that risk serious untoward effects?

The answer in Alberta as well as other provinces seems to be that a lot of the Canadian elite decided about 10 years ago that our country should have the for-profit sector deliver much elective surgery. I was told this in 2001 by a senior health administrator in Alberta and recently by a senior health ministry official in another province. When I asked given the risks, given the current public sector best practices which could be easily spread, why was he pursuing activity-based funding. He said that activity-based funding was inevitable and he was resigned to trying to implement it is such a way as would cause the least harm.