ACTIVITY BASED FUNDING
Chris Mazurkewich
Executive Vice President and Chief Financial Officer
Alberta Health Services
Presentation to the
Pan-Canadian Discussion on Hospital Funding
Edmonton, Alberta
November 26, 2010
Our History
• The creation of Alberta Health Services (AHS)
was announced May 15, 2008, bringing together
12 former, separate entities, including nine
health regions and three provincial entities.
• AHS became a legal entity April 1, 2009
• Ground ambulance service was added to
AHS responsibilities April 1, 2009.
• Fixed Wing Ambulance and Corrections Services
in 2010
2
What is Alberta Health Services’ Comparative Advantage
• Intra-provincial learning
• Intra-provincial equity
• Efficiency and economies of scale/expertise
• All of these are ‘works in progress’
• But we are realizing benefits already
3
Transformational Improvement Programs
• Guide us in becoming “the best performing, publicly
funded, health care system in Canada”
• Building on our goals of quality, accessibility and
sustainability
• Values of Respect, Accountability, Transparency and
Engagement
• Five areas of focus to prioritize our work over the next
five years
4
Improving health for all Albertans
Target 2015
Enabling One Health Service
Human Resources
Finance
Improving Access
Reducing Wait Times
Information Technology
Data Integration, Measurement
& Reporting
Right service
Right place
Right time
Capital
Procurement
Enabling Our People
Working as one
Making healthy choices easy choices
Right Care in Right Place & Time
Best Use of Resources
Reducing rework and waste
Supporting self management
Supportive Environments
& Options for Seniors
Skilled & Satisfied Workforce
Working with partners
Engagement Plan (5 strategies)
Scope of practice
Health and Safety
Culture and values
Building a Primary Care
Foundation
Choice and Quality for
Seniors
Primary care access
Early Detection
Today 2010
Future ready
Growing, Aging ,
& Diverse Populations
Disparities in Health
The chronic disease tsunami
Waiting for Service
Practice Variation
Limited options for Seniors
Effort and resource duplication
Workforce misalignment
At home
Management & Treatment
In the community
Self Management
Mental Health
Staying Healthy, Improving Population Health
5
Plans, Reporting and Accountability
Strategic
Direction
(3rd quarter)
Measures reported in Quarterly
Public Performance Report
Informs Refresh
(along with review of health
needs etc.)
Annual Review of Risk
(3rd quarter)
Increases
likelihood
of
achievement
Increases likelihood
of achievement via
Performance
agreements
Strategic
Health Plan
(TIPs)
Individual Performance Agreements
Operational Business Plan/Budget
(1st quarter)
(4th quarter)
6
ACTIVITY BASED FUNDING
7
What is Activity Based Funding?
• A way of allocating a (capped) provincial budget
– Funding based on price per standard unit of service
– Utilizes price-setting, quotas, bonuses, and deductions to
create incentives
– Beyond creating incentives for higher efficiency
(sustainability), need to incorporate measures to ensure
quality and access are appropriate
• “The money follows the patient”
– Uncapped payment per weighted patient?
• Maybe a combination of capped and uncapped payment
8
Some ‘theory’ about activity based funding
Population
Expenditure
=
Size of
Utilization
(weighted,
Rate
(conditions
needs
x per person X
adjusted)
admissions
population
per condition)
Population
Funding
x
Services/
Casemix x Admission x
How successful have
any entities been in
managing this?
Cost/Service
/Quality
(eg days,
tests)
Regional Health Authority/LHIN etc
Funder
Who allocates funding to hospitals on different bases
Activity-based
Funding
ABF
Funder
Hospital
+ Residual (perverse incentive risk)
9
Some ‘theory’ about activity based funding
Population
=
Expenditure
Size of
(weighted,
x
needs
adjusted)
population
Utilization
Rate
(conditions
per person X
admissions
per
x
Casemix x
Cost/Service
/Quality
Services/
x (eg days,
Admission
tests)
condition)
Hospital
Who controls this?
How much of our variation problem
relates to this or cost control?
Different levers for two components
Conditions per person: hard to influence
Admissions per person: also hard to
influence
Who controls this?
How much of our variation
problem relates to this or cost
control?
10
Policy Objectives of ABF
• Some of the policy objectives of ABF are:
– Management of prices, volumes and location of service for
equitable access and long term sustainability – utilization rate
and price?
– Meet established standards and quality – incentives?
– Increase access through incentives to efficient providers –
increase service volumes
– Meet regulatory requirements such staffing ratios in long term
care
– Intra-provincial equity e.g. 17+ ways to fund long term care to a
single funding methodology
11
ABF Roadmap for Alberta
• Long Term Care
– Started implementation April 1st, 2010
– Complete Phase in over 6 years although for AHS
facilities 2 years phase in.
• Supported living next
– From 1 April 2011
• Acute Care
• Home Care, Mental Health follow
12
Implementation Approach
• LTC implementation
– Engagement of all stakeholders – AHW, AHS, Operators,
Associations (e.g. ACCA) in developing funding template and
transition strategy
– Engaging Researchers – U of A School of Nursing, U of C, Inter
RAI and CIHI
– Development of quality indicators through Seniors Strategy
– Keeping political balance through regular meetings and
information sessions
– Clear articulation of Vision and Work plan – ABF Charter and
Project Plan signed of by all stakeholders
– Bi-weekly meetings with President & CEO, EVP & CFO, EVP –
Seniors, and ABF Team
13
Engagement is Critical
• Management and clinician (re)training important
• Management and clinician involvement important
• Simplicity and transparency a major advantage of case
mix-based funding
 Be clear about behavioral responses intended
 Avoid conflicting incentives
• Audit essential to integrity of system
14
Lessons Learnt
• Data availability and quality – organizations planning to implement
ABF must focus on how data is collected and entered into systems
– training and support for front line staff essential
• Engagement of stakeholders – it is never enough – one on one
meetings to mitigate political and operational risk
• Balance implementation approach with practical applicability e.g. 6
year phase in sounds good on paper but not for those who will get
extra funding – they want it NOW!
• Need dedicated support from Operations, Strategy, Finance –
eases implementation
• Strong project framework and focus required
• Must have a way to leverage strengths from external organization
and universities
15
Lessons Learnt
• Expertise (either internal or external) – for AHS Dr. Stephen
Duckett critical resource
• Knowledgeable staff – Economists, Finance, Policy, Strategy,
Clinicians
• Have clear goals and linkage to organizational strategy
• Develop common language and terms so that people clearly
understand the message – too many acronyms
• Common IT systems important but should not be used as an
excuse for not moving forward
16
QUESTIONS?
17