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Canada fails to pay for hospital care based on actual patient services

Canada fails to pay for hospital care based on actual patient services

virtually every other developed country with universal healthcare has moved to funding hospitals based on services provided to patients?

NORTHERN, ONTARIO   ~~~~~~  April 29, 2021  (LSN) Virtually every other developed country with universal healthcare has moved to funding hospitals based on services provided to patients, while Canada remains one of only a handful of countries that funds hospitals primarily with lump sum payments, regardless of how many patients they treat, finds a new study released today by the Fraser Institute, an independent, non-partisan, Canadian public policy think-tank.

“Over the last 30 years, the vast majority of developed nations with universal health care have moved away from the financing approach used in Canada towards a system where funding follows patients for hospital care,” said Nadeem Esmail, senior fellow at the Fraser Institute and author of Money Following Patients: A Better Way to Pay for Universally Accessible Hospital Care.

The study finds that of the 28 countries that provide universally accessible health care, only five—Canada, Ireland, Iceland, Luxembourg and New Zealand—still largely fund hospitals with lump sum payments. Conversely, all of the other 23 countries with universal health care have adopted per-patient funding models, otherwise known as activity-based funding.

Under activity-based funding, hospitals are paid an amount of money for each patient cared for based on their particular condition and unique care needs.

Paying hospitals in this manner, when coupled with appropriate initiatives to manage possible negative outcomes, creates powerful incentives to deliver a greater volume and quality of services, with the potential to reduce wait times.

“Policymakers across Canada should learn from our counterparts in other countries that have embraced per patient funding of hospitals as part of universal health care,” said Esmail.

“The way we primarily pay for hospital care in Canada runs counter to the international norm, and serves neither the interests of patients nor taxpayers who fund their care.”

Main Conclusions

  • Over the last 30 years, nearly all of the world’s developed nations with universally accessible health-care systems have moved to at least partially having money follow patients for hospital care, and away from the global-budget approach that dominates hospital funding in Canada.
  • While simpler to administer, global budgets disconnect funding from the volume and quality of services delivered to patients, leading to lower levels of activity and providing no financial incentives for improved access to care or superior quality services.
  • Money following patients turns this system on its head, shifting patients from cost centres and a drain on the budget to a source of additional financial resources for the hospital, and creating powerful incentives for providers to increase throughput, improve efficiency, and improve the patient-centeredness of the services provided.
  • Incentives to improve quality of care, both from a cost perspective and to attract additional patients, are also created by activity-based funding and can be strengthened by funding approaches that restrict payment for complications and poor quality or that reward higher quality.


Nadeem Esmail

Senior Fellow, Fraser Institute

Northern Ontario 
Kenora, Rainy River, Dryden, Thunder Bay, Terrace Bay Marathon, Sault Ste Marie, Sudbury, North Bay, Ontario


Categories: Health
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The Lake Superior Circle Tour in northern Wisconsin (highway 13), loops around Lake Superior state highways in the US states of Michigan, Minnesota (highway 61) and Wisconsin and provincial highways in the Canadian province of Ontario (highway 17). These highways are usually the closest to the lake.

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The Great Lakes — Superior, Huron, Michigan, Ontario and Erie — make up the largest body of fresh water on Earth, accounting for one-fifth of the freshwater surface on the planet at 6 quadrillion gallons. The area of all the Great Lakes is 95,160 square miles (246,463 square kilometers) and span 750 miles (1,200 km) from west to east.



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