Think tank applauds Alberta shift to activity-based hospital funding

A Canadian think tank is voicing immediate support for Alberta Premier Danielle Smith's decision to fund acute care services through activity-based funding, saying it matches best practices internationally.

Smith announced the decision alongside Adriana LaGrange, Minister of Health, and Dr. Chris Eagle, interim president and CEO of Acute Care Alberta. Instead of paying Alberta Health Services with a single annual grant, the province will pay hospitals for each service rendered. This aligns with a patient-focused funding model.

In a press release, Smith said, "The current global budgeting model has no incentives to increase volume, no accountability and no cost predictability for taxpayers. By switching to an activity-based funding model, our health care system will have built-in incentives to increase volume with high quality, cost predictability for taxpayers and accountability for all providers. This approach will increase transparency, lower wait times and attract more surgeons – helping deliver better health care for all Albertans, when and where they need it.”

Currently, the health care system is primarily funded by a single grant made to Alberta Health Services to deliver health care across the province. This grant has grown by $3.4 billion since 2018-19, and although Alberta performed about 20,000 more surgeries this past year than at that time, the province says, "this is is not good enough. Albertans deserve surgical wait times that don’t just marginally improve but meet the medically recommended wait times for every single patient."

Activity-based funding is based on the number and type of patients treated and the complexity of their care, incentivizing efficiency and ensuring that funding is tied to the actual care provided to patients. This funding model improves transparency, ensuring care is delivered at the right time and place as multiple organizations begin providing health services across the province.

LaGrange says, “Exploring innovative ways to allocate funding within our health care system will ensure that Albertans receive the care they need, when they need it most. I am excited to see how this new approach will enhance the delivery of health care in Alberta.”

Independent think tank MEI previously called for the province to make the change and immediately welcomed the news.

"For too long, the way hospitals were funded in Alberta incentivized treating fewer patients, contributing to our long wait times,” explains Krystle Wittevrongel, director of research at the MEI. “International experience has shown that, with the proper funding models in place, health systems become more efficient to the benefit of patients.”

Currently, Alberta’s hospitals are financed under a system called “global budgeting.” This involves allocating a pre-set amount of funding to pay for a specific number of services based on previous years’ budgets.Under the government’s newly proposed funding system, hospitals receive a fixed payment for each treatment delivered. In this way, money follows the patient.

An Economic Note published by the MEI last year that recommended Alberta adopt this approach showed that Quebec’s gradual adoption of activity-based funding led to higher productivity and lower costs in the province’s health system.

Notably, the province observed that the per-procedure cost of MRIs fell by four per cent as the number of procedures performed increased by 22%. In the radiology and oncology sector, it observed productivity increases of 26% while procedure costs decreased by 7%.

“Being able to perform more surgeries, at lower costs, and within shorter timelines is exactly what Alberta’s patients need, and Premier Smith understands that,” continued Wittevrongel. “Today’s announcement is a good first step, and we look forward to seeing a successful roll-out once appropriate funding levels per procedure are set.”

The governments expects to roll-out this new funding model for select procedures starting in 2026.