If you want healthcare change, you change the incentives, and that is precisely what Premier Danielle Smith has finally done with her announcement of a pilot project introducing “patient-focused funding” in healthcare. She's been wanting to do it for a long time, more than 25 years, in fact – as I can personally attest.Smith announced the launch of the first phase of a major reform to surgical care funding, introducing a “patient-focused funding” model that shifts away from traditional block funding for hospitals toward an activity-based system where funding follows the patient. Backed by an $809 million investment, the plan aims to dramatically increase the number of surgeries performed — targeting up to 50,000 additional procedures — by tying hospital funding to the volume and complexity of surgeries delivered, while expanding the use of both public operating rooms and chartered private surgical facilities.I say ‘finally’ above, as Smith has dreamed of this day for more than 25 years. Back when the now-premier and I occupied adjacent offices in the Calgary Herald’s editorial board row, changing healthcare by changing incentives was much talked of. Medical professionals outside the provincial health system and unconstrained by union contracts look for efficiencies and apparently find them: if you need the services of a dentist or an eye surgeon, you typically don’t wait long. Their profitability depends on their efficiency, and the people needing their services are the beneficiaries..What if the government system were incentivized to do the same?I was an early convert.So here we are, a quarter of a century later. Alberta Health Services (AHS) still receives the vast majority of its funding through block funding from the provincial government. These are fixed annual allocations based on historical spending, population needs, and negotiations, and it’s intended to cover acute care, surgeries, emergency departments, and related services.Unfortunately, what that means is that every person who goes to the hospital is still a cost to the system. That’s a problem. So how do you control costs? You limit service, that's what you do. That’s why it takes months, even years, to obtain certain medical procedures — joint replacements are the usual distress example, but there are others. There is only so much money, so wait your turn. The medical establishment’s only answer is to demand more money from the government. Changing how they do things in pursuit of efficiency is seldom entertained.What Smith is trying to do is turn the cost-centre patient into a revenue stream — a customer to be served, even sought out..Not a cost, you see. A revenue opportunity. And if that is successful, it changes everything.That is, if you have a system where the patient becomes a source of new revenue, instead of a drag on a fixed amount of money, the incentive for hospital administration is now to go looking for customers. The question becomes not how long can we ask poor old Mr. Jones to wait for a new knee, but how can we squeeze him in more quickly and bill the government?Will it work?The Alberta Medical Association has expressed cautious support..Alberta’s Left predictably calls this a step to healthcare privatization. They would say that, of course, change-resistant as the people in Alberta’s healthcare system are encouraged by their unions to be. And yes, certainly private clinics will be able to bid along with established hospitals on the work made possible by an infusion of funds that accompanies Smith’s announcement. But whoever does the work, it’s still the government paying.Bottom line: Funding “follows the patient” based on the volume and complexity of surgeries performed. Funding is tied to actual procedures delivered. For now, Alberta will have a hybrid model: most hospital funding remains global/block, with activity-based elements being phased in for high-volume surgeries to incentivize more procedures and reduce wait times.But you can see what the opportunities are. The government’s stated goal is to reduce Alberta’s longstanding surgical wait times, drive greater efficiency and accountability in the health system, and incentivize hospitals to treat more patients rather than operating within fixed annual budgets.At last.Bring it on.
