Hospital_David Fulmer*Photo by David Fulmer via flickr

Study Led by Karen Palmer Finds Activity-Based Funding of Hospitals May Not Reap Anticipated Benefits

November 05, 2014
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Karen Palmer_Oct 2014Karen Palmer

A new study led by SFU health sciences adjunct professor Karen Palmer suggests that decision-makers considering activity-based funding of hospitals (ABF) should plan for likely increases in post-acute care admissions, and be aware of the large uncertainty around impacts on other critical outcomes.

Recently published in PLOS ONE, the study funded by the Canadian Institutes of Health Research (CIHR) reveals a 24-per-cent increase in discharge from hospitals to post-acute services after implementing ABF. More patients were discharged to community-based providers, such as convalescent care, long-term care, inpatient rehabilitation facilities, skilled nursing facilities and homecare.

“The message emerging from this comprehensive systematic review of the worldwide evidence available on ABF is that governments may not necessarily get the benefits they are expecting with activity-based funding. There may be adverse consequences for which governments are unprepared,” says Palmer.

ABF is an alternative to more traditional hospital-funding mechanisms, such as per diem payments, retrospective cost-based reimbursements and negotiated global budgets (predominant in Canada) in which hospitals receive an annual lump sum. Under ABF, hospitals receive a pre-determined fee for each episode of care. The fee is intended to cover the bundle of services and products ordinarily provided to patients with particular diagnoses, such as appendicitis, pneumonia, traumatic injury or childbirth.

British Columbia, Ontario and Quebec are among the Canadian provinces actively pursuing ABF following its adoption in the United States in 1983. ABF has since spread elsewhere, including to England, Australia, Switzerland and Germany.

Although Canada has publicly funded hospital and physician care, there is comparatively little public funding for home care, rehabilitation care and other forms of post-acute care. The anticipated pressure on post-acute care that follows ABF has potential implications for equitable access to care.

“Governments implementing ABF in hospitals need to watch out for increasing burden on post-acute services, particularly homecare,” says co-investigator Gordon Guyatt, the study’s senior author, a physician and professor of the Michael G. DeGroote School of Medicine at McMaster University. “If they don’t make sure the funding is available, patients could suffer.”

“Governments ought to consider the evidence we found, and exercise due caution before making big changes affecting entire populations,” notes Palmer. “If they move ahead with ABF, they should implement it in stages, and evaluate the impact as they proceed, especially on post-acute-care burden, readmissions, death rates and administrative costs.

The study led by Palmer is the first systemic review of worldwide evidence on ABF. 16,565 articles published during the last 30 years were reviewed by the study’s international research team comprised of 19 researchers at several Canadian, Swiss and Australian universities.

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