Ontario reformed its hospital funding model in 2012 to help control rising healthcare costs and bring the system in line with leading international models. The new model called the Health-Based Allocation Model (HBAM) allocates 40% of provincial funding to hospitals based on clinical data, financial information, and demographics rather than global budgets. It uses a patient-based approach called Quality-Based Procedures to set fixed rates for clusters of related diagnoses to standardize care, reduce inappropriate variation, and incentivize quality improvements and cost reductions while earning margins. The funding changes have led to unintended consequences like significant yearly redistributions of funding between hospitals, an increased focus on clinical documentation to ensure accurate coding and payments, and concerns

1. “The Times They Are
A’ Changin’”: Ontario’s
Health System Funding
Reform
Tyler Chalk
The Hospital for Sick Children
CAPHC Annual Conference
October 2016

2. Objectives
• Understand how (and why) the Ontario government
fundamentally changed how hospitals are funded in 2012
• Review some consequences (intended and otherwise), how
hospitals have responded, and the critical importance of analytics

3. Ontario reformed hospital funding in 2012 to help bend the cost curve and
catch up with leading health systems
• Healthcare is 42% of every dollar the province spends
• If trends continue, grows to 70 cents in 12 years
• Clear trend in year-over-year funding changes
• Ontario is late to the game
• Learning from other jurisdictions

4. Source: Ontario Ministry of
Health and Long-Term Care
Moving from global funding to patient-based funding

5. 5
HBAM• Competitive model, share of the pie exercise (zero-sum game)
• $5.2B divided between hospitals each year
The Health-Based Allocation Model (HBAM) uses clinical, financial and
demographic data to allocate 40% of provincial funding for hospitals
Quality-Based Procedures: fixed rate x volume funding with clear incentives
to improve quality, reduce variation and cost, and earn a positive margin
• Clusters of patients with
related diagnoses
• Objectives:
 standardize care
 minimize inappropriate
practice variation
 encourage investments in
quality and safety

6. “Here is Edward Bear, coming downstairs now,
bump, bump, bump, on the back of his head,
behind Christopher Robin.
It is, as far as he knows, the only way of coming
downstairs.
But sometimes he feels that there really is
another way, if only he could stop bumping for a
moment and think of it."
A.A. Milne (from Winnie-the-Pooh)
Funding reform – a burning platform for change at Ontario hospitals
Making time for strategy, while keeping
up with operations…

7. Impact on hospitals
Unintended
Consequences?
Data QualityClear Winners and Losers
- Significant redistribution
of funding each year
- Concept of “forced
improvement”
- Need to confront systemic
issues
- Premium on new models
of care, collaboration,
analytics
- “If it wasn’t documented and
coded, it didn’t happen and
we wont pay for it”
- Clinical Documentation
Improvement as a major
growth industry
- Stifling innovation?
- Ambulatory care
- Case weight methodology
- Non-clinical investments

8. Inset
The analytics journey

9. Thank you!
tyler.chalk@sickkids.ca

10. Thank you!
tyler.chalk@sickkids.ca