Over the next few weeks, The Hub will be expanding upon the top five submissions for the 2023 Hunter Prize for Public Policy, which asked for proposals that would tackle the wicked problem of Canada’s growing wait times for medically necessary care. In each of these dispatches, readers will get a closer look at the issues at play, as well as analysis from experts in the field.

In 2022, Canadians faced an average wait time of almost 28 weeks for medically necessary treatment—close to three times longer than in 1993. Could a new funding model help tackle the problem? 

In the runner-up entry for the 2023 Hunter Prize for Public Policy, “The Diagnosis-related Groups Domino-effect: From Hospital Remuneration to Healthcare Reform,” Bacchus Barua, director of health policy studies at the Fraser Institute, examines how medical wait times in Canada can be shortened through the adoption of activity-based funding for hospitals.

Under an activity-based funding system, Barua believes the problems inherent in the current global budgeting regime—such as a lack of transparency and disincentivizing efficiency—can be eliminated. According to Barua and several health-care policy experts, activity-based funding can better align patient needs and health-care spending, even if it means a more complex system overall.

Global budgeting vs. activity-based funding

Under the global budgeting system, hospitals typically receive funding based on historical budgets, adjusted for factors such as inflation and population growth. This system also takes into account the specific health-care needs and priorities of different regions, as well as performance and efficiency metrics.

Shawn Whatley, a physician and Munk senior fellow for health-care policy at the Macdonald-Laurier Institute, agrees that global budgeting no longer meets Canadians’ health-care needs.

“Global budgets make it very hard for hospitals to respond to demands. Activity-based funding means they can respond immediately,” says Whatley. “Patient demands go up, they immediately are getting extra funding, and they can hire more help or pay nurses overtime or do whatever they have to do.” 

While serving on the finance committee for a hospital near Toronto, Whatley experienced the global budgeting regime first-hand. If they came in under budget, he reveals, the government would cut their funding. If they broke even, the government would not provide funds for growth in the community. And if they were too far over budget, the government would replace the board. The aim, therefore, was always to slightly exceed their budget.

Unlike global budgeting, activity-based funding allocates funds according to the actual services provided. This model, Barua argues, could reduce wait times without necessitating increased private-sector involvement, creating a competitive and dynamic funding environment where funding follows the patients. 

Nadeem Esmail, a senior fellow at the Fraser Institute who served as its director of Health System Performance Studies from 2006 to 2009, says that with activity-based funding, patients are the source of hospital revenues. If a particular hospital doesn’t treat enough patients or if its emergency room is inaccessible, he notes, that hospital would not have the same revenue as a hospital that is performing well in both of those areas.

“For providers, all of a sudden patients no longer drag money out of the budget that the hospital is trying to hold on to for the end of the year so they can hit some magical mark,” says Esmail. 

Barua’s study calls for implementing activity-based funding alongside a national efficient price and diagnosis-related groups to ensure fair and demand-driven federal health-care transfers to provinces. This approach aims to improve transparency and remove political bias from the funding process.

For context, a national efficient price is a standardized cost measure used by health systems, including public health-care models, to determine the appropriate level of funding for services delivered by a hospital. A diagnosis-related group is a system designed to classify hospital cases into specific groups in order to identify the products and services that a hospital provides. Diagnosis-related groups help ensure health-care facilities are paid according to the conditions or illnesses they treat, and the services provided, instead of the resources used by a patient or the length of their stay.

Implementing activity-based funding

Barua writes that implementing activity-based funding would partially rely on a case-mix system. A case-mix is defined as a group of patients treated at a specific hospital that require similar tests, diagnostics, procedures, etc., and helps determine what different hospitals specialize in. 

Additionally, Barua says that an activity-based funding system would rely on a price per case-mix group. He notes that Canada already employs this system through a version of the International Classification of Disease (ICD) standard, which codes inpatient activity and features a version of case-mix grouping based on the diagnosis-related-groups system. 

Barua suggests that the federal government could assign the task of determining a nationally efficient price for medical services required for each case-mix to the Canadian Institute for Health Information, utilizing this standard.

Krystle Wittevrongel, a senior policy analyst at the Montreal Economic Institute, was intrigued by Barua’s proposition to use existing ICD codes to help implement activity-based funding. 

“We often talk about activity-based funding and using the diagnosis-related-groups basket as well, but when the author was talking about ICD codes and having the Canadian Institute for Health Information be the one to take ownership of this in that context, I thought it was really interesting,” she says. 

Barua writes that the federal government could also provide a one-time fund for the provinces to improve their electronic medical records (EMRs) to help centralize and enable cross-province patient referrals. Wittevrongel says Barua’s advocacy for the use of EMRs is very important.

“That’s also something that we have talked about a lot in the past—the need for interoperable digital medical health records, especially to connect the provinces,” she says, noting that the modernization and digitization of health care are recurring themes in all Hunter Prize submissions for 2023.

Canada out of step with its peers

Whatley and Esmail note that Canada stands out among its peer countries for not having made the transition to activity-based funding.

“The whole world left global budgets for hospitals years ago,” says Whatley. “Central planners try to estimate population growth and the burden of disease and demographic changes, and try to have evidence-based policy design, and decide this is how much a hospital needs. None of that works.”

Esmail points out that even the United Kingdom’s National Health Service, itself often maligned for long wait times, has modernized in the last 30 years to an extent that the Canadian health-care system has not.

“One of the big key reforms that has happened around the developed world over the last 30 years is changing hospitals from a budgetary-based funding to activity-based funding as Bacchus discusses, and that actually shifts incentives in any number of areas,” he says. 

Potential pitfalls

A summary of activity-based funding from the University of British Columbia (UBC) indicates that while the system has been adopted by most of the developed world over the past 30 years, there have been some drawbacks. The report found that hospital spending has increased in countries that adopted the funding model, causing administrative difficulties. According to UBC, much of this additional spending is due to an increase in volume, as well as the incentivizing of unnecessary care. 

Whatley further cautions that while activity-based funding works well for funding hip or knee replacements and emergency room procedures, it is less effective when it comes to people seeking help for depression or dizziness or dehydration.  

“The body can only go so fast in recovering from those kinds of things,” he says.

The UBC report notes that other areas—including intensive care and mental health care—have also been identified as difficult to manage with activity-based funding, due to heightened levels of care and higher costs. Many countries are still experimenting with funding these services through the activity-based funding system. 

Why governments still prefer global budgeting 

Barua says governments are predisposed to retaining global budgeting because it is simpler to administer and requires less accountability—and that patients are paying the cost in longer wait times. 

He notes that when activity-based funding systems are administered correctly—as in Switzerland or Germany, for example—the increased volume of care and potentially shorter wait times can lead to lower costs per procedure. However, he cautions that without other reforms, such as cost-sharing and private partnerships, there will be higher costs.

“This is beneficial for patients and providers, but not necessarily for the government that will have to either raise taxes in response, cut bureaucracy, or consider additional common-sense reforms,” says Barua.

Esmail agrees that global budgets are administratively simple for governments and operationally simple for hospitals because everyone understands the amounts of money being transferred. Negotiating activity-based funding will be complex, he says, and will require work from sides to set costs for procedures and establish billing for services on a more individualized basis. In the end, however, he believes the effort would be worth it.

Right now, he says, “it’s simply a politicking game where the hospital is trying to encourage the provincial government or the health authority to give them more budget, for whatever reasons,” he says Esmail. “On the flip side [with activity-based funding], we now have transparency from the government and a clear record of what health care is being purchased from providers.” 

The Hamas terrorist attack in southern Israel on October 7 killed more than 1,200 Israeli civilians—the most Jews killed in a single day since the Holocaust. In the aftermath of that attack, how divided is the Jewish diaspora regarding Israel and its military offensive in Gaza? Not very, according to some members of the community—and they are sharply critical of media outlets that are amplifying the voices of what they say is a very small minority of Jews who oppose Israel. 

Many public figures around the world have been calling for a ceasefire between Israel and Hamas, whose operations are based in the Gaza Strip. But supporters of Israel’s offensive into Gaza, intended to destroy Hamas’ military capabilities permanently, say a ceasefire would only aid and reward Hamas.

Ariella Kimmel, vice-president of strategic communications and development for Winston Wilmont, says a ceasefire is not widely supported in the Jewish community. While she mourns the loss of Palestinian civilians, she believes that Hamas left Israel no choice but to conduct a military operation. 

“Most of the community understands that Hamas must be destroyed,” says Kimmel. “There is no way Israel can live safely and securely otherwise.”

While Kimmel believes that most of the Jewish community shares this view, she points out that the media frequently quotes Jews who oppose Zionism, many of whom belong to organizations like Jewish Voice for Peace (JVP) or Independent Jewish Voices (IJV). Kimmel notes that while differences of opinion are natural, people should be careful when considering the positions held by these groups.

On October 31, for example, JVP was sharply criticized in a Jerusalem Post editorial as being representative of a “small minority of Jews who identify as anti-Zionist.” 

“Groups like…the Orwellian-named Jewish Voice for Peace, and others, have been front and center at massive anti-Israel demonstrations, and individuals wearing kippot and wrapped in tallitot have drawn camera lenses in public protests against the Jewish state,” the editorial stated. “Anti-Zionist Jews are not representative of the Jewish community and they don’t speak in its name. They are as Jewish as the Westboro Baptist Church is Christian.” 

Kimmel agrees. “Their views, statistically, are not representative of the community as a whole,” she says. “JVP has recently been organizing with Samidoun, which is directly affiliated with the Popular Front for the Liberation of Palestine [PFLP].” 

The PFLP, a far-left group based in the Gaza Strip and the West Bank, has been listed as a terrorist entity by the U.S. government since 1997. In 1970, the PFLP took part in an attack on an Israeli school bus that killed or wounded 37 civilians and has conducted rocket attacks against Israel in the 21st century. In 2022, Samidoun organized a rally with JVP in New York City to call for the release of a PFLP leader being held in an Israeli prison. 

Large media outlets such as the CBC have often interviewed members of similar organizations, including Independent Jewish Voices. Like JVP, IJV is critical of Israel. It has also faced fierce criticism from Jewish organizations such as B’nai Brith for its support of the Boycott, Divestment, and Sanctions movement that promotes economic sanctions against Israel. 

An IJV co-founder and former Carleton University professor, Diana Ralph, contributed to a book that asserted 9/11 conspiracy theories, and in 2007 posted a $10,000 bail for a suspected terrorist. IJV itself has faced further controversy for posting a link to an article denying that six million Jews were murdered in the Holocaust. The organization retracted the link and blamed its posting on “sloppy social media use,” stating that IJV does not promote Holocaust denial.  

Michael Tzion, a Toronto resident, says that the media’s desire to speak with such organizations reflects how people are more interested in reading news for controversy than for facts. 

“The truth is the Jewish people have never ever been united as much as they are today,” he says. “Jews are rallying across the world supporting the people of Israel and showing their Jewish pride.” 

Two recent polls support Tzion’s claim. An Angus Reid poll found that a vast majority of Canadian Jews, 78 percent, sympathize with Israel during the war, with a negligible percentage sympathizing with Palestine. A 2019 survey from the University of Toronto and York University found the same percentage of Canadian Jews felt a strong or moderate connection to Israel. 

Tzion says Jews who oppose Israel are few and far between, but those who do exist are very vocal and receive the platforms and attention they are looking for. 

“The Jewish community by and large is not even remotely divided. We have never been so united,” says Tzion. “It’s obvious in Israel, considering all the protests have stopped. And even if people disagree with the government, they understand that now is the time to unite and support our soldiers in the front lines.” 

Protests against the current Israeli government had been ongoing since 2022, but have mostly ceased since the October 7 attack and Israel’s declaration of war on Hamas. Hundreds of thousands of Israelis, including those with dual citizenship and those living abroad, have registered for service in the Israel Defense Forces. 

Kimmel agrees with Tzion that anti-Israel voices are amplified to fit a particular narrative—which is that Israel’s actions are so widely opposed that even Jews are against it. 

“It’s an attempt to use those they view as ‘good Jews,’ with the views they want to amplify, rather than engaging with the wider Jewish community,” says Kimmel. “My biggest question for these anti-Zionist Jews is: Even if you oppose Israel, how can you not condemn Hamas? And where are your calls for the return of the hostages when you’re protesting against Israel?” 

Kimmel continues: “They knew what they were doing when they committed the massacre on October 7. They knew the full force of Israel’s army would come down on them, and they have made clear they don’t feel responsible for Palestinian civilians.” 

Kimmel believes a ceasefire will not be possible unless Hamas is fully disarmed, surrenders unconditionally, and releases every hostage taken in the October 7 attacks. As well, those responsible for the attack must be turned over to Israel.