The Dryden Observer

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Small hospitals spared from volume-based funding

Chris Marchand

Chris Marchand served as editor of the Dryden Observer from August 2009 to April 2018.

By Jon Thompson

Although Ontario’s health care system is undergoing an overhaul, it’s proceeding with caution in small, rural and northern hospitals.

The tabled provincial budget made last year’s $20-million fund for small hospitals into a permanent investment and those hospitals will see budgets rise by an additional one per cent in 2013. Applied to the Dryden Regional Health Centre, one per cent would mean a base funding increase of $175,000 while the $20-million fund could alleviate pressure to raise revenues by supporting infrastructure.

“This money is to help us during transformation phase of health system reform and providing making sure that those hospitals in small rural and northern communities are stable while investments are being made in community services and other programs,” said Dryden hospital CEO and chair of the Ontario Hospital Association for small, rural and northern hospitals, Wade Petranik.

Dryden’s hospital ended 2012 with an audited $360,000 surplus, which Petranik attributed to additional funding provided for specific procedures such as knee and hip surgeries.

If applied on a larger scale, however, the type of volume-based financing that helped Dryden reach its budget this year could make funding unpredictable for Ontario’s small hospitals.

Speaking to the Northwestern Ontario Associated Chambers of Commerce (NOACC) on Apr. 27, Petranik pointed out that small hospitals in Northern Ontario represent about six per cent of the province’s health spending. When the medium-sized hospitals in the North are factored in, the piece of the funding pie doubles to 12 per cent of health spending for less than six per cent of Ontario’s population. The province expects the Northwest’s population will only increase one per cent by 2036 while health spending is expected not only to contract, but to evolve.

The plan to integrate services province-wide has progressed from 14 Local Health Integration Networks (LHINs) to “local hubs” within those networks. While Petranik spoke supportively of the local hub model, he has been advocating for maintaining base funding for small hospitals.

Hospital specialization is on the horizon in urban centres as Ontario moves to “quality-based” procedures, a model that funds operations based on volume. Petranik anticipates Southern Ontario could create huge economies of scale, drive standardization and lower costs under a model that could theoretically specialize entire facilities to single procedures. If it were to be applied to rural areas and particularly to communities separated by great distances in Northern Ontario, however, he argued it would destabilize the budget process.

“We’d be changing from a very base budget funding model where we know what we’re going to get every year to a much more variable system that is more dependent on the volume of services provided,” he told the regional chamber. “We have highly fixed costs and capacity costs. Even to keep the doors open to our emergency, we need lab x-rays. We need other support services. Some of the unintended consequences of this one-size-fits-all approach is we’re going to get a smaller portion of a shrinking pie.”

Long-term strategies could see processes such as cataracts and colonoscopies transferred from hospitals to community clinics. As the Aging At Home strategy is implemented, some care is expected to migrate from hospitals and long term care homes to personal residences, intending to alleviate pressure on both institutions.

Petranik spoke of a “delicate balance” in small hospitals where if procedures are removed from the catchall, local health care facilities, larger problems like staff recruitment and emergency management could begin to impact the quality of care.

“We’ve been very honest with them that this isn’t going to work. We rely on those volumes to create critical mass. It makes us look more inefficient than we actually are,” he said. “It’s really important that all stakeholders in the community understand that this is a serious time in terms of health system transformation. We know we have big financial problems on the provincial level. We know economies in the Western world are struggling with health care costs and how they grapple with aging demographics and people living longer with chronic disease. It has special meaning for small, rural and northern communities in that we don’t have all the options available to us that might be available in an urban environment.”

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