In solution mode | The autonomy of non-profit hospitals

The state of our health systems is deteriorating. Wait times in emergency rooms are increasing. In Quebec, they have increased by 42 minutes over the last five years.

Published at 3:04 a.m. Updated at 1:00 p.m.

Emmanuelle B. Faubert Economist at the Montreal Economic Institute

The wait to see a specialist is long. Last year, one in two Canadian patients waited more than six months from the time they were referred by their GP to receiving treatment from a specialist.

Access to a family doctor is not easier. Right now, one in six Canadians still does not have one.

The fact is that our health care systems are struggling to provide Canadians with the care they need. But it doesn’t have to be this way.

Canada is looking bad

Among countries with universal health care systems, many perform better than Canada in terms of access to health care.

In an oft-cited ranking of health systems, that of the Commonwealth Fund⁠1, we rank 10th out of 11, ahead of the United States.

European states with universal systems like ours rank better than us. France, Germany and the Netherlands occupy 8th, 5th and 2nd place respectively.

One thing these systems have in common is that they allow independent, not-for-profit hospitals to operate within their health systems.

These institutions account for 14%2 of hospital beds in France. They account for 28% of beds in Germany. In the Netherlands, all hospital beds are in independent, non-profit institutions.

Remove political control

Much of their success is due to the relative autonomy these hospitals enjoy in their management.

Unlike in Canada3, where equipment acquisition and collective agreements are handled through the ministry, independent non-profit hospitals make these decisions locally, based on their own assessments of their needs.

This brings the decision-making process closer to the frontline staff who deal directly with patients, which ends up better reflecting the reality on the ground.

After all, who is best placed to know whether a regional hospital needs a new imaging machine? Is it front-line staff and local administrators, or health officials far away in the capital? Or politicians on the campaign trail?

This last question might seem absurd if it were not for the fact that similar promises have been made in recent elections.

Just before the start of the 2021 election campaign, the Newfoundland and Labrador Liberals promised to buy a $2-million CT scanner for the Corner Brook hospital, even though the health minister insisted a week earlier that such a machine would be of little use.

By removing centralized political control over institutions, countries across Europe have allowed independent, nonprofit hospitals to allocate their funds to areas of greatest need, rather than where the best shot is taken.

Hospital financing

Another part of their success has to do with how these hospitals are financed, because different financing methods tend to encourage different behaviors.

In Canada3, hospitals are primarily funded through what is called block funding.

Essentially, once a year, the Department of Health estimates how much funding it thinks a hospital will need based on the previous year’s level of activity. Once that money is received, hospitals must use it sparingly so they don’t run out of money before their next big cheque comes in.

Under this system, every patient who enters is considered a cost to the hospital, which is then incentivized to ration care through long waiting times.

In European healthcare systems2, hospitals are mainly financed through an activity-based financing model, where a hospital receives money from the government for each medical act performed.

Since every act of care performed is linked to a direct source of revenue, hospitals are encouraged to treat more patients in order to increase their funding.

This helps create healthy competition among hospitals, which seek to attract patients with quality care and short waiting times.

Instead of letting politicians and civil servants run our hospitals from tall towers in our provincial capitals, we should give frontline staff greater local control over our hospital facilities.

This is what independent non-profit hospitals offer.