Ontario's hospital transitional funding initiative: an overview and assessment

In 1989, the hospital transitional funding initiative, which incorporates case mix measurement into the hospital funding process, was started in Ontario. This initiative is the beginning of a new, more objective basis for determining hospital funding. In its initial stages, incremental growth and interhospital equity adjustments are made to the global budgets. In this paper, we describe the launching of this initiative and the funding formulas that emerged from its first phase. The issue of incentive effects is then discussed and, as this is an evolving or "transitional" undertaking, we comment on several economic issues arising as a result of this new venture.