Paying for volume: British Columbia's experiment with funding hospitals based on activity

For decades, Canadian hospitals have been funded using global budgets, a lump sum for providing care irrespective of the volume or mix of patients. In 2010, British Columbia (BC) introduced a controversial, but limited, form of activity-based funding (ABF) for hospitals. This study uses a quasi-experimental design to evaluate the impact of the introduction of ABF funding in the province.

Our analysis used the population of patient-level acute hospitalization and day surgery discharge summaries from BC's acute hospitals from April 1, 2008 to March 31, 2013. Our outcome measures focused on both the intended and unintended impacts of ABF including the volume of cases, the efficiency of care, and the quality of care delivered. Our analysis used interrupted time series analysis.

There was an increase in the volume of inpatient surgical activity associated with the implementation of ABF. The volume of medical cases dropped, and medical patients' lengths of stays increased. There were no changes in measures of quality.

Hospitals' measurable responses to ABF policies on a number of key performance measures were mixed. Though BC's experiment with ABF was not associated with increases in hospital volumes for all types of care, the experience provides key lessons that small magnitude and short-term reforms are unlikely to change hospitals' behaviors quickly.