36 hospitals will be losers in new funding formula – significant layoffs likely

This week Health Minister Deb Matthews told the media that 36 hospitals will have their budgets cut by as much as three per cent as the new hospital funding formula rolls out.

The statement leaves many questions, including which hospitals are going to lose revenue as the government shifts to a blended funding model. The Health Minister gives no clue as to what the base funding will look like – for that we have to wait for the March 27 provincial budget. The South East LHIN has told its hospitals to expect no increase in base funding, while some hospitals elsewhere in the province say they are planning for a one per cent base increase.

The Drummond Commission on Public Service Reform recommends a 2.5 per cent increase in health care funding over each of the next four years, but most of that is intended to go to community-based care, not hospitals. Over the summer the Ontario Auditor General warned that a 3.6 per cent increase in overall health care funding would likely put hospitals back into deficit or require significant cuts to services.

Past discussions about such a model have included a grandfather clause that would prevent hospitals from losing existing funding under a new formula, but the Ministry seems to have abandoned this approach, creating definite winners and losers as the funding vice grows tighter.

This will likely undermine acceptance of the new model if communities are faced with major cuts at their hospital.

“This is not about cuts,” Matthew told the media over the weekend. “This is not about saving money. This is about shifting resources. This is, in effect, a zero-sum game.”

This won’t be a zero sum game for hospitals losing three per cent of their funding. If there is no base increase, this could result in unprecedented layoffs and cuts to services – the impact affecting a patchwork of communities.

Ninety-one hospitals are expected to benefit from the new formula, 36 will lose funding, and 54 will remain unaffected according to the Minister. Where these numbers come from is a mystery given the total adds up to more than the existing number of hospital corporations publicly funded in Ontario.

Nor did Matthews indicate how this would work with rural and northern hospitals, the McGuinty government having formerly stated they would exempt such hospitals from the formula.

Matthews says the new funding formula provides an incentive: the “more people you serve, the higher your budget will be.”

She may be right about one thing – if the incentive is to do more, there won’t be any savings as hospitals scramble to fill their beds and clinics at the province’s expense.

Nor does it make clear how this fits the patient-centered approach Matthews has been extolling for the past two years. If funding goes to hospitals that are deemed the most “efficient,” how does this take into consideration the needs of patients, especially those who are less able to travel from their community.

This also comes at a time when the government is moving away from fee for service for family doctors. Clearly the Minister saw fee for service as creating perverse incentives for docs, now they appear to want to do the opposite for hospitals.

Go figure.

One response to “36 hospitals will be losers in new funding formula – significant layoffs likely

  1. Ian L. Mitchell

    I am intrigued by a couple of statements by the MoH in this article about the number of hospitals whch may lose funds as a result of the latest Provincial Budget. The first is “Patient centered approach” Has this been defined?There are very few costs , in my view that does not affect patient care. one way or another.Another-” the more patients/people you serve the higher your budget will be” The response to that is noted in the article.
    Has it ever occured to the MoH that a simple solution to budgetting in the rural hospitals would found easily by re-instituting a Line-by-Line Budget? It is easier to do and provides full transparency to MoH Auditors. This method was in place when the late, lamented, Ontario Hospital Services Commission. was charged with Rural hospitals,as well as all other hospitals. It must be noted, that it is unseemly, and therefor they cannot go out in community “beating the Bushes” for more patients– any time.

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