1. ACTIVITY BASED FUNDING Chris Mazurkewich Executive Vice President and Chief Financial Officer Alberta Health Services Presentation to the Pan-Canadian Discussion on Hospital Funding Edmonton, Alberta November 26, 2010

2. 2 Our History The creation of Alberta Health Services (AHS) was announced May 15, 2008, bringing together 12 former, separate entities, including nine health regions and three provincial entities. AHS became a legal entity April 1, 2009 Ground ambulance service was added to AHS responsibilities April 1, 2009. Fixed Wing Ambulance and Corrections Services in 2010

3. 3 What is Alberta Health Services’ Comparative Advantage Intra-provincial learning Intra-provincial equity Efficiency and economies of scale/expertise All of these are ‘works in progress’ But we are realizing benefits already

4. 4 Transformational Improvement Programs Guide us in becoming “the best performing, publicly funded, health care system in Canada” Building on our goals of quality, accessibility and sustainability Values of Respect, Accountability, Transparency and Engagement Five areas of focus to prioritize our work over the next five years

5. 5 Improving health for all Albertans Enabling One Health Service Human Resources Finance Information Technology Data Integration, Measurement & Reporting Capital Procurement Today 2010  Growing, Aging, & Diverse Populations  Disparities in Health  The chronic disease tsunami  Waiting for Service  Practice Variation  Limited options for Seniors  Effort and resource duplication  Workforce misalignment Enabling Our People Engagement Plan (5 strategies) Scope of practice Health and Safety Culture and values Future ready Improving Access Reducing Wait Times Right service Right place Right time Choice and Quality for Seniors At home In the community Building a Primary Care Foundation Primary care access Early Detection Management & Treatment Self Management Mental Health Target 2015 Working as one Making healthy choices easy choices Right Care in Right Place & Time Best Use of Resources Reducing rework and waste Supporting self management Supportive Environments & Options for Seniors Skilled & Satisfied Workforce Working with partners Staying Healthy, Improving Population Health

6. 6 Plans, Reporting and Accountability Strategic Direction (3 rd quarter) Informs Refresh (along with review of health needs etc.) Annual Review of Risk (3 rd quarter) Individual Performance Agreements (1 st quarter) Operational Business Plan/Budget (4 th quarter) Measures reported in Quarterly Public Performance Report Increases likelihood of achievement Strategic Health Plan (TIPs) Increases likelihood of achievement via Performance agreements

7. 7 ACTIVITY BASED FUNDING

8. 8 What is Activity Based Funding? A way of allocating a (capped) provincial budget –Funding based on price per standard unit of service –Utilizes price-setting, quotas, bonuses, and deductions to create incentives –Beyond creating incentives for higher efficiency (sustainability), need to incorporate measures to ensure quality and access are appropriate “The money follows the patient” – Uncapped payment per weighted patient? Maybe a combination of capped and uncapped payment

9. 9 Some ‘theory’ about activity based funding Activity-based Funding ABF Funder Population Funding Hospital Funder Regional Health Authority/LHIN etc + Residual (perverse incentive risk) Who allocates funding to hospitals on different bases Population Expenditure Size of (weighted, needs adjusted) population Utilization Rate (conditions per person X admissions per condition) Casemix Services/ Admission Cost/Service /Quality (eg days, tests) =x x x x How successful have any entities been in managing this?

10. 10 Some ‘theory’ about activity based funding Who controls this? Hospital Population Expenditure = Size of (weighted, needs adjusted) population x Utilization Rate (conditions per person X admissions per condition ) x Casemix x Cost/Service /Quality (eg days, tests) x Services/ Admission How much of our variation problem relates to this or cost control? Who controls this? How much of our variation problem relates to this or cost control? Different levers for two components Conditions per person: hard to influence Admissions per person: also hard to influence

11. 11 Some of the policy objectives of ABF are: –Management of prices, volumes and location of service for equitable access and long term sustainability – utilization rate and price? –Meet established standards and quality – incentives? –Increase access through incentives to efficient providers – increase service volumes –Meet regulatory requirements such staffing ratios in long term care –Intra-provincial equity e.g. 17+ ways to fund long term care to a single funding methodology Policy Objectives of ABF

12. 12 Long Term Care –Started implementation April 1 st, 2010 –Complete Phase in over 6 years although for AHS facilities 2 years phase in. Supported living next –From 1 April 2011 Acute Care Home Care, Mental Health follow ABF Roadmap for Alberta

13. 13 LTC implementation –Engagement of all stakeholders – AHW, AHS, Operators, Associations (e.g. ACCA) in developing funding template and transition strategy –Engaging Researchers – U of A School of Nursing, U of C, Inter RAI and CIHI –Development of quality indicators through Seniors Strategy –Keeping political balance through regular meetings and information sessions –Clear articulation of Vision and Work plan – ABF Charter and Project Plan signed of by all stakeholders –Bi-weekly meetings with President & CEO, EVP & CFO, EVP – Seniors, and ABF Team Implementation Approach

14. 14 Management and clinician (re)training important Management and clinician involvement important Simplicity and transparency a major advantage of case mix-based funding  Be clear about behavioral responses intended  Avoid conflicting incentives Audit essential to integrity of system Engagement is Critical

15. 15 Data availability and quality – organizations planning to implement ABF must focus on how data is collected and entered into systems – training and support for front line staff essential Engagement of stakeholders – it is never enough – one on one meetings to mitigate political and operational risk Balance implementation approach with practical applicability e.g. 6 year phase in sounds good on paper but not for those who will get extra funding – they want it NOW! Need dedicated support from Operations, Strategy, Finance – eases implementation Strong project framework and focus required Must have a way to leverage strengths from external organization and universities Lessons Learnt

16. 16 Expertise (either internal or external) – for AHS Dr. Stephen Duckett critical resource Knowledgeable staff – Economists, Finance, Policy, Strategy, Clinicians Have clear goals and linkage to organizational strategy Develop common language and terms so that people clearly understand the message – too many acronyms Common IT systems important but should not be used as an excuse for not moving forward Lessons Learnt

17. 17 QUESTIONS?