Activity Based Funding won’t solve waitlists and overcrowding in hospitals, creates barriers to needed reforms: study

January 16, 2012

(Vancouver) As Canada’s premiers meet in Victoria to discuss different approaches to health system reform, a new study raises serious concerns about “Activity Based Funding” (ABF), a new funding model introduced in BC that pays hospitals based on the number of surgeries they perform. Research evidence from the US, UK and Europe shows that ABF’s narrow focus on increasing “activity” in one part of the health care system does not address the system-level changes needed to control health care costs and improve patient care.

Beyond the Hospital Walls: Activity Based Funding Versus Integrated Health Care Reform finds that ABF is not the right fix for BC’s health care problems:

  • ABF fails to address the root causes of overcrowding and long waitlists: lack of accessible, effective community-based services for people with chronic illnesses, such as the frail elderly or mental health patients. These patients often end up in hospital, “blocking” beds.
  • ABF is designed to increase volume (by rewarding “activity”) but does not focus on improving patient care. In fact, ABF creates an incentive to focus on lower-risk patients and procedure and can lead to the under treatment of people with higher more complex needs.
  • ABF is complex to administer; the international evidence that it improves cost-efficiencies in hospitals is at best mixed, and in many jurisdictions it has led to increased costs.
  • ABF can be used to encourage competition among hospitals and private clinics, creating barriers to collaboration and service integration.

In contrast, successful healthcare systems reform initiatives in other jurisdictions have focused on integrating hospitals with primary care (family doctors) and community care (seniors’ homes, community clinics, etc). These systems have prioritized collaboration across sectors, coordination of services, improving patient experience and clinical outcomes, and reducing the inappropriate use of high-cost emergency and in-patient hospital services. These more integrated systems have been most effective in improving quality of care and controlling cost increases.

Lead author Marcy Cohen says that BC is pursuing competing directions in health care reform. “So far, activity based funding has received most of the new provincial dollars and media attention, and integrated health care reform has played a secondary role. But in fact, BC has had some real success with integration projects like the regional improvement strategy in the Northern Health Authority and hip and knee programs in the Lower Mainland. We’re calling for provincial leadership to scale up these initiatives and improve the whole system, instead of narrowly focusing on a problematic funding mechanism like ABF.”


Beyond the Hospital Walls: Activity Based Funding Versus Integrated Health Care Reform, by Marcy Cohen, Margaret McGregor, Iglika Ivanova and Chris Kinkaid is available at

For more information or to arrange an interview, contact Sarah Leavitt at sarah at policyalternatives dot ca or 604-801-5121 x233.