Ontario tinkers with health care, and still nobody knows what anything costs

Posted on March 12, 2019 in Health Debates

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NationalPost.com – Full Comment – Now doctors are typically paid on a fee-for-service basis. Surgeries and other treatments are paid from hospitals’ global budgets. This has it exactly backwards
March 11, 2019.   Andrew Coyne

Oh, by the way, the government of Ontario has just turned the province’s health-care system upside down — the most sweeping reform to health care, as it has been described, in 50 years. Only nobody quite knows what’s involved, least of all, it appears, the government.

The headline-grabber was the proposed amalgamation of 20 existing health agencies, including the province’s 14 Local Health Integration Networks (LHINs), into a single, monolithic super-agency, to be known as Ontario Health.

But the more important reform may prove to be the health care “teams” the government envisages as delivery vehicles, in which providers of different services — primary care, hospitals, home and long-term care, and so on — would band together to provide “seamless” care to patients as they passed from one to the other.

Whether either of these reforms will work as intended however, will depend crucially on the details. So far, what we have is mostly a lot of buzzwords about being “connected” and “sustainable,” “patient-centred” and “digital-first.”

Ontario Health, for example, could easily be just another in an endless, pointless series of reorganizations, of a kind governments like to do to look busy: centralize, decentralize, then centralize again. The notion that amalgamation will yield much in the way of savings by  “removing overlap” and other “administrative efficiencies” will not cut much ice with those who remember the municipal amalgamations the Harris government imposed.

But what if there’s more to Ontario Health than that? What if the point is not so much to replace all those sub-organizations, but the department: to take operational decision-making away from elected politicians, and place them with an arm’s-length agency, rather like a Crown corporation? The broad policy objectives might still be set by the minister, but precisely how these were met could be left to the professionals. That would be a reform worth doing.

Still, that only gets you so far. Some decisions on health care need to be made centrally, but most do not. It’s not clear the Ford government gets this. Much of the accompanying rhetoric, indeed, gives the impression that what the government thinks Ontario’s health care system needs is more and better central planning — when in fact central planning is the problem.

The efficiency argument for medicare was supposed to be that a single purchaser could realize savings by striking a hard bargain with providers. What was forgotten was that at the head of any such gargantuan bureaucracy are fallible, vulnerable politicians who have to get re-elected every few years, and who stand to be blamed for anything that goes wrong with the health care system. People with a bulls-eye on their backs are not inclined to strike hard bargains.

What’s needed, rather, is to localize the budget constraint — to decentralize decision-making such that it is guided by less politics and more information; to allow for greater experimentation and innovation, not so much sequentially but simultaneously, different approaches applying within different parts of the system at the same time. These can then be compared and contrasted, the lessons learned, without committing the whole system to one or another.

Enter the new Ontario Health Teams. Again, much remains to be explained, or possibly worked out. How would these be formed? Government orders? Spontaneous attraction? Random chance? How would patients be enrolled? Just on the basis of where they lived, or could they choose from competing teams?

The interesting thing to me about these is not that they are teams, but that they are plural. Yoking providers of different services together under the same banner isn’t, on its own, going to solve much (isn’t that what the LHINs were supposed to do?); it may not even be a good idea.

The reason there are such long waits for care, in Ontario as across the country, even as health spending now absorbs nearly half of provincial budgets, isn’t because providers aren’t working together in teams. It’s because the system uses resources so inefficiently.
It does so because, for the most part, nobody knows what anything costs. We do not have information on costs, because nobody has the incentive to collect it. That won’t change until we change the way the system is funded — not the public funding at its source, but the way in which those funds flow through the system: the way people get paid, to be vulgar about it.

Right now doctors are typically paid on a fee-for-service basis. Surgeries and other treatments, on the other hand, are paid for out of hospitals’ global budgets. This has it exactly backwards. When doctors are paid fee-for-service, they have an incentive to load up patients with services they don’t need; patients, for their part, have neither the incentive nor the expertise to resist. Which is why the trend of late has been to pay doctors by a system known as capitation: a flat annual flee for each patient enrolled in their care, adjusted for particular risk groups.

On the other hand, when hospitals fail to price the services they provide, there is no way for competitors, such as specialized clinics, to undercut them, and no incentive to find ways to do them more efficiently. And who should pay for those services? Why not the doctors who refer their patients to them, out of the share of public funds allotted to them — the capitation fee. In effect, doctors would act as surrogate consumers on patients’ behalf.

So the really interesting unanswered question about these new teams is how they are to be funded. Doctors already have both the know-how and the incentive, via the Hippocratic oath, to do what’s best for their patients; giving them a budget constraint would incentivize them to do what’s best for taxpayers as well.

Andrew Coyne: Ontario tinkers with health care, and still nobody knows what anything costs

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