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The “Big Squeeze” on hospital budgets in Ontario: Get ready for the backlash

Since shortly after the 2008-2009 downturn, Ontario’s relatively modest economic growth has meant for public services a prolonged period of austerity. For the healthcare sector, where annual growth had previously been in the 6.5% range, the change from the base of 2010-11 to 2.6% per annum, representing a slight decline in real per capita terms, has been painful. This reduction in spending growth has been largely borne by the hospital sector, where after contracted salary increases, inflation, etc., are factored in, there has been essentially zero growth for nearly a decade. Continued restraint in health spending, which now exceeds 40% of the total, anchors the government’s 2017/18 balanced budget projection.

At the same time, the much discussed demographic shift has started. The Baby Boomers are starting to retire: the number of Canadians over the age of 65 will double in 20 years and those over 85 will quadruple. While this is surely a reason to celebrate, it also presents daunting challenges. How do we transform our acute, episodic illness focused, hospital dominated “system” into one that also accommodates to the new health care landscape filled by people with multiple, complex, chronic diseases who need, want, and should have care in their own homes and communities?

The solution, so the thinking has been, would be for us to invest more in chronic care and community-based solutions rather than in hospital care. The new care model would be more appropriate for the chronic disease paradigm, closer to home, more team-based, and cheaper. Meanwhile, hospitals would be freed up to do what they are supposed to be doing – looking after acutely ill people – rather than being overfilled with patients waiting for home and long term care. Squeezing hospital budgets will force efficiency, and we can invest proportionally more in the community resources that patients increasingly need.

So how is it turning out?

Hospitals have certainly been squeezed. Effectively flat budgets have forced some efficiencies, like some decreases in lengths of stay (despite increasing complexity of patients) and some limited improvement in wait times for targeted surgical procedures. But in broad strokes, what has happened (very simply) are hospital program cuts; real reform continues to be frustrated by the “system’s” siloism and the agonizing slowness in expanding the capacity of home and community care to relieve hospitals of ALC patients[1] and of primary care to provide care for patients 24/7. Meanwhile, the volume of patients presenting to hospital increases unabated. Emergency Departments and hospitals are more congested than ever, alternate-level-of-care (ALC) patient numbers are at an all-time high, and occupancy rates hovering around 100% (and often higher) have made “Code Gridlock” (a term used to describe the inability to move patients through the system because of congestion) a daily rather than an occasional reality. Hospital leadership teams are increasingly consumed with just getting through the day – managing patient flow – rather than having time to think strategically about reform. And so, hospitals find themselves in a position where they can’t control their inputs, can’t control their outputs, and cannot make investments outside their walls in order to influence either.

There has been some progress. The HealthLinks initiative, which aims to deliver better, more efficient care to the sickest 5% of our population, is a good example. Despite all the hype, the recent re-jigging of Community Care Access Centre (CCAC) services into a LHIN-controlled model promises no meaningful impact. No home and community care initiative is making enough of an impact to slow the relentless increase in demand for hospital services. Those in charge of and working in Ontario’s hospitals are well aware that the Ontario Government is determined to keep healthcare spending in line with economic growth and avoid a repeat of the mid-1990s when a period of austerity was followed by a catch-up spending boom . But hospitals are in crisis. They have deferred significant capital spending. They have squeezed all the efficiency they can out of their operations. Health professionals and hospital leaders are exhausted. And the demographic tsunami has only begun. Genuine reform of the healthcare “system” has to get in gear very soon because a backlash is imminent.

If patients keep coming in increasing numbers and nothing is done about their ALC patients, hospitals will need a significant cash infusion very soon. As the congestion continues to worsen, any efficiency gains that have been made will be threatened. It is crucial that new investments be targeted at “anti-gridlock” initiatives. The creation of a “pull” culture (where patients are actively moved along to the next point in their care trajectory) to replace the current “push” culture, together with a funding model whereby money follows the patient wherever they are in the system would help. Running hospitals at full capacity on the weekends, as we do during the week, would also make a big difference. Enhanced regionalization would help to knit the silos closer together. And getting community-based and hospital-based teams together to better manage the transition points in patient care is absolutely essential. It is at the transition points where mistakes are made, negative perceptions are born, and inefficiencies are generated.

There is no doubt that we need to “de-hospitalize” our system to a significant degree. But it is clear that crude budget cutting has not accomplished the reform we need. Hospitals have been squeezed, but the transition to a community-based health system remains in its very early days. These years of squeezing the sponge have bought us time, not change. And now we are out of time.

[1] https://www.google.ca/search?q=Walker+report%2COntario+ALC&oq=Walker+report%2COntario+ALC&aqs=chrome..69i57.14513j0j7&sourceid=chrome&ie=UTF-8


This post was originally co-authored by Dr. Chris Simpson, Dr. Ruth Wilson, Dr. David Walker, Don Drummond, and Dr. Duncan Sinclair for Queen's School of Policy Studies. 

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