Is Ontario Spending Too Little on Hospitals?

Earlier this month, the Ontario Council of Hospital Unions issued a media release for their The Fewer Hands, Less Hospital Care report, that made the following statement: “Based on the latest figures from the Canadian Institute for Health Information (CIHI), Ontario government funding for hospitals is $1,395.73 per capita. The rest of Canada, excluding Ontario, spends $1,749.69 per capita. In other words, provincial and territorial governments outside of Ontario spend $353.96 more per person than Ontario does. That is a whopping 25.3 percent more than Ontario. Overall there would be an additional 45,500 hospital employees, 15,200 of them nurses, in Ontario if funding was on par with the average for the rest of Canada.” The report goes on to say that this would amount to an additional 4.8 billion dollars for Ontario hospitals.

This argument is not entirely without merit. After all, Ontario does spend less per capita on provincial government hospital spending than most provinces and indeed on provincial government health spending in general. Moreover, real per capita provincial government hospital spending in Ontario has been declining since 2010. Provincial-territorial government health spending in Canada in 2015 is forecast by the Canadian Institute for Health Information to be $4,018 with Ontario coming in at $3,752. Of the ten provinces, Ontario ranks ninth – ahead of Quebec at $3,656. Who are the biggest per capita spenders? Newfoundland and Labrador and Alberta are first and second at $5,181 and $4,682 respectively. (See Figure 1). And Ontario has the same 9th place rank when it comes to per capita provincial government hospital spending (See Figure 2).

However, aside from any potential under funding there are a number of reasons as to why Ontario spends less per capita on hospitals. First, every provincial government makes choices about how to structure and deliver their health care services and Ontario has decided to place more emphasis on other aspects of health expenditures. Many of the other provinces have chosen to devote a larger share of their government health budgets to hospital based care. While Ontario spends 35 percent of its $51.8 billion health budget on hospitals, Alberta spends 46 percent of its $20.4 billion health budget.

While Ontario is near the bottom when it comes to hospital spending, it is near the top when it comes to some of the other categories. In 2015, Ontario is forecast to rank first among the provinces when it comes to per capita provincial government drug spending and second when it comes to physicians. It is mid-ranked when it comes to administration, public health and other professionals. Relative to the other provinces, Ontario ranks near the bottom for hospitals, other institutions and all other health spending. (See Figure 3). Of course, one could argue that rather than the outcome of evidence based government choices, this result is also a function of more successful lobbying of government by physicians and pharmaceutical companies.

Second, part of the difference in spending across the provinces is inevitably rooted in economies of scale. Ontario and Quebec have the largest populations and therefore can spread the fixed costs of their health care and hospital systems across a larger and often denser population. Part of the reason per capita health spending in Nunavut or the Yukon is so high is the small geographically dispersed population in these territories which raise the per capita cost of providing even a basic set of services. Per capita provincial territorial health spending ranges from $3,752 (QE) to $5,180 (NL) for the ten provinces and then jumps to $7,553 for the Yukon, $10,017 for the NWT and $11,377 for Nunavut. I would venture that if one began to examine health spending on a per capita basis within Ontario, one would also find per capita hospital spending higher in its northern districts than the GTA for similar reasons.

Injecting more public money into Ontario’s health care system would increase per capita provincial government health spending. However, given what appear to be Ontario's health expenditure priorities, I’m not so sure that additional money would all get into front line health care or hospitals for that matter.

Comments

[Arrow]

I can't comment on this question in particular, but some of my work involves cross-provincial healthcare costing statistics.

Anybody out in the comments know if any part of this is driven by accounting differences in how costs are allocated into different Ministry of Health 'buckets'?

(That is to say: no difference in the structure of the healthcare system, only in how it's costs are recorded)

The 2 obvious things that come to mind as points of difference:

1) The OCCI costing statistics that we use do not include the cost of fee for service physician care of in-hospital patients (often including monitoring and/or surgical procedures). Salaried staff, including some physicians are included in the cost statistics.

I imagine this could differ by province. Does the province pay the surgeon, or does the hospital? Are there different rates of salaried physicians in the hospitals in different provinces?

2) In-Hospital drug expenditures: Again, do they come out of the "hospital budget", or the 'drug budget'. Given the relative position of Ontario for drug spending vs. hospital spending "I wouldn't be surprised if" the cost of chemotherapy is being recorded under CCO's drug budget in these statistics, whereas it is a 'hospital expense' in at least some other jurisdictions.

[Livio Di Matteo]

Hello Arrow:
The data is from the Canadian Institute for Health Information (CIHI) and should be relatively standardized across provinces but you might want to query them directly. Chris Kuchiak at CIHI would be able to assist you. As for drug spending, the drug category in the CIHI NHEX data does not include drugs dispensed in hospitals and other institutions and they are included under the spending of the institutions. As well, the physician spending does not include remuneration of physicians on hospital or public sector health agency payrolls. Cheers. Livio.

[Arrow]

TLDR: Provincial healthcare systems in Canada are not the same, and the closer you get to source of a lot of data, the less consistent it will appear. I'm sure CIHI does the best they can with the funding they have, but I would definitely look to accounting / funding differences for potential deviations between provinces, especially when it comes to the distribution of spending, and not the overall amount.

I don't want to spend all afternoon on this, so I'll make a couple quick points here:

1) Looking at the CIHI NHEX methedological notes:
https://www.cihi.ca/sites/default/files/document/nhex_methodological_notes_october2015_en.pdf

"The drugs category does not include drugs dispensed in hospitals and, generally, in other institutions. These are included with the category of hospitals or other institutions."

2) I'm not aware of other CDN provinces having a body analogous to CCO (Cancer Care Ontario), which funds cancer treatments outside of standard hospital funding mechanisms.

A quick look at their 2014 financials suggests that between $300 Million & $1 Billion (depending on how much of 'Cancer Programs' represents drug costs) could plausibly be recorded as hospital spending in other jurisdictions (corresponding to between $220 & $770 per person).

Even if it's at the low end of that range, that eats up almost the entire variance between Ontario & the average above.

3) Lastly, I looked at the OCHU report linked to above, and would caution against taking it as a statistical source. A lot of the data that goes into it is likely valid, but the graphs were clearly constructed with Stats-101 level decisions (ie. no "0" on the Y-axis)... On the whole, I found it very unconvincing.

[Nathan W]

Population is denser (not accounting for all the completely empty places), so ... scale economies.

Consider that the highest spenders are:

a) a very remote place and

b) a relatively expensive place that, to be honest, people who care about people in a fairly general sense (surely overrepresented in the health profession) might simply not want to live in. I mean, really, who would want to live in Alberta if they could get a pretty OK job somewhere else, unless they already had ties in the province?

Consider that doctors and nurses are demanded internationally. Bad weather (way too cold in winter, too hot in summer), an often hostile culture to newcomers, high cost of living, distant from basically anywhere unless you get on a plane ... obviously, Alberta is going to have to pay a premium to attract an retain talent. At least the geniuses managed to land atop a mountain of black gold, which have been wisely invested over the last 40 years, to the extent that the province can weather an entire couple years before its net fiscal position in a downturn goes into debt.