Big change takes big courage: New way to pay hospitals offers lessons on change management

By: Karen Palmer and Noah Ivers

If there’s one thing provincial governments across Canada can agree on, it’s that the status quo in health care is no longer good enough to deliver equitable access to high quality care in a cost-efficient manner. Ontario’s Ministry of Health under the previous government has led the way by altering how hospitals are paid, in an effort to encourage implementation of best practices in patient care.

Successfully executing big policy change in hospitals is hard work. So has it worked so far in Ontario?  Yes and no.  And are there lessons learned for other provinces? Unequivocally, yes.

Some hospitals managed the change better than others. The “secret sauce” has been open communication and strong collaboration between experts who best understand patient care — like doctors, nurses and patients themselves, along with those who understand how hospitals work — like finance experts, hospital decision support teams and policy analysts.

In 2012, Ontario hospitals started replacing some of their global budgets — the annual amount hospitals traditionally receive to fund all patient care — with something called Quality-based Procedures or QBPs. These “patient-based payments” give hospitals a pre-determined fee for each diagnosis (like pneumonia) or each procedure (like knee replacement) when patients are admitted.

The good thing about paying hospitals through global budgets is that they are predictable, stable and administratively very simple. The bad thing about global budgets, critics argue, is that they lack incentives to boost efficiency, are not always transparent or equitable and funding isn’t necessarily targeted at areas with the most impact on patients if government and hospital spending priorities don't align.

The hope with QBPs was that they would improve access to care, reduce costs per admission, reduce variation in both costs and clinical practice and, most importantly, improve the quality of patient care.

As part of this funding shift, hospitals were also given clinical handbooks — outlining evidence-based care pathways for each QBP diagnosis and procedure — to give doctors, nurses and other care providers better guidance on how to provide "the right care, in the right place, at the right time" and at the right cost.

So how did this all pan out?  

We recently published a study showing that, as with most complex system change, some hospitals managed better than others at rolling out QBPs. As one senior hospital executive put it, “I think the hospitals are pushing back and saying, slow down, because this is tougher to manage than we thought and it’s got all kinds of complication in the implementation.”  

Hospitals struggled to adapt if they were less ready for change, especially when it was more complex in nature, or they didn’t have the management capacity to support it.

Conversely, hospitals that were able to adapt showed a high degree of readiness for change and had good capacity to manage it, especially when new requirements were less complex.

Change never goes as planned, and large-scale change in complex health care systems is no exception.

Old patterns can be difficult to break. The first time you try, failure may seem inevitable, but as every entrepreneur knows, it should be viewed as an opportunity to learn and try again. Similarly, the ability to take stock along the way — through embedded evaluations — allows health system leaders to honestly look at what is working and what isn’t.

Whether as individuals or in complex systems, knowing when to admit that it’s time to change course is critical to any improvement.

We suggest that a structured process be put in place to help identify and choose the right tools for the job, so that adoption of new initiatives is enabled and desired outcomes are achieved. To that end, we propose that those seeking change – regardless of the setting – ask three questions: Who needs to do what differently? Why isn’t that happening now? What can we do to enable change and overcome barriers?

Big change takes big courage, a shared vision and clear communication.  Ontario’s efforts to explore how to implement change are valuable and instructive and Ontario’s Ministry of Health, hospitals, provincial health care agencies and care providers should be lauded for their efforts.  

Scaling up Ontario’s successes to other provinces, and continuing to experiment, would help ensure that high quality affordable health care is available to all Canadians.  

Karen S. Palmer is a health care systems and policy research at Women’s College Research Institute in Toronto, an Adjunct Professor at Simon Fraser University and a Contributor to EvidenceNetwork.ca based at the University of Winnipeg.

Noah Ivers is a family physician at Women’s College Hospital, Scientist at Women’s College Research Institute, and Assistant Professor at the University of Toronto.

A version of this commentary ran in Policy Options.