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About 10 days ago we received news from the Ministry of Health regarding UHN funding for the fiscal year 2013-14 and we expect to receive our funding letter by mid-July. I hope you will forgive the length of this message but I think it is important that you understand how we are funded and what changes to the funding formula mean for UHN. This year, the Ministry moves to "Activity Based Funding" as part of "Health System Funding Reform" and there are four parts to our funding which I've outlined below:
1. Activity Based Funding or Volume-Funded procedures are not new at UHN -- as much of the activity in cancer, transplant, cardiac, neuroscience and arthritis is already funded in this way. For example , our revenue from the Ministry is based on the number of cases of cancer surgery, radiation, transplant or treatment and there is a "rate" of money associated established each year for the number of treatments we provide. If we don't meet that target, the Ministry will take the money back. If we exceed the target we negotiate as to whether the funding will flow for the additional treatments. About 25% of our budget from the Ministry is related to "volume funded" activities this year. 2. Quality Based Procedures (QBP) funding is another mechanism we work with at UHN. This is a discreet treatment with a set payment and QBPs now funds total hip and knee surgery, dialysis and chronic renal disease management -- which were volume-funded before but are now funded as QBPs. Additionally, medical conditions such as congestive heart failure, stroke and COPD will be funded as QBP.
QBPs differ from Activity Based Funding in that most of these procedures were in our hospital "global budget". The government now sets a "rate" -- or cost -- for the treatment and removes that amount of money that an organization spends on the activity from the hospital budget. We then receive the money back at the "best practice rate". If we are spending more on QBPs than the established rates, we will not receive the difference from the Ministry.
Fortunately we have very strong "case costing" experts at UHN and we know exactly how much we spend treating every patient. We have also been attentive to how much we spend to provide best practices to our patients and we have focused on efficiencies in patient care- especially in limiting the length of stay that patients have in hospital. Thanks to your work, we are meeting this part of our funding requirements. 3. The new funding element -- "Health Based Allocation Method" or HBAM. HBAM now accounts for about 40% of our funding. HBAM is determined by a reasonably complex mathematical calculation called regression analysis which evaluates the acuity and complexity of the patients treated along with the cost efficiency of how much we spend treating these patients.
Fortunately Justine Jackson's team has been working on HBAM for some time and we treat very complex and acutely ill patients at UHN in a cost-effective manner. So despite the mathematical complexity of HBAM, we are reasonably confident that we are appropriately funded under the HBAM model and this work will result in $5 million to UHN.
4. Finally -- Global Funding is the balance of our revenue from the Ministry which covers a wide range of clinical and support services at UHN.
Given the efforts that our teams have made to realize efficiencies and your dedication to effective and efficient care we can go forward in 2013-14 in a balanced position with enough funding to pay for such things as investments in clinical areas, inflation, increases negotiated under central bargaining, and pay increases for non-union staff in October.
As you know, the Government of Ontario is exercising financial restraint in all areas and we have received no new funding for the global portion of our budget. We will continue to control costs, drive efficiency and take new approaches to providing care. In future Straight Talks I will address some of our efforts in these areas but today I want thank everyone at UHN for doing your part in the delivery of high quality and cost effective care to some of the most complex patients in any hospital in the world.