The Financial - Canadian Institute for Health Information | CIHIreport valuable. 4 The Financial...

in Canada

The FinancialManagement of

Acute Care

The FinancialManagement of

Acute Carein Canada

March 2001

A REVIEW OF FUNDING, PERFORMANCE MONITORING AND REPORTING PRACTICES

Canadian Institute for Health Information

Ian McKillop, PhDSchool of Business & Economics Wilfrid Laurier University, Waterloo, Ontario

George H. Pink, PhDDepartment of Health Administration University of Toronto, Toronto, Ontario

Lina M. Johnson, MBASchool of Business & EconomicsWilfrid Laurier University, Waterloo, Ontario

The Financial Management ofAcute Care in CanadaA Review of Funding, Performance Monitoring andReporting Practices

M a r c h 2 0 0 1

Contents of this publication may be reproduced in whole or inpart provided the intended use is for non-commercialpurposes and full acknowledgement is given to this report.

Opinions expressed in this document are those of the authors.Endorsement of these opinions by the Canadian Institute forHealth Information is not implied.

For further information, please contact:Canadian Institute for Health Information377 Dalhousie Street, Suite 200Ottawa, Ontario Canada K1N 9N8

Telephone (613) 241-7860Fax (613) 241-8120www.cihi.ca

ISBN 1-896104-71-1

© 2001 Canadian Institute for Health Information

TM Registered Trademark for the Canadian Institute for Health Information

Cette publication est disponible en français sous le titre « La gestion financière des soins de courte durée au Canada :une revue du financement, du suivi du rendement et des pratiques de communication de l'information, mars 2001 »ISBN 1-896104-72-X

www.cihi.ca

Acknowledgements

This comprehensive project could not have been completed without thetremendous support provided by ministries and departments of health acrossCanada. Each province and territory made freely available a wealth of documentsand information for use in this study, and also offered expertise to reviewmaterials specific to their jurisdiction. We are extremely grateful to our provincialand territorial contacts, listed in Annex 3, who worked tirelessly to meet deadlinesnot of their own making.

Projects of this scope benefit immensely from the insightful suggestions ofreviewers. We were fortunate to receive comments from Vern Hicks (HealthEconomics Consulting Services, Nova Scotia); Frank Markel (Joint Policy andPlanning Committee, Ontario); and Trevor Shaw (Office of the Auditor General,Alberta).

We are also grateful to the Canadian Institute for Health Information forsponsoring the university-based research project from which this study emerged.Acting on behalf of CIHI, Christine Fitzgerald and Terry Campbell provided vitalassistance that facilitated the effective management of the project.

Ian McKillopSchool of Business & EconomicsWilfrid Laurier UniversityWaterloo, OntarioCanada

George H. PinkDepartment of Health AdministrationUniversity of TorontoToronto, OntarioCanada

Lina M. JohnsonSchool of Business & EconomicsWildfrid Laurier UniversityWaterloo, OntarioCanada

Executive Summary

This study provides a comprehensive inventory of practices related to themanagement of the financial resources dedicated primarily to hospital-delivered acute care in Canada for the fiscal year April 1, 2000 throughMarch 31, 2001.

For each province and territory, the study reports on three issues related tothe management of financial resources:

1. The approach used to determine funding allocations toorganizations responsible for hospital-delivered acute care ineach jurisdiction.

2. The methods used to evaluate the financial performance of theseorganizations by the provincial/territorial government providingthe funds.

3. The financial reporting requirements imposed upon organiza-tions providing hospital-delivered acute care.

Observation of Canadian practice indicates that provinces and territoriesuse one or more of eight different funding methods. The way in which thefunding methods are applied depends upon the mandate of the organizationreceiving funds. The study finds a trend toward population-driven fundingapproaches, although the specific steps used to generate population-basedfunding allocations differs significantly among jurisdictions.

Table of Contents1 . O v e r v i e w

Using This Study .......................................................................................................3Approach...................................................................................................................5Hospital Spending in Canada .................................................................................. 10Summary................................................................................................................. 11

2 . C l a s s i f y i n g F u n d i n g P r a c t i c e sFunding Approaches Used in Canada..................................................................... 13Applying the Taxonomy........................................................................................... 38Summary................................................................................................................. 40

3 . F u n d i n g P r a c t i c e sAcute Care Funding in Canada ............................................................................... 43Primary Funding Approaches .................................................................................. 45Secondary Funding Approaches ............................................................................. 52Summary................................................................................................................. 56

4 . P e r f o r m a n c e M o n i t o r i n g P r a c t i c e sPerformance Monitoring Practices........................................................................... 57Prospective Monitoring Practices ............................................................................ 59Retrospective Monitoring Practices ......................................................................... 69Summary................................................................................................................. 71

5 . R e p o r t i n g P r a c t i c e sFinancial Reporting Practices.................................................................................. 73The Role of CIHI ..................................................................................................... 74Required Reporting Activities .................................................................................. 78Non-Required Reporting Activities........................................................................... 84Summary................................................................................................................. 86

6 . C o n c l u s i o nSummary................................................................................................................. 87Principal Findings.................................................................................................... 89The Future .............................................................................................................. 91

7 . P r o v i n c i a l / T e r r i t o r i a l S u m m a r i e sAlberta

Background.................................................................................................................... 94Funding Approaches...................................................................................................... 96Performance Monitoring .............................................................................................. 104Reporting Practices ..................................................................................................... 108

British ColumbiaBackground.................................................................................................................. 110Funding Approaches.................................................................................................... 112Reporting Practices ..................................................................................................... 121Performance Monitoring .............................................................................................. 122

ManitobaBackground.................................................................................................................. 123Funding Approaches.................................................................................................... 125Performance Monitoring .............................................................................................. 129Reporting Practices ..................................................................................................... 133

Table of Contents (cont'd)7 . P r o v i n c i a l / T e r r i t o r i a l S u m m a r i e s ( c o n t ' d )

New BrunswickBackground.................................................................................................................. 135Funding Approaches.................................................................................................... 137Performance Monitoring .............................................................................................. 143Reporting Practices ..................................................................................................... 147

NewfoundlandBackground.................................................................................................................. 150Funding Approaches.................................................................................................... 152Performance Monitoring .............................................................................................. 159Reporting Practices ..................................................................................................... 164

Nova ScotiaBackground.................................................................................................................. 166Funding Approaches.................................................................................................... 168Performance Monitoring .............................................................................................. 173Reporting Practices ..................................................................................................... 178

OntarioBackground.................................................................................................................. 180Funding Approaches.................................................................................................... 182Performance Monitoring .............................................................................................. 191Reporting Practices ..................................................................................................... 195

Prince Edward IslandBackground.................................................................................................................. 197Funding Approaches.................................................................................................... 199Performance Monitoring .............................................................................................. 204Reporting Practices ..................................................................................................... 207

QuebecBackground.................................................................................................................. 208Funding Approaches.................................................................................................... 210Performance Monitoring .............................................................................................. 219Reporting Practices ..................................................................................................... 225

SaskatchewanBackground.................................................................................................................. 227Funding Approaches.................................................................................................... 229Performance Monitoring .............................................................................................. 236Reporting Practices ..................................................................................................... 241

YukonBackground.................................................................................................................. 243Funding Approaches.................................................................................................... 244Performance Monitoring .............................................................................................. 249Reporting Practices ..................................................................................................... 253

Annex 1 — Additional Information on the MIS Guidelines ..................................... 255Annex 2 — Glossary of Terms .............................................................................. 261Annex 3 — Provincial/Territorial Contributors........................................................ 265Annex 4 — References ......................................................................................... 267

T h e F i n a n c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a 1

1 / Overview

1. Overview

Although the guiding principles of the provision of health services areestablished by the Canada Health Act, responsibility for themanagement and stewardship of the health system is largely entrustedto the governments of the ten provinces and three territories.

Provincial and territorial governments execute their responsibility forthe provision of health services to their constituents in a mannerconsistent with the individual government’s political environment andpolicy position. As a result, although there is a high degree ofconsistency in the purpose of the health system across Canada, avariety of organizational delivery structures, accountabilityrequirements, and funding models have emerged.

The fact that all jurisdictions share a common interest in providingquality health services, but cchhoooossee to fund, monitor and evaluate theorganizations providing these services differently, presents aninteresting opportunity to compare the financial managementpractices related to hospital-delivered acute care across Canada. Indoing so, this study makes the following contributions:

• New approaches to funding (particularly in the way in whichfunding models are developed and implemented) are emerging.This study provides a ready source of information describing theseapproaches and can be used by readers wishing to understandfunding models used in specific jurisdictions.

• Given the size of the health budget in all provinces and territories,jurisdictions have an increased interest in expanding theirperformance monitoring capabilities. This report providesinformation on how these initiatives are developing.

2 T h e F i n a n c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a

1 / Overview

• National standardized financial reporting practices have beenadopted by almost all provinces and territories in the past fewyears. This report summarizes the state of required and non-required financial reporting activities in each jurisdiction.

• Understanding variations in funding and financial monitoringpractices provides a valuable learning opportunity from whichlessons and techniques with potential utility in other settings canbe extracted.

This study presents a comprehensive inventory of practices related tothe management of the financial resources dedicated primarily tohospital-delivered acute care in Canada as of December 2000.Information on funding methods, performance monitoring practicesand financial reporting practices is that which was applied for thefiscal year ended March 31, 2001.

For each province and territory, the study reports on three issuesrelated to the management of financial resources:

1. The approach used to allocate or flow funds by provincial/territorial governments to organizations responsible for hospital-delivered acute care.

2. The methods used to evaluate the financial performance of theseorganizations by the provincial/territorial government providingthe funds.

3. The financial reporting requirements imposed upon organizationsproviding hospital-delivered acute care.

The study was undertaken by a university-based research team withthe support and sponsorship of the Canadian Institute for HealthInformation.


1 / Overview

Using This StudyThis study provides a single-source reference guide to the funding,financial performance monitoring and financial reporting practices ofall provinces and territories in Canada except Nunavut and theNorthwest Territories (NWT) related to the provision of hospital-delivered acute care.

Financial management practices evolve to reflect changing needs in allprovinces and territories. Where information was available describingforthcoming changes in financial management practices, thisinformation has been incorporated in the summary of pro-vince/territory practices in Chapter 7. For all provinces/territories,contacts within health ministries/departments have been providedwhere available. References to documents available from healthministries/departments related to financial management practices havealso been noted where appropriate.

Intended Audiences

This inventory of fiscal management practices will be valuable to anumber of audiences, including:

• researchers needing to understand the underlying rules and policiesused by organizations responsible for hospital-delivered acute careto report financial and operational activity data found in MISGuideline-based datasets;

• provincial health ministries and departments interested in comparingfunding, financial reporting and financial performancemeasurement policies with those used in other provinces;

• federal government agencies requiring ready access to a simplified, yetcomprehensive inventory of provincial and territorial financialadministrative and management practices for health serviceorganizations;

• health service managers seeking to identify managers in otherjurisdictions who are faced with similar operational constraintswith whom lessons learned could be obtained or shared; and

The financialmanagement

practices of alljurisdictions inCanada except

Nunavut and NWT aredescribed.

A number ofstakeholders will find

the contents of thisreport valuable.


1 / Overview

• users of the health care system who are interested in a comparativeunderstanding of how organizations responsible for hospital-delivered acute care are funded and monitored across Canada.

Contents

The study is organized in seven parts.

Chapter 1 provides an overview of the structure of the hospital systemin Canada and will be of value to readers from other countries wishingto gain a high-level overview of how hospital-delivered acute care isorganized and managed in Canada. Chapter 1 also describes thepurpose of the study, and outlines the process used to collect andvalidate the information presented.

Chapter 2 introduces a taxonomy that can be used to classify thefunding approaches found in Canada. This taxonomy was developedafter observing characteristics of the funding approaches reviewed tocomplete this study. The taxonomy provides a framework aroundwhich a discussion of funding approaches used in Canada can bedeveloped.

Chapters 3, 4 and 5 present an integrated discussion of the variousfunding methods, financial performance and financial reportingpractices used by provinces/territories.

Chapter 6 includes a discussion of the state of hospital financialperformance management practices in Canada.

Chapter 7 provides a reference to the specific financial managementpractices used by each province and territory included in this study.Links allowing readers to obtain further information specific to aprovince or territory are included where available.

A taxonomy offunding approaches

in Canada wasdeveloped as part of

this study.

Readers interested inan integrated

overview of Canadianfinancial reportingpractices will find

Chapters 3 through 5useful.

Readers needingaccess to informationon financial reportingpractices in a specific

jurisdiction will findthis information in

Chapter 7.


1 / Overview

ApproachThe process by which data were obtained, verified and assembled forpresentation in this study is presented here. Because of the variation inhospital governance and organizational structures found in Canada,and the impact that this variation has on the selection of the unit ofanalysis, an explanation of hospital organizational structures is alsoprovided.

Sources of Data

The funding, performance monitoring and financial reportinginformation presented in this study was provided by provincial andterritorial health ministries/departments. Data were gathered betweenAugust and November 2000.

Governments were asked to provide documents such as policymanuals, ministry directives, and educational materials related to theirfinancial management practices for the fiscal year 2000/2001. (Allfiscal year ends occur at March 31.)

The research team used these documents to create a summary offinancial management practices specific to each province/territory asdescribed by the provincial or territorial government.

The extent to which organizations responsible for hospital-deliveredacute care comply with these practices has not been investigated.

Data Verification

The summary of financial management practices created by theresearch team was sent to a pre-arranged representative selected byeach ministry/department of health for review and verification. Therepresentative was asked to provide details for missing data elementswhere these elements were relevant in their jurisdiction. Changesrequested by provinces/territories were incorporated and a final copyof the provinces'/territories' summary of practices was returned to theprovinces'/territories' contact person for final verification. Finally, all

The data presented inthis study was

provided byprovincial/territorial

governments.

Provincial andterritorial

governments havereviewed and verified

the information inChapter 7.


1 / Overview

of the provinces/territories were sent a complete draft of the entiredocument and asked to provide comments.

The material appearing in Chapter 7 was extracted from the verifieddata reports submitted by provinces/territories. Chapters 3, 4, and 5were developed by synthesizing information provided by the pro-vinces and territories to create an integrated discussion of funding,performance monitoring and reporting practices across Canada.

The classification of the funding approaches used in each jurisdictionis that of the research team and is based on the authors' assessment ofthe information submitted by jurisdictions.

Unit of Analysis

In this study, the unit of analysis in each province/territory is theorganizational unit responsible for the delivery of hospital-based acutecare services. Hospital-based acute-care services implies the availabilityof diagnostic services, inpatient nursing, surgical and/or post-surgicalrecovery capabilities, drugs, and medical services.

This approach is taken because the variety of corporate structuresused across Canada creates a situation in which the relationshipbetween provincial/territorial health ministries/departments andindividual acute-care hospitals differs from jurisdiction to jurisdiction.

In some provinces/territories (e.g., Ontario), the unit of analysis is atthe individual hospital level. In other provinces/territories (e.g.,Alberta, British Columbia), the unit of analysis is a group of hospitalswithin a regional health organization that are treated as a single entityfor funding and reporting purposes.

The result is that, in many jurisdictions, it is impossible for thegovernment to directly observe the financial activities of hospitalsresponsible for the delivery of acute care. This situation occursbecause many jurisdictions advance funds to organizations withmandates that include health services other than acute-care hospitals(such as community care, long term care, etc.). Even in settings suchas Ontario where funds are directed to organizations that typicallyhave an acute-care focus, it may be impossible to observe the

This study focuseson the organizational

unit in eachprovince/territory thatmanages the delivery

of hospital-basedacute care.

The many types oforganizational

structures used inCanada means thatthe unit of analysis

varies byprovince/territory.


1 / Overview

performance of individual hospitals because multiple sites report as asingle accounting entity.

Types of Hospital Corporate Structures in Canada

Because the unit of analysis differs among jurisdictions, an overviewof the various organizational and governance structures under whichhospitals operate in Canada is provided.

Some of these structures include:

• Regional health organization—a corporate body with a single board ofgovernors that is responsible for acute-care hospitals, as well as thedelivery of a broad range of health care services other than acute-care hospitals;

• Single-site hospital—a single hospital with an individual corporateidentity and its own board of governors;

• Multi-site hospital—multiple hospitals sharing a corporate identitywith a shared board of governors;

• Alliance—multiple hospitals sharing a single CEO but withindividual corporate identities and individual boards of governors;and

• Network—multiple hospitals with separate CEOs, individualcorporate identities and individual boards of governors, but withshared or rationalized clinical and/or support services.

In this report, the term health service organization is a genericterm that refers to any organizational structures that include anacute-care hospital. The term hospital is used only when it isnecessary to specifically refer to an acute-care hospital, either as asingle corporation or within a larger health service organization.

Although health service organizations use a wide variety of corporatestructures, all share some common characteristics. A number of thesecharacteristics are listed below.

Many hospitalgovernance and

corporate structuresare found in Canada.

In this report, theterm health services

organization is ageneric term that

refers to anycorporate structure

that includes anacute-care hospital.


1 / Overview

• The majority of revenues come from a single payer (the Ministryor Department of Health).

• With few exceptions, Canadian health service organizations existas not-for-profit entities without share capital.

• Ownership of health service organizations usually resides with amunicipal government, religious organization, university or othernon-profit organization and seldom with the provincial/territorialgovernment. In all cases, however, the provincial/territorialgovernment manages the operating and capital funding process.

• Governance is usually executed by volunteer trustees. A variety ofmethods are used to appoint trustees.

• A number of fiscal and legal responsibilities and accountabilitiesexist between health service organizations and the Minister ofHealth (or equivalent).

• For most health service organizations, there is little interactionwith the federal level of government.

Funding/Reporting Organizations by Province/Territory

The number of health service organizations that provide acute carevaries widely by province. Table 1.1 shows the unit of analysis and thenumber of health service organizations in each province/territory as atApril 1, 2000.


1 / Overview

Table 1.1

Organizational Unit Used forFunding, Performance Monitoring & Reporting

(As at April 1, 2000)

Jurisdiction Organizational Unit # oforganiza-

tional units

# ofhospitals

# ofbeds

Alberta • Regional Health Authorities 17 115 10,634British Columbia1 • Regional Health Boards;

• Community Health Councils1734

80 15,156

Manitoba2 • Regional Health Authorities 12 79 4,701New Brunswick3 • Region Hospital

Corporations8 30 4,014

Newfoundland andLabrador

• Regional Health Boards 9 33 2,489

Northwest Territories 5 254Nova Scotia4 • District Health Boards 9 35 3,099Nunavut 1 34Ontario5 • Public Hospitals 163 163 27,270Prince Edward Island6 • Regional Health Authorities 5 7 474Quebec7 • Regional Health and Social

Services Boards18 95 21,957

Saskatchewan8 • District Health Boards 32 71 3,813Yukon • Hospitals 2 2 59CANADA 771166 9933,,995544

Source: Annual Hospital Survey FY2000/2001 (Preliminary) CIHI, unless otherwise specified.Notes:1. Includes approved beds in Community Health Councils. Breakdown between Regional

Health Board and Community Health Councils is not known.2. Source: Manitoba Health.3. Source: New Brunswick Health & Wellness (hospitals include 27 general, 2 psychiatric, and

1 rehabilitation).4. The number of beds includes acute-care beds only (Source: Nova Scotia Health).5. The number of organizations equals the number of hospitals because there are no regional

health organizations in Ontario. The number of hospitals includes 144 acute, 12 chronic, 4rehabilitation and 3 specialty (Source: Ministry of Health and Long Term Care).

6. Source: Prince Edward Island Department of Health and Social Services.7. The number of beds includes acute and psychiatric beds only. (Source: Quebec Ministry of

Health and Social Services).8. The number of hospitals includes 69 acute-care hospitals and 1 rehabilitation centre and 1

psychiatric hospital. The number of beds includes 3,328 beds in the acute-care hospitals(comprising 2,944 acute, 183 psychiatric, and 201 long term care, rehabilitation, and other);307 beds in the rehabilitation centre; and 178 beds in the psychiatric hospital (as atMarch 1, 2000) (Source: Saskatchewan Health).

1 0 T h e F i n a n c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a

1 / Overview

Hospital Spending in CanadaIn 2000/2001 it is projected that provincial and territorialgovernments in Canada will spend $63.1 billion on health care. Of thistotal, expenditures on hospitals will account for the largest share,44.1% ($27.9 billion)1. Two decades ago the proportion of healthspending allocated to hospital services was 8.3 percentage pointshigher at 52.4%. This proportion has declined nearly every year sincedue to lower growth in hospital expenditures relative to othercategories of health expenditure. Hospital expenditures declined forthree consecutive years beginning in 1993/1994. By 1998/1999 theygrew by 7.7%, a rate last experienced in the early 1990s. Provincial andterritorial government expenditures on hospital services are forecast togrow by 3.2% in 1999/2000 and by 7.0% in 2000/2001.

Figure 1.1 - Provincial/Territorial Government Hospital Expenditure per Capita, by Province and Territory,

1998/99 and 2000/01 - Current Dollars

$2,0

41

$1,5

47

$1,9

51

$0

$300

$600

$900

$1,200

Nfld.

P.E.I.

N.S.

N.B.

Que.

Ont.

Man

.Sa

sk.

Alta.

B.C.

Y.T.

N.W

.TNu

n.

Province/Territory

1998/99 2000/01f

Sources: Canadian Institute for Health Information, Statistics Canada

1 Canadian Institute for Health Information, National Health Expenditure Database, 2000.These totals do not include deficits or surpluses carried on the books of regions orhospitals. Adjustments for regional and/or hospital deficits or surpluses are not madein the National Health Expenditure database unless the provincial government assumesthem.. Once assumed by the provincial government, deficits are allocated to the yearswhen the region and/or hospital incurred the deficit. In recent years this occurred bothin the provinces of Quebec and Nova Scotia. In fiscal year 1998/99, the Quebecgovernment paid out $1,346.2 million allocating these dollars to “deficits/adjustments/shortfalls” of prior years as follows: $90 million in 1995/96; $63.5 billion in 1996/97;$378.7 million in 1997/98 and $814 billion in 1998/99. In 1998/99 the Nova Scotiagovernment paid out $280 million to cover regional deficits. $123.6 million wasallocated to 1998/99, and $156.4 million was allocated to 1997/98 and prior years.

f = forecast data

T h e F i n a n c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a 1 1

1 / Overview

Hospital spending per capita is highest in the Northwest Territories.Among the provinces, in 2000/2001, per capita hospital spending isprojected to be highest in Newfoundland ($1124) and Manitoba($1040). Saskatchewan is expected to have the lowest spending ($773).(Figure 1.1)

During the 1990’s, health care consumed an increasing share of totalprovincial/territorial government spending. In 1999/2000 (the latestyear for which estimates are available) health care in provinces andterritories is estimated to average 36.1% in total provincialgovernment spending, an increase of 3.0 percentage points from theaverage of the previous year.

SummaryThis study provides a single source reference for stakeholders whorequire access to information describing the funding approaches,financial performance monitoring and financial reporting practices ofprovinces and territories in Canada related to the management ofhospital-delivered acute care services.

The document describes the financial management practices of allprovinces and territories in Canada except Nunavut and theNorthwest Territories.

The unit of analysis for each province/territory matches theorganizational unit used for funding, performance monitoring andreporting of the organization responsible for hospital-based acutecare. There is substantial variation in the responsibilities and mandatesof these organizational units among jurisdictions.


2 / Classifying Funding Practices

2. Classifying Funding Practices

A variety of approaches are used by provincial and territorialgovernments to apportion monies from provincial treasuries forspending by organizations responsible for hospital-delivered acutecare.

Chapter 2 of this study describes these approaches.

Funding Approaches Used in CanadaTo assist in describing how provinces and territories choose toapportion funds for health service organizations, a taxonomy offunding approaches was developed. This taxonomy is based onobservations derived from the sample of approaches submitted by the10 provinces and 1 territory reviewed in this study.

Each province’s/territory’s approach to funding of health serviceorganizations can be described using a framework consisting of twoelements. Table 2.1 shows that these elements are the scope of thefunding approach, and the method used for apportionment.

Funding approachescan be described

in terms ofscope and method.



Some provinces/territories use ex-post adjustments in their approachto funding. The impact of these adjustments is to alter the amountthat would otherwise be determined using a specific method. Theseadjustments are called method modifiers in this study.

It was also observed that jurisdictions sometimes choose between twoalternative data sources when obtaining the data needed to operation-alize various methods.

The scopes, methods (and the underlying method modifiers and datasources) used in the funding of Canadian health service organizationsare summarized in Table 2.2.

Table 2.1

Elements of a Taxonomy for Classifying FundingApproaches

Element Explanation

Scope Describes the extent to which the funding targets money directlyfor hospital-based acute care, or whether the approach flowsmoney to organizations that provide a variety of health servicesthat includes acute care.

Method Describes the mechanical elements of the process used todetermine the specific dollar amount to be distributed.

Sub-components of Methods:

MethodModifiers

When applicable, describes techniques used to adjust thefunding allocations determined by one of the funding methods onan ex-post ("after the fact") basis.

Data Sources When applicable, describes the premise used by a jurisdiction toobtain the data needed for certain methods.



Table 2.2

A Taxonomy of Funding Approaches Used in Canada

Scope Methods Sub-components of MethodsComprehensive Population-based Method ModifiersInstitutional Facility-based Penalty/Incentive adjustmentService specific Case mix-based Import/Export adjustment

Global No loss adjustmentLine-by-linePolicy-based Data SourcesProject-based Spending dataMinisterial discretion Explanatory data

Scope

Table 2.3 shows that three funding scopes are used in Canada. Scopeis determined by the mandate of the health service organization towhich the province/territory is distributing funds and engaging inreporting/performance monitoring activities.

Comprehensive funding approaches are used to determine fundingallocations when distributing money to organizations with multi-sectorresponsibilities. These organizations often have responsibilities forlong term care, community health, mental health, and other servicescombined with their responsibility for hospital-delivered acute care.Regional health organizations (with names such as Regional HealthAuthorities, Regional Health Districts, District Health Boards, etc.) areusually the recipients of provincially/territorially distributed funds.The specific sectoral responsibilities of these regional healthorganizations differ considerably across Canada.

A province/territory’sfunding approach

can be described bychoosing one

element from eachcolumn.



Table 2.3

Scope of the Funding Approach

Scope Description

Comprehensive Comprehensive funding approaches flow money to health serviceorganizations with multi-sector responsibilities that includeshospital-delivered acute care. These organizations may haveconsiderable freedom with respect to how they choose to distributefunds to each sector.

Institutional Institutional funding approaches flow money directly to specificacute-care hospitals (or groups of acute-care hospitals operatingas a single corporate body.) Although these organizations mayhave some discretion over how money will be spent within theirorganization, they are usually not permitted to re-direct money toother organizations.

Service Specific Service specific funding approaches flow money to organizationsto support the provision of a specific service, or the care of aspecific disease. The organization usually has a mandate toprovide this care to residents drawn from a wide geographic area.Funds cannot be used for purposes other than the service ordisease for which the funds were specifically granted.

Because of the multi-sector responsibilities of regional healthorganizations, it is often not possible (nor desirable from an incentivepoint-of-view) for governments to specifically direct monies towardacute-care services in these settings. Regional health organizations areusually permitted considerable freedom to choose how best to directfunds provided by their province/territory to each of the sectors forwhich they have responsibility.

Funding approaches with an institutional scope target monies directly toacute-care hospitals. In some cases, a group of hospital sites may beoperating as a single corporate body, in which case funding may bedirected at the corporate body. Health service organizations in settingswhere a funding approach with an institutional scope is used are rarelypermitted to re-direct their funding for use in other sectors. Thisfunding approach is common in settings where regional healthorganizational structures have not been implemented.

Funding approaches with a service specific scope direct monies tosupport the provision of a specific service or the care of a specificdisease. Funding approaches with a service specific scope tend to bespecialized in nature and are rarely used as the primary approach fordetermining operating funds. For example, although a jurisdiction may



distribute most of its acute-care funding to regional healthorganizations, it may also wish to provide direct support for a cardiacpacemaker program. A separate envelope of funds, determined using afunding approach with a service specific scope, can be used for thispurpose.

In a few cases, health service organizations may have the bulk of theirallocation determined using a service specific funding approach. Thisoccurs in settings where a health service organization has a narrowmandate to provide a specific service, or to care for a specific disease.Regional laboratories and cancer care centres are two examples. Theseare services or diseases that would otherwise fall under theresponsibility umbrella of health service organizations responsible forthe delivery of a wide range of hospital-based acute-care services.

Methods Used for Funding

All funding approaches use at least one method to determine theactual dollars that should be flowed to a health service organization.Most provinces/territories use more than one method. Typically, onemethod is used for apportioning the majority of operating funds. Anumber of secondary methods are used to distribute the balance ofoperating funds, usually targeted for specific issues or specialprograms. A third method is often used for funding capital projects.

Methods observed in the funding approaches seen across Canada canbe classified as being population-based, facility-based, case mix-based,global, line-by-line, policy-based, project-based, and ministerialdiscretion. An explanation of each method is presented in Table 2.4.

➀➀➀➀ Population-Based Methods

Description

Population-based methods use demographic or other characteristicsof the population (such as age, gender, socio-economic status,mortality, etc.) to determine the relative propensity of differentpopulation groups to seek health services.

The mechanism bywhich an actual

dollar allocation isdetermined is the

funding method.

Eight fundingmethods were

identified.

Population-basedmethods recognize

that populationgroups seek hhoossppiittaall--

ddeelliivveerreedd care withdifferent frequencies.



By linking the cost of providing specific health services with thepropensity of certain populations to seek these services at a specifichealth service organization, it is possible to estimate the spendingprofile of the organization. The spending profile can then be used todetermine the organization's share of overall provincial/territorialspending.

Table 2.4

Methods Used for Funding

Method Description

➀ Population-based Uses demographics or other characteristics of the population(such as age, gender, socio-economic status, etc.) to determinethe relative propensity of different population groups to seek healthservices.

➁ Facility-based Uses characteristics of the organization providing care (such assize of organization, type of organization, geographic isolation,occupancy rate) to estimate the cost of operating a health serviceorganization.

➂ Case Mix-based Uses a profile of cases and/or service volumes previously provided(such as number of knee replacements, number of dialysisprocedures) to estimate the cost to sustain a specified profile ofcases and/or service volumes in the future.

➃ Global Applies a factor to a previous spending figure (or to a forecastspending figure) to derive a predicted spending level for anupcoming period.

➄ Line-by-line Applies factors on an individual basis to previous cost experiences(or to forecasted costs) to derive a proposed funding level for eachline item (such as housekeeping, inpatient nursing, etc.) for anupcoming period.

➅ Policy-based Directs spending to address specific policy initiatives of theDepartment or Ministry of Health. These policy initiatives affect theoperation of multiple organizations within the jurisdiction.

➆ Project-based Flows funds to a single health service organization in response toevaluating a proposal from that organization for one-time funding,often for a major expenditure.

➇ Ministerialdiscretion

The Minister of Health decides on the specific dollar amounts toflow to health service organizations.



Generalized Process

In general, the mechanical steps associated with this method are:

1. Assign each member of the population to a specific populationgroup based on the characteristics of the individual. (e.g., age,gender, income quintile, aboriginal status).

then either

2. Calculate a per capita rate of spending for health servicesfor each specific population group across theprovince/territory.

3. For each geographic region, multiply the per capita rate foreach population group by the number of individuals in thegroup. Then, sum this amount for all population groups inthe geographic region.

or2. Determine the cost of providing care to each member of

the population using service recipient costing.2

3. For each population group within each region, sum thecost of providing care to all members of the populationgroup. Then, for each region sum the total costs across allpopulation groups.

Advantages

• Objective—this method uses data obtained from sources otherthan the entities being funded and does not require subjectiveassumptions to implement

• Comprehensive—relevant characteristics of a population can beincorporated

Shortcomings

• Complex—involves the use of sophisticated routines to linkdatabases

2 Service Recipient Costing is used to determine the cost of providing care to specificclients in Canadian health service organizations.

Population-basedmethods are foundmost frequently in

provinces/territoriesusing regionalorganizational

structures.

The specific stepsemployed by

provinces/territoriesthat use a population-based method can be

found in Chapter 7.



• Can be difficult to implement—demands considerable attention begiven to the process of implementation

• Resource intensive—from both an information systemsperspective and a staffing perspective

• Potential lack of transparency—depending on steps involved, maybe difficult for users to understand how funding amounts havebeen determined

➁➁➁➁ Facility-Based Methods

Description

Facility-based methods use characteristics of the organizationproviding care (such as size, amount of teaching activity, distancefrom nearest tertiary facility, occupancy rate, etc.) to estimate the costto operate the health service organization.

Generalized Process


1. Decide the characteristics of a facility that influence the cost ofproviding care.

Example of a population-based method

A province / territory tracks each encounter every member of its population has with the healthsystem. Members of the population are assigned to age and sex groups: males 0-5 years;females 0-5 years; males 6-10; females 6-10 males over 85, and females over 85. Theaverage annual cost of providing care to individual people in each group is calculated.

Funding is determined by multiplying the number of members of each population group living inthe geographic area served by a health service organization by the average cost per memberof that group.

Funding = (# of males 0-5 years * annual rate for a male 0-5 years)+ (# of females 0-5 years * annual rate for a female 0-5 years)+.…++ (# of males over 85 * annual rate for a male over 85)+ (# of females over 85 * annual rate for a female over 85)+ …

Example only. Not intended to describe practice in a particular jurisdiction. This example uses spending data.

Facility-basedmethods reflect

characteristics of ahealth service

organization (such asteaching mandate)that are shown toaffect the cost of

providing services.



2. Fund the facility based at a per unit rate for each of thecharacteristics identified.

Example of a facility-based method

A province/territory decides to fund facilities based on the type of patient days (number of acutepatient days; number of complex continuing care (CCC) patient days; etc.) A different rate is setfor each type of patient day.

Funding is determined by multiplying the number of patient days of each type in the facility bythe rate per patient day for each type. The rate per patient day is established using theprovince's case costing data.

Funding = (# of acute patient days * rate per acute patient day) + (# of CCC patient days * rate per CCC patient day) + (# of rehabilitation patient days * rate per rehab patient day) + …


Example of a facility-based method

A province/territory uses regression to determine that the number of medical students training ata hospital largely explains the difference in cost structures between teaching and communityhospitals. Using output from the regression formula, a rate per student day is determined.

Funding is equal to some base amount (the intercept from the regression) plus the rate perstudent day times the number of student days.

Funding = base amount + (# of medical student days * rate per student day)+…

Example only. Not intended to describe practice in a particular jurisdiction. This example uses explanatory data.

Advantages

• Recognizes that organizational structure (e.g., small rural healthservice organization versus large urban health service organizationwith a teaching hospital) can influence the cost of providingidentical services

• Allows Ministries/Departments of Health to create fundingincentives/disincentives for organizational characteristics that aredeemed desirable/undesirable

Shortcomings

• May not reward utilization efficiencies

• Not responsive to demographic or case mix changes

A challenge indeveloping facility-

based methods is todesign models that

incorporate onlyfactors deemed

beyond managementcontrol.



➂➂➂➂ Case-Mix Based Methods

Description

Case-mix based methods use information describing the types andvolumes of services previously provided (such as number of dialysisprocedures, number of knee replacements, etc.) to estimate thespending required for a specified profile of service volume and type.

Generalized Process


1. Determine the number of cases of each type, such as bypasssurgery, dialysis, or hip and knee replacement, provided by a healthservice organization in period x.

2. Using data available from the CIHI, determine the total weightedcases based on the number of cases treated for each case-mix type.

3. Obtain the total actual costs for period x .

4. Calculate the average cost per weighted case. (= Total actualcosts/total weighted cases).

5. Multiply the average cost per weighted case by the weighted casesexpected in period x+1.

Example of a case mix-based method

A province/territory decides to fund cardiac bypass surgery (CABG) on a per weighted casebasis. The annual cost of all CABGs in the province is divided by the annual number of CABGweighted cases in the province to obtain an average cost per weighted case.

Funding is determined by multiplying a health service organization's number of CABG weightedcases by a rate per CABG weighted case.

Funding = (# of CABG weighted cases * rate per CABG weighted case)+ …

(Potential Enhancement: Fund the health service organization at the provincial average cost perweighted case times next year’s anticipated weighted case volume.)



provinces/territoriesthat use a case mix-

based method can befound in Chapter 7.

Case mix- basedmethods use the

volume and type ofcases treated by a

health serviceorganization to

determine funding.



Advantages

• Relates funding to actual services provided

• When used with provincial average cost per weighted case createsan incentive to provide care in as efficient a manner as possible

Shortcomings

• May create an incentive for weighted-case creep (coding practiceschanging in an effort to maximize the weighting assigned to a case)

➃➃➃➃ Global Methods

Description

Global methods adjust a previous total spending figure (or a forecastspending figure) to derive a proposed funding level for an upcomingperiod. This can be accomplished by using a multiplier (such as 1 +rate of inflation) or an additive/reductive factor (such as giving eachhealth service organization $1 million more than last year).

When a multiplier is used, the factor is often set equal to the amountby which the provincial/territorial spending envelope has beenincreased or decreased since the previous funding allocation wasmade.

Generalized Process


1. For each health service organization, begin with a base amount,such as the prior year's base allocation or total actual spending.

2. Adjust this amount by a predetermined factor. (Such as the rate ofinflation; or the amount by which the provincial/territorial healthspending budget has increased/decreased).

The specific stepsemployed by a

province/territorywhen using the

global method can befound in Chapter 7.

Global methods relyon accurateaccountinginformation

describing pastspending. External

validation of theaccounting

information (e.g.,,audits) is usually

required.



3. The result is the health service organization's base funding for thecurrent year.

Example of a global method

A province/territory decides to increase global funding for health service organizations by aspecific percentage next year.

Funding is determined by multiplying last year’s global funding by the percentage increase.

Funding = (Global funding provided last year * percentage increase)+ …


Advantages

• Provides some degree of predictability because the base amount issimilar to the current year's base

• Fairly straightforward to calculate

Shortcomings

• Perpetuates inequities

• Does not encourage more desirable behaviours such as increasedefficiency and more appropriate utilization of services

➄➄➄➄ Line-by-Line Methods

Description

Line-by-line methods apply factors on an individual basis to previousspending experience (or to a forecast spending figure) to derive aproposed funding level for each line item for an upcoming period.Depending upon the organization, line items could be the nature ofexpenditures (such as housekeeping, inpatient nursing services,medical/surgical supplies, etc.) or line items could be programs ordepartments (such as family birthing unit; emergency care; cardiaccare).

Line-by-line methodsalso rely on the

availability ofaccurate and

validated accountinginformation on past

performance.



The line-by-line method provides Ministries/Departments of Healthwith a more active instrument to direct spending within health serviceorganizations to conform to changing province/territory mandates.For example, a province that wished to promote day surgery couldincrease the line funding available for this activity by a factor greaterthan that applied to the in-patient nursing line.

Generalized Process


1. For each health service organization, begin with a base amount,such as the prior year's funding allocation or spending on a line-by-line basis.

2. Adjust the amount for each line item by a pre-determined inflationor adjustment factor, such as 3%. The factor applied to each lineitem can be different.

3. Sum the adjusted line items to determine the organization’s revisedbase amount for the current year’s funding.

Example of a line-by-line method

A province/territory decides to increase funding for nursing by x%, increase ambulatory care byy%, and decrease administration by z%.

Funding is determined by multiplying last year’s line-by-line funding by the percentage change.

Funding = Nursing funding provided last year * (1+x%)+ ambulatory care funding provided last year * (1+y%)+ administration funding provided last year * (1-z%)+ …


Advantages

• Allows Ministries/Departments of Health to promote focusedpolicy initiatives via directed funding

• Provides some degree of predictability for the health serviceorganization because the base amount is similar to the currentyear's base

• Simplicity


provinces/territoriesthat use the line-by-line method can befound in Chapter 7.

Line-by-line methodsare used by

provinces/territoriesto engage in active

oversight activities.



Shortcomings

• Unable to determine if past base allocations or spending for lineitems represent appropriate or efficient spending patterns

• Does not encourage increased efficiency and more appropriateutilization of services

➅➅➅➅ Policy-Based Methods

Description

Policy-based methods are used to direct spending to address specificpolicy initiatives of the Department or Ministry of Health. Thesepolicy initiatives affect the operation of multiple facilities within thejurisdiction.

An example of a policy-based method would be flowing money tohealth service organizations to support the availability of a guaranteed48 hour post-partum stay in a family birthing unit. All organizationsproviding birthing services would receive funding for this purpose.

Method modifiers (see page 31) are sometimes combined with policy-based methods to make funding contingent on particular performancetargets being met.

Policy-based funding methods are usually used to flow funds that arein addition to the apportionment that is determined using one of theother funding methods.

Generalized Process


1. Identify a total province-wide amount of money to beapportioned.

2. Using an allocation base appropriate for the specific issue orservice requirement, determine for each health serviceorganization's portion of the total provincial amount.

Policy-basedmethods allocate

dollars for initiativesspecifically directed

by the Ministry orDepartment of Health.

Policy-basedmethods are often

developed on a peruse basis. This

ensures the fundingmethod is closely

aligned with thegovernment’s

specific policyinitiative.

All provinces usepolicy-based

methods. Thespecific measuresused by individual

provinces/territoriesare described in

Chapter 7.



3. Calculate the actual amount of the allocation for each healthservice organization.

Example of a policy-based method

A province/territory adopts a policy that all emergency patients should be triaged within xminutes of arrival at a hospital. Funding is provided to achieve this policy.

Funding is determined by multiplying a health service organization’s share of the provincialfunding envelope by the triage funding.

Funding = (Health service organization share of provincial envelope * triage funding)+ …


Advantages

• Permits provinces/territories to ensure initiatives directed by thegovernment are embraced by health service organizations

• Focused on specific desired behaviours or delivery of care issues

• Dynamic and timely as this method can be adopted at any timethroughout the fiscal year in response to specific event oridentified need

Shortcomings

• Limited in its ability to be comprehensive across all services withina health service organization

• May be labour intensive in that the method requires identificationof an appropriate allocation base and data related to that basefrom each health service organization



➆➆➆➆ Project-Based Method

Description

Project-based methods flow funds to a health service organization inresponse to evaluating a proposal from the organization for a one-time need.

This method is often used to fund significant capital expenditures forwhich health service organizations are not required to provide fromoperating funds. (The building of a new hospital wing is an example.)

The distinction between the project-based method and the policy-based specific method is that the latter apportions a pool of fundsamong many health service organizations to support a government-initiated policy. The project-based method directs money to anindividual organization to support a one-time need identified by agovernment or other organization.

Generalized Process


1. A request for one-time funding is prepared by a health serviceorganization.

2. The request is submitted to the government (and perhapsother organizations) for review.

3. Using various criteria, the request is evaluated by government.

4. A funding decision is made and communicated to therequesting organization.

5. The government engages in an active monitoring process withthe requesting organization to ensure that the funds areexpended as originally proposed.

Project-basedmethods advancefunds to a single

entity, almost alwaysas one-time funding.



Example of a project-based method

A health service organization identifies the need for a new magnetic resonance imaging (MRI)machine. Capital and renovation cost estimates are obtained from other organizations that haverecently installed MRIs. MRI capital costs and related facility renovations are not funded throughbase operating grants.

The Ministry of Health evaluates the merits of the business case and approves the project.Funds are provided to the health service organization based on data in the business case.

Funding = Capital and renovation cost estimates + …


Advantages

• Permits the government to actively engage with the health serviceorganization in the evaluation of funding requests

• Allows the government to manage its portfolio of capitalexpenditures

• Ensures that the expertise needed to review and monitorsignificant funding initiatives can be accessed as such specializedexpertise may not lie within all health service organizations (e.g.,engineering and structural engineering expertise)

Shortcomings

• The approval and review process is often very time and resourceconsuming for both the government and the requestingorganization

• Difficult to prioritize between competing demands on limitedcapital resources

➇➇➇➇ Ministerial Discretion Method

Description

Ministerial discretion methods are those where the specific dollaramount to flow to an organization is made by the Minister of Health.In most cases, the decision to flow money to an organization is madeafter the organization has made a specific request to the Minister forfunding to address an event not recognized by the usual funding

Ministerial discretionmethods are basedon decisions made

by the Minister ofHealth or theLegislature.



approach. Requesting funds to cover a significant deficit is anexample.

It is recognized that all health funding is administered at the pleasureof the Minister of Health and is approved by the provincial/territoriallegislative body. The distinction made when classifying a method asministerial discretion is that the political arm of the governmentdetermines the funding allocation to specific organizations. This is incontrast to all other funding methods where the legislature approves apool of funds to be distributed, and empowers the Minister to workwith the bureaucratic arm of the government to determine allocationsto specific health service organizations.

Generalized Process


1. The Minister is made aware of a situation that is affecting theability of the health service organization to support on-goingoperations.

2. The Minister interacts with his/her ministry/department to obtaininformation needed by the cabinet or other groups convened bythe Minister to review the situation. The Minister may also receiveinput from citizens, administrators and care providers.

3. The Minister makes a funding decision.

Example of a ministerial discretion method

A province/territory decides to increase global funding for all hospital organizations but not toassume responsibility for any deficits. A board writes a letter to the Minister claimingextraordinary costs that will not be covered by the increase in global funding. The Ministerreviews the situation and decides to cover the deficit.

Funding = Funding approved by Minister




Advantages

• Permits governments to direct the funds necessary for majorsystem re-design initiatives

• Consistent with policy—allows a government to demonstrate itspolicy platform through funding decisions

• Representative—recognizes the role of officials who have beengiven a elected mandate to govern

• Participative—allows interested groups to participate in thefunding process through lobbying efforts

• Flexibility—removes non-discretionary constraints on decisionsthat are implicit in other funding methods

Shortcomings

• Potentially inconsistent—significant changes in funding may occurafter elections in which the majority party changes

• Short-term focus—may only be applied once, or change as policiesor governments change

• A government’s strategic direction may not be viewed as beingequitable to all parties

• How the funding decision is made is known only to the Minister(or the Minister's representatives) and is often not disclosed to theaffected parties

Method ModifiersSome provinces/territories include ex-post (i.e., “after the fact”)adjustments in their funding methods. The impact of theseadjustments is to alter the funding amount that would otherwise bedetermined using a specific method. As these adjustments are notfunding methods in themselves, and because they are always used incombination with a funding method, the adjustments are calledmethod modifiers. Three forms of method modifiers are used inCanada.

The impact of amethod modifier is to

change the fundingdetermined using one

of the eight fundingmethods.

Although approachesthat use a ministerial

discretion methodare highly subjective,

they offer a numberof advantages.



Table 2.5

Method Modifiers

Modifier Description

Penalty/IncentiveAdjustment

Penalty/incentive adjustments are used to increase or decreasefunding based on certain performance criteria being met (or notbeing met).

Import/ExportAdjustment

Import/export adjustments are used to move funds from one healthservice organization to another when a funding method is not ableto fully reflect patterns of providing care.

No loss adjustment A no-loss adjustment sets funding equal to the greater of a) theamount indicated by the new funding approach or b) the fundingthat would be announced if the former funding approach wereused.

Penalty/Incentive Adjustments

Description:

Penalty/incentive adjustments are used as a results-based managementcontrol mechanism to reinforce desired behaviours that may not befully reflected in the funding method.

Example of a penalty/incentive adjustment

A province/territory decides to allocate funds to help relieve emergency department pressures.Health service organizations are required to demonstrate that all patients presenting inemergency are triaged within x minutes by a registered nurse. Failure to meet this performancetarget by more than y times in a month will result in a $z reduction in the following month’soperating grant payment.

Funding = Funding +/- penalty/incentive adjustment

Example only. Not intended to describe practice in a particular jurisdiction. This example is a policy-based methodthat uses spending data.

Incentiveadjustments can be

used to flowadditional funds to

health serviceorganizations with

performance thatexceeds a target.



Example of a penalty/incentive adjustment

A province/territory decides to reward efficient health service organizations. If an organization’sactual cost per weighted case is less than the provincial average cost per weighted case, itreceives a share of an efficiency fund. The greater the difference, the greater the share of theefficiency fund allocated to a health service organization. If an organization’s actual cost perweighted case is greater than the provincial average cost per weighted case, it does not receivea share of the efficiency fund.

Funding = Funding * penalty/incentive

Example only. Not intended to describe practice in a particular jurisdiction. This example is a case mix method thatuses spending data.

Import/Export Adjustments

Description

A number of funding methods make assumptions about where peoplewill seek care, or that similar services are available from all healthservice organizations. To the extent that these implicit assumptionsare incorrect, the output from the funding method does not accuratelyreflect an equitable distribution of funds.

Import/export adjustments can be used to move funds from onehealth service organization to another to adjust for the actual demandsfor services created by patients seeking care.

Example of an import/export adjustment

A province/territory decides to use a population-based formula to determine the funding forhealth service organizations. Organization X has no orthopaedic services, but because apopulation-based funding approach is used, its annual funding includes an implicit amount fororthopaedic care.

Residents from Organization X's catchment area usually travel to Organization Y to receiveorthopaedic care. Funds are transferred from the base funding for Organization X to the basefunding for Organization Y to compensate Y for treating patients from X’s area.

Funding = Population-based funding +/- import/export adjustment

Example only. Not intended to describe practice in a particular jurisdiction. This example is a population-basedmethod that uses explanatory data.

When specialized services are available only from specific healthservice organizations, provinces/territories have a variety of choiceswith respect to how to flow funds to support these services.Import/export adjustments are only one such choice.



Import/export adjustments are used when a health serviceorganization provides care to a person who resides outside of theorganization’s geographic area. The adjustment is used to move fundsfrom the health service organization in the patient’s region ofresidence to the organization that actually provided the care insituations where the organization in the region of residence originallyreceived funds for providing the care.

An alternative to using import/export adjustments is to flow fundsdirectly to the organization that actually provides the specializedservice. Funding approaches with a service specific scope are designedin this manner.

A third alternative is for a province/territory to include the amountneeded to provide the specialized service within the calculation of thefunding amount directed to the health service organization thatprovides the specialized service. This simpler approach is often usedin provinces with only a few health service organizations.

No-loss Adjustments

Description

No-loss adjustments are made to ensure that an organization's fundingis not less than the previous year's funding as a result of changes in thefunding approach. A no-loss adjustment sets funding equal to thegreater of: a) the amount indicated by the new funding approach; and,b) the funding that would be announced if the former fundingapproach were used.

Adjustments made at the discretion of the ministry/department ofhealth to alter the funding amount determined by a ministerialdiscretion method are regarded by this taxonomy as part of theministerial discretion method and not as a method modifier.

Data SourcesData describing past financial performance is needed to operationalizea number of the funding methods used in Canada. Two sources forthese data are observed.



Spending Data

Some jurisdictions operationalize funding methods using spendingdata, where past accounting performance is measured usingaccounting conventions. Elements of accounting performance used asa data source include total expenditures, individual expense itemsfrom the Statement of Operations, revenues, cash inflows andoutflows, case costs, and individual asset or equity balances extractedfrom the Statement of Financial Position. Auditor certification of dataelements is usually required to be submitted to the provincial/territorial government.

Advantages

• Consistency—there are well established conventions governing themeasurement and presentation of accounting information

• Availability—accounting data is routinely collected for all organi-zations responsible for hospital-delivered acute care

• Familiarity—accounting data is easily understood by boards andmanagers which facilitates ease of use

Shortcomings

• Entrenched bias—there is a limited ability to identify situations ofover or under-funding

• Stasis—this data source limits the ability to identify fundingadjustments related to changes in volume and type of care

• Subjectivity—spending data can be more susceptible to subjectiveinfluences than explanatory data (see below)

Approaches that usespending data benefit

from access toreadily available data

prepared in aconsistent manner.

Approaches that usespending data have

difficulty addressingproblems created by

entrenched bias,stasis, and possible

subjectivity.



Explanatory Data

An alternative to using spending data is to use explanatory data tooperationalize funding methods. Explanatory data describesrelationships observed between one or more events or conditions(such as the proportion of the population over age 65 or the numberof neo-natal births) and the expenditure patterns of health serviceorganizations.

Economic and mathematical techniques are used to identify theserelationships using data on previous expenditure patterns. Onceidentified, these relationships are expressed in mathematical terms.The resulting equation (also referred to as a model) is then used topopulate the funding method with the data needed to determinefuture funding.

The mathematical rigour required to use explanatory data for fundingmodels helps ensure that the factors identified in these models are keydeterminants of expenditure patterns. When there is a high degree ofcorrelation between the incidence of the observed factor (such as thenumber of patient days) and the resulting outcome (e.g., expendituresby a hospital), the model is said to have a high explanatory power.

Advantages

• Conceptual—relates spending to factors driving costs

• Objective—less subjective influence or decision-making

• Data-based—uses the richness of information captured incomplex databases

Using explanatorydata has the

advantage of beingobjective and

inclusive.



Shortcomings

• Lack of transparency—depending upon how the model isconstructed or presented, it can be difficult for lay users tounderstand the relationships among the events or conditions

• Perverse incentives—health service organizations may “gamethe approach” and make decisions that maximize benefit to theorganization but may not be in the best interest of the healthsystem as a whole

• Consequence of error—a misspecification in the model, eitheras a result of poor data quality or a mathematical error inmodel design can cause incorrect apportionment

When using explanatory data it is important to engage in an on-goingprocess of model review to ensure the continued robustness of themodel when examined in light of new data.

It was also noted that provinces/territories seek to improve the powerof their explanatory data by identifying and evaluating other potentialfactors that may help to better explain expenditure patterns. Detailsabout specific model review and enhancement initiatives are providedin the detailed information included for each province/territory inChapter 7.

Funding approachesthat use explanatory

data may promoteunintendedbehaviours.

Periodic review ofmodels that use

explanatory dataensures the on-goingvalidity of the model.



Applying the TaxonomyThe taxonomy introduced in this study describes Canadian fundingapproaches in terms of scope and method. Scope describes themandate of the organization to which funds are directed, and methoddescribes the mechanical steps used to determine the fundingapportionment.

Adjustment to the funding levels indicated by some methods are madeusing method modifiers, and jurisdictions have a choice of two datasources for some methods.

Although many combinations of the four elements are possible, somecombinations complement each other better than others. A fewcombinations are illogical and would not be expected to appear inpractice.

Comprehensive Examples

This section demonstrates how the funding taxonomy can be used todescribe the components of a funding approach used by a govern-ment.

Comprehensive Example #1

A province flows funds directly to hospital corporations for acute care. The hospitals are notpermitted to redirect these funds to activities beyond their service mandate.

Each year, the Ministry of Health forms a committee with representatives from the provincialmedical association, the provincial nursing association, hospital managers and three citizens toreview the business plans, budgets and audited financial statements submitted by hospitals. Thecommittee reviews the documentation and makes recommendations regarding the appropriatefunding for each hospital.

The Minister receives this information and decides on actual funding amounts. These amountsmay, or may not, reflect the committee’s recommendations. Only hospitals deemed efficient(actual cost per weighted case was less than the provincial average) received a fundingincrease, irrespective of the content of their business plan or budget.

Example only. Not intended to describe practice in a particular jurisdiction.



Table 2.6

Classifying the Funding Approach in Comprehensive Example #1

Component Classification Rationale

Scope Institutional The funding decision will flow moneydirectly to acute-care health serviceorganizations, and they are not permittedto divert funds to other organizations.

Method Ministerialdiscretion

Although a formal evaluation processexists, the funding decision is made by theMinister. No evidence is providedindicating the funding allocation wascalculated in the same manner for eachhospital.

Method Modifier Penalty/IncentiveAdjustment

Even though business plans or budgetsshowed a potential increase in costs, thefact that the hospital was deemed by theMinistry to be operating inefficiently meantthat they did not share in any of theincreased funding available.

Data Source Spending data Evidence of past spending and financialestimates of future spending are beingevaluated as part of the funding process.

Comprehensive Example #2

A territory has three regional health organizations.

Using information available from CIHI, the health department determines the total weightedcases in each region for last year. The territorial average cost per weighted case is calculated.Last year’s average cost per weighted case is multiplied by the change in the consumer priceindex as reported by Statistics Canada to better reflect the expected cost per weighted case forthe upcoming year. Each region's funding allocation also includes an amount to cover the cost ofoperating long term care facilities. This amount is calculated as 15% of the acute care budget.

Funding for each region's operating expenses for acute care is based on the number ofweighted cases times the expected cost per weighted case.

Example only. Not intended to describe practice in a particular jurisdiction.



Table 2.7

Classifying the Funding Approach in Comprehensive Example #2

Component Classification Rationale

Scope Comprehensive The funding amount is allocated to theregions who have a mandate to fund theservices within their jurisdictions.

Method Case mix- based

Global

The primary method of funding is casemix-based because the majority of theoperating funding announcement is basedon the number of weighted cases and anaverage rate. It is not population-basedbecause it did not take any populationcharacteristics into account.

A secondary method is being used to fundlong term care. A multiplicative factor (inthis case, 10% of the acute care budget) isbeing used to compensate for long termcare costs. The comprehensive scope ofthis funding approach implies that theregion is free to allocate more or less than10% of its total budget to long term care.

Method Modifier None

Data Source Spending data Data on total actual spending for theregion last year is being used to calculatethe average cost per weighted case, andto determine the global amount on whichthe 10% long term care allowance iscalculated.

SummaryProvinces/territories use a variety of approaches to fund the organi-zations responsible for providing hospital-delivered acute care in theirjurisdictions. Although the approaches are tailored to the uniqueneeds of each province/territory, the approaches can all be classifiedin terms of scope (determined by the mandate of the organization towhich the funds are directed) and method (the mechanical steps usedto determine the funding apportionment). Some jurisdictions usemethod modifiers to adjust the funding levels otherwise indicated byfunding methods. It was also identified that jurisdictions choosebetween two data sources when obtaining input data to operationalizesome methods.



This taxonomy is used to structure the discussion of approaches tofunding chosen by specific provinces and territories in Chapter 4. Thetaxonomy is also used to organize the detailed information providedon funding approaches presented in Chapter 7.


3 / Funding Practices

3. Funding Practices

A variety of approaches are used by provincial and territorialgovernments to apportion monies from their treasury for spending byhealth service organizations. In Chapter 2, a taxonomy for classifyingthese approaches was introduced.

Chapter 3 applies the taxonomy to develop an integrated overview ofhow provinces and territories fund the operating and capital needs oftheir health service organizations. A discussion of similarities,differences and strengths of the funding approaches used by provincesand territories is provided.

Readers interested in obtaining specific information about anindividual province or territory’s funding approach are referred toChapter 7 where this information has been organized alphabetically byjurisdiction.

Acute Care Funding in CanadaAlmost all medically-necessitated hospital-based services areuniversally available to Canadian residents without requiring paymentfor care.3 The revenues needed to support these activities comes viataxes levied by the federal and provincial/territorial governmentswhich are then channelled to health service organizations using thefunding approaches reviewed in this study.

3 Some jurisdictions assess modest health insurance fees.

In Canada, almostall funds to supporthospital operations

are provided bygovernment.



Funding for Operating vs. Capital Purposes

To assist in managing the significant provincial/territorial budget itemrepresented by health services, all governments in Canada separatetheir management of the funds intended for operating purposes fromthose intended for capital purposes. An explanation of the difference

in application of operating funds and capital funds is presented inTable 3.1.

Primary vs. Secondary Funding Approaches

Provinces/territories rarely use the same approach to distributeoperating funds as that used to distribute capital funds.

This report describes the funding approach used to determine thelargest percent of the value of operating grants announced by a

Table 3.1

Operating versus Capital Funds

Type Description

Operating Funds Operating funds costs are used to pay for day-to-day expensesincurred by health service organizations, such as nursing, suppliesand inpatient drugs, support services (housekeeping andadministration, etc.), as well as the on-going replacement of mostequipment (e.g., beds, imaging systems). (See table note 1)Asset purchases made with operating funds are recorded on theStatement of Financial Position and the expense is amortized overtime. Capitalization thresholds are specified in the MIS Guidelines.

Capital Funds Capital funds are used to pay for hospital construction, majorbuilding renovations, and building-related equipment purchases(such as elevators).Some high cost equipment (e.g., emerging diagnostic imagingtechnologies) are funded using a Capital Funding approach.The accounting treatment of assets acquired using capital fundscan differ by jurisdiction. Some hospital organizations record theasset acquired on their balance sheet. Sometimes the asset iscarried on the financial statements of a related organization (suchas a foundation.) The asset may also be carried on the financialstatements of the funding agency.

Notes:1. An exception is often made for very expensive equipment such as an MRI unit. Such equip-

ment is not funded by the primary operating funding approach.



province/territory as that province’s/territory’s primary operatingfunding approach.

A similar distinction is made for capital grant determinations. Theapproach used to determine the largest percentage of capital grantannouncements is considered to be the province’s/territory’s primarycapital funding approach.

For presentation clarity, approaches that are not primary are classifiedas secondary funding approaches. All jurisdictions were found to use avariety of secondary funding approaches. These approaches are usedfor many purposes such as directing money for services not offered byall health service organizations.

The classification of a particular funding approach as primary orsecondary is jurisdiction specific. What is the primary approach in onejurisdiction may be a secondary approach in another.

Primary Funding ApproachesFor both operating and capital purposes, the primary fundingapproach is the approach used to apportion the largest percentage ofthe funds being distributed.

Approaches used for Primary Operating Funding

Currently(fiscal year ending March 2001)

Table 3.2 illustrates the approaches used for primary operating funds.For the fiscal year ending March 2001, all jurisdictions in Canadaemploy a primary funding approach with a spending focus. Theimplication is that governments believe that validated measures of pastspending provide a reliable platform upon which decisions can bemade about future funding requirements.



As is expected, jurisdictions with regional health structures useprimary funding approaches with a comprehensive scope. OnlyOntario and the Yukon have primary funding approaches with aninstitutional scope. This approach is consistent with the hospital-basedfocus of health service organizations in these jurisdictions.

While almost all jurisdictions distribute some funding using a fundingapproach with a service specific scope, the relative amounts involved(when compared with the total acute care budget) are small.

It is interesting to note that for the fiscal year ended March 2001, alljurisdictions use spending data to operationalize their fundingmethods. The findings presented in Chapter 7 indicate that someprovinces (e.g., Ontario, New Brunswick) are considering the use ofexplanatory data to operationalize their funding methods in futureyears.

Table 3.2

Primary Operating Funding Approaches Used by Jurisdiction(in effect for fiscal year ending March 2001)

Province Funding ApproachScope Primary Method

MethodModifier(s)

Data Source

Alberta Comprehensive Population-based Import/export+ No-lossadjustment

Spending data

BritishColumbia

Comprehensive Line-by-line andPopulation-based

None Spending data

Manitoba Comprehensive Ministerial discretion None Spending dataNewBrunswick

Comprehensive Line-by-line andPopulation-based

None Spending data

Newfoundlandand Labrador

Comprehensive Ministerial discretion None Spending data

Nova Scotia Comprehensive Ministerial discretion None Spending dataOntario Institutional Global None Spending dataPrince EdwardIsland

Comprehensive Ministerial discretion None Spending data

Quebec Comprehensive Global None Spending dataSaskatchewan Comprehensive Population-based Import/export

adjustmentSpending data

Yukon Institutional Ministerial discretionand Global

None Spending data



Although there is considerable consistency in the scope of fundingapproaches used in Canada, the methods used to implement primaryoperating funding differ across the country. For the fiscal year endingMarch 2001, two jurisdictions (Alberta and Saskatchewan) haveprimary operating funding approaches with a population-basedmethod. Five jurisdictions use a ministerial discretion method(Manitoba, Prince Edward Island, Nova Scotia, Newfoundland andLabrador, and Yukon); two jurisdictions (Ontario and Quebec) use aglobal method and two (British Columbia and New Brunswick) use aline-by-line method. Approximately half of the jurisdictions also usesecondary funding methods to determine some portion of operatingfunds. The policy-based method is the most commonly used for thispurpose. Two jurisdictions use a population-based method incombination with the primary method. For example, in NewBrunswick, a population-based method is used to allocate new dollarsfor the patient care services line. In British Columbia, a population-based method is used to inform the line-by-line method.

Although the classification of a funding method may be the same fortwo jurisdictions, the way in which the method is implemented maydiffer. A good example of this difference can be seen in thepopulation-based methods used by Alberta and Saskatchewan.

To determine the expected cost of providing care to populations, theGovernment of Alberta uses a pro-forma spending profile thatsummarizes the actual historical health care system usage for everyresident of the province. This profile is then used to approximate thecost of providing care to the group of residents living in each healthregion.

In contrast, Saskatchewan uses a relative population size adjusted forage, gender, health needs and patterns of service flow. The fundingpool is allocated based on the districts’ (i.e., health regions’) relativeshare of the population.

Alberta’s combination of a population-based method with service-recipient costing information creates a funding approach that isobjective, data rich, consistent in application, and comprehensive inoutlook. It is important to note, however, that Alberta is able to dothis because Alberta Health & Wellness has access to province-widesystems that track the use of health services by all residents. Theministry has also sponsored a health-costing project allowing the



province to determine the cost of providing services at the servicerecipient level.

A number of provinces, including British Columbia, New Brunswick,Ontario, and Quebec establish funding amounts by adjusting previousyear spending to account for known changes in overall cost structures.For example, British Columbia makes specific adjustments for anumber of input costs. The Yukon uses a somewhat similar approach.

In contrast, the Ontario Ministry of Health and Long Term Carefocuses its energy on ensuring that it has a good understanding ofaggregate spending patterns by health service organizations. Thisallows Ontario to apply the same global multiplier to each hospital'sprevious year’s primary operating grant figure to determine funding ina subsequent year. Aggregate budget increases based on overallprogram spending pattern changes are also used in Quebec.

Manitoba, Newfoundland and Labrador, and Prince Edward Island alluse funding approaches based on a ministerial discretion method. Inthese jurisdictions, the provincial health ministry/department worksclosely with health service organizations to review proposed operatingplans, budgets, and evidence of past spending patterns. Based on thisinteraction, the ministry/department of health determines each healthservice organization’s funding announcement. Often seniorrepresentatives of the government (e.g., the provincial treasurer) areinvolved in determining or approving the announcement.

Method Modifiers(for Primary Operating Funding)

Three jurisdictions use method modifiers to adjust the amount offunds a health service organization would otherwise receive.

In Alberta and Saskatchewan, an adjustment to the base funding isrequired because the funding approach is based on the premise thatresidents will seek care in the region where they live. When residentsseek care from other regions/districts, either because the serviceneeded is not available from their health service organization, or forreasons of personal choice, it is necessary to redirect funds from thehealth service organization originally funded to provide care to thehealth service organization where the care was actually provided.

Ontario is activelyexamining a new

funding approachthat uses

explanatory dataand uses

population andfacility-based

methods.



Alberta’s comprehensive system for tracking what health care isprovided to every resident allows it to use an import/export adjustmentto correct for the effect of care received outside of a resident’s homeregion. Saskatchewan makes a similar adjustment, but uses provincialutilization rates.

Another method modifier used in Alberta is a no loss adjustment. Theimpact of this adjustment is to ensure that a health region’s funding isnot reduced from historical levels, even if the result of the population-based method indicates the region is over-funded given the profile ofresidents in the region. Such a provision violates the theoreticalintegrity of a population-based method. However, it may be veryimportant to use such a provision in the first few years after theimplementation of a population-based method as shedding fixed coststo adapt to new funding levels requires long term planning.

Approaches Proposed or Under Development(for Primary Operating Funding)

A number of jurisdictions are actively exploring alternate approachesto funding. Most noticeable is the strong interest in approaches thatincorporate population-based methods. A summary of primaryfunding approaches being considered by jurisdictions is shown inTable 3.3.

A proposal for an approach that uses explanatory data is currentlybeing reviewed by the Ontario government. Depending upon Cabinetapproval, and recommendations for change from the Minister ofHealth, Ontario’s proposed funding model could be implemented forthe 2001/02 fiscal year.

British Columbia and New Brunswick have also developed expertisein this area. The approach being considered in these jurisdictionswould apply an average cost per weighted case to a populationadjusted expected weighted case volume for the area served by eachhealth service organization.

A common theme across Canada is the interest to review and adaptfunding approaches to promote equity in funding. This is irrespectiveof the method used. For example, Alberta has established acommittee to analyse variations in costs and utilization betweenregions. Enhancements to further improve the equity and

Ontario’s ProposedPrimary Funding

Approach forOperating Funds

Ontario’s proposedprimary operating fundingapproach is somewhatunique in that it combinestwo methods. Apopulation-based methodwould be used todetermine the volume ofweighted-cases a healthservice organization isexpected to treat based oncharacteristics of thepopulation served by thehospital. A facility-basedmethod would be used todetermine the expectedcost per weighted-casebased on characteristics ofthe hospital.

A health serviceorganization’s fundingcould be determined bymultiplying the mix ofcases expected (thevolume) times the cost ofproviding care (the rate),apportioning volume andrate funds using theindividual volume and rateformulae, or some othercombination of methods.

A no-lossadjustment has

interestingmanagement

controlimplications.



transparency of the funding approach used in Alberta could emergefrom this analysis.

Approaches used for Primary Capital Funding


All provinces/territories in this study use a project-based method astheir primary capital funding approach. Capital funding appears in allbut one case (Quebec) to have a scope with an institutional focus.Even in jurisdictions with regional health organizations, it does notappear that money for buildings and infrastructure is given to theregional health service organization for spending in the sector of itschoosing. The exception to this is Quebec, where funds are allocatedto regional boards for capital expenditures and the boards areresponsible for allocating the funds among facilities. Also notable inQuebec is the involvement of the provincial housing corporation inconsolidating the bank financing of capital projects undertaken by

The project-basedmethod is used by

all provinces forprimary capital

funding decisions.

Table 3.3

Jurisdictions Considering a Change inPrimary Operating Funding Approach

Province Funding ApproachStatus Scope Method Data Source

BritishColumbia

Current Comprehensive Line-by-line + Population-based

Spending

Possible Comprehensive Population-based Spending

NewBrunswick

Current Comprehensive Line-by-line + Population-based

Spending

Possible Comprehensive Population-based Explanatory


Current Comprehensive Ministerial discretion Spending

Possible Comprehensive Population-based Spending

Nova Scotia Current Comprehensive Ministerial discretion SpendingPossible Comprehensive Population-based Spending

Ontario Current Institutional Global SpendingPossible Institutional Population-based +

Facility-basedExplanatory

Quebec Current Comprehensive Global SpendingPossible Comprehensive Population-based +

Facility-basedExplanatory



health service organizations, and in providing technical and financialmanagement assistance with large scale capital projects.

A much more common approach to the funding of routine capitalexpenditures is for jurisdictions to require hospitals to fund thepurchase and replacement of non-major equipment (such as beds,furnishings, medical equipment, etc.) through funds received viaregular operating funds. These funds are often supplemented withmonies raised from other sources (such as donations or supplementalrevenues such as parking fees or preferential accommodation charges).As such, capital funding methods are generally reserved for providingsupport for major capital expenditures such as new construction,building renovations, and major equipment expenditures (such as MRImachines).

The project-based approach is well suited for large-scale, one-timeprojects that tend to require fairly extensive information on programand functional plans, as well as costing analyses on a case-by-casebasis.

Some provinces (e.g., Alberta, British Columbia) have explicitevaluation criteria with 3-year planning horizons for capital projectfunding decisions. Other provinces (e.g., Prince Edward Island,Manitoba) tailor evaluation criteria to the project proposal submitted.

Although jurisdictions are consistent in their use of a specific capitalfunding approach to major construction projects, there is considerablevariation with respect to how capital equipment purchases arefinanced. In some jurisdictions (e.g., Nova Scotia and Ontario), fundsprovided for operating purposes include money for ongoing capitalequipment requirements. Exceptions are made for special high cost oremerging technologies such as the purchase of an MRI unit.Application can be made for special grants for capital equipment inthese cases.

In many jurisdictions (e.g., Quebec, Manitoba, New Brunswick, andothers), capital equipment is not funded through operating grants.Application for specific capital equipment purchases is made to theministry/department of health.

Alberta and BC usea 3-year capital

project planninghorizon.



Table 3.4 summarizes the approach used to fund capital equipmentpurchases in each jurisdiction.

Secondary Funding ApproachesThe funding approaches used to determine the largest percentage of ajurisdiction’s funding announcements for operating and capitalpurposes are considered to be the jurisdiction’s primary fundingapproaches. Methods used to apportion lesser amounts are classifiedas secondary funding approaches.

No secondary funding approaches for capital purposes wereidentified. All jurisdictions rely on a single primary capital fundingapproach for capital funding decisions.

Table 3.4

Means By Which Capital Equipment Replacement is Funded(by Jurisdiction)

(in effect for fiscal year ending March 2001)

Province Funding Approach including Replacement of CapitalEquipment

Approach Amount

Alberta Primary Operating Approach

British Columbia Primary and Secondary Operating ApproachManitoba Primary Capital ApproachNew Brunswick Primary Capital Approach >$100,000Newfoundland andLabrador

Primary Capital Approach

Nova Scotia Primary Operating ApproachOntario Primary Operating ApproachPrince Edward Island Primary Capital Approach >$25,000Quebec Primary Capital ApproachSaskatchewan Primary Operating Approach (with some

exceptions)Yukon Primary Operating Approach (with some

exceptions)



Approaches used for Secondary Operating Funding


Provinces/territories use a number of secondary funding approaches.These funding approaches are used for a variety of purposes, such asdetermining a health service organization’s share of one-time fundingannouncements. Every province uses secondary funding approachesto some extent, although the approaches are formalized in only fourjurisdictions. In jurisdictions where no secondary operating fundingapproach formally exists, there is the ability to receive supplementalfunds for extraordinary operating purposes by application to theMinister.

All provinces usesecondary funding

approaches foroperating funds.

No province,however, uses a

secondary methodfor capital funds.

Table 3.5

Secondary Operating Funding Approaches Used by Jurisdiction(in effect for fiscal year ending March 2001)

Province Funding ApproachScope Method Modifier Data Source

Alberta1 Comprehensive Policy-based None Spending

British Columbia2 Comprehensive Policy-based None Spending

Manitoba No secondary operating approach

New Brunswick No secondary operating approach


No secondary operating approach

Nova Scotia No secondary operating approach

Ontario InstitutionalInstitutionalInstitutional

Policy-based3a

Facility-based3b

Population-based facility-based3c

Penalty/incentiveNoneNone

SpendingExplanatoryExplanatory

Prince EdwardIsland4

No secondary operating approach

Quebec ComprehensiveService specific

Population-based5a

Policy-based5bImport/ExportNone

SpendingSpending

Saskatchewan No secondary operating approach

Yukon No secondary operating approachNotes:1. Used for non-population based items (e.g., community laboratory, public health services,specific diagnostic imaging adjustments). Also used for inflation adjustment.2. Used for provincial strategic initiatives and dedicated funding (e.g., cardiac and orthopaedicservices).3a. Used for specific issue announcements (such as minimum 60 hour maternity stay policy).3b. Adjustment Factors Model and Small Hospital Formula have been used in the past for primaryoperating funding decisions. Now used for adjusting some one-time funding announcements.3c. Proposed only. May become primary operating funding approach if approved.4. Typically used if regional authorities require funds to meet specific policy initiatives.5a.Used to calculate the interregional discrepancies and redistribute resources among regions.5b.Used to allocate development funding for various services.



Alberta and British Columbia use a secondary approach to apportionfunds for services that are not population-based and also for certainincremental funding announcements. Quebec uses a secondaryoperating funding approach to fund the development of new services.Ontario has recently used secondary operating funding approaches fora number of funding announcements such as:

• $130M to support the hiring of additional nurses. Apenalty/incentive method modifier was used. Health serviceorganizations were audited to verify the money advanced was usedfor nursing and funds were clawed back from those that failed theaudit.

• Funding to support a government policy of the availability of aminimum 60 hour maternity stay for all mothers.

BC and Alberta also use policy-based methods to apportion selectedincremental funding announcements.

Method Modifiers(for Secondary Operating Funding)

Ontario’s Adjustment Factor Model has been used for secondaryoperating funding purposes. The model estimates the relativeefficiency of individual health service organizations. A provincialaverage cost per weighted case is calculated and then adjusted toreflect health service organization characteristics4 that affect the costof providing care. The findings make it possible to determine if ahealth service organization’s acute inpatient, complex continuing careinpatient and day surgical costs for a prior period are greater or lessthan expected.

4 The characteristics used in the 1998/99 version of the model were teaching activity,(medical student days/patient days), neonatal and newborn (NN) tertiary activity (NNweighted cases/total weighted cases), and adult tertiary activity (adult tertiary weightedcases/total weighted cases). These three factors have been shown mathematically tohave a strong explanatory effect on the cost of operating a hospital in Ontario.



Health service organizations with actual costs less than expected haveshared in secondary funding announcements and those with actualcosts greater than expected have not shared.5 In 1999/00 $65 millionwas distributed using this criterion. Potential modifications to2000/01 funding have not yet been decided.

Quebec has a secondary funding approach that is population-based.As is common with these methods, an import/export modifier is usedto adjust for differences between where health services are funded andwhere they are provided.

Approaches Proposed or Under Development(for Secondary Operating Funding)

Many provinces/territories test potential primary funding approachesby first using the approach for secondary funding purposes. Thisallows health service organizations to familiarize themselves with theimpact and mechanics of a funding approach prior to it being used todetermine primary operating funding announcements. TheAdjustment Factors Model in Ontario is a good example.

For the past few years, all health service organizations in Ontario havebeen given information on their total expected costs, and the totalexpected costs of all other health service organizations in the provinceas determined using the Adjustment Factors Model. The experiencegained in this process contributed greatly to the development workthat resulted in the combined population and facility-based modelbeing evaluated for use in Ontario in 2001/02.

Approaches Used for Secondary Capital Funding

Although a variety of secondary approaches are used to distributeoperating funds, capital funding is distributed using only the primarycapital approach noted in Table 3.4.

5 A small hospital version of the model is used to determine expected costs of smallhospitals.



SummaryProvinces/territories use a variety of approaches to determine fundingfor health service organizations in their jurisdiction.

In general, however, provinces/territories use a single approach toapportion the majority of operating funds and a single approach toapportion the majority of funds for capital purposes. Other secondarymethods are used when special funding announcements are made, orin situations where the primary funding approach is not appropriate.

It is interesting to note the strong interest in funding approachesbased on a population-based method. Provinces such as Alberta andSaskatchewan already use such an approach and five otherjurisdictions incorporate elements of population-based methods intheir funding approach, or are considering doing so.

Provinces aremoving towards

using thepopulation-based

method toapportion the

majority ofoperating funds.


4 / Performance Monitoring Practices

4. Performance Monitoring Practices

This chapter discusses the financial performance monitoring practicesof provincial/territorial governments with respect to health serviceorganizations.

The unit of analysis is consistent with that used elsewhere in thisreport. To assist in clarity of presentation, the term health serviceorganization is used to refer to this unit. It is recognized that in manysituations the organizational unit is something other than an individualacute-care hospital. Examples are regional health authorities, networksand alliances. In all cases, however, the organizational unit receivesfunds from the provincial/territorial government for the provision ofhospital-delivered acute care.

Performance Monitoring PracticesFinancial performance monitoring practices describe how governmentsuse financial information generated by health service organizations.

Definition

Financial performance monitoring is defined as any activity in which aprovincial or territorial government:

a) uses financial information to evaluate the spending (or generating)of funds by health service organizations;

Performancemonitoring can

involve a variety ofoversight activities.

Chapter 4 examineshow governments

use health serviceorganization

generated financialinformation.



b) receives, with the purpose of providing approval, budgets,operating plans, business plans, or other documents outlining theexpected or historical financial performance of a health serviceorganization; or

c) calculates indicators of financial performance and/or financialcondition related to health service organization activities.

This chapter examines how governments use financial informationdescribing the activities of health service organizations. Chapter 5reviews financial reporting practices, presenting details of whatinformation must be reported to governments by health serviceorganizations and in what format.

Performance Monitoring Horizons

Financial monitoring practices can be either prospective or retro-spective in nature. All provinces/territories engage in both practices tosome extent.

Prospective monitoring involves evaluating plans for expected futureevents. Submitting a budget for approval prior to executing a projectis an example of a prospective monitoring activity.

Retrospective monitoring activities involve evaluating pastperformance, either in absolute terms (“health service organizationexpenditures exceeded revenues by 5%”), relative terms (“a healthservice organization’s expenditures were much higher than those ofsimilar size and scope”), or evaluative terms (“a health serviceorganization’s expenditures were 15% higher than the benchmark”).

An interesting observation about the performance monitoringactivities of provinces/territories is that, although there is widevariation in funding approaches, there is considerable consistency inthe prospective monitoring activities observed. There is lessuniformity with respect to retrospective monitoring practices.



Prospective Monitoring PracticesProspective monitoring practices are activities that involve receiving,reviewing and/or evaluating plans for expected future events.

Prospective monitoring practices are examined from the perspectiveof health ministries and departments. Health service organizations alsoengage in a myriad of prospective planning activities. In many cases,the output from these activities serves as the input to the monitoringactivities of provincial or territorial departments/ministries of health.Health service organization-based prospective monitoring practicesare not described in this report. Readers interested in the prospectivemonitoring practices of specific health service organizations areencouraged to contact the organization’s Chief Financial Officer.

Three types of prospective monitoring practices are observed. Thesepractices can be briefly described as:

Operating Budgets Financial statements describing expected revenuesand expenditure for the next fiscal period. Thesestatements may or may not be accompanied bydetailed explanations supporting the calculationsused to derive amounts.

Capital Budgets Financial statements accompanying a request fornon-operating funds intended to finance capitalprojects. These statements are almost alwaysaccompanied by detailed explanations supportingthe calculations used to derive amounts.

Descriptive Plans Documents combining narrative discussions withrelevant financial information. A number of termsare used for these descriptive planning documents.For example, in Alberta, health serviceorganizations prepare a business plan. In Ontario,health service organizations prepare an operatingplan. In British Columbia, health serviceorganizations prepare 3-year health service plans.

Submitting abudget for

approval is anexample of

prospectivemonitoring.



Operating Budgets

Health service organizations are required to submit budgets to theprovincial/territorial government in all jurisdictions in Canada. Thebudget may be a stand-alone document, or it may form part of a morecomprehensive planning document such as an operating or businessplan. Table 4.1 shows the use of operating budgets by Province/Territory.

Submission Process

All jurisdictions, with the exception of Alberta, British Columbia, andSaskatchewan, require the submission of a budget prior to thebeginning of the fiscal year. The differences in timing of submissionsimply that budgets are being used for different purposes in thesejurisdictions.

Jurisdictions asking to receive operating budgets prior to makingfunding decisions enjoy the benefit of being able to assemble aprovince or territory-wide picture of expected spending by healthservice organizations. Provinces such as Quebec and Prince EdwardIsland can use this information in discussions within the healthministry/department, and for discussions with the treasury indetermining overall provincial budgets.

A significant drawback to this approach arises when the fundingprovided is not the same as the amount budgeted by the health serviceorganizations. When this situation occurs, health service organizationsmust repeat the budgeting process (a non-trivial exercise) in order touse their budget as an effective management control tool.

It is common for provinces to require that balanced budgets besubmitted. This means that projected revenues must be sufficient tocover projected expenditures. In provinces such as Nova Scotia, thisrequirement is reinforced by “no planned deficit” legislation.

All jurisdictionsuse budgets as

part of theirprospectivemonitoring

process.

Jurisdictions withregional health

organizationsrequest budgets

after announcingprimary operating

funds.



Table 4.1

Use of Operating Budgets by Province/Territory(for the fiscal year 2000/2001)

Province BudgetRequired?

Must Be Submitted by BudgetedDeficit

Allowed?

Alberta Yes 8 weeks after funding announcement Yes–note 1BC Yes June 30 following fiscal year end No–note 2Manitoba Yes June 1, 2000 for the upcoming fiscal

yearN/A–note 3

NewBrunswick

Yes mid January for the upcoming fiscalyear

No–note 4


Yes October 16 for the upcoming year Yes–note 5

Nova Scotia Yes usually in February for the upcomingfiscal year and 10th of each month forupdates

No–note 6

Ontario Yes Date varies annually – usually inFebruary for the upcoming fiscal year

No–note 7

PEI Yes January/February for the upcomingfiscal year

No–note 8

Quebec Yes 3 weeks after being advised of theamount of the annual budget

No–note 9

Saskatchewan Yes May 15, 2000 for fiscal year 2000-01. Yes–note 10Yukon Yes September 30 for the upcoming fiscal

yearNo–note 11

Notes:1. Specific conditions apply for deficit to be accepted. See page 105.2. The Ministry works with health service organizations anticipating a shortfall.3. In Manitoba, requests for additional funding are made with the budget submission.4. The government of New Brunswick has issued a directive that Region Hospital

Corporations will operate within approved budgets. Transitional funding to cover workingcapital shortfalls will be available to Regional Hospital Corporations as required pendingupcoming government decisions concerning system structure and governance.

5. In Newfoundland and Labrador, an action plan is being developed in an attempt to controldeficits.

6. No planned deficit legislation exists in Nova Scotia. A planned deficit must be supportedwith a plan to eliminate within a specified period of time.

7. Ontario’s policy is to not fund deficits, although some health service organizations havereceived special funding for this purpose because of financial pressures. Extended financialdifficulty may trigger an operational review by the Ministry.

8. In PEI, Regional Health Authorities are expected to submit a balanced budget.9. Quebec Ministry of Health and Social Services requires submission of a fiscal balance plan

to correct the deficit, when a deficit is projected.10. Saskatchewan Health is not committed to funding deficits. If a deficit budget is submitted, a

plan for how this will be managed in the current year and eliminated in future years isrequired.

11. The Contribution Agreement in Yukon Territories requires the health service organization tooperate within budget. Operating surpluses may be used to fund deficits from prior yearsor in future years.



In situations where health service organizations are unable to submitbalanced budgets, there is usually a mechanism by which theministry/department of health works with the organization toexamine the reason for the projected deficit. For example, in Ontarioif a health service organization is found to be in financial difficulty foran extended period of time, the Ontario Ministry of Health and LongTerm Care may conduct an operational review, appoint an Inspector,or appoint a Supervisor in very serious circumstances.

Whether a projected deficit will be accepted or funded is jurisdictionspecific.

Use of Budgets

In jurisdictions where funding methodologies use spending data (seesection beginning on page 93), budgets can act as valuable inputs tothe funding process for the provincial/territorial government. In thiscapacity, budgets are more of a planning tool for the government thana management control mechanism for monitoring health serviceorganization performance.

Budgets assume a much stronger role in performance monitoring injurisdictions where the proposed operating budget is formallyapproved by the provincial/territorial government and then becomesa reference against which actual financial management practices can beevaluated.

Alberta, British Columbia and Saskatchewan’s approach to operatingbudget submission is unique among the jurisdictions examined. Inthese provinces, health service organizations develop budgetsdemonstrating how funding that has already been announced will bespent. Announcing funding prior to receiving estimates of spendingby health service organizations is possible because these jurisdictionsincorporate population-based elements in their funding approaches.

This approach to prospective monitoring allows health serviceorganizations to develop budgets that are closely aligned with theknown amount of funding that will be received. A shortcoming of thisapproach is that because the government does not see the proposed

Governments canuse budgets to

evaluate expectedresource needs.

RHAs in Albertaprepare & submitbudgets after the

fundingannouncement

has been made.

Balanced budgetsare required by all

jurisdictions.Special attentionis given to deficit

budgetsubmissions.



budget until after the funding announcement, important signallinginformation that would be identified earlier in other jurisdictions (suchas a change in strategic direction) could be missed.

Approval Process

Budget approval by the governance body of the health serviceorganization is required in all jurisdictions studied. This is sometimes apart of the operating or business plan review process.

There is wide variation in when budgets must be submitted forapproval by the government. Yukon Territory has the earliestsubmission deadline (September 30 for the upcoming fiscal year).

Treatment of Surplus/Deficit

The treatment of realized surplus and deficits (as opposed to budgetedsurpluses and deficits) differs by jurisdiction. Many jurisdictionspermit health service organizations to retain surplus funds.Exceptions are Prince Edward Island where surpluses must bereturned, and Newfoundland and Labrador where surpluses have notexisted recently. Conditions may be imposed upon the use of thesefunds. For example, it may be necessary to use an annual surplus toreduce accumulated deficits. Quebec permits surpluses to be used tosupport temporary projects that improve client services, or forequipment purchases.

Other jurisdictions require that non-Ministry generated revenues (suchas charges for preferred accommodation) above a certain threshold besubmitted to the government, which limits a health serviceorganization’s ability to generate a surplus.

Table 4.2 describes the treatment of realized surpluses.

Most jurisdictionspermit health

serviceorganizations to

use operatingsurpluses at their

discretion.

All jurisdictionsreceive & approve

health serviceorganization

budgets.



Table 4.2

Treatment of Realized Surplus by Province/Territory

Province/Territory Can surplus be retainedby health service

organization?

Restrictions on use of surplus

Alberta Yes None—province recommendsusing for capital equipment

BC Yes None—province recommendsusing for capital equipment,except surpluses from speciallyfunded services

Manitoba Yes A maximum of 2% of budgetmay be kept and used at theirdiscretion. Windfall surplussesare fully recoverable by theprovince

New Brunswick Yes Yes—a portion of surplus intransferable programs may bekept by Region HospitalCorporations; governmentretains surplus in non-transferable programs

Newfoundland &Labrador

NA In recent years, surpluses havenot existed

Nova Scotia Yes Yes—all surpluses are reviewedby Department and an actionplan is taken accordingly

Ontario Yes None—province recommendsusing for capital equipment

Prince Edward Island No NA

Quebec Yes Approval of Health and SocialServices Board is requiredbefore facility is permitted to useits surplus

Saskatchewan Yes None

Yukon Yes None



Capital Plans

There is consistency in the jurisdictions studied with respect to themonitoring activities related to major capital expenditures.

Major capital expenditures are targeted to fund acquisition of newtechnology, facility construction, renovation or building supportequipment (e.g., elevators). All jurisdictions provide a mechanism forhealth service organizations to submit applications for this type offunding. Details of the funding methods used to approve capitalprojects are described in Chapter 2.

Jurisdictions engage in an active reporting and monitoring role forcapital projects. For example, the Quebec Housing Corporationprovides health service organizations not only with financing andfinancial expertise for major building projects, but also with technicalexpertise in managing building projects. In doing so, the Corporationd’hébergement du Québec is able to engage in active prospectivemonitoring processes on behalf of the Quebec government.

Health service organizations in British Columbia submit three-yearcapital plans in June of each year. When major projects are beingrequested (over $1.5 million), a project study, facility inventory andmaintenance plan must accompany the plan.

Descriptive Plans

In many provinces/territories, the budget is a required component ofa larger planning document that must be submitted for review by thegovernment. The intent of the comprehensive document is to providehealth service organizations with an opportunity to outline importantplanning information such as service level objectives and strategicdirections.

Several provincesrequire budgets to

be accompaniedby descriptive

plans whensubmitted for

approval.



Business & Operating Plans

Table 4.3 shows that Alberta, British Columbia, Manitoba, NewBrunswick, Nova Scotia, Ontario, Prince Edward Island, andSaskatchewan all require health service organizations to providecomprehensive planning documents to accompany the budgetsubmission.

Although the approach to development of planning documents isoften quite different, the performance monitoring objectives of therespective health ministries/departments are quite similar.6 With theexception of only a few services7, health ministries/departments allowconsiderable freedom for health service organizations to decide on thescope and range of services that will be offered.

6 Details of the required content of the planning documents can be found in Chapter 7.7 Although considerable freedom to plan for local health service needs is given, it is notuncommon for governments to insist that no changes be made in certain programswithout ministry approval. In Ontario, these are called priority programs. A hospital is notpermitted to eliminate a priority program from its service offering in order to balance abudget, or to divert funds to other services. Province-wide services in Alberta are also anexample of services that Regional Health Authorities cannot eliminate in order toachieve budget objectives.



Table 4.3

Planning Documents (Other than Budgets) Reviewed/Monitored byProvinces/Territories

(for the fiscal year 2000-2001)

ProvinceType of Planning

Document Due WhenDevelopment

ProcessSpecified

Penalty for LateSubmission

Alberta Business Plan 8 wks afterfundingannounced

No No

BC Health ServicesPlan

June No No

Manitoba Regional HealthPlan

June 1, 2000for currentfiscal year

Yes No

NewBrunswick

Operating Plan January fornew fiscal year

No No

Newfoundland& Labrador

None NA NA NA

Nova Scotia Annual BusinessPlan

January fornew fiscal year

Yes Yes (a delay inbudget approval)

Ontario Operating Plan in Feb, prior tofunding beingannounced

Yes Yes (financialpenalty of 0.03%of budget for first

week (min.$2000) and one-

half of initialreduction for eachsubsequent week

Prince EdwardIsland

None NA NA NA

Quebec None NA NA NASaskatchewan Health Budget Plan May 15 for the

current fiscalyear

Yes No

Yukon None NA NA NA

In many cases, detailed expectations for the content of Business andOperating Plans are provided to health service organizations. Thefocus of these documents varies considerably across jurisdictions.

Alberta favours a focused document describing the strategic plans of aRegional Health Authority. Detailed program and service plans are notrequired. Regional Health Authorities must include information onthe health status of their populations, and tangible measures of theirorganization’s performance. In situations where the Minister has madespecific directions in the past to a Regional Health Authority, thebusiness plan must comment on how these directions have beenaddressed.

Alberta RHAsdevelop and

report onperformance

measures in theirbusiness plan.



The Alberta business plan is very much in keeping with its underlyingphilosophy of health service organization funding. The Albertaapproach entrusts local authorities to make decisions that are in thebest interest of the population served. To ensure these decisions areappropriate, Alberta Health & Wellness monitors macro indicators ofhealth status and health system performance. The implication is that ifthese indicators are acceptable and the Regional Health Authority hasachieved its objectives without incurring a deficit, management of thesystem from a government perspective is acceptable.

In contrast, Ontario is more prescriptive with respect to content of itsoperating plans. Ontario Operating Plans must include health serviceorganization and community profiles, the rationale for any programchanges, and descriptions of efforts to improve clinical andadministrative efficiencies. A somewhat similar approach is used inManitoba. In British Columbia, the Health Service Plan includes asigned acute tertiary performance contract between the province andthe health service organization.

Ministries/departments of health in jurisdictions where intense reviewof planning documents occurs must maintain a pool of in-houseexpertise in order to undertake this task in a comprehensive fashion.

Ontario is unique in Canada for imposing a penalty for the latesubmission of the Operating Plan document. This suggests theOntario Ministry of Health and Long Term Care views theprospective monitoring activities based on this document to be animportant component of its responsibilities. Ontario health serviceorganizations face a reduction of 0.03% of their base fundingallocation for the first week the plan is late or incomplete (minimumpenalty of $2,000). For every week thereafter, the penalty is one-halfthe initial reduction.

Approval Process

In all jurisdictions, business plans are approved by the governing bodyof the health service organization before being sent to thegovernment. Usually the provincial ministry/department of healthprovides feedback on the contents of the planning document onbehalf of the Minister.



The importance of the planning documents is reflected in the fact thatin a number of jurisdictions (e.g., Alberta, Yukon) components of theplanning documents are tabled in the legislature.

Retrospective Monitoring PracticesRetrospective monitoring practices are those activities undertaken byhealth ministries/departments to consider (and potentially evaluate)the past performance of health service organizations. The introductionof balanced scorecards and other uses of performance indicatorsfeature prominently in these activities.

Interest in retrospective financial monitoring practices is growing inCanada. Although all provinces/territories still rely heavily onprospective monitoring techniques (such as budgets and descriptiveplans), there is growing interest in developing retrospectiveperformance monitoring capabilities. Alberta, Ontario and NewBrunswick have made advances in this area. The Manitoba Centre forHealth Policy and Evaluation has been working with the Departmentof Health in Manitoba to develop useful measures of performance forhealth service organizations in that province. Plans and/or committeeshave been formed to evaluate and consider appropriate retrospectiveperformance monitoring approaches in British Columbia, Newfound-land and Labrador, Nova Scotia, and Saskatchewan.

Performance Indicators

Alberta Health & Wellness has established four provincial goals for itshealth system (see page 106) and track a number of financial andclinical indicators related to each goal. Some of the financial indicatorsmonitored are presented in Table 4.4. In addition, several RegionalHealth Authorities have published their own scorecards and reportcards.

Performanceindicators are an

example ofretrospective

monitoring.

Alberta hasestablished 4

goals for itshealth system

against which it ispossible to

measure financialperformance.



Region Hospital Corporations in New Brunswick have collaboratedwith the Department of Health & Wellness to develop a balancedscorecard approach to performance measurement in that province.Financial and clinical measures were developed in November 1999,with completion of the project scheduled for 2001.

British Columbia and Ontario both propose to monitor a variety offinancial results for their health service organizations. A preliminarydraft of standard financial reporting monitoring indicators is currentlyunder committee review. Ontario is considering measures such asapproved expenditures and actual expenditures on a year-to-date basis.

Since 1998, Ontario health service organizations have participated in aperformance measurement initiative sponsored by their hospitalassociation. In 1999, this initiative resulted in the public release of ninemeasures of financial performance and condition for 89 hospitalorganizations representing 91% of all acute inpatient and day surgeryin the province in 1997/98.8 This study has been expanded for 2001, 8 Baker, GR, et al. Hospital Report ’99: A Balanced scorecard for Ontario acute care hospitals.Toronto: Department of Health Administration, University of Toronto, 1999. (ISBN 0-7727-8753-0.)

Ontario isparticipating in

the largesthospital

performancemeasurement

project in Canadadesigned for

public disclosure.

Table 4.4

Sample of Financial Performance Indicators Used orUnder Development

Province Performance IndicatorsAlberta • Annual surplus/deficit as a percent of actual expenditures

• Working capital ratio• Average remaining life of capital equipment

New Brunswick • Surplus/deficit (net of depreciation) as a percent of totalexpenses

• Administration and support net expenses as a percent oftotal expenses

• Quick ratioNova Scotia • Budget to actual variance

• Current ratio• Debt to equity ratio

Quebec • Length of stay and actual and expected cost of hospitaldays for comparable cases

• Annual surplus/deficit as a percent of actual expendituresSaskatchewan • Variance between actual and approved budget

• Current ratio• Debt to equity ratio



and the Ontario Ministry of Health is participating as a sponsor. Theresult is that an increased range of financial performance indicatorswill be developed with ministry participation in the upcoming year.

Despite the considerable interest in developing indicators of financialperformance observed across Canada, tangible evidence of widespreaduse of these indicators in the field is lacking. Efforts are hampered bythe lack of data required to generate indicators and by data qualityissues.

Audited Financial Statements

All provinces require health service organizations to submit auditedfinancial statements permitting ministry/department staff to evaluatethe past year’s performance of the organization.

SummaryThis section has provided an overview of the financial monitoringpractices of provincial and territorial governments across Canada.

Provinces/territories are similar with respect to their prospectivemonitoring activities. All require health service organizations toprepare budgets for ministry/department of health approval. Manyjurisdictions also require the preparation of descriptive plans ofproposed operations during the upcoming year.

Developing budget documents after funding announcements havebeen made is done in only a few provinces. In each case, fundingapproaches with a population-based component are used. It is muchmore common for jurisdictions to require the submission of budgetdocuments to assist the government in the development of itsspending forecasts.

Routine performance measurement activities are not yet common inCanada. Although all provinces require health service organizations todemonstrate stewardship of funds via annual audits, using indicatorsof financial performance and condition to assess financial health andperformance occurs much less frequently. There is, however,



considerable interest in developing this capacity across the country asis demonstrated by the number of special committees that have beenformed to investigate the feasibility of this issue in many jurisdictions.

Notable in Ontario is that the Department of Health Administrationat the University of Toronto developed a publicly released report cardon the Ontario hospital system that included measures of financialperformance and condition. The Ontario Ministry of Health and LongTerm Care is collaborating on a subsequent version of this report thatwill significantly enhance the Ministry’s capacity to monitor retro-spective measures of financial performance.

Although these efforts are notable, performance measurement in thehealth services is in its infancy in Canada.

Strong interest isbeing

demonstrated indeveloping acapacity for

retrospectivemonitoring across

Canada.


5 / Reporting Practices

5. Reporting Practices

This chapter presents an overview of the financial reportingrequirements of provincial/territorial governments with respect tohealth service organizations.

Financial Reporting PracticesFinancial reporting practices describe what financial information mustbe reported (and to whom) by health service organizations. Theprevious chapter considered how this financial information is used byprovincial/territorial governments.

The section titled Required Reporting Activities describes the form andsubstance of financial reports that must be provided by legislation orfor other regulatory purposes.

The section titled Non-Required Reporting describes the form andsubstance of financial reports that health service organizations elect toproduce and distribute although not required to do so by legislation orregulatory requirements.

Reporting Audiences

As the primary funder of health service organizations, governments inCanada take an active interest in the form and substance of financialand clinical records maintained by these organizations. These recordsserve two important purposes.

This chapterexamines what

financialinformation must

be reported byhealth service

organizations andin what format.



Information is used to support the management needs of the healthservice organization. Organizations use this information for short andlong term decision making, and to demonstrate stewardship to thecommunity.

This information is also of considerable value to governments. At theprovincial and federal level, information on how funds were spent toprovide care can be used for planning and comparative purposes.

Canadian health service organizations engage in a variety of financialreporting activities. These activities can be categorized by examiningthe audience (i.e., user of the report), the frequency, and the nature ofreporting as shown in Table 5.1.

The Role of CIHICreated in 1994 by Canada’s health ministers, the Canadian Institutefor Health Information (CIHI) is the national, not-for-profitorganization responsible for coordinating the development andmaintenance of the country’s health information system. To this end,CIHI provides accurate and timely information that is needed toestablish sound health policies, manage the Canadian health systemeffectively and create public awareness of the factors affecting goodhealth.

Table 5.1

Categorizing Financial Reporting Activities

Audience Nature of Reporting Frequency

Management Required reporting activities AnnualPublic Non-required reporting activities Interim

MinistryNational (CIHI)



The Institute’s core functions are:

• identifying health information needs and priorities;• collecting, processing and maintaining national data holdings;• developing and maintaining national standards for financial,

statistical and clinical data as well as technical standardsrelating to health informatics/telematics; and

• producing and disseminating value-added analysis.

CIHI collects hospital financial and operational data through theAnnual Hospital Survey, which is based on the Guidelines forManagement Information Systems in Canadian Health Care Facilities (knowncommonly in Canada as the MIS Guidelines). CIHI also obtains servicerecipient cost data from the provinces of Ontario and Alberta todevelop and maintain Resource Intensity Weights. CIHI has had along history of developing RIWTM for hospital inpatient and daysurgery services. More recently, CIHI has begun work on RIW forhospital-based ambulatory care services and complex continuing careservices.

The MIS Guidelines

The MIS Guidelines are national standards that provide an integratedapproach to managing financial and statistical data related to theoperations of Canadian health service organizations. They weredeveloped in recognition of the need to improve the effectiveness andefficiency of health service organizations in Canada through bettercomparative financial information and measures of productivity.

The key components of the MIS Guidelines include:

• A chart of accounts—a coding structure designed in a hierarchicalmanner that provides a defined "roll-up" or method of aggregationof accounts. This allows reporting to be done in various waysranging from an individual general ledger account to anaggregation of data across various health service delivery settings.

• Accounting principles and procedures—procedures, systems andtreatments that are consistent with generally accepted accountingprinciples contained in the Handbook of the Canadian Institute ofChartered Accountants.



• Workload measurement systems—management tools that provide astandardized method of measuring the volume of activitiesperformed by health care providers within specific functionalcentres. (CIHI supports 21 discipline-specific workloadmeasurement systems.)

• Indicators—ratios that specify how financial and statistical data canbe integrated to yield information that is useful for planning,control and evaluation.

• Glossary of terms—standardized definitions for key terms.

The MIS Guidelines have a lengthy developmental background withtheir roots in the MIS Project that was funded in 1982 as a combinedeffort of the federal and provincial governments, provincial hospitaland health associations, and the Canadian Healthcare Association.

The major driving force behind the establishment of the MIS Projectwas the need for comparable hospital financial and statistical data. TheCanadian Hospital Accounting Manual (CHAM), which had been theaccepted accounting standard for hospitals, was outdated and nolonger served the evolving information needs of the industry. As well,the acceleration of independent efforts to develop computerizedmanagement information solutions posed a significant threat to thecomparability of information among facilities and provinces.

The MIS Guidelines were developed to:

• better measure the use of resources in relation to activities, byintegrating financial, statistical and clinical operational data bases;and

• improve the timeliness and comparability of information beingcollected within Canadian health care facilities for management,planning, evaluation, reimbursement and research purposes.

To address these goals, the MIS Guidelines were designed to provide areporting framework in which to answer two primary questions:

1) how many and what kinds of resources are used to provide aspecific service within a specific department and at what cost? and



2) how many and what kinds of resources are used to treat a specificpatient or group of patients and at what cost?

The development work of the early 1980's resulted in the publicationof the MIS Guidelines in 1985. The MIS Guidelines were tested in 10pilot sites from 1985-1989. Updates were developed and publishedannually beginning in 1986.

Implementation start dates and milestones varied considerably acrossCanada, with the first province beginning in 1991 and the last in 1995.Start dates varied for several reasons, such as the level of requiredinvestment and the implementation of health care reforms. By 1995,all provinces and territories, except Quebec and Saskatchewan,required hospitals within their jurisdictions to report to the ministriesof health using the structure and content outlined in the MISGuidelines.

Some jurisdictions have adapted elements of the MIS Guidelines tobetter accommodate local reporting needs. Common modificationsinvolve adding numbers to the coding structure of the chart ofaccounts. Provinces specify the minimum level of reporting required.

Evaluations/Reviews

The widespread adoption of the MIS Guidelines by 1995 made this anopportune time to examine the utility of the MIS Guidelines.

A research study was sponsored by CIHI to explore a number ofissues related to the emerging use of the MIS Guidelines. The studyassessed the appropriateness of the cost assignment and allocationmechanisms. An assessment of the MIS Guidelines’ ability toaccommodate emerging management structures (such as regional

Although oftenadapted to reflect

local needs, alljurisdictions

except Quebecand

Saskatchewanrequire the use of

the MISGuidelines.

The MISGuidelines are now

revised regularlyto reflectemerging

requirements inhealth services

reporting.

Table 5.2

MIS Adoption by Provinces/Territories

1991 1992 1993 1994 1995Alberta Yukon British Columbia Manitoba

Nova Scotia Ontario PEINew Brunswick Newfoundland

Northwest Territories



health organizations and program-based management) was alsocompleted.9

A number of the recommendations emerging from the 1995 studywere implemented in the following years.

An on-going formal process of reviewing and assessing suggestionsfor enhancements to the MIS Guidelines is undertaken by CIHI. Since1986, this process has resulted in regular revisions to the MISGuidelines being released. Most notable was the revision in 1997 whenthe MIS Guidelines were expanded beyond their original scope ofhospital-delivered acute care to better accommodate the needs of thebroader health care sector.

Required ReportingThe MIS Guidelines provide the building block upon which almost allrequired financial reporting activities are based in Canada.

Definition

Required reporting activities involve the preparation and distributionof health service organization financial information to one or more ofthe following audiences:

• the public• the provincial/territorial government (usually via the

department or ministry of health)• Canadian Institute for Health Information

9 McKillop, I. A Research Project to Examine the Costing Methodologies Recommended in the MISGuidelines. Ottawa: Canadian Institute for Health Information, 1995. 155pp.

Health serviceorganizationsmust prepare

financial reportsfor a number of

audiences.



where the form, substance, or frequency of the financial report hasbeen determined by agents other than the health service organization.

Reporting to the Public

Annual Reports

All provinces/territories require health service organizations toprepare publicly available financial statements on an annual basis.

The financial statements must be examined by public accountants whoprovide an opinion on whether the statements fairly reflect thefinancial position of the organization in accordance with GenerallyAccepted Accounting Principles.

The financial statements must be presented to the health serviceorganization’s governing board for approval. Once approved, the fin-ancial statements are included as a part of the organization’s AnnualReport.

Reporting to the Provincial/Territorial Government

Provinces/territories require extensive reporting to the provincialdepartment or ministry of health. A variety of reports are required:


All provinces require health service organizations to submit a copy ofthe annual audited statements to the government. These statementsmust usually be submitted by June 30 of each year. (This is threemonths after the fiscal year end.)

A unique feature of the processes in Alberta and Saskatchewan is thatRegional Health Authorities and District Health Boards, respectively,can engage the services of a public accounting firm or the provincialAuditor General’s office to fulfil this function. In other provinces,health service organizations must engage the services of a publicaccounting firm.



Interim Trial Balance Reports

The adoption of MIS Guideline-based financial reporting structures byalmost all provinces/territories facilitates the collection of financialperformance and activity data in a standardized format.

Eight of eleven jurisdictions studied have developed the systems andcapacity to permit the electronic submission of trial balance records asshown in table 5.3

Year-End Trial Balance Reports

Organizations submit electronic copies of their year-end general ledgeraccount balances as at March 31 of each year. Jurisdictions vary withrespect to when this submission must occur. For example, Ontario’ssubmission is not required until mid-August to ensure thatorganizations have had time to incorporate adjustments identifiedduring the audit process.

As with the late submission of an operating plan, Ontario is unique inimposing a financial penalty for failure to provide the annual trialbalance submission by the required deadline. The penalty is 0.03% of

Table 5.3

Trial Balance Reporting FrequencyProvince Due Date

Alberta End of 1st, 2nd and 3rd quarterBritish Columbia 13 times per year—every 4 weeksManitoba MonthlyNew Brunswick MonthlyNewfoundland Quarterly, but many boards submit monthlyNova Scotia No electronic trial balance submission required for 2000-

01. (For 2001-02, year end electronic trial balance will berequired.)

Ontario End of 2nd and 3rd quarter (planned for 2001/02)Prince Edward Island End of each month (electronic financial general ledger)Quebec AnnuallySaskatchewan No electronic trial balance submission requiredYukon No electronic trial balance submission required



the approved yearly operating funding for each week the year-end trialbalance is overdue.

Details of requirements related to year-end trial balance submissionsare shown in Table 5.4.

Table 5.4

Year End Trial Balance Submissions

Province Requirements

Alberta Minimum reporting at Level 3. Specific statistical accountsmandatory. Edit checks for valid accounts & duplicate accounts.Cross checked to audited financial statement balance.

British Columbia Year end post-audit MIS submission required after audit. Period13 interim trial balance received during normal reporting cycle.Edit checks occur at regional health authority level.

Manitoba Monthly MIS reporting required. Majority of edit checks arefinancial; however, considering edits for statistical information.No penalties for late submission, but regional authorities notified ifdata are late. Year end MIS data must be audited and reconcileto financial statements.

New Brunswick Selected financial and statistical data are submitted monthly(including trial balance). Full MIS submissions are electronicallytransmitted on a quarterly basis and subjected to edit checks foraccount validity and minimum reporting level. A comprehensivedata quality audit is conducted at year end.

Newfoundland Financial MIS data are submitted monthly, statistical MIS dataare submitted annually. Must be at minimum reporting level ofprovincial chart of accounts.

Nova Scotia Not required in 22000000--0011. However, newly established DistrictHealth Authorities will be required to submit a year-end trialbalance in 2001-02.

Ontario Minimum reporting level as established in Ontario HospitalReporting System Manual. (Differs by functional centre.) Specificstatistical accounts mandatory. Edit checks for format, validaccounts, balanced (within $100), charge backs balanced againstinternal recoveries, and minimum reporting levels.

Prince Edward Island Department has capability to create a trial balance from theprovincial database of regional health authority general ledgers, which must be maintained in MIS format.

Quebec Facilities must submit annual financial reports, mainly inelectronic format with revenue, expenditures by responsibilitycentre, fiscal year financial results, etc.

Saskatchewan No electronic trial balance submission required at this time, butmay be required in future as a provincial chart of accounts isdeveloped.

Yukon No electronic trial balance submission required at this point.Financial statements are submitted in hard copy.



Reporting to CIHI

Health service organizations are required to provide a variety offinancial information to CIHI. In all provinces, the reporting ismanaged on behalf of health service organizations by the provincialgovernment.

Annual Hospital Survey

Since 1936 Statistics Canada has conducted an annual survey ofhospitals—the Annual Return of Health Care Facilities—Hospitals, Parts 1and 2 (HS1/2). The survey, last revised in 1971 and collected underthe Statistics Act, was based on the Canadian Hospital AccountingManual (CHAM). In more recent years, as provinces adopted the MISGuidelines as their accounting standard, the need to revise the surveywas identified.

In early 1995 CIHI, in consultation with Statistics Canada, initiated theAnnual Hospital Survey (HS1/2) redevelopment project. The primaryobjective of this project was to redevelop and modernize the AnnualHospital Survey to make the collection of financial and statistical dataas efficient, relevant and timely as possible. The development processincluded an extensive national consultation with data suppliers on keyareas such as data content and data collection methods.

Primary AHS data users are Statistics Canada (STC), Health Canada,CIHI, researchers and national organizations. Statistics Canada’sprimary use is for the system of national accounts from which theGross Domestic Product is calculated.

The database contains key financial and statistical elements forCanada’s hospitals. Financial data includes balance sheet information,revenues and expenses, including compensation, supplies, andequipment expense. Statistical data includes elements such asapproved beds, patient days, admissions, discharges, visits, earnedhours.



Trial Balance Reports

CIHI receives electronic copies of the year-end trial balance files of allpublic hospitals in all provinces and the Yukon. In most provinces,this information is forwarded by the provincial ministry of health.

The quality of data received by CIHI is directly related to the edit andvalidation process implemented at the provincial/territorial level.Provinces differ in the extent and depth of their edit protocols.

At CIHI, the data quality of Annual Hospital Survey data is assessed;ratings are assigned and the results are communicated to the dataproviders. (See Annex 2 for a description of the data qualityassessment process.) CIHI works with the provinces and territories toidentify ways to improve data quality. Data quality ratings for fiscalyear 1998/99 data are shown in Table 5.5.

Table 5.5

Annual Hospital Survey Data Quality Ratingsfor Provincial/Territorial 1998/99 Data

Province Rating Interpretation

Alberta 2 Use with minor restrictionsBritish Columbia 3 Use with major restrictionsManitoba 2 Use with minor restrictionsNew Brunswick 2 Use with minor restrictionsNewfoundland 3 Use with major restrictionsNova Scotia 2 Use with minor restrictionsNorthwest Territories NA Data not providedOntario 1 Use without restrictionsPrince Edward Island NA Unable to evaluate due to small sample sizeQuebec 3 Use with minor restrictionsSaskatchewan 3 Use with major restrictionsYukon 3 Use with major restrictions

Note: The methodology used by CIHI for assessing data quality of Annual HospitalSurveys is at its first milestone of development. As development progresses to milestone3, criteria for assessing data quality will become more stringent than that recently used, andwill be reflected in the rating scheme and scores.



Non-Required ReportingThe MIS Guidelines also provide the building block upon which almostall non-required financial reporting activities are based in Canada.

Definition

Non-required reporting activities involve the preparation and dis-tribution of health service financial information to audiences forpurposes other than compliance with legislative or regulatoryrequirements.

Reporting to the Public

Over the past few years, health service organizations have shown agrowing interest in demonstrating their accountability to the publicthey serve. In Alberta, Regional Health Authorities have developedmeasures of performance that are tracked and disclosed publicly.

Individual health service organizations have developed a variety ofsupplementary data to include with their annual reports.

Chapter 4 explained how Ontario health service organizations haveparticipated in the largest performance measurement initiative to datein Canada. That initiative involved the public disclosure of 9 measuresof financial performance and condition; 12 measures of clinicalutilization and outcomes; 8 measures of patient satisfaction and 9measures of system integration and change for 89 health serviceorganizations (over 140 hospitals) representing 91% of inpatientactivity in the province. An even more comprehensive initiative isunderway in Ontario for 2001.

Reporting to the Provincial/Territorial Government

Although most reporting activities involving the provincial/territorialgovernment are required in nature, some health service organizations

A growingnumber of

health serviceorganizations are

publiclydistributing

performance data.



participate in non-required reporting activities. These activities areusually designed to address management accounting issues. Mostnotable are the case costing initiatives under way in Ontario andAlberta.

Case Costing Projects

Two of the provinces studied (Ontario andAlberta) have extended their financialreporting capabilities to support thedetermination of service recipient costs.

Only a few health service organizations ineach jurisdiction participate in theseinitiatives. Participation appears to be afunction of system capacity and capability,and the availability of the resources necessaryto sustain a costing initiative.

Alberta’s costing capability is the farthestdeveloped. Responsibility for case costing wastransferred to Alberta Health & Wellness in1998. The system currently costs over 1/3 ofinpatient stays and has been extended topermit the costing of ambulatory visits.

In Ontario, the Ontario Case Cost Project wasbegun in 1993 and is currently being reviewed and re-launched as theOntario Case Cost Initiative.

Both Alberta and Ontario have contributed case cost data to CIHI.CIHI uses this data to calibrate its RIW database, helping to ensurethat the relative weights properly reflect expected resourceconsumption. Prior to the availability of Canadian case cost data,CIHI had to use American charge data to estimate the relativeweights.

See www.occp.com fordetails of the Ontariocosting initiative.Ontario’s websiteincludes information oncase costs for a varietyof CMGs.

Alberta Health &Wellness releases anAnnual Report on healthcosting each year. Adescription of how thecosting project wasdeveloped can be foundin Provincial CostingProject—Final Report1998 available fromAHW.



SummaryThis chapter has reviewed the financial reporting practices of healthservice organizations in Canada. The focus was on what informationneeds to be reported to provincial/territorial governments and in whatformat.

Provinces and territories are found to require health serviceorganizations to engage in a variety of public and private financialreporting activities.

Requirements to submit trial balance data (often in electronic form)on a quarterly basis are common. Some provinces (such as BC) requiremore frequent submissions.

All provinces/territories require health service organizations topublicly release annual reports containing audited financial statements.

Two provinces (Alberta and Ontario) have developed case costingcapabilities. Only a selected number of health service organizations ineach province participate in these projects, but their volume ofpatients is sufficiently large to support the development of a rich dataset. Alberta’s initiatives in this area are currently the most advanced inCanada. Ontario has recently re-energized its case costing activitiesand it is expected that Ontario will play an important role in thedevelopment of case cost data in the near future.


6 / Summary

6. Conclusion

It is hoped that this study provides a valuable reference forstakeholders who require access to information describing the fundingapproaches, financial performance monitoring and financial reportingpractices of provinces and territories in Canada.

SummaryWhat is happening in the funding, financial performance monitoring andfinancial reporting of acute care in Canada?

• Alberta—the primary operating funding of Regional HealthAuthorities is comprehensive in scope and uses a primary method ofpopulation-based. An operating budget and business plan must besubmitted 8 weeks after funding is announced. Realized surpluses canbe retained. Financial performance indicators are used or underdevelopment. Trial balance data must be submitted quarterly.

• British Columbia—the primary operating funding of Regional HealthBoards and Community Health Councils is comprehensive in scopeand uses primary methods of line-by-line and population-based. Achange in primary operating funding to population-based only isbeing considered. An operating budget and health services plan mustbe submitted by June 30. Realized surpluses can be retained. Trialbalance data must be submitted every four weeks.

• Manitoba—the primary operating funding of Regional HealthAuthorities is comprehensive in scope and uses a primary method ofministerial discretion. An operating budget and a regional health planmust be submitted by June 1. Realized surpluses can be retained.Trial balance data must be submitted monthly.


7 / Provincial / Territorial Summaries

• New Brunswick—the primary operating funding of Region HospitalCorporations is comprehensive in scope and uses primary methodsof line-by-line and population-based. A change in primary operatingfunding to population-based is being considered. An operatingbudget and operating plan must be submitted by January. Realizedsurpluses can be retained. Financial performance indicators are usedor under development. Trial balance data must be submittedmonthly.

• Newfoundland and Labrador—the primary operating funding ofRegional Health Boards is comprehensive in scope and uses aprimary method of ministerial discretion. A change in primaryoperating funding to population-based is being considered. Anoperating budget must be submitted by October. Realized surpluseshave not existed in recent years. Trial balance data must be submittedquarterly.

• Nova Scotia—the primary operating funding of District Health Boardsis comprehensive in scope and uses a primary method of ministerialdiscretion. A change in primary operating funding to population-based is being considered. An operating budget and annual businessplan must be submitted by February and January, respectively.Realized surpluses can be retained. Financial performance indicatorsare used or under development. Trial balance data must be submittedstarting 2001/02.

• Ontario—the primary operating funding of public hospitals isinstitutional in scope and uses a primary method of global. A changein primary operating funding to population-based and facility-based isbeing considered. An operating budget and operating plan must besubmitted by February. Realized surpluses can be retained. Trialbalance data must be submitted quarterly.

• Prince Edward Island—the primary operating funding of RegionalHealth Authorities is comprehensive in scope and uses a primarymethod of ministerial discretion. An operating budget must besubmitted by January/February. Realized surpluses cannot beretained. Trial balance data must be submitted monthly.

• Quebec—the primary operating funding of Regional Health and SocialServices Boards is comprehensive in scope and uses a primarymethod of global. A change in primary operating funding topopulation-based and facility-based is being considered. An operatingbudget and operating plan must be submitted 3 weeks after being


6 / Summary

advised of the annual budget. Realized surpluses can be retained.Financial performance indicators are used or under development.Trial balance data must be submitted annually.

• Saskatchewan—the primary operating funding of District HealthBoards is comprehensive in scope and uses a primary method ofpopulation-based. An operating budget and operating plan must besubmitted by May 15. Realized surpluses can be retained. Financialperformance indicators are used or under development. Noelectronic trial balance submission is required.

• Yukon—the primary operating funding of hospitals is institutional inscope and uses primary methods of ministerial discretion and global.An operating budget must be submitted by September 30. Realizedsurpluses can be retained. No electronic trial balance submission isrequired.

Principal FindingsThe principal findings of the study are:

• Health service organization funding approaches can be classified—Provinces/territories use a variety of approaches to fund the healthservice organizations responsible for providing acute care in theirjurisdictions. Although the approaches are tailored to the uniqueneeds of each province/territory, this study classified all of theapproaches using a taxonomy consisting of three elements—scope,method, and sub-components of methods of funding.

• A wide variety of funding approaches are used—Although many differentfunding approaches are used across Canada, in general,provinces/territories use a single approach to apportion the majorityof operating funds and a single approach to apportion the majority ofcapital funds. Secondary methods are used when special fundingannouncements are made, or in situations where the primary fundingapproach is not sufficient or appropriate.

• There is growing interest in population-based methods of funding—Alberta andSaskatchewan already use a population-based method and Ontariohas a proposed funding approach that combines population-basedand facility-based components. British Columbia and New Brunswickhave also explored how a population-based method could be used.

Provinces aremoving towards

population-basedmethods to

apportion themajority of

operating funds.



These developments reflect a trend in many developed countriestowards population and needs-based funding.

• There is extensive prospective financial monitoring of health service organizationsby ministries and departments of health—The provinces are similar withrespect to their prospective monitoring activities. All require healthservice organizations to prepare budgets for ministry/department ofhealth approval and some also require the preparation of descriptiveplans of proposed operations during the upcoming year. Someprovinces require that budgets be developed after the annual fundingannouncement has been made and to explain how they will distributeand spend the money it received in its allocation. Other provincesrequire that budgets be prepared before the annual fundingannouncement. This process allows the province to use proposedbudget information to both evaluate the plans of health serviceorganizations as well as to facilitate discussions within the ministryand at treasury regarding funding needs for the upcoming year.

• There is much less retrospective financial monitoring of health service organizationsby ministries and departments of health—Although all provinces requirehealth service organizations to demonstrate stewardship of funds viaannual audits, the use of indicators of financial performance andcondition to assess financial health and performance occurs muchless frequently. In Alberta, several RHAs have published report cardsthat include financial indicators. In Ontario, the Department ofHealth Administration at the University of Toronto developed apublicly released report card on the Ontario hospital system thatincluded measures of financial performance and condition. TheOntario Ministry of Health and Long Term Care is collaborating on asubsequent version of this report that will significantly enhance theMinistry’s capacity to monitor retrospective measures of financialperformance. Although the efforts in both provinces are laudable,measurement of health services performance is in its infancy inCanada.

• All health service organizations must report financial data to ministries/departments of health and to the public—Provinces require health serviceorganizations to engage in a variety of public and private financialreporting activities. Requirements to submit trial balance data (oftenin electronic form) on a quarterly basis are common and someprovinces require more frequent submissions. All provinces/territories require health service organizations to publicly releaseannual reports containing audited financial statements.

Strong interest isbeing

demonstrated indeveloping acapacity for

retrospectivemonitoring across

Canada.


6 / Summary

• Only Alberta and Ontario have developed and use case costing data—Only afew health service organizations in each province participate in casecosting projects, but their volume of patients is sufficiently large tosupport the development of a rich data set. Alberta’s initiatives in thisarea are currently the most advanced in Canada. Ontario has recentlyre-energized its case costing activities and may play an important rolein the development of case cost data in the near future.

The FutureAcross Canada, there is extensive variation in the funding, reporting andmonitoring of health service organizations. Identification andconsideration of these variations provides a valuable learning opportunityfrom which lessons may be extracted. From this perspective we offer thefollowing recommendations for the future:

• Health service organizations should be required to report using the MISGuidelines—Benchmarking, report cards, scorecards and performancemeasurement require data that have been reported using the same setof accounting principles. Ministries /departments of health should bevigilant in requiring health service organizations to report using theMIS Guidelines.

• Greater attention should be paid to data quality—The few studies offinancial data quality that have been undertaken in Canada indicatesubstantial variation in reporting practices that compromisecomparability (see GH Pink et al, “A Test of the Completeness,Consistency, and Reasonableness of the OHRS Data”, Pub. No. 00-02-TR, Institute for Clinical Evaluative Sciences, April 2000 andMcKillop et al, “An Examination of How Hospitals Use theReporting Framework Prescribed in the Ontario Hospital ReportingSystem”, Pub. No. 00-03-TR, Institute for Clinical EvaluativeSciences, August 2000). Ministries and departments of health shouldroutinely assess data quality and have in place a data qualityimprovement program.

• Valid, standardized measures of financial performance should be developed—Many traditional financial ratios are not relevant to Canadian not-for-profit health service organizations. Valid and relevant indicatorscalculated using standard definitions would substantially advanceperformance measurement and give governments the comparabledata to meet their public accountability requirements.



• There should be greater implementation and use of case cost data—In his1999/2000 report, the Alberta Auditor General states that “To date,there has been little change in reporting the cost of outputs. Linkingcosts with outputs would assist resource allocation...While somehealth authorities may have started or have tried developing costingcapabilities, there does not yet appear to be a concerted and focusedeffort across the health system...Given the need for cost informationhas been noted in my Reports since 1966, a concerted effort isneeded to achieve a breakthrough in measuring and publiclyreporting the costs of outputs, such as cost per type of service”(Recommendation 19, p 137).

• There should be more evaluation of the outcomes of different health serviceorganization funding approaches—The substantial variation in themethods of funding health service organizations suggests that manyof these approaches have been adopted without evidence about theirefficacy or expected outcomes. As a country with a dominant singlepayer of health services, Canada should be at the leading edge ofresearch into new and innovative methods of funding.

• CIHI should publish comparative financial data about health serviceorganizations across Canada—In a system that spends billions andbillions on health care, it is astounding that most health serviceorganizations in Canada do not have access to routinely publishedinformation about margins, inventory management, capital structure,liquidity, efficiency, and other financial measures that the privatesector has used for decades. Provincial level data is useful forcomparing how governments allocate funding, but bettermanagement and quality improvement at the front lines requireorganizational level data. Benchmarking and performancecomparisons can be done only if managers can compare the financialperformance of their organization to that of similar organizations intheir own province and, increasingly, with organizations in otherprovinces and countries. Canada should consider the comparativedata published by the National Health Service in the UnitedKingdom and other countries as potential role models.



7. Provincial/Territorial Summaries

This section provides summaries of the data collected from each ofthe provincial/territorial governments participating in this study.Representatives from the governments who were involved in writingand/or reviewing and verifying the summaries in this section arenamed in the list of contributors provided in Annex 3. Classificationof the funding approaches included in these summaries is that of theauthors and not of the governments. The summaries are presented inalphabetical order by province/territory.


Alber taBackground

7 / Provincial/Territorial Summaries

Alberta QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Alberta Health & Wellness.

The classification of funding approaches is that of the authors.

Funding Approaches Used...........................................................................96Specifics of Primary Operating Funding Approach ....................................97

Primary Capital Funding Approach.........................................99Secondary Operating Funding Approach .............................101Import/Export Adjustment .......................................................98

Use of Financial Performance Indicators ...................................................106Trial Balance Submission Details ..............................................................108

ContextAlberta restructured its health care delivery system in April 1994 from over200 hospital boards and administrations to 17 regional health authorities.Under the regionalized structure, different types of services (acute care,long term care, home care) separated from each other, were amalgamatedwithin an overall regionalized provincial framework. It is still not a totallyintegrated system because some services are managed separately. Forexample, physicians services are funded by Alberta Health and Wellness;ground ambulance services are managed through variety of organizationsincluding municipalities and voluntary organizations.

Another major aspect of restructuring was the streamlining of the deliverysystem and refinancing of the system. A streamlined administration,building of connections among services, and service delivery in responseto local needs were some of the benefits. A population-based fundingmodel was developed and beginning with the 1997-98 fiscal year, Albertaadopted this new method of funding regional health authorities to ensurethat each region received a fair share of available health dollars. Thefunding model has since been annually refined to make it more equitableand respond to the dynamic nature of health care delivery.


Alber taBackground


Unit of AnalysisPopulation ofProvince:

2,964,689 (Statistics Canada, July 1, 1999)

Percent of Canada'sPopulation:

9.7% (Statistics Canada, July 1, 1999)

Entity Funded (Unit ofAnalysis):

Regional Health Authorities

Description andNumber of Entities:

17 Regional Health Authorities

Responsibilities ofEntity Funded:

Services funded include: inpatient acute care, ambulatory care, continuingcare, home care, protection, promotion and prevention (PPP) and privateclinics. Province wide services are funded separately. These are only thepopulation-based pools. Regions are also responsible for communityrehabilitation, community lab and other public health services for whichitemized funding is provided.

Services Excluded: Physician services, drugs (Blue Cross), Mental HealthBoard and Cancer Board services.

1999-2000 HospitalSpending:

$2,409,569,275 (Source: CIHI)


Alber taFunding Approaches


Current Funding Approach

Primary Funding Approach

Scope Method Modifiers Data SourceOperating Comprehensive Population-based Import/export

Adjustment + No-Loss Adjustment

Spending data

Capital Comprehensive Project-based None Spending data

Secondary Funding Approaches

Scope Method Modifiers Data SourceOperating

Non-populationBased Funding

Comprehensive Policy-based1 None Spending data

Notes:1. Used for non-population based items (e.g., community laboratory, public health services, community rehabilitation and

to add an inflation adjustment (minimum guarantee) to both population and non-population portions).Also used to fund Province wide services. Edmonton and Calgary Regional Health Authorities are funded separately forprovince wide services that are provided to all residents of Alberta (services include: heart surgeries, organ and bonemarrow transplants, renal dialysis, neurosurgery, selective cancer treatments, intensive care for severely ill infants andpatients with severe trauma or burns).




Primary Operating Funding Approach— DetailsScope: Comprehensive

Method: Population-based

Modifiers: Import/Export Adjustment and No-Loss Adjustment

Data Source: Spending data

Used For: Primary operating funding decisions for all 17 Regional Health Authoritiescomprising approximately 90% of Regional Health Authority global funding.Province-wide services are funded separately.

Current ApproachFirst Used:

1997-98 fiscal year adopted population-based method

Last Major Revision: 2000-01. Enhancements are made on a continual basis. Examples includeadditional data sources (sub-acute care, private clinics and alternatecontinuing care services) and methodological changes (increased fundingallowance for remote populations).

Previous Approach: Prior to 1997-98, health care funding was directed toward specific facilities,agencies or programs, and was essentially determined by previous fundinglevels.

Restrictions: Regional Health Authorities may move funds within regions with norestrictions, except for funds designated for province-wide services.

Method Detail: Step 1. Based on the latest reported spending (MIS data), allocatepopulation based expenditures into funding pools, representing types ofcare within regional services (i.e., inpatient acute; ambulatory care;continuing care; home care; protection, promotion and prevention; andprivate clinics). This delineation is for calculation purposes. The proportionof each pool size has been stable over time.

Step 2. Remove province wide services, non-population based fundedexpenditures and any offset revenue. (The government only funds netexpenditures). The resulting proportions of the funding pools are applied tothe 2000-01 funding pool of $2.387 billion. (Note that MIS data used is forthe funding year 2 years later).

Step 3. Group population. The provincial population is divided into 124mutually exclusive groups based on age, gender and socio-economic statusas follows:• 28 aboriginal status groups (14 age groups x 2 genders)• 28 welfare status groups (14 age x 2 gender)• 28 subsidy groups (14 age x 2 gender)• 40 other, which is full premium paying for those under 65 and also

includes all persons over 65.




Step 4. Calculate a Per Capita Rate for each demographic group. Attachcost weights to activity data for each service pool (except protection,promotion and prevention). Scale weights to produce total expenditure foreach funding pool equal to the total pool size amount. Determine provincialper capita rate for each demographic group by dividing expenditure bypopulation for each demographic group.

The 1999-00 capitation rates (except for protection, promotion andprevention) vary from $139 for female age 10-14 to $19,045 for female age90+.

Step 5. Allocate to regions. This is calculated by multiplying the numberof individuals in the region in each of the demographic groups by thecorresponding capitation rate. Thus, each region has a different averagecapitation rate due to its unique population composition.

Step 6. Calculate the Protection, Promotion and Prevention (PPP)allocation. PPP includes Health Protection (immunizations, dental health,chronic diseases programs, etc.) and Community Health Services (e.g.,breast screening, drug awareness). PPP pool is $100.6 million. Separatemethod is used due to lack of patient level data. Divide population into fourage categories for each region. Use weighting scheme to weight the socio-demographic groups' use of PPP programs (aboriginal and welfare=5,subsidy=2, and non-subsidy=1). Determine each region's share of four sub-pools by its share of estimated provincial weighted population.

Modifier Detail: Import/export Adjustment:–Used for funding regions for health servicesprovided to individuals from other regions. Comprises over 14% of allregional health activity.

Step 1. Identify activity provided to individuals outside the region forinpatient, ambulatory, chronic, home care and private clinics using latestdata.

Step 2. Use provincial average rates for each specific activity.

Step 3. Apply adjustments to regional global funding. Regions with anet inflow of patients from other regions receive a positive adjustment.Regions with net outflow of patients receive a negative adjustment. Netimporters were Calgary ($62.5 million) and Capital (Edmonton) ($123.7million). All other regions were net exporters of patients.

No-loss Adjustment - A no-loss adjustment sets funding equal to thegreater of a) the amount indicated by the new funding approach and b) thefunding that would be announced if the former funding approach were used.This element has been the subject of review on an annual basis.




Primary Capital Funding Approach— DetailsScope: Comprehensive

Method: Project-based

Modifiers: None


Used For: All major capital projects (over $2.5 million) and capital upgrading projects(under $2.5 million) approved by Alberta Health & Wellness and AlbertaInfrastructure. (Note: Regions are expected to meet their ongoingequipment requirements from the population based funding amount. In2000-01, $15 million in funds were included in the amount.) Regions alsohave access to provincial lottery grants for medical equipment and funds forequipment may be included in capital grants.

100% of the cost of upgrade, renovation, expansion or replacement ofexisting health infrastructure owned by health authorities and construction ofnew infrastructure. Includes land, site servicing, consultant services andeligible furniture and equipment costs.


July 1995

Last Major Revision: September 1999.

Nature of Revision: Capital rating criteria revised.

Previous Approach: Individual project requests submitted annually and assessed withoutreference to specific criteria

Method Details: Capital budget spending limits announced three years in advance. Approvalof new projects is contained within the budget limits.

Major capital project requests are rated and prioritized using 12 criteria thatreflect provincial service strategies and the condition of infrastructure. Insummary the criteria assess whether the proposed project:

• is based on a programming study, included in a long term regional capitalplan and is a high priority project in that plan;

• increases health service capacity in response to a significant,demonstrated service need;

• improves access to health services by redistributing services on a moreequitable basis;

• implements a needed increase in health service capacity for programsthat represent a provincial priority;

• improves utilization of health services;

1 0 0 T h e F i n a n c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a



• corrects functional deficiencies and/or inefficiencies at a health facility;• involves facilities which have been in service for a period that exceeds the

provincial average;• involves facilities in relatively poor physical condition;• provides an adequate return on capital investment in terms of ongoing

annual operational savings;• consolidates clinical programs or support services to achieve financial

and/or non-financial benefits;• provides a cost-effective alternative to investing provincial capital funds by

partnering with the private or voluntary sector for needed accommodation;• eliminates or reduces duplication of facilities through arrangements or

agreements between two or more health authorities.

Capital funding for major capital projects is requested by submitting anupdated long term capital plan to Alberta Health & Wellness and AlbertaInfrastructure by October 30 each year. The plan should identify, justify andprioritize capital projects needed over the next three to five years or longer.Before requesting funds for a major capital project, a programming study(comprised of functional and program requirements and space and budgetplan) must be completed.

Requests for capital upgrading projects are made through AlbertaInfrastructure’s web-based Integrated Health Facility Information System onan annual basis.

Key Features: Specific guidelines criteria are used to assess whetherproposed projects should be prioritized and considered for approval. Theseguidelines reflect key criteria that must be met by each project included in acapital plan:

1. Focus on needs- not wants.2. Consider alternatives to institution-based services.3. Ensure operating cost effectiveness or economy.4. Analyze alternatives using financial techniques.5. Correlate capital expenditures to age and condition of facilities.6. Adhere to regional inpatient service targets7. Maximize utilization of existing capacity.8. Ensure reasonable distribution of health services.9. Recognize obligations for cost recovery.10. Ensure commitment of financial support from all parties (e.g., funds for

ongoing operations must be allocated in regional operating budgets.)

A capital project rating scale outlining 11 specific criteria that reflect theMinistry's policies and goals with respect to the acquisition of newtechnologies is used to determine whether a capital project request shouldbe approved.

T h e F i n a n c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a 1 0 1



Secondary Operating Funding Approach – Details

Scope: Comprehensive

Method: Policy-based

Modifiers: None


Used For: The policy specific method is used for the funding apportionment referred toby Alberta Health & Wellness as Non-population Based Funding.

Community Laboratory Services ($66.6 million)Community Rehabilitation ($41.1 million)Cost of Doing Business ($7.7 million)Other Services ($12 million)Public Health Services ($3.4 million)Diagnostic Imaging Adjustment, Minimum Guarantee (of 3.53% = $89.9

million).

This approach was first used in 1997/98 fiscal year, and last revised in 2000-01. Changes are made each year. The desire is to move all funding topopulation based. Prior to 1997/98 health care funding was directed towardsspecific facilities, agencies or programs and was essentially determined byprevious funding levels.

Method Details: Growth and inflationary amounts are provided by Treasury. PopulationGrowth Compensation is based on growth of population in each regionscaled to produce an overall population increase equal to the expectedprovincial population growth of 1.9%. Changes to population (within eachgroup, within each region) are then valued (volume times rate) at each of the124 capitation rates, thus, both population growth and ageing are factored in.

Assured Access funding is provided to qualifying regions in recognition ofthe greater service delivery costs associated with sparsely populated areas.Regions receive an additional percentage of the per capita funding rate foreach of their residents living outside of population circles (50 kilometreradius) in their region with a population concentration of at least 5,000.

An inflation adjustment of 3.5% was added to the total of the populationand non-population based allocations to Regional Health Authorities.

Modifier Details: None




Information Accessed for Funding CalculationsAHCIP Population Registry files (contains all known residents of Albertaeligible for health care insurance coverage; excludes some residents such asRCMP and military personnel with federal health care coverage linked topatient level databases via personal health number.)

Patient level databases• Inpatient Morbidity• Ambulatory Care• Home Care• Fee for service physician claims• Laboratory (1999/2000)• Private clinics• Continuing Care

Other Databases• National Physician Database• Therapeutic Abortions• Communicable Diseases• Community Immunization

Trial Balance submission of Regional Health Authorities.

Patient Costing data listed under Financial Reporting section.

Evaluations of Current Funding ApproachesExternal Reviews: In 1998-99, Auditor General followed up on the prior year recommendation

regarding the funding methodology. Follow up stated progress has beenmade to improve data quality and work to improve regional data onambulatory and other services. No loss subsidy continues, but at loweramount in attempt to prevent certain Regional Health Authorities fromexperiencing financial difficulties. Department continues work on potentialuse of a health economic model for demographic forecasting. No consensushas been reached on how to recognize utilization and cost differencesamong regions.

Internal Reviews: The Health System Funding Review Committee (1998) was put in place toconsider the adequacy of health care funding. The committee recommendedthat the population-based funding formula be maintained as the methodologyfor allocating funds to the Regional Health Authorities.




Approaches Being Considered

Inpatient grouping will move to CIHI’s CMGTM plx/RIW system for 2001/02funding. (Previously Alberta had used Refined Diagnostic Related Groupsand a provincially developed specific case weighting scheme called Made inAlberta Relative Value. Alberta costs by Refined Grouper Number willcontinue to be used for funding of province wide services for the upcomingfiscal year. A size and complexity study is being undertaken.

The model is continually being improved in terms of methodology andapplication.

A patient costing initiative is in place to collect patient-level cost data.Currently only inpatient and ambulatory care data are collected.

Collection of data for both community laboratory and communityrehabilitation is underway.

Management of the Funding Process

Managed by:Contact (at Dec/2000)

Health Resourcing BranchAlberta Health & Wellness19th Floor, TELUS Plaza North Tower10025 Jasper AvenueEdmonton, AB T5J 2N3Telephone: 780 427-7040

Regional HealthAuthority/HospitalInvolvement:

All Regional Health Authorities have their Chief Financial Officer or arepresentative on the Population Based Funding Committee.

Announcement: Funding announcements are usually made in February. For 2000-01,funding targets were given to the Regional Health AuthoritiesMarch 3, 2000.


Alber taPerformance Monitoring


Routine PracticesProspectiveMonitoring Practices:

A Business Plan (an accountability and planning report) must be submittedby each Regional Health Authority 8 weeks following the fundingannouncement. These are concise documents of 15 to 20 pages showingthe direction that the region is taking. (Detailed program and service plansare not required.)

Considerable attention is given to the review of business plans submitted byRegional Health Authorities prior to each fiscal year. These contain anoperating and capital plan budget, as well as performance measures andtargets.

RetrospectiveMonitoring Practices:

Annual Report (a public accountability document) must include performancemeasures, on each provincial and regional goal identified in thecorresponding year's business plan. The Ministry uses this for the nextplanning cycle and may provide direction to the health authorities based onresults reported in the annual reports.

Financial performance measures and indicators based on defined goalsmust be included in the business plan and annual report. The Ministry hasspecified 4 provincial goals, providing broad statements of desired results inRegional Health Authorities. Each goal has performance measures andtargets, calculations, and sources of data specified.

Prospective Monitoring Practices— DetailsThe Regional Health Authority Business Plan

Content: Regional Health Authorities are required to submit Business Plans—conciseaccountability and planning documents of 15-20 pages showing directionthat region is taking. Detailed program and service plans are not required.

This document provides both a qualitative and quantitative analysis.Categories should include: regional demographics and epidemiology,stakeholder expectations, regional economic trends, service volumes, clinicaladvances, human resources, financial and other resources, regional andprovince wide relationships. Risks and contingency plans must also beincluded.

Required components of the business plan are:

• statement of accountability• vision and mission• opportunities and challenges• core business goals




• strategies (including province-wide services where applicable)• performance measure targets and key indicators• long term capital plan• financial information• overview of information management technology plan (integration with

province wide health information system called Wellnet)• health workforce plan

Supplementary information on assumptions and risks is to be included as aseparate document with the business plan. These are underlying factorsthat provide the basis for the development of the business plan.Assumptions should provide three years of historical data and three years ofprojections.

Process: Business Plans are due eight weeks after Regional Health Authorities areadvised of their funding for the fiscal year.

The Minister reviews business plans to ensure they contain the requiredcomponents, strategic directions for health and any directions from theMinister. Regional Health Authorities can discuss plans with Ministryrepresentatives.

Informal feedback is given within six weeks of submission. Formal feedbackis provided to each Regional Health Authority by the Minister.

Regional Health Authority budgets are approved with the business plan.Approved plans are tabled in Legislative assembly.

Late Submission: No penalty for late submission of the Business Plan.

Planned OperatingSurpluses/Deficits:

Regional Health Authorities keep surpluses. These can be used for capitalequipment purchases.

Alberta Health and Wellness will recommend to Minister acceptance of abusiness plan with a temporary deficit if:• rationale is submitted for a one-time deficit, including an analysis of cost

savings from the one-time cost,• deficit pay-back period is reasonable• deficit financing does not exceed borrowing limits prescribed by the

Minister.

Regional Health Authorities are expected to submit a deficit elimination planrelating to accumulated deficit. Accumulated deficit is defined as a negativeamount when summing unrestricted net assets and internally restricted netassets at end of the year. A Regional Health Authority shall not exceed itsdebt limit indicated in its borrowing by-laws. It must also indicate new debtplanned during the plan period, indicate how the health authority plans toretire its total debt and the time frame for retirement. Total debt is defined asthe sum of bank indebtedness plus the amount of long term debt and capitallease obligations at the end of a plan period.




Retrospective Monitoring Practices— Details(a) Annual ReportContent: Financial Statements, Auditor’s Report, Letter from Management.

Approval Process: NA

Late Submission: NA

(b) Financial Performance Measures & Indicators

Overview: The Ministry has specified four provincial goals, providing broadstatements of desired results for its Regional Health Authorities. Each goalhas specified performance measures and targets. Calculations andsources of data are also specified. Regional Health Authorities are requiredto report these performance measures, targets, and key indicators in theirbusiness plan and annual report. Furthermore, a Regional Health Authoritymay identify additional goals to address unique priorities and communityneeds specific to its performance measure and a performance target.

FinancialPerformance:Measures Used:

Several financial and non-financial measures have been specified by theMinistry. Only the financial measures related to the four Ministry goals arelisted here. Measures pertaining to labour hours or full time equivalents areincluded with the financial measures because Alberta Health & Wellnessregard these as proxies for expenditures adjusted for wage rates.

Goal 1. To sustain and improve the delivery of accessible, effective, qualityhealth services to Albertans who need them.• ALC days as a percent of total patient days• Health Workforce Measures. (These are detailed measures of personnel

counts and forecasts in terms of full time equivalents).

Goal 2. To improve the health and well-being of Albertans through RegionalHealth Authority strategies for protection, promotion and prevention.• no financial measures

Goal 3. To support and promote a system for health.• Evaluations of health impact, cost and client satisfaction for selected

programs and services.

Goal 4. To optimize the effectiveness of the Regional Health Authority.• Balanced budget• Annual surplus/deficit as a percentage of actual expenditure• Percent variance of actual expenditure to approved budget.• Working capital ratio• Average remaining useful life of capital equipment• Long term capital plan is submitted in 2000-01, including all required

elements.




Source of Data: Regional Health Authority Annual Report

Proposed Monitoring: Alberta Health & Wellness is actively working with Regional HealthAuthorities to develop an integrated performance monitoring system.

Incentives/Disincentives:

No explicit incentives or disincentives related to a region's performance onthe financial measures.

Performance Linkageto Funding:

Each region is required to include the specified performance measures intheir business plan and annual report. Each measure has a target. TheMinister must approve the business plan.

Calculation/Verification ofMeasures:

Each Regional Health Authority calculates the measures for its region andincludes the measure in its business plan submission. Also, quarterlyreporting requires calculation of working capital ratio.

Dissemination ofMeasures:

Regional Health Authority Annual Report—performance measures are tobe included in the annual report of each Regional Health Authority. Sincethis is a public accountability document, the measures are essentiallyavailable to the public.

Ministry Annual Reports—Alberta Health & Wellness provides comparativeregional information for many of the regional performance measures in itsannual reports.

Management of the Monitoring ProcessResponsibility: 1. Alberta Health & Wellness

2. Regional Health Authorities

Contact Information: Shaukat Moloo, DirectorAlberta Health & Wellness16th Floor, TELUS Plaza North Tower10025 Jasper AvenueEdmonton, AB T5J 2N3Telephone: 780 427-0571

Organization ofFinancial Monitoring:

Financial monitoring of Regional Health Authorities occurs within the divisionof External Financial Reporting. This consists of 5 financial analysts, adirector and one administrative assistant. Financial analysts review businessplans, monitor quarterly financial results against performance objectives andvalidate financial projections.


Alber taReporting Practices


Required Reporting ActivitiesTo Public: Annual Report (see page 106 under Performance Monitoring)

To Health Ministry /Department:

Audited Financial Statements—required in place of the fourth quarterreport by June 30 following the end of the fiscal year.

Interim summary financial statements from each Regional HealthAuthority within 45 days after the end of the first three quarters. Financialquarterly reports must be prepared in accordance with requirements set outin financial directives (FD17). Since 1995-96, all Regional Health Authoritiesare required to submit financial and statistical data to Alberta Health andWellness, by facility. For 2000-01 calculations, data were available from 14of 17 Regional Health Authorities representing the majority of total spending.Minimum reporting required at Level 3 or lower. Specific statistical accountsare mandatory. Submission undergoes edit checks that include:

• use of valid primary and secondary accounts,• reporting at only one level for functional centres• no duplicate account or functional centre combinations• calculated total must match the footer total (audited financial statements).

Quarterly reports may also be required for program issues.

To CIHI: Annual Hospital Survey—Regions submit an electronic trial balance of MISdata to the province for the provincial database. Following validation, thesedata are submitted by the province to the CIHI Annual Hospital Surveydatabase.

Penalties for LateSubmissions:

Annual Report NoAudited Financial Statement NoInterim Trial Balance NoQuarterly Reports NoAnnual Hospital Survey No

Accounting PracticesAccounting RecordsMaintained in MISGuidelines Format:

Yes. Provincial adaptation of national guidelines used. Modified by jointMIS/Costing Function Team for use in Alberta.

Involvement ofProvincial Auditor:

None at hospital level.


Alber taRepor t ing P ract ices


Involvement ofProvince in FinancialReporting:


Reconciliationbetween AuditedFinancial Statements& Ministry Reporting:

Yes, trial balance submission reconciled to audited financial statements byregional health authority.

Fiscal Year End: March 31

Balance SheetTreatment of NewBuildings &Equipment:

Equipment purchases are recorded on the Regional Health Authority balancesheet as a capital asset. If externally funded, the contribution is shown asunamortized external capital contribution and recognized as revenue whenthe asset is amortized (revenue neutral). Buildings financed by InfrastructureFunding or internally funded and used by the Regional Health Authoritywould also be shown on their balance sheet as a capital asset. If, however,the building is built by Infrastructure and operated by a voluntary contractoron behalf of the Regional Health Authority, the voluntary contractor wouldprobably show the building as an asset. There is ongoing discussion as tothis treatment and Alberta Health & Wellness needs to clarify this treatmentand who controls the asset.

Treatment ofSurplus/Deficits:

It is an expectation of the Ministers that all Regional Health Authorities willnot have a deficit and that they will manage and deal with deficits that occur.There is no requirement to return surpluses to the Ministry because RegionalHealth Authorities are responsible for replacement of capital assets.


Br i t i sh Co lumbiaBackground


British Columbia QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by British Columbia Ministry of Health andMinistry Responsible for Seniors.


Funding Approaches Used ................................................................... 112Specifics of Primary Operating Funding Approach ............................. 112

Secondary Operating Funding Approach ........................ 116Primary Capital Funding Approach.................................. 114

Trial Balance Submission Details ......................................................... 121

ContextUnder British Columbia's regionalized health care system, introduced in1997/1998, responsibility for the direct delivery and management of mosthealth care services has been transferred from the Ministry of Health to 11Regional Health Boards, 34 Community Health Service Societies, and 7Community Health Councils across the province. Regional Health Boardshave the responsibility to deliver a full range of health services exceptthose delivered by the Province. Community Health Service Societieswork in partnership with Community Health Councils to oversee thedelivery of health care in rural and remote areas of the province whereRegional Health Boards do not exist.

While most health services are governed and managed regionally andlocally, the Ministry of Health remains responsible for the Medical ServicesPlan which includes physician fee-for-service payments, Pharmacare, VitalStatistics, and the British Columbia Ambulance Service. The Ministry fundshealth authorities, and monitors, evaluates, and supports theirperformance in governing and managing health care services.



Percent of Canada's 13.2% (Statistics Canada, July 1, 1999)

A c u t e C a r e i n C a n a d aFunding, Performance Monitor ing and Financial Report ing Pract ices 1 1 1

Br i t i sh Co lumbiaBackground


Population:Entity Funded (Unit ofAnalysis)

Three types of health authorities with differing mandates.


Province is divided into 18 geographic regions. Three types of local healthauthority structures are used.

Regional Health Boards manage 11 of the geographic regions.

The remaining 7 geographic regions are managed using a two healthauthority structure. Within these 7 geographic regions there are 34Community Health Councils (CHC) and 7 Community Health ServiceSocieties (CHSS).

Health authority (HA) refers to RHBs, CHCs, and CHSSs.Responsibilities ofEntity Funded:

Regional Health Boards—responsible for the provision of all healthservices within their regions, excluding physician services, pharmacareand BC ambulance services.

Community Health Councils—responsible for acute care and continuingcare residential services.

Community Health Service Societies—responsible for providing continuingcare community services (home support, direct care services, adult daycare), public and preventive health, and adult mental health.

Physician services, pharmacare, and BC ambulance services are not theresponsibility of the entities described above.


$3,346,435,313 (Source: CIHI)


Br i t i sh Co lumbiaFunding Approaches




Scope Method Modifiers Data SourceOperating Comprehensive Line-by-line and

Population-based1None Spending data

Capital Institutional Project-based None Spending data



Comprehensive Policy-based2 None Spending data

Notes:1. Used to inform the ministerial discretion. Hospital Funding Allocation Model (HFAM) determines increase in funding for

acute and continuing care to meet population/demographic increases.2. Used for tertiary, provincial strategic initiatives, and dedicated funding (e.g., tobacco reduction)


Method: Line-by-line and Population-based

Modifiers: None


Used For: Regional Health Boards—acute care, continuing care residential services,continuing care community services, public and preventive health, adultmental health. Some Regional Health Boards have contracts to providetertiary and specialized services.

Community Health Councils—acute and continuing care residential services.

Community Health Service Societies—acute and continuing care residentialservices.





Line-by-line multiplier method has been used for a number of years.

Last Major Revision: 1992/93

Nature of Revision: The Hospital Funding Allocation Model (HFAM) was introduced into thefunding approach. The Hospital Funding Allocation Model is used in acuteand continuing care funding decisions to identify situations where anadjustment for population changes should be made. The Hospital FundingAllocation Model estimates population needs based on the regionalage/gender population structure, provincial utilization rates adjusted for aneed, provincial average cost per weighted case, and inter-regional referralpatterns.

Previous Approach: Comprehensive, Ministerial discretion, spending data.

Restrictions: Health Authorities may move funds within regions according to followingcriteria:

1. Reallocation of funds may occur within sectors.2. Funds may be moved from acute care to any other sector.3. Funds may be moved from continuing care residential and continuing

care community to any other sector except acute care.4. Reallocation of public preventative health or mental health sector funding

is not allowed.5. Sources of funds must be identified if moved to public and preventative

health sector.

Method Detail: Step 1. Regional Health Boards, Community Health Councils andCommunity Health Service Societies submit 3 year Health Service Planswhich outline current and proposed service levels. (See ProspectiveMonitoring Details on page 118).

Step 2. 1999/2000 base funding is updated to adjust forpopulation/demographic changes, non-wage inflation, partial funding ofincreased WCB premiums and major and minor (under $100,000) capitalequipment. There are separate funding envelopes for capital, tertiary, andprovincial programs.

Step 3. Impact of population changes is assessed using Hospital FundingAllocation Model. The percentage of funding for each health authority iscalculated as follows:

1. Population estimates by 19 age groups for males and females arecalculated from provincial population projects (PEOPLE from BC Stats).

2. Population is multiplied by provincial average utilization rates forweighted cases and summed. The total workload is multiplied by themortality rate adjustment factor (Standardized Mortality Rate).




3. The adjusted workload is then allocated to hospitals that provided theservice, to adjust for services received outside the regional healthorganization of usual residence.

4. Health authorities with teaching activities have their estimated workloadincreased to account for the additional costs attributable to teaching.

Step 4. Funds are allocated after Ministry staff reviews plans with healthauthorities. Ministry also reviews all available information (including resultsfrom population-based calculation in Step 3) prior to making a decision onhow to allocate the population portion of total health authority funding.

To prepare for the introduction of a population needs-based funding model in2001/02, 2000/01 funding took into consideration an approximation of theregional population’s need for health care from previous work (RegionalFunding Allocation Model Developed in 1996). 30% of population/demographic incremental funding was designated as a one time onlypayment to allow Ministry of Health to manage base funding adjustmentswhich may be required should a decision be made to implement thepopulation needs-based funding model in 2001/02.

Modifier Detail: None

Primary Capital Funding Approach— Details

Scope: Institutional


Modifiers: None


Used For: Capital projects involving major capital projects (over $1.5 million); minorprojects ($100,000 to $1.5 million) and Maintenance/Repair projects.


NA

Last Major Revision: NA

Nature of Revision: NA

Previous Approach: NA




Method Details: Most funding for capital projects is split 60%/40% between Ministry of Healthand Regional Hospital Districts; this includes funding for hospitals andextended care beds. Other projects are 100% funded by Ministry, mainlycontinuing care and multicare beds.

Regional Hospital Districts (which existed prior to regionalization) are agentsfor government and hospitals in the financing activities associated with theacquisition and construction of hospitals and hospital facilities. There are 23active Regional Hospital Districts, 14 of them correspond to boundaries ofregional districts (entities under the Municipal Act related to local propertytaxation), and 9 correspond to boundaries of Health Authorities.

Step 1. Health authorities submit a 3-year Capital Plan in June 2000. Majorprojects submissions for 2001/02 require a Project Study and facilityinventory and maintenance plan.

Step 2. The Ministry reviews the projects and ranks them high, medium orlow based on the Ministry's own analyses, and the Ministry's overallstrategies and priorities.

Step 3. The Ministry submits a Long Term Capital Plan and funding requestto Treasury Board (Ministry of Finance). The review of the plan is based oncompliance with the Ministry of Health’s Strategic Plan.

Step 4. After the project is approved in principle, the regional hospital districtworks with the Ministry of Finance who takes responsibility for financialmanagement of the project. For cost-shared projects, the regional hospitaldistrict share is arranged through the Municipal Financial Authority.

Criteria are used to assess relative differences among capital projects and torank capital projects for the health authorities and Ministry. For the purposesof ranking, capital projects are categorized as maintenance projects whichrelate to the age and physical condition of the facility, and non-maintenance /program related projects including renovation, replacement, or expansion ofspace.

Criteria for ranking maintenance projects were developed by a WorkingGroup of Capital Planning Advisory Committee. They include safety/riskmanagement (how does the project minimize the risk to health and safety ofclients and staff), and building lifecycle (how does the project achieve theuseful life of the building/facility/asset). Criteria for ranking non-maintenanceprojects are still under development.





Secondary Operating Funding Approach— DetailsScope: Comprehensive


Modifiers: None


Used For: The non-population based portion is used for issues and specializedprograms, such as tertiary services and union agreements.

Targeted funding for Tertiary services includes AIDS/HIV, AmbulatoryClinics, Cancer Tertiary Activity, Cardiothoracic, Drug and PoisonInformation Centre, Eating Disorders, EENT, Endocrine/Urinary, Hepatitis CCentre for Excellence, Interns and Residents, Neonatal, Neurosciences (I/P),Orthopaedic/Spinal, Psychiatry, Renal Services, Teaching, Transplant,Trauma, Speciality Maternal/Maternity, ICU and Paediatric Transport,Medical Genetics Program, Paed. Cardiac, Paed. Neurosciences, Paed.Oncology/BMT, Paed. Psychiatry, Paed. Surgery, Paediatrics (Med.),Special Laboratory, Specialty Outpatient Rehab Programs, SpecialtyOutpatient Programs, Tertiary Extended Care.

$290 million additional funds were announced in September 2000. $180 forlocal hospitals to train nurses, increase surgeries, improve patient care; $70million to buy critical care equipment; $40 million to recruit and retraindoctors in rural and small communities.

Method Details: NA

Modifier Details: NA

Information Accessed for Funding CalculationsPopulation-based method—Patient level databases listed under FinancialReporting section. HA population projects produced by BC Stats (PEOPLE).

Patient-specific—Discharge Abstract (acute care) sent by hospital to CIHI.Client Patient Information Management database (CPIM) for Mental Healthclient specific reporting. Continuing Care Information Management System(CCIMS) for reporting on residential and community continuing careservices.




Evaluations of Current Funding ApproachesExternal Reviews: Currently underway at Ministry of Health and health authorities.

Internal Reviews: The mandate of the Operational Funding Standing Committee (of the JointAdvisory Committee) includes a review of funding and the development of apopulation needs-based funding model.

Approaches Being ConsideredWorking towards implementing a ppooppuullaattiioonn nneeeeddss-based model. Intendingto make changes to model based on recommendations of the reviewcommittee.

A committee has been convened to design a population needs-based modelto be implemented in 2001/02 for acute care, continuing care, and mentalhealth.

Management of the Funding Process

Managed by:Contact (at Dec/2000)

BC Ministry of Health and Ministry Responsible for SeniorsContact (at Dec/2000) 5-1 1515 Blanshard Street, 5th FloorVictoria, BC V8W 3C8


Hospitals are under the responsibility of Health Authorities (RHBs andCHCs); in addition, there are Cluster Boards for the major tertiary facilitiesin the lower mainland. Operational Funding Standing Committee of theJoint Advisory Committee is composed of a cross section of stakeholdersincluding Senior Health Authority, Senior Ministry of Health, Union andAssociation representatives. The committee’s main function is to reviewand make recommendations on the current and medium term (2-3 years)funding requirements and allocation processes.

Announcement: For 2000/01 fiscal year, announcement was made Sept 18, 2000. Usuallyannouncement is made before the end of June for the current fiscal year.


Br i t i sh Co lumbiaPerformance Monitoring


Routine Practices

ProspectiveMonitoring Practices:

Health Service Plans receive considerable attention by Ministry. Theseplans contain an operating and capital equipment budget. The Ministry hasfive Regional Teams that work directly with geographical groupings of healthauthorities.


Annual Report prepared by each health authority.

Prospective Monitoring Practices— Details(a) Health Service Plan

Content: Detailed plan describing scope, range and details of health services to bemanaged by health authority in upcoming year.

Required components of the Health Service Plan are:• Service projections and budget assumptions.• Signed acute tertiary performance contract.• Summary of financial data (Health Authority Pro forma Statement of

Operations, Cash Flow Projection Report, Pro forma Balance Sheet).• Operating funds to be used for capital equipment.• Regional Officer approval of Public and Preventive Health jointly funded

service.• Board approval-resolution.• Detailed statistical/financial data (electronic submission of MIS data, hard

copy budgets for contracted providers that are grant funded by the HealthAuthority).

Process: Balanced budget to be submitted by health authorities after the fundingdecision has been announced. If a deficit budget is submitted, the Ministry ofHealth will work with the health authority to help resolve the situation.

Late Submission: Late submissions or the submission of deficit budgets are subject to a fullfinancial audit.


Health authorities may use surplus funds (except those from specially fundedservices) to acquire capital equipment, up to 3% of operating funds, uponsubmission of a request to the Ministry.

The Ministry works with health authorities if there are anticipated shortfalls.




Retrospective Monitoring Practices— Details(a) Annual Report

Content: Financial Statements, Auditor’s Report, Letter from Management.


Late Submission: NA


Overview: Standardized financial performance measures and indicators have not beenadopted yet. See Proposed Monitoring below.

FinancialPerformanceMeasures Used:

None. Standard financial reporting capacity exists as described on page 121.

Source of Data: Health Authority Management Information System (HAMIS) holds 13 periodMIS data. Will provide base for proposed monitoring activities.

Proposed Monitoring: Efficiency indicators for new regional structure are under development by theMonitoring and Measurement Committee of the Joint Advisory Committee.

Currently, there is no ability to link patient data with financial data. Plans areunderway to use both financial and non-financial measures to monitorperformance.

A formal performance monitoring framework is under development. Apreliminary draft of standard financial monitoring indicators is currently undercommittee review.


NA


No direct linkage to funding, although health authorities have a legalobligation to meet the Ministry of Health standards of service. Funding basedon Hospital Funding Adjustments Model calculations forpopulation/demographic change use provincial utilization and average costs,which provide financial incentives to efficient and innovative healthauthorities.





Discussion is ongoing between Ministry regional teams and healthauthorities.


Regional Programs Branch of Ministry to health authorities. A formalperformance monitoring framework is under development.

Management of the Monitoring ProcessResponsibility: 1. Ministry of Health and Ministry Responsible for Seniors

2. Health authorities3. Treasury Board (monitoring Ministry of Health and Ministry Responsiblefor Seniors, not Health Authorities)

Contact Information: Regional ProgramsMinistry of Health and Ministry Responsible for Seniors6-1 1515 Blanshard Street, 5th FloorVictoria, BC V8W 3C8


NA


Br i t i sh Co lumbiaReporting Practices


Required Reporting Activities

To Public: Annual Report

To Health Ministry/Department:

Audited Financial Statements—Board approved, audited financialstatements are required from health authorities at year end

Electronic MIS submissions for each of 13 periods per year including clientspecific data, statistical and financial data. Data are submitted for mostservices. MIS data reported to HAMIS (Health Authority ManagementInformation System) using Health Authority Reporting Program (HARP), aMinistry of Health provided financial/statistical reporting application.Submission undergoes edit checks at the Health Authority level, thenMinistry electronic file submission is prepared.

Annual Health Service Plans.

Year end post-audit MIS submission.

To CIHI: Annual Hospital Survey—Regions submit an electronic trial balance of MISdata to the province for the provincial database. Following validation, thesedata are submitted by the province to the CIHI Annual Hospital Surveydatabase.


Annual Report NoAudited Financial Statement Yes, full financial audit.Annual Health Service Plan NoYear end post audit MIS submission NoAnnual Hospital Survey NoQuarterly Reports NoInterim Trial Balance No





Yes. MIS Guidelines modified by British Columbia to develop a regional chartof accounts. Functional centres and accounting centres are referenced to aspecific sector. Balance sheet accounts are reported at region level.

Generally, financial secondary accounts are relevant for all sectors,statistical accounts are sector specific.

Review of statistical reporting requirements for Public and Preventive Healthand Adult Mental Health services. Aim to incorporate core set of statistics inchart of financial and statistical accounts by 2000-01.


None at Health Authority level.


NA


Yes. At year-end a post audit report is required from health organizationsthat must reconcile general ledger submission to the audited financialstatements.



In accordance with the CICA handbook, grants from MOH for new buildingsand equipment are recorded in the Health Authority accounts as deferredrevenue contributions, and subsequently amortized over the life of the asset.The asset is capitalized and amortized over the life of the asset.


NA


Mani tobaBackground


Manitoba QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Manitoba Health.


Funding Approaches Used.........................................................................125Specifics of Primary Operating Funding Approach ..................................125

Secondary Operating Funding Approach .............................127Primary Capital Funding Approach.......................................126


ContextManitoba Health funds the Regional Health Authorities for health careservices based on needs assessments and funding requests provided bythe Regional Health Authorities. The rural Regional Health Authoritieswere formed in 1997. The urban Regional Health Authorities were formedin 1998.








12 Regional Health Authorities


Mani tobaBackground



The Regional Health Authorities provide a full range of health and socialservices including: inpatient acute care, ambulatory care, chronic care,mental health, home care, public health, support to seniors in thecommunity, and salaried physicians.

Cancer Care, a province-wide service is a separate entity and is fundedseparately. Some provincial services are funded separately but aredefined as protected lines in the global budget, such as lung and bonetransplants, dialysis and defibrillation. Most of the province-wide servicesare provided for the most part by the Winnipeg Regional Health Authorityand to some extent by the Brandon Regional Health Authority as arequired referral centre for Western Manitoba.

Services Excluded: Physician fee-for-service payments, drugs foroutpatients.


$1,011,688,300 (Source: CIHI)


Mani tobaFunding Approaches




Scope Method Modifiers Data SourceOperating Comprehensive Ministerial discretion None Spending data




None


Method: Ministerial discretion

Modifiers: None


Used For: The health plan review method of funding covers approximately 68% of theoperating funds of Regional Health Authorities. The services include: acuteinpatient, chronic, rehabilitation and long term care, home care, communitymental health services, emergency response and transport services.


The current approach has been used since the Regional Health Authoritieswere formed in the 1997/98 and 1998/99 fiscal years.

Last Major Revision: The methodology has been revised in terms of the type of information thathas been requested by the Manitoba of Health in the Annual Health Plan.More detailed statistical information has been requested for the purpose ofbetter understanding the funding pressures related to volumes, priceincreases, and acuity level changes.

Previous Approach: Prior to regional health authorities, a global budget approach based on eachfacility’s requirements was used.

Restrictions: The Regional Health Authorities are allowed to move funding betweenservices, but the Regional Health Authorities are to inform Manitoba Healthof transfer of funds in their health plans.




Method Detail: Step 1. Regional Health Authorities submit an annual health plan.

Step 2. A Manitoba Health team of program consultants, finance officersand Regional Health Authority liaison officers review information inconjunction with Regional Health Authority staff. A decision is made withrespect to the funding level that will be recommended for inclusion in theestimates submitted to Treasury Board. This is based on the evidenceprovided by the Regional Health Authorities in support of the request, andfrom the recommendations of the liaison and the finance officers assigned tothe region. The funding levels do not cover depreciation expense onequipment, thus a provision for basic equipment purchases is included in therecommended budget. Note that some specialized equipment requestsmust be reviewed by special committees (e.g., Imaging Committee).

Step 3. Funding requests, approved by the Treasury Board, are forwardedin next year's estimates.

Modifier Detail: Funding may differ from the recommended amount due to changes in thestart-up dates and present funding requirements. Significant increases infunding require approval from Treasury Board.

Primary Capital Funding Approach— DetailsScope: Institutional


Modifiers: None


Used For: Capital funds are used for major capital projects (i.e., projects greater than$3M), conversion projects (converting space), safety and security projects,and equipment purchases.


Capital funds have been used in this manner since the 1970s.

Last Major Revision: April 1998, with the adoption of Regional Health Authorities.

Nature of Revision: Revised to accommodate Regional Health Authorities.





Method Details: Regional Health Authorities include their prioritized capital projectrequirements in the annual Health Plan. The prioritized requests for eachRegional Health Authority are reviewed and assessed by Manitoba Healthwith capital funding provided to the most urgent needs first.

Manitoba Health will fund 80% of eligible costs for approved projects.Regional Health Authorities are required to obtain 20% of costs fromCommunity sources. In Winnipeg, the community contribution for any projectis capped at $6.0 million per project or facility within a ten year period. Inrural Manitoba, the cap is $6.0 million at the community level. Safety andsecurity projects do not require a community contribution. Provincial supportis provided through cash provisions, and support through approvedborrowings.

Eligible costs, approved by the province as part of the capital project, arefunded on a cost shared basis. Costs are specified as shareable and non-shareable. Non-shareable costs are those for which the community areresponsible.

Regional Health Authorities submit a proposal for capital project funding.Manitoba Health approves the project, and provides an announcement ofcash provision and other support.

Criteria used for determining which projects are to be funded are based onreview of Regional Health Authority Health Plan submissions.

Secondary Operating Funding Approach— DetailsScope: NA

Method: NA

Modifiers: NA

Data Source: NA

Used For: NA

Method Detail: NA

Modifier Detail: NA




Information Accessed for Funding CalculationsAnnual Health Plan (including the annual operating plan within it).

MIS data are used to support the requests of the Regional HealthAuthorities. The MIS database information includes the financial andstatistical information of the Regional Health Authorities. The database isused to verify the information in support of the requests by the RegionalHealth Authorities.

Evaluations of Current Funding ApproachesExternal Reviews: The current funding approach is being reviewed externally and internally.

Internal Reviews: NA

Approaches Being ConsideredThree years ago, a considerable amount of work was done with theManitoba Centre for Health Policy and Evaluation to develop a fundingmodel, but the model was not implemented. A new Funding AdvisoryCommittee has been established to review, and if appropriate, develop anew funding methodology.

Management of the Funding ProcessManaged by:Contact (at Dec/2000)

Stephen Willetts, Director, Financial ServicesManitoba Health2145 - 300 Carlton StreetWinnipeg, MB R3B 3M9(204) 786-7138

Regional HealthOrganization/HospitalInvolvement:

Representatives from the Regional Health Authorities are involved in thefunding process. They are members of the committees reviewing newfunding approaches. The Committee of Regional Health Authority ChiefFinancial Officers also have a working group on funding processes.

Announcement: In the first quarter of the year (May 15), Manitoba Health provides eachRegional Health Authority with a budget. This budget may be revisedduring the year as, for example, new projects are started or wagesettlements are approved.


Mani tobaPerformance Monitoring



Annual Health Plan—Regional Health Authorities are required to submit aRegional Health Plan annually. It is due June 1, 2000 for the operational planof fiscal year 2000-01 and for the strategic plan of 2001-2004 (see below fordetails).

Quarterly Forecasts—The Regional Health Authorities submit informationshowing the year-to-date financial position along with the projections to theend of the fiscal year.


Annual ReportAn annual report required by the Regional Health Authorities. It is due onOctober 1st. It contains the following:

• A report respecting the activities of the Regional Health Authority,including but not limited to the health services provided or funded by theRegional Health Authority, and the costs of those activities.

• A report respecting the health status of the population of the healthregion and the effectiveness of the health services provided or funded bythe Regional Health Authority.

• The audited financial statement of the Regional Health Authorityrespecting the fiscal year covered by the annual report, in the formspecified by the minister, and

• Such other information as may be required by the Minister.

Financial Performance Measures and Indicators—are under development(see below).




Prospective Monitoring Practices— Details(a) The Regional Health Plan

Content: The Regional Health Plan conveys direction of the Regional Health Authority.It is intended as a communication, consultation and public accountability tool.The Regional Health Plan consists of:1. Strategic Plan—consisting of an overview of the region; vision, mission, and

values; environmental scan; strategic priorities; and strategic capitalneeds.

2. Operating Plan—consisting of a management component, status reportcomponent, operational component, financial component, capital andequipment component.

In preparing the regional health plan, the Regional Health Authority shallconsult with such persons as municipalities, Indian bands, governmentdepartments and agencies as the Regional Health Authority considersappropriate.

The financial plan is comprehensive and shall include a statement of howresources, including but not limited to financial resources, will be allocated tomeet the objectives and priorities developed by the Regional Health Authorityand provincial objectives and priorities. The financial plan includes a scheduleof price increases (salary and operating cost increases to maintain the currentlevel of full-time equivalents and programming), and of volume increases(required in program expenditures due to increase in demand) which cannot becontrolled without changes to existing program guidelines.

The equipment plan is part of the regional health plan. (See approval processfor this above.)

Process: Upon receipt of specialty equipment requests, as part of the annual plan,Manitoba Health will engage the appropriate review process. This may involvereferral of requests to the corresponding Provincial Program or expertcommittee or the establishment of an ad hoc group with the necessaryprogram, operational and financial representation. The decision to approverequests will reside with the Executive Committee of Manitoba Health.Equipment purchases greater than $100,000 must be approved by ManitobaHealth and if greater than $500,000 by Treasury Board. (Manitoba Health willkeep a province-wide database of major equipment.) (New technology isconsidered under capital planning for new and expanded programs.)

Late Submission: No penalties at this time.


Regional Health Authorities are permitted to keep operating surpluses and touse them at their discretion up to a maximum of 2% of the Regional HealthAuthority’s budget.

If deficits occur, there is no guarantee that Manitoba Health will provide theadditional funding.





Content: See description above.


Late Submission: No penalty at this time.

(b) Quarterly Reporting

Content: Regional Health Authorities are required to provide monthly reportingbeginning with the second quarter of year. The monthly reports must containfinancial information on year-to-date actual spending, budget, and variances.Reasons for variances must be provided. Regional Health Authorities mustalso provide projections to the end of the year and explain variance frombudget.

Approval Process: The review is used to apprise Senior Management of fundingissues/pressures within each Regional Health Authority.

Late Submission: No penalty at this time.

(c) Financial Performance Measures & Indicators

Overview: Manitoba Health has initiated a pilot project for performance measurement.A Performance Measurement Committee has been established. Thecommittee is currently looking at the pros and cons of the performancemeasurement of Regional Health Authorities.


The Manitoba Centre for Health Policy and Evaluation is currently producingsome financial indicators, which are available to the Manitoba Health.Examples are: comparisons of average cost per weighted case and otherutilization and cost structure measures.

Manitoba Health does produce some financial indicators on an ad hoc basisto assist with the review process of the Annual Health Plans and in makingits funding recommendations.

Source of Data: The initial source of data will probably be MIS financial and statisticalinformation and discharge abstract data.

Proposed Monitoring: When performance measures are selected, and a performancemeasurement system is established, Manitoba Health is considering enteringinto contractual agreements with the Regional Health Authorities.





No incentives or penalties exist related to performance.


Currently under development.


NA


No discussion at this time.

Management of the Monitoring ProcessResponsibility: 1. Manitoba Health

2. Regional Health Authorities

Contact Information: Financial Services, Manitoba Health


This is currently under review. A Manager has been hired recently.


Mani tobaRepor t ing P ract ices


Required Reporting ActivitiesTo Public: Annual Report—is due October 1.


Annual Audited Financial Statements—Regional Health Authorities arerequired to submit annual audited financial statements to Manitoba Health.

Electronic Trial Balance—Regional Health Authorities are required toprovide monthly MIS reporting. There are a number of MIS audit checks, themajority being financial. However, more edits are being considered forstatistical information. There are no incentives/penalties for late submission,however, Regional Health Authorities will be notified if MIS data are notprovided on time.

Quarterly Variance Analysis and Cash Flow—Regional Health Authoritiesare required to provide quarterly variance analyses and cash flow projectionsalong with explanations.

To CIHI: Annual Hospital Survey—Regions submit an electronic trial balance of MISdata to the province for the provincial database. Following validation, thesedata are then submitted by the province to the CIHI Annual Hospital Surveydatabase.


Annual Report NoAudited Financial Statement NoMonthly Electronic Trial Balance NoQuarterly Reports No


Yes.


Provincial Auditor's staff conduct substantive audits of Manitoba Health atyear end to ensure the reporting is consistent with the actual fundingrequirements. They also receive the audited financial reports of the RegionalHealth Authorities and the non-devolved facilities.


NA


Mani tobaRepor t ing P ract ices



Regional Health Authorities are required to submit audited MIS data andaudited financial statements that are reconciled with the MIS data.

Fiscal Year End: March 31st


The Deferral Method is used. That is, capital contributions are recorded as aliability, then the revenue is recognized as the depreciation expense isrecorded.


Deficit settlements are covered by the Department of Health subject to ayear-end reconciliation and review process conducted in accordance withapproved policy.

Some Regional Health Authorities have operating surpluses. They areallowed to keep up to 2% of the approved budget and the amount in excessof 2% is recoverable by the province. This applies to earned surpluses only.Surpluses defined as “Windfalls” are fully recoverable by the province.


New BrunswickBackground


New Brunswick QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by New Brunswick Department of Health andWellness.



Primary Capital Funding Approach.......................................139


ContextIn February 2000, the Department of Health and Wellness, in collaborationwith the Region Hospital Corporations, developed an accountabilityframework. One of the key processes supporting accountability, which isshared between the Department of Health and Wellness and RegionHospital Corporations, is a joint planning process established through theRegion Hospital Corporation System Planning Committee. ThisCommittee, composed of all Region Hospital Corporation Chief ExecutiveOfficers and Department of Health and Wellness Senior Management, willfocus on an evidence-based approach to important system-wide issuessuch as clinical program planning, funding, performance measurement,utilization management and information management.

A working group of the System Planning Committee, the System PlanningCommittee Funding Group, was given the mandate in March 2000 toconduct a comprehensive review of the Region Hospital Corporationfunding system and make recommendations for enhancement of budgetprocesses, funding distribution methodologies and the policy framework.This process is underway.


New BrunswickBackground



754,969 (Statistics Canada, July 1, 1999)




Region Hospital Corporations


8 Region Hospital Corporations in 7 Health Regions


Region Hospital Corporations provide a full range of health servicesincluding: inpatient acute, rehabilitation and extended levels of care,ambulatory services, and home health care (through the Extra Muralprogram). Tertiary services are provided in selected Region HospitalCorporations and are also funded through the Hospital Services program.

Separately funded services:- the Medicare program (Public Health and Medical Services Division of

the Department of Health and Wellness) provides funding for physicianservices

- the Mental Health Division of the Department of Health and Wellnessprovides funding for the clinical or direct patient care component ofmental health services, including tertiary psychiatric facilities operatedin two Region Hospital Corporations

- the Department of Veterans Affairs program is funded through thefederal government


$691,958,921 (Source: CIHI)


New BrunswickFund ing Approaches



Primary Funding Approach (Classified)

Scope Method Modifiers Data SourceOperating Comprehensive Line-by-line +

Population-basedNone Spending data




None


Method: Line-by-line Multiplier and Population-based

Modifiers: None


Used For: Services funded through this method are: acute, extended and rehabilitationlevels of care and community-based (home care, rehabilitation and addictionservices). Patient Care Services includes inpatient nursing for acute,rehabilitation and extended levels of care, ambulatory care, most diagnosticand therapeutic services (including laboratory), and some tertiary services(including cardiac. neurosurgery and neonatology).

In 2000/01, the Patient Care Services budget was adjusted for inflation andsalary increases; additional new dollars were then distributed using apopulation-based formula. Line-by-line multiplier was used for the remainderof programs funded.

The remainder of the Region Hospital Corporation program allocationsinclude food services, health centres, psychiatric services, the Extra Muralprogram (home care), addiction services, separately funded tertiary services(oncology and dialysis), rehabilitation services, energy, magnetic resonanceimaging, education programs, etc.

Administration and support funding includes general administration, finance,human resources, housekeeping, plant and materials management.





The current funding methodology was introduced in the 1995-96 budgetyear.

Last Major Revision: The funding methodology is currently under review. Introduction of thepopulation-based formula in 1999/00 for distribution of new funding forPatient Care Services represented a significant change in approach.However, the 1995/96 methodology remains in place pendingrecommendations for a phased implementation of population-based patientcare funding.

Previous Approach: The province used a number of funding methods during the 1990's. TheHospital Master Plan was developed to specify the scope of services to bedelivered at each hospital. Prior to 1992, base budget reviews wereconducted, with increases in funding based on volumes as measured by anumber of activity indicators.

During the 1991-92 operating year, base budget reviews were discontinuedas directed by Government and during the 1992-93 operating year, theRegion Hospital Corporations were created. Approved beds and relatedexpenditures were reduced.

Formula based funding was implemented in the 1990’s for a variety ofhospital services, such as food services and laboratory. Patient CareServices base funding was established in 1995/96 using service population,derived from acute care discharge data accounting for age, gender and inter-regional flows.

In 1995/96 base funding was also established for tertiary services usingavailable cost and activity data. Since 1996/97, Current Service Levelfunding (line-by-line multiplier) has been applied.

Restrictions: The Patient Care Services global envelope and some separately fundedservices are designated as Transferable. Other funding flows (29programs/services) are designated as Non-Transferable (protected). RegionHospital Corporations are permitted to move transferable funds betweenservices at their discretion.

Method Details: The initial Budget Assessment for each Region Hospital Corporation isbased on the prior year’s funding level, adjusted for recurring expendituresapproved in-year, for new approved programs or services, for inflation onsupplies as appropriate, and for provincially negotiated wage settlements,less non-recurring expenditures.

In 2000/01, these adjustments were applied to:• Patient Care Services (approximately 50% of total Region Hospital

Corporation funding)• Patient Food Services• Health Centres• Psychiatric Services (non-clinical support functions only)• Dialysis and Radiation Oncology• Energy




• Non-Transferable programs (e.g., clinical education, Extra Muralprogram, rehabilitation services)

Additional new funding for Patient Care Services (approximately $26 million)was distributed according to the population based patient care fundingdistribution formula, with approximately $3 million of this amount distributedas an under-funding adjustment to three Region Hospital Corporations.

The population based patient care funding distribution methodology isdescribed in detail in a following section (Approaches Being Considered,page 142).

Additional enhancements (approximately $2 million) were applied toseparately funded tertiary programs for oncology and dialysis, based onthree-year growth in volumes.

Funding for Administration and Support (e.g., general administration,housekeeping, plant and materials management) is allocated as apercentage of direct patient care components.

Centrally managed items (WCB, retirement allowance, lithotripsy, magneticresonance imaging, breast cancer screening etc) are based on actual costand flowed to Region Hospital Corporations in-year.




Modifiers: None


Used For: Three votes of capital funds—major capital construction (greater than $1million); capital improvement (less than $ 1 million); capital equipment(greater than $100,000).


April 1, 1968

Last Major Revision: April 1, 1972

Nature of Revision: Transfer of administration of the capital votes from the Department of PublicWorks to the Department of Health




Previous Approach: The Department of Public Works, the agency historically responsible for theconstruction of schools, roads, public buildings and hospitals, administeredthe allocation. However, there was little input from the health care industry.The transfer of responsibility for project administration to the Department ofSupply and Services was accompanied by process improvements designedto increase the participation of the Department of Health and Wellness.

Method Details: Capital funding is based on the overall capital budget for the province.Approval processes depend on the size/scope of the project.

Major Capital Projects—The request may originate with either the RegionHospital Corporation or the Department of Health and Wellness. Theapproval process is the responsibility of the Board of Management (Cabinet),with advice and input from the Department of Health and Wellness.Approval is granted by a two step process. (1) Capital initiation request - isapproved in principle. (2) Capital appropriation request - is formally approvedfor capital funding. Major Capital Projects are generally cash-flowed over 1year. Project cost includes first-time acquisition of capital equipment.

Capital Improvement Projects—These are for major upgrade/replacementto a building component/system that will prolong the useful life of the facility,increase the replacement value of the facility, increase the capacity and /orquality of service provided by the facility. There is no minimum costestimate. Maximum cost is less than 1 million dollars. These cannot becash-flowed over 2 fiscal years. The requests originates from the RegionHospital Corporation and are then prioritized by the Department of Healthand Wellness. For all but the smallest projects, the Department of Healthand Wellness forwards the approved projects to the Department of Supplyand Services that manages the tendering process.

Capital Equipment Replacement—These projects are to replace existingobsolete medical equipment and require individual approval by thedepartment. The Region Hospital Corporations forward a list of priorities tothe Department of Health and Wellness. The Department integrates allrequests and prioritizes them for funding. Funding is in the form of anequipment grant.

Total installed cost exceeds $100,000. Equipment has an estimated usefullife of five years or more. Region Hospital Corporations are reimbursed at90% of the total installed cost for each piece of equipment approved and arerequired to self-fund the remaining 10%.





Method: NA

Modifiers: NA

Data Source: NA

Used For: NA

Method Detail: NA

Modifier Detail: NA

Information Accessed for Funding CalculationsPatient level databasesDischarge Abstract Database

Other databasesStatistics Canada population data

Trial BalanceHospital Financial and Utilization Management Database (HFUMS)—MISdata

Patient CostingNA

Evaluations of Current Funding ApproachesExternal Review: NA

Internal Review: The current funding system is under review by the Region HospitalCorporation System Planning Committee Funding Group. This grouprepresents interdisciplinary collaboration between Region HospitalCorporations and the Department of Health and Wellness.




Approaches Being ConsideredThe System Planning Committee Funding Group is currently developing animplementation plan for the population-based funding distributionmethodology developed in 1998. The methodology was used to distributenew dollars allocated to the Patient Care Services global envelope in1999/00 and 2000/01.

The population based funding methodology calculates an equitable regionaldistribution of available funds through:- Allocation of volumes (RIW) to regional populations and adjustment for

age, sex, relative need (mortality, fertility, income)- Allocation of each regional population's volumes to each Region Hospital

Corporation based on historical market share- Adjustment of corporation volumes to correct for deficiencies in maternity

RIW and the diseconomies of operating small facilities- Allocation of ambulatory volumes (assuming 27% of total patient care

services budget) based on RIW distribution without inter-regional flows

Further refinement of the methodology for allocation of ambulatory flows,using the physician billing database, is currently underway.

The recommendations of the Funding Group will include the process andtime-line for moving toward full implementation of the methodology for theentire Patient Care Services envelope. The Group will also makerecommendations as to the composition of the envelope (i.e., whether someof the currently Non-Transferable funding flows will be included forpopulation-based distribution).


Art Cormier, Senior Financial Officer, Hospital Services Branch,Department of Health and Wellness 506-453-5981

Nancy White, Department of Health and Wellness Lead for the SystemPlanning Committee Funding Group (planning and policy development)506-453-3314

Regional HealthOrganization/Hospital Involvement:

Region Hospital Corporations are all represented on the System PlanningCommittee Funding Group. This group is mandated to provide advice togovernment on the Region Hospital Corporation Funding System,including all processes, policies and distribution methodologies.

Announcement: In the past, the main estimates for the Department of Health & Wellnesswould be delivered by mid-January and the Hospital Corporations wouldreceive their funding targets by the end of January. With the change ingovernment in 1999, this process was delayed considerably for the 2000-01 operating year. It is anticipated that the detailed budget assessment willbe issued, for the 2001-02 fiscal year, by the end of February.


New BrunswickPer fo rmance Mon i to r ing



Operating PlanThere is currently no process for Region Hospital Corporation submission ofoperating plans. However, Region Hospital Corporations are required tosubmit annual budget forecasts by mid-January for the upcoming fiscal year,as well as monthly data to support detailed monitoring of budget versesactual revenues and expenditures and cash flow forecasts (see below).


Operational Monitoring ProcessMonthly and quarterly submissions are reviewed by a Department of Healthand Wellness monitoring team.

Annual Report of Hospital ServicesThe annual report was redesigned for the year ending March 31, 1999 andincludes revenue, expense, statistical and clinical data by Region HospitalCorporation.

The Region Hospital Corporation Balanced ScorecardThe Department of Health and Wellness and the Region HospitalCorporations have collaborated in a process for development of performancemeasures for the New Brunswick Region Hospital Corporation system.

Prospective Monitoring Practices— Details(a) Operating Plan

Content: A detailed operating plan is not mandatory. However, revenue andexpenditure forecasts and utilisation information are required by mid-January for the upcoming fiscal year. Monthly data submissions with cashflow forecasts are required for the ongoing operational monitoring process(see below).

Approval Process: Reviewed by Senior Financial Officer, Hospital Services Branch

Late Submission: No late submission penalty at this time.


Government has issued a directive that Region Hospital Corporations willoperate within approved budgets. However, transitional funding will beprovided for projected 2000-01 working capital shortfalls pending decisionson system structure and scope.




Retrospective Monitoring Practices— Details(a) Operational Monitoring Process

Content: A framework for detailed monitoring of financial performance and cash flowis currently under development. Monthly submissions of financial, statisticaland human resource information are required and include:- a summarized balance sheet reflecting the major items, including

appropriate notes to clarify issues, obligations, anomalies that havetaken place or will take place during the operating year, and non-cashitems such as vacation accruals and deferred contribution for capitalassets

- a cash flow statement for the current period and projections to the end ofthe operating year reflecting in-year adjustments

- year-to-date actual to budget operating expenses comparisons andcorresponding paid hours (expensed)

- aging of accounts receivable and payable

The requested information for operating expenses is required at a Level 3MIS or departmental reporting.

Approval Process: Department of Health and Wellness, Office of the Comptroller andDepartment of Finance

(b) Annual Report

Content: The Annual Report of Hospital Services was redesigned for the year endingMarch 1999 and reflects significant data quality improvements achievedthrough the MIS Quality project launched in that year. The report containsdetailed expenses and revenues, compensation expenses and statistics, andpatient activity. Changes from previous years include:- data on all activity, including activity funded outside of the Hospital

Services program, are reported- the report represents a region-level, rather than facility-level focus- trend data are reported (2 years in 1999; 3 years planned for 2000)- patient statistics from the Discharge Abstract Database are included

Approval Process: Department of Health and Wellness approval following review and sign-off byRegion Hospital Corporations.

(c) The Region Hospital Corporation Balanced Scorecard

Overview: In response to provincial and national initiatives to improve accountability,the Minister mandated the Provincial Utilization Management CoordinatingCommittee to develop a balanced set of indicators to support the quality andsustainability of the Region Hospital Corporation system. Phase 1 of theRegion Hospital Corporation Balanced Scorecard was completed inNovember 1999, with development of clinical and financial indicators. Phase2, development of measures of patient satisfaction, system integration andorganizational learning, is underway with completion targeted for 2001.





Financial/Management Indicators for Immediate Application• Surplus/Deficit (net of depreciation) as a Percent of Total Expenses• Administrative and Support Net Expenses as a Percent of Total

Expenses• Breakdown of Administrative and Support Expenses by Type of Function

(Management, Hotel, and Clinical Support) as a Percent of TotalExpenses

• Sick Leave Hours as a Percent of Total Paid Hours• Acute Inpatient Unit Total Paid Hours per Weighted Case• Laboratory and Diagnostic Imaging Productivity: Workload Units as a

Percent of Total Paid Minutes• Average Age of Equipment• Equipment Expenses as a Percent of Total Hospital Expenses• Information Systems and Communications Department Expenses as a

Percent of Total Hospital Expenses• Quick Ratio

Indicators for Future Application• Cost per Weighted Case• Unit Producing Personnel (UPP) Hours and/or Management Operations

and Support (MOS) Hours as a Percentage of Total Hours• Cost per Workload Unit by Functional Centre• Workload Units per UPP Worked Hour

Source of Data: MIS financial and statistical data

Incentives/Disincentives

Currently, there are no incentives/penalties for performance measured byscorecard indicators.


None


A data quality audit was conducted prior to calculation of the indicators. Aninterdisciplinary Region Hospital Corporation/Department of Health andWellness working group reviewed all measures and eliminated those wheredata quality was considered to be inadequate for fair measurement.


The Technical Report with detailed Region Hospital Corporation-level clinicaland financial indicators was distributed to all Region Hospital Corporations inOctober 1999. The Premier’s Health Quality Council was established in1999 and given the mandate to develop a provincial health report card. Thescope and timing of public release of Balanced Scorecard information will beconsistent with their recommendations, expected in 2001.




Management of the Monitoring ProcessResponsibility: A monitoring team was established in October 2000 with representation from

Department of Health and Wellness, the Office of the Comptroller and theDepartment of Finance

Contact Information: Art Cormier, Senior Financial OfficerNew Brunswick Department of Health and WellnessHospital Services Branch520 King Street, P.O. Box 5100Fredericton, NB E3B 5G8Telephone (506)453-2283


The Region Hospital Corporation Monitoring Team is composed of 2members from the Department of Finance, 1 member of the Office of theComptroller, and 5 members from Department of Health and Wellness:• Hospital Services senior financial, administrative and clinical liaison

officers• The Executive Director (acting) of Hospital Services Branch• The Director of Financial Services Branch

Monthly Region Hospital Corporation submissions are reviewed, withconsultation and clarification with Region Hospital Corporations as required.Based on the analysis and recommendations of the monitoring team,adjustments to Region Hospital Corporations bi-weekly payments may bemade. Summary reports are submitted to the Assistant Deputy Minister,Institutional Services Division (Department of Health and Wellness).


New BrunswickRepor t ing P ract ices


Required Reporting ActivitiesTo Public: Region Hospital Corporation Annual Report—Each Region Hospital

Corporation publishes an Annual Report. The Auditor General requires thatthese be produced in accordance with the Province of New BrunswickAnnual Report policy established in 1991.


Submissions for Operational Monitoring Process—Region HospitalCorporations are required to submit financial, statistical and human resourceinformation to the Region Hospital Corporation Monitoring Team on amonthly basis.

Annual Audited Financial Statements—Region Hospital Corporations arerequired to submit annual audited financial statements to the Department ofHealth and Wellness along with an electronic trial balance.

Quarterly Reporting—Region Hospital Corporations are moving towardquarterly submissions of MIS data, with full compliance expected in thecurrent fiscal year.

Electronic Trial Balance—prepared in accordance with the MIS Guidelinesadapted for the province of New Brunswick. Submitted monthly along withselected operational monitoring data. Also submitted electronically as part ofthe full MIS submissions required on a quarterly basis. MIS submissions aresubjected to edit checks for account validity and minimum reporting level. Acomprehensive data quality audit is conducted at year end.

To CIHI: Annual Hospital Survey – Region Hospital Corporations submit anelectronic trial balance of MIS data to the province for the provincialdatabase. Following validation, these data are submitted by the province tothe CIHI Annual Hospital Survey database.

Discharge Abstract Database – Region Hospital Corporations submitabstract file (monthly) to CIHI. Following year-end “closure” of the DischargeAbstract Database, CIHI submits the complete file to Department of Healthand Wellness including value-added components (e.g., MCC, Plx, RIW)where the data are stored in Hospital Financial and Utilization ManagementSystem for provincial analysis and reporting.


Annual Report NoAudited Financial Statement NoInterim Trial Balance Reports NoQuarterly Reports NoAnnual Hospital Survey No





The Department of Health and Wellness and the New Brunswick Office ofthe Comptroller are collaborating with the Region Hospital Corporations inthe MIS Quality Project, which is a project designed to ensure reliable,comparable, consistent MIS reporting across the province for performancemeasurement and benchmarking analysis.

Enhancements include:• complete reporting and matching of revenues and expenses by

functional centre• consistent methodology for depreciation and reporting by functional

centre• comprehensive reporting of costs• moving toward full reporting of workload in all patient care areas• compensation data submitted consistently by broad occupational groups• tracking activity by level of care• reporting day surgery and ambulatory care using consistent definitions


The Department of Health and Wellness provincial database (HospitalFinancial and Utilization Management System) is maintained and providesthe information for the Annual Report of Hospital Services and for the RegionHospital Corporation Balanced Scorecard.


There is a year-end settlement process to reconcile audited financialstatements with the trial balance submission.



The treatment is dependent on the funding source. If the Province is fundingthe acquisition of the new fixed asset, the following process is followed:• the asset is recorded in the fixed assets on the balance sheet• a corresponding deferred revenue is reported on the liability side of the

balance sheet which correspond to the amount of provincial fundingreceived

• the deferred revenue will be reported as a revenue on the incomestatement which will effectively reduce the depreciation expense of theabove assets

• only the net non-government funding component of the acquisition will beapplied against operations

If funding of the acquisition is through the Region Hospital Corporation orother third party, the assets are recorded in the fixed assets and their entiredepreciation expense is reported against operations with no offsettingrevenue.





The surplus/deficit policies depend on the funding flow. Government retainsNon-Transferable program surpluses. Region Hospital Corporations mayretain a portion of a surplus generated in Transferable programs funded byHospital Services. The government has recently assumed responsibility forworking capital shortfalls and has limited the borrowing capacity of RegionHospital Corporations.


Newfoundland and LabradorBackground


Newfoundland and Labrador QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Department of Health and CommunityServices, Government of Newfoundland and Labrador.





ContextHealth services were regionalized in Newfoundland in 1995-96. The socialprograms were transferred from the Department of Human Resources andEmployment to Department of Health and Community Services. Hence, inthe province of Newfoundland and Labrador the definition of health isbroader than the national perspective in that social programs, such asfoster care for children and home support for seniors, are included underthe Department of Health and Community Services.





Entity Funded (Unit ofAnalysis)

Regional Health Boards


13 Regional Health Boards; 1 Provincial Cancer Control Agency (NCTRF)


Newfoundland and LabradorBackground


Responsibilities ofentities:

The 13 Regional Boards include 7 institutional, 4 community and 2integrated Boards. Hospital and nursing home services are provided by 7institutional Boards. Community services in the areas of health promotion,disease prevention, health protection, mental health, continuing care,addictions, youth corrections, child welfare and family and rehabilitativeservices are delivered by 4 community Boards. The 2 integrated Boards,which operate in Northern Newfoundland and Labrador, provideinstitutional and community services. The Provincial Cancer ControlAgency offers a comprehensive provincial cancer control program for allNewfoundland residents.

Province wide services are funded as part of the global budget for therespective board.

Services Excluded: Physician services, drugs for outpatients.


$576,275,191 (Source: CIHI)


Newfoundland and LabradorFunding Approaches




Scope Method Modifiers Data SourceOperating Comprehensive Ministerial discretion1 None Spending data

Capital Institutional Project-based2 None Spending data

1. Used for all operating expenses of the regional health boards.2. Used for major capital projects and for replacement of equipment/ and information technology.



None


Method Used: Ministerial discretion

Modifiers Used: None


Used For: The budget provided to the Regional Health Boards includes funding for alloperating expenses of the boards. Services funded include all those forwhich the regional boards are responsible. These operating funds do notinclude depreciation expense for equipment, as equipment replacement isfunded separately (see secondary operating method below). The accrualportion of severance pay and vacation pay is not funded.


This funding approach has been used since 1984, after the report of theRoyal Commission on Hospital and Nursing Home Costs.

Last Major Revision: No major revisions have been made to the approach in the past severalyears.





Restrictions: Boards are permitted to move funds between services, including to and frominpatient services. However, boards are not permitted to use savings tocreate new programs, without prior approval from the Department of Healthand Community Services.

Method Detail: Step 1. Regional Health Boards submit a budget to the Department ofHealth and Community Services in October for the following fiscal year. Thebudget is a detailed document and includes narrative information justifyingthe requested funds.

Step 2. A review of the Regional Health Boards' budgets is conducted bythe Financial Services Division and the Board Services Division (i.e., regionalhealth consultants). The budgets are reviewed according to Treasury Boardguidelines including: (1) allowable increases for salaries; (2) proper costingof FTEs; and (3) anticipated increases in programs and services. RegionalHealth Boards are consulted during this review.

Step 3. The review process results in a recommendation to the DeputyMinister of Health and Community Services and Senior Executive.

Step 4. The Deputy Minister and Senior Executive reach an agreement onrequired funding levels, which is then forwarded to the Treasury Board.

Step 5. The provincial funding level is determined by the Treasury Board (abranch of the Executive Council of Government). Here the senior team ofthe Treasury Board consider the required funding levels within the Province'sfiscal framework and make a final recommendation for Cabinet approval.

Step 6. Following Cabinet's approval, the Department of Health andCommunity Services determines the annual budget allocations for the 13regional Boards and the provincial cancer control agency. The approvedbudget is distributed to the boards in 12 equal payments. Adjustments suchas salary increases, or increases in program volumes, for example, arefunded on the basis of implementation date.

Modifier Details: Mid-Year Adjustment—A budget adjustment may be considered at any timethrough the fiscal year. The Department of Health and Community Serviceswill consider available funds and evaluate requests from the Regional HealthBoards for funding adjustments based on the merits and details of therequests. Any approved budget adjustment would be funded toward the endof the fiscal year and subject to the availability of funding per Treasury Boardguidelines.






Modifiers: None


Used For: Capital funding is divided into two categories: (1) major capital projects—newbuildings or major re-developments of existing facilities, (2) repairs andrenovations, (3) capital equipment. Capital equipment funding is divided intotwo sub-categories: (a) patient and resident care equipment; and (b)information technology. The major capital projects are funded through theDepartment of Works Services and Transportation. The funding allocationfor repairs and renovations, as well as capital equipment falls within theDepartment of Health and Community Services' mandate.

The methods for funding these are similar, but each is described below.


This approach was first used for independent Boards at least 10 years ago.(Note that regional health authorities have been in place since 1995.)

Last Major Revision: Prior to 2000-01, the regional Boards submitted annual plans for repairs/renovations and equipment. Since then, 3-year capital improvement andequipment plans are developed by the regional Boards. However, fundinglevels continued to be approved annually, consistent with Government’sfunding practices.

Nature of Revision: Previously, the planning horizon in the budget submission for capitalequipment was annual, but starting in 1999 for fiscal year 2000-01 this waschanged to a 3-year budget. However, the approved funding is only for thecurrent year's request.


Method Details: Annual Budget Submission for Major Capital Projects

Step 1. Each year, by September 30, the Regional Health Boards submittheir requests for major capital projects, either new construction orredevelopment of existing facilities.

Step 2. Prior to this submission, significant consultations have occurredbetween the regional Boards and the Department regarding the project,scope, order-of-magnitude capital costs, and urgency of project. In someinstances, master programming and master planning initiatives may beunderway.




Step 3. The Department of Health and Community Services prioritizes themajor capital projects on a provincial basis and in consultation with theDepartment of Works, Services and Transportation, identifies preliminarycost estimates and 3-4 year cash flow projections.

Step 4. The Department of Health and Community Services submits theprovincial summary of capital projects to the Department of Works, Servicesand Transportation by October 31 for inclusion in the latter Department'sbudget submission for health facilities, schools and other public buildings toTreasury Board by mid-December.

Step 5. In consultation with both Departments, the Treasury Board makesrecommendations to Cabinet regarding the funding priorities for major capitalprojects and the annual cash flow projections.

Step 6. When Government brings down its Provincial Budget, usually inMarch, the capital funding for major health projects is announced publicly.• For committed health projects, budget requests are not required from

regional Boards in subsequent fiscal years. The Department of Works,Services and Transportation updates the project capital costs and cashflow projections based on cost escalations in the construction industryand any revisions in project schedules.

• For savings financed projects identified by the regional Boards, theMinister of Health and Community Services recommends the project andseeks Government approval regarding the proposed financingarrangements. These projects are those where regional Boards haveidentified operating savings to offset the capital costs over a 15-20 yearpayback period.

Annual Budget Submission for Capital Equipment Replacement

Step 1. Each year, by mid-November, the regional Health Boards andNCTRF submit a 3-year priority capital plan for repairs, renovations andequipment.

Step 2. The Department of Health and Community Services reviews thesesubmissions and prepares a provincial budget summary document forconsideration by Treasury Board. With respect to repairs and renovations,the budget requests are organized into 5 categories: (1) fire and life safety,(2) patient health and safety, (3) general health and safety, (4) buildingintegrity, and (5) operational improvements. The capital equipmentrequirements are organized into 3 broad groupings: (1) critical, eg., X-ray,ICU, Emergency, (2) patient/ resident care, eg., physiotherapy, occupationaltherapy, and (3) support, eg., food service, laundry. Step 3. Similar to the operating funds, Treasury Board determines annualfunding levels for Cabinet approval. Step 4. Based on Cabinet’s decisions, the Department of Health andCommunity Services determines the annual budget allocations in May-Junefor the regional Health Boards and Provincial Cancer Agency.




Step 5. The approved budgets may include a basic allocation which theregional Boards may use at their discretion, and allocations that areearmarked for specific repairs, renovations, and equipment being fullyfunded or cost shared by the Department of Health and CommunityServices. Step 6. The Department reserves a small contingency fund to addressrequests of an emergent nature throughout the fiscal year. Step 7. The regional Boards are required to submit a quarterly expenditurereport on repairs, renovations and equipment purchases.

Annual Budget Submission for Information Technology

The annual budget submission for information technology is similar to that forcapital equipment, but this is a one-year plan only.



Method: NA

Modifiers: NA

Data Source: NA

Used For: NA

Method Details: NA





Information Accessed for Funding CalculationsBudget submission by the Regional Health Boards—the submission fromRegional Health Boards would include information from the MIS trial balanceand prior year actuals from financial statements, as well as any fundingrequirements, such as salary increases, known increases, or anticipatedincreases in the budget year. Also, a narrative would provide explanationsfor each of these categories and a detailed description of any new initiativesthat boards may wish to present to the Department.

Monthly Monitoring Reports—these reports, submitted by the RegionalHealth Boards, are in electronic, trial balance format. This submission wouldinclude detailed monthly actual revenues and expenditures, by bothfunctional centre and secondary accounts. These reports assist theDepartment in calculating surplus/deficit positions.

Evaluations of Current Funding ApproachesExternal Reviews: The Newfoundland and Labrador Health Boards Association is in the

process of reviewing alternate funding approaches and of particular interestis a population-based approach.

Internal Reviews: The province is not actively reviewing the current funding approaches;however, it is currently engaged in several strategic planning initiatives(Provincial Health Strategic Plan; Health Human Resources Plan). Theoutcome of both reviews may result in a reassessment of fundingapproaches.

Approaches Being ConsideredThe Department of Health and Community Services is interested in alternatefunding approaches for operating funding of Regional Health Boards. (Seesub-section above "External Reviews" under section "Evaluations of CurrentFunding Approaches".)





Jim Strong, Director, Financial Services DivisionGovernment of Newfoundland and LabradorDepartment of Health and Community ServicesP.O. Box 8700St. John's, NewfoundlandCanada, A1B 4J6

RHA/HospitalInvolvement:

The Department of Health and Community Services is in consultation withthe Regional Health Boards before the recommendation is put forth to theTreasury Board.

Announcement: The budget decision is announced by the Department of Health andCommunity Services between March 15 and April 1.


Newfoundland and LabradorPerformance Monitoring



Annual Budget—The budget request for operating funds is due October16, 2000. Budget submissions are reviewed by the Department of Healthand Community Services, and preliminary decisions are made by mid to lateFebruary. This was the first year of the new process and format.

Monthly Projections—Although monthly projections are submitted, thedepartment pays most attention to the 2nd and 3rd quarter submission. Theseinclude projections of expenses to year end. The final submission of theyear should reconcile to the audited financial statements.

Major Capital Projects Plan—requests for new construction/majorredevelopments and cost estimates are due to the Department of Works,Services and Transportation by late October for Treasury Board submissionin December.

3-Year Capital Equipment and Renovations Plan—updates to the plan aredue from regional Boards by November 1, 2000. Submission of Departmentof Health and Community Services Capital Account Budget is due to theTreasury Board December 15, 2000.


Annual Report—an annual report is due July 31, 2000. Details of itscontents are described below.

Financial Performance Measures and Indicators—The Department ofHealth and Community Services has initiated discussion on developing aperformance measurement process.

Expenditure reports on repairs, renovations and equipment are due fromthe regional Boards on a quarterly basis.




Prospective Monitoring Practices – Details(a) Annual Budget

Content: Annual Budget—A Special Review Team has been working with 9institutional boards to gather financial and statistical information. This datawas invaluable in aiding the government to understand expenditure growth.The Department of Health and Community Services is attempting to maintainand update this information on an annual basis. Thus, templates have beencreated to aid in this.

The financial template provides a listing of primary and secondary financialand statistical accounts to be included in the operating budget submission.Other information required:1. Budget Explanatory Notes—explain services included in the budget

category and justification for the budget calculations.2. Statistical Templates—required updates on projections for 2000-01 as

well as 2001-02 plans.3. 2001-02 Negotiated Salary Increases and Pay Equity Adjustments4. 2001-02 Other Known Increases/Decreases5. 2001-02 Anticipated Increases/Decreases6. 2001-02 New Initiatives

Process: Boards submit the Annual (operating) Budget by October 16, 2000. TheDepartment of Health and Community Services reviews the operatingbudgets and submits justified expenditure increases to the Treasury BoardSecretariate by December 15, 2000. Treasury Board provides preliminarydecision to the Department of Health and Community Services by earlyFebruary.

Late Submission: No late submission penalty.


The Department will be using the findings of the Special Review Team,Regional Health Board 2001 budget requests and 3-Year Action Plans toestablish future budget funding levels.




(b) Monthly Forecasts

Content: Monthly Forecasts include consistent financial and statistical information,and projected operating surplus/deficit revisions to the end of the fiscal year,and narrative explanations of the operating results for the period underreview.

Process: Monthly reports are to be submitted monthly within 30 days of each monthend for the purpose of budget monitoring. Department of Health andCommunity Services staff briefly discuss the report with the Board uponreceipt, then perform a desk review of the report. Department staff will thenfollow up with the Board in approximately 2 weeks to identify questions orissues of concern and any necessary action required by either party.


Planned OperatingSurplus/Deficit:

Mid-year, requests may be considered by the Department of Health andCommunity Services subject to available funding sources by the Departmentand Treasury Board. Primarily, these requests would be considered andreviewed in light of any countervailing savings or potential efficiencymeasures elsewhere within the Health Care Board.

(c) 3-Year Capital Plan for Repairs, Renovations and Equipment

Content: The regional Boards prepare 3-year plans for repairs, renovations andequipment. The repair and renovations plan includes the facility, adescription of the project, the potential or existing risk to patients, visitors andstaff, a cost estimate and the Board’s contribution towards the project. Thecapital equipment plan identifies the facility, the type of equipment, whether itis new or replacement, and any proposed cost sharing arrangements.

Process: The 3-year plans are submitted to the Department of Health and CommunityServices. The plans are reviewed to prioritize needs and ensure requests fallwithin the Boards’ service mandates. Provincial budget summary documentsare prepared and submitted to Government for approval in March. RegionalBoards are notified of their annual budget allocations in May-June. Fundingrequests for emergency repairs and renovations, and replacement ofequipment due to major failure are considered by the Department on anindividual basis, within the Department’s annual fiscal capacity.




Retrospective Monitoring Practices – Details(a) Annual Report

Content: The Annual Report must include:1. A brief overview of the organization's activities, two copies of audited

financial statements and supplementary schedules for all funds of theBoard. Financial statements are required by September 30. Draftstatements are required by June 30.

2. Electronic submission of financial and statistical data for period 13(excluding Health and Community Services Boards). Financial datashould agree with the audited financial statements and should includeminimum level operating revenues and expenditures (sharable and non-sharable) and balance sheet data. Statistical data should includestatistics required for the Annual Hospital Survey.

3. Financial settlement forms (as reflected in the audited financialstatements).

4. Management letters issued by the external auditor of the Health Board,or letter from the auditor that no letter was issued.

5. Responses to the management letter in the point above.6. A summary organization chart depicting the principal reporting

relationships within the organization during the year.7. The mission statement of the organization together with applicable goals,

objectives, and strategies for the year under review.8. The current Strategic Plan for the Board.9. Capital Assets Purchased report.Any other information the Board may feel appropriate.

Approval Process: Regional Health Boards are required to submit an annual report to theDepartment of Health and Community Services by July 31.

Late Submissions: No late submission penalties at present.


Overview: The Department is looking at developing current standards for evaluatingoperating activities. Some standards exist but it was recognized by theSpecial Review Team that many of these standards are now out-dated. TheDepartment has also realized that measures of utilization, workload, qualityof care need to be looked at as well as financial measures of performance.

Work on performance measures is in the initial discussion stages.


No specific financial measures have yet been identified; however, this issuewill be addressed as part of a Government initiative regarding theAccountability of Publicly Funded Bodies.




Source of Data: NA

Proposed Monitoring: NA


NA


NA


NA


NA

(c) 3-Year Capital Plan for Repairs, Renovations and Equipment

Content: NA

Process: Regional Health Boards must submit quarterly expenditure reports forreconciliation with approved funding allocations by the Department and toensure consistency with the regional Board's mandate.

Management of the Monitoring ProcessResponsibility: 1. Newfoundland and Labrador, Department of Health and Community

Services2. Regional Health Boards

Contact Information: Financial Services Division, Department of Health and Community Services.


Within the Financial Services Division, the Financial Information Servicessection is responsible for the reporting requirements for monitoring purposes.There are three staff in this section. The purpose of their roles is to ensurethat the budget monitoring reports are complete and submitted on a timelybasis. Reports are submitted by the Boards in one of three formats: (1)electronically to a central database, (2) emailed in a spreadsheet, or (3) viahard copy.

The monitoring process is performed by the Board Financial Servicessection. There are 2 staff in this section. They review the budgetmonitoring reports in consultation with the board and others within theDepartment of Health and Community Services.


Newfoundland and LabradorReporting Practices


Required Reporting ActivitiesTo Public: Annual Report—see below


Annual Report—Regional Health Boards are required to submit an annualreport to the Department of Health and Community Services by July 31.

Electronic Submission—includes annual budget and salary details,detailed monthly/quarterly actuals (trial balance) annual balance sheet,annual statistical MIS data. The electronic submission of the financial andstatistical data must be in accordance with the minimum reportingrequirements of the provincial chart of accounts. Some boards utilize theelectronic submission process for budget monitoring purposes, whereby thedepartment will generate the necessary reports from their submissions.

To CIHI: Annual Hospital Survey—Regional Health Boards submit an electronic trialbalance of MIS data to the province for the provincial database. Followingvalidation, these data are submitted by the province to the CIHI AnnualHospital Survey database.


Annual Report NoAudited Financial Statement NoInterim Trial Balance Reports NoMonthly/Quarterly Reports NoAnnual Hospital Survey No


Yes. Newfoundland began implementation of the MIS Guidelines for thefiscal year 1995-96. The financial chart of accounts is implemented. Thesecondary statistical chart of accounts is being implemented in variousstages within the Regional Health Boards.

Modifications have been made to the National MIS Guidelines to produce theProvincial Chart of Accounts.


In May 2000, the Health Care Boards Monitoring Review Committee wasformed. Its purpose was to review the budget monitoring relationshipsbetween the Boards and the Department of Health and Community Servicesand to determine the reporting requirements to be implemented for the fiscalyear 2000-01. The intent of the recommendations the committee made wasto improve accountability of the Boards and Department by providing usefuland timely information to stakeholders.


Newfoundland and LabradorRepor t ing P ract ices



Health Care Boards are required to submit a year-end electronic trial balancethat agrees with the audited financial statements.



Funding for multi-year projects is recorded using the deferred method wherefunds received are shown as a deferred capital grant and the revenue isrecognized as the depreciation expense is recorded.

Treatment of Deficit/Surplus:

Boards that had an operating fund deficit for 1999/2000 fiscal year wererequired to leave the deficit reported in the operating fund and not transferthe deficit to the Board Fund.

The Audit Division of the Department of Health and Community Services willconduct post-year reviews of boards with operating deficits.


Nova Scot iaBackground


Nova Scotia QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Nova Scotia Health.





ContextFor 2001-02 fiscal year, the province will undergo a re-organization andmove from having 4 Regional Health Boards and 4 Non-DesignatedOrganizations to 9 District Health Authorities. One aim of this change wasto make smaller boards that could better meet the needs of thecommunity. This survey reflects the funding approaches, performancemonitoring and reporting practices for the 4 Regional Health Boards and 4Non-Designated Organizations up to the end of fiscal year 2000-01.






Regional Health Board/Non-Designated Organizations


4 Regional Health Boards and 4 Non Designated Organizations areresponsible for the operation and administration of hospitals in theprovince, with 35 hospitals and approximately 3099 acute care beds.


Nova Scot iaBackground



The Regional Health Boards and the Non-Designated HealthOrganizations are responsible for acute care, mental health, public healthand addiction services. Home Care and Long Term Care are currentlyunder the direct responsibility of the Department of Health. Plans areunderway to devolve responsibility to the regional authorities in the nearfuture.

Regional Health Boards plan, manage, deliver, monitor and evaluatehealth services within their region. Whereas Non-DesignatedOrganizations are hospitals that have programs and services that extendwithin and across the regions, the province, and in some cases, theAtlantic provinces.

Province-wide services are funded through the Regional Health Boardsand Non-Designated Health Organizations and include Breast Screening,and Renal Dialysis. Items funded directly from the Department of Healthinclude Cancer Care Nova Scotia and high cost drugs.


$909,221,557 (Source: CIHI)


Nova Scot iaFunding Approaches




Scope Method Modifiers Data SourceOperating Comprehensive Ministerial discretion None Spending data




None

Primary Operating Funding Approach – DetailsScope: Comprehensive


Modifiers: None


Used For: The primary operating funding approach is used for the general operations ofmost programs provided by Regional Health Boards and Non-DesignatedOrganizations. These include: Acute care, Mental Health, Public Health andAddiction Services. The operations of non-portable programs are fundedusing a separate method, as described below. Regional Health Boards andNon-Designated Organizations are expected to fund replacement of capitaloperating equipment from their operating funds.


1997-98


Previous Approach: The previous approach entailed a review of prior year’s results andconsideration of identified pressures.




Restrictions: The Regional Health Boards and the Non-Designated Organizations arepermitted to move operating funds as long as they are not deemed to benon-portable.

Non-portable funded services are: Nursing & Medical Education, RenalDialysis, Mental Health, Public Health, Addiction Services, Mammography,Diabetes Care, Reproductive Care, Gynecology Screening.

Portable funded services are: Administration Areas, Clinical Support Areas,Clinical Operations, Nursing/Surgical Operations.

Method Detail: Step 1. Business Plan template is issued to Regional Health Boards andNon-Designated Organizations by the Department of Health.

Step 2. Business Plan is completed and submitted to Department of Healthby Regional Health Boards and Non-Designated Organizations. TheRegional Health Boards and Non-Designated Organizations deal withstakeholders and program directors within the facilities in preparation of theplan and are required to obtain approval of their respective Boards ofDirectors.

Step 3. Business Plan review is undertaken within Department of Health.Program and Financial managers are involved in the review process.

Step 4. After its initial review of the Business Plan, the Department of Healthengages in a communication process to ensure the needs of the RegionalHealth Boards and Non-Designated Organizations are understood and toensure that a collaboration is achieved within the province. This processincludes a presentation by the Regional Health Boards and Non-DesignatedOrganizations to the Department of Health.

Step 5. If necessary, revisions are undertaken and submitted by theRegional Health Boards and Non-Designated Organizations.

Step 6. Steps 3-5 repeated until business plan meets the objectives of theDepartment of Health with respect to health services and fiscal realities.

Step 7. Business Plan is approved, implemented & monitored. A budgetletter is sent by the Department of Health to the Regional Health Boards andNon-Designated Organizations regarding the global budget and non-portableareas.

Step 8. Following notification of the funding amount, bi-weekly funding flowsare adjusted to the approved level.







Modifiers: None


Used For: Capital funds are provided for major capital construction and major capitalequipment (such as, CAT Scanner). Funding for replacement of operatingequipment is included in the operating funding.


April 1, 1993

Last Major Revision: Effective April 1, 1993

Nature of Revision: The local share (i.e., Regional Health Board and Non-DesignatedOrganization share) on all capital construction projects was increased from20% to 25% local, and 75% is funded by the Department of Health.

Previous Approach: Capital Construction Projects were previously funded at 80%, with 20%funded from local share contribution.

Method Details: Capital construction projects are categorized as either major construction ormajor equipment.

Step 1. The Regional Health Boards submit a capital project request to theDepartment of Health outlining a business case for a major capital project orlisting major equipment they wish to replace in the current fiscal year.

Step 2. These are reviewed by the regional directors of the Department ofHealth. Based on the proposals and other meetings with the RegionalHealth Boards and Non-Designated Organization, a five-year plan isestablished by the Department using certain criteria.

The criteria used include: the need for new technology improvements,condition of the existing capital, new program/ service requirements,continued service delivery and the availability of funds. The five year plan isupdated each year to reflect current priorities.

Step 3. Capital requests, approved by the Department of Health are fundedon a project-by-project basis from the Department of Health budget.






Method: NA

Modifiers: NA

Data Source: NA

Used For: NA

Method Details: NA


Information Accessed for Funding CalculationsAnnual Business Plan—including financial and program service informationprovided with it.


Monthly Forecast Information

Department of Finance Targets

Evaluations of Current Funding ApproachesExternal Reviews: Auditor General's Office will evaluate compliance to department's policy as it

pertains to funding methodologies.

Internal Reviews: Senior Management, Program Management, Financial Services




Approaches Being ConsideredFunding Formulas that are evidence based in nature are being consideredand established throughout.

This includes establishing funding based on information derived fromstandard performance indicators. For example population-based fundingadjusted for socio-economic factors.


Chief Financial OfficerNS Dept. of Health1690 Hollis St.,PO Box 488Halifax, NS B3J 2R8Telephone: 902-424-5948


There is extensive consultation with the Regional Health Boards and Non-Designated Organizations. Refer to Steps 1-8 in the Primary OperatingFunding Approach section above.

Announcement: A letter is forwarded to the Regional Health Boards and Non-DesignatedOrganizations outlining the approved budget along with a lead sheet thatoutlines the portable and non-portable items and the applicable fundingafter approval of Provincial budget.

The announcement is usually determined by approval of the budget in theLegislature with the expectation to release the budget at the beginning ofthe fiscal year (April 1).


Nova Scot iaPerformance Monitoring



Annual Business Plan—typically due in February prior to the beginning ofthe new fiscal year. Please refer to the Primary Operating FundingApproach section above.

Monthly Forecasts—forecasts are submitted by Regional Health Boardsand Non-Designated Organizations including variance analysis. Forecastsreviewed by Financial Advisors, then followed up with program managersand Regional Health Boards and Non-Designated Organizations. Forecastsare submitted to the Budget Co-ordinator of the Department of Health.Approval of the Chief Financial Officer and Deputy Minister is obtained.Forecasts are then submitted to the Provincial Department of Finance.

Monthly Business Plan Initiatives Update—entail an update of keyinitiatives approved in the Business Plan.


Audited Financial Statements, Notes & Management Letter—Requiredby June 30.

Annual Report—not a formal requirement until Designated HealthAuthorities are enacted.

Financial Performance Measures and Indicators—are under development(see below).




Prospective Monitoring Practices - Details(a) Annual Business Plan

Content: Statement of Accountability—Confirms plan was developed in accordancewith appropriate legislative authority and government requirements.

Mission & Goals—Declaration/purpose and broad statements on overallexistence.

Challenges/Opportunities—identify challenging issues and opportunitiesthey are facing and steps to address.

Performance Measures—Indicate performance measures and how tomeasure them.

Statistical Information

Health Services Component—Delivery plan of all health related services(i.e., Acute Care, Mental Health, Addiction Services, Public Health).

Human Resources Component—FTE’s and number of Employees andplan to increase or downsize.

Information Technology—Co-ordination of their individual plan and toprovide input into provincial planning.

Community Consultation—Strategies and processes on how to engageCommunity Health Boards.

Financial Component—Cost of plan (operating and capital) indicating allsources of revenue and how to meet shortfall if necessary.

Communication Component—Indication of ongoing communication plan(town hall meetings, annual meetings, etc.).

Process: Please refer to Steps 1-8 in the Primary Operating Funding Approachsection.

Late Submission: Delay in final budget approval.


“No planned deficit legislation” exists in Nova Scotia. A deficit identified mustbe supported with a plan to eliminate within a specified period of time.




(b) Monthly Forecasts

Content: Revenue/Expenditure forecast (Budget, YTD, forecast, variance andexplanation). Cash flow analysis as required.

Process: Forecasts are submitted by Regional Health Boards and Non-DesignatedOrganizations. These include a variance analysis. Forecasts are reviewedby Financial Advisors of the Department of Health who follow up withprogram managers at the Department and Regional Health Boards and Non-Designated Organizations. Forecasts are then submitted to Budget Co-ordinator of the Department of Health. Following approval by the ChiefFinancial Officer and Deputy Minister, the forecasts are submitted to theDepartment of Finance.

Late Submission: No penalties.


If unplanned deficits are forecasted, Regional Health Boards and Non-Designated Organizations are expected to submit a plan for managing itselimination.

(c) Monthly Business Plan Initiative Update

Content: The Business Plan Initiative Update consists of a report which provides anupdate of key initiatives approved in the Business Plan.

Process: Key initiatives identified. Monthly update on progress of implementation.Financial, Human Resources and Program information provided.

Late Submission: No penalty.


NA




Retrospective Monitoring Practices— Details

(a) Audited Financial Statements

Content: Audited Financial Statements are due June 30. These include a completeset of Notes and Management Letter.

Approval Process: These must be approved by the Board of Directors of the respectiveRegional Health Boards and Non-Designated Organizations.


(b) Annual Report

Content: Submission of an Annual Report is currently voluntary. This will be arequirement when District Health Authorities are enacted.

Approval Process: Annual Reports must be approved by the Board of Directors of therespective Regional Health Organizations and Non-Designated Boards.

Late Submission: No late submission penalty


Overview: The Department of Health intends to enhance its accountability processwhen the District Health Authorities are enacted. Plans are underway toestablish a list of performance indicators which will be used for assessing,monitoring, and comparing performance of the District Health Authorities.The Department has not yet determined whether future performancemeasures will be linked to funding, how these will be calculated anddisseminated.


Currently, some of the financial performance measures used are:budget to actual variance, current ratio, debt to equity ratio.

Source of Data: Source of data for the current financial performance measures are theAudited Financial Statements



NA





NA


NA


NA

Management of the Monitoring ProcessResponsibility: Financial Services Division of the Department of Health

Contact Information: Chief Financial OfficerNova Scotia Department of Health1690 Hollis St.PO Box 488Halifax, Nova Scotia B3J 2R8


The financial services division is currently staffed by:(a) a Chief Financial Office, responsible for the process and is a member ofsenior staff;(b) a Director of Finance, Health Services who provides direction on budgetand ongoing operation; and(c) 2 Financial Advisors, who liases with the Regional Health Boards andNon-Designated Organizations on financial policy, performance andreporting.


Nova Scot iaRepor t ing P ract ices


Required Reporting ActivitiesTo Public: As indicated above, submission of an Annual Report is voluntary.


Annual Audited Financial Statements—due June 30.

Monthly Forecast—due 10th of each month and are sent electronically inthe form of a spreadsheet. These are for forecasting operating results onlyand do not provide trial balance information.

Business Plan Initiatives Update—due 10th of each month.

Annual Business Plan—typically due in January before the beginning of thenew fiscal year.

Electronic Trial Balance—not required in 2000-01, but newly establishedDistrict Health Authorities will be required to submit a year-end trial balancein 2001-02.

To CIHI: Annual Hospital Survey—sent directly by Regional Health Boards andNon-Designated Organizations.


Annual Business Plan Yes – Delay in budgetAudited Financial Statement NoMonthly Forecasts NoBusiness Plan Initiatives Update NoAnnual Business Plan NoAnnual Hospital Survey No


Nova Scotia was one of the first provinces in Canada to implement the MISGuidelines. The national guidelines have been modified for use in NovaScotia. Since the establishment of Regional Health Boards 4 years ago, andthe intent that boards would be self-governing, use of the guidelines becameinconsistent across boards. Now with the establishment of the DistrictHealth Boards effective Jan 01, 2001, there has been a renewed effort toestablish consistent reporting. A standard chart of accounts has beenestablished and quarterly reporting will be required of the District HealthBoards. Reporting will occur by facility within the Districts. Expenditures thatare centralized at the district and regional level will be allocated to thefacilities prior to CIHI reporting.


Nova Scot iaRepor t ing P ract ices



The Auditor General's Office of Nova Scotia carries out an annual financialaudit of the Province of Nova Scotia including the Department of Health. Allprograms, service and administrative areas are subject to the audit.


From time to time, as a central agency, the Provincial Department of Financeis involved in providing direction on financial standards and policy to theRegional Health Boards and Non-Designated Organizations.


Annual reconciliations are performed between the audited financialstatements and the department’s general ledger reports.



The Department of Health provides a capital grant to the Regional HealthBoard based on claims submitted. In turn, the Regional Health Board appliesthe deferral method according to the CICA Handbook.


“No Planned Deficit Legislation” exists in NS. A deficit identified must besupported with a plan to eliminate within a specified period of time. Allidentified deficits/surpluses are reviewed within the Department and action istaken accordingly.


Ontar ioBackground


Ontario QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Ontario Ministry of Health and Long TermCare.





ContextOntario acute care hospitals were substantially reorganized by theHospital Services Restructuring Commission between 1996 and 2000. Inthe past few years the Joint Policy and Planning Committee has beendeveloping a funding formula that proposes to change funding from aglobal method to a population based method.


11, 513, 808 (Statistics Canada, July 1, 1999)




Public Hospitals


144 public (acute) hospitals (exclude stand-alone chronic (12), stand-alonerehabilitation (4) and specialty (psychiatry) (3)).

Acute hospitals are categorized into teaching, community and small. Ofthese, 12 are teaching hospitals–fully affiliated with one of five universitiesthat have faculties of medicine.


Ontar ioBackground



Public hospitals - responsible for acute care. Some provide continuingcare and / or long term care in addition to acute care.

Exclusions: Medically unnecessary procedures, such as cosmetic surgeryand procedures considered as research; all non-hospital based services;non-acute care services unless provided by the acute care facility (such aslong term care, rehabilitation, and chronic care); most drugs foroutpatients, home care services, and physician reimbursement which ispredominantly fee-for-service. Few hospitals have salaried physicians.


$9,159,270,390 (Source: CIHI)


Ontar ioFunding Approaches




Scope Method Modifiers Data SourceOperating Institutional Global None Spending data




Service specific Policy-based andCase Mix-based1

Penalty/Incentive Spending data

AdjustmentFactors Modeland SmallHospital FundingModel

Institutional Facility-based2 None Explanatory data

The new fundingformula

Institutional Population-based3 None Explanatory data

Notes:1. Used for specific issues and special programs. The penalty/incentive adjustment is used to ensure that funding matches

actual service volumes.2. Facility-based methods are the Adjustment Factors model and Small Hospital Funding model. These have been used in

the past for adjusting base funding or determining some one-time amounts.3. Population-based method (proposed) - The new funding formula, a population-based method is currently under review for

use in 2000-01 fiscal year to determine base or adjustment amounts.




Primary Operating Funding Approach— DetailsScope: Institutional

Method: Global

Modifiers: None


Used For: Public hospitals (acute care) Specialized services and some other programsare included in the base amount, unless considered new funding.

Acute hospital-based services including acute inpatient, day surgery,ambulatory, and emergency. In addition, a few public hospitals also providechronic care and long term care inpatient services.

Specialized programs (dialysis, cardiac surgery, cancer care and so on) aredistributed throughout the province. Specialized services and some otherprograms are included in the base amount, unless considered new funding.


Global method has been used since 1969.

Last Major Revision: March 2000, JPPC submitted a proposed new funding model to theMinistry of Health and Long Term Care. The methodology was anenhancement and expansion of the Adjustment Factors Funding Model(described below under secondary funding approaches—details).

Nature of Revision: The new funding model was proposed to replace facility-based methods andglobal multiplier methods with a population-based method. The facility-based method (Adjustment Factors Model), which derived an actual andexpected cost per weighted case for each hospital using multiple linearregression, may be replaced by a combined facility-based and population-based method that derives a facility-specific rate per weighted case, usingmultiple linear regression, and a facility-specific expected weighted casevolume based on population characteristics and referral patterns.

Previous Approach: Global method (absent of Facility-based or Population-based methods).

Restrictions: Hospitals are generally free to allocate Ministry of Health funds within thehospital (excluding priority programs and other programs that may bedesignated from time to time e.g., Lab services and Mental Health which arecurrently protected pending further developments).

Method Detail: Step 1. Take base amount from previous year. Add 2% inflation increase–maximum amount allowed by provincial government for 2000-01 institutionalinflation increases.




Step 2. Add recurring policy-based adjustments (described below) to arriveat total base amount.

Step 3. Add one-time, policy-based adjustments (described below) to arriveat time-specific, one-time apportionment. Sum of adjusted base and one-time payments equals total hospital allocation.





Modifiers: NA


Used For: Capital projects


NA

Last Major Revision: December 1996 (date of capital planning manual distribution).

Nature of Revision: Addition of kick-off meeting between ministry and hospital.


Method Details: Capital Planning Manual 1996 outlines policies and associated proceduresfor range of health care facilities (including hospitals). Ministry submissionand approval requirements are dependent on scope and size of project andrelated program and service delivery implications. Capital projects givenpriority are those that:1. are essential to the implementation of Health Services Restructuring

Commission directions;2. address gaps in services or a need in the community identified as a

result of program evaluation or analysis;3. address service volume and growth in demand, and are based on a

need for service.

Ministry will support up to 50% of applicable costs of approved capitalprojects and up to 75% in Northern Ontario where population is less than12,000.




Shareable fee schedule outlines allowable costs and percentage fees forconsultants (e.g., functional program consultant fees up to 1% ofconstruction cost exclusive of taxes).

Ministry can withdraw funding commitment to project if hospital awardscontract before receiving Ministry approval for total project cost, capital grant,and approval to sign contract.

Costs not shared by Ministry include: replacement equipment (should befunded by operations), financing charges, campaign costs, etc.

Five stages outlined to streamline process: (1) proposal submission, (2)functional program submission, (3) development of preliminary design, (4)development of contract and (5) implementation.

Key Features: After a project approval has been accepted, a kick-offmeeting is conducted between ministry and hospital to develop a projectchecklist and facility agreement identifying planning submissionrequirements, timelines, deliverables, and ministry approvals required.




Secondary Operating Funding Approach— Details(a) Policy-based method

Scope: Service specific

Method: Policy-based and Case mix-based

Modifiers: Penalty/Incentive adjustment


Used For: Examples are: nursing resource requirements, priority program adjustments,emergency services, population growth funding.

Nursing resource support—provided to increase levels of nursing staff thatmay have been depleted in recent restructuring efforts.

Priority Programs adjustment—funds for service volumes of essential, life-sustaining services. Examples include dialysis, chemotherapy, hip and kneereplacements, and end stage renal disease.

Emergency services—several adjustments made using different bases forapportionment. Aimed at increasing access to emergency services.

Population growth—provided to hospitals with a disproportionately highershare of population growth (such as suburban areas surroundingmetropolitan Toronto, referred to as 905 areas).

Method Details: Calculation of adjustment is dependent upon the type of adjustment.

Modifier Details: Used for ensuring that, for specific services funded, volumes match demandfor those services as measured by actual cases or procedures (e.g., cardiacsurgery, renal dialysis). Thus, if actual volume of services provided washigher than budget (i.e., funded levels), funding may be increased to matchactual volume. If actual volume of services was lower than budget (i.e.,funded levels), funding may be decreased to match actual volume.

Step 1. Hospital submits budgeted service levels in Operating Plan.

Step 2. Ministry funds hospitals for approved service level at a set rate foreach case, procedure, or unit and so on.

Step 3. In the subsequent planning cycle, variance from budget is analyzed,and funding may be adjusted accordingly.




(b) Facility-based method (for large hospitals)


Method: Facility-based

Modifiers: None

Data Source: Explanatory data

Used For: Adjustment Factors Model—developed to achieve equitable funding oflarge acute hospitals. Model derives an expected average cost per weightedcase adjusted for facility characteristics (not in management's control)compared to actual average cost per weighted case. Difference reflectsefficiency compared to a hospital with similar characteristics.

For 1996-97, the adjustment factors model was one of the factors used todetermine "clawback" amount in the base allocation to certain hospitals. InDecember 1999 used to determine allocation of a special adjustment of $196million.

Services Included: Actual Cost per Weighted Case (ACPWC) and ExpectedCost per Weighted Case (ECPWC) derived for Acute Inpatient, Newborn andDay Surgery Cases. Last major revisions of method was in 1998-99 withrevision of adjustment factors

Method Details: Step 1. Calculate acute inpatient, newborn, and day surgery weighted casesfrom CIHI hospital discharge abstract. Adjust total for multi-year cases toexclude weighted cases related to prior years' care.

Step 2. Divide inpatient, newborn and day surgery costs derived fromOCDM to calculate ACPWC.

Step 3. Using a multiple linear regression model with ACPWC as dependentvariable and facility characteristics (found to explain 80% of the variation inACPWC amongst hospitals) to derive ECPWC.

Step 4. Use regression equation coefficients to derive: Base Amount($2218), Adult Tertiary adjustment ($11.01 for each tertiary weighted case),Teaching Adjustment ($934.44 for every medical student day), and TertiaryNewborn Adjustment ($34.59 for every newborn tertiary weighted case).





(c) Facility-based method (for small hospitals)


Method: Facility-based

Modifiers: None

Data Source: Explanatory data

Used For: Small Hospital Funding Model—developed to achieve equitable funding forsmall hospitals. Arose from Adjustment Factors Model recognizing smallhospitals have different factors affecting their costs than large hospitals.

Small Hospitals are defined as hospitals with activity less than 3,500equivalent weighted cases in 1996-97, hospital ESI referral population lessthan 20,000 in 1996-97 and hospital acts as a single provincial communityprovider. Resulting in 62 hospitals.

Actual Cost per Equivalent Weighted Case (ACPWC) and Expected Cost perEquivalent Weighted Case (ECPWC) are derived for all services provided bysmall hospitals.

Method Details: Step 1. Use total hospital costs due to difficulty with allocating costs to acuteinpatient, newborn and day surgery costs in small hospitals.

Step 2. Calculate Equivalent weighted cases for ambulatory care andmedical day night care, which do not have weighted cases. (See referencedocument for details).

Step 3. Divide total hospital costs by sum of weighted cases and equivalentweighted cases to derive Actual Total Cost Per Equivalent Weighted Case(ACPEWC).

Step 4. Calculate Total Expected Direct Expense, Total Expected OverheadExpense, Isolation Adjustment to derive the Expected Total Cost perEquivalent Weighted Case (ECPEWC). The difference between ACPEWCand ECPEWC as a percent of ECPWC can be used as a measure of cost-efficiency.





Information Accessed for Funding CalculationsFacility-based—Ontario Cost Distribution Methodology to derive for eachhospital "inpatient, newborn and day surgery" portion of total hospital costsfrom MIS Trial Balance.

Hay Level of Care Methodology to identify CMGs typically performed inspecialized hospitals, referred to as Tertiary.

JPPC collects medical student days from hospitals and verifies withuniversities.

Patient-specific Databases—Discharge Abstract (acute inpatient and daysurgery) sent by hospital to CIHI.

Evaluations of Current Funding ApproachesExternal Reviews: Contact Lawrie Kaplan (Contact for Provincial Auditors)

Telephone: (416) 327-7136

Internal Reviews: Yes. Ministry and JPPC review model on an annual basis.

Approaches Being ConsideredThe Ministry is working towards developing a comprehensive model thatprovides incentives for the provision of cost-effective care (i.e., efficiency andappropriateness of service).

The proposed new funding model has been developed and is currentlyunder review for some degree of possible implementation in 2000-01. Themethod is designed to fund hospitals based on a facility-specific rate(determined using a facility-based method) and a facility-specific volume ofweighted cases (determined using a population-based method).

Combining a facility-based method to adjust for characteristics of theproviding facility with a population-based method to adjust for characteristicsof the referral population is intended to facilitate a comprehensive method offunding hospitals.

The Ontario Case Cost Initiative is underway in 31 hospitals to collectmade-in-Ontario patient specific cost data for acute, day surgery, andambulatory services. Its aim is to generate Ontario based cost weights foruse in funding model.





Ontario Ministry of Health and Long Term Care, Finance and InformationSystems Branch

Pier Falotico, Divisional Finance Manager. (416) 326-4805TBD after Dec 31, 2000.


Joint Policy and Planning Committee (JPPC) develops funding models andsubmits recommendations to MOHLTC for hospital allocations.

Announcement: Funding announcements for the primary operating grant are usually madeon in early April. For 2000/01, the primary operating grant announcementwas made on June 7, 2000.


Ontar ioPerformance Monitoring



Operating Plan (an accountability and planning report) must be submittedby each hospital prior to the beginning of the new fiscal year. It includesstrategic direction of hospital and detailed program and service plans, and abalanced budget.

Operating Plan Quarterly Reports—are required for the second and thirdquarters. These are both prospective and retrospective reports.


Annual Report must be submitted at the end of each fiscal year and includeaudited financial statements, trial balance reconciled to the audited financialstatements and year-end supplementary forms of specified financial andstatistical data and the Year End MIS Trial Balance Submission (described inmore detail under 'Required Reporting Activities below'.)

Quarterly MIS Submissions—it is likely that these will be requiredbeginning fiscal year 2001-02.

Financial Performance Measures and Indicators—development effortsare currently underway.

Prospective Monitoring Practices— Details(a) Operating Plan

Content: Required components of the Operating Plan are:

• executive summary• hospital and community profile• programs and service plan (including rationale for program changes,

projected impact on access to programs and services) improvements inservices and clinical efficiencies, administrative efficiencies)

• budget report (including operating certificate). Includes informationsupporting narrative sections of operating plan.

Process: Operating Plan—must be submitted to Ministry of Health and Long TermCare prior to the beginning of fiscal year, usually February.

The annual hospital budget is included in Operating Plan. Hospitals mustform a committee to develop the plan. Board approval is required. DistrictHealth Councils (DHCs) review plan, submit comments to Ministry of Healthand Long Term Care, providing advice on hospital program and capitalprojects. Ministry of Health and Long Term Care reviews plan and adviseshospital of status. Ministry of Health and Long Term Care approval of plandoes not constitute approval of any new or expanded priority program orcapital project as these have a separate approval process.




Late Submission: If submitted late or incomplete, hospital is subject to a financial penalty of0.03 percent in hospital allocation (minimum $2000) for first week and one-half of initial reduction for each subsequent week of non-compliance.


A balanced or surplus budget required by Ministry of Health and Long TermCare.

Hospitals may retain surplus funds. Those with repeated large annualsurpluses may be reviewed to ensure appropriate services are beingprovided. Annual surpluses of 1 to 2% are encouraged by the Ministry ofHealth and Long Term Care.

Ministry of Health and Long Term Care policy is not to fund operatingdeficits. However, during past few years, funds have been allocated tohospitals facing short-term expenditure reduction pressure. Hospitals infinancial difficulty for extended periods may be reviewed by an Ministry ofHealth and Long Term Care conducted operational review.

(b) Operating Plan Quarterly Reports

Content: The financial and statistical sections of these reports contain two prior yearsand the current year's Operating Plan data and call for the hospital to providethe quarterly year-to-date data, as well as forecast to year-end.

In addition to the detailed financial and statistical information, each QuarterlyReport should outline variances from the approved Operating Plan,indicating reasons for the variance, measures that the hospital hasundertaken or will undertake to address the variances and information on theprocess used to develop the quarterly variance report.

Process: Hospitals are required to submit to the Ministry and to the District HealthCouncil a Quarterly Report for the second and third quarters.

Late Submission: Hospitals will be subject to one or more of the Ministry's compliancemechanisms, including subject to a financial penalty, if a Quarterly Report isunsatisfactory, late, or not submitted.





Content: Financial Statements, Auditor’s Report


Late Submission: No late submission penalty

(b) Quarterly MIS Submissions

Content: MIS financial and statistical data

Approval Process: In 1994/95 quarterly MIS submissions were required from each hospital forthe second and third quarter but were later discontinued. The Ministry ofHealth and Long Term Care remains committed to again requiring secondand third quarter MIS Trial Balance Submission in addition to the annualrequirement. It is likely that this will be in place for the 2001-2002 fiscal year.

Late Submission: NA


Overview: Two performance measures committees currently underway to: (1) developsystem level outcome indicators and (2) develop and monitor hospital leveland program specific indicators of cost, quality and utilization of services.These measures include financial measures.


Currently being developed for use:• Approved Expenditures (year to date)• Actual Expenditures (year to date)• Regional Total Weighted Cases and Cost per Weighted Case• Regional Expected minus Actual Cost per Weighted Case• Annual Funding Announced• Annual Funding Flowed

Source of Data: Hospital quarterly reports based on MIS compliant financial and statisticaldata and Cost per Weighted Case calculated by JPPC, using CIHI and otherdatabases.

Proposed Monitoring: To be determined


To be determined





To be determined. In fiscal year 2000-01, no portion of funding has yet beenbased on performance measures. In December 1999, a special allocation of$196 million was partially based on Actual verses Expected Cost perWeighted Case performance.


To be determined


To be determined

Management of the Monitoring ProcessResponsibility: Ministry of Health and Long Term Care, Financial and Information Systems

Branch

Contact Information: John Szpik, Information Management CoordinatorTelephone: 416 327-7766


NA


Ontar ioReporting Practices


Required Reporting ActivitiesTo Public: Annual Report


Audited Financial Statements—Board approved, audited financialstatements are required from hospitals by June 30.

Quarterly Reports—In 1994/95 quarterly MIS submissions were requiredfrom each hospital for the second and third quarter but were laterdiscontinued. The Ministry of Health and Long Term Care remainscommitted to again requiring second and third quarter MIS Trial BalanceSubmission in addition to the annual requirement. It is likely that this will bein place for the 2001-2002 fiscal year.

Electronic MIS Trial Balance Submission to the Finance and InformationSystems Branch of the Ministry of Health and Long Term Care required byeach hospital at end of the fiscal year by specified date (August 25, 2000).Financial Penalty for late submission of trial balance is 0.03 percentreduction in hospital allocation per week. Edit Checks—extensive editprocess includes: format specifications, valid primary account, validsecondary and valid primary/secondary combinations, balanced (within$100), balanced charge back accounts with corresponding internalrecoveries (e.g., linen & laundry, catering), adherence to minimum reportinglevel specified for each functional centre (varies from Levels 3 to 5), inclusionof specified statistical accounts and so on. Voluntary remotesubmissions—speed up processing time and will allow for more timelyinformation (used by over 60% of hospitals in 2000-01 the second year of theremote process). Verification reports—provided by Ministry of Health andLong Term Care to hospitals for correction and final approval before data areused.

Year-end Supplementary Form—submitted with trial balance submissionand similar format as quarterly reports includes summarized statistical andfinancial actual and budget as well as reconciliation to audited financialstatements.

To CIHI: Annual Hospital Survey—Hospitals submit an electronic trial balance ofMIS data to the province for the provincial database. Following validation,these data are then submitted to the CIHI Annual Hospital Survey database.


Annual Report NoAudited Financial Statement NoQuarterly Reports NoAnnual Operating Plan YesYear-end MIS Submission YesYear-end Supplementary Forms YesAnnual Hospital Survey No


Ontar ioReporting Practices



Yes. National MIS Guidelines modified by the Ministry of Health and LongTerm Care for use in Ontario, as specified in the Ontario Hospital ReportingSystem (OHRS) Version 4 effective April 1999.

Beginning in the 1994-95 fiscal year all acute-care hospitals have beenrequired to maintain MIS compliant financial and statistical databases.




NA


Yes, trial balance submission reconciled to audited financial statements andYear-end Supplementary Form and checked by Ministry of Health and LongTerm Care Regional Financial Coordinator.



In accordance with the CICA handbook, grants from Ministry of Health fornew buildings and equipment are recorded in the hospitals' accounts asdeferred revenue contributions, and subsequently amortized over the life ofthe asset. The asset is capitalized and amortized over the life of the asset.


NA


Pr ince Edward Is landBackground


Prince Edward Island QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Prince Edward Island Health and SocialServices.





ContextRegional Health Authorities were established in April 1993. To ensure afree flow of communication between the Department of Health and SocialServices, monthly meetings are held between the CEOs of the 5 RegionalHealth Authorities and the Department, as well as between the ChiefFinancial Officers of the regional authorities and the Department. Theseforums provide an avenue for province-wide coordination as well as amechanism for keeping the Department up-to-date with respect to thedelivery of programs.

A health financial system is also in place whereby the financial generalledgers of the Regional Health Authorities can be accessed on-line by theDepartment at anytime up to the most recent month, which has closed.This system enables electronic compilation and access of routine reportsfrom the regional authorities.






Pr ince Edward Is landBackground





5 Regional Health Authorities; 7 hospitals,


Regional Health Authorities provide a full range of health and socialservices including: inpatient acute, dental public health, mental health,public health nursing, environmental health, provincial pharmacy, addictionservices, child and family services, job creation, home care and support,community public health nursing, continuing care, and communityresidential services.

Province-wide services are funded on a provincial basis. Some of theprograms may be delivered from only one or a few Regional HealthAuthorities because they would have the appropriate human resourcesand/or facilities to deliver the program. In such instances, the relevantportion of the provincial budget is transferred to the Regional HealthAuthority and adjustments are made to the region's original budget to takesuch realities into account. In such cases, the regions maintain a revisedbudget against which is tracked the forecast amounts as determined atquarterly intervals through the year.

Services Excluded: Fee for service physicians and private health drugplans. Physician services are funded by the Department through aphysician payment program that pays the physicians on a fee for servicebasis. Some regions pay some of their physicians on a salary basis. Thoseindividuals are tracked as a sub-set of the physician database and arepaid under a salary arrangement administered by the Regional HealthAuthority. The dollars related to those physicians are then transferred fromthe Department which has budgeted responsibility for physician costs tothe regions which is accounting for the cost centre which houses thosesalaried personnel.


$128,570,899 (Source: CIHI)


Pr ince Edward Is landFunding Approaches





Capital Institutional Project-based2 None Spending data



Notes:1. Used for most operating expenses of the regional health authorities.2. Used for capital requests over $25,000 for new building, renovation and equipment.3. Used for special requests of the regional health authorities to meet specific policy issues.

Primary Operating Funding Approach – DetailsScope: Comprehensive


Modifiers: None


Used For: Services included in the primary operating funding approach are: acute care,addiction services, child and family services, community mental health,continuing care, private nursing home subsidies, environmental health,provincial pharmacy, home care and support, income support, job creationprograms and other community organization grants.


April 1993, when the regional authorities were established.

Last Major Revision: Before the Regional Health Authorities were established, hospitals providedtheir own budgets based on the global approach.





Restrictions: Regional Health Authorities are given autonomy to deliver programs within aspecified allocation but are also given flexibility in individual programrequirements. Regional authorities are allowed to move funds betweenservices, as long as core services are still provided.

Method Detail: The Regional Health Authorities budget on a global basis and hospitals arebudgeted separately within that exercise. The Regional Health Authoritiesthen apportion the appropriate allotment to the hospitals. The Department ofHealth and Social Services recognizes the hospital allotments in the budgetprocess.

Step 1. On or about November of each year the Department of Health andSocial Services, in consultation with the Regional Health Authorities, identifythe budgetary adjustments that would be required to fund the existing levelsof current programs and services for the upcoming year. This process isidentified as the Status Quo Budget exercise and takes into considerationthe range of issues that would impact current programming, including suchitems as wage settlements, increases in drug costs and other operating costadjustments. Determinations of Status Quo adjustments are negotiated bysenior departmental staff with Provincial Treasury officials and ultimatelyapproved by Budget Cabinet. This exercise is usually completed by the endof January.

Step 2. The Status Quo Budget approved in Step 1 is then allocated amongthe Regional Health Authorities to establish their Global Budget for theupcoming year. Regional Health Authorities are then directed to completetheir Detailed Budget within the Status Quo amount for submission to theDepartment usually before the end of February.

Step 3. A separate exercise is the identification of policy issues notaddressed in Status Quo as well as the identification of new initiatives thatthe Health Ministry wishes to forward for Budget Cabinet consideration.Should any policy issues or new initiatives be approved, the amounts may beadded to the Status Quo allocation or Budget Cabinet may direct that theMinistry identify savings from within the Status Quo allocation to fund part orall of the new initiatives. The adjusted amount would then become theGlobal Budget allocation for the Health Ministry for the upcoming year.

Step 4. The overall global budget for the Health Ministry as establishedthrough the above process is prepared in detail for submission to theProvincial Treasury for incorporation into the provincial budget documentstabled in the Legislative Assembly by the Provincial Treasurer usually beforethe end of March.

Modifier Detail: None.






Modifiers: None


Used For: Capital requests are required for new building, major renovations, and capitalequipment over $25,000. Funds for replacement of capital equipment maybe included in the operating funds of the regional authorities, if under$25,000. Requests for all health services with capital requirements areconsidered, including most hospitals, long term care facilities, and socialhousing facilities.


NA

Last Major Revision: Decisions on such matters are made at the provincial level.



Method Details: A goal of the Department of Health and Social Services is to have allbuildings in a safe, well-maintained state.

Step 1. Regional Health Authorities provide a list of projects in order ofpriority, together with preliminary cost estimates, to the Department of Healthand Social Services. They are also required to provide a general descriptionof buildings in the regional authority to assist with priority setting. In addition,discussions for capital requirements are held at the monthly meetings ofCEOs and Chief Financial Officers.

Step 2. The capital request submissions are then evaluated and approvedby the Department.

Step 3. Recommendations for funding are then forwarded to theDepartment of Transportation and Pubic Works.





Secondary Operating Funding Approach— Details

(a) Policy Issues



Modifiers: None


Used For: Specific policy related issues.

Method Details: If regional authorities require funds to meet specific policy initiatives,requests for additional operating funds may be made. When these are notincluded in the annual operating budget submission, these are reviewed andconsidered separately.


Information Accessed for Funding CalculationsHealth Financial System—comprised of the general ledgers of the RegionalHealth Authorities. This system provides on-line access to the Departmentof Health and Social Services of the financial and statistical information up tothe most recent months. Reports are also available to allow summarizationof account information for the annual budget and quarterly forecasts.

Evaluations of Current Funding ApproachesExternal Reviews: No external evaluations have been conducted.

Internal Reviews: No internal evaluations have been conducted.




Approaches Being ConsideredOther approaches to funding are not being discussed at this time.


Department of Health and Social ServicesGovernment of Prince Edward Island16 Garfield StreetPO Box 2000Prince Edward IslandCanada C1A 7N8

RHO/HospitalInvolvement:

Regional Health Authorities are involved in the funding process throughthe preparation of annual budget submissions and monthly meetings withthe Department of Health and Social Services.

Announcement: Once the entire budget for the Department of Health and Social Servicesis passed by the Legislative Assembly, the Department then allocates thebudget allotment between the Department and regions. Theannouncement typically occurs during the spring sitting of the legislature inMarch or April.


Pr ince Edward Is landPerformance Monitoring



Annual Business Plan—due in January/February.

Quarterly Forecasts—due within the month following the end of the quarter.


Audited Financial Statements—due June 30.

Annual Report—due in October following the year end.

Financial Performance Measures and Indicators—no initiatives underwayat this time.

Prospective Monitoring Practices— Details(a) Annual Business Plan

Content: The following items are required in the annual budget:• Detail budget for each program and service provided, broken down into

major cost components

Process: Submission of an annual budget by the Regional Health Authorities ismandatory. It must be submitted by February prior to the new fiscal year.

The annual budget is used as a basis for the operating funds allocation. (SeePrimary Operating Funding Approach above for details.)



Regional Health Authorities are expected to submit a balanced budget.




(b) Quarterly Forecasts

Content: NA

Process: After the first, second and third quarters, Regional Health Authorities arerequired to submit quarterly forecasts to the Department. Reporting isrequired by major expense category, in the same format as the annualbudget.

These are reviewed by the Department and discussed with the regionalauthorities as required.



If regional authorities submit operating deficit projections, these arediscussed with the regions by the Department and a plan for eliminating thedeficit is discussed.

Retrospective Monitoring Practices— Details(a) Audited Financial Statements

Content: NA

Approval Process: These must be approved by the board of the regional authority.

Late Submission: No late submission penalty at this time.

(b) Annual Report

Content: Typical contents of the annual report include: the mission and values of theRegional Health Authority, reports from the Chairman, Chief ExecutiveOfficer, and medical director, key program highlights from the past year,highlights on the community services and residential services, and theaudited financial statements.

Approval Process: The annual report is approved by the board before final release to theDepartment and public.






Overview: There are currently no initiatives underway for developing comparativeperformance measures and indicators, however the Department is workingtowards moving in this direction.


NA

Source of Data: NA



NA


NA


NA


NA

Management of the Monitoring ProcessResponsibility: Department of Health and Social Services


Contact Information: Department of Health and Social ServicesFinancial Administration DivisionGovernment of Prince Edward Island16 Garfield StreetPO Box 2000Prince Edward IslandCanada C1A 7N8


Financial Administration Division of the Department of Health and SocialServices is responsible for monitoring regional authority performance andmaintaining the information system.


Pr ince Edward Is landRepor t ing P ract ices


Required Reporting ActivitiesTo Public: Annual Report—due in the fall of each year.


Annual Audited Financial Statements—due June 30

Quarterly Forecasts—due one month following the end of the quarter,submitted electronically into the provincial Health Finance System.

Annual Business Plan—due in February prior to the new fiscal year.Monthly Submission of the Regional Health Authority financial generalledger to a provincial database enables electronic compilation and accessof routine reports by the provincial government.

To CIHI: Annual Hospital Survey—a routine is currently being developed toenable the provincial government to produce this for each hospital from theHealth Finance System.


Annual Report NoAnnual Business Plan NoAudited Financial Statement NoQuarterly Forecasts No


The national guidelines have been modified for use in Prince EdwardIsland. Accounting records are maintained in MIS format.


NA

Involvement of Provincein Financial Reporting:

The Department of Health and Social Services is involved in financialreport of the regional authorities through the HFS Working Group and theChart of Accounts Committee.

Reconciliation betweenAudited FinancialStatements & MinistryReporting:

Annual reconciliations between the audited financial statements and trialbalance of each regional authority are performed by the department.


Balance SheetTreatment of NewBuildings & Equipment:

The fund accounting method is used.


Regional Health Authorities are not permitted to retain operating surpluses.Operating deficits may be funded by special warrant.


QuebecBackground


Quebec QuickfindThe information describing funding approaches, financial monitoring, and accountability was providedand reviewed by the Quebec Ministry of Health and Social Services (MHSS).





ContextThe Ministry of Health and Social Services (previously the Ministry ofSocial Affairs) was formed on June 20, 1985. Since 1994, the Ministry’smission has focused on central and strategic functions of the health andsocial services system. Its role essentially involves regulating the system,determining the general direction of health and social services policy, andevaluating the outcomes obtained in relation to the set objectives.

The health and social services system is managed by the Ministry as wellas 17 regional boards and one regional council throughout the 18 healthand social services regions in the province.

The mission of the Regional Health and Social Services Boards is tooversee, within their territories, the planning, implementation, organization,and coordination of programs and services and the allocation of resources.The mission of facilities within the Regional Health and Social ServicesBoard territory is to establish and deliver appropriate services to varioustypes of users, in compliance with legal requirements concerning thefunctions that they must fulfil. Within this structure, the Regional Healthand Social Services Boards provide funding to the hospitals, which aregoverned by their own board of directors.


QuebecBackground


Unit of AnalysisPopulation of theProvince:


Percent of Canada’sPopulation:



Regional Health and Social Services Boards


18 Regional Health and Social Services Boards

Responsibilities ofEntities:

The budget envelope for regional boards provides funding for:

a) all services delivered by public health facilities (local communityservice centres, general and specialized care hospital centres,residential and long term care centres, rehabilitation centres, youthprotection centres);

b) all services delivered by private facilities with which fundingagreements have been reached (primarily residential and long termcare centres as well as some rehabilitation centres);

c) community agencies working in the health and social services sector;and

d) pre-hospital emergency services.

The Regional Health and Social Services Boards have latitude, within theframework established by the Ministry of Health and Social Services, to setrules for allocating funding among facilities.


$6,878,251,435 (Source: CIHI)


QuebecFund ing Approaches




Scope Method Modifiers Data SourceOperating Comprehensive Global None Spending data




Weighted PerCapital Funding

Specific NeedsFunding

Comprehensive

Service specific

Population-based1

Policy-based2

Import/Export

None

Spending data

Spending data

Notes:1. Weighted per capita approach based on interregional equity:

This approach has been used since 1994-1995 and has served as the basis for setting regional budgets during thetransformation of the health and social services system (review of service organization, alternatives to hospitalization,etc.), the restoration of public finances to a healthy condition (elimination of the government’s operating deficit),interregional reallocation of resources, and the addition of the major portion of funding allocated to developing andimproving services.

In particular, it was used in 2000-2001 to allocate $70 million in funding for home support services as well as to meet theincrease in patient acuity levels and bring basic services in outlying and northern areas up to provincial levels.

2. Approaches taking into account the specific needs for services and programs for which funding is provided:

These approaches were used to allocate $130 million in 2000-2001 development funding for various services (e.g.,physical rehabilitation, remuneration of intermediate resources, youth services, alleviating emergency room crowding,etc.). It is important to stress that these approaches generally favour the same regions as the interregional equityapproach. Therefore, the two approaches are in some sense complementary and generally work together.





Method: Global

Modifiers: None


Used For: Each of the 18 regional boards receives an overall budget envelope(transferable between clientele programs and types of health and socialservices), to provide facilities and community health and social servicesagencies within their territories with required operating funding.

The Regional Health and Social Services Boards have latitude, within theframework established by the Minister of Health and Social Services, to setrules for allocating funding among facilities and community agencies.


April 1, 1994

Last Major Revision: April 1, 2000 (updated and improved annually).


Method Detail: The 2000-2001 budget envelope confirmed by the Minister of Health andSocial Services was determined by:

1. Indexing the region’s 1999-2000 envelope to reflect changes in programcosts ($409.9 million) in 2000-2001;

2. Adding an amount of $425 million to correct the financial situation offacilities running deficits in 1999-2000. The amount of this additionalfunding by region was established using criteria that simultaneouslyfactored in the amount of the deficits, the cost of front-line services,facilities’ financial performance, and interregional equity;

3. Providing $200 million in development funding in 2000-2001 forgovernment priorities, using allocation rules described in the SecondaryOperating Funding Approach section on page 214 below.

Modifier Detail: The differences between some expenditure or income amounts approved inthe budget and the actual amounts are governed by a regional board policyand may, based on the regional board’s budget policy, become a year endaccount receivable from the board or an account payable to the board.Revenue from clients being housed (in care-home beds or long term carebeds) may often be modifiable.




Primary Capital Funding Approach - DetailsScope: Comprehensive


Modifiers: None


Used For: Capital funding is allocated through two distinct envelopes:

• an envelope directly allocated by the ministry to fund specificconstruction and major renovation projects (over $1,000,000 for hospitalcentres or over $500,000 for non-hospital centres);

• a decentralized envelope provided to regional boards for capitalexpenditures, under the aforementioned ceilings, and for informationtechnology projects. The size of the funding envelope for informationtechnology projects is determined with regards to specific projects. Forthe other capital, furnishings, and equipment projects, envelopes aredistributed based on the replacement value of a region’s capitalinfrastructure and furnishings/equipment infrastructure. The regionalboards are responsible for distributing these envelopes among facilities.


At least two decades ago, with adjustments when the Regional Health andSocial Services Boards were created.

Last Major Revision: July 13, 2000.

Nature of Revision: Amounts and processes updated.


Method Detail: With respect to projects with capital costs over $1,000,000 for hospitalcentres or over $500,000 for non-hospital centres, Treasury Board allocatesan annual budget envelope to Ministry of Health and Social Services forpreparing project proposals, which mainly involves developing thepreliminary concept, plans, and estimates and final plans and estimates.

The triennial investment plan submitted and approved annually by TreasuryBoard provides Ministry of Health and Social Services with an envelope tocarry out capital projects for which final plans and estimates have beenapproved. However, each project must be submitted to Treasury Board forregistration on the annual capital plan before being executed.




Process:

In short, and in general terms, the process with respect to these envelopesstarts when Ministry of Health and Social Services informs each RegionalHealth and Social Services Board (and facilities, for some projects) of theamounts that they have been allocated.

The Regional Health and Social Services Board (and Ministry of Health andSocial Services, for some projects) subsequently authorize projects thatfacilities fund from these envelopes. These projects are temporarily fundedby RHSSBs through bank financing arranged on behalf of facilities. Foraccounting purposes, the temporary financing is immediately transferred tofacilities until they arrange long term financing through the ministry offinance.

Bank financing that Regional Health and Social Services Boards arrangewith their financial institutions is paid back by the Corporation d’hébergementdu Quebec (Quebec housing corporation), which temporarily consolidatesthe financing until facilities make long term arrangements. However, facilitieskeep the temporary borrowing on their books and accounts until it istransferred into long term financing.

ROLE OF THE CORPORATION D’HÉBERGEMENT DU QUÉBEC—TheCorporation d’hébergement du Québec’s main responsibilities with respect tocapital projects are to:

1. provide technical and financial expertise to facilities and regional boardsin developing functional and technical programs (FTP) and findingsolutions to capital expenditure issues;

2. analyse FTPs submitted by Ministry of Health and Social Services,validate their contents, evaluate feasibility and costs, and makeappropriate recommendations to Ministry of Health and Social Services;

3. work with facilities to write project proposals and prepare plans andestimates. Submit these documents to Ministry of Health and SocialServices and their regional board, with appropriate recommendations;

4. provide facilities with technical expertise to support them through projectconstruction. When the Corporation is to own the building,10 it performsthe work itself;

5. supply financial management and arrange temporary financing forprojects under study and under construction;

6. provide regional boards and the ministry with required progress reportsand information on how projects are developing;

7. arrange long term financing.

10 It is to be noted that the Corporation d'Hébergement du Québec generally owns the new buildings, which it subsequentlymakes available to facilities.




Secondary Funding Approaches— Details(a) Weighted Per Capita Funding





Used For: Allocating, among health and social services regions, spending cuts andreallocation of resources from 1994-1995 to 1997-1998 and the majorportion of the additional resources injected since that time.

Method Details: Weighted per capita approach to interregional equity—This approachwas used in 2000-01 to distribute $70 million in development funding forhome support services as well as to meet the increase in patient acuitylevels and bring basic services in peripheral regions of Montreal andQuebec, and in northern areas up to the provincial level.

A weighted per capita model is currently used to calculate the interregionaldiscrepancies and redistribute resources among regions. This calculationmay be comprehensive, factoring in all of a region’s resources, or byclientele program, only factoring in resources used to serve a clientele. Thecalculation consists of:

A numerator, corresponding to the expenditures made by the population ina region, from within the region or from another region.

Factoring in mobility or exchanges of service between regions involvestemporarily reattributing the cost of services used in another region to theuser’s home region.

A denominator, corresponding to the population weighted by a needsindicator. This is established for each region by factoring in:

• the size of the population. In the case of clientele programs for “Elderlypersons experiencing loss of independence” and “Youth and theirfamilies,” we consider the population 65 years of age and over and 0 to17 years of age, respectively. For other clientele programs, the totalpopulation is the denominator.

• a needs indicator that is comprehensive or by clientele program. Thecomprehensive needs indicator includes the following components:age/gender, educational level, and life expectancy. With respect toprogram needs indicators, their components are identified by MHSS.




Budget adjustments related to interregional equity are based on thisapproach, which evaluates whether a region is over or under funded inrelation to population needs.

Modifier Details: When allocating resources to each region, the cost of services used by aregion’s population while in another region is reattributed to the region wherethe services were provided. Thus, this approach is neutral with respect toexchanges of service between regions, unless ministerial decisions aremade to promote regional self-sufficiency.

(b) Specific Needs Funding

Scope: Service specific




Used For: Allocating a portion of additional resources injected since 1998-99.

Method Details: Specific need for services Funding—This method was used to allocate$130 million in development funding for various services (e.g., physicalrehabilitation, remuneration of intermediate services, youth services,alleviating emergency room crowding, etc.). It is important to stress that thismethod based on specific needs for clientele programs generally favours thesame regions as the weighted per capita approach related to interregionalequity.





Information Accessed for Funding CalculationsPatient information databases

In addition to containing clinical and administrative information on eachhospital short stay and day surgery, MED-ECHO, is also a source file forupdating and completing other related registries. It allows these otherregistries to obtain very high quality information, without requiring facilities toresubmit the same data.

The MED-ECHO system is associated with multiple registries [e.g.,Canadian Hospital Morbidity System, the fichier Québécois des tumeurs(Quebec tumour registry), fichier québécois des tierces responsabilités(Quebec third-party responsibility registry), trauma and organ donationregistries to come].

It makes it possible to produce the Quebec AP-DRG registry (diagnosesgrouped by patient acuity levels), to evaluate hospital centre performance inrelation to both length of stay and cost per hospitalization.

Other primary databases used:

The financial reporting system consolidates annual financial reports fromall facilities.

The facility statistical reporting system includes multiple summary data onfacilities’ capacity, clientele, and various activity volumes.

The emergency system includes individual data on patient stays inemergency rooms.

Trial balance (see Performance Monitoring—Prospective MonitoringPractices)

Evaluations of Funding ApproachesExternal Reviews: By law, the Auditor General has to power to audit the use of funds provided

to regional boards and health and social services facilities.

The Minister of Health and Social Services may also set up working groupswhose terms of reference may include, among other things, evaluatingfunding methods (see next section on initiatives in progress).

Internal Reviews: The Ministry of Health and Social Services conducts ongoing evaluation offunding methods.




Approaches Being ConsideredA task force on health and social services has been set up, with the followingterms of reference:

• to stimulate public debate on the issues facing the public health andsocial services system, and possible solutions;

• determine the views held by the public, the system’s partners,representative organizations in society, and specialists, on issues raisedby the task force;

• focus the debate on the themes of service organization and systemfunding.

The task force’s terms of reference expire on December 15, 2000, and it willthen submit a report to the government that includes the conclusions thatemerged from its work and consultations and the policy directions that itrecommends.

In addition, a committee to reassess the funding formula for general andspecialized service hospitals has been set up. Its terms of reference are tore-evaluate the current funding formula for facilities:

• to reflect patient acuity levels and service levels more accurately, basedon facilities’ various missions;

• to promote maintaining satisfactory control over budgets allocated tofacilities, taking facilities’ relative performance into account.

The committee to reassess the funding formula for general and specializedservice hospitals must provide ministry officials with a December 2000interim report on options for transitional adjustments to current fundingformulas for the year 2001-2002. The committee’s final report must besubmitted by April 2001.

Finally, the ministry orders, if necessary, financial and organizational auditsto ascertain the administrative and budgetary situation prevailing in theaudited organizations.

Management of the Funding ProcessManaged byContact (as atDec/2000):

Ministry of Health and Social Services

For operating expenditures:Direction générale du financement, du suivi budgétaire et des technologiesde l’informationDirection de Politiques and des systèmes financiers1005 chemin Sainte-Foy, seventh floorQuebec QC G1S 4N4Telephone: (418) 266-5960 Fax: (418) 266-5995




For capital funding expenditures:

Direction générale des services à la populationDirection des investissements et partenariat1005 chemin Sainte-Foy, sixth floorQuebec QC G1S 4N4Telephone: (418) 266-5830 Fax: (418) 266-5834


A mechanism for consultation and cooperation with Regional Health andSocial Services Boards was implemented when these organizations werecreated. This mechanism is structured in two levels (Minister of Health andSocial Services and regional board chairs, and Deputy Minister of Healthand Social Services and executive directors of regional boards).

In addition, regular consultations take place with various facilityassociations, including the Quebec Hospital Association.

Announcement: Funding for the 2000-2001 fiscal year was announced in March and theregional budget envelopes were communicated to the Regional Health andSocial Services Boards on March 29, 2000.

Following this announcement, the Regional Health and Social ServicesBoards have three weeks to inform facilities of the amount of theirapproved budgets.

After receiving these budget amounts, facilities must:

• within three weeks of being advised by the regional board of theamount of its operating budgets, adopt an operating budget that isbalanced or shows a surplus;

• issue a letter of declaration (see section on prospective monitoringpractices); and

• send this letter and a copy of the Board of Trustees’ motion to adopt theoperating budget to the Minister and regional board.


QuebecPer fo rmance Mon i to r ing


Routine PracticesProspective FinancialMonitoring Practices:

Budget—Facilities submit a detailed budget indicating expenditures andexpected activity levels by responsibility centre. This budget must alsoindicate if there is potential deficit.

Fiscal balance plan—Facilities submit a fiscal balance plan if the detailedbudget identifies a potential deficit.

Periodic reports on expected revenues and expenses—Submission,following a schedule established by the regional board, of a report containingyear-to-date actual and year-end projections for expected revenues andexpenses.

RetrospectiveFinancial MonitoringPractices:

Annual report—In addition to financial information, the annual financialreport contains the report from the board chair, the external auditor’s report,and the questionnaire completed by the auditor.

Annual statistical reports—These reports provide statistical data that mayhelp explain the financial results.

Annual activity reports—This report explains the direction in which thefacility is moving, its objectives, and the results obtained.




Prospective Monitoring Practices— Details(a) Budget and Fiscal Equity Plan

Content and Process: To speed up the budget process, Ministry of Health and Social Services tooksteps to implement dynamic, rigorous financial monitoring. For this purpose,legislation was passed on fiscal balance in the system. Pursuant to thislegislation, a guideline was issued establishing a rigorous frameworkcontrolling budget expenditures. To comply with this guideline, all publicfacilities must produce the following documents each period:

• a table indicating the situation at the end of the period, and the annualprojection.

• a letter of declaration, signed by a facility’s executive director, indicating:• that regular monitoring of the facility’s financial situation is being

carried out, to ensure that fiscal balance is achieved during thecurrent fiscal year;

• the arrangements made to inform the Executive Director, asrequired, of any circumstances that may hinder the attainment of thisobjective, and to inform the facility’s board of trustees as soon aspossible;

• that, as required, the necessary corrective measures have beentaken to rectify the financial situation for the current fiscal year;

• that the facility will be able to end the fiscal year with a balancedbudget or a surplus;

• that the information accompanying the letter is based on validrecording and control methods, and that it accurately represents thefacility’s operating results from the start of the fiscal year.

Supplementary information (periodic reports on the financial situation to dateand projected for the current fiscal year) must be provided by public facilitiesthat, in 1999-2000, ran an operating deficit in excess of five percent of theirgross operating budget, or by any other facility identified during the currentfiscal year by a regional board or the ministry.

The information provided under this guideline supports a financial monitoringtrend chart for public facilities, which the ministry updates on an ongoing andproactive basis. Working with regional boards, the ministry evaluates thequality of the information provided, conducts monitoring to identify problemsand, as required, proposes appropriate measures.

Fiscal Balance Plan—The fiscal balance plan must specify the nature of themeasures to be taken to reduce expenditures and achieve fiscal balanceand, as required, must identify any impact on services to the public. Afacility’s fiscal balance plan must be approved by the Regional Health andSocial Services Board.

Late Submission: No penalties for late submission.





A surplus related to a facility’s primary activities may be allocated to thefacility by a decision of the regional board (after analysis). The surplus isadded to the facility’s equity. A facility may use a surplus for temporaryprojects to improve client services or for equipment purchases with, asrequired, authorization from the health and social services board.

Any facility that projects a deficit, either in its detailed budget or in the courseof the current fiscal year, is required to submit a fiscal balance plan to correctthe deficit.




Retrospective Financial Monitoring Measures— Details

(a) Annual reports

Content: Each facility must render accounts to the regional board and the public.

In terms of rendering accounts on a formal and regular basis, a facility mustprovide the ministry or the regional board with all information on its financialsituation (LSSS legislation, section 297).

With respect to annual rendering of accounts, a facility must:

• hold a public information meeting once a year (LSSS legislation, section178);

• produce reports, including those addressing the use of financialresources, i.e., annual financial report, annual statistical reports, andannual activity report.

Annual financial report—Section 295 of the LSSS legislation requires allfacilities to submit an annual audited financial report by June 30 at the latest,using the specified forms (annual financial report by health and socialservices facilities).

In addition to financial information, the annual financial report contains areport from the board chair, the external auditor’s report, and thequestionnaire completed by the auditor.

Annual statistical reports—These reports provide statistical data that mayhelp explain the financial results. These data include the number ofauthorized beds, the number of patient-days, and the number of usershaving receiving services from specific responsibility centres, the volume ofservices delivered, etc. (form AS-478).

Annual activity report—This report indicates the direction in which thefacility is moving, its objectives, the results obtained, and other information.Facilities are also asked to comment on their financial situation.

(b) Financial Performance Measures and Indicators

Overview: Many facility financial performance indicators have been developed.Indicators of cost per act or by responsibility centre are also used to evaluatefacility financial performance.





A method to evaluate the length and cost of hospital stays (average length ofstay) for comparable cases has been developed and is used to evaluate therelative performance of hospital centres. Each hospitalization is assigned anAP-DRG and a relative resource level. This relative level is based on theMaryland structure of hospital charges. An expected cost per hospitalizationis also determined, factoring in hospital centres’ features (size, remoteness,university teaching, etc.).

Source of Data: The main databases used to measure health facilities’ financial performanceare the Financial and Operational Information System and, for short-stayhospitalizations, the MED-ECHO database.

Proposed Monitoring: The Ministry updates information in the public facility financial monitoringtrend chart on an ongoing, proactive basis.


NA


There is no direct link between funding and financial performance of publichealth facilities. Nevertheless, these facilities are required to comply with therequirements of the legislation on fiscal balance.


Working with regional boards on an ongoing basis, the ministry evaluates thequality of information provided and conducts monitoring to identify problemsand, as required, proposes appropriate measures.


Information related to facilities’ financial performance is disseminatedthrough various annual reports, which are described in further detail in thesection on retroactive financial monitoring measures.

Many indicators and tables are also presented in the statistics section of theMinistry of Health and Social Services’ Web site.




Management of the Monitoring ProcessResponsibility: Although the Regional Health and Social Services Boards are responsible for

closely monitoring the financial situation of all facilities in their territories, theMinistry of Health and Social Services specifically monitors the fiscal balanceof facilities experiencing budget problems.

Contact Information: Direction générale du financement, du suivi budgétaire et des technologiesde l’informationDirection du suivi financier1005 chemin Sainte-Foy, third floorQuebec QC G1S 4N4Telephone: (418) 266-5920 Fax: (418) 266-5858


NA

T h e F i n a c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a 2 2 5

QuebecRepor t ing P ract ices


Required Reporting ActivitiesTo Public: Regional board annual report

Hospital centre annual report

To HealthMinistry/Department:

Audited financial statement—The Regional Health and Social ServicesBoards must submit an annual financial report to the Ministry of Health andSocial Services. In addition to analysing the regional board’s internaloperating expenditures, this financial report must account for use of thebudget envelopes that the Ministry provides for the operation of facilities andcommunity agencies.

Trial Balance—Facilities must also submit their own annual financial reports(mainly in electronic format) with revenue, expenditures by responsibilitycentre, fiscal year financial results, etc.

To CIHI: Annual Hospital Survey—Hospitals submit their financial reports based onthe Quebec Hospital Reporting System to the province. Following validation,the Ministry of Health forwards the data tape to CIHI, where the detailedtransactions are mapped into the MIS Guidelines national chart of accounts.

Penalties for LateSubmission :

Annual report NoAudited financial statement NoInterim trial balance NoPeriodic financial reports NoHealth facility annual reports No


Accounting files based on the Canadian Hospital Accounting Manual(CHAM), updated and adjusted to take current accounting requirements intoaccount as well as specific characteristics of the funding formula generallyused in Quebec.


By law, the Auditor General has the power to audit the use of funds providedto regional boards and health and social services facilities.


Yes


Yes


QuebecRepor t ing P ract ices




NA


A surplus related to a facility’s primary activities may be allocated to thefacility by a decision of the regional board (after analysis). The surplus isadded to the facility’s equity. A facility may use a surplus for temporaryprojects to improve client services or for equipment purchases with, asrequired, authorization from the health and social services board.

If the fiscal year ends with a deficit, this must be factored into the facility’sequity. The facility must also adopt measures to eliminate this deficit when itcannot be absorbed, in whole or in part, by the organization’s accumulatedsurplus.


SaskatchewanBackground


Saskatchewan QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Saskatchewan Health.




Use of Financial Performance Indicators ...................................................239

ContextBeginning in 1993-94, 400 plus health facilities were amalgamated into 32health districts and one health authority.

Health districts provide a variety of services, and have the responsibilityand authority to plan and co-ordinate all health services within the district.






District Health Boards


32 District Health Boards and one Health Authority


District Health Boards have the responsibility and authority to plan and co-ordinate all health services in their district, including: acute care, supportivecare, home care, ambulatory care, emergency/ambulance services,addictions services, community services, mental health, and rehabilitation.


SaskatchewanBackground


Funding for acute care specialized hospital programs is provided byproviding target funding to specific health districts. Programs fundedinclude the following:• Integrated Renal Program (dialysis and organ donor)• Cardiac Catheterization• Magnetic Resonance Imaging• Nuclear Medicine• Computerized Tomography• Bone Mineral Density Testing• Specialized Respiratory Services• Poison Control• Medical Illustration• Medical Genetics• Enterostomal Therapy• Pediatric Transport• Lithotripsy

Services Excluded: Physician services are generally not funded throughthe health districts. In cases where health districts employ physiciansdirectly, districts receive a global amount of funding for medicalremuneration.


$752,479,062 (Source: CIHI)


SaskatchewanFunding Approaches




Scope Method Modifiers Data SourceOperating Comprehensive Population-based Import/export

AdjustmentSpending data




Targeted &HistoricalBased Funding

Service specific Policy-based None Spending data



Modifiers: Import/export adjustment


Used For: Approximately 90% of acute-care services funding provided to healthdistricts is based on the population needs-based funding pool.

Services funded by this method include: acute care, supportive care (i.e.,long term care), and home care.


Population needs-based funding was first used in 1994-95.

Last Major Revision: In 1995-96, population needs-based funding was changed to provide fundingfor both non-primary and primary acute care. Previously, population needs-based funding only provided funding for non-primary acute care.

2 3 0 T h e F i n a c i a l M a n a g e m e n t o f A c u t e C a r e i n C a n a d a



Previous Approach: Individual health facilities were line item funded. Funding was based mainlyon approved volumes of service, derived largely from past levels of use.

Restrictions: District Health Boards may reallocate funding among programs, but shouldnot move funds from community and home-based services to institutionalservices. Institutional services are defined as acute and supportive careservices.

Method Detail: The method described here is used to determine the allocation for acutecare. Two other similar population needs-based methods are used todetermine the allocation for supportive and home care.

Population need-based funding allocates funds to populations with thegreatest relative health needs. Funding is based on relative population sizeadjusted for:• the age and gender of the population served• the health needs of the district• patterns of service flow

Step 1. Each health district’s population is adjusted to reflect the particularage and gender distribution of the district for each service. This adjustment isbased on provincial utilization rates for each gender and age group. Therates are then applied to the number of people in each age-gender group ofthe district, and an age-gender adjusted population for the district isproduced.

Step 2. The district’s population is further adjusted for the health needs ofthe district. The three indicators of relative need that are used to measurethe health needs of the population are:• standardized mortality ratio for premature deaths. The premature death

rate is a relative measure of premature death. (It is calculated as theratio of deaths in population to the number of deaths expected if thedistrict has the same age and gender specific death rates as theprovincial population.)

• fertility factor; and• standardized low birth weight ratio.

Step 3. The district’s population is adjusted for the movement of residentsbetween districts. The population is increased for inflow of residents ordecreased to recognize an outflow of residents.

Step 4. Additional funding allocated to the needs-based funding pool for theyear is then allocated to those districts who are relatively under-resourced,based on their share of the adjusted population.

Step 5. This amount is added to the actual amount of needs-based fundingprovided to the health district in the previous year.




Modifier Detail: For 2000-01, in addition to the population needs-based funding calculationdescribed above, two additional factors were considered:• breadth of inpatient acute care services provided by districts relative to

the provincial average – in order to further recognize the variations in thecase intensity (and cost), priority was given to those districts thatcurrently provide the widest range of inpatient services (as measured bythe number of unique case mix groups provided within each districtduring 1998-99).

• districts’ ability to attract patients relative to the provincial average –consideration was given to the actual average time travelled by clients toaccess acute (inpatient or same-day surgical) services in each district.Priority was given to those districts that have been able to attract acutecare patients beyond those in their immediate catchment areas.



Modifiers: None


Used For: Capital funding is generally provided for capital construction cost only. Theprovince funds capital construction projects using a basic funding formula of65% provincial funding and 35% district contributions. In cases where theprogram involved is provincial in nature, the province funds 100% of theconstruction cost related to that program.

Capital construction projects are divided into three categories: (1) Group A—less than $500,000; (2) Group B—Less than $1,000,000; (3) Group C—greater than $1,000,000.

With a few exceptions, the province does not provide specific funding todistricts for capital equipment. Exceptions include:• Tertiary capital equipment funding is provided to the province’s two

tertiary care centres to assist them in meeting some of their tertiarycapital equipment needs; and

• Funding for capital equipment needs in the start up of specializedservices such as telehealth, as well as, for the testing of new technologythrough the establishment of pilot projects.




The Department also assists the districts with maintenance projects,however, they are expected to maintain the condition of facilities withoperating funds.


This approach was first used in November 1994.

Last Major Revision: The capital project review method was enhanced in 1999-2000.

Nature of Revision: The program was expanded to include occupational health and safety,energy management and maintenance initiatives. These initiativespreviously were not eligible for capital construction funding. The capitalevaluation process was also enhanced by upgrading the technicalassessment aspect of the capital review process. (see Evaluations ofCurrent Funding Approaches section below).

Previous Approach: Previously, the basic provincial funding formula for acute care capital fundingwas as follows:• Regional Hospitals, 70% provincial funding• Large community hospitals (50 or more Average Daily Census), 60%

provincial funding• Small community hospitals (up to 50 Average Daily Census), 50%

provincial funding• Community Health and Social Centres, 60% provincial funding to a

maximum of $27,000.

The above basic formula was further adjusted for additional factors such ascommunity tax assessments. The maximum provincial funding contributioncould not exceed 85%.

For long term care facilities, provincial funding was 85% of the approvedproject cost.

Method Details: District Health Boards are invited to submit requests for capital projects atany time throughout the fiscal year. Those received by a specified date eachyear are considered for the current year's budget.

Step 1. When projects requests are received by the Department of Health,they are categorized into Groups A, B and C (discussed above) and thenevaluated using three Need Categories (Life Safety, Facility, and Program).

Step 2. Projects are given an initial rating according to specified criteria afterthey are evaluated according to the need categories. The rating scheme is"high, medium, or low priority". Specific criteria for each category are usedto determine which rating a project is given.




Step 3. A number of factors are used to modify the initial rating. The initialrating primarily evaluates needs and the modification factors adjust for avariety of circumstances affecting the proposed resolution of the need.Modification factors can adjust the initial rating higher and lower. Thesefactors are outlined and grouped as: general factors, facility related factors,and program related factors.

Step 4. When Saskatchewan of Health determines which projects will befunded, the District is notified. At that time, the district is notified of anyadditional conditions that must be met to be eligible for provincial funding.

Capital project requests must include the following:• a fully completed copy of the Project Brief• a summary of how the project supports the district's annual health budget

plan including impacts to operations• an updated executive summary of the health district Capital Management

Plan (CMP) indicating how the proposal supports directions and prioritiesof the CMP and district’s facility structure

• an indication that there has been sufficient local consultation to ensurethat the scope is clearly established and that the stakeholders support theestimated costs

• evidence that the local contribution will not encumber operation and be inplace at the time of potential tender; and

• if submitting more than one Project Brief, prioritize them from highest tolowest.

Secondary Operating Funding Approach— Details(a) Targeted and Historical Based Funding



Modifiers: None


Used For: Approximately 10% of funding for acute services forms part of the targetedand historical based funding pools. Targeted funding directs funds to specialinitiatives and programs (e.g., renal dialysis, cardiac catheterization, medicalimaging services, etc.).

Historical based funding allocates dollars based on service/funding levels inexistence prior to the formation of district health boards.




Method Details: Approximately 10% of funding for acute care services forms part of thetargeted and historical based funding pools. Targeted funding directs newfunds to special initiatives and programs. These funds are generally directedto specialized hospital programs (e.g., renal dialysis, cardiac catheterization,medical imaging services, etc.) Historical based funding is used to maintainservice/funding levels in existence prior to the formation of district healthboards and ensure those programs that received targeted funding in the pastreceive additional funding in recognition of increased costs related to salaryincreases due to collective bargaining settlements, etc. Thus, the targetedand historical funding methods may direct funds to similar programs.

Targeted FundingStep 1. Department determines priorities of special program/initiatives.

Step 2. Available funding is distributed to the health districts based onDepartment priorities.

Historical FundingThe funding amount is comprised of the previous year actual and anincrease for inflation and collective bargaining.

Step 1. Funding to be provided for inflation and collective bargaining isdetermined.

Step 2. Any funding increase is provided to all health districts based on theirprior year’s prorated share of the funding pool.


(b) Other

Other SecondaryMethods:

Funding to cover the incremental costs of the 2000-01 collective bargainingagreement was allocated to health districts based on their prorated share ofboth the needs based and targeted/historical funding pools.




Information Accessed for Funding Calculations1. Saskatchewan Personal Registry System (populations, age and gender)2. Vital Statistics Data (birth and mortality indicators)3. CIHI Discharge Abstract Data

Evaluations of Current Funding ApproachesExternal Reviews: NA

Internal Reviews: Capital funding—Saskatchewan Health has reviewed the revisions to itscapital funding program and has found that the districts support theenhancements to the capital program. In particular, districts appreciate thefeedback on the final results of all proposal rankings considered in thereview, as this demonstrated the process to be open and transparent.

Approaches Being ConsideredFunding methodologies are under continuous review by SaskatchewanHealth. One factor that may influence future funding methodologies isSaskatchewan’s Commission on Medicare. Saskatchewan established aCommission on Medicare in June 2000. The Commission is expected torelease its final report in the spring of 2001.


Director, Integrated Financial Services Unit3475 Albert StreetRegina, SASKATCHEWAN S4S 6X6Telephone: (306) 787-1797 Fax: (306) 787-0218


The Funding User Group is made up of representatives from the healthdistricts. This committee has met over the years (particularly in the earlyyears of health district formation) to provide advice to SaskatchewanHealth with respect to funding methodologies.

Announcement: Funding levels are provided on the day the Province releases its ProvincialBudget. (March 29, 2000 for the 2000-01 fiscal year)


SaskatchewanPerformance Monitoring



Health Budget Plan—District Health Boards are required to submit anannual Health Budget plan. The plan is due May 15, 2000 for the fiscal year2000-01. The plan is intended to assist Saskatchewan Health to: (1) assesshealth district plans and activities in relation to provincial priorities, districtgoals and directions, and (2) fulfil the Minister's obligations to the legislature,public, and district health boards. The format has been modified for fiscalyear 2000-01 to include program schedules to facilitate preparation andreview of plans.

Quarterly Forecasts—Districts are required to submit quarterly forecastsand budgets for quarters 2, 3, and 4, one month after the last day of thequarter being reported. Only year-to-date actuals were required for the firstquarter of 2000-01 fiscal year.


Annual Report—District health boards are required to report annually (bylegislation) the following:• a report of the district health board’s services and activities and their

costs;• a detailed audited set of financial statements;• a detailed audited schedule of investments; and• a report on the health status of the residents of the health district and the

effectiveness of the district health board’s programs.

District health boards may provide this information in an annual report.

Financial Performance Measures and Indicators—The Department iscurrently working towards establishing financial performance measures andindicators.




Prospective Monitoring Practices— Details(a) Health Budget Plan

Content: Key components of the Health Budget Plan include:• Identification of Service Delivery/Planned Changes (major program

changes being considered, impact of these changes, arrangementsmade with bordering districts, key components of the implementationplan for each program, proposed fee increases, plans to improve thehealth of the population and the balancing of population health initiativeswith need for institutional/treatment services.

• Capital Construction Project Proposals (project proposals to besubmitted by May 15).

• Capital Equipment Information Requirements (current capital equipmentrequirement, planned expenditures for the current year, and plans forfinancing the expenditures).

• Information Technology Information Requirements (major acquisitionsand developments considered for the current year, and their costimplications).

Schedules included in the plan include: operating budget, summary ofplanned capital transactions, working capital, deferred revenue, borrowingrequest, capital equipment, and program services schedules.

Planning parameters are also provided. These include a list ofservices/programs the districts are expected to maintain, the expectation thatthe districts must comply with the one-way valve policy for home care andcommunity-based programs. Guidelines are also provided for consideringinitiatives that will result in program/service level reductions.

Process: Guidelines for the preparation of the health budget plan are provided bySaskatchewan Health. The guidelines include the following information anddirections:• changes necessary to achieve their surplus/deficit target for 2000-01

were to be identified in the plan;• direction that the changes should not proceed until the plan is approved;• an expectation that the districts will engage in discussions with their

service area partners and review efficiencies and interdependencies inprogram planning and service delivery as the Annual Health Budget Planis developed; and

• that Saskatchewan Health would review health plans for all districts byservice area.

Late Submission: No penalties for late or incomplete submissions.


District health boards are allowed to keep any operating surpluses and canuse the funds at their discretion.




If deficits occur, there is no commitment that Saskatchewan Health willprovide additional funding.

In the quarterly forecasts, if a district forecasted a deficit that was notaddressed at the beginning of the year, they are required to indicate how thiswill be managed in the current year and eliminated in future years.

(b) Quarterly Forecasts

Content: First quarter reports were only required to contain year-to-date actualinformation. Second, third and fourth quarter reports are required to containyear-to-date actuals, as well as budget and forecast information.

The information required is primarily financial and is outlined in quarterlyfinancial schedules: statement of financial position, statement of operations,statement of capital transactions.

Process: Quarterly reports are due on the last day of the month following the end ofthe quarter.

Late Submission: No penalty for late submissions.

Planned OperatingSurplus/Deficit:

If a deficit is forecasted, the notes to the quarterly reports must include at aminimum an explanation of: (1) how the district plans to manage the deficit inthe current year and (2) how the district plans to eliminate it in future years, ifthis was not addressed at the beginning of the year.





Content: Health districts are required to prepare and submit an “annual report” byJune 30 each year. Annual Report guidelines are available to assist healthdistricts in the preparation of the annual report.

Districts are required (by legislation) to provide the following information tothe Minister of Health on an annual basis:• a report of the district health board’s services and activities and their

costs;• a detailed audited set of financial statements;• a detailed audited schedule of investments; and• a report on the health status of the residents of the health district and the


This information may be included in their annual report.


Overview: Saskatchewan Health is currently working towards establishing financialperformance measures and indicators. Currently, District health plans,financial statements and quarterly reports, are reviewed and analyzed on aregular basis.


In reviewing the above reports the following key information is reviewed andanalyzed:• surplus/deficit positions (actual year-to-date, budget , forecast)• working capital position• cash flow position• capital cash inflows and outflows• revenue and expenditures by program including percentage increase

and decrease.

Source of Data: • Audited financial statements• Health plan financial schedules• Quarterly financial reports



NA


NA





N/A


N/A

Management of the Monitoring ProcessResponsibility: Saskatchewan Health

Contact Information: Saskatchewan Health, Financial and Management Services Branch,Integrated Financial Services Unit.


Director, Integrated Financial Services Unit• Manages the development and implementation of financial reporting and

financial management policies/practices for the province’s health districts• Co-ordinates the health districts’ budgeting and forecasting processes• Directs and guides the analysis of health district financial performance

Assistant Director, District Financial Services• Develops, implements and monitors policies relating the health district

financial reporting and financial management practices• Provides advice and recommendations on accounting practices and

financial management issues

District Financial Consultants (5 staff)• Analyze health district annual financial plans, interim reports and year-

end financial statements• Provide financial advice and expertise to health districts and department

branches


SaskatchewanRepor t ing P ract ices



To Public: Public Meetings—at least twice in each fiscal year, a district health boardmust conduct a board meeting to which the general public is permitted. Atone of the meetings the district health board is required to present:• An operation and expenditure plan for the next fiscal year; and• A report on the health status of the residents of the health district and the



Annual Report—to be submitted to Saskatchewan Health by June 30 eachyear. A guide for preparing annual reports has been distributed to thedistricts by Saskatchewan Health.

Audited Financial Statements—The Health Districts Act requires districtsto submit audited financial statements and an audited schedule ofinvestments within 3 months of the fiscal year end (June 30). Health boardsare also asked to submit an internal control opinion and legislativecompliance opinion by July 31. Health districts are responsible forgathering and submitting affiliate audited financial statements, internalcontrol opinions, and legislative compliance opinions by the same deadlines.

• Federal cost sharing claim information is to be submitted by June 1 eachyear.

• Schedule on the amount of administration and board costs is to besubmitted with the audited financial statements, within three months ofthe fiscal year end (June 30).

Quarterly Financial Reports

Health Plan

Trial Balance—no electronic trial balance submission is required at thistime. However, this may be required in the future as the Department ofHealth is currently developing a provincial chart of accounts to obtainstandardized reporting.

To CIHI: Annual Hospital Survey—Districts are required to prepare the AnnualHospital Survey and submit it to Saskatchewan Health by July 31 each year.Saskatchewan Health forwards these surveys to CIHI.


Annual Report NoAudited Financial Statement NoInterim Trial Balance Reports NoQuarterly Reports NoAnnual Hospital Survey No


SaskatchewanRepor t ing P ract ices



The Department plans to issue a draft provincial chart of accounts by the endof the 2000-01 fiscal year. The draft chart of accounts will be compatiblewith the national MIS Guidelines.


All 32 district health boards and the one health authority appoint an auditor.The Provincial Auditor performs cyclical audits of 10 district health boardsper year. The Provincial Auditor relies on the work of the appointed auditorsto perform his audits.


• Department staff are involved in the districts’ audit planning meetings,where necessary.

• The Department issues a Financial Reporting guide that outlines thefinancial reports format and policies districts must follow in preparingtheir year end financial statements.

• The Department follows up with health districts on any issues identifiedby their appointed auditors or the Provincial Auditor to ensure resolutionof issues identified.


Draft year-end financial statements are reconciled by the Department ofHealth to the funding amounts provided during the year.



Health districts use the Restricted Fund Accounting method in accordancewith CICA Handbook section 4410. As a result, for the health districts’restricted capital fund, revenue is recognized in the period it isreceived/receivable (normally via a capital funding agreement) andexpenditures reflect the amortization of assets over their useful lives.


District deficits are not funded. Districts are allowed to keep their surplus.


YukonBackground


Yukon QuickfindThe information describing funding approaches, performance monitoring, and reporting practicespresented in this section was provided and reviewed by Yukon Territories Government.



Primary Capital Funding Approach.......................................246

Use of Financial Performance Indicators ...................................................251Financial Statement Reporting...................................................................253


30,633 (Statistics Canada, July 1, 1999)Whitehorse has a population of 23,000.




Hospital


There are 2 hospitals in the Yukon–Whitehorse General Hospital (50 beds-49 acute inpatient, 1 mental health inpatient, 10 day surgery beds) andCottage Hospital (10 beds). Most acute care requiring more than a fewdays stay is provided by Whitehorse or patients are transferred to anotherprovince (British Columbia or Alberta).


Government and hospitals agree on services that are to be provided.Whitehorse provides: acute care, mental health, rehab medicine(physiotherapy, occupational therapy), diagnostic imaging, pharmacy, lab,administration and support services, day-surgery, emergency room,visiting specialists clinics (from other provinces, ophthalmologists,orthopaedic surgeons, ears-nose-throat), cataract, breast screening, FirstNations Health Program (FN (7,000) where a liaison workers deals withpatients and families—social worker).

Services Excluded: Physician services, drugs for outpatients, home care,community services (which are funded through a separate program of theYukon Territory Government).


$24,836,258 (Source: CIHI)


YukonFunding Approaches




Scope Method Modifiers Data SourceOperating Institutional Ministerial discretion

and GlobalNone Spending data




None

Primary Operating Funding Approach – DetailsScope: Institutional

Method Used: Ministerial discretion and Global



Used For: Services provided by the acute care hospitals as specified in the agreement(see above).


Since 1998-99 when the government implemented the 3 year contributionagreement.


Previous Approach: The Yukon Hospital Corporation was created in April 1993. From 1993 to1998, the hospitals were funded globally, on an annual basis.

Restrictions: Under the contribution agreement, hospitals must use funds for the servicesthat are contracted, but hospitals can use discretion in achieving efficiencies,provided that contracted service levels are maintained.




Method Details: In 1997, 3 years ago, the government conducted an operational review of thehospitals. The outcome of this was a contribution agreement specifyingthe base budget for the 3 fiscal years ending March 2001. Hospitalrepresentatives were involved in the agreement.

For the last two years, take prior year budget and add salary increaseequivalent to government workers. No adjustments for increases in generalsupplies and non-salary expenses. Adjustments may be made forextraordinary increases, such as significant increase in chemotherapyservices.

Another contribution agreement is being planned to begin fiscal year 2001-02.

Step 1. In 1998-99, a new base amount was determined by the operatingreview. Then a 3-year agreement was established for the annual baseamount.

Step 2. Each year, following the budget submission, the government mayadd adjustments to the base amount for salary increases. These are basedon union contracts and other labour agreements. No adjustments are madeto the base for non-salary increases.

Step 3. Operating funds forwarded to hospital are equal to the adjustedbase.

Step 4. At year end, surpluses/deficits are reviewed. Justifiable deficits,such as those for increased fuel and drug costs would most likely be fundedby the government. Where these types of increased costs are likely to beongoing, funding will be added to the base for future years.

At the beginning of the year, the hospitals are given the operating funds in alump sum amount and are allowed to invest these at their discretion.

Revenue from other sources includes: base funding interest and revenue fortreating out of territory patients.

Modifier Details: No additional funds are flowed to the hospital during the fiscal year.






Method Used: Project-based



Used For: Capital requests are required for new equipment, or major buildingrenovations over $50,000, or where the purchase of new equipment isrequired for new programming or will have a significant impact on operationalfunding requirements.


Has been in place since 1993




Method Details: A goal of the Government with respect to capital funding is the provision ofdiagnostic support based on clinical evidence of efficacy and efficiency,reduction of reliance on out of territory services, cost efficiency, and patientservice requirements.

The global funding agreement includes an annual contribution of $300,000for ongoing capital replacement costs.

Hospital can also submit a special capital request for new initiatives such asCT Scan. Hospital draws up a business case, government discusses withhospital then request goes The Management Board of the Government, whomakes the final decision on capital and operating budgets. The relatedoperating costs must also be included in the business case. Government willconsider whether it is more advantageous to purchase or lease theequipment.

Management Board must balance competing demands between differentsectors such as education and health when making capital fundingallocations.

The addition, expansion, or replacement of equipment for any hospital-basedservices can be considered in capital funding requests; and buildingrenovations in excess of $50,000.




Step 1. $300,000 provided annually through contribution agreement.

Step 2. Hospital requested to submit additional requests on annual basis,when Governmental capital budget for following fiscal year is beingprepared.

Step 3. Hospital can also submit requests when need is identified.

Step 4. Requests reviewed by Department and submitted to ManagementBoard.

Step 5. Final funding decisions are made by Management Board.

Step 6: Approved funding is provided to hospital through contributionagreement specifying the use of funding.



Method Used: NA

Modifiers Used: NA

Data Source: NA

Used For: NA

Method Details: NA





Information Accessed for Funding CalculationsThe following reports submitted by the hospitals to the government:

Monthly financial statementsYear-end audited financial statementsMonthly statisticsAnnual statistics

Discharge abstracts (acute and day-surgery) are submitted to CIHI.

Evaluations of Current Funding ApproachesExternal Reviews: NA

Internal Reviews: NA

Approaches Being ConsideredThe hospital would like to come up with a funding basis for taking intoconsideration increases in supply costs and salary increases and workloadincreases.


Yukon Territories Government


No involvement by hospital in the funding allocation other than submissionof the operating budget during the period a contribution agreement is ineffect.

Discussions with the hospital would occur prior to the development of anew funding agreement.

Announcement: Usually February prior to the new year.


YukonPerformance Monitoring



Annual Budget Plan—Hospitals are required to submit budget plan for thenext fiscal year, by September 30. These include financial and statisticalinformation (related to workload), as well as justification for budgetincreases.


Annual Report—Monthly Financial Statements are required within 20 daysfollowing month end. A summary sheet that explains variances and reasonsfor their occurrence, as well as plans for how to manage to budget areincluded.

Financial Performance Measures and Indicators—The hospital providesinformation to the department which identify occupancy and workloadstatistics with comparison to prior years.




Prospective Monitoring Practices— Details(a) Annual Budget Plan

Content: Financial and statistical information.

Process: Government reviews the hospital’s budget submission; and, if reasonable,includes in Health and Social Services Department’s Budget submission,Management Board makes funding allocation decisions usually by Jan 30,and forms the Government’s budget, which includes all departmentalbudgets. The budget is usually tabled in the legislature sometime inFebruary. Once tabled, the information is public and can be shared with thehospital.

After submitting a more generalized global request to the Government, thehospital develops a more detailed budget based on information from hospitaldepartments.

Liaison meetings are held with the government on a monthly basis. Thus, alot of detailed information is not required with the annual budget submission.

Late Submission: If a submission is received too late from the hospital to be included in thegovernment’s budget, base funding would be maintained at the same levelas was provided in the prior year.


The Contribution Agreement requires the hospital to operate within budget.If there is a deficit, the government will evaluate reason for deficit and mayfund the deficit depending on the results of the evaluation. Hospital isallowed to keep operating surpluses. These can be used to fund future orprior year deficits using a 3-year time frame.





Content: Audited Financial Statements, Yearly Statistical Summary.

The hospital has an annual public meeting, where the community can cometo the hospital to hear a report on the hospital's past performance and futuredirections.


Late Submission: NA


Overview: White Horse General Hospital is planning to voluntarily submit a corporatescorecard to the government.

White Horse General Hospital has initiated the development of a balancedscorecard. Every department has had to develop a balanced scorecard andperformance measures. The hospital is examining the Ontario HospitalAssociation balanced scorecard approach and its 4 perspectives to see howthese might apply to the hospital. From these efforts, a corporate scorecardwill be developed.


In its balanced scorecard effort, White Horse General Hospital is attemptingto create all financial indicators in the Ontario Hospital Association reportcard.

Source of Data: MIS data

Proposed Monitoring: Part of the contribution agreement is that the government has access to anyhospital information.


Retention of surplus and freedom to use at hospital's discretion.


NA


White Horse General Hospital intends to calculate the measures for its ownscorecard.





The hospital’s annual report currently includes statistical workloadinformation, and may include scorecard information in the future.The Government will be working in conjunction with other provinces to meetthe public accountability requirements for the Federal funding. This maytake the form of a health scorecard.

Management of the Monitoring ProcessResponsibility: 1. Yukon—The Director of Insured Health Services monitors funding and

statistical variances2. Hospitals or Regional Health Authorities

Contact Information: Health and Social Services


Director of Insured Health Services monitors funding and statisticalvariances, and identifies concerns to the Assistant Deputy Minister, HealthServices. The Assistant Deputy Minister will brief the Minister whererequired. Approved adjustments in funding will be identified in Departmentalsupplementary funding requests.


YukonReporting Practices



To Public: Annual Public Meeting


Annual Audited Financial Statements—hospitals are required to submitannual audited financial statements.

Monthly financial statements are also required in hard copy. No electronicsubmissions, such as the trial balance, are required at this point.

To CIHI: Annual Hospital Survey—is compiled by the government and submitted toCIHI.


Annual Budget Plan NoAnnual Public Meeting NoAudited Financial Statement NoMonthly financial statements NoAnnual Hospital Survey No

Audit, Reconciliation and Accounting PracticesAccounting RecordsMaintained in MISGuidelines Format:

Yes. The national MIS Guidelines have been adapted for use by Yukon.


NA


Hospital hires its own auditor in producing annual financial statements.


None required. The only explanation provided is between unaudited year-end financial statements submitted to the governmental and the auditedfinancial statements.

Fiscal Year End: March 31.


Use deferral method of revenue contributions for capital purchases.(Deferred capital contribution).


YukonReporting Practices


Treatment ofSurpluses/Deficits:

The Yukon Territories Government will fund operating deficits, providedthese are satisfactorily justified. For example, a deficit resulting from higherfuel costs or increased chemotherapy costs would be funded. Thesettlement occurs at year-end.

The contribution agreement provides service volume guides. If asignificant increase in the service volume occurs, funding requirementswould be reviewed by the Government.


Annex 1 — Additional Information on the MIS Guidelines

Annex 1— Additional Information on the MIS GuidelinesThe MIS Guidelines are national standards that provide an integrated approach to managingfinancial and statistical data related to the operations of Canadian health serviceorganizations.

The MIS Guidelines address information at the functional centre and service recipient-specific level, but do not encompass information related to the care, treatment or clinicalstatus of the service recipient, or attempt to quantify or assess the quality of such services.

They reflect management information principles and a conceptual framework that togetherprovide an integrated approach for the collection, integration and reporting of financial,statistical and clinical data.

Management Information Principles

A number of principles considered essential for the development of national guidelines formanagement information systems are incorporated into the overall design of the MISGuidelines. These include:

Relevancy—The MIS Guidelines were created to ensure that health service managers havethe means to collect financial, statistical and service recipient-related data that is relevant tomanagement needs. They are structured to provide information that is action-oriented andaddress such issues as resource accountability, cost containment, productivity enhancement,and quality assurance, topics that are of critical concern in today's changing health careindustry.

Comprehensiveness—The MIS Guidelines provide a comprehensive methodology forcollecting, processing and reporting information for management purposes. They arestructured to identify the specific management information needs of functional centremanagers within the context of the overall information requirements of the health serviceorganization and its diverse groups of health care professionals, and provide an extensiveinfrastructure to ensure the transformation of data into comprehensive managementinformation.

Consistency—The collection, processing and reporting of financial, statistical and clinicaldata must be unbiased, reliable and consistent to allow meaningful comparisons over timeand between organizations. The MIS Guidelines, through the identification and definition



of data elements, the refinement of accounting principles and procedures, the developmentof workload measurement systems, and the creation of indicators, have developed standardsto ensure consistency in the treatment of management information.

Conciseness—The introduction of computer technology has resulted in a proliferation ofdata supposedly intended for management's use. However, too much "information" is oftenas bad as too little. Too much data can obscure information, thereby decreasing the user'sability to effectively use systems expected to improve productivity and service recipient care.A key feature of the MIS Guidelines is the organization of data for purposes ofconsolidation. The hierarchical coding of functional centres, as well as financial andstatistical data, facilitates concise reporting and supports detailed analysis.

Sensitivity—The collection and reporting of information must be sensitive to discretechanges in operations in order to provide meaningful insights into the causal factors andresults. The identification and integration of financial and statistical data in the MISGuidelines provides users with information at sufficient levels of detail to probemanagement reports and assist in the interpretation of operational trends.

Adaptability—To ensure the widespread use of national guidelines, guideline concepts andprinciples must be adaptable to health service organizations that differ in size, affiliation,specialization and level of automation. CIHI’s goal is to assure that the MIS Guidelines areapplicable to the management information needs of health service organizations throughoutCanada. As such, the MIS Guidelines adhere to nationally accepted accounting principles,incorporate a flexible data collection and reporting framework, provide functionalspecifications for finance and service recipient system applications, and promote the use ofstandardized workload measurement systems.

Conceptual FrameworksThe MIS Guidelines are based on frameworks that enable an integrated approach for bothmanaging information and utilizing management information, and include the following:

Management Information Systems Application Framework—In order to provide managementinformation, data must be identified, defined, collected, processed and then reported. Thisframework provides a set of functional specifications that describe major system functions,data flows, interfaces, inputs and outputs of finance-oriented and service recipient systems,as well as describing the mechanics (manual or automated) by which data is collected,processed, integrated and hence transformed into information for management reporting.

Functional Centre Framework—This framework is a five-level hierarchical arrangement offunctional centres that recognizes the diversity in size and specialization of health serviceorganizations, and provides a method of organizing financial and statistical information forboth internal and external reporting purposes.



Costing Methodology Schematic Diagram

Indirect Cost Allocation

Administrative and Support,and Select Education*

Functional Centres

Nursing Inpatient/Resident, Ambulatory Care,

Diagnostic andTherapeutic, and Community andSocial Services Functional Centres

Health Service Organization/Logical Entity

Research, RemainingEducation** and

UndistributedFunctional Centres

Service Recipients

Service Recipients -Uniquely Identified

Demographic & Clinical Data

Grouped

Unallocated

Service Recipients -Not Uniquely Identified

ServicesServices Services

GroupingMethodology

Program Physician Other

FUNCTIONALCENTREDIRECTCOST

REPORTING

SERVICERECIPIENTREPORTING

FUNCTIONALCENTREFULLCOST

REPORTING

DirectResources

DirectResources

DirectResources

Direct and IndirectResources

Direct and IndirectResources

Research, RemainingEducation andUndistributed

Functional Centres

Nursing Inpatient/Resident, Ambulatory Care,

Diagnostic and Therapeutic, andCommunity and Social

Services Functional Centres

Services Services

Service Cost Distribution

* Audiovisual and In-Service Education

** Library, Medical Illustration and all Formal Education accounts



Functional Centre Direct Cost/Functional Centre Full Cost/Service Recipient Reporting Frameworks—These frameworks work in concert to provide an integrated approach for collecting,processing, reporting, and using management information for decision-making purposes atthe functional centre and service recipient-specific levels.

The Functional Centre Direct Cost Reporting Framework builds on the Functional CentreFramework, linking revenues, expenses, statistics and indicators to provide a comprehensivepicture of the functional centre's resource utilization, activity and productivity.

A principal component of this framework is the various workload measurement systems(WMS) that use standardized units of time for measuring and recording the volume ofactivity provided by a specific functional centre.

Functional Centre Direct Cost Reporting addresses the management information needs offunctional centre managers by providing a set of guidelines and standards that assist indetermining the volume, costs, and kinds of resources consumed to provide a specificservice within a particular functional centre.

Functional Centre Full Cost Reporting includes both the direct operating expenses incurredfor labour, material, and equipment, and the indirect expenses allocated from Administrativeand Support and select Education Services. These direct and indirect expenses, recorded indollars, are referred to as the inputs to functional centre reporting. The outputs aremeasured through the use of a workload measurement system and are expressed in terms ofworkload units or units of service.

Since functional centre reporting produces information relating to the utilization offunctional centre resources and the production of outputs, managers can use thisinformation to more effectively monitor and control operations for which they areaccountable.

Service Recipient Reporting changes the focus from the functional centre to a specificservice recipient. It provides a more complete picture of how medical, nursing, diagnostic,therapeutic, and support services are utilized in the treatment of individuals or variousgroups, whether uniquely identified or not. Service recipient reporting transcends functionalcentre reporting to demonstrate the impact of practice patterns, programs, services, and casemix groups on functional centres and the health service organization as a whole.

Service recipient reporting is designed primarily to meet the information needs of utilizationand physician managers, senior management, board members and policy makers in that itprovides service organizations with a means of monitoring resource utilization andcontrolling expenditures. It may also yield important resource utilization information for thefunctional centre manager as the reporting will identify the users of their services, in terms ofspecific service recipients, physicians, programs, etc. Such information proves useful for



planning and budgeting purposes, especially when projecting the impact of expanding ordownsizing of health service organization operations.

Excerpted from Chapter 1, “Introduction to the MIS Guidelines”, Guidelines for ManagementInformation Systems in Canadian Health Service Organizations, CD ROM, 1999, Canadian Institutefor Health Information, Ottawa.


Annex 2 — Glossary of Terms

Annex 2— Glossary of TermsAnnual Hospital SurveyThe national database contains financial and statistical data relating to Canadian hospitals.Starting fiscal 1995/96, the database was re-engineered by CIHI so that it was based on theaccount structure contained in the Guidelines for Management Information Systems inCanadian Health Care Facilities (MIS Guidelines). Statistics Canada holds historical datafrom 1932.

Annual Hospital Survey Data Quality Assessment

For data reported to the Annual Hospital Survey data quality is assessed from theperspective of usability. The approach seeks to answer the questions: How complete andaccurate is the provincial data? and, What issues must be kept in mind while performingnational/inter-provincial analyses?

The approach examines the quality of provincial data from five perspectives:

Perspective ExplanationMinimumReporting

Determines if the required financial and statistical data have beensubmitted from every region or hospital in the province. The requireddata include activity statistics, balance sheet financials, workload,expenses, non-hospital information (where applicable). It also checksthat regions and hospitals have a balanced set of books.

TransactionValidity

Checks that technical specifications are met. For example, this includes:whether revenues are negative, statistics are positive, balance sheetaccounts have zero filled secondary accounts, the majority of expensesand statistics are reported in the functional centres and not in theaccounting centres, and whether hours and compensation are reportedacross the broad occupational groups.

HistoricalConsistency

Checks for large changes in key statistical and financial variables fromyear to year.

CombinationReporting

Checks for required associations between certain variables. For example,statistics must be matched with expenses; hours and compensationshould be matched across occupational groups and compensation/hourtypes. It also checks that admissions roughly equal separations.

RelationalValidity

Checks for large differences in key performance ratios from year to year.Ratios are also checked for reasonableness against national averages.



After all the edit checks in each of the five areas has been completed, an overall ranking isassigned to the provincial/territorial data. Rankings are assigned based on the degree towhich any inconsistencies, omissions, or errors in the data will affect the utility of the data inanalytical exercises such as benchmarking or performance measurement. There are fourpossible rankings:

Grade Name Explanation1 Use without

restrictionIf any issues have been identified they are not deemed to affect theuse of the data.

2 Use withminorrestrictions

These are typically minor issues linked to under-reporting of certainstatistical fields, underreporting of statistics in functional centres orother transaction inconsistencies, inconsistent historicalcomparisons, some statistics with no expenses, aggregated reportingof certain fields (e.g., compensation), or mid-range provincialresponse rates. While users are cautioned to be wary of certainpoints, the interpretation and utility of the data is not seriouslythreatened.

3 Use withmajorrestrictions

These tend to be more systematic issues that may affect theinterpretation and utility of the provincial data. Examples are largegaps in the data (e.g., missing statistical/expense fields), lowprovincial response, many statistics with few or no associatedexpenses, or data that is grossly inconsistent across time and/oragainst national averages.

4 Unusable Data with critical errors that prevent the use of the data.

The results of the data quality assessment are communicated to the data supplier; this mayprompt a resubmission.

Average Length of Stay (ALOS) DefinitionThe average length of stay in hospital is calculated by dividing the total number of inpatientdays across all patients by the total number of separations (departures from hospital whetheralive or dead). Variations in average lengths of stay between the provinces and territoriesmay be attributed to the differences in definitions for reporting facilities between thejurisdictions (e.g., all levels of care are reported for British Columbia, unlike otherprovinces).

The average LOS may also be calculated by summing the length of stay of all cases of aparticular CMG and dividing by the total number of cases. The median LOS is calculated byranking all the length of stay values and identifying the value below which half the cases fall.The average LOS can have a decimal value because calculating an average involves a divisionthat may not result in an integer. The median LOS, however, is not an average, but an actualvalue in the data that represents the 50th percentile. Since all LOS values are integers, themedian LOS will be one as well.



Comprehensive Ambulatory Classification SystemA grouping methodology that has been developed by CIHI for use in all hospital-basedambulatory care settings (i.e., emergency, day surgery and clinics).

Case Mix GroupA system (grouping methodology) devised by CIHI that categorizes hospital patients intogroups based on similarities of diagnosis, procedure, length of hospital stay and resourcerequirements.

ComplexityComplexity identifies diagnoses, other than those used for CMG assignment, for whichprolonged LOS and/or more costly treatment might be reasonably expected. It reflects theinteraction of a patient’s multiple diagnoses on LOS/resources within each CMG. Acomplexity-derived variable was introduced to DAD reports April 1, 1997. Severity is aclinical evaluation of how seriously ill a patient is within a given illness.

Day Procedure GroupA grouping methodology developed by CIHI that is used for day surgery patients

Grouping MethodologyA system that categorizes patients into discrete groups based on similar clinicalcharacteristics and/or similar patterns of resource use.

HospitalAn institution where patients are accommodated on the basis of medical need and areprovided with continuing medical care and supporting diagnostic and therapeutic services,and which is licensed or approved as a hospital by a provincial/territorial government.

Major Clinical Category (MCC)A categorical system developed by CIHI based on the ICD diagnostic categories and thediagnosis most responsible for the greatest portion of individual patient length of stay; isdivided into medical and surgical partitions.

MIS GuidelinesThe Guidelines for Management Information Systems in Canadian Health ServiceOrganizations (MIS Guidelines) are a set of national standards for gathering and processingdata, and reporting financial and statistical data on the day-to-day operations of a healthservice organization. They also provide a framework for integrating clinical, financial andstatistical data when service recipient costing is done.



Plx LevelThe Complexity Level assigned to the cases by the CMG grouping methodology.1. No Complexity2. Complexity related to chronic condition(s)3. Complexity related to serious/important condition(s)4. Complexity related to potentially life-threatening condition(s)

Resource Intensity WeightA resource allocation algorithm, devised by CIHI for estimating the relative hospitalresources used for a typical inpatient or day surgery case; used with Case Mix Groups tointegrate the clinical and financial aspects of hospital care.


Annex 3 — Provincial/Territorial Contributors

Annex 3— Provincial/Territorial ContributorsAlbertaTapan Chowdhury—Alberta Health & WellnessJeanette Machtemes—Alberta Health & WellnessMichael Lynch—Alberta Health & WellnessShaukat Moloo—Alberta Health & Wellness

British ColumbiaMartha Burd—Ministry of Health and Responsible for SeniorsJohn Cheung—Ministry of Health and Responsible for SeniorsAlan Thomson—Ministry of Health and Responsible for Seniors

ManitobaEd Golembioski—Manitoba HealthBrian Riddler—Manitoba HealthStephen Willetts—Manitoba Health

New BrunswickNancy White—New Brunswick Department of Health and Wellness

NewfoundlandMoira Hennessey—Department of Health and Community ServicesKaren Legge—Department of Health and Community ServicesDerek Penney—Department of Health and Community ServicesJim Strong—Department of Health and Community Services

Nova ScotiaGary Glessing—Nova Scotia Department of HealthFlorence Hersey—Nova Scotia Department of Health

OntarioDean Martin—Ontario Ministry of Health and Long Term CareJohn McKinley—Ontario Ministry of Health and Long Term CareAnicia Rajani—Ontario Ministry of Health and Long Term CareJohn Szpik—Ontario Ministry of Health and Long Term Care

Prince Edward IslandBill Hook—Department of Health and Social Services


Annex 3 — Provincial/Territorial Contributors

QuebecHung Do—Québec Ministère de la Santé et des Services sociauxNormand Lefebvre—Québec Ministère de la Santé et des Services sociaux

SaskatchewanRosanne Anderson—Saskatchewan HealthBarry Lacey—Saskatachewan HealthShana Smith—Saskatchewan Health

YukonRon Brown—Yukon Hospital CorporationJoanne Fairlie—Yukon GovernmentNick Leenders—Yukon Hospital Corporation


Annex 4 — References

Annex 4— References

AlbertaBalanced Budget and Reserve Requirements. Memo to Chief financial officers, RHAs and

Regional health boards, April 19, 1999 from Aslam Bhatti, Chief Financial Officer,Alberta Health and Wellness

Financial Directive 16, Requirements for financial statements, Alberta Health and Wellness.

Financial Directive 17, Quarterly Financial Reports, Alberta Health and Wellness.

Health Authority Business Plan and Annual Report Requirements, 2000-2001 to 2002-2003,December 1999, Alberta Health and Wellness

Management Discussion and Analysis: A Guide for Preparing MD&A for Inclusion inHealth Authority Annual Report, January 2000, External Financial Reporting, AlbertaHeath and Wellness.

Policy Statement 16.1, Chart of Accounts and Account Classification, Alberta Health andWellness

Policy Statement 16.2, Sample financial statements, Alberta Health and Wellness

Regional Health Authority Global Funding Manual 2000-01. Health Resourcing Branch,Alberta Health and Wellness, March 2000

British Columbia1999/2000 Health Authority Funding, Budget and Reporting Requirements (document

binder from BC MOH)

ManitobaMemorandum from Stephen Willetts, Manitoba Health, "Internal Programs and

Operations", September 5, 2000.

Manitoba Health, "Guidelines for the Preparation of Regional Health Authority Health Plans2001/2002 and Beyond".

Memorandum from Stephen Willetts and Donna Forbes, Manitoba Health FinancialServices, "Re: price and volume increases", April 6, 2000.



Manitoba Health, "Equipment Policy", April 1997.

Manitoba Health, "Health Care Facility Capital Projects: Funding, Accounting, andReporting Requirements", September 1, 2000.

Memorandum from Susan Murphy, "Third Quarter Financial Report and Year-EndProjections", December 1999.

Manitoba Health, "Community Health Needs Assessment Guidelines", June, 1997.

New BrunswickNew Brunswick Department of Health and Community Services, Presentation slides,

"Update on MIS Data Quality Project", July 2000.

New Brunswick Department of Health and Community Services, Presentation slides, "RHC(Region Hospital Corporations) System Planning Committee Funding Group".

New Brunswick Department of Health and Community Services, Presentation slides,"Province of New Brunswick Capital Account".

New Brunswick Department of Health and Community Services, "The New BrunswickRegion Hospital Corporation (RHC) Balanced Scorecard".

New Brunswick Department of Health and Community Services, "Building on ourstrengths: A framework for region hospital corporation accountability", February2000.

New Brunswick Department of Health and Community Services, Presentation slides, "NBHealth Regions", "National Spending Levels–Hosptials", "Growth in spending".

NewfoundlandMemorandum from Karen Legge, Government of Newfoundland and Labrador,

(Background information for study), September 14, 2000.

Health Care Boards Budget Monitoring Review Committee, "Budget Monitoring for HealthCare Boards, Phase 1 Report–Final Report", September 2000.

Memorandum from Jim Strong, Government of Newfoundland and Labrador, "1999/2000Annual Reporting Requirements", July 7, 2000.



Government of Newfoundland and Labrador, "Financial Statement PresentationRequirements, 1999/2000".

Government of Newfoundland and Labrador, "Budget Preparation for Health BoardsFinancial Template".

Nova ScotiaNova Scotia Department of Health, "Program/System Description - Capital", March 2000.

Nova Scotia Department of Health, "Program/System Description - Grants &Contributions - Hospitals & Other Programs", March 2000.

Ontario2000/2001 Hospital Operating Plan Requirements. Ministry of Health and Long Term

Care, February, 2000 (Document).

An Approach for Funding Small Hospitals, JPPC (Document).

Capital Planning Manual: A guide to the capital planning process, Ministry of Health,Ontario, December 1996.

Collaco & Milnes. Ontario Hospital Cost Distribution Methodology by Patient Activity,JPPC Reference Document #9-4, March 2000.

Hospital Quarterly Report - August 18, 2000 (Draft).

Ladak, Nizar. How Ontario Hospitals are Funded: An Introduction, JPPC ReferenceDocument RD#6-11.

"Ontario Hospital Financial and Statistical System", by John Szpik and Kamini Milnes, June2000, MOH/LTC. (Presentation slides).

Ontario Hospital Reporting System, Version 4, Ministry of Health, Overview Text.

Ontario Ministry of Health and Long Term Care, Trial Balance Submission Specificationsfor Ontario Hospital Reporting System, June 2000.

Small Hospital Funding Model using 1996/97 Data, JPPC, RD#7-9, September 1998.



Trial Balance Submission Specifications for Ontario Hospital Reporting. Ontario Ministryof Health and Long Term Care. Version #4.0 (for 1999-2000 submission), June2000.

Prince Edward IslandSurvey form completed by Bill Hook - Prince Edward Island, Department of Health and

Social Services.

QuebecAssemblée nationale, première session, “Loi sur l’équilibre budgétaire du réseau public de la

santé et des services sociaux”, le 28 mars 2000.

Lettre de Pauline Marois, Québec, ministère de la Santé et des Services sociaux.“Orientations ministérielles et budgétaires 2000-2001”, le 29 mars 2000.

Québec, ministère de la Santé et des Services sociaux, “Circulaire: Suivi de l’équilibrefinancier des établissements publics du réseau de la santé et des services sociaux—Exécution du budget”, le 15 mai 2000.

Québec, ministère de la Santé et des Services sociaux, “Circulaire: Suivi de l’équilibrefinancier des établissements publics du réseau de la santé et des services sociaux—Planification budgétaire, le 9 mai 2000.

Québec, ministère de la Santé et des Services sociaux, “Notes explicatives relatives àl’actualisation des enveloppes régionales de crédits 2000-2001”, le 12 avril 2000.

Québec, ministère de la Santé et des Services sociaux, “Orientations Ministérielles relatives àla répartition interétablissements du rehaussement du financement des établissementsen déficit”, le 28 mars 2000.

Québec, ministère de la Santé et des Services sociaux, “La méthode d’allocation desressources”.

Québec, ministère de la Santé et des Services sociaux, “Survol de la gestion financière desétablissements publics.”

Québec, ministère de la Santé et des Services sociaux, “L’évolution de la démarche utiliséepour mesurer et réduire les écarts interrégionaux en allocation des ressources de1994-1995 à 1999-2000”, février 2000.



Québec, ministère de la Santé et des Services sociaux, “Les compressions et les réallocationsbudgétaires, soumises à la methode d’équité interrégionale 1997-1998”, mai 1997.

Québec, ministère de la Santé et des Services sociaux, “Manuel de gestion financière”, le 1avril 1997.

Québec, ministère de la Santé et des Services sociaux, “Rapport financier annuel,Établissements publics et privés conventionnés, “ le 31 mars 2000.

Québec, ministère de la Santé et des Services sociaux, “Rapport d’étape concernant leprocessus budgétaire et le suivi financier des établissements publics du réseau de lasanté et des services sociaux”, le 21 septembre 2000.

Régie régionale de la santé et des services sociaux, “Budget détaillé établissements publics”,le 31 mars 2000.

Régie régionale de la santé et des services sociaux, “Rapport périodique établissementspublics”, le 31 mars 2000.

Régie régionale de la santé et des services sociaux du Québec, “Rapport statistique annuel,1999-2000, centres hospitaliers et centres d’hébergement et de soins de longuedurée”, février 2000.

SaskatchewanSaskatchewan Health, "Review Process for Health District Capital Proposals".

Saskatchewan Health, "Guidelines for Preparation of the 2000-01 Health Budget Plan".

Memorandum from Barry Lacey, Saskatachewan Health. "2000-01 Quarterly FinancialSchedules and Timelines", July 20, 2000.

Memorandum from Barry Lacey, Saskatchewan Health. "2000 Financial Reporting Guide",April 5, 2000.

Saskatchewan Health, "Reporting Guide", March 2000.

YukonInterview with Nick Leenders, Yukon Hospital Corporation, November 2000.

Survey completed by Joanne Fairlie, Government of Yukon, November 2000.

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