HOSPITAL BUDGETING

OCHU Convention
April 2017
Doug Allan

cope491:djk
Key points

1 2 3
The main building The main sources What to look for in
blocks of hospital of funding the budgets
budgeting
 HAPS AND HSAA
Two key building blocks
Hospital Accountability Planning
Submissions
HAPS (formerly known as Hospital Annual Planning Submission).
First step in annual hospital budget planning process.
Information collected through the Hospital Accountability Planning Submission
(HAPS) and Additional Input forms will be used in Hospital Service Accountability
Agreements (HSAAs).
HSAAs is the contract between LHINs and hospitals for services provided by
hospitals and funding provided by LHINs.
The HAPS will cover one fiscal year 2017/18.
HAPS timeline and approval process

This years HAPS initial deadline was November 21, 2016 for the 2017/18 fiscal year
starting April 1, 2017.
Not a final deadline: changes usually occur post submission up to January through
the LHIN review process.
The final HAPS is supposed to be approved by Hospital Boards in January 2017.
Approval by hospital should be captured in hospitals governing body (i.e. the
hospital board) meeting minutes.
HAPS planning process

Hospitals will individually and locally determine reasonable planning assumptions

for use in the completion of the 2017-18 HAPS.
Hospitals supposed to use information currently available including assumptions
for HBAM and Quality Based Procedures.
The LHIN will review assumptions for reasonableness.
In some LHINs, the LHIN and hospitals may agree on a common set of
assumptions.
Hospital Service Accountability
Agreements (HSAAs)
HSAAs follow after HAPS.
Create a contract between LHIN and hospital for funding and services.
Hospitals and LHINs are supposed to liaise early and often to develop a mutually
acceptable HSAA within the requisite timeline.
HSAAs are Public documents.
HSAAs
Plan:
LHIN prepares the Hospital Agreements and Schedules & sends to Hospitals:
January 16/17 to February 1/17.
Hospital Boards approve HSAA agreement and returned signed copies to LHIN:
February 1/17 to March 31/17.

However negotiations often break down and LHIN and hospital agree to do
update only.
 MSAAs (where hospitals provide community services.
Line by line funding micromanaged).
LSAAs (where hospitals provide long-term care beds.
Again line by line micromanaged).
Other
accountabilities Agreements with other ministries.
CEOs complain about too many accountabilities:
120 deliverables.
Too many or not enough?
Hospital funding comes in many forms
Three main types all coming via the LHIN:
Global
Health Based Allocation Model (HBAM)
Quality Based Funding

Other funding not always involving LHIN

Direct from MOHLTC Line (or specific program) funding
Other Vote
Cancer Care Ontario funding
Post Construction Operating Plan

Other ministry
Global Funding
Historically based.
Varies by hospital.
Use to be 100% of funding.
Allowed significant managerial leeway but did not allow for differences
between hospitals.
Every hospital gets the same % increase.
Predictable.
Global Funding 2
Now only accounts for 30% of funding.
Global funding moderates the swings in funding driven by other funding
mechanisms.
MOHLTC manages Global funding more through performance measures and
volume commitments in HSAAs.
HBAM
30%
Complex
OHA has developed tool to help hospitals predict funding levels.
Biased against rural communities?
Population growth may be removed.
HBAM 2
1] Expected Volumes, then factor in population growth, rurality, age adjustments,
clinical and demographic characteristics.
2] Expected Costs, modified by various other factors (economies of scale etc.).
Calculate on basis of [1] and [2] the hospitals expected expenses.
Then calculate the hospitals expected expenses as a percentage of total provincial
expected expenses.
With a few other modifications (for things like non-ministry revenue) this
determines percentage of $5.1 HBAM funding, e.g. if a hospital has expected
expenses of 2% of provincial expected expenses, it would get 2% of $5.1 billion
or $102 million.
HBAM 3
Biased against rural communities?
Growing communities will get a bigger and bigger portion of HBAM funding.
Takes funding from shrinking communities and gives it to growing communities.
Population growth may be removed from calculation.
Quality Based Procedures Funding (QBP)
Fee for service.
19 procedures.
Number X Fee (adjusted for various circumstances by Case Mix Index).
The Q for quality is not a big factor in this aspect of funding.
More QBP procedures coming .
Supposed to edge up to 30% of total hospital funding.
QBP payments per procedure
 QBP PAYMENTS ADJUSTED FOR
COMPLEXITY CASE MIX INDEX (CMI)
Other Votes
Funding for areas where government feels they need to specially protect funding
levels e.g. mental health.
Fear that hospitals might otherwise spend it on more popular items.
Line by line budget.
Post-Construction Operating Plan (PCOP) funding
After construction of new facilities, hospitals may need extra operating funding to
use the new facilities:
Incremental service volumes and equipment amortization,
Facility costs,
Transition and start-up costs.

Service volume and amortization funding is ramped up over six years following
construction completion: 25%/ 50%/ 62.5%/ 75%/ 87.5%/ 100%.
Facility costs are awarded in the year of construction completion.
Transition and start-up funding is provided in the year of/or year prior to opening.
Any funding not employed for its intended purpose is recovered.
Funding from outside of the LHINs
Significant amount of hospital funding does not come from LHIN.
Funding for cancer care and nephrology (kidney issues e.g. dialysis and issues
arising from diabetes).
May receive direct funding from the MOHLTC.
May receive funding as a teaching hospital or as a research institution.
May receive funding from ministries other than MOHLTC: Ministry of Community
and Social Services (MCSS) or even from Attorney General for childrens programs.
All of these will come with specific accountabilities that the hospitals must meet.
Also private payments (semi-private, WSIB, parking, etc.). Varies significantly.
Base and One Time Funding
Base is in hospital funding for every year thereafter.
One time hospital only gets it this year for sure
May not get it next year.
Could get one time funding only once.
Or it could be renewed for years
The funding bias from government
Want to fund new things not the same old things.
Little interest in allocating money to offset increasing costs (i.e. inflation) for
existing services.
Extremely sensitive when hospitals fall into deficit or say they have no money.
If a hospital wants more money they will look at benchmarks and say No, your
admin costs are too high.
Bias towards quantity of services rather
than quality
Volumes of services are a key measure to meet for hospital to get funding.
Very few quality measures in the accountability mechanisms the hospitals must
meet.
It would be very easy for us to shoot down cutbacks that resulted in reduced
number of services.
Quality is harder to measure or quantify and so it is harder to demonstrate cuts
that effect quality.
Where should we focus?
Hospital Annual Planning Submission (HAPS) .
This is a key place where proposed changes in funding and staffing are set out.
Developed before the changes happen.
Audited financial statements only come out after the fact and have much less
detail.
HAPS are basis for HSAA the contractual agreement between hospital and LHIN.
Not always shared willingly or on time.
HAPS Wage Assumptions
HAPS Staffing Changes (by category)
Changing hospital capacity and occupancy
Overall Hospital Capacity and Occupancy
HAPS Funding Changes
HAPS Quality Based Funding
HAPS Medical Fees
HAPS Revenue
HAPS Expenses
HAPS Sustainability
What if the Hospital refuses to supply?
Confer with OCHU.
Central coordinated grievance.
Key that we pursue this information and get the best ruling on our access to it
where it is withheld.
Thank You
Doug Allan, CUPE Research Representative. For more:
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