Health System Funding Reform (HSFR)

The government of Ontario’s Excellent Care for All Act and supporting strategy represent a significant culture shift in Ontario’s health care system. Part of this shift is the need for Ontario to implement funding models that are fairer, more evidence-based, and more responsive to the emerging health care needs of the province’s changing population.

Ontario needs a strategic funding system that encourages quality health services across the continuum of care. Health System Funding Reform (HSFR) is a fundamental response to these vital concerns with the development and implementation of funding policy and models which are driven by evidence and efficiency. HSFR is based on the key principles of quality, sustainability, access and integration.

Historically, health service providers have received an across-the-board funding increase annually. The provincial government, through the 14 Local Health Integration Networks, has made significant investments in health service providers, and have partnered with them on initiatives that have benefitted patients/clients/residents, like lowering wait times for key surgeries and enabling more people to remain in their homes longer. Ontario has much to be proud of in terms of the efficiencies that have already been gained in the health care system.

Going forward, health service providers will receive funding based on how many patients/clients/residents they look after, the services they deliver, the evidence-based quality of those services, and the specific needs of the population they serve. This is referred to as Patient-Based Funding.

The province, through the LHIN, is now working with our hospital partners to transition from global or “lump-sum” funding allocations towards a patient-centered model, where funding is based on the services provided. The new model, effective April 1, 2012, will have an impact on the type and level of hospital-based and associated community services that will be funded going forward.

In the South West LHIN, work is continuing with local health service providers to evolve service accountability agreements to align with changes to what services will be provided, funding available to deliver these services in a high quality, accessible, integrated system and the impact or outcome patients/clients/residents will experience. This type of system planning, funding and accountability between the South West LHIN and its health service providers has always been a collaborative partnership that has led to the introduction of many new programs that have focused on the needs of local patients/clients/residents and their caregivers.

HSFR will support Ontario’s Action Plan for Health Care by ensuring that Ontarians receive the Right Care, at the Right Time, and in the Right Place .

Key Messages

  • Patient-Based Fudning (PBF) will be phased in over three years, starting April 1, 2012, allowing the sector to anticipate changes and plan for impacts.
  • The Ministry wants to minimize disruption of services and impact on health human resources.  Mitigation strategies, education, toolkits and other transitional supports will be provided to support health service providers throughout the change.
  • For example, a patient who has a total knee replacement requires both surgery and rehabilitation. PBF sets out how much money each health care provider receives for their contribution to that patient’s care journey.
    • This approach is also known as “funding follows the patient”.
  • PBF will facilitate the standardization of care and thus minimize practice variation and allow patients, wherever they may be, to receive the best practice care at the right time and at the right place.
  • PBF encourages hospitals to invest in quality improvement and patient safety activities to provide appropriate care.
  • PBF consists of two key components:
    • Health Based Allocation Model (HBAM):
      The HBAM model is used to allocate funding in the hospital and Community Care Access Centres (CCAC) sectors. This model uses a methodology based on a wide range of demographic, clinical and financial data to estimate expected health care expenses at the organizational level.
    • Quality Based Procedures (QBPs):
      These are groups of services for specific types of patients that require similar care. They present opportunities for health care providers to share clinical, evidence-based best practices that will allow the system to achieve even better quality and system efficiencies.
    • Funding is allocated to specific procedures based on a “price x volume” basis. HeaIth system providers will be reimbursed for the types and quantities of patients they treat, using rates that are adjusted for patient complexity and quality of health care delivered. Starting in 2012, Quality Based Procedures will include:
      - Total hip replacement and total knee replacement
      - Chronic kidney disease services
      - Cataract surgery
    • Other quality based procedures will be added over the three year phase-in period.
  • Global budgets will continue to be used for activities that cannot be modeled or that are otherwise unique, such as outpatient service costs.
  • Over the next three years, global funding will be reduced as QBP increases.
  • Small hospitals and forensic health in-patient facilities will continue to be funded on a global basis.
  • The long term care sector is already substantially funded using a PBF model and as result there will be no impact on long-term care homes in the short-term.


For HBAM and QBP modeling resources, please click here

Additional information

You may also click here to visit the Ministry of Health and Long-Term care website and view a video about Health System Funding Reform.