Pushing the envelope: Advancing Canadian healthcare payment models through evaluation

Introduction

When health systems aim to improve, two key considerations tend to be front and centre: cost and quality. On the cost side, health spending in Canada continues to rise, despite a slowing rate of expenditure growth over the past decade. ¹ In 2018, we spent about $250 billion dollars on healthcare, or about $6,800 for every Canadian—a 50% increase from our health spending at the start of the new millennium (approximately $4,500 per capita in 2000 in 2018 dollars). Healthcare accounts for about 11% of our national gross domestic product ¹ : this puts us in a similar range with our most common Organisation for Economic Co-operation and Development comparators (note 1), ² many of whom also share concerns over rising healthcare expenditures.

On the quality side, we are acutely aware of several aspects of Canadian healthcare where there is wide room for improvement. A 2017 Commonwealth Fund report ranked Canada 9^th out of 11 high-income nations on our overall healthcare performance, placing higher than only France, and the US. Canada ranked particularly poorly on measures of access (especially timeliness of care), equity, and health outcomes. ³ While these rankings can be subjective and tend to focus on a limited range of measures, potentially overlooking areas of excellence ⁴ —for example, less widely reported is that Canada outshines most other countries on measures of survival after a cancer diagnosis ⁵ —they should nevertheless give us pause for thought.

As the primary funders of healthcare, governments in Canada have always played a large direct role in managing healthcare costs through their powers to set budgets and to decide who gets paid and how. Governments have historically played a much smaller role in monitoring the quality of care or supporting quality improvement, often delegating these responsibilities to professional colleges and associations. Some provincial governments fund arms-length organizations that focus on quality, but these tend to be small and have limited mandates. Perhaps more importantly, provincial quality initiatives have traditionally operated with little connection to the ways in which governments choose to compensate healthcare providers.

In recent years, there has been growing recognition in Canada and elsewhere that modes of payment can have powerful impacts on the quality of care provided. ^{6 –8} Traditional fee-for-service payment has created strong incentives for volume but left much to be desired across key dimensions of quality such as patient centredness and effectiveness. The challenge of incentivizing these aspects of quality and promoting higher value care has given rise to a variety of alternative and blended payment models. These new models range from the relatively simple—such as pay-for-performance schemes targeting specific provider behaviours—to the monumentally complex, such as condition-specific bundles of care that incentivize coordination among providers that have traditionally been paid out of separate envelopes.

By applying lessons from the experiences of innovators in this area (in particular, the US Center for Medicare and Medicaid Services Innovation [the Innovation Center]), we believe that Canada can become an international leader in paying for the delivery of high-quality, affordable care. In this article, we present a vision for modernizing Canadian healthcare payment systems and for evaluating the impact of new payment models.

We use Ontario as our example for this vision, a province in which changing political and professional landscapes may present opportunities to take an integrated, forward-thinking approach to what have previously been extemporaneous efforts to design, implement, and evaluate payment models. We believe this approach is relevant to all jurisdictions seeking to extract more value through their payment models.

Healthcare payment reform: From whom can we learn?

In recent years, there has been a global movement for health systems to reconsider and redesign their legacy payment models. There have been similar calls to action in Canada. The 2015 Advisory Panel on Healthcare Innovation in Canada (the Naylor Report, colloquially) advocated for the use of payment innovation to better integrate systems of care and save money. ⁹ The panel suggested Canada needs to move much faster with payment reforms. Indeed, in Ontario, the panel’s findings had been preceded by policy experts advocating for the introduction and expansion of integrated funding models in the province. ^10,11

The Naylor Report specifically highlighted the example of the Innovation Center for Canadian governments to consider emulating. The Innovation Center is one of the most promising—and yet lesser known—elements of the Affordable Care Act. Created in 2010, its primary objective is to test health system payment and service delivery innovations. Bestowed with an annual budget of about $1 billion, the Innovation Center has been given a degree of discretion and independence to carry out its work, in part because prior US efforts to implement healthcare reforms were often stalled or derailed by Congress. ¹²

The Innovation Center officially began work in 2011 and has since evaluated a number of new models, including accountable care organizations and bundled payments. ^13,14 The acid test for determining whether their innovations “work” is relatively straightforward: costs must either decrease or stay constant while quality must either improve or be maintained. ¹⁵ To date, of the more than 40 models evaluated through the Innovation Center, only 2 have met this threshold: Pioneer Accountable Care Organizations and the YMCA Diabetes Prevention models. ¹⁶ While a full accounting of the Innovation Centre’s years in operation has not yet been conducted, independent reviews by the Congressional Budget Office (CBO) have projected about $34 billion in net savings from 2017 to 2026 attributable to the Innovation Center’s efforts. ¹⁷ The CBO attributes a large part of estimated savings to cost avoidance—that is, the Secretary of Health and Human Services has the legislated authority to discontinue payment models whose evaluations fail to demonstrate savings. We believe this point is worth underscoring. Without the Innovation Center, many unsuccessful models may have continued indefinitely at great expense.

The Innovation Center is proof of concept that government can play an important role as a facilitator in health system innovation and learning. ¹⁸ Prior to the establishment of the Innovation Center, US federal health system planners and policy-makers relied on much cruder instruments, often with only poor quality evidence to support major policy decisions. Now, they can take greater risks with payment policy experimentation and more confidently dial in on innovations that demonstrate value.

Despite many structural differences between our health systems, decision-makers in both Canada and the United States often grapple with similar healthcare challenges—such as escalating care costs and a lack of evidence that increasing investments are buying better care—and hence the Innovation Center model appears to also offer relevant lessons for Canadian governments.

What is the current state of payment model evaluation in Ontario?

While numerous new payment models have been implemented in Ontario in the past two decades—particularly in the primary care setting ¹⁹ —there has only recently been a shift toward including prospective evaluation as a key component in payment reforms. ²⁰ Ontario is currently evaluating the effects of an initial wave of single-site “Integrated Funding Model” pilots targeting a variety of acute episodes, including cardiac surgery, stroke, and heart failure. ²¹ This is being followed by a province-wide bundled payment program (including a prospective evaluation) for primary unilateral hip and knee replacements and for a variety of other bundles (such as shoulder replacement) starting in 2019.

Building on these important initial efforts, there are a wide range of opportunities for carefully constructed evaluation designs to yield high-quality, policy-relevant evidence. For example, the expansion of bundled care pilots across multiple sites enables examination of the effects of these models in different contexts, increasing the robustness of study findings. And while rapidly changing policy environments are not generally amenable to “gold standard” randomized controlled trial designs, quasi-experimental research methods—such as stepped wedge and difference-in-differences designs—with appropriately matched controls can still produce good evidence in these dynamic contexts. Indeed, such methods have been frequently used in national evaluations by the Innovation Center. ²² Finally, in order to promote transparency, protocols for evaluation designs can be published, with prespecified outcomes to minimize the risk of reporting bias. These foundational elements can support a rigorous, comprehensive approach to evaluating payment models in Ontario as well as other provinces and territories.

How can we make this vision a reality?

We believe that a collaborative approach that draws on the unique views and perspectives of a variety of stakeholders—including patients, government officials, provider associations, healthcare professionals, and others—and that employs evaluation as the backbone of payment innovation, is the best way forward.

The recent developments in Ontario described above have set the stage for this sort of collaborative effort. New legislation recently put forward by the Government of Ontario ²³ to create integrated care delivery vehicles also opens the door to a variety of evaluation possibilities. There exists a wealth of homegrown talent in health system policy and funding and related disciplines in Ontario, including critical competencies such as patient ^{24 –26} and clinical engagement, payment modeling and design, ^27,28 evaluation and analytics, ²⁹ health technology assessment and evidence-based medicine, ^29,30 public reporting, ³¹ and implementation science—all necessary skills to help move us closer to higher value.

In its plan for expanding bundled care, the Ontario government has also signalled a strong role for monitoring and evaluation, with a view to ensuring payment is aligned with quality, integration, and efficiency goals. These goals are also shared by other payment reform efforts underway in Ontario that would benefit from the evaluation approach proposed, including a redesign of the current funding model for arthroscopic knee surgery to reduce funding for potentially ineffective procedures, ³² and future physician payment changes proposed by the recently announced Appropriateness Working Group collaboration between the government and the Ontario Medical Association. ³³

We believe a crucial next step is to institutionalize the role of evaluation. In Ontario, evaluative functions and expertise could be embedded within existing stakeholder advisory structures that provide input to the Ministry of Health and Long-Term Care on payment policy decision-making, supported by a staff secretariat. ³⁴ Additional competencies, as outlined above, could be leveraged in support of the mandate of the governing body—including implementation supports, ongoing performance monitoring, and reporting to model sites.

Evaluation designs would take different forms, depending on the structure and scope of the payment model being tested, and include a combination of quantitative and qualitative analysis. This mixed methods evaluation approach is frequently employed by the Innovation Center, where qualitative research helps to elucidate the context and implementation strategies employed by participating model sites. The analytic work for each evaluation could be performed by a combination of internal secretariat staff and external academic or contract researchers.

Where model evaluations show improved quality of care and constant or reduced costs, or constant quality of care and reduced costs, the advisory group would recommend province-wide expansion. Models that fail to meet these criteria would be recommended for redesign or discontinuation. While the upfront costs of designing and implementing rigorous evaluations may create some initial sticker shock, the Innovation Center has demonstrated their considerable return on investment: for a fraction of the cost of the payment model being studied, the information produced by well-designed evaluations can empower decision-makers to make confident choices around scaling up successful models and scaling back models that do not work. ¹⁷

With its initial efforts to prospectively evaluate new payment models, Ontario has taken important steps toward ensuring value for patients. Other Canadian healthcare decision-makers can learn from these efforts and the example of the Innovation Center as they consider redesigning their payment systems. By institutionalizing and coordinating these functions across provinces and territories, while ensuring standardization and consistency across model implementation and evaluation, we could have even greater impact on a pan-Canadian scale. Realizing this vision will help us push the envelope toward higher value in Canadian health systems.