How much funding should our governments give hospitals for robust patient care? The dollar amount is not as clear as you’d think.

It’s time Canada had an independent agency – like Australia – that sets targets for fair and equitable hospital funding.

HN Summary

• Canada lacks an independent agency to set evidence-based, transparent funding targets for hospitals, leading to uncertainty over whether hospitals are fairly funded and taxpayers are getting value for money.

• Hospitals face rising costs and growing patient demand, while governments struggle to ensure spending improves patient outcomes, avoids waste, and addresses differences in hospital efficiency and complexity.

• Establishing a non-binding, expert-driven agency—modeled after Australia—could provide clear guidance on fair hospital funding, benefiting both hospitals and governments by improving transparency, accountability, and resource allocation.

Hospitals are bleeding red ink across Canada. Yet long waits for surgery and overcrowding in emergency departments don’t raise much of an eyebrow. 

Are taxpayers getting good value for their spending on hospitals? 

On the one hand, for Canada’s publicly funded hospitals, balancing the books has become an almost impossible task. The population is growing and input costs are rising. The largest and most prestigious hospitals are reporting significant gaps between what they receive from government and how much they spend on patient care.

For governments, there is a sucking sound from their health systems. Each year, hospitals want more of taxpayers’ dollars and some threaten reductions in services.

Yet more money is not the only answer to Canada’s hospital woes.

It’s time Canada emulated best practices elsewhere internationally and establish a transparent system to determine ‘fair funding’ for our hospitals. Canada needs an independent agency that balances financial prudence with pressing need.

Canada spends more than its fair share on health care. Compared with other publicly funded health systems, like Norway and Finland, Canada spends similar amounts on a per capita basis — but with poorer outcomes. The Canadian Institute for Health Information (CIHI) forecasts that Canadian hospitals will spend over $100 billion in 2025. 

Governments are being asked whether they are living up to their end of the deal or whether they are underfunding hospitals. Vast sums are at stake, as is the employment of thousands of people working in hospitals.

So, are hospitals being underfunded? There is evidence on both sides of the argument. 

Hospitals certainly think so, and the public hears stories of long waits and high pay for doctors, medications and supplies. 

On the other side of the argument, governments ask whether more spending on hospitals will shorten wait times, reduce overcrowding in emergency departments, stem departures of highly skilled professionals for greener pastures or slow the revolving door of very hard-to-treat complex patients. 

Governments see that hospitals don’t always spend on things that improve patients’ health. Examples include costly duplicate imaging, unnecessary prescriptions or laboratory tests, and surgeries that provide questionable value. 

Governments also grapple with understanding why hospitals have significant differences between them in the volume and costliness of their care even after adjusting for the complexity of their patients. 

So, are the amounts provided by governments to fund hospitals fair to the hospitals — and fair value for money to the taxpayer? There is no referee to judge what is fair.

Maybe it’s time we had one.

Hospitals and governments need advice regarding what is a fair amount of funding to assure efficient, effective and safe care. There is no function in Canada that currently provides this advice. But such a role exists in other countries.

Australia, for example, has an organization that every year publishes an amount that they think hospitals should be spending on each patient case. This organization is federally funded, and their experts are drawn from areas of economics, health data and health system expertise. 

In a federal system like Canada, such an organization’s funding targets would be non-binding for provinces and territories, just as they are for Australia’s states.

So how would this improve our system? It creates a mediator position for a highly contestable field, but one for which there is evidence and expertise.

Hospitals would benefit by knowing that they are spending too much or have some room to spare. Governments would benefit by untangling financial shortfalls from patients’ needs. 

There are, of course, risks too. For some hospitals, their managers will face greater strains, pulled toward achieving spending targets. For governments, the targets may be more than they can afford given they have to make allocative decisions between bridges, schools and hospitals, among other priorities.

An agency setting targets for government funding on hospitals will not solve all the ills in our healthcare system. But it would be a step toward transparency and the use of best practices and evidence.

Jason M. Sutherland is the UBC Professor of Health Services and Policy and Director of the Centre for Health Services and Policy Research in the School of Population and Public Health at the University of British Columbia.