Alberta
Activity-Based Hospital Funding in Alberta: Insights from Quebec and Australia

From the Montreal Economic Institute
Quebec has experienced increased productivity and efficiency, as well as reduced costs, in those sectors to which ABF has been applied
Alberta’s healthcare system costs more than those of many of its peers across Canada and internationally, yet underperforms by many metrics—wait times perhaps being the most visible.(1) For instance, while Alberta consistently spends a fair deal more per capita on health care than Canada’s other large provinces do, the median wait time from referral by a GP to treatment by a specialist was 33.3 weeks in 2022, versus 29.4 weeks in Quebec, 25.8 weeks in British Columbia, and 20.3 weeks in Ontario. Albertans waited a median 232 days for a hip replacement that year, longer than those in Quebec, British Columbia, and Ontario.(2) In Australia, meanwhile, the median wait time for a total hip replacement in 2022 was 175 days in public hospitals.(3)
One of the things keeping Alberta’s healthcare system from better performance is that it relies on global budgets for its hospital financing. Such a system allocates a pre-set amount of funding to pay for an expected number of services, based largely on historical volume. The problem with global budgets is that they disregard the actual costs incurred to deliver care, while undermining incentives to improve outcomes. This ultimately leads to rationing of care, with patients viewed as a cost that must be managed.
Activity-based funding systems are associated with reduced hospital costs, increased efficiency, and shorter wait times, among other things.
An alternative is activity-based funding (ABF), which has largely replaced global budgeting in many OECD countries, and is starting to do so in some Canadian provinces.(4) With ABF, hospitals receive a fixed payment for each specific service delivered, adjusted for certain parameters.(5) If a hospital treats more patients and delivers more services, it receives more funding; if it does less, it receives less. In essence, the money follows the patient, which has a dramatic effect: patients are now viewed as a source of revenue, not merely as a cost. Studies have shown that ABF systems that include appropriate safeguards for quality and waste are associated with reduced hospital costs, increased efficiency, and shorter wait times, among other things.(6)
To increase its capacity and performance, Alberta should consider moving to such a system for hospital financing. As over 25% of total health spending in the province goes to hospitals,(7) driving down costs and finding efficiencies is of paramount importance.
ABF models vary by jurisdiction and context to account for distinct situations and the particular policy objectives being pursued.(8) Two jurisdictions provide interesting insights: Quebec, with ABF hospital funding being gradually implemented in recent years, and Australia, where after more than three decades, ABF is the rule, global budgets the exception.
ABF in Quebec: Increased Performance and Decreased Costs
Quebec’s hospital payment reforms over the past two decades have been aimed at better linking funding with health care delivery to improve care quality and access.(9) These patient-based funding reforms (a type of ABF) have resulted in increased volumes and efficiency, and reduced costs and wait times for a number of surgical and other procedures in Quebec.(10)
These reforms started in 2004, when Quebec applied ABF in the context of additional funding to select surgeries in order to reduce wait times through the Access to Surgery Program.(11) The surgeries initially targeted were hip replacement, knee replacement, and cataract surgeries, but other procedures were eventually integrated into the program as well. Its funding covered the volume of surgeries that exceeded those performed in 2002-2003, and it used the average cost for each specific surgery. Procedures were classified by cost category, which also took into account the intensity of resource use and unit cost based on direct and indirect costs.
The expansion of ABF in Quebec aims to relieve hospital congestion by driving down wait times and shrinking wait lists.
By 2012-2013, this targeted program had helped to significantly increase the volume of surgeries performed, as well as decrease wait times and length of stay.(12) However, as ABF was applied only to surplus volumes of additional surgeries, efficiency gains were limited. For this reason, among others, the Expert Panel for Patient-Based Funding recommended expanding the program,(13) and in 2012, the Government of Quebec began considering further pilot projects for gradual ABF implementation.(14)
- In 2015, ABF was implemented in the radiation oncology sector, which resulted in better access to services at a lower cost, with productivity having increased more than 26% by 2023-2024, and average procedure costs having fallen 7%.(15)
- In 2017-2018, ABF was implemented in imaging, which resulted in the number of magnetic resonance imaging tests increasing more than 22% while driving the unit cost of procedures down 4%.(16)
- Following the above successes, in 2018-2019, the colonoscopy and digestive endoscopy sector also moved to ABF, which led to a productivity increase of 14% and a 31% decrease in the case backlog.(17)
Overall, then, Quebec has experienced increased productivity and efficiency, as well as reduced costs, in those sectors to which ABF has been applied (see Figure 1).
The Department of Health and Social Services continued to expand ABF to more surgeries in 2023, following which it was expected that about 25% of the care and services offered in physical health in Quebec hospitals would be funded in this manner, with the goal of reaching 100% by 2027-2028.(18) Further, the 2024-2025 budget expanded ABF again to include the medicine, emergency, neonatal, and dialysis sectors.
This expansion of ABF aims to relieve hospital congestion by driving down wait times and shrinking wait lists.(19) It will also align Quebec’s health care funding with what has become standard in most OECD countries. In Australia, for instance, ABF is the rule, not the exception, covering a large proportion of hospital services.
Australia’s Extensive Use of ABF
Australia also implemented ABF in stages, as Quebec is now doing. It was first introduced in the 1990s in one state and adopted nationally in 2012 for all admitted programs to increase efficiency, while also integrating quality and safety considerations.(20) These considerations act as safeguards to ensure efficiency incentives don’t negatively impact services. For instance, there are adjustments to the ABF payment framework in the presence of hospital acquired complications and avoidable hospital readmissions, two measures of hospital safety and service quality.(21) If service quality were to decrease, funding would be adjusted, and payments would be withheld. Not only has ABF been successful in increasing hospital efficiency in Australia, but it has also enabled proactive service improvement, which has in turn had a positive impact on safety and quality.(22)
ABF now makes up 87.0% of total hospital spending in Australia, ranging from 83.6% in Tasmania to 93.0% in the Australian Capital Territory.
Currently, ER services, acute services, admitted mental health services, sub-acute and non-acute services, and non-admitted services are funded with ABF in Australia. This includes rehabilitation, palliative, geriatric and/or maintenance care.(23) Global budgets are still used for some block funding, but this is the exception, restricted to certain hospitals, programs, or specific episodes of care.(24) Small rural hospitals, non-admitted mental health programs, and a few other highly specialized therapies or clinics or some community health services tend to be block funded due to higher than average costs stemming from a lack of economies of scale and inadequate volumes, among other things.
When first introduced, ABF made up about 25% of hospital revenue (approximately where Quebec currently stands).(25) ABF now makes up 87.0% of total hospital spending in Australia, ranging from 83.6% in Tasmania to 93.0% in the Australian Capital Territory (see Figure 2).
There is more variability, however, at the local hospital network level within territories or states. For instance, between 2019 and 2024, an average of 92.3% of total funding for the hospitals in the South Eastern Sydney Local Health District was ABF, and just 7.7% was block funding.(26) For the hospitals in the Far West Local Health District, in comparison, ABF represented an average of 72.0% of total funding, and block payments 28.0%, over the same period.(27)
The proportion of ABF funding per hospital is dictated, for the most part, by the types and volumes of patient services provided, but also by hospital characteristics and regional patient demographics.(28) For example, there could be a need to compensate for differences in hospital size and location, or to reimburse for some alternative element of the fixed cost of providing services. In the Far West Local Health District, on average 65.1% of block funding between 2019-2020 and 2023-2024 was provided for small rural hospitals, while only 1.4% of the block funding in the South Eastern Sydney Local Health District was for these types of hospitals.(29) Ultimately, these two districts serve very different populations, with the Far West Local Health District being the most thinly populated district in Australia.(30)
Overall, ABF implementation in Australia has significantly improved hospital performance. Early after ABF implementation, the volume of care in Australia increased, and waiting lists decreased by 16% in the first year.(31) Between 2005 and 2017 the hospitals that were funded by ABF in Queensland became more efficient than those receiving block funding.(32) In addition, ABF can contribute to reductions in extended lengths of stay and hospital readmission,(33) both of which are expensive propositions for health care systems and also tie up hospital beds and resources.
Conclusion
ABF has been associated with reduced hospital costs, increased efficiency, and shorter wait times, areas where Alberta is lacking and reform is needed. To increase its health system performance, Alberta should consider emulating Quebec and moving to an activity-based funding system. Indeed, based on the experience of countries like Australia, widespread application should be the goal, as it is in Quebec. Alberta patients have already waited far too long for timely access to the quality care they deserve. The time to act is now.
The MEI study is available here.
* * *
This Economic Note was prepared by Krystle Wittevrongel, Senior Policy Analyst and Alberta Project Lead at the MEI. The MEI’s Health Policy Series aims to examine the extent to which freedom of choice and entrepreneurship lead to improvements in the quality and efficiency of health care services for all patients.
The MEI is an independent public policy think tank with offices in Montreal and Calgary. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
Alberta
Made in Alberta! Province makes it easier to support local products with Buy Local program

Show your Alberta side. Buy Local. |
When the going gets tough, Albertans stick together. That’s why Alberta’s government is launching a new campaign to benefit hard-working Albertans.
Global uncertainty is threatening the livelihoods of hard-working Alberta farmers, ranchers, processors and their families. The ‘Buy Local’ campaign, recently launched by Alberta’s government, encourages consumers to eat, drink and buy local to show our unified support for the province’s agriculture and food industry.
The government’s ‘Buy Local’ campaign encourages consumers to buy products from Alberta’s hard-working farmers, ranchers and food processors that produce safe, nutritious food for Albertans, Canadians and the world.
“It’s time to let these hard-working Albertans know we have their back. Now, more than ever, we need to shop local and buy made-in-Alberta products. The next time you are grocery shopping or go out for dinner or a drink with your friends or family, support local to demonstrate your Alberta pride. We are pleased tariffs don’t impact the ag industry right now and will keep advocating for our ag industry.”
Alberta’s government supports consumer choice. We are providing tools to help folks easily identify Alberta- and Canadian-made foods and products. Choosing local products keeps Albertans’ hard-earned dollars in our province. Whether it is farm-fresh vegetables, potatoes, honey, craft beer, frozen food or our world-renowned beef, Alberta has an abundance of fresh foods produced right on our doorstep.
Quick facts
- This summer, Albertans can support local at more than 150 farmers’ markets across the province and meet the folks who make, bake and grow our food.
- In March 2023, the Alberta government launched the ‘Made in Alberta’ voluntary food and beverage labelling program to support local agriculture and food sectors.
- Through direct connections with processors, the program has created the momentum to continue expanding consumer awareness about the ‘Made in Alberta’ label to help shoppers quickly identify foods and beverages produced in our province.
- Made in Alberta product catalogue website
Related information
Alberta
Province to expand services provided by Alberta Sheriffs: New policing option for municipalities

Expanding municipal police service options |
Proposed amendments would help ensure Alberta’s evolving public safety needs are met while also giving municipalities more options for local policing.
As first announced with the introduction of the Public Safety Statutes Amendment Act, 2024, Alberta’s government is considering creating a new independent agency police service to assume the police-like duties currently performed by Alberta Sheriffs. If passed, Bill 49 would lay additional groundwork for the new police service.
Proposed amendments to the Police Act recognize the unique challenges faced by different communities and seek to empower local governments to adopt strategies that effectively respond to their specific safety concerns, enhancing overall public safety across the province.
If passed, Bill 49 would specify that the new agency would be a Crown corporation with an independent board of directors to oversee its day-to-day operations. The new agency would be operationally independent from the government, consistent with all police services in Alberta. Unlike the Alberta Sheriffs, officers in the new police service would be directly employed by the police service rather than by the government.
“With this bill, we are taking the necessary steps to address the unique public safety concerns in communities across Alberta. As we work towards creating an independent agency police service, we are providing an essential component of Alberta’s police framework for years to come. Our aim is for the new agency is to ensure that Albertans are safe in their communities and receive the best possible service when they need it most.”
Additional amendments would allow municipalities to select the new agency as their local police service once it becomes fully operational and the necessary standards, capacity and frameworks are in place. Alberta’s government is committed to ensuring the new agency works collaboratively with all police services to meet the province’s evolving public safety needs and improve law enforcement response times, particularly in rural communities. While the RCMP would remain the official provincial police service, municipalities would have a new option for their local policing needs.
Once established, the agency would strengthen Alberta’s existing policing model and complement the province’s current police services, which include the RCMP, Indigenous police services and municipal police. It would help fill gaps and ensure law enforcement resources are deployed efficiently across the province.
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