Alberta is introducing a new funding model that ties hospital funding directly to patient care, moving away from the traditional fixed block budget system. The province announced on Monday that 12 hospitals are currently operating under phase one of the patient-focused funding (PFF) model, an activity-based funding formula where health service providers are compensated based on the care they deliver.
Phase One Details
Phase one applies to four specific surgeries: hip replacements, knee replacements, cataract surgery, and shoulder rotator cuff repair. Under the new model, hospitals that treat more patients will receive more funding, a shift from the previous system where hospitals received a fixed budget regardless of patient volume or surgeries performed.
Hospital and Surgical Health Services Minister Adriana LaGrange emphasized the change, stating, “Funding follows the patient.” She noted that the traditional model “doesn’t align incentives the right way. It can actually discourage hospitals from doing more.”
Hospitals Involved
Of the 12 hospitals operating under the PFF model, nine are operated by Alberta Health Services (AHS) and three by Covenant Health. Three Edmonton hospitals are included: Royal Alexandra Hospital, Grey Nuns Community Hospital, and Misericordia Community Hospital. The province says the new model will increase efficiency and transparency, with 26,000 procedures funded under PFF in 2026-27.
Cost Variations
The cost of each surgery varies under the new model depending on classification. Hip replacements range from $8,900 to $33,440; knee replacements from $8,530 to $24,790; cataract surgery from $880 to $1,600; and rotator cuff repairs cost $6,800.
Alberta Premier Danielle Smith anticipates the model will drive surgery costs down. She explained that more surgeries will be performed within a surgical block, potentially reducing overall costs. Chartered surgical facility operators may bid to perform a certain block of surgeries at a lower price, further driving down costs.
“You have to start by what it’s currently costing for each of these types of surgeries and encourage your public hospitals to be able to do more of them, and then we’ll see what develops from the private sector,” Smith said.
Future Implementation
Interim Acute Care Alberta (ACA) CEO David Diamond stated that the first phase will focus exclusively on procedures in public facilities, with potential later implementation in chartered surgical facilities. He called the first year a “learning year.”
“Over time, patient-focused funding will become one input to gradually align with other service delivery models, including terms of surgical facilities, and improve value for Albertans,” Diamond said.
Acute Care Alberta chief medical officer Dr. Aaron Low confirmed that the province will continue to monitor surgical quality using patient experience scores, 30-day unplanned surgical readmission rates, and average length of stay.
