Alberta Unveils Bold Shift to Activity-Based Health Funding Model

By Mindi Soren

On April 7, 2025, Alberta Premier Danielle Smith, alongside Health Minister Adriana LaGrange, announced a transformative overhaul of the province’s healthcare funding system, marking a significant departure from the traditional global budgeting model. Speaking at a press conference in Edmonton, Smith revealed that Alberta will transition to an activity-based funding (ABF) approach for acute care services, a move aimed at boosting surgical capacity, enhancing accountability, and fostering competition within the healthcare system.

Under the current global budgeting model, hospitals receive a fixed annual allocation regardless of the volume or complexity of services they provide. Smith argued that this system lacks incentives for efficiency and limits the utilization of chartered surgical facilities, leaving patients waiting longer for critical procedures. “We spend billions on acute care services, and while we’ve seen some improvements, it’s simply not enough,” she stated. “It’s time to supercharge the amount of surgeries we do in Alberta—it’s time for patient-based funding in healthcare.”

The new ABF model ties public funding directly to the number and type of procedures performed, a framework Smith said is inspired by systems in countries like Australia. “This isn’t uncharted territory,” she noted, emphasizing that the approach has proven effective elsewhere in driving surgical volume and reducing costs. Hospitals and providers will now compete for funding based on their output, with the potential to earn more by optimizing operating rooms (ORs) or even renting unused OR space to private physicians for publicly funded surgeries.

Smith highlighted that the change aims to address inefficiencies in the current system, where hospitals face little accountability for missing surgical targets despite receiving their full budgets. “The old top-down approach offers no incentive to do more for patients and limits our ability to direct dollars where they can get the best results,” she explained. The shift, set to roll out for select surgeries in 2026, will retain global grants for small rural facilities, general admissions, and emergencies, but major urban hospitals will operate under the new competitive framework.

Health Minister LaGrange elaborated that the cost per surgery will be transparent, with compensation adjusted for complexity to ensure fairness. “Doctors and facilities will be rewarded for tackling tougher cases,” she said, underscoring the government’s commitment to improving access to care. The announcement aligns with the United Conservative Party’s broader restructuring of Alberta Health Services (AHS), which is being dismantled into four specialized public agencies, including the recently launched Acute Care Alberta.

The move has sparked mixed reactions. Supporters, including some within the Alberta Medical Association (AMA), see potential in reversing the province’s growing surgical waitlists. AMA President Dr. Shelley Duggan noted that elements of ABF have been used in Alberta for years and expressed cautious optimism about its expansion. However, critics warn of unintended consequences. NDP health critic Sarah Hoffman argued that the model prioritizes profit-driven private providers over quality care, potentially siphoning resources from public hospitals. “This is about shifting public funds to private surgical profits,” she cautioned, urging a focus on system-wide efficiency rather than competition.

The Health Sciences Association of Alberta echoed concerns, suggesting that private companies might cherry-pick low-risk, high-profit surgeries, leaving public hospitals underfunded and overstretched. Advocacy group Friends of Medicare called it a “voucher model” designed to erode universal healthcare, while rural advocates pointed out that smaller communities, excluded from ABF, might miss out on the benefits of increased investment.

Smith dismissed these critiques, framing the policy as a pragmatic solution to a strained system. “If our operators aren’t performing, we need to hold them accountable and open the door to those who can,” she said, hinting at further integration of private facilities into Alberta’s publicly funded network. The premier’s announcement comes amid ongoing tensions with AHS leadership and a broader push to decentralize healthcare governance, reflecting her administration’s belief that innovation and competition can deliver better outcomes for Albertans.

As the province prepares for this seismic shift, all eyes will be on its implementation—and whether it can deliver the promised surge in surgical capacity without compromising the public system’s integrity. For now, Smith’s vision is clear: Alberta’s healthcare future lies in rewarding action over allocation.

Mindi Soren is a freelance journalist and writer for Veritas Expositae

You can reach her at mindi.soren@veritasexpositae.com