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In this article, Father Morrisey uses a legal approach to analyze the challenges facing Catholic healthcare in a time of rapid change, drawing his observations from his work with Catholic healthcare institutions both in Canada and in the United States.

On an incentive theory background the different financing methods for health care are discussed. Three main categories of financing methods are presented: (1) global budget solutions (capitation and global budget based on historical costs), (2) per-case reimbursement (per-diem rates, fee-for-service, prospective reimbursement on the basis of product groups, episode of care-based reimbursement, result graded reimbursement with use of e.g. the Oregon model concept), (3) hybrid methods of financing. Financing methods can be used to obtain different goals. Organizations and individual physicians seem to respond generally in the same way to similar incentives. Also unwanted effects seem common. Shifts in financing methods over time may look natural to attack problems. Empirical research has demonstrated financing methods as important tools in the management of a health service. Knowledge of possible health effects for the patients as a consequence of financing methods seems limited.

In 1990 Canadian hospitals provided more services at less cost than did acute care facilities in the United States. Canadians spent $2,720 less per discharge for 48 percent longer stays. If U.S. acute care facilities had achieved an average discharge cost comparable to that in Canada, the annual savings among hospitals in the United States would have totalled $84.3 billion. In a comparative study of volumes and costs in medium-size and teaching hospitals, it was found that U.S. hospitals had greater costs for delivering services than Canadian acute care facilities did in almost every department.

The centerpiece of Canadian health policy is a system of public health insurance covering the cost of hospital and medical services for all Canadians. The author analyzes the historical development of this policy and critically assesses its structure and dynamics. He argues that health insurance was won by Canadian workers through protracted industrial and political struggle. At the same time, health insurance was accommodated to the existing structure of power and privilege within the health care delivery system, which precluded a significant shift in the distribution of health care consumption and perpetuated the "irrationality" of a system that treats health as a problem located in the sphere of personal consumption.

Hospital financing in the United States suffers from many problems. Many persons lack access because they lack third-party coverage. Among those covered, benefits vary, and persons receive unequal services. Costs are high and are uncontrolled. The hospital is burdened by complicated relations with many payers. In order to cover their costs and earn extra cash, hospitals overcharge the more generous third parties, and recriminations result. All other developed countries have either statutory health insurance, national health services, or full public financing of privately managed hospitals. Whatever the financing method, all countries avoid the problems prevailing in the United States. All citizens are covered, all have access, and hospitals reject no one for financial reasons. All citizens have equal benefits and receive the same basic services. Regulation by government and negotiations with health insurance carriers guarantee the hospital's operating costs to service its catchment area adequately, but also prevent the hospital from installing excessive equipment and excessive staff. Each hospital is paid by all-payer standard rates, administration of reimbursement is simple, and shifting of costs among payers is both unnecessary and administratively impossible. Costs are contained by the total management of the system, not by fragmented efforts by separate insurance carriers. Considerable strategic thinking by government, the providers, and other interest groups sets guidelines for spending levels every year to meet the country's clinical needs but also to stay within its fiscal capacity. Capital investment for new treatments depends on government grants and evaluation of needs.

An attempt has been made to determine the true cost of providing primary health care for nontraumatic conditions in the emergency departments of two hospitals in Ontario and in the offices of family physicians. A total of 1117 patients presenting with 1 of 10 common symptom/sign complexes at the emergency departments or the offices of 15 participating family physicians were studies with regard to number of visits made, type of assessment by the physician, investigations undertaken, management, therapy and outcome of the illness. Costs were calculated from the charges that would be made against the provincial health services insurance plan and from the system of hospital financing in effect in the province. The average true cost per illness episode of this type of care was $14.63 in hospital A, $14.20 in hospital B and $15.90 in the family physician's office.