Law & Governance

Law & Governance November -0001 : 0-0

Legal Update: Will The Courts Decide How Hospitals Spend Their Funding?

Kathy O'Brien


It's a reality: the demand for healthcare services continues to grow, and funding for health care is not keeping pace. Hospital boards are faced with very difficult decisions - do they incur a deficit (which may or may not be funded by the Ministry, and which may or may not lead to replacement of the board with a government-appointed supervisor) or do they make difficult decisions to cut programs and services?
Up until recently, we have advised our hospital clients that (i) the board is responsible, as part of its governance responsibilities, for determining how the hospital's funds will be allocated, including making tough decisions about program and service cuts in order to avoid insolvency; and (ii) the courts would likely defer to the resource allocation decisions made by a hospital board, based on case law in Canada and abroad.

That advice may be changing soon - depending on the outcome of a case that the Supreme Court of Canada has agreed to hear regarding the right of judges to direct how health care funding should be allocated.

Current State of the Law

The board is responsible for the governance of the hospital - it must develop and carry out a strategic plan, set a budget for fulfilling its strategic plan, and make sure its decisions do not threaten the fiscal viability of the corporation. In short, a hospital board should not approve an operating plan that threatens the hospital's very existence by placing it on the brink of insolvency.

There have been judicial decisions, both in Canada and abroad, in recent years that support the ultimate authority of a hospital and its board to make its own resource allocation decisions. For example, in the United Kingdom, the English Court of Appeal considered a health authority's right to make resource allocation decisions and concluded that deference should be paid to such decision-making. In its judgment, the court stated:

"It is common knowledge that health authorities of all kinds are constantly pressed to make ends meet. They cannot pay their nurses as much as they would like; they cannot provide all the treatments they would like; they cannot purchase all the extremely expensive medical equipment they would like; they cannot build all the hospitals and specialist units they would like. Difficult and agonizing judgements have to be made as to how a limited budget is best allocated to the maximum advantage of the maximum number of patients. That is not a judgement which the Court can make." (R. v. Cambridge Health Authority, 1995)

The Auton Case

The Auton case from British Columbia will be heard by the Supreme Court of Canada and focuses on who ultimately decides how limited health care funding is spent - the government or the courts.

In Auton v. British Columbia (2002), the British Columbia Court of Appeal ordered the province of British Columbia to provide a specific type of treatment for autistic children. Four children diagnosed with autism and their parents asked for declarations that the provincial government's refusal to fund an early intensive behavioural intervention ("IBI") violated sections 7 (protection of life, liberty and security) and 15 (equality without discrimination) of the Charter of Rights and Freedoms. The families also asked for an order that the province pay for past and future treatment, and damages.

The British Columbia Court of Appeal held that the failure of the health care administrators to fund early IBI for autistic children constituted an infringement of their equality rights under s. 15 of the Charter. The failure to provide public funding for such treatment suggested that autistic children were less worthy of assistance than other children needing medical care or than adults needing mental health therapy. The court found that this discrimination against autistic children could not be justified under s. 1 of the Charter (which is the "balancing provision" of the Charter that allows individual rights to be limited for the good of society as a whole).

The controversial question about this decision is whether it is appropriate for courts to order the government to supply funding to eliminate rights violations. The debate is whether the courts are interfering with the legislature's jurisdiction to make budgetary decisions regarding funding and allocation of limited government funds.

In the Auton case, the British Columbia Court of Appeal justified its intervention on the basis that the issue before it was compliance with the constitution, and therefore the court had jurisdiction to decide how government funds should be allocated, in order to eliminate a human rights violation. The court's view was that, in this circumstance, the legislature did not have the exclusive right to make the allocation decision. The court was dealing with a failure of a universal public health care system to fund necessary medical treatment for children to help a debilitating condition.


In the cases discussed, the court is ordering the government to supply funding for medically necessary treatment for children with autism, on the basis the failure to fund is discriminatory and violates the Charter rights of those children. If the Supreme Court of Canada agrees that judges have the right to direct how the government allocates health care funding, then courts may also be able to dictate what services a hospital provides to certain segments of population. This is because the Charter may apply to hospitals when hospitals exercise a governmental/policy function (Stoffman v. Vancouver General Hospital (1990)), and courts may intervene if a particular decision made by a hospital violates a Charter right.

We will watch the Auton case with close interest.

About the Author(s)

Kathy O'Brien is a lawyer practising exclusively with healthcare clients in the Health Law Group of Cassels Brock.


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