Lack of Incentives Limits the Adoption and Deployment of New Health Technologies in Canada

Economic Note showing why Canadian patients wait longer than necessary to benefit from innovations that have already been proven safe and effective elsewhere

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This Economic Note was prepared by Emmanuelle B. Faubert, Economist 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.

Medical innovation is an important driver of population health. Thanks to new technologies and advanced treatments, health problems can be detected earlier and patients can live longer, healthier lives. But Canada’s public healthcare systems, like many public institutions, tend to be highly bureaucratic. The incentive structure typically present in governmental organizations negatively impacts the adoption and deployment of novel medical technologies. This explains why Canadian patients often wait longer than necessary to benefit from innovations that have already been proven safe and effective elsewhere.(1)

Bureaucratic Operations

The first hurdle to adoption and deployment relates to risk aversion in public bureaucracies. Public decision-makers generally operate under fixed budgets and intense scrutiny, which leaves little room for considering the adoption of innovations.(2) For instance, approving a device that has the potential to improve outcomes but later ends up causing harm is highly visible, whereas quietly sticking with older, less efficient technologies is less apparent to the public and therefore less risky.

Thus, the dominant strategy is usually to delay new technology, as hospitals and policymakers seek to avoid mistakes rather than pursue better outcomes—especially when they lack the financial stability to absorb the costs of innovation failures. This can happen even when there is strong evidence to support the technology’s effectiveness, safety, and reliability.

Moreover, there is a distinct asymmetry between benefits for patients and costs for authorities. Canadian healthcare is financed mainly through provincial governments (and federal transfers), with hospitals operating under fixed global budgets. Unless they receive extra funding, either from the government or through foundation fundraising, hospitals have to make do with the global budgets allocated to them.(3) In contrast, the benefits innovations may bring are often less immediately clear. The patients who benefit from the adoption of innovations do so over the long run, often after the original decision-makers have already left office.

This asymmetry is intensified by Canada’s single-payer provincial system. A health minister can be directly criticized for a budget deficit tied to a new technology. It is much less common to take direct flak for not funding a better device (see Figure 1).

There is also a lack of competitive pressure in Canadian healthcare systems. In contrast, in decentralized systems where the money follows the patient, clinics or hospitals that provide even marginally worse service may lose significant numbers of both patients and funding.

In Germany, for instance, hospitals performing more advanced procedures can increase their revenue, with high upfront capital investment supported through the growth in patient volume. In other words, if an investment stands to benefit patients, it can help a hospital be more competitive, which then attracts more patients and earns it more revenue to justify the costs.

Canadian patients, on the contrary, rarely “shop” for treatments, nor is there strong inter-hospital competition. Sometimes, innovations will not be adopted even when public decision-makers are willing to do so, simply due to the lack of available funding to cover their cost. This is exacerbated by the fact that Canadian hospital funding generally does not follow the patient. Most of the funding received by hospitals is needed to cover the costs of providing existing care to patients. This is why many innovations fail to move from the pilot phase to the deployment phase, unless they can be funded through philanthropy.

Canadian patients often wait longer than necessary to benefit from innovations that have already been proven safe and effective elsewhere.

It is this skewed bureaucratic incentive structure that slows the spread of novel beneficial technologies in Canada, such as robotic-assisted surgery and proton beam therapies.(4)

Robotic-Assisted Surgery

Using robotics to assist in surgeries aids the surgeon with fine motor control and increases surgical precision. Other notable benefits are the reduction of blood loss, shorter hospital stays, and lower risk of complications and readmissions.(5)

Despite growing evidence of its benefits, the deployment of robotic-assisted surgery in Canada has been slow.(6) In 2010-2011, Canada had 25 such robotic systems installed.(7) By early 2025, just 39 centres in Canada were using these systems, with seven of them having installed more than one such system.(8)

Meanwhile, the number of systems in use in the United States has more than doubled since 2010.(9) As of 2020, over 2,000 U.S. hospitals used robotic-assisted surgery technology, with more than 5,500 systems in all.(10) For every million inhabitants, Canada has access to 1.1 systems, compared to 16.6 in the United States (see Figure 2).(11)

Germany also has more robotic-assisted surgery systems than Canada does. As of 2021, over 200 robotic da Vinci Surgical Systems had been installed in that country.(12) Germany has a competitive hospital market, where private firms operate alongside government and non-profit clinical facilities. German hospitals can therefore act very independently even when installing expensive medical technologies. This has allowed them to adopt new technology much faster than Canadian hospitals.

The Leipzig Heart Center, a private university hospital partnership, performed a first-of-its-kind robotic assisted surgery back in 1998.(13) This early adoption was not the result of government planning, but rather of a hospital taking an entrepreneurial risk on a promising technology. Asklepios Kliniken, a private operator founded in 1984, has integrated robotic surgery across its network. Asklepios Klinik Altona in Hamburg has been recognized as a leading institution for robotic surgeries in Germany.(14)

In Germany, if an investment stands to benefit patients, it can help a hospital be more competitive, which then attracts more patients and revenue.

The majority of Canada’s da Vinci systems come from philanthropic donations to hospital foundations, such as the Boris Family Centre for Robotic Surgery at St. Joseph’s Healthcare in Hamilton. It provided $11.5 million in donations to purchase the da Vinci systems and establish the centre.(15)

Unfortunately, Canadian hospitals do not have the same kind of independence in adopting new technologies as their US or German counterparts. When provincial bodies have been asked to assess robotic-assisted surgery technology formally, the process has been slow. Health Quality Ontario conducted a review and determined that robotic technology should not be funded publicly. The expert committee advising Ontario found there was limited evidence that the gains from robot-assisted radical prostatectomy was significant enough when compared to conventional surgery to justify the extra public spending.(16)

In Germany, there is no need to wait for a provincial committee to run a years-long review of potential gains and drawbacks before installing a new system. Hospitals in a competitive market have incentives to adopt it to attract patients and surgical talent. Hospitals that do not invest in new infrastructure risk losing out on patients, staff, and funding.

Proton Beam Therapy

Proton beam therapy, a type of radiology that is used to treat cancer, is another example of delayed innovation in Canada. While it has existed for decades, and was approved by Health Canada in 2015, Canada still does not have a proton beam therapy clinic—the only G7 country without one.(17) Patients in need of the therapy often do not have any comparable options. Currently, they are sent abroad by provinces at high marginal cost, typically to the United States, which has more than 40 active centres.(18) Between 2018 and 2024, 143 requests to receive proton beam therapy out-of-country were approved for Ontario patients alone, at an average cost of over $80,000 per patient.(19)

Canada still does not have a proton beam therapy clinic—the only G7 country without one.

The reason why a centre has yet to be built in Canada is mainly the bureaucratic inability to manage covering high fixed capital costs. In 2018, a centre was proposed in Quebec in the form of a public-private partnership with CDL Laboratories. It ultimately was not built, in part due to a change of government and opposing views arguing against partnering with the private sector.(20) An independently owned centre, supported by philanthropic efforts, was announced in Edmonton, but is not yet operational.(21) In comparison, an early form of proton beam therapy was first used in the United States as far back as 1954.(22)

Canada’s lack of such technology further exemplifies the structural incentive problems in Canadian healthcare. A proton beam therapy centre is extremely expensive to build, with capital costs typically in the nine-figure range, plus ongoing maintenance and staffing expenses.(23) Canadian healthcare is provincially funded, so these capital costs fall on a single provincial government’s healthcare budget. A proton facility could serve patients in multiple provinces, but none want to bear the full cost alone.

In Germany, which has five active facilities,(24) public-private partnerships can play an important role. A German university hospital can decide to build a facility as an investment project, often with support from governments, universities, and industrial partners.

For instance, the Heidelberg Ion-Beam(25) Therapy Center, which opened in 2009, had its 119-million-euro investment split between the German government and Heidelberg University.(26) In contrast, Canadian hospitals cannot independently decide to build a proton therapy facility. The provincial government must approve the project and allocate capital funding before procurement and partnerships with industry can begin.

Other countries with universal healthcare systems have better incentive structures and leverage the private sector.

The Marburg Ion Beam Therapy Center is another example of such a public-private partnership in Germany. The particle therapy centre in Marburg was originally founded by Rhön-Klinikum AG, a private hospital company, which bore the cost of constructing the facility.(27) The private bet initially failed, however, and the initial engineering firm decided to terminate its involvement. The Heidelberg University Hospital subsequently inaugurated the centre on November 11, 2015 in a joint venture with Rhön-Klinikum AG.(28) This time again, however, it was unable to sustain itself. The centre filed for insolvency in 2018, with Rhön-Klinikum AG taking over business operations going forward.(29)

This is a genuine case of a private hospital group rescuing and operating a proton beam therapy centre, while still being co-embedded with a university hospital. Having the government support the project was crucial, but importantly, a private firm was able to take an entrepreneurial risk, something that public choice incentives make incredibly unlikely under Canada’s current model. Whereas Germany’s mixed system and competitive hospital market create decentralized incentives to invest, Canada’s centralized, single-payer structure has produced collective inaction.

Conclusion

In heavily centralized and bureaucratic systems like Canada’s, it is hard for new technologies to smoothly go from pilot phase to deployment due to the lack of proper incentives. Other countries with universal healthcare systems have better incentive structures and leverage the private sector to promote the implementation and deployment of novel technologies that greatly benefit patients. Canadian healthcare systems should emulate this approach in order to bring beneficial medical innovations to Canadian patients sooner.