Manageable hospital service volume under global budgeting: evidence from a policy reform in Taiwan

ABSTRACT

This paper investigates whether health care providers change their behaviour in response to different payment structures. Using a policy reform in Taiwan that allowed hospitals to switch from a global budgeting system, a reweighted fee-for-service system, to an individual budgeting system, a capitation system, the results show that the individual budgeting system led to lower services volumes. This effect is significant for more discretionary care but not for less elective services like cancer care.

JEL CLASSIFICATION:

• I11
• I18

Acknowledgment

I thank the Editor, Mark Taylor, and an anonymous referee for their suggestions to this paper. I am grateful for Li-Jin Chen’s investigation on the details of the Hospital Excellence Initiatives in Taiwan in her Master’s thesis at National Chung Cheng University. Eric S. Lin, Hung-Pin Lai, Wei-Chih Chen and Michael S. Chen provided helpful comments and suggestions in the early stage of this paper. This study is based in part on data from the National Health Insurance Research Database provided by the Bureau of National Health Insurance, Department of Health and managed by National Health Research Institute. The interpretation and conclusions contained herein do not represent those of Bureau of National Health Insurance, Department of Health or National Health Research Institutes. All errors are my own.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Chen et al. (2007), Cheng, Chen, and Chang (2009), and Chen and Fan (2014) analysed Taiwanese data and found that the effect of global budgeting on service quantity varies by disease and hospital size. Hurley, Lomas, and Goldsmith (1997) found the service quantity increased after Canada implemented global budgeting, but Redmon and Yakoboski (1995) found opposite results using French data.

² Example of service volume reduction can be found at https://news.ltn.com.tw/news/focus/paper/14522 (in Chinese).

³ https://dep.mohw.gov.tw/DOS/np-1865–113.html.

⁴ The cancer patient claims data are essentially the population data of cancer patients in Taiwan. The data combine patients’ information on their insurance background and their claims record from 1995 to 2013. This information was aggregated by medical provider for empirical analysis used in this paper. The following information on the details of this dataset was copied from the NHIRD website, https://nhird.nhri.org.tw/en/Data_Subsets.html. Cancer patient original claim data were extracted from the CD data file. Data that matched any of the cancer-related ICD-9-CM or other cancer-related codes were selected to construct this dataset, i.e. the cancer treatment codes 12, D1, and D2 from CUREITEMNO1 to CUREITEMNO4, the disease-category codes of “ACODEICD913” with the first three digits from 140 to 239, the diagnosis codes “ACODEICD913” with the first three digits from A08 to A17, and the cancer-surgery-related codes “ICDOPCODE” with the first three digits from V57 to V58.

Additional information

Funding

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.