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Empirical Economics

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28-08-2017

Hospital efficiency under global budgeting: evidence from Taiwan

Authors: Hung-pin Lai, Meng-Chi Tang

Published in: Empirical Economics | Issue 3/2018

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Abstract

Global budgeting sets a predetermined cap to restrain health expenditure, but the fixed budget for medical providers could result in less efficient services. This paper measures hospital efficiency under global budgeting using simultaneous stochastic frontier analysis, stressing that physicians and dentists within a hospital were under separate budgets in Taiwan. Empirical results show that hospital efficiency was not improved after global budgeting, and physicians were found to be less efficient than dentists. The physicians and dentists within the same hospital were also found to be less integrated after global budgeting. Empirical results show that a joint analysis improves the estimation efficiency from separate analysis and suggest that the aggregate inefficiency came mostly from physicians in hospitals that were small, public, non-teaching, located in small markets and had a low market share. Except for public hospitals, physicians and dentists in the above hospitals were also found to be less integrated.

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For related reports and news coverage, see http://universalhealthcoverageday.org/news/, http://www.who.int/universal_health_coverage/en/, and a recent report by the World Health Organization (2015).

For example, Cheng (2003) showed that the annual growth rate of the health expenditure in Taiwan was 6.26% between 1995 and 2001 since its universal healthcare inception, while the rate of revenue is about 4.26%. Chang and Hung (2008) list the annual revenues and expenses of the Taiwanese National Health Insurance in their Table 1. Kan et al. (2014) also mentioned that the NHI accumulated a deficit of NT$12.82 billion during 1996–2001, with the average growth rate of 7.43%.

Chen and Fan (2015) mentioned three ways to enforce global budgeting: price adjustment, capitated payments, and limiting a provider’s budget.

We thank the editor for this point.

Lee and Jones (2004) studied dentists’ response to global budgeting in Taiwan. They found this policy constrained the costs but also changed the mix of dental services.

Some hospitals in Taiwan also have Chinese medicine divisions, but the percentage is small (4%). Thus, we did not include Chinese medicine in the analysis.

1 NTD equals .03 USD as of January 2016.

Worthington (2004) summarized the outcome measures used in the literature, mostly inpatient days or outpatient visits. Jacobs et al. (2006) argued that most outcome measures in the literature are crude because the effectiveness of healthcare treatments is hard to quantify.

Hospitals also likely increased more services that were not reimbursed by the National Health Insurance after global budgeting. Commenced such services were not recorded in our data and were not subject to the global budgeting cap, thus the National Health Insurance. Thus, our efficiency estimates are subject to the NHI reimbursed services.

In particular, BNHI negotiated individual caps and point values with individual hospitals that participated in this program, based on their efficiency and quantity performance in the previous year. The program also offered an advantage to save hospitals from complicated audit process required by the BNHI. Nevertheless, various quality requirements by the BNHI also distorted hospitals’ incentives and behaviors, such as referrals that transferred patients with severe conditions to hospitals not participating in this program.

For more details about the data, visit http://nhird.nhri.org.tw/en/index.htm.

Ownership includes public hospitals, e.g., city-owned, county-owned, and military-owned hospitals, and private hospitals, e.g., for-profit hospitals and private medical school hospitals. Details of the list can be found on the same Web site mentioned in the previous footnote. Hospital type, in addition, specifies whether a hospital is a general or a specialty hospital.

The hospital accreditation system was modified in 2004 and recorded differently in the NHIRD and MHW datasets. A correspondence table that compares the accreditation level recorded in NHIRD and MHW is available upon request.

For example, if the ratio between dentists and physicians is 1:3 in a hospital, we considered 1 out of 4 nurses was assigned to a dentist in that hospital. Because some hospitals have a traditional Chinese medicine division, these practitioners were also included in the calculation.

Although the drop in TE during 2002–2003 could be attributed to global budgeting, the SARS epidemic outbreak was also likely to be a reason behind it. The improvement of TE in 2004, in addition, may be partially due to the implement of the hospital self-management program.

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Title: Hospital efficiency under global budgeting: evidence from Taiwan
Authors: Hung-pin Lai
Meng-Chi Tang
Publication date: 28-08-2017
Publisher: Springer Berlin Heidelberg
Published in: Empirical Economics / Issue 3/2018
Print ISSN: 0377-7332
Electronic ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-017-1317-3

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