The impact of global budgeting on treatment intensity and outcomes.

This paper investigates the effects of global budgets on the amount of resources devoted to cardio-cerebrovascular disease patients by hospitals of different ownership types and these patients' outcomes. Theoretical models predict that hospitals have financial incentives to increase the quantity of treatments applied to patients. This is especially true for for-profit hospitals. If that's the case, it is important to examine whether the increase in treatment quantity is translated into better treatment outcomes. Our analyses take advantage of the National Health Insurance of Taiwan's implementation of global budgets for hospitals in 2002. Our data come from the National Health Insurance's claim records, covering the universe of hospitalized patients suffering acute myocardial infarction, ischemic heart disease, hemorrhagic stroke, and ischemic stroke. Regression analyses are carried out separately for government, private not-for-profit and for-profit hospitals. We find that for-profit hospitals and private not-for-profit hospitals did increase their treatment intensity for cardio-cerebrovascular disease patients after the 2002 implementation of global budgets. However, this was not accompanied by an improvement in these patients' mortality rates. This reveals a waste of medical resources and implies that aggregate expenditure caps should be supplemented by other designs to prevent resources misallocation.

Does a global budget superimposed on fee-for-service payments mitigate hospitals' medical claims in Taiwan?

Taiwan's global budgeting for hospital health care, in comparison to other countries, assigns a regional budget cap for hospitals' medical benefits claimed on the basis of fee-for-service (FFS) payments. This study uses a stays-hospitals-years database comprising acute myocardial infarction inpatients to examine whether the reimbursement policy mitigates the medical benefits claimed to a third-payer party during 2000-2008. The estimated results of a nested random-effects model showed that hospitals attempted to increase their medical benefit claims under the influence of initial implementation of global budgeting. The magnitudes of hospitals' responses to global budgeting were significantly attributed to hospital ownership, accreditation status, and market competitiveness of a region. The results imply that the regional budget cap superimposed on FFS payments provides only blunt incentive to the hospitals to cooperate to contain medical resource utilization, unless a monitoring mechanism attached with the payment system.

A new costing model in hospital management: time-driven activity-based costing system.

Traditional cost systems cause cost distortions because they cannot meet the requirements of today's businesses. Therefore, a new and more effective cost system is needed. Consequently, time-driven activity-based costing system has emerged. The unit cost of supplying capacity and the time needed to perform an activity are the only 2 factors considered by the system. Furthermore, this system determines unused capacity by considering practical capacity. The purpose of this article is to emphasize the efficiency of the time-driven activity-based costing system and to display how it can be applied in a health care institution. A case study was conducted in a private hospital in Cyprus. Interviews and direct observations were used to collect the data. The case study revealed that the cost of unused capacity is allocated to both open and laparoscopic (closed) surgeries. Thus, by using the time-driven activity-based costing system, managers should eliminate the cost of unused capacity so as to obtain better results. Based on the results of the study, hospital management is better able to understand the costs of different surgeries. In addition, managers can easily notice the cost of unused capacity and decide how many employees to be dismissed or directed to other productive areas.

The effect of health payment reforms on cost containment in Taiwan hospitals: the agency theory perspective.

This study aims to determine whether the Taiwanese government's implementation of new health care payment reforms (the National Health Insurance with fee-for-service (NHI-FFS) and global budget (NHI-GB)) has resulted in better cost containment. Also, the question arises under the agency theory whether the monitoring system is effective in reducing the risk of information asymmetry. This study uses panel data analysis with fixed effects model to investigate changes in cost containment at Taipei municipal hospitals before and after adopting reforms from 1989 to 2004. The results show that the monitoring system does not reduce information asymmetry to improve cost containment under the NHI-FFS. In addition, after adopting the NHI-GB system, health care costs are controlled based on an improved monitoring system in the policymaker's point of view. This may suggest that the NHI's fee-for-services system actually causes health care resource waste. The GB may solve the problems of controlling health care costs only on the macro side.

Factors affecting the profitability of surgical procedures under 'Payment by Results'.

We wished to analyse the factors influencing the potential profitability of surgical operations under the National Health Service 'Payment by Results' scheme. First, we planned to develop a generic theoretical model describing the relationships between 'profit', 'procedure duration' and 'costs'. Second, for a group of specific operations, we planned to investigate (using analysis of hypothetical lists) whether it was possible for hospitals to make a profit when lists were maximally efficient. 'Efficient' meant full utilisation of the list time, with no gaps between cases and no case cancellations. We assumed that operating theatres cost a median of £16.min(-1) (range £12-20.min(-1) or ~£7680 for an 8-h list), and we used published mean (SD) times for seven common day-case operations (varicose veins, inguinal hernia, cataract, circumcision, hydrocoele, cystoscopy, breast biopsy). We found that even when conducted perfectly efficiently, some operations (notably varicose veins) were always unprofitable. Conversely, other operations (notably cataracts) would be likely to be profitable even if conducted inefficiently. We conclude that current tariffs do not properly reward efficiency. As tariffs are based in large part on hospitals' reporting their own costs, flaws in the tariffs are likely to be due to inaccurate reporting. Even for this imperfect funding system, our theoretical model may help to develop strategies to maximise profit. Our analysis suggests alternative ways in which reimbursement systems could be designed to avoid creating perverse incentives and instead properly reward efficient practices.

Hospital response to a global budget program under universal health insurance in Taiwan.

OBJECTIVES: Global budget programs are utilized in many countries to control soaring healthcare expenditures. The present study was designed to evaluate the responses of Taiwanese hospitals to a new global budget program implemented in 2002. METHODS: Using data obtained from the Bureau of National Health Insurance (NHI) and two nationwide surveys conducted before and after the global budget program, changes in the length of stay, treatment intensity, insurance claims, and out-of-pocket fees were compared in 2002 and 2004. The analysis was conducted using the Generalized Estimating Equations (GEEs) method. RESULTS: Regression models revealed that implementation of the global budget was followed by a 7% increase in length of stay and a 15% increase in the number of prescribed procedures and medications per admission. The claim expenses increased by 14%, and out-of-pocket fees per admission increased by 6%. Among the hospitals, no coalition action was found during the study period. CONCLUSIONS: In the present study, it appears that hospitals attempted to increase per-case expense claims to protect their reimbursement from possible discounts under a global budget cap. How Taiwanese hospitals respond to this challenge in the future deserves continued, long-term observation.

Reimbursement systems, organisational forms and patient selection: evidence from day surgery in Norway.

Cream skimming can be defined as the selective treatment of patients that demand few resources while providing high economic refunds. We test whether cream skimming occurs after the introduction of DRG-based activity-based financing (ABF) in Norway in 1997 and if the problem further increased after the 2002 organizational reform when hospitals were turned into trusts. The DRG-system offers the same economic reimbursement for patients classified within day-surgical DRGs irrespective of whether the patient receives same-day treatment or in-patient care over several days. This provides potential for cream skimming and allows us to investigate cream skimming within the actual diagnoses. Patient data from the period 1999-2005 is analyzed. Waiting times are used as indicators of patient selection and analyzed as a function of severity within each diagnosis, controlling for age and gender of the patient, as well as institutional and time-dependent variables. The analysis gives some evidence of cream skimming in the first period of ABF, in particular within the lighter orthopaedic diagnoses. However, cream skimming does not increase after the 2002 organizational reform but is stable, and for some DRGs even reduced. The study indicates that cream skimming may occur if reimbursement systems are not particularly sophisticated. Softening of budget constraints after the hospital reform of 2002 may explain why cream skimming does not increase after the reform. However, further investigation into this mechanism is needed.

A modified method of activity-based costing for objectively reducing cost drivers in hospitals.

OBJECTIVES: Activity-based costing (ABC) is widely used to precisely allocate indirect costs to medical services. In the ABC method, the indirect cost is divided among the medical services in proportion to the volume of "cost drivers", for example, labor hours and the number of hours of surgery. However, the workload of data collection of cost drivers can be time-consuming and a considerable burden if there are many cost drivers. The authors aim to develop a method for objectively reducing the cost drivers used in the ABC method. METHODS: In the ABC method, the cost driver is assigned for each activity. We assume that these activities and cost drivers are the best combination. Our method, that is cost driver reduction (CDR), can objectively select surrogates of the cost drivers for each activity in ABC from candidate cost drivers. Concretely, the total indirect cost of an activity is temporarily allocated to the medical services using each candidate of cost drivers. The difference between the costs calculated by each candidate and the proper cost driver used in ABC is calculated to evaluate the similarity by the evaluation function. RESULTS: We estimated the cost of laboratory tests using our method and revealed that the number of cost drivers could be reduced from seven in the ABC to four. Similarly, the results of cost estimation obtained by our method were as accurate as those calculated using the ABC. CONCLUSIONS: Our method provides two advantages compared to the ABC method: 1) it provides results that are as accurate as those of the ABC method, and 2) it is simpler to perform complicated estimation of hospital costs.

Case-mix payment in Japanese medical care.

The Japanese medical care system, highly rated internationally, has recently experienced a crisis that has placed a burden on all of its citizens, providers, and payers, due to the expansion of medical expenditures in rapidly aging society with the stagnant economy. To address this, in April 2003, Japan implemented a case-mix payment system, instead of conventional fee-for-service payment, based on an original case classification with 2552 groups (Diagnosis Procedure Combination: DPC), with inpatients from 82 special functioning hospitals. This system contains two parts: per diem prospective payment for hospital's fee with a three-level step down according to average length of stay for each diagnosis group, which is adjusted to secure the previous year's remuneration in each hospital; fee-for-service payment for doctor's fee based on national fee schedule. The payment system reduced average length of stay, but did not change inpatient expenditures and increased outpatient expenditures. The in-hospital mortality rate, although un-adjusted, did not changed, but the readmission rate increased mainly through an increase in planned, not accidental, readmissions. For the expansion of this system, ongoing program refinement, reflecting the results of data analysis, is indispensable.

The cost of hospital care in Canada: a comparison of two alternatives.

This article compares resource intensity weight costs with case costs for selected patient groups at St. Paul's Hospital, British Columbia. Analysis found that average case costs for surgical patients were 23.9% higher than their resource intensity weight costs, whereas case costs for non-surgical patients were 14.8% lower. Average case costs for patients receiving surgical implants were 32.8% higher than resource intensity weight costs. For patients receiving internal defibrillators average case costs were three times higher.

The importance of being earnest about your business plan.

Writing about the importance of business planning for a financially oriented audience may equate with preaching to the choir.

Um estudo de caso sobre a metodologia de custeio adotada pela Unidade de Nutrição e Dietética de um hospital / Cost-management methodology of a hospital nutrition and diet unit: a case study

Este artigo apresenta um estudo de caso realizado numa instituição hospitalar, com a finalidade de analisar o método de custeio adotado pela Unidade de Nutrição e Dietética. A Unidadade de Nutrição e Dietética adota o método de custeio ponderado, onde são atribuídos pesos às diferentes refeições dependendo da importância (ou onerosidade) delas. Comparativamente, aplicou-se o método de custeio por absorção. Analisando-se os resultados, percebeu-se uma grande distorção entre os dois métodos. Concluiu-se que as distorções ocorreram em função dos graus de subjetividade quanto à atribuição de pesos, no método de custeio por absorção. Diante dos resultados obtidos, foi sugerido que a instituição adote um método de custeio que mensure com maior exatidão o custo, como, por exemplo, metodologia de custeio baseado em atividades - ABC (Activity Based Costing).

The effect of activity-based financing on hospital efficiency: a panel data analysis of DEA efficiency scores 1992-2000.

Activity-based financing (ABF) was implemented in the Norwegian hospital sector from 1 July 1997. A fraction of the block grant from the state to the county councils has been replaced by a matching grant depending upon the number and composition of hospital treatments. As a result of the reform, the majority of county councils have introduced activity-based contracts with their hospitals. This paper studies the effect of activity-based funding on hospital efficiency. We predict that hospital efficiency will increase because the benefit from cost-reducing efforts in terms of number of treated patients is increased under ABF as compared with global budgets. The prediction is tested using a panel data set from the period 1992-2000. Efficiency indicators are estimated by means of data envelopment analysis (DEA) with multiple inputs and outputs. Using a variety of econometric methods, we find that the introduction of ABF has improved efficiency when measured as technical efficiency according to DEA analysis. The result is less uniform with respect to the effect on cost-efficiency.

The reform of hospital financing in Germany: an international solution?

From 2003, each inpatient's stay at a German hospital will be reimbursed according to diagnosis related groups. The former German hospital financing system, which consisted partly of per diem rates and partly of per-case rates, was abolished in an attempt to increase efficiency in hospitals. This can be seen as the government's attempt to act on the principles of evidence-based policy. Since there is no strict global budget for inpatient treatment, it is not certain that those diagnosis related groups will actually decrease overall expenditures on hospitals. Also, it is argued that the introduction of diagnosis related groups in Germany may not be the last step in rebuilding the German health care system. The manner, scope and timing of this reform suggests that it will not succeed. Reforms lead to yet more reforms.

Administraçäo orçamentária em hospitais públicos: estudo de caso / Budgetary management in public hospitals: case study

Estudo de caso, no qual o objeto é a implantaçäo de um sistema de gestäo orçamentária em instituiçöes públicas de saúde. O Estudo se passa no Projeto REFORSUS, em especial o Projeto Piloto de Modernizaçäo Gerencial em Grandes Estabelecimentos de Saúde. Investiga e identifica os principais aspectos da introduçäo da administraçäo orçamentária nos hospitais públicos, no período de julho de 2001 a dezembro de 2002. Identifica as contribuiçöes da mesma para a melhoria da administraçäo econômico-financeira hospitalar e da administraçäo dos recursos destinados à área de saúde de cada Estado. Aborda o orçamento público, seu conceito, histórico, evoluçäo e procedimentos. Ilustra a aplicaçäo do orçamento público às organizaçöes de saúde. Explica o sistema de saúde brasileiro.