Global budgets and provider incentives: hospitals' drug expenditures in Taiwan.
OBJECTIVE
This chapter examines how drug prescribing behavior in Taiwanese hospitals changed after the government changed reimbursement systems. In 2002, Taiwan instituted a system in which hospitals are reimbursed for drug expenditures at full price from a fixed global budget before the remaining budget is allocated to reimburse all other expenditures, often at discounted prices. Providers are thus given a financial incentive to increase prescriptions.


METHODS
We isolate the effect of this system from that of other confounding factors by estimating a difference-in-difference model to analyze monthly drug expenditures of hospital departments for outpatients during the years 1999-2006.


RESULTS
Our results suggest that hospital departments which use drugs more heavily as part of their regular medical care increased their drug prescription expenditures after the implementation of the global budget system. In addition, we find that the response was stronger among for-profit than not-for-profit and public hospitals.


CONCLUSIONS
Hospital doctors responded to the financial incentive created by the particular global budgeting system adopted in Taiwan by increasing expenditures on drug treatments for outpatients.
Chou
Shin-Yi
SY
Department of Economics, Lehigh University, Bethlehem, PA, USA.
Deily
Mary E
ME
Lien
Hsien-Ming
HM
Zhang
Jing Hua
JH
D002017:Budgets / Q000331:legislation & jurisprudence*; D019992:Databases as Topic; D011307:Drug Prescriptions / Q000191:economics*; D004469:Economics, Hospital; D012052:Reimbursement, Incentive / Q000331:legislation & jurisprudence*; D013624:Taiwan