Decentralization of management responsibility: the case of Danish hospitals

This article examines a specific management reform at three hospitals in a Danish county. Management reform at the hospital level implies a decentralization of responsibility and power to the departmental level. Along with increased responsibility and power, departments get the message: keep your budgets and keep your output level. This preliminary analysis indicates that departmental budgets can be a way of containing costs in clinical departments. Non-staff expenditures especially are subjected to reductions. The system still seems to 'favour' doctors and nurses, but less than in a system with traditional budgetary institutions. The behaviour of the top-management teams shows that the output constraint is not seriously meant. Departments are allowed to reduce capacity, with declining output, with the knowledge of the top-management team. The declining output makes it easier to departments ceteris paribus to keep within their budgets. And that makes it easier for the top-management team to keep the overall hospital budget. The obligation to keep the overall hospital budget is thus an important criterion of success in the eyes of the political masters of hospitals.