Hospital ownership and drug utilization under a global budget: a quantile regression analysis

A global budgeting system helps control the growth of healthcare spending by setting expenditure ceilings. However, the hospital global budget implemented in Taiwan in 2002 included a special provision: drug expenditures are reimbursed at face value, while other expenditures are subject to discounting. That gives hospitals, particularly those that are for-profit, an incentive to increase drug expenditures in treating patients.

We calculated monthly drug expenditures by hospital departments from January 1997 to June 2006, using a sample of 348 193 patient claims to Taiwan National Health Insurance. To allow for variation among responses by departments with differing reliance on drugs and among hospitals of different ownerships, we used quantile regression to identify the effect of the hospital global budget on drug expenditures.

Although drug expenditure increased in all hospital departments after the enactment of the hospital global budget, departments in for-profit hospitals that rely more heavily on drug treatments increased drug spending more, relative to public hospitals.

Our findings suggest that a global budgeting system with special reimbursement provisions for certain treatment categories may alter treatment decisions and may undermine cost-containment goals, particularly among for-profit hospitals.