Global budget versus cost ceiling: a natural experiment in hospital payment reform in the Netherlands

Global budget (GB) arrangements have become a popular method worldwide to control the rise in healthcare expenditures. By guaranteeing hospital funding, payers hope to eliminate the drive for increased production, and incentivize providers to deliver more efficient care and lower utilization. We evaluated the introduction of GB contracts by certain large insurers in Dutch hospital care in 2012 and compared health care utilization to those insurers who continued with more traditional production-based contracts, i.e., cost ceiling (CC) contracts. We used the share of GB hospital funding per postal code region to study the effect of contract types. Our findings show that having higher share of GB financing was associated with lower growth in treatment intensity, but it was also associated with higher growth in the probability of having at least one hospital visit. While the former finding is in line with our expectation, the latter is not and suggests that hospital visits may take longer to respond to contract incentives. Our study covers the years of 2010-2013 (2 years before and 2 years following the introduction of the new contracts). Therefore, our results capture only short-term effects.