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The soft budget constraint syndrome in the hospital sector

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  • János Kornai

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Abstract

Research to date has focused mainly on the soft budget constraint syndrome in the corporate sector and in the credit system. This article concentrates on the hospital sector. It describes the motivations and the contradictory nature of the behaviour of the patient, the physician, the hospital director, the politician and the hospital owner. The motivations explain the reasons behind the strong inclination to overspend and the tendency of softening budgetary limits. The burden of overspending and debt is pushed upward at each level of the decision-making and financing processes. This article covers the relationship between the various ownership types (state, non-profit and for-profit non-state ownership types) and the soft budget constraint syndrome. Finally, it looks at the phenomenon from normative aspects: the favourable and unfavourable consequences of the hardening of the budgetary limit and how normative dilemmas are reflected in the minds of the participants of the events.
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Suggested Citation

  • János Kornai, 2009. "The soft budget constraint syndrome in the hospital sector," International Journal of Health Economics and Management, Springer, vol. 9(2), pages 117-135, June.
  • Handle: RePEc:kap:ijhcfe:v:9:y:2009:i:2:p:117-135
    DOI: 10.1007/s10754-009-9064-4
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    References listed on IDEAS

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    Cited by:

    1. Laurène PETITFOUR & Xiezhe HUANGFU & Martine AUDIBERT & Jacky MATHONNAT, 2017. "Efficiency of township hospitals in China in the context of the drug policy reform: Progress should not get bogged in midstream - A case study from a survey in Weifang prefecture," Working Papers P185, FERDI.
    2. Thomas Czypionka & Markus Kraus & Susanne Mayer & Gerald Röhrling, 2014. "Efficiency, ownership, and financing of hospitals: The case of Austria," Health Care Management Science, Springer, vol. 17(4), pages 331-347, December.
    3. Audibert, Martine & Mathonnat, Jacky & Pelissier, Aurore & Huang, Xiao Xian & Ma, Anning, 2013. "Health insurance reform and efficiency of township hospitals in rural China: An analysis from survey data," China Economic Review, Elsevier, vol. 27(C), pages 326-338.
    4. Rosta, Miklós, 2015. "Introduction of soft budget constraint to analyze public administration reforms. Some evidence from the Hungarian public administration reform," MPRA Paper 68473, University Library of Munich, Germany.
    5. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2015. "Hospital Competition with Soft Budgets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(3), pages 1019-1048, July.
    6. Cavalieri, M. & Guccio, C. & Lisi, D. & Pignataro, G., 2015. "Does the Extent of Per-Case Payment System Affect Hospital Efficiency? Evidence from the Italian NHS," Health, Econometrics and Data Group (HEDG) Working Papers 15/29, HEDG, c/o Department of Economics, University of York.
    7. Laurène PETITFOUR & Xiezhe HUANGFU & Martine AUDIBERT & Jacky MATHONNAT, 2017. "Efficiency of township hospitals in China in the context of the drug policy reform: Progress should not get bogged in midstream - A case study from a survey in Weifang prefecture," Working Papers P185, FERDI.
    8. Kamhon Kan & Shu-Fen Li & Wei-Der Tsai, 2014. "The impact of global budgeting on treatment intensity and outcomes," International Journal of Health Economics and Management, Springer, vol. 14(4), pages 311-337, December.
    9. Cappellari, Lorenzo & De Paoli, Anna & Turati, Gilberto, 2014. "Do Market Incentives in the Hospital Industry Affect Subjective Health Perceptions? Evidence from the Italian PPS-DRG Reform," IZA Discussion Papers 8636, Institute for the Study of Labor (IZA).
    10. Donald J. Wright, 2016. "Soft Budget Constraints in Public Hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 25(5), pages 578-590, May.
    11. Massimiliano Piacenza & Gilberto Turati, 2014. "Does Fiscal Discipline Towards Subnational Governments Affect Citizens' Well‐Being? Evidence On Health," Health Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 199-224, February.
    12. Yu-Chu Shen & Karen Eggleston, 2009. "The effect of soft budget constraints on access and quality in hospital care," International Journal of Health Economics and Management, Springer, vol. 9(2), pages 211-232, June.
    13. Barbel Held, 2015. "Comparison Of Public, Non-Profit And Private Hospitals," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 10(1), pages 155-178, March.
    14. Karen Eggleston & Yu-Chu Shen & Mingshan Lu & Congdong Li & Jian Wang & Zhe Yang & Jing Zhang, 2009. "Soft budget constraints in China: Evidence from the Guangdong hospital industry," International Journal of Health Economics and Management, Springer, vol. 9(2), pages 233-242, June.

    More about this item

    Keywords

    Soft budget constraint; Bail-outs; Hospitals; Central–local government; Healthcare financing; I1; P3; H7;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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