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Strategic Provider Behavior Under Global Budget Payment with Price Adjustment in Taiwan

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  • Bradley Chen
  • Victoria Y. Fan

Abstract

Global budget payment is one of the most effective strategies for cost containment, but its impacts on provider behavior have not been explored in detail. This study examines the theoretical and empirical role of global budget payment on provider behavior. The study proposes that global budget payment with price adjustment is a form of common‐pool resources. A two‐product game theoretic model is derived, and simulations demonstrate that hospitals are expected to expand service volumes, with an emphasis on products with higher price–marginal cost ratios. Next, the study examines the early effects of Taiwan's global budget payment system using a difference‐in‐difference strategy and finds that Taiwanese hospitals exhibited such behavior, where the pursuit of individual interests led to an increase in treatment intensities. Furthermore, hospitals significantly increased inpatient service volume for regional hospitals and medical centers. In contrast, local hospitals, particularly for those without teaching status designation, faced a negative impact on service volume, as larger hospitals were better positioned to induce demand and pulled volume away from their smaller counterparts through more profitable services and products such as radiology and pharmaceuticals. Copyright © 2014 John Wiley & Sons, Ltd.

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  • Bradley Chen & Victoria Y. Fan, 2015. "Strategic Provider Behavior Under Global Budget Payment with Price Adjustment in Taiwan," Health Economics, John Wiley & Sons, Ltd., vol. 24(11), pages 1422-1436, November.
    • Handle: RePEc:wly:hlthec:v:24:y:2015:i:11:p:1422-1436
    DOI: 10.1002/hec.3095
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    1. Guanshen Dou & Yilin Zhang & Yunzhen He & Qiaoyun Huang & Yingfeng Ye & Xinyu Zhang & Weibing Wang & Xiaohua Ying, 2019. "Impact of the Global Budget Payment System on Expenditure of Cardiovascular Diseases: An Interrupted Time Series Analysis in Shanghai, China," IJERPH, MDPI, vol. 16(8), pages 1-14, April.
    2. Chan, Marc K. & Zeng, Guohua, 2018. "Unintended consequences of supply-side cost control? Evidence from China's new cooperative medical scheme," Journal of Health Economics, Elsevier, vol. 61(C), pages 27-46.
    3. Shin‐Yi Chou & James A. Dearden & Mary E. Deily & Hsien‐Ming Lien, 2020. "Provider responses to a global budgeting system: The case of drug expenditures in Taiwan hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 29(10), pages 1270-1278, October.
    4. Braendle, Thomas & Colombier, Carsten, 2020. "Budgetary targets as cost-containment measure in the Swiss healthcare system? Lessons from abroad," Health Policy, Elsevier, vol. 124(6), pages 605-614.
    5. Li Xiang & Zhengdong Zhong & Junnan Jiang, 2022. "The Response of Different-Levels Public Hospitals to Regional Global Budget with a Floating Payment System: Evidence from China," IJERPH, MDPI, vol. 19(23), pages 1-11, November.
    6. Hung-pin Lai & Meng-Chi Tang, 2018. "Hospital efficiency under global budgeting: evidence from Taiwan," Empirical Economics, Springer, vol. 55(3), pages 937-963, November.
    7. András Kiss & Norbert Kiss & Balázs Váradi, 2023. "Do budget constraints limit access to health care? Evidence from PCI treatments in Hungary," International Journal of Health Economics and Management, Springer, vol. 23(2), pages 281-302, June.
    8. Fu, Hongqiao & Li, Ling & Yip, Winnie, 2018. "Intended and unintended impacts of price changes for drugs and medical services: Evidence from China," Social Science & Medicine, Elsevier, vol. 211(C), pages 114-122.
    9. Katalin Gaspar & France Portrait & Eric Hijden & Xander Koolman, 2020. "Global budget versus cost ceiling: a natural experiment in hospital payment reform in the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(1), pages 105-114, February.
    10. Lin, Lee-Kai, 2022. "Effects of a global budget payment scheme on medical specialty workforces," Social Science & Medicine, Elsevier, vol. 309(C).
    11. Lai, Yi & Fu, Hongqiao & Li, Ling & Yip, Winnie, 2022. "Hospital response to a case-based payment scheme under regional global budget: The case of Guangzhou in China," Social Science & Medicine, Elsevier, vol. 292(C).

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