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Global Budgets and Excess Demand for Hospital Care

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  • Roger Feldman
  • Felix Lobo

Abstract

Excess demand is a pervasive feature of health care systems that use global budgets to pay for hospital care, regardless of the amount of money spent by those systems. This paper presents a theory that explains this feature of global budgets. The theory emphasizes that hospital administrators control the allocation of their budget, and that they choose quantity and resource intensity to maximize their own utility. The equilibrium quantity of care provided may be less than quantity demanded by consumers, leading to excess demand for admissions. An increase in the hospital's budget may even be associated with an increase in excess demand. © 1997 by John Wiley & Sons, Ltd.

Suggested Citation

  • Roger Feldman & Felix Lobo, 1997. "Global Budgets and Excess Demand for Hospital Care," Health Economics, John Wiley & Sons, Ltd., vol. 6(2), pages 187-196, March.
    • Handle: RePEc:wly:hlthec:v:6:y:1997:i:2:p:187-196
    DOI: 10.1002/(SICI)1099-1050(199703)6:2<187::AID-HEC259>3.0.CO;2-W
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    File URL: https://doi.org/10.1002/(SICI)1099-1050(199703)6:23.0.CO;2-W
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    References listed on IDEAS

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    1. Lindsay, Cotton M & Feigenbaum, Bernard, 1984. "Rationing by Waiting Lists," American Economic Review, American Economic Association, vol. 74(3), pages 404-417, June.
    2. Naylor, C. David & Levinton, Carey M. & Wheeler, Susan & Hunter, Linda, 1993. "Queueing for coronary surgery during severe supply-demand mismatch in a Canadian referral centre: A case study of implicit rationing," Social Science & Medicine, Elsevier, vol. 37(1), pages 61-67, July.
    3. Feldman, Roger & Dowd, Bryan, 1986. "Is there a competitive market for hospital services?," Journal of Health Economics, Elsevier, vol. 5(3), pages 277-292, September.
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    Cited by:

    1. Margit Malmmose & Karoline Mortensen & Claus Holm, 2018. "Global budgets in Maryland: early evidence on revenues, expenses, and margins in regulated and unregulated services," International Journal of Health Economics and Management, Springer, vol. 18(4), pages 395-408, December.
    2. N. Kalant, 1998. "Choice of hospital: comments on ‘global budgets and excess demand for hospital care’," Health Economics, John Wiley & Sons, Ltd., vol. 7(6), pages 557-559, September.
    3. Jon Magnussen & Lee Rivers Mobley, 1999. "The Impact of Market Environment on Excess Capacity and the Cost of an Empty Hospital Bed," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(3), pages 383-398.
    4. Kjeld Møller Pedersen & Terkel Christiansen & Mickael Bech, 2005. "The Danish health care system: evolution ‐ not revolution ‐ in a decentralized system," Health Economics, John Wiley & Sons, Ltd., vol. 14(S1), pages 41-57, September.
    5. Ma, Ching-to Albert, 2004. "Public rationing and private cost incentives," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 333-352, January.
    6. Chia-Hsuan Wu & Ching-Cheng Chang & Po-Chi Chen & Ken-Nan Kuo, 2013. "Efficiency and productivity change in Taiwan’s hospitals: a non-radial quality-adjusted measurement," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 21(2), pages 431-453, March.
    7. Xuanming Su & Stefanos Zenios, 2004. "Patient Choice in Kidney Allocation: The Role of the Queueing Discipline," Manufacturing & Service Operations Management, INFORMS, vol. 6(4), pages 280-301, June.
    8. 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.
    9. Sergi Jimenez & Natalia Jorgensen & José María Labeaga, 2008. "Immigration and the Demand for Health in Spain," Working Papers 2008-38, FEDEA.
    10. Maria J. Perez-Villadóniga & Ana Rodriguez-Alvarez & David Roibas, 2022. "The contribution of resident physicians to hospital productivity," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(2), pages 301-312, March.
    11. A. Spithoven, 2009. "Why U.S. health care expenditure and ranking on health care indicators are so different from Canada’s," International Journal of Health Economics and Management, Springer, vol. 9(1), pages 1-24, March.

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