Hospital efficiency under global budgeting: evidence from Taiwan

Global budgeting sets a predetermined cap to restrain health expenditure, but the fixed budget for medical providers could result in less efficient services. This paper measures hospital efficiency under global budgeting using simultaneous stochastic frontier analysis, stressing that physicians and dentists within a hospital were under separate budgets in Taiwan. Empirical results show that hospital efficiency was not improved after global budgeting, and physicians were found to be less efficient than dentists. The physicians and dentists within the same hospital were also found to be less integrated after global budgeting. Empirical results show that a joint analysis improves the estimation efficiency from separate analysis and suggest that the aggregate inefficiency came mostly from physicians in hospitals that were small, public, non-teaching, located in small markets and had a low market share. Except for public hospitals, physicians and dentists in the above hospitals were also found to be less integrated.