Kanhom Kan Shu-Fen Li Wei-Der Tsai 1

Objective of this study Investigate the impact of global budgeting on treatment outcome. Motivation: 1. The rapid increase in health care expenditure since the 1960s has become a great concern to policy makers in most developed countries. 2. Global Budgeting is effective in controlling medical expenditures. 3. Global Budgeting was adopted in OECD countries (see Docteur and Oxley, 2004, and Wolfe and Moran, 1993). 2

Data Source ： OECD Health Data Comparison of per capital NHI Between OECD countries and Taiwan

資料來源：中央健保局 The Growth of NHI Revenues and Expenditures 4

Literature Review Most relative research focus on the provider’s behavior responses (quantity and quality) to global budgeting: A. Theoretical Prediction: 1. Phelps (2009) and Fan et al. (1998) show that medical service providers will increase the quantity of services supplied. 2. Benstetter and Wambach’s (2006) suggest that there is likely to be a coordination failure such that medical service providers will supply a high quantity of services in order to achieve a target income and prevent bankruptcy (the so-called “treadmill effect”). 5

Literature Review (cont) A. Theoretical Predictions: 3. Based on the assumption of monopolist and Cournot competitive market, Mougeot and Naegelen (2005) suggest that compared with FFS, an expenditure cap results in a lower level of service quantity and quality. 4. Feldman and Lobo’s (1997) assume that medical service providers’ utility is a function of services quantity and quality. Their model indicates that the excess demand which is prevalent under global budget systems is due to the high level of resource intensity chosen by service providers. 6

Literature Review (cont) B. Empirical Evidence: 1. Rochaix (1993) show in response to an expenditure cap, physicians in Québec increase their activity levels, and provide more complex and high-priced procedures. 2. Similar results found by Hurley et al. (1997) [cases of Alberta and Scotia Nova in Canada] and Lee and Jones (2004) [case of Taiwan’s dentists]. 3. Chen et al. (2007) and Cheng, et al. (2009) show that hospitals in Taiwan are more likely to hospitalize patients and increase per case expenses claim under global budgeting. 7

Research Agenda The literature is silent on the issue that whether the implement of global budgeting has an impact on quality or treatment outcome. Using the data of Taiwan’s National Health Insurance claim records in , we examine the effect of global budgeting on treatment outcomes of AMI (acute myocardial infraction), ischemic heart disease, ischemic stroke and hemorrhagic stroke patients. 8

Research Agenda (cont) Treatment outcome is measured by inpatient readmission within 30 days, and the rate of 7, 14, 30, 60 and 90 days post-discharge mortality. Hospitals were divided into for-profit and not-for- profit hospitals. Different ownership may respond to the launch of global budget differently. Regression discontinuity design was applied to analyze the effect of global budgeting on treatment outcome. 9

Background of Taiwan’s NHI National Health Insurance (NHI) was implemented in March of NHI provides patients with comprehensive care, but only requests low out of pocket expenditures. Payment system started from FFS in 1995, but changed to global budget system sector by sector. 1998/7 Dental services 2000/7 Chinese Medicine 2001/7Community clinics in /7 Hospital services 2010/1DRG for some hospital inpatient services. 10

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Background of Taiwan’s NHI (cont) Under FFS, a providers is credited a certain point for each treatment procedure offered and each point is worth NT$ 1. Under global budgeting system, there is a regional level expenditure cap. Taiwan was divided into six medical regions. The point value for a given region is determined as follows 12

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For-profit vs. Not-for Profit Hospitals For-profit and not-for-profit hospitals have different ownership. Not-for-profit hospitals enjoys property tax exemption and profit tax exemption if over 80% of its earnings are spent. Not-for-profit hospitals (i.e., public hospitals and private not-for-profit hospitals) lack profit-making incentives. Hence, they would respond to global budgeting in a way different from that of for-profit ones. 18

For-Profit and Not-for-Profit Hospitals in Taiwan 19

For-Profit and Not-for-Profit Hospitals in Taiwan (cont) 20

Data Description Claim record form the Claim File of Taiwan’s NHI. The claim record contain information both on hospitalized patients’ and hospitals’ characteristics. We use the claim data to construct three samples, including AMI (acute myocardial infraction, ICD 410), ischemic heart disease (ICD ), ischemic stroke ( ICD 434) and hemorrhagic stroke (ICD ) patients during the period

Data Description Some criteria are imposed to exclude observations. (a) hospitalized due to the same disease in the previous year; (b) admitted to a hospital, which treated less than 30 cases in the current year; (c) hospitalized for the disease during the SARS epidemic (March-July, 2003); (d) hospitalized during July 2002 (1 st month of GB); (e) Patients not discharged from hospital after admission; (f) Patients transferred from one hospital to another hospital Obs for AMI: 40,444; Ischemic heart disease: 232,157; ischemic stroke: 155,884; hemorrhagic stroke: 49,373 22

Measurement of Treatment Outcome (a) 30-days readmission rate; (b) 7-day mortality rate; (c) 14-day mortality rate; (d)30-day mortality rate; (e)60-day mortality rate; (f)90-day mortality rate; 23

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Empirical Strategy Linear probability model with hospital fixed effects: Where subscribe d index calendar dates, h and i index, respectively, the hospital and the patient; y hid an outcome of interest; GB d global budgeting indicator; trend d year trend, X hid a vector of patient characteristics (i.e., CCI score, age, gender); η h hospital fixed effect; ε hid residuals. 28

Empirical Results— Coefficient estimates of GB 29

Empirical Results— Coefficient estimates of GB 30

Empirical Results— Coefficient estimates of GB 31

Empirical Results— Coefficient estimates of GB 32

Conclusion Our estimation results suggest that global budgeting has some effects on post-discharge readmission and mortality for for-profit hospitals, but not for not-for-profit hospitals. For AMI patients hospitalized in for-profit hospitals, GB reduces 30 days post-discharge readmission by 5.85% (compared to the sample means 13.93% in 2000 and 14.47% in 2001, respectively), and 7 days post-discharge mortality by 1.94% (compared to 4.25% in 2000 and 4.25% in 2001, respectively). 33

Conclusion (cont) For hemorrhagic stroke patients hospitalized in for-profit hospitals, GB reduces the 30 days post- discharge readmission rate by 3.12% (compared to the sample mean 16.89% in 2000 and 17.08% in 2001, respectively). Moreover, GB reduces 14, 30 and 60 days post-discharge mortality by 1.55%, 1.78% and 1.89%, respectively. The impacts of GB are non-negligible if compared to sample mortality rates of 8%-7.02% (14 days), 10.12%-8.89% (30 days), and 12.05%-10.31% (60 days). 34

Conclusion (cont) The vast increase in the amount of resources devoted to medical treatment after the launch of GB yield some effects. This suggests that the installation of GB, which contains costs, has the side effect of improving the outcomes of treatment. 35

36 The End. Thank you and Comments are welcome!