Why are there problems with budgeting in hospitals?

Abstract

When global hospital budgeting was first implemented in Holland in 1983, it was anticipated to be a far more helpful tool for controlling costs than traditional retrospective output reimbursement. There is a discussion of the underlying presumptions of hospital budgeting, including the following: it will incentivize hospitals to increase their efficiency; it won't have a detrimental effect on the standard of treatment; it partially restores hospital autonomy; and hospital administrators are competent to execute greater efficiency. Additionally, consideration is given to the structure of external budgeting, how it affects the connection between insurers and hospitals, and the relationship between planning and budgeting. Hospital budgeting has several implications, which are covered in the second section. Hospital budgeting appears to be a successful strategy for controlling costs; it is associated with a decline in hospital output and impacts hospital administration, policy formation, and the public-private healthcare system. The widespread consensus is that hospital budgeting has considerably more benefits than drawbacks regarding cost containment.