How Healthcare Facilities are Financed?
Historically hospitals were paid through ‘line item’ budgets, based largely on bed
numbers. Polyclinics received funds according to a similar formula that used a notional
number of visits in lieu of beds. These budgets were increased each year on the basis
of a centrally agreed figure that covered inflation, growth, etc. There were, therefore,
perverse incentives to expand facilities in order to command greater resources. The
shift to a financing system based in part on insurance mechanisms was intended to
address these issues and, through insurance-based pricing pressures to create
incentives for hospitals to reduce the length of stay and to use diagnostic tests and
investigations more rationally. The prospective payment method was to fix the price for
any particular inpatient case against a schedule of diagnostic classifications. Payments
to polyclinics were to be by a variety of methods, providing encouragement to treat
patients in the ambulatory setting rather than referring them on to hospitals. In addition,
it was expected that hospitals and polyclinics would receive some 30% of their finances
from the region based on their actual costs. In practice the operation of the new funding
has been more complex and the payment of hospitals has varied from the original
proposals.