GLOBAL BUDGETING OF HOSPITALS IN HONG-KONG

Policy-makers in industrialized countries face the dilemma of having to contain soaring hospital costs while resisting any reduction in the quality and quantity of hospital services. Among the many hospital financing systems, centralized control via global budgeting is advocated by some to be the most effective in containing hospital costs. Containing hospital costs, however, is but one aspect of the trade-off between cost containnment and quality of care. The hospital financing system of Hong Kong provides some insights into the extent to which cost control can be achieved through global budgeting; and its impact on the accessibility of hospital care. The case of Hong Kong highlights three necessary conditions for effective cost control: (1) the payer must have a clear policy stance on overall public spending; (2) the payer must have a clear policy stance on the importance of hospital care relative to other goods and services; and (3) the payer must also have the will and ability to limit hospital spending within finalized global budgets. However, successful cost containment in Hong Kong affects the accessibility of hospital care. In a time of population growth and economic prosperity, new community needs seem to have preceded government plans and actions to build hospital facilities.