Rules and incentives for hospitals: the Belgian financing system.

The purpose of the paper is to analyze the set of rules and mechanisms that control the financing of Belgian hospitals. It emphasizes their effects on economic incentives for hospital managers and physicians. For this purpose, it is first necessary to understand how the social security system and the health care sector are organized in Belgium. The paper first describes their main features. The paper then gives an historical overview of recent developments in the financing of Belgian hospitals. It emphasizes the double source of hospital revenues, i.e., patient per-diam prices and medical practice fees, although its main concern is with the evolution of the rate-setting process for the per-diem prices. Since the 1981 decision to freeze the per-diem prices and patient-day quotas for individual hospitals, proposals for changes in the financing system have been under study. Implementation of some of these changes began in 1986. The major modification involved is to correct historical per-diem prices by means of interhospital cost comparisons. The paper ends with a critical appraisal of these latest developments. It focuses on the advantages and shortcomings of the pre-1986 system and of the recent changes. The accent is put on the economic incentives and their effects on the behavior of hospitals.