companies. In this picture you van see the different parties that are involved. The government sets the limits for the total budget in health care. The advisory body, in which all parties are represented, establishes guidelines on the basis of which hospital budgets can be determined. The actual size of these individual hospital budgets is then negotiated by the insurance companies and the hospitals. They do this by reaching agreement every year with regard to the amount of the production. Besides that, the specialists have their own negotiations with the insurance companies about their production. It's a complex mix that is hard to understand for anyone who is not directly involved. When we talk about the budget system, we only talk about the variable costs of the hospital, that is: the number of admissions, the number of outpatient visits, the number of nursing days, etoetera. The fixed costs, as for the building, are financed through other sources. The variable costs, however, are set in budgets which directly relate to the volume of activity, that is, the production of a hospital. This system is called: outputpricing.
This budget system has quite an impact on the internal hospital organization. The specialist income used to be determined by the number of treatments, investigations, nursing days, etcetera, which they brought about. This system is called: fee-for-service. You could say: you get paid for activities. This is not the right way to control health care costs, because it makes the specialists have an interest in a high production. The introduction of the budget system, therefore, had a lot of influence on the internal processes of the hospital. Until 1982 every hospital was financed according to an open-end system: practically everything a hospital spent, was reimbursed.
screen 29 (hospital organization: before the budget system)
That means that at the time there was in fact no limitation to the volume of supplied services. It
