What is global budgeting in health care delivery and its effect on costs?

• A. A flexible budget that adjusts monthly to patient load.
• B. A budget per patient per visit.
• C. A fixed total budget for a hospital/system intended to align incentives to reduce unnecessary care and costs.
• D. A budget that only covers medication costs.

Answer: (C)

Global budgeting is a fixed total amount allocated to a hospital or health system for a set period to cover all care costs, rather than paying for each service separately. This setup creates an overall spending cap and encourages coordination, prevention, and cost-effective choices because providers must manage within the available funds. The result is a built-in incentive to reduce unnecessary services and overuse, aiming to control the growth of costs while maintaining care quality. Of course, it requires careful monitoring of outcomes and can risk under-provision if the budget is too tight or not adjusted for demand. This differs from a flexible budget that changes with patient load, a budget per patient per visit, or a budget that only covers medications, all of which do not impose a single fixed total for all services.