Performance Budgeting in Practice: the Case of Danish Hospital Management

Abstract

Performance budgeting systems have been introduced in the OECD countries with the proclaimed aim to increase public sector efficiency. However, the aim has often been hampered by a lack of relevant information, symbolic politics and conflicting political preferences. In this study, we investigate Danish public hospitals to see how performance budgeting works in the regions where the fundamental problems of performance information are negligible and the regions statutorily obligated to increase public sector efficiency by performance budgeting. The analysis shows that the regions in general have designed the performance budgeting system to increase efficiency and mitigate the dilemma of performance budgeting between increasing activity and controlling cost at the same time. Still, there are signs of moderation of the instrumental efficiency use of performance budgeting due to political concerns for equity.