ABSTRACT
Second, it is critiqued in this study that the above method using the 15% markup principle neglects the fact that the zero-markup policy does increase hospital health care revenue. Alternatively, government subsidy could be estimated by the ‘natural growth principle’. Specifically, Equation (3) was used to more accurately measure government subsidy:
Percentage increase of health care revenue ¼ (health care revenue in 2011 � health care revenue in 2010)=health care revenue in 2010 (3)
Setting natural growth of health care revenue at 5% annually, government compensates the hospitals if hospital health care revenue increases less than 5% after implementing the zero-markup drug policy; when the hospitals reach natural growth rate or exceed the rate, government does not subsidize the hospitals. This is the rationale for using the ‘natural growth principle’ to determine whether the government should subsidize the hospitals.
