individual wards are not aligned with the overall goals and needs of the hospital. These problems are also noted by adopters, but some fi nd them manageable or at least not detrimental enough to outweigh the benefi ts. The same is the case when it comes to other possible negative eff ects of formula-based performance budget- ing. The interviewees point to the risk of gaming, and the feelings of injustice the formula create by not giving what is considered to be fair reimbursement to all wards.
It also underlines the importance of the ‘management capacity’ perspective that the key mechanisms behind the expected diff erences between the hospital and the ward levels are clearly present. Both adopters and non-adopters are aware of the importance of the size of hospitals and wards respectively for their fi t with formula-based performance management. Among adopters, one hospital offi cial emphasizes the large size of the wards at his particular hospital, while the non- adopters point to the limited size of wards compared to hospitals.
In summary, we have good reasons to believe that considerations about the impact of management capacity are important in the decision to adopt and particularly partially adopt formula-based performance management systems in the Danish hospital sector. Institutional pressures also have a role to play, but management capacity seems more important in relation to the diff erences at hospital and ward levels.
We found no signs of other important explanatory factors in the interview data. This could not be ruled out a priori as the literature on policy adoption and perfor- mance management has also pointed to factors such as veto points and ideology as potential explanations for adoption of formula-based performance management (Binderkrantz & Christensen, 2009; Gilardi et al., 2009). Furthermore, considering the diff erence between hospital and ward levels, it does not seem likely to be the result of either ideology since the political principals are the same; nor of diff er- ent veto structures since there are more potential veto points in the broad county/ regional councils with many political parties than in the management teams of the individual hospitals.
6. Conclusion
In the Danish hospital sector, the dominant organizational response to the concept of formula-based performance management has been partial adoption in the form of avoidance and partial defi ance. The formal adoption of formula-based funding has been widespread, but there have also been many instances at both hospital and ward level where this has not been followed by either formal adoption of transfer clauses or a practice of not exempting from such clauses. The pattern of adoption thus refl ects the international trend of partial adoption of performance management systems. This is a fi nding that calls for further research, as studies have started to empirically show how diff erent degrees of partial adoption shape the performance of public sector organizations (Nielsen, 2013).
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The dominant organizational response, however, also diff ers between the hospi- tal and ward levels. There is a stronger form of partial adoption at the ward level where the median response is partial defi ance, than at the hospital level where the median response is avoidance.
Finally, the analysis has shown that likely explanations for these patterns of adop- tion can be found within the ‘institutional pressure’ and ‘management capacity’ perspectives that are central in performance management literature. While vari- ations in institutional pressure would predict some form of partial adoption, it can neither account for non-adoption in cases of pressure, as with formal transfer clauses, nor for the marked diff erence between the organizational levels. Instead, the paper has found strong indications that this diff erence is the result of the way the relevant actors interpret formula-based funding to fi t with their capacity to achieve organizational goals.
Overall, the study has identifi ed patterns of adoption of formula-based perfor- mance budgeting in the Danish hospital sector as well as some likely explana- tions for these patterns. While these results contribute to the general literature on performance management their limitations must be kept in mind. By focusing on a highly fi nancial and incentivized form of performance management, the con- clusions cannot be generalized to other less incentivized forms of performance management. While the pattern of partial adoption has been found to be rather general in the performance management literature, it is quite likely that less incen- tivized forms of performance management would have a better fi t with manage- ment capacity at a ward level than is the case with formula-based performance budgeting. Still, this is an issue that merits further research. Furthermore, as the paper is based on cross-sectional data and utilizes simple bivariate analyses, it can- not make very strong claims on causality. But the results defi nitely call for further research, particularly into the impact of management capacity.
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Notes
1. This includes two hospitals from each region except Region Zealand, where only one hospital wanted to participate.
2. The subsequent results also hold if we only look at the rate of reimbursement before and after the baseline, respectively.
3. Test of differences in means between two groups. 4. Test of difference in proportions between two groups. 5. Test of difference in proportions between two groups.
6. Test of difference in proportions between two groups; it is signifi cant, however, at an 80 percent confi dence level.
7. Based on a two-sample Wilcoxon rank-sum (Mann-Whitney) test that fi ts the ordinal nature of the data. Performing a standard test of differences in group means also shows a signifi cant difference; p = 0.0053.
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