Masoud Abolhallaje1, Seyyed Meysam Mousavi2, Mehdi Jafari3. 1. 1. Performance Monitoring and Budgeting Center, Ministry of Health and Medical Education , Tehran, Iran. 2. 2. Dept. of Health Management and Economics, School of Public Health, Tehran University of Medical Sciences , Tehran, Iran. 3. 3. Health Management and Economics Research Center, Iran University of Medical Sciences , Tehran, Iran ; 4. Dept. of Health Services Management, School of Health Management and Information Sciences, Iran University of Medical Sciences , Tehran, Iran.
A recent study showed that budgeting system in Iran based on incremental method and relies on inventory of the National Treasury’s (1). In fact, most experts believe that budgeting in Iran is faced with several complications (2, 3). Studies (49) confirmed that traditional methods of budgeting have been ineffectiveness and inapplicable. It is worth noting that traditional methods of budgeting do not meet requirements of managers and decision-makers. Hence, reforming the budgeting system and implementation of performance-based budgeting system as a necessity has been mentioned in the fourth economic, social and cultural development Plan Act of the Islamic Republic of Iran (articles 138 and 144). This has been emphasized in the general policies of the fifth economic, social and cultural development Plan Act of the Islamic Republic of Iran (point’s 32 and article 219) (3).Nowadays there are at least four alternatives to traditional methods of budgeting as following: a) planning programming budgeting system (PPBS), b) zero-based budgeting, c) Incremental budgeting and d) performance-based budgeting. Performance-based budgeting has the advantage of being flexible for needs of decision-makers than most other methods and is much popularity in Iran (3). Therefore, financial management reforms launched to the Ministry of Health and Medical Education (MOHME) as a “new financial system” in recent years and have been suggested in four steps following:Accounting approach change from cash-based to accrual-basedEstablishment of cost price systemImplementation of performance-based budgetingProductivity management, evidence-based analyzing and decision makingThe first step was started from 2005 and it has been currently developed up in the affiliated units of MOHME. It is remarkable that the MOHME are preparing the basic infrastructure to appropriate implementation of performance-based budgeting. Encoding of cost centers and identifying the revenue and cost behavior are requirements to establishment of performance-based budgeting in the health system. Thus, cost price of services will be calculated and even MOHME can forecast of cost price. Also, elasticity of revenue and cost of services should be examined and analyzed. After the implementing performance-based budgeting, MOHME can expect that tariffs are actually and funding of government insurances is obtained from the public sources. Resource integration of insurances, as well as other policies can help to easier implementing of performance-based budgeting in the health system.