Until 2003, hospitals' revenues had been decided ex-ante by Parliament, within the scope of the annual social security financial law. Public and private not for profit entities received a global operating allowance covering almost 80% of their budgeted costs, and evolving annually according to a nationally set index based on the previous year's expenditure level (on average +5.5% per year over 1999-2003).
To remain on balance, a hospital's annual expenditures should not outpace the provisional budget allocated.
This system, though providing public hospitals with stable and predictable revenues, resulted in a disconnection between the grants received and the hospital's actual medical activity, translating into either structural surpluses or a lack of resources, and thus operating deficits for the most active structures.

Over 2004-2012, the gradual introduction of the output-oriented reimbursement scheme (tarification à l'activité or T2A) modifies this balance, since revenues of public and private not for profit hospitals will be calculated according to the nature and volume of their real activity--as for the private for-profit entities, whose revenues already reflect expected costs and actual volumes. Standard national tariffs per act (set to represent the real costs of service provision) will apply, and this will be reflected in the amount paid by the social security.
The reform will require public hospitals to reduce internal costs and align them with the national average, or to increase their activity in order to maintain or increase their existing revenue level. Nevertheless, tariffs will continue to be set at the national level. In the new system, part of revenues corresponding to public service roles (e.g. emergency) and specific research activities will remain under the global allowance scheme.

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