Objective: To explore whether individual hospital budgeting implemented by military hospitals had any influence on physicians' practice behavior. Methods: The study used a Nonequivalent Control Group Design and analyzed the 2003 to 2004 Taiwan National Health Insurance Research Database. We used military hospital physicians as our study subjects: 75 physicians who were involved in individual hospital budgeting (case group) and 40 physicians who were not (control group). Independent variables included the number of outpatient and inpatient visits, the expenditure for outpatient and inpatient visits, the number of outpatient and inpatient examinations, the expenditure for outpatient and inpatient examinations, the number of prescriptions days of outpatient visits and length of inpatient stays. Control variables included physicians' age and department, hospital level, primary care rate of outpatient and the severity of illness for each inpatient. We utilized Chi-Square tests, two sample t-tests, paired t tests, difference-in-difference (DID) and the general linear mixed model (GLMM) to conduct the analysis. Results: The GLMM results showed that the case group had an increase in total inpatient visits (β=28.6, p＜0.05), total inpatient days (β=340.0, p＜0.05) and total expenditure for inpatient examinations (β=24.4, p＜0.05) after the implementation of individual hospital budgeting. Conclusions: After individual hospital budgeting was implemented, the inpatient practice behavior of military physicians changed as they increased the medical utilization of inpatient departments.