title: Marginal-cost contracting in the NHS: results of a preliminary survey.
abstract: Market disciplines and incentives were expected to improve efficiency in the UK National Health Service following the introduction of an 'internal market' in 1991. An exploratory survey of all Health Authorities and Trusts in the UK was undertaken to investigate whether players in the NHS managed market are behaving as economic theory predicts they should. The focus was on how and to what extent marginal costing has been used in the contracting process and on whether in some instances an inappropriate use of marginal costing may be resulting in inappropriate investment decisions. Twenty of 29 responding Health Authorities (69%) and 16 of 39 Trusts (41%) stated that they had considered purchasing/providing services on a marginal-cost basis and all of these led to contracts. Marginal-cost contracting appears to be fairly commonplace and the process does not appear to be causing insurmountable conflicts between players. Most marginal-cost contracts were specifically to meet waiting-list initiative targets. Overall results suggest that economic principles are not being particularly adhered to, with expansion in output rarely being related to available capacity. As increased responsibility for commissioning passes to primary care teams and local health groups, there are lessons for those involved in this more disaggregated approach to service shaping and service delivery.
authors.affiliation: Welsh Institute for Health and Social Care, University of Glamorgan, Pontypridd CF37 1DL, Wales, UK.
authors.forename: A J
authors.initials: AJ
authors.lastname: Beddow
authors.forename: D R
authors.initials: DR
authors.lastname: Cohen
mesh_terms: D000552:Ambulances / Q000191:economics; D003153:Community Health Services / Q000191:economics; D003284:Contract Services / Q000191:economics*; D003361:Cost Allocation / Q000379:methods*; D003659:Decision Making, Organizational; D004465:Economic Competition; D017598:Efficiency, Organizational; D019981:Health Care Sector; D006302:Health Services Research; D006779:Hospitals, Public / Q000191:economics; D018854:Managed Competition; D011332:Privatization / Q000191:economics*; D013222:State Medicine / Q000191:economics / Q000458:organization & administration*; D011795:Surveys and Questionnaires; D006113:United Kingdom