Efficiency and administrative costs in primary care

Abstract

We use a formal model to examine the implications of endogenous managerial effort for the interpretation and estimation of efficiency in health care organisations. The model is applied to investigate the doubling of the cost of administering primary care in England in real terms between 1989/1990 and 1994/1995. The main cost determinant was the number of general practitioners (GPs), and there were economies of scale but not of scope. Fundholding had a positive but small effect on administrative costs, so that the recent abolition of fundholding may do little to reduce primary care administrative costs. After allowing for changes in the numbers of primary care practitioners, the quality of pr..