Cost-control issues within the hospital environment in the United Kingdom

Health care in the United Kingdom is dominated by the National Health Service, which operates under a system in which care is delivered free at the point of need and is funded by taxation. Experimentation with a number of different models has occurred since 1980 and has culminated in recent National Health Service reforms characterized by the separation of purchaser and provider functions. An inescapable result of this is the formal definition of the relationship between need and service provision (contracts or performance arrangements), and the equally unavoidable costing of "patient episodes" or equivalent as a tool for estimating both supply and demand. This change has completely altered the way in which individual capital and revenue costs are viewed in the National Health Service. With regard to drugs, costs can now be seen as part of a patient's consumption of resources as opposed to a hospital budget heading. The new system acknowledges that higher drug costs can be incurred if the overall patient-episode cost is reduced as a result. Such a reduction in average patient costs might then lead to more contract work and a higher revenue for the hospital. Quality of care specifications by purchasers may also affect drug costs.