Does budget-holding have a long-term effect on expenditure, staff and patients?

Kupat Holim Clalit (KHC), Israel's largest sick fund, initiated a unique demonstration program to transform primary care clinics into autonomous budget-holding units. The program was accompanied by an evaluation study that examined the influence of the program on clinic staff, level of expenditure, quality of service and patient satisfaction. Few studies have empirically examined the influence of a budget-holding program in relation to such a wide range of expected outcomes. A longitudinal study was conducted from 1991 to 1994 employing two methodologies: (a) a controlled case study of one experimental and one control clinic and (b) monitoring of all nine budget-holding clinics over time, compared to other clinics in the district. Multiple research tools were used: staff surveys, patient surveys, in-depth interviews, and analysis of financial data. The findings indicate that the budget-holding program has the potential to achieve cost containment without injuring staff morale, the service to patients or patient satisfaction. However, the KHC program did not lead to the expected improvement in staff motivation and attitudes, clinic services and clinic responsiveness to patients' needs. Implications for the literature on organization and management and for organizations considering the implementation of budget-holding programs are discussed.