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Efficiency and administrative costs in primary care.

A Giuffrida¹, H Gravelle, M Sutton

¹National Primary Care Research and Development Centre, University of York, UK.

Journal of Health Economics

|February 24, 2001

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Primary care administrative costs in England doubled between 1990 and 1995, largely due to unexplained factors and increased administrative burden from reforms, not general practitioners (GPs) or fund-holding. Efficiency varied little across areas.

Area of Science:

Health economics
Healthcare management
Public health policy

Background:

Primary care administrative costs in England significantly increased between 1989/1990 and 1994/1995.
The drivers of this cost increase and their impact on healthcare efficiency require detailed examination.

Purpose of the Study:

To formally model the implications of endogenous managerial effort on healthcare efficiency.
To investigate the substantial rise in primary care administrative costs in England during the specified period.

Main Methods:

Application of a formal economic model to analyze healthcare administrative costs.
Econometric analysis to identify cost determinants, including general practitioners (GPs), economies of scale and scope, and fund-holding.
Adjustment for changes in practitioner numbers, primary care quality, and fund-holding extent.

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Main Results:

The number of general practitioners (GPs) was the primary cost determinant.
Economies of scale were present, but not economies of scope.
Fund-holding had a small positive effect on administrative costs; its abolition may not significantly reduce costs.
Most of the cost increase remained unexplained after accounting for measured factors, suggesting unmeasured administrative burden from the 1990 reforms.
Little variation in relative efficiency was observed across different areas.

Conclusions:

The significant increase in primary care administrative costs was primarily driven by factors beyond the number of GPs, economies of scale/scope, or fund-holding.
The 1990 reforms likely introduced unmeasured administrative burdens contributing to cost escalation.
Policy changes like the abolition of fund-holding may have limited impact on reducing these administrative costs.
Healthcare efficiency in primary care showed minimal variation across geographical areas during this period.