Lanterns in the jungle: is the NHS driven by the wrong kind of efficiency?

The performance of the National Health Service is assessed in part by an Efficiency Index (EI) which is applied to the service as a whole as well as to individual health authorities. The EI relates increases in the amount of patient care activity to increases in total expenditure. The index can give a misleading impression of performance, creates perverse incentives and is at odds with the overall strategy of the health service which is to place greater emphasis on the promotion of health and to provide more care in primary and community-based settings. The philosophy, validity and appropriateness of the EI are discussed.