Contracting in the NHS quasi-market

This paper examines the development of contracting within the NHS on the basis of the data collected as part of a national survey of English District Health Authorities carried out in late 1994. The paper starts with a discussion of the background to contracting and its evolution during the first 4 years of the NHS internal market. The second section describes the methodology employed in the national survey. The third section presents the results of the survey alongside a discussion of their relevance in terms of the economics of contracting. This section shows the prevalence of different types of contracts and discusses the emergence of the most common type-sophisticated block contracts. Details are provided of how contracts deal with issues such as the measurement of activity, the pricing of projected activity and of activity variances (mainly at marginal cost), as well as the involvement of clinicians in contracting. Other topics explored include the management of extra contractual referrals, contracting for specialized services, arbitration arrangements, the purchaser efficiency index and contracts with the independent sector. The final section offers some concluding thoughts on the current state and future of contracting in the NHS.