Do budget-holding physicians respond to price? The case of fundholding in the UK

Abstract

In an effort to improve the efficiency of the healthcare sector, some countries have experimented with various forms of 'internal market' in public healthcare provision. In some models, policymakers have assumed that actors will behave, as in a retail market, by responding to price in the course of seeking the best 'value for money' from healthcare providers. In the study reported here we examined the responsiveness of general practitioners to price during the British experiment in general practice (GP) fundholding. The study analysed routine data on 29 423 referrals for elective care made by 129 practices in one city to two competing providers of secondary care. Indices of price responsiveness were calculated for each practice from their manifest referral behaviour. These were then used to compare fundholding and non-fundholding practices. The results showed no difference between these groups in their propensity to respond to published procedure prices, even when potential savings were very large. Our findings are consistent with the reported views of fundholding GPs that price was a secondary consideration in their referral behaviour, and provides further evidence that healthcare markets cannot be understood in simplistic terms.