Financial incentives and primary care provision in Britain: do general practitioners maximise their income?

M Lynch
Developments in Health Economics and Public Policy 1998, 6: 191-210
The system of remunerating general practitioners (GPs) in Britain underwent significant changes in April 1990 with the implementation of a new contract between individual GPs and health authorities. The changes were a precursor to a wide-ranging programme of reforms of the British National Health Service. This paper investigates the relationship between financial incentives and the provision of primary health care services in Britain. A comprehensive anonymized data set was used, comprising information on 208 general practices in Scotland which serve just under one million people. An econometric model was tested to identify the determinants of cross-practice variation in the magnitude of the changes in GPs' remuneration levels between the two contracts. A linear programming model was used to examine the GPs' response to the financial incentives built into the new contract. The results of the econometric model indicated that the main beneficiaries of the 1990 contract were the practices which had expanded over the 1989-92 period, re-structured the GPs' partnership and made use of managerial skills by employing a practice manager; those practices also had larger lists in 1992 and relatively more patients attracting deprivation payments. The linear programming model showed that only a small minority of the practices (4.8%) maximised the remuneration from the new contract. Optimal solutions concerning income maximization strategies identified financial disincentives in the fee structure of the remuneration system associated with the provision of selected services and the care of particular groups of patients. The successful adoption of these strategies would involve cream skimming and selective service provision. However, there is no conclusive evidence of British GPs engaging in such activities.

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