Exit signs flash for GP fundholders

Many doctors oppose Labour plans to end the funding system. But the jury is out on whether it saves money, says Paul Gosling

If the Labour Party wins the election tomorrow it is likely to end GP fundholding. Although Labour's opposition to fundholding has softened, it still blames it for creating a two-tier National Health Service, and remains committed to introducing, instead, joint GP and health authority commissioning.

This will upset many fundholders, who claim they have made savings and passed them on to their patients as service improvements. But six years after fundholding was introduced there is still no clear evidence that it has achieved net savings, and it may have actually led to increased costs, according to recent research.

Fundholding was introduced in 1991, and extended last year. It allows GPs to commission a range of services that were previously the responsibility of local health authorities and family health service authorities, including planned operations, surgery and mental health outpatients, community nursing, X-rays and physiotherapy - which together account for about 20 per cent of the cost of patients' health care.

Services which health authorities still purchase include accident and emergency outpatients, emergency admissions, in-patient mental health, maternity, and those patients whose treatment costs exceed pounds 6,000 a year.

It could be expected that by now it would be clear whether fundholding had generated savings. But according to the Audit Commission, which completed a comprehensive review of fundholding last year, a fair comparison between fundholders and non-fundholders is impossible because of different demographics.

The vast majority of fundholders are in affluent suburbs and rural areas, while most non-fundholders are in the inner cities. This reflects more than possibly contrasting political views of the GPs concerned. Initially, only larger GP practices could become fundholders, and urban practices tend to be smaller than rural ones because of property costs and availability.

Headline figures produced by the Audit Commission do nothing to support the idea that fundholding achieves savings. Up to April 1995, fundholding practices had received pounds 232m to cover transition costs, mostly for increased computing, management and staff costs. The savings generated were pounds 206m.

Many of the transition costs should be non-recurring and generate future savings. However, without direction from the NHS Executive, many GP practices purchased computers that are incompatible with creating a national electronic patients' records system and will have to be either replaced or augmented in the near future.

What fundholdings have clearly done is shift spending priorities. The Audit Commission found that fundholders spent less on drugs, and were moving from branded drugs to cheaper generic prescriptions. With asthma cases, though, there was a heavier prescription of proven drugs to prevent more expensive hospital admissions. There was also increased use of day surgery.

But more recent research, conducted by Newcastle University, found that GP fundholders were less motivated, when commissioning, by cost than by the length of wait for treatment, reputation of specialists, and nearness of the provider. This led to variations in costs for identical treatment of as much as 400 per cent. If all GP fundholders in Yorkshire health authority purchased in line with an optimal price, annual savings of pounds 25m could be achieved.

Paul Miller, health economist at Newcastle, says that this research suggests that GPs may be the wrong people to commission health care. The outcome of continued GP fundholder commissioning, he predicts, could be rising prices as providers realise customers are not price-sensitive, leading to greater rationing and longer waiting lists.

Other research, conducted by Jenny Griffiths for a consortium of 11 health authorities and nine GP practices, has concluded that whether or not GP fundholding continues, the most important priority is to eliminate the duplication of commissioning. One system needs to be applied universally. Ms Griffiths found that the extra costs involved in passing responsibilities to fundholding practices did not lead to any reduction in overheads for health authorities. The authorities continued to purchase on behalf of non-fundholders, maintaining existing administrative arrangements.

Ms Griffiths also found that although fundholders spent less than health authorities on mental health services, user involvement, continuing care, clinical effectiveness and Health of the Nation, these were all beginning to be given a higher priority. But she discovered significant variations between health authorities, indicating that these, too, needed to review their spending priorities.

The conclusion reached by Chris Ham, Professor of Health Services Management at Birmingham University, is not that we should now return to centralised commissioning by health authorities, nor adopt the joint commissioning proposed by the Labour Party. Professor Ham argues instead for a plurality of approach, based on improving fundholding rather than abolishing it.

"The blinkered approach of politicians of both parties is regrettable, because the argument ought not to be about whether health authorities or fundholders are the better purchasers, but rather how the best features of different approaches can be combined," said Professor Hamn