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General Practice

Determining the size of a total purchasing site to manage the financial risks of rare costly referrals: computer simulation model

BMJ 1996; 313 doi: (Published 26 October 1996) Cite this as: BMJ 1996;313:1054
  1. Max O Bachmann, lecturer in public health medicinea,
  2. Gwyn Bevan, senior lecturer in health economicsa
  1. a Department of Social Medicine, University of Bristol, Bristol BS8 2PR
  1. Correspondence to: Dr Bachmann.
  • Accepted 30 August 1996


Objective: To estimate the financial risks of 15 categories of rare costly referrals for total purchasing sites of different population sizes.

Design: Computer simulation of 100 fund years assuming Poisson distribution of referrals.

Setting: British general practices that have opted to become total purchasing sites. Referral rates and price estimates were supplied by South and West Devon Health Commission.

Main outcome measures: Variation in referral costs to purchasers in relation to size of risk pool (person years at risk).

Results: Random variation in referral costs increased as the size of the risk pool decreased. Variation increased greatly below 30 000 person years. The mean simulated cost of the referral categories considered was 2.8% of total NHS hospital and community service costs, and the maximum simulated cost for 7000 person years was 6.8%. Simulated variation was robust to assumptions about prices and referral rates for specific types of referral.

Conclusion: Rare costly referrals seem unlikely to bankrupt total purchasing sites. The management of risk is not in itself justification for total purchasing to be based in several general practices in order to generate large populations. There are other ways of managing risk. Sites can easily explore options by simulations using local referral rates and prices.

Key messages

  • Insurance arrangements for most risks ought to be organised to extend each practice's risk pool by giving it more years over which to pay ∗ Risk pools of at least 30 000 patient years should be created: a total purchasing practice of 10 000 patients ought to seek at least three years to manage its expenditure

  • Financial risk due to rare costly referrals may easily be modelled if local referral rates and prices are available

  • Special arrangements are needed for cata- strophic insurance for rare and costly hospital care over which general practitioners have little discretion


  • Funding No specific funding.

  • Conflict of interest None. We are members of the Total Purchasing National Evaluation Team.

  • Accepted 30 August 1996
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