Intended for healthcare professionals

Education And Debate

Measuring performance in the NHS: what really matters?

BMJ 2000; 320 doi: (Published 27 May 2000) Cite this as: BMJ 2000;320:1464

This article has a correction. Please see:

  1. John Appleby, director, health systems programme (,
  2. Andrew Thomas, medical directorb
  1. a King's Fund, London W1M 0AN
  2. b Royal Orthopaedic Hospital NHS Trust, Birmingham B31 2AP
  1. Correspondence to: J Appleby

    Encouraging the efficient use of NHS resources is vitally important for patients and doctors. Inefficiency means that money is wasted, but more importantly it means that the opportunity is lost to save lives, avert pain, and provide care to those in need. In a system as large and as complex as the NHS, however, actively promoting efficiency through the design and use of incentives is a difficult task.

    Two recent attempts to grapple with efficiency were the implementation of the internal market (which relied on supply side competition within the NHS to drive down costs) and the combined monitoring and measurement of performance targets known as the purchaser efficiency index (which was a demand side management tool aimed at encouraging health authorities to provide an incentive for purchasing efficiently provided services).1 Although the new NHS white paper has retained the split between purchasers and providers, the competitive thrust of the internal market has been abandoned.2 And, although the purchaser efficiency index has also been jettisoned, the annual requirement for health authorities to make efficiency savings of around 3% a year has been retained.

    The NHS white paper strongly criticised these mechanisms, arguing that the internal market increased administrative costs, fragmented decision making, distorted incentives, and promoted inequality.2 The efficiency index—a ratio of changes in activity to changes in financial inputs—was criticised for being narrowly focused and providing perverse incentives.1 3 4 What should replace these performance measures, and are the proposed solutions radical departures or simply tweaks at the periphery?

    Summary points

    The national reference costs database and indices provide a first step in describing and understanding variations in costs between NHS trusts

    There are serious drawbacks to the quality and coverage of the data used to compile the unit costs

    Much of the variation in overall costs …

    View Full Text

    Log in

    Log in through your institution


    * For online subscription