The influence of budget-holding on cost containment and work procedures in primary care clinics

In 1990, Kupat Holim Clalit (KHC), Israel's largest health insurance fund, initiated a demonstration program for transforming primary care clinics in the Negev district of southern Israel into autonomous budget-holding units. Four program components were implemented in nine clinics: allocation of a fixed budget; expansion of day-to-day decision-making authority; establishment of a computerized information system for producing monthly reports on expenditure; and provision of incentives for budgetary responsibility (returning part of a clinic's savings for use at its discretion). The demonstration program had three objectives: budgetary control and cost containment; improvement of services and increased client satisfaction; and improvement in the motivation, initiative, responsibility, and satisfaction of clinic staff. This report presents interim findings from an evaluation study of the budget-holding program conducted in 1991-1992. The report considers three questions: How was the demonstration program implemented? Did work procedures in the clinics change following implementation of the program? How did budget-holding influence levels of expenditure in the clinics? The program components were implemented gradually in the nine clinics during 1991-1992. Not all, however, were fully implemented. The staff survey conducted after implementation of the program identified a number of changes in the work procedures of the clinics: heightened cost consciousness, discussion of the monthly expenditure reports, emphasis on the need to economize, and attempts to economize. Data on expenditure in the budget-holding clinics were analyzed and compared to data on expenditure in primary care clinics in the Negev district as a whole. It was found that while the average quarterly per capita expenses in the district increased in real terms from 1991-1992, expenses in the budget-holding clinics remained stable or, in some cases, actually decreased. While we cannot conclude categorically from the existing data that the budget-holding program is responsible for the unique patterns of expenditure in the nine clinics, we can confidently state that work procedures in the nine clinics changed following implementation of the program and that the clinics achieved cost containment relative to the district as a whole. Findings from the various research tools support one another, and reinforce the conclusion that budget-holding can potentially promote cost containment.