Croxson B, Propper C and Perkins A, (2001)

‘Do doctors respond to financial incentives? UK family doctors and the GP fundholder scheme’

Journal of Public Economics, 79 (2): 375-398

Examines the impact of the GP Fundholding scheme on the behaviour of fundholding GPs.
Argues that the way the GP fundholding scheme as structured gave fundholders a financial incentive to increase non-emergency referrals to hospital in the year before they became fundholders, and to lower them thereafter.
This was because fundholder budgets, in the early years of the scheme, were set according to activity levels in the year before being awarded fundholder status. Thus by increasing activity in the year prior to fundholding, GP’s could inflate their budgets.
Uses a data set containing all admissions by 59 GPs over a four year period in North West Anglia.

The results show a clear response by fundholding GPs to financial incentives.
They have a rise in elective admissions prior to becoming a fundholder, and a fall in admissions in the year in which they assume fundholder status.
The rise in admissions in the preparatory year is in the order of 10%, and the fall in the following year is of a similar order of magnitude.
Since the (inflated) budgets of fundholders are taken from a fixed NHS budget, this result implies a transfer of resources from non-fundholding GPs to fundholders.