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Long-term contracts in the NHS: a solution in search of a problem?


  • Diane Dawson

    (Centre for Health Economics, University of York, York, UK)

  • Maria Goddard

    (Centre for Health Economics, University of York, York, UK)


Purchasers and providers in the National Health Service (NHS) are now required to move from annual contracting cycles to longer-term contracts. The benefits are expected to include more efficient investment and improved sharing of financial risk. This paper argues that the economic analysis of longer-term contracts has assumed implicitly that agents operate in the private sector. Once the constraints of the public sector are introduced, the apparent economic benefits of longer-term contracts become doubtful. The paper explores these issues using evidence collected from analysis of the contracts of a sample of Health Authorities and from semi-structured interviews with individuals involved in the contracting process. We conclude that with the property rights and financial structure of the public sector, the move from short- to long-term contracts is unlikely to produce the improvements in performance expected by the government. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • Diane Dawson & Maria Goddard, 1999. "Long-term contracts in the NHS: a solution in search of a problem?," Health Economics, John Wiley & Sons, Ltd., vol. 8(8), pages 709-720.
  • Handle: RePEc:wly:hlthec:v:8:y:1999:i:8:p:709-720 DOI: 10.1002/(SICI)1099-1050(199912)8:8<709::AID-HEC482>3.0.CO;2-0

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    References listed on IDEAS

    1. Joskow, Paul L, 1985. "Vertical Integration and Long-term Contracts: The Case of Coal-burning Electric Generating Plants," Journal of Law, Economics, and Organization, Oxford University Press, vol. 1(1), pages 33-80, Spring.
    2. Chalkley, M. & Malcomson, J.M., 1996. "Contracts for National Health Service," Discussion Paper Series In Economics And Econometrics 9641, Economics Division, School of Social Sciences, University of Southampton.
    3. Goldberg, Victor P & Erickson, John R, 1987. "Quantity and Price Adjustment in Long-term Contracts: A Case Study of Petroleum Coke," Journal of Law and Economics, University of Chicago Press, vol. 30(2), pages 369-398, October.
    4. Blair, Roger D & Kaserman, David L, 1987. "A Note on Bilateral Monopoly and Formula Price Contracts," American Economic Review, American Economic Association, vol. 77(3), pages 460-463, June.
    5. Chalkley, Martin & Malcomson, James M, 1996. "Contracts for the National Health Service," Economic Journal, Royal Economic Society, vol. 106(439), pages 1691-1701, November.
    6. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
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    Cited by:

    1. Jan, Stephen, 2003. "A perspective on the analysis of credible commitment and myopia in health sector decision making," Health Policy, Elsevier, vol. 63(3), pages 269-278, March.
    2. Brodrechtova, Yvonne, 2015. "Economic valuation of long-term timber contracts: Empirical evidence from Germany," Forest Policy and Economics, Elsevier, vol. 55(C), pages 1-9.
    3. Giorgio Marini & Andrew Street, 2006. "The administrative costs of payment by results," Working Papers 017cherp, Centre for Health Economics, University of York.
    4. Marini, Giorgia & Street, Andrew, 2007. "A transaction costs analysis of changing contractual relations in the English NHS," Health Policy, Elsevier, vol. 83(1), pages 17-26, September.

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