Abstract
The introduction of GP commissioning almost assumes that there is a weak link between financial risk and size and that risk is independent of location-specific environmental factors—i.e. costs are entirely predicted by a capitation formula based on population demographic and socio-economic variables. This article seeks to investigate the volatility associated with different aspects of healthcare costs, namely, occupied beds as a proxy for inpatient costs. The observed volatility can give an estimate of the real world volatility in the total costs of a commissioning budget. This study extends the previous analysis of year-to-year volatility at national level down to local level using English primary care trust (PCT) populations mainly aligned to local authority boundaries. The difficulty of formulating equitable risk sharing instruments in the presence of significant environment or location-specific volatility is discussed along with the implications to population- or person-based funding formula.
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