Managerial Perceptions of the Incentives Inherent in National Health Service Capital Charging

Abstract

Capital charging was introduced into the National Health Service (NHS) in 1991 in order to stop capital being treated as a ‘free’ good and to encourage managers to use their assets more efficiently. This article seeks to examine the extent to which managerial thinking has been influenced. It uses as evidence interviews with NHS managers conducted in Scotland in 1994. The following uses of capital charges data are explored: capital programme; disposal programme; maintenance programme; contract pricing; and budgetary devolution. New capital programmes required more justification and capital charges were seen as relevant to estate rationalization. Less effect was found with regard to the maintenance programme, though this may have been due to a downgrading of the estates function in most Trusts. Although the capital charge costs included in contract prices affect the competitive position of providers, there was criticism of the lack of development of the purchasing function. Budgetary devolution was proceeding relatively slowly but, among those Trusts which had devolved capital charges, evidence was found that some clinicians were becoming aware of the full costs of equipment use. This article concludes, with cautious optimism, that capital charges are beginning to influence decisions and that, despite some incentives being dysfunctional, they will lead to a better managed NHS.