CONTRACTS - PROBLEMS AND PROSPECTS

This article focuses on the important role played by contract prices in the new NHS. The power of prices to both inform and misinform the allocation of resources is highlighted. Orthopaedic surgery is used as a case study to indicate not only the obstacles to prices leading to improvements in efficiency but also the substantial scope for the prices set to convey valuable information on relative costs. Whether the purchaser-provider split will lead to an improved use of scarce resources will depend on several factors. One of the most important of which will be the development of sophisticated contracts embodying accurate price information.