Derivation of a needs based capitation formula for allocating prescribing budgets to health authorities and primary care groups in England: regression analysis.

OBJECTIVE To develop a weighted capitation formula for setting target allocations for prescribing expenditures for health authorities and primary care groups in England. DESIGN Regression analysis relating prescribing costs to the demographic, morbidity, and mortality composition of practice lists. SETTING 8500 general practices in England. SUBJECTS Data from the 1991 census were attributed to practice lists on the basis of the place of residence of the practice population. MAIN OUTCOME MEASURES Variation in age, sex, and temporary resident originated prescribing units (ASTRO(97)-PUs) adjusted net ingredient cost of general practices in England for 1997-8 modelled for the impact of health and social needs after controlling for differences in supply. RESULTS A needs gradient based on the four variables: permanent sickness, percentage of dependants in no carer households, percentage of students, and percentage of births on practice lists. These, together with supply characteristics, explained 41% of variation in prescribing costs per ASTRO(97)-PU adjusted capita across practices. The latter alone explained about 35% of variation in total costs per head across practices. CONCLUSIONS The model has good statistical specification and contains intuitively plausible needs drivers of prescribing expenditure. Together with adjustments made for differences in ASTRO(97)-PUs the model is capable of explaining 62% (35%+0.65% (41%)) of variation in prescribing expenditure at practice level. The results of the study have formed the basis for setting target budgets for 1999-2000 allocations for prescribing expenditure for health authorities and primary care groups.