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Charging for capital in the National Health Service in Scotland

Charging for capital in the National Health Service in Scotland
Charging for capital in the National Health Service in Scotland
This article evaluates the capital charging system implemented in the National Health Service in Scotland, probing its intellectual coherence and implementa‐ tion. Asset valuations may be too high because of the decision to value at Depreciated Replacement Cost (even when higher than market value) and the decision to disregard the issues raised by Modern Equivalent Asset methodology. The incentive effects of capital charges are complex: historically good maintenance may be penalised, and economic and financial appraisal of new projects may give conflicting signals. Capital charging differently affects Hospital Trusts and Directly Managed Units. Moreover, the interaction of capital charging and the public corporation status of Hospital Trusts inflates gross public expenditure on health.
0267-4424
57-74
Scott, David Alexander
19b5fd34-9974-4ae4-8be0-27a693639e20
Heald, David
078e1b35-f173-4f02-abad-1a2134453063
Scott, David Alexander
19b5fd34-9974-4ae4-8be0-27a693639e20
Heald, David
078e1b35-f173-4f02-abad-1a2134453063

Scott, David Alexander and Heald, David (1995) Charging for capital in the National Health Service in Scotland. Financial Accountability & Management, 11 (1), 57-74. (doi:10.1111/j.1468-0408.1995.tb00396.x).

Record type: Article

Abstract

This article evaluates the capital charging system implemented in the National Health Service in Scotland, probing its intellectual coherence and implementa‐ tion. Asset valuations may be too high because of the decision to value at Depreciated Replacement Cost (even when higher than market value) and the decision to disregard the issues raised by Modern Equivalent Asset methodology. The incentive effects of capital charges are complex: historically good maintenance may be penalised, and economic and financial appraisal of new projects may give conflicting signals. Capital charging differently affects Hospital Trusts and Directly Managed Units. Moreover, the interaction of capital charging and the public corporation status of Hospital Trusts inflates gross public expenditure on health.

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Published date: 28 June 1995

Identifiers

Local EPrints ID: 441349
URI: http://eprints.soton.ac.uk/id/eprint/441349
ISSN: 0267-4424
PURE UUID: 545e5a55-8109-44f7-9e92-82fdd303d169
ORCID for David Alexander Scott: ORCID iD orcid.org/0000-0001-6475-8046

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Date deposited: 10 Jun 2020 16:31
Last modified: 29 Jul 2020 01:54

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Contributors

Author: David Alexander Scott ORCID iD
Author: David Heald

University divisions

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