What is it about?
The loss ratio is a measure used in the insurance industry for the ratio of expenses to income. To be financially viable the ratio has to be less than 1.0 to cover administrative costs (roughly 20% in the US). The size of the insurer needs to be above $100,000,000 (2010 prices) to bring the loss ratio down to an acceptable size. Clearly obvious implications to the size of commissioning organisations in the NHS.
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Why is it important?
Decades of government policy in England has totally ignored all available evidence on the role of size in the financial stability of health care commissioning organisations.
Perspectives
Small commissioning organisations simply cannot achieve long term financial stability. Never could do in the past and never will do in the future. The simple mathematics behind financial risk cannot be overruled. Part of a longer series at http://www.hcaf.biz/2010/Publications_Full.pdf Unsurprisingly the NHS in England is undergoing yet another round of mergers!
Dr Rodney P Jones
Healthcare Analysis & Forecasting
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This page is a summary of: Risk in GP commissioning: the loss ratio, British Journal of Healthcare Management, November 2012, Mark Allen Group,
DOI: 10.12968/bjhc.2012.18.11.605.
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