tions were being recommended by physicians based on symptom level alone, rather than on the degree to which the symptoms actually bothered patients or an understanding of the risks and benefits of surgery (Wasson et al., 1993). Providing balanced information led to substantial reductions in the rate of surgery. Investigators from RAND found that many of the diagnostic tests and surgical procedures that are performed are inappropriate (e.g., Park et al., 1989). The use of hospitals when alternative, less costly, and less intrusive sites of care are equally effective represents a similar problem—the unnecessary consumption of resources.

A second form of inefficiency can be found in failures to provide care that is known to be effective (i.e., lost opportunities). The failure to provide low-cost interventions of well-documented efficacy and effectiveness would represent an inefficiency of the community health system. From this perspective, the failure to provide childhood immunizations, adequate prenatal care, or appropriate screening for the early diagnosis of cervical cancer would all be evidence of an inefficient allocation of health care resources.

A third form of inefficiency is found when one examines differences in expenditures for the performance of specific health care-related tasks in a defined population (i.e., process inefficiency). Given an equal outcome, the treatment provided at a lower cost to the consumer is more efficiently delivered. This raises questions about both the amount of resources used and the prices paid for those services. Evidence of differences in the prices paid to providers for health care services is substantial for hospital services (e.g., Pennsylvania Health Care Cost Containment Council, 1995), for physician services (Welch et al., 1996), and for the provision of specific high-cost procedures that entail both physician and hospital care. Such evidence has led many purchasers to contract with specific ''centers of excellence" that can provide high-quality care at a lower price—an improvement in efficiency from the payer's perspective. Consideration of price also leads quickly into highly charged questions about what represents a reasonable profit or operating margin. What is a fair return for a hospital? What is a reasonable income for a physician? What is a fair profit for a health plan?

Finally, one can consider outcome inefficiency, or expending more resources than necessary to achieve a given health outcome in a defined population. An approach to defining populations based in the current market-driven reforms of the health care system is the effort led by the National Committee for Quality



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