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BACKGROUND: The general practice fundholding scheme is now at the forefront of the National Health Service (NHS) reforms and should lead to the more efficient use of services by making general practitioners more aware of the financial consequences of their clinical decisions. However, there is a concern that adverse effects may also occur. AIM: To monitor the changes occurring in a sample of fundholding and non-fundholding practices between 1992 and 1995, including providing care nearer to patients, the mixed economy of care, the efficiency and costs of fundholding, and the commitment of fundholders. METHOD: Fifteen first-wave practices, four second-wave practices, and four non-fundholding practices in the former South East Thames Region took part in the study. Information was collected using interviews, questionnaires, prescribing data, and annual fundholders' income and expenditure accounts. RESULTS: Consultant clinics were set up in 10 different practices in 15 different specialties, and paramedical clinics in 12 different practices. Physiotherapy and mental health clinics constituted over 90% of the paramedical hours. Fundholders had private arrangements with an individual consultant or practitioner for approximately half of the contracted hours in both types of clinics. Fundholders had lower overall prescribing costs than non-fundholders, but the overall costs for prescribing for all groups had risen by about one third over three years. CONCLUSION: While outreach clinics may help to provide for the needs of patients with common conditions, they may lead to the fragmentation of services. The provision of primary care by those who are not NHS employees needs careful consideration. Recent policies for general practice have emphasized its role in disease prevention and in coordination of care for chronic illness. Fundholding also promotes two additional roles, the purchasing of care and the development of in-house facilities. Combining these different functions presents a considerable challenge.