Escalating costs of providing health care are cause for worldwide concern. In South Africa there is increasing concern about expenditure in the public and the private health care sectors. Although public sector expenditure has increased in per capita terms over the past 2 decades, at the micro-level comparison of expenditure over a 14-year period in one major teaching hospital region indicates that, despite increasing complexity and sophistication, real costs have not escalated at a greater rate than the consumer price index, if extraordinary factors are discounted. The development and utilisation of productivity and performance indicators are reviewed and some mechanisms for containing costs in public hospitals are discussed. These include formalised strategic planning and allocation of resources, rationalisation and reorganisation of services, improved productivity and utilisation of scarce health manpower, improved accounting and management information systems, and the development and use of measures of outcome. Concern is expressed regarding excessive quantification of costs and efficiency to the detriment of health care in general
