The introduction of primary care groups is unlikely to reduce NHS management costs in their first few years, a King's Fund report has suggested.

The report, an evaluation of the first-wave total purchasing pilots that started in October 1995, says 'higher direct management costs were associated with greater achievements in the first year'.

It adds: 'It is highly likely that costs will need to rise as PCGs are established since health authorities will have to continue to operate as important commissioners until all the local PCGs are at level 2 and possibly level 3.'

The report says PCGs will need time and money to invest in information technology and training and that support from HAs will be 'essential'.

The pilots cover around 30,000 people, about a third of the size proposed for PCGs. Yet the report found that smaller pilot schemes were able to achieve their objectives more often than larger ones.

It says the mix of fundholders, non-fundholders and 'practices ideologically opposed to holding budgets' in PCGs will pose 'a major organisational development challenge'.

Total Purchasing, a step towards primary care groups. From the King's Fund 0171-307 2591. pounds 10.