- To evaluate the effects of fundholding on cost containment and after termination of the project. Primary care practices participating in the project were allocated an itemized budget. Practices assumed authority for hospitalization, drugs, ambulatory medical diagnostic, consultant services and acquisition of minor equipment. Financial incentives were offered, but no penalties were imposed on practices where expenditure exceeded budget. Nine primary care practices in southern Israel. Total expenditure and a breakdown of expenditure per capita. Fundholding practice expenditure was compared with expenditure in the district as a whole. During the study period, total expenditure in fundholding practices rose by 12%, whereas that of the district rose by 37%. With discontinuation of the project, expenditure of the designated practices returned to the original levels, equivalent to those of the district. Fundholding is an efficient method of cost-containment. The effect will be long lasting only if motivation is maintained.