The purpose of this study is to conducta baseline survey on the cost and efficiency in PrimaryHealth Care (PHC) Centers in Serbia before theimplementation of the payment reforms. Results can be usedto inform the payment reform and to establish a baseline onhealth sector performance including utilization, quality,cost, and efficiency against which the impact of the reformscan be assessed in a follow-up survey. Recommendations aboutpayment system design and capitation formula are beyond thescope of this report and have been undertaken as a separateactivity. This study was conducted with the support of WorldBank health sector strategy funds. The rest of this reportis organized is follows. Chapter two presents the data andmethodology used in this survey to evaluate the cost andefficiency performance in Dom Zdravlja (DZs). Results arepresented and discussed in chapter three. Based on findings,chapter four concludes and proposes several reform measuresto support the effect of the provider payment reform. Theannex contains additional information including a technicalannex with an overview on the literature on cost andefficiency analysis, the econometric analysis, and the modelbuilding process; a list of health facilities included inthe survey, summary results, and the questionnaire used tocollect information.