IMPROVING THE EFFICIENCY OF DISTRICT HOSPITALS - IS CONTRACTING AN OPTION

A world-wide revolution in thinking about public sector management has occurred in recent years, termed the 'new public management'. It aims to improve the efficiency of service provision primarily through the introduction of market mechanisms into the public sector. The earliest form of marketization in developed countries has tended to be the int roduction of competitive tendering and contracts for the provision of public services. In less wealthy countries, the language of contractin g is heard with increasing frequency in discussions of health sector r eform despite the lack of evidence of the virtues (or vices) of contra cting in specific country settings. This paper examines the economic a rguments for contracting district hospital carl in two rather differen t settings in Southern Africa: in South Africa using private-for-profi t providers, and in Zimbabwe using NGO (mission) providers. The South African study compared the performance of three 'contractor' hospitals with three government-run hospitals, analysing data on costs and qual ity. There were no significant differences in quality between the two sets of hospitals, but contractor hospitals provided care at significa ntly lower unit costs. However, the cost to the government of contract ing was close to that of direct provision, indicating that the efficie ncy gains were captured almost entirely by the contractor. A crucial l esson from the study is the importance of developing government capaci ty to design and negotiate contracts that ensure the government is abl e to derive significant efficiency gains from contractual arrangements . In other parts of Africa, contracts for hospital care are more likel y to be agreed with not-for-profit providers. The Zimbabwean study com pared the performance of two government district hospitals with two di strict 'designated' mission hospitals. It found that the two mission h ospitals delivered similar services to those of the two government hos pitals but at substantially lower unit cost. The nature of the contrac t between government and missions was implicit rather than explicit an d of long standing. On the whole the mission organizations felt the in formal nature of the agreement was advantageous, though the government plans to introduce service contracts at district level with all hospi tals, both government and mission. The paper concludes by identifying concerns raised by the case-studies that are of relevance to other cou ntries considering the introduction of explicit contractual arrangemen ts for district hospital provision.