ANALYZING THE DECENTRALIZATION OF HEALTH SYSTEMS IN DEVELOPING-COUNTRIES - DECISION SPACE, INNOVATION AND PERFORMANCE

Decentralization has long been advocated as a desirable process for im proving health systems. Nevertheless, we still lack a sufficient analy tical framework for systematically studying how decentralization can a chieve this objective. We do not have adequate means of analyzing the three key elements of decentralization: (1) the amount of choice that is transferred from central institutions to institutions at the periph ery of health systems, (2) what choices local officials make with thei r increased discretion and (3) what effect these choices have on the p erformance of the health system. This article proposes a framework of analysis that can be used to design and evaluate the decentralization of health systems. It starts from the assumption that decentralization is not an end in itself but rather should be designed and evaluated f or its ability to achieve broader objectives of health reform: equity, efficiency, quality and financial soundness. Using a ''principal agen t'' approach as the basic framework, but incorporating insights From p ublic administration, local public choice and social capital approache s, the article presents a decision space approach which defines decent ralization in terms of the set of functions and degrees of choice that formally are transferred to local officials. The approach also evalua tes the incentives that central government can offer to local decision -makers to encourage them to achieve health objectives. It evaluates t he local government characteristics that also influence decision-makin g and implementation at the local level. Then it determines whether lo cal officials innovate by making choices that are different from those directed by central authorities. Finally, it evaluates whether the lo cal choices have improved the performance of the local health system i n achieving, the broader health objectives. Examples from Colombia are used to illustrate the approach. The framework will be used to analyz e the experience of decentralization in a series of empirical studies in Latin America. The results of these studies should suggest policy r ecommendations for adjusting decision space and incentives so that loc alities make decisions that achieve the objectives of health reform. ( C) 1998 Elsevier Science Ltd. All rights reserved.