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DECENTRALIZED MANAGEMENT OF HEALTH SERVICES
Decentralization usually refers to a political reform, designed to reduce the extent of central influence and promote local autonomy. While this reform is rarely focused on improving health services, it does engender changes in the authority and often financial responsibility for health services. Hence, decentralization can have a large impact on health services performance.
Two forms of decentralization often applied within the health sector are:
- Deconcentration: This form of decentralization (sometime referred to as “administrator” or “ministrative”, decentralization) transfers authority and responsibility from a central Ministry of Health to field offices of the Ministry at a variety of levels (regional, provincial, and/or local)
- Delegation: This form of decentralization transfer authority and responsibility from the Ministry of Health to organizations not directly under its control (ie non-governmental agencies).
Status of Decentralization
This reform approach transfers fiscal, administrative, ownership, and political authority for health service delivery from the central Ministry of Health to alternate institutions. Proponents of decentralization suggest that the benefits of such a policy are improved efficiency and quality of services.
- Technical efficiency improves through greater cost consciousness at the local level.
- Allocative efficiency increases because local decision-makers have access to better information on local circumstances than central authorities, and they use this to tailor services and spending patterns to local needs and preferences.
- Quality of service improves because the public provides input on local decision-making processes and holds local decision-makers accountable for their actions.
Issues in Decentralization
Several issues constrain the intended impact of decentralization. Information asymmetry between the Ministry of Health and the lower level agencies, local politics, and capabilities of the agent are some of these issues.
- Information asymmetry – Local governments or agencies can pursue their own agenda if central MOH is not well informed about their activities.
- Local politics – If local powerful groups (ie insurance companies and physicians) have significant investments in health care issues, they may use their influence to limit the intended objectivities of decentralization. Pokhrel (2000) found that in Bangladesh the medical community strongly resisted decentralization.
- Capabilities of the agent – if administrative and management capacity in the local government body is inadequate, decentralization may not meet its intended objectives because agens may mismanage finances and waste resources.
In addition, issues that face decentralized hospitals include insufficient tax funds, difficult coordination with other health service organizations, and lack of congruence in fiscal base.
- Insufficient tax funds – If a decentralized hospital provides health care to patients that do not reside in the taxed district, it can lower profits and create budgetary uncertainty for the hospital.
- Coordination – If the hospitals are not at the same political, financial, and administrative level as other health service organizations (ie general practitioners), coordination of services is more difficult because organizations face disparate incentives.
- Congruence – If the central government agency assigns service delivery responsibility to a local hospital, fiscal base needs to be sufficient to fund delivery of services.
Other issues that are relevant to decentralized hospitals are an inadequate population base and local political pressure.
- Population base – If hospital do not serve a certain population base, quality of services can deteriorate because providers will have fewer opportunities to maintain or improve their skill. Efficiency also decreases since the hospital cannot capture economies of scale.
- Local perspectives and local political pressures can block needed rationalization. Especially, they can block closure or shifting from acute to delivery of other type of care.