| Autonomization/Corporatization | Decentralization Definition Autonomization and corporatization are reforms that give public provider organizations greater autonomy and rely on market or "market-like" incentives to generate pressures to improve performance. Autonomization and corporatization both change the degrees of decision rights, residual claim, and market exposure. These reforms also create more indirect accountability arrangements that give managers more day-to-day freedom-such as oversight boards. Obligations related to money losing services and other social functions are usually made more explicit, and often funded to ensure continued delivery. However, corporatization offers a greater degree of change of the above five elements than autonomization. Under corporatization, provisions for managerial autonomy are stronger than under autonomization, giving managers virtually complete control over all inputs and issues related to service delivery. The organization is often legally established as an independent entity, making the transfer of control more durable than under autonomization. A corporatized entity's status includes a hard budget constraint or financial bottom line, which often makes the organization fully accountable for its financial performance. Top Status of Autonomization/Corporatization Autonomization/Corporatization are reforms applied most often to hospitals to improve their efficiency and thereby the effectiveness of public expenditures on tertiary care. The concepts of these reforms are reviewed in greater detail in Preker (2003) and Jakab (2002). These reform approaches are often a response to the escalation in health care costs and inefficiencies associated with public health care services. In particular, these reform approaches target public hospitals both because they are a big component in a health system, and because they are noted to have difficulties ensuring efficient and effective functioning. Kenya, India, and New Zealand are some of the countries that implemented these reforms. Technical and allocative efficiency increase for two reasons: 1. An incentive structure (ie ability to claim residual revenue) associated with these reform approaches promotes managers and employees to make efficient decisions. 2. The greater freedom associated with these reforms (ie increased decision making ability) provide enhanced opportunities for managers to choose their optimal production function. The reforms create stronger incentives for managers, which leads to optimal employment of personnel, improvements in staff performance, increased availability of drugs and services, and improved maintenance of facilities and equipment. Yet there is little documentation of the successes and failures of these reform initiatives because it is often difficult to ascertain whether these reform approaches have worked. There is no unambiguous measure of performance and there is no effective method to distinguish the effects of the reforms from other factors. Top Issues in Autonomization/Corporatization Focusing on public hospitals, several issues limit the outcomes of these reform approaches, slowing down the potential health gains. The inability to transplant appropriate private sector structure and incentives, limited decision-making and management capacities, and political constraints are some of these issues. Autonomization and corporatization of public hospitals can face limits in creating appropriate private sector incentives to improve efficiency and quality of services. These limitations include the near monopoly situation, constraints on staffing procedures, and the safety-net of a government bail-out. More information is available in Govindaraj (1996). - Monopoly -- If a public hospital faces a near monopoly situation, it has little incentive to act competitively, and thus efficiently and effectively.
- Staffing -- If recruiting, promoting, and transferring of staff are constrained by regulation or other institutional constraints they will limit the ability of managers to manage the largest input to production of healthcare.
- Bail-Outs -- If a public hospital recognizes that the government will bail it out of a financial crisis, it may have little incentive to act competitively.
Autonomization and Corporatization may also fail to meet their intended objectives if decision-making and management capacities are poor. Specifically, if key staff do not possess the necessary competencies to undertake their job, they can make inappropriate decisions or provide poor services. One study by Govidaraj (1996) in India found that managers with viable leadership abilities were able to make significant improvement within a hospital, while other managers could not under the same reform strategy. Furthermore, these two reform approaches may encounter political problems that mitigate the theorized benefits. That is, changes in political leadership, opposition by certain political parties, and conflicting agendas among key bureaucrats may hinder effective implementation of these reforms. These issues are discussed in Preker (2003). - Political volatility -- In New Zealand changes in political leadership made momentum and clear direction in health reform difficult to sustain.
- Political opposition -- In the UK, political parties opposed to the reform harnessed union opposition, heightening conflict and generating uncertainty about the durability of the reforms.
- Conflicting agenda -- In Indonesia conflicting agendas and interests among key politicians account for some of the shift between original policy intentions and results.
- Ineffective boards -- The boards created to hold autonomous hospitals accountable may not exercise effective oversight.
Top Trends in Autonomization/Corporatization In order to understand the factors that contribute to successful implementation of these reforms, researchers have conducted case studies of several countries that have autonomized/coporatized their public hospitals. Countries planning to introduce these reforms should learn the lessons from these case studies and integrate them into the design, implementation, and monitoring of this reform. Results from these case studies as well as other reports have shown a variety of mechanisms that promote the success of these reforms. Some global experiences show the importance of competent leadership, a strong legal framework, and adequate funding for the hospital during the reform process. Detailed descriptions of these factors are available in many publications, including Chawla (1996), Collins (1999), and Govindaraj (1996). In addition, trends show the importance of stakeholder involvement, political consensus, and board structures/functions. Such guidances are reflected in Preker 2003. Top Key References World Bank - Jakab, M., A. S. Preker, A. Harding and L. Hawkins (2002). The Introduction of Market Forces in the Public Hospital Sector: From New Public Sector Management to Organizational Reform. HNP Discussion Series. Washington.
 Provides insight into recent hospital reforms, with an emphasis on organizational changes, including autonomization and corporatization. Specfically, it addresses the questions of 1)what problems did these types of reform try to address, 2)what are the core elements of their designs, and 3)is there any evidence that this type of reform is successful in addressing the intended problems. - Preker, A. S. and A. Harding (2003). Innovations in Health Service Delivery: The Corporatization of Public Hospitals. Washington, World Bank.
Examines the design, implementation, and impact of reforms in the public hospital sector. The book offers case studies on the analysis of autonomization in several countries, including the UK, New Zealand, and Hong Kong. In addition, Singapore and Malaysia are analyzed as case studies of corporatization. - Harding, A. and A.S. Preker (2000). Understanding Organizational Reform: The Corporatization of Public Hospitals. HNP Discussion Series. Washington, World Bank.
Establishes a conceptual framework for introducing autonomization and coporatization as mechanisms to improve hospitals services in developing countries.
External - Bossert, T., S. Kosen, B. Harsono and A. Gani (1997).Hospital Autonomy in Indonesia. Boston, Harvard University.
Evaluates autonomization of hospitals in Indonesia. Focuses on the process and impact changes in financing, equity, quality, and efficiency that could be attributable to hospital autonomy. The paper finds that while there was no significant changes in efficiency and quality of services, there was a decrease in equity. - Chawla, M. and A. George (1996). Hospital Autonomy in India: The Experience of APVVP Hospitals. Boston, Harvard University.
Evaluates autonomization of hospitals in India. Discusses the conceptual framework for autonomy and the impact of autonomy on performance of the hospitals. The paper notes that autonomization led to gains in quality of services, but no change in incentives for those working in the organization. - Collins, D., G. Njeru, J. Meme and W. Newbrander (1999). "Hospital autonomy: the experience of Kenyatta National Hospital." Int J Health Plann Manage, 14(2): 129-53.
Reviews the experience of Kenyatta National Hospital in Kenya and its process of introducing autonomy. Discusses the key concepts of hospital autonomy, and points out that autonomization contributed to gains in technical efficiency and quality of care. Authors note that the success of autonomization is largely contingent upon an established legal framework and adequate funding for the hospital during the reform process. - Govindaraj, R. and M. Chawla (1996). Recent Experiences with Hospital Autonomy in Developing Countries. Boston, Harvard University.
Describes the autonomization process and outcome in five countries-Ghana, Kenya, Zimbabwe, India, and Indonesia. Summarizes the effects of this reform on the intended benefits of efficiency, quality of care, and public accountability. Identifies obstacles towards the success of this reform. - Govindaraj, R., A. Obuobi, N. Enyimayew, P. Antwi and S. Ofosu-Amaah (1996). Hospital Autonomy in Ghana: The Experience of Korle Bu and Komfo Anokye Teaching Hospitals. Boston, Harvard University.
Provides a description and analysis of the experience of two public hospitals in Ghana in their move towards autonomy. From its analysis it presents the pros and cons of hospital autonomy. The authors note that autonomization in Ghana has not yielded many of the intended benefits, and that one significant barrier was the inability of the MOH to allow the two hospitals to function as autonomous institutions.
Top Resource People World Bank: - Alexander S. Preker: Chief of Health Systems Development at the World Bank
- April Harding: Senior Economist in the Health, Nutrition, and Population Dpt. at the World Bank
External: - Melissa Jakob, Consultant
- Kevin Woods, University of Glasgow
Top Useful Websites Additional References - Collins, D., G. Njeru and J. Meme (1996). Hospital Autonomy in Kenya: The Experience of Kenyatta National Hospital. Boston, Harvard University.
- Pearson, M. (2000). International Experience of Hospital Autonomy. London, Institute for Health Sector Development.
- Woods, K. (2002). A Critical Appraisal of Accountability structures in Integrated Health Care Systems. Glasgow, Scottish Executive Health Department.
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