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Decentralization

Autonomization/Corporatization | Decentralization

Definition

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 service 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 transfers authority and responsibility from the Ministry of Health to organizations not directly under its control (ie non-governmental agencies).

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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. 

In addition, advocates of this reform approach argue that it creates space for learning, innovation, community participation and the adaptation of public services to local circumstances. 

Broadly, however, reports have noted that the effects of decentralization have been difficult to estimate because it requires major research effort to gather relevant data in a systematic manner over time. For example, one study, Bossert (2002), evaluated four nations with significant experience with decentralization and found that sufficient evidence does not exist to assess the impact.

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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. These issues as well as others are discussed in many of the key references and additional references below. 

  • 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 objectives of decentralization. Pokharel (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 agents 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. Such issues are discussed in Pedersen (2002).

  • 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 hospitals do not serve a certain population base, quality of services can deteriorate because providers will have fewer opportunities to maintain or improve their skills. 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.

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Trends in Decentralization 

Global trends show that there are a variety of factors that contribute to the success of decentralization. Nations planning to introduce this reform should learn from these trends and integrate the lessons into the design, implementation, and monitoring of this reform.

Bossert (2002), Mills (1990), and Londono (1999) are examples of studies that analyze country experiences with decentralization. Countries that are analyzed in these examples include Ghana, Botswana, and Columbia. 

In addition, trends and lessons in more developed countries are reflected in Pedersen (2002), which reviews the Norwegian reform. Another report from PHR-Plus offers broad guidance for implementers of decentralization.

Finally, for those interested in developing a framework for their own country analysis, Bossert (1998) displays a starting point.

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Key References

World Bank

  • Khaleghian, P. (2003). Decentralization and Public Services: The Case of Immunizations. Washington, World Bank.
    This document examines the impact of political decentralization on childhood immunization. The study finds that this reform has different effects in low- and middle- income nations. 
  • Litvack, J., J. Ahmed, et al. (1998). Rethinking Decentralization in Developing Countries Washington, World Bank.
    This document discusses the institutional capacities necessary for decentralization to be successful. No specific references to health, but many examples of the World Bank's involvement in decentralization in other sectors. 
  • Londono, B., I. Jaramillo and J. Uribe (1999). Decentralization and Reforms in Health Services: The Columbian Case. Washington, World Bank.
    This paper addresses the process of decentralization in the Republic of Columbia. The paper analyzes the strategies to implement decentralization, and the accomplishments and obstacles related to this reform.

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External

  • Bossert, T. (1998). "Analyzing the decentralization of health systems in developing countries: decision space, innovation and performance." Soc Sci Med 47(10): 1513-27.
    Introduces a framework for analyzing decentralized or decentralizing health systems. The framework is based on the "principal-agent" approach and focuses on three areas: decision-space, innovation, and performance. 
  • Bossert, T. and J. Beauvais (2002). "Decentralization ofhealth systems in Ghana, Zambia, Uganda, and the Phillipine: a comparative analysis of decision space." Health Policy and Planning 17(1): 14-31.
    A set of case studies that analyze the decentralized health systems of four countries-Ghana, Zambia, Uganda, and the Philippines. Uses the public administration and principal-agent frameworks, and provides a useful example of how Bossert's framework can be used to analyze decentralized health systems. 
  • Mills, A., J. Vaughan, et al. (1990). Health System Decentralization: Concepts, Issues, and Country Experience. Geneva, World Health Organization.
    Defines decentralization into three categories: deconcentraion, delegation, and devolution. Outlines the key practical issues relevant to health system decentralization. Includes a set of case studies.
  • Pedersen, K. (2002). Reforming decentralized integrated health care systems: Theory and the case of the Norwegian reform. Oslo, University of Oslo.
    This essay develops a conceptual and theoretical scheme for decentralized integrated health care systems of the northern European country. The essay evaluates the Norwegian reform. Evaluation is based on a "principal-agent" approach and the analysis of discrete structural alternatives. 
  • PHR-Plus (2002). Decentralization and Health System Reform. Bethesda, Partner for Health Reformplus.
    This document provides information in designing decentralization policies and strategies, implementing them, and/or operating within decentralized health systems.

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Resource People 

World Bank:

  • Alexander S. Preker: Chief of Health Systems Development 
  • Daniel Cotlear: Senior Health Economist 
  • Juan Pablo Uribe: Public Health Specialist

External:

  • Thomas Bossert: Lecturer, Harvard School of Public Health 
  • Anne Mills: Professor of health economics and policy at the London School of Hygiene and Tropical Medicine.
  • Lucy Gilson: Senior Lectures at the London School of Hygiene and Tropical Medicine. 
  • William Savedoff: Senior Research Economist, Inter-American Development Bank

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Useful Websites

  • World Bank: Decentralization 
    Reviews health sector decentralization from a broader perspective. It outlines the World Bank activities, key topics, and key documents in health sector decentralization. This website is especially useful for those in the initial phases of searching for resources on health sector decentralization. 
  • USAID: Decentralization
    Provides a brief overview of USAID's activities in supporting decentralization. Briefly describes USAID's role and activities in two countries (Peru and Indonesia) that are implementing decentralization. 
  • PHR-Plus: Decentralization and Health System Reform
    Discusses PHR-Plus's strategy in assisting countries that are pursuing decentralization policies. Examples of PHR-Plus activities (consensus building, clarification of roles, management strengthening, and monitoring) in different countries are available on the website.

Additional References 

Bossert, T., O. Larranaga, et al. (2000)."Decentralization of health systems in Latin America." Rev Panam Salud Publica 8(1-2): 84-92.

Bossert, T. J., O. Larranaga, et al. (2003)."Decentralization and equity of resource allocation: evidence from Colombia and Chile." Bull World Health Organ 81(2): 95-100.

Cohen, J. and S. Peterson (1996). Methodological issues in the Analysis of Decentralization. Boston, Harvard Institute for International Development.

Gershberg, A. (1998). "Decentralization,Recentralization and Performance Accountability: Building an Operationally Useful Framework for Analysis." Development Policy Review 16(4): 405-431.

Gilson, L. and A. Mills (1995). "Health sector reforms insub-Saharan Africa: lessons of the last 10 years." HealthPolicy 32(1-3): 215-43.

Hurley, J., S. Birch, et al. (1995). "Geographically Decentralized Planning and Management in HealthCare: Some Informational Issues and their implicationsfor Efficiency." Social Science and Medicine 41(1): 311.

Kolemainen, R. and W. Newbrander (1997).Decentralizing the Management of Health and Family Programming. Boston, Management Sciences for Health.

Pokharel, B. (2000). Decentralization of Health Services. New Delhi, World Health Organization- Regional Office for South East Asia.




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