The role of contractual arrangements in improving health sector ...

Morocco 

Draft 

The role of contractual 

arrangements in improving 

health sector performance 

Experience from countries of the 

Eastern Mediterranean Region 

Tunisia 

Egypt 

Lebanon 

Jordan 

Iran 

Afghanistan 

Bahrain 

Pakistan

© World Health Organization 2006 

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CONTENTS 

FOREWORD.............................................................................................................................. 4 

PART ONE: INTRODUCTION AND SYNTHESIS OF COUNTRY EXPERIENCES 

1. INTRODUCTION ............................................................................................................ 6 

2. SUMMARY ANALYSIS OF COUNTRY EXPEREINCES .......................................... 10 

2.1 Introduction ........................................................................................................... 10 

2.2 Approach and methodolgy..................................................................................... 10 

2.3 Results ................................................................................................................... 11 

2.4 Discussion.............................................................................................................. 27 

2.5 References ............................................................................................................. 32 

3. CONCLUSIONS AND RECOMMENDATIONS OF THE REGIONAL MEETING 

ON THE ROLE OF CONTRACTUAL ARRANGEMENTS, CAIRO, APRIL 2005.... 33 

PART TWO: COUNTRY STUDIES 

AFGHANISTAN ...................................................................................................................... 38 

BAHRAIN................................................................................................................................ 48 

EGYPT ..................................................................................................................................... 63 

ISLAMIC REPUBLIC OF IRAN ............................................................................................ 86 

JORDAN ................................................................................................................................ 104 

LEBANON ............................................................................................................................. 148 

MOROCCO............................................................................................................................ 179 

PAKISTAN ............................................................................................................................. 199 

TUNISIA ................................................................................................................................ 227

FOREWORD 

Contracting out of publicly financed health services to the private sector has been 

the subject of extensive debate and discussion for many years among public health 

professionals across the world. Indeed, in 2003 the World Health Assembly issued a 

resolution in which it asked Member States to assess the role of contractual arrangements 

in improving health systems’ performance. The resolution provided impetus for 

undertaking a multi-country study to better document this experience. 

This publication is the result of a systematic analysis of contracting out of health 

services conducted during 2004–2005 in 10 countries of the WHO Eastern Mediterranean 

Region: Afghanistan, Bahrain, Islamic Republic of Iran, Egypt, Jordan, Lebanon, 

Morocco, Pakistan, Syrian Arab Republic and Tunisia. It assesses the range of health 

services contracted out, the process of contracting, features of specific interventions, and 

factors that influence contracting out. 

Contracting is not synonymous with privatization of health services. Instead, it 

provides an opportunity to better manage the private providers in countries with poor 

regulatory capacity. When used judiciously, it has the potential to improve health system 

performance. It can influence access, equity, quality and efficiency of health services, 

create an environment conducive to public–private collaboration, and promote public 

health goals. However, the process is challenging and requires transparent procedures, 

well-designed contracts, clear performance obligations and credible funding mechanisms. 

In addition, governments need to be able to monitor the contracts and have credibility as 

a trustworthy partner. 

Contracting with the private sector may seem to be the only way to get the system 

moving quickly in post-conflict situations, but the risk of bypassing the opportunity for 

longer term health system development makes this area an important focus for research 

and debate. Contracting, thus, is a means rather than an end in itself, and should be used 

primarily to promote public health objectives. 

This publication is the first organized effort to review the process of outsourcing of 

health services among countries of the Region, recognizing that there are gaps in 

information on the subject which need to be addressed. At the same time, it provides a 

basis for developing a regional strategy on the subject, strengthening awareness and 

capacity among policy-makers and senior managers, and creating dialogue on the subject 

to formulate evidence-based national polices and strategies. 

Hussein A. Gezairy MD FRCS 

Regional Director for the Eastern Mediterranean 

4

The role of contractual arrangements in improving health sector performance 

PART ONE: INTRODUCTION AND 

SYNTHESIS OF COUNTRY EXPERIENCES 

5


1. INTRODUCTION 

The inefficiencies of publicly financed and provided health services in developing 

countries has led many health policy-makers to consider alternate means of service 

provision. Contracting out publicly financed health services to private sector 

organizations or to autonomous public providers is one such intervention. Advocates 

claim that the contracting out of health care services will improve service delivery 

performance by stimulating competition among providers and by creating economic 

incentives for improved performance through linking payment to provider performance. 

Critics, however, argue that, in many developing country contexts, contracting out is 

unlikely to achieve its intended objectives because the costs of administering contractingout 

initiatives are high and the market assumptions regarding the number of private 

providers to compete for contracts are unrealistic [1]. 

Contracting has been defined as a purchasing mechanism used to acquire a 

specified service, of a defined quality and quantity, at an agreed-on price, from a specific 

provider, for a specified period [2].TP PThrough this arrangement one party, the principal or 

purchaser, provides compensation to another party, the agent or provider, in exchange for 

a defined set of health services for a defined target population [3].TP PT 

Non-clinical contracting out in the health sector has been going on for several 

decades. The renewed interest in contracting has arisen due to the potential for 

contracting out clinical services—hospital as well as primary health care—to private 

sector providers or in certain cases to autonomous public sector organizations when the 

latter have characteristics of private providers. 

Contracting does not mean privatization. Contracting out should be considered as 

an alternate management and regulatory tool in the hands of public sector managers to 

achieve public health goals, which sometimes are difficult to achieve through direct 

provision of services. There are several options for contracting between the public and 

private sector. These include contracting out or outsourcing, contracting in, procurement, 

leasing, and subsidy and franchising. Table 1 provides a brief description of each of these. 

This regional study has focused on the contracting out or outsourcing of publicly 

financed services to the private sector. 

The key elements of types of contracting out vary, depending on a range of factors 

that include the following [1]: 

• Who are the purchasers: governments, donors, public insurers, or private insurers? 

• Who are the providers: public or private, for-profit or not-for-profit, hospitals or 

physicians or and health workers? 

6


• What services are contracted out: clinical or non-clinical, inpatients or outpatients, 

preventive or curative? 

• How are the providers paid: input-based or cost-based, output-based, outcome-based, 

or performance-based? 

• What are the objectives of contracting out: to increase efficiency and productivity, to 

promote access to health care, to improve quality of care, to save costs; to improve 

health outcomes, or to improve the performance of health care delivery (the latter can 

include more than one specific objective)? 

Table 1. Contracting options for purchasing health services [2] 

Options Applications 

Contractingout 

or 

outsourcing 

Purchase one or more services from an outside source that 

provides the service to either a government entity or patients, 

using primarily an external work force and resources. Examples 

of services provided to government entities include sending 

linens out to a private laundry or securing clinical laboratory 

services from a private laboratory. 

Examples of services provided to patients might include 

contracting with a nongovernmental organization to manage a 

number of district facilities, or to provide a service package to 

identified users in their own facilities. 

Contracting- 

Purchase management services from an outside source that is 

a 

inP P 

assigned responsibility for managing on internal service or 

work force. Examples include hiring a private firm to manage a 

hospital’s housekeeping staff (most of whom remain publicly 

employed) or external technical assistance to direct an internal 

task force. 

Procurement Purchase supplies or materials from one or more outside 

sources, as in the purchase of medicine, food, or medical 

equipment Procurement contracts are typically used when a 

large volume of goods—in terms of number or cost—are to be 

acquired. 

Lease or 

rental 

Securing the use, but not the ownership, of facilities or 

equipment from an outside source under a lease agreement. 

Leasing is usually used for capital-intensive items. Examples 

include the leasing of buildings, specialized medical equipment, 

and vehicles. 

Subsidy or 

Direct or indirect financial support intended to alter the 

b 

subventionP P 

provision or production of a selected service. Direct subsidies 

include grants and budgetary support; indirect subsidies may be 

in the form of tax exemptions. Subvention is a form of subsidy 

commonly used in Africa where government provides financial 

support to religiously sponsored charity hospitals in areas not 

served by public facilities. These arrangements may or may not 

be formalized by contract. 

Franchise A contractor, or franchisee, is granted the right which may or 

may not be exclusive, to provide specified services to a defined 

clientele or in a specified geographic region. The contractor is 

7


given the right to collect and retain revenues, but is required to 

pay a fee or a percentage to the government for the privilege of 

doing so. 

a. Contracting-in should not be confused with internal contracts among governmental agencies. Contracting-in, as 

used here and in some countries (such as in Cambodia), refers to bringing in outside private management to 

operate an internal government service. 

b. Subvention is also used as a public finance term in many Eastern European countries for reallocation of financial 

flows across geographic regions. 

Contracting out health services is an increasingly prevalent phenomenon in 

developing countries and governments in all regions contract out some type of health care 

service. In developing countries, contracting out has been an element of health system 

reform programmes often under the influence of multilateral and bilateral agencies. 

These agencies promote a new role for the state in health care provision. Specifically, 

they emphasize the state’s role as a catalyst for competition among providers and as a 

force that encourages greater utilization of private providers, rather than promoting the 

state as the dispenser of services itself. 

Contracting out of health services is receiving increasing attention among low- and 

middle-income countries, but evidence relating to the benefits and risks of the approach, 

while accumulating, is far from conclusive. Despite the growing experience with 

contracting out of health services in developing countries, limited evidence exists on the 

impact these programmes have had on equity, quality, and efficiency or on health 

outcomes. 

Resolution WHA56.25 endorsed by the World Health Assembly in 2003 asked 

Member States to assess the role of contractual arrangements in improving health system 

performance [4]. There is limited experience, and even less documentation, on 

contracting out of publicly financed health services among countries of the Eastern 

Mediterranean Region, although several are at various stages of implementing health 

sector reforms. There is increasing realization within the Region, as elsewhere, of the 

importance of awareness creation and capacity-building within ministries of health in 

contracting out publicly financed health services to the private sector. 

The purpose of this document is to share experience in contracting from among 10 

countries of the Region: Afghanistan, Bahrain, Islamic Republic of Iran, Egypt, Jordan, 

Lebanon, Morocco, Pakistan, Syrian Arab Republic and Tunisia. The country studies on 

contracting of publicly financed services were undertaken between January and 

September 2004. Countries were identified representing the Region, based on the size of 

the private sector, on anecdotal evidence of experience with contractual arrangements, 

and implementation of a programme in which contractual arrangement with the private 

sector was the principal strategy. 

8


The study objectives were to: 1) assess the capacity of the ministries of health to 

outsource health services; 2) review a specific health intervention that has taken up 

contractual arrangements as its implementation strategy; and 3) identify key factors that 

influence outsourcing. The country studies were presented by the country investigators in 

a regional meeting in April 2005. What follows in part one is a summary analysis of the 

findings of all the country studies, along with a set of recommendations on the role of 

contracting in improving health system performance developed jointly by the participants 

of the regional meeting. Part two contains selected country studies. 

This is the first organized effort to review outsourcing of health services among 

countries of the Eastern Mediterranean Region. All ten country studies have contributed 

to acquiring a better understanding of the subject in the Region. All studies have 

reviewed features of the contracting process in their respective countries. However, on its 

own each study is different in the manner in which it depicts the overall policy of the 

country, its experience with contracting, and the extent and quality of the documentation 

of the experience. While each country study has aimed to collect the best evidence, it is 

recognized that there are gaps in information on the subject which need to be filled in 

future efforts. 

The summary analysis attempts to pull together and synthesize the findings of the 

country studies, and identify the strengths and limitations of this multi-country study on 

contracting. It is hoped that this effort will serve as the basis for future and more in depth 

studies on contracting out of health services so as to assist countries in formulating more 

rational and evidence-based policies and strategies on the subject. 

References 

1. Liu X et al. Contracting for primary health services: Evidence on its effects and a 

framework for evaluation. 2004 Available at: HTUhttp://www.who.int/reproductive- 

health/tcc/meeting_documents/hotchkiss_et_al.pdfUTH 

2. Harding A, Preker AS. Private participation in health services. Human 

development Network, Health, Nutrition and Nutrition Series. Washington DC, The 

World Bank, 2003. 

3. England R. Contracting and performance management in the health sector: A guide 

for low and middle income countries. London, the Health System Resource Centre, 

Department for International Development, 2000. Available at: 

HTUhttp://www.eldis.org/static/DOC10297.htmUTH 

4. Fifty-sixth World Health Assembly. (2003) The role of contractual arrangements in 

improving health sector performance in countries. Agenda item 14.13; WHA 56.25, 

Document A/56. 

9


2. SUMMARY ANALYSIS OF COUNTRY EXPEREINCES 

2.1 Introduction 

Contracting is being increasingly used by the public sector in developing countries 

for the purchase over time of specified services from the private sector [1–5] or in some 

developed countries through contracts with autonomous public providers [6–9]. 

Contracting is an important element of many countries’ health sector reform programmes 

because it provides governments with a management and regulatory tool that creates 

incentives for improved performance and increased accountability [1,10]. Recent reviews 

have suggested that contracting can potentially influence access, equity, quality and 

efficiency of health services; promote public health goals; and create an environment 

conducive to public–private collaboration [11–13]. However, the process is challenging, 

and requires transparent bidding procedures, well-designed contracts, clear performance 

obligations and credible funding mechanisms. In addition, governments need to be able to 

monitor the contracts and must have credibility as a trustworthy partner. 

There is limited experience among countries of the World Health Organization’s 

Eastern Mediterranean Region in the area of contracting out publicly financed health 

services to the private sector, although several countries are at various stages of 

implementing health sector reforms. A multi-country study was undertaken in 10 

countries of the Region to document experience with outsourcing of publicly financed 

health services to private sector organizations in countries with an active private and/or 

nongovernmental organization sector. The objectives of the study were to: 1) assess in 

countries, the capacity of the public sector organizations, especially the ministries of 

health, to outsource publicly financed health services; 2) review a specific health 

intervention that has taken up contractual arrangements as the principal implementation 

strategy; 3) identify the key factors that influence and drive contracting in health. This is 

the first organized effort in the Region to comprehend the situation and to craft a regional 

strategy on the role of contractual arrangements in improving health system performance. 

2.2 Approach and methodology 

The Eastern Mediterranean Region covers 22 countries from Morocco to Pakistan, 

with a total population of 500 million, and has the demographic profile of a developing 

region. Overall it is a low middle-income region with a GNP per capita of less than 

US$ 1700 [14]. Afghanistan, Djibouti, Somalia, Sudan and Yemen are the five least 

developed countries in the Region. The geopolitical situation of the Region is perhaps the 

most challenging. Afghanistan and Sudan are countries in a post-conflict state, and their 

health sectors are at various stages of recovery and reconstruction. Iraq, Palestine and 

Somalia continue to be in a state of conflict as a result of invasion, occupation or civil 

strife. 

10


The country studies on contracting of publicly financed services were undertaken 

between January and September 2004. Ten countries were identified to represent the 

Region, based on the size of the private sector, on anecdotal evidence of experience with 

contractual arrangements, and on implementation of a programme in which contractual 

arrangement with the private sector was the principal implementation strategy. The 

countries were Afghanistan, Bahrain, Islamic Republic of Iran, Egypt, Jordan, Lebanon, 

Morocco, Pakistan, Syrian Arab Republic and Tunisia. 

Contracting was defined as a purchasing mechanism used to acquire a specified 

service, of a defined quantity and quality, at an agreed-on price, from a specific provider, 

for a specified period [15]. Contracting out in the health sector was generally defined as 

the development and implementation of a documented agreement by which one party 

(purchaser) provides compensation to another party (provider) in exchange for a defined 

set of health services for a defined target population [16]. Here the terms contracting out 

and outsourcing of health services are used interchangeably. 

An assessment checklist was developed to facilitate data collection (Annex 1). The 

checklist had two sections: 1) overall capacity of the ministries of health in the 

contracting of health services; and 2) review of a specific intervention that has taken up 

contractual arrangements as its principal implementation strategy. The purpose of the 

checklist was to serve as a guide to data collection for country researchers and at the 

same time to allow for comparison across country studies. 

Given the limited experience with contracting of health services in the Region, 

inclusion criteria were relaxed in the selection of a specific intervention. Interventions 

were selected in the following order of preference: primary health care services; hospital 

services; non-clinical services. Those contracts that used some system of monitoring or 

evaluation of performance were given preference. Several country studies covered 

experience with contracting in two or more service categories. 

An electronic network was established for all the country researchers to monitor 

progress, share experience and resolve problems as they occurred. Occasional monitoring 

in the countries was done by the Regional Office staff during visits to the countries. 

2.3 Results 

Summary of individual country studies 

An overview of the financing of health care allows insight into the context and 

nature of contractual arrangements in the respective countries (Table 1). Afghanistan and 

Pakistan are low-income countries; Bahrain is a high-income country and the remaining 

countries are middle-income. The range of total expenditure on health as a percentage of 

GDP varies between 3.2% and 11.5%. The per capita total health expenditure on health 

11


for Afghanistan and Pakistan is less than US$ 15 per capita, for all middle-income 

countries with the exception of Lebanon it ranges between US$ 58–165 and for Bahrain 

and Lebanon goes beyond US$ 500. The per capita private health expenditure is greater 

than the general government expenditure on health in all countries except Bahrain. There 

is no consistent association between the level of total health expenditure, social security 

or out-of-pocket expenditure on health and the nature and extent of contractual 

arrangements in the countries assessed. 

Table 1. Health care financing indicators for individual countries, 2002 

Country Population 

(million) 

Total 

expenditure 

on health as 

% of GDP† 

Per capita 

general 

governmen 

t 

expenditur 

e on health 

at average 

exchange 

rate (US$) 

12 

Per capita 

private 

expenditure 

on health at 

average 

exchange 

rate (US$) 

Social 

securi 

ty 

expen 

ditur 

e on 

healt 

h as 

% of 

gener 

al 

gover 

nmen 

t 

expen 

ditur 

e on 

healt 

h 

Afghanistan 22.9 8.0 6 8 0.0 80.5 

Bahrain 0.7 4.4 372 145 0.4 69.2 

Egypt 70.5 4.9 21 38 22.0 92.0 

Islamic 

Republic of 

Iran 

68.1 6.0 50 54 37.0 96.4 

Outof 

- 

pock 

et 

expe 

nditu 

re on 

healt 

h as 

% of 

priva 

te 

expe 

nditu 

re on 

healt 

h 

Jordan 5.3 9.3 76 89 0.7 74.3 

Lebanon 3.6 11.5 171 397 43.7 80.0 

Morocco 30.1 4.6 18 37 7.6 74.0 

Pakistan 149.9 3.2 5 8 42.9 98.3 

Syrian Arab 

Republic 

17.4 5.1 27 31 0.0 100.0 

Tunisia 9.7 5.8 63 63 22.7 83.0 

Source: WHO National Health Accounts 2002: NHA Website country tables


Afghanistan 

Afghanistan’s health indicators lag significantly behind other countries in the 

Region, and most of the Afghan population does not have access to basic health services. 

During 2002, up to 80% of the health facilities were operated by nongovernmental 

organizations, which were directly contracted by the donors with minimal involvement of 

the Ministry of Public Health [17]. Subsequently, and as a key strategy of its national 

health policy, the Ministry focused attention on contracting out the delivery of a Basic 

Package of Health Services (BPHS) to nongovernmental organizations. Although an 

alternate service delivery mechanism exists through direct provision of BPHS, delivery 

through contractual arrangements predominates. By January 2005, the population 

coverage of the BPHS contracted out to nongovernmental organizations had extended to 

almost 16.5 million, or over 70% of the population; however, the actual extent of service 

coverage remains unclear. 

The BPHS, which forms the core of service delivery in all primary health care 

facilities and promotes redistribution of health services by providing access especially in 

underserved regions, covers maternal and newborn health, child health and 

immunization, public nutrition, communicable diseases, mental health, disability and 

supply of essential drugs to the four levels of health facility [18]. The estimated cost of 

the BPHS is US$ 4.5 per capita. Programmes such as routine immunization, nutrition and 

malaria, tuberculosis and HIV/AIDS control are not yet fully integrated to the BPHS, and 

they are implemented through vertical approaches that rely heavily on support from 

WHO, UNICEF and other UN and international agencies. 

The Ministry of Public Health has defined separate geographical regions to utilize 

donor funds. The World Bank committed US$ 46.3 million, USAID US$ 60 million and 

EC Euro 25 million. Out of the 34 provinces, 11 are assigned to the World Bank, 13 to 

USAID and 9 to EC funds. The Asian Development Bank and TKreditanstalt für 

WiederaufbauT (KfW) have also joined the partnership, and cover a total of 11 districts. 

The World Bank channels its funds through the contract management unit established 

within the Ministry of Public Health; others do it directly. Nongovernmental 

organizations go through a competitive bidding process, and payment for their services, 

including the bonus given for extraordinary achievements, is made based on 

predetermined national indicators. The performance is apparently measured through 

regular monitoring by the Ministry of Public Health and by independent evaluations. 

However, a clear monitoring mechanism does not seem to be in place. There is anecdotal 

evidence that health managers in the provinces feel marginalized as they are disconnected 

with entire process of contracting out of health services. 

There are certain risks inherent in the contracting out of health services. Principal 

among them include the possibility of emergency withdrawal of contracted out services; 

the Ministry of Public Health’s responsibility to provide health services directly for the 

13


30% of the uncovered population; increasing demands on central government funds for 

managing hospitals that are under direct Ministry control; the reduction in external donor 

funds for contracting to nongovernmental organizations; and rising expectations in the 

population for access, quality and range of services. In addition, ongoing debate on the 

role of the nongovernmental organizations and on their non-profit status calls into 

question whether they will continue to be the main provider of health services in the 

country. 

An evaluation of the contracting out of health services in Afghanistan is currently 

being undertaken by a team from Johns Hopkins University with the support of the World 

Bank. The report has yet to be made public. 


The Ministry of Health has been contracting out various non-clinical services for a 

long time, but there is no experience with contracting out direct health care services. At 

the other extreme, the Ministry is studying the future privatization options and issues for 

the new King Hamad General Hospital, in line with the recent economic policy of the 

country to promote privatization [19]. 

The selection process for contracting out non-clinical support services by the 

Ministry of Health was based on bid price as well as the quality of technical proposal. A 

high level of transparency and fairness of the selection process was ensured by involving 

an expert third party, the Tender Board. Although the contract design included the 

standards of expected services and contactor performance was strictly monitored, it did 

not include clearly specified performance indicators. 

The legal framework is sufficiently robust to facilitate contracting between the 

public and private sectors. The public and private sectors have the capacity to undertake a 

cost and price analysis for support services prior to negotiations. The Ministry of Health 

does not have comprehensive information system to compute costs of various services 

dynamically; however, it has adequate cost information for “make or buy” decisions. 

Egypt 

Under the Health Sector Reform Programme in Egypt, the Family Health Fund was 

established by governmental decree as the main contracting and purchasing agency for 

health care services. At present, it is functioning as a pilot unit in the Ministry of Health 

and Population. Its purpose is to: a) separate service finance from service provision and 

ensure competition between service providers to contract with the Fund based on the 

quality of services offered; b) act as an agent and contractor to purchase health services 

for families, insured and uninsured, through public, private and nongovernmental 

organization units; and c) act as a forerunner of a national health insurance fund [20]. 

14


The Family Health Fund is in its second year of operation and has contracted with a 

range of public and private providers. It is being piloted in five governorates of the 

country. Based on preliminary information, the main role of the Fund is to purchase a 

package of primary health care services for registered families in a community. In 

addition to contracting with private providers and Nongovernmental organizations, the 

Fund has initiated contracts with the reformed public sector facilities that fall under the 

district provider organizations in the governorates and provide a defined package of 

services to the district population. All providers, whether public or private can enter into a 

contractual arrangement only after having received an accreditation certificate from the 

Ministry of Health and Population. Payment mechanisms are still being piloted on a per 

capita as well as fee-for-service basis. A set of 30 coverage, utilization and quality 

indicators have been identified that will be used for all contracting facilities to allow fair 

competition. A formal evaluation of the Family Health Fund has yet to be undertaken. 

Islamic Republic of Iran 

The Third Socioeconomic Development Plan of 1999 encouraged public–private 

partnership in the country and authorized the Ministry of Health and Medical Education 

to contract out health services [21]. Article 192 of the Plan focused on privatization in 

general, and on outsourcing of health care delivery in particular. Seven out of the 29 

medical science universities were selected to pilot outsourcing. Some rushed to contract 

out almost all clinical and non-clinical services, while others did so on a limited scale. 

Despite a comprehensive guideline for implementation of Article 192 to contract out 

health services, a uniform tool for monitoring and evaluation of contracted out services 

does not exist and each university has developed its own criteria for assessment of private 

providers’ performance. 

Conflict of interest between the purchaser and provider is addressed through 

traditional arbitration. Normally, contracts are made for a single fiscal year and renewal 

and nullifying of contracts depends on the outcome of assessment of providers’ 

performance, based on individual checklists developed by the universities. Providers are 

selected mainly through bidding but sometimes good local reputation and 

recommendations by experts and colleagues are used as criteria for provider selection. 

Nursing, laboratory, radiology, operating room, pharmacy, dentistry, intensive care 

and health house services are the services most frequently outsourced. The universities 

purchase a package of services from private individual providers or health cooperatives. 

A specific budget set aside for this kind of purchasing is transferred from the Ministry of 

Health and Medical Education to the universities. Capitation is more frequent than global 

budgets as a method of payment, though both are practised. 

There is a perception that contracting out has reduced unit cost, increased access 

and improved quality of services. The stated reasons are restrictions on new employment, 

15


lower wages and financial incentives and lower productivity in the public sector. 

Opportunistic behaviour, lack of relevant experience among health cooperatives, delays 

in payment, restrictive laws and regulations, and providers’ “playing on both sides of the 

fence” (public and private sectors) are considered the disadvantages of outsourcing. 

There is no consensus on financial risk sharing among contracting parties. There is belief 

among some universities that they benefit from a more powerful negotiating position in 

contracting out health services. On balance it is difficult to determine clearly the impact 

of contracting out of health care services in the absence of a comprehensive evaluation. 

Jordan 

The Ministry of Health in Jordan has been contracting out health services to the 

private sector and other autonomous public sector organizations over the past three 

decades. Contracts are mostly given by the Health Insurance Directorate of the Ministry 

of Health for the provision of hospital services. Of the 8 formal contracts for purchase of 

services by the Ministry, 5 are with private hospitals and 3 with autonomous public 

providers. Of these, 6 are reimbursed according to fee-for-service while 2 receive a fixed 

payment against leasing a specific number of hospital beds. Currently, the Ministry of 

Health with the support of Partnership for Health Reform Plus is implementing a health 

insurance pilot project to enhance the capacity of the Ministry in contract design, 

monitoring and enforcement. 

There is some evidence that contracting has contributed to improving access and 

promoting equity through extension of subsidized Ministry of Health activities to the 

poor and vulnerable. In terms of efficiency, the cost per admission in some autonomous 

hospitals reduced to less than US$ 424 as compared to over US$ 706 in private hospitals 

without contracts. There was no evidence, however, that it contributed to improving the 

quality of services. 

Lebanon 

Lebanon has a large private health sector and uses contractual arrangements 

extensively to provide health care and other services to its citizens. Over 80% of 

Lebanese receive health care based on one form or another of contractual arrangements. 

The Ministry of Public Health uses contracting as one of the main tools at its disposal to 

perform its functions. This includes contracting with primary care centres and hospitals to 

provide care for the uninsured and with local nongovernmental organizations to support 

social welfare. 

There are many limitations to the current contractual arrangements. Some of these 

include fragmentation of contracting mechanisms, lack of public capacity for monitoring 

of performance and outcomes, the limited leverage of the public sector as compared with 

the private sector, and the inability of current arrangements to contain escalating health 

16


care costs. Many perceive current arrangements as providing public–private “cash 

transfers” which do not serve the government or the Lebanese citizen in the long term. 

Considering that recent large-scale health sector reform projects have not been 

evidently successful, contracting can be used an entry point to gradual reform. Several 

recommendations for improving performance of current arrangements can be made, that 

include creation of a central contracting body, linking inpatient and outpatient care, and 

unifying tariffs across financing agencies. 

Morocco 

The Ministry of Health of Morocco recognizes the competencies and innovative 

management procedures of private providers and encourages contracting with them. 

Morocco follows contractual arrangements in a broad sense of the term, which includes 

purchasing, delegation of services to lower levels, and cooperation among partners. 

Purchasing has involved the traditional contracting of a private provider on a regular 

salary to work within a public health institution and provide health services that are not 

well covered. Such arrangements have been on the decline with the expansion of public 

health services. 

More recent experience in Morocco relates to its policy of hospital autonomy and 

decentralization of district services and entering into a contractual arrangement with 

them. The Ministry of Health and the Ministry of Finance and privatization concluded 

what have been called workplan contracts with two university hospitals to meet their 

statutory responsibilities, namely care, training and education and research. The idea 

underlying this twin intervention of decentralization and contracting is that these 

institutions will improve management, optimize use of resources, be more accountable 

and improve overall performance. The terms and conditions of the contract include a 

global budget and set of agreed-upon performance monitoring indicators. A similar 

arrangement called programme contracts has been made with the decentralized facilities 

of the Ministry of Health that are responsible for providing district health services. 

Another form contractual arrangement based on cooperation exists between the 

public sector and the nongovernmental organizations covering such activities as contact 

tracing for infectious diseases, family planning and diagnostic and treatment services. 

The public contribution to these organizations comes not only through formal contractual 

payments but also through annual subsidies, provision of medicines and supplies, and 

sharing of infrastructure and human resources. Such agreements usually do not anticipate 

the means and tools necessary to control, monitor and follow up the input of 

nongovernmental organizations. 

17


Pakistan 

The contracting arrangements between the public purchasers and private providers 

vary with the level of hierarchy, type of contract and set of services to be provided. The 

purchasers are mainly the Federal Ministry of Health, provincial departments of health 

and social welfare, and district governments. The private providers are mainly the 

international and national nongovernmental organizations, institutions and private firms. 

Contract types include contracting out, cost-sharing agreements, grants and loans. The set 

of activities covered in contractual arrangements comprise primary health care services, 

research and development services, and technical and management services. 

The public sector rationale for contractual arrangements is to partner with the 

private sector to target priority health problems, expand coverage in less accessible areas, 

meet rising consumer expectations and test public–private innovations. The private sector 

interests include enhanced size and scope of activities, recognition and financial support, 

and humanitarian concerns. 

There exists serious political commitment in favour of public–private partnership. 

Despite a cautious approach, support for contracting is increasing, along with the number 

of projects with contractual arrangements. The early success of the flagship project, the 

contracting out of primary health care services in district Rahim Yar Khan, has led to its 

possibly premature replication in several districts of the Punjab province. A recent World 

Bank-sponsored evaluation showed mixed results. On one hand, the utilization and 

physical condition of primary health care centres have improved, patient satisfaction has 

increased, and out-of-pocket expenditure has decreased. On the other hand, quality of 

care, drug availability and accessibility by remote communities have remained poor. In 

addition, contracting out has had little effect on the coverage of preventive health services 

[22]. 

The institutional arrangements for managing the contractual partnerships are 

inadequately developed. Although private sector partners have expressed overall 

satisfaction with the support received from their public counterparts during planning and 

implementation of project activities, delays in payment have also been reported due to the 

complexity of government financial procedures. 

Many national programmes have developed capacity in preparing bids, evaluating 

technical and financial proposals, negotiating terms and awarding contracts. There is 

wide variation in the technical, managerial and financial capacity of private providers, 

which is often addressed through short-term expert inputs. The majority of private 

providers rely on up-front project funding for initiating activities, which makes the longterm 

sustainability of such activities less certain. 

18


The most common payment method is block payment made against an agreed set of 

activities and outputs. However, there are examples of payments to private sector 

providers on the basis of fee-for-service, and indemnification and prepayment. Both 

public sector managers and most private sector organizations have limited ability to 

undertake cost and pricing analysis. 

The Ministry of Health does not have the capacity to monitor and evaluate ongoing 

projects efficiently, even if monitoring indicators are identified. There is thus no regular 

arrangement for collecting data on project outputs or outcomes. Independent reviews are 

sometimes undertaken through donor support. The Ministry does not maintain a database 

of the private sector partners according to their areas of expertise or work experience. 

Syrian Arab Republic 

Although the number of government contracts with the private sector almost 

doubled from 260 to 492 during the period 2001–2003, most contracting in the Syrian 

Arab Republic is done for non-clinical services. The areas covered include maintenance 

of hospitals and equipment and catering, cleaning and construction services. The Ministry 

of Health continues to promote a policy of direct provision of health services through the 

establishment of new hospitals and health centres instead of contracting out health 

services to the private sector. The Ministry of Health owns 80% of the health institutions 

in the country and is planning to establish an additional 74 new hospitals and 350 health 

centres during 2006–2010. 

The overall political and bureaucratic environment is not conducive to contracting 

out health services at present, nonetheless there is growing keenness among the private 

sector to enter into contractual arrangements, as such arrangements would offer a reliable 

source of revenue, raise the volume of under-utilized services and add to the credibility of 

services. 

The lack of experience in contracting out of clinical services in Syrian Arab 

Republic may be attributed to several factors, important among them being: historical 

policy of direct provision in most social sectors; lack of knowledge and trust of the 

advantages that each has to offer; and lack of experience in the public and private sectors 

in negotiation of contracts, their preparation, management, monitoring and evaluation. 

Tunisia 

The Tunisian health system has made use of contractual arrangements since 1970, 

when the Social Security Fund agreed to pay a lump sum amount to the national treasury 

for health care provided to their affiliate members and their dependents. The process of 

contracting has greatly developed since then. In 1987, contracting with the private sector 

in Tunisia received a boost when it was realized that the social security fund had to pay 

19


large sums of money to almost 60% of patients requiring cardiac surgery in order to send 

them abroad. 

Currently, the relationships between the health insurance organization (Social 

Security Fund) and health care providers (both public and private) are managed and 

regulated through contracting, which also helps achieve consensus on the often 

conflicting interests of the fund and the providers. Several specialized services were not 

provided for in the initial agreements made between the Social Security Fund and the 

Ministry of Public Health. Most of these health care services are the subject of 

agreements and memoranda of understanding with the Ministry, to which some private 

specialized care institutions and the military hospital have been included. There is no act 

or decree allowing the socially insured to receive health care in private health facilities. 

The agreements have proved useful as they enable the private facilities to be brought into 

the process of contracting of health services. 

There are two types of health coverage schemes operational in Tunisia, health cards 

and reimbursement schemes. Irrespective of the scheme, the affiliate members are 

entitled to all health care services provided in the terms of agreement. The wide range of 

services include highly sophisticated techniques such as lithotripsy, transplants (bone 

marrow, renal and heart), other cardiovascular interventions, thermal treatments, 

haemodialysis, and all forms of scanning procedures. 

In order to participate in the contractual arrangement, private institutions are 

obliged to accept the following conditions: a) reimbursement is made on the basis of a 

flat rate determined at the level of the Ministry of Public Health; b) private facilities 

cannot increase the agreed rates or charge co-payment; c) for cardiovascular 

interventions, a justification for the procedure is required from the private institutions; 

and d) private facilities are subject to medical inspection, provided for in the agreements, 

which is also a requirement for public facilities. 

Overall capacity for contracting health services 

Contracting out of health services occurs more frequently than presumed. There is a 

wide range of services contracted out that varies from non-clinical services to primary 

care and hospital services. Table 2 shows a comparison of the overall capacity of the 

public sector in general and ministries of health in particular to contract out health 

services. The rationales for contracting out by ministries of health are to: improve 

efficiency; enhance access and coverage; improve quality of care; address shortage of 

public hospitals; and provide services targeted at culturally sensitive problems such as 

HIV/AIDS through building partnership between public and private sectors. 

Most countries, with the exception of the Syrian Arab Republic, have a policy that 

promotes enhanced involvement of private sector. Afghanistan has the most explicit 

20


policy on contracting out of primary health services. Bureaucratic support for contracting 

varies depending on previous experience both with contracting and with working with the 

private sector. Countries such as Jordan, Lebanon, Morocco and Tunisia have a long 

experience with contracting, while the experience in Afghanistan, Egypt and Pakistan is 

relatively recent. The legal framework and the necessary rules and procedures for 

tendering for goods exist in all countries; however, in several countries the legal 

framework requires updating for outsourcing of health services. 

Most ministries have limited capacity for cost and price analysis. Estimation of the 

transaction cost of outsourcing health services has not been undertaken in most countries 

except in Pakistan, where the administrative and transaction cost for the flagship project 

in Rahim Yar Khan district was estimated at 10% of the total project cost. 

21

Table 2. Assessment of overall country capacity for contracting health services 

Country Rationale for MOH 

to enter into health 

service contracts 

Afghanistan Disrupted public 

sector health 

services due to years 

of conflict 

80% of health 

facilities operated by 

NGOs during and in 

the early postconflict 

period 

Bahrain Improved efficiency 

Economies of scale 

in private sector 

Government policy 

to involve private 

sector 

Egypt Increase coverage of 

services 

Utilize advanced 

technology available 

with private sector 

Improve quality of 

Interest of the 

NGOs/ private 

sector in 

contracting 

NGOs would 

continue to be 

actively engaged 

in provision of 

care 

NGOs would 

receive US$ 4.5 

per capita as cost 

of BPHS 

Increase scale of 

work 

Assurance of 

regular source of 

revenue 



revenue 

Guaranteed 

registration of 

families 

Political 

environment, 

bureaucratic 

support, legal 

framework 

Adequate 

political, 

bureaucratic and 

legal framework 

did not exist 

External donor 

influence to push 

for contracting, 

e.g. World Bank, 

USAID, EC 

Government 

policy of 

developing the 

private sector 

Supportive 

bureaucratic 

process 

Strong legal 

framework 

Contracting is part 

of reform 

programme 

Legal framework 

for contracting 

present 

Capabilities of 

the purchaser 

(strengths and 

weaknesses) 

MOPH lacked 

experience with 

purchasing of 

health services 

General contract 

management unit 

established in 

MOPH for 

managing World 

Bank funds 

Other donors 

contracted out 

directly 

Clearly defined 

rules and 

procedures 

Dedicated section 

in Finance 

Ministry 

Six technical units 

established in 

Family Health 

Fund which 

support 


Capabilities of 

providers 

(strengths and 

weaknesses) 

NGOs had 

previous 

experience of 

receiving contracts 

from donors 

Lack of 

information on the 

quantity, quality 

and distribution of 

workforce among 

NGOs 

Limited capacity 

of local companies 

for most contracts 

Opportunities for 

international/ 

regional 

companies 

Private sector 

provides most of 

ambulatory care 

Majority of 

facilities not 

accredited by 

Risks of the process Mechanisms for 

monitoring 

performance 

Reduction in external 

donor funds for 

contracting NGOs 

Rising expectations 

in population for 

access, quality and 

range of services 

NGOs non-profit in 

principle but not 

necessarily in 

practice 

Ministry of Health 

has to have a backup 

option in case of 

failure of contractor 

to provide services 

Fee-for-service and 

capitation are being 

tried as two different 

methods 

Accreditation of 

private facilities may 

Performance 

monitored by the 

MOPH based on 

agreed indicators 

In practice 

monitoring 

mechanisms do not 

exist, especially 

outside the capital 

city 

MOH approves 

hiring of personnel 

by the contractor 

Users report 

performance 

Previous record 

taken into account 

11 weighted 

performance 

indicators 

(encompassing 

coverage, quality 

and utilization)

Islamic 


Iran 

care (increase 

clientele) 

Decentralization of 

services 

MOH policy to 

provide services for 

segment of rural and 

deprived population 

contracting out 

Jordan Optimize capital 

investments by 


Improve 

accessibility and 

efficiency 

Decrease waiting 

lists at government 

hospitals 

Lebanon More elaborate 

infrastructure of 

hospitals in the 


Avoid duplication of 

services already 

available in private 


Morocco Decentralization of 

services 

Improve access to 


Access to 

government 

resources for 

family 

physicians 

Utilize spare 

capacity 



revenue 

Increase 

credibility in 

population 

through 

affiliation with 

MOH 

Access to major 

insurers of 

population 

Utilize capacity 

in private sector 

Enhanced 

recognition of 


Opportunity for 

Political and legal 

support through 

3rd Socioeconomic 

Development Plan 

passed in 1999 

Political 

environment and 

legal framework is 

present 

Health reforms to 

improve equity 

and access 

Bureaucratic 

framework is not 

flexible 


is adequate 

Political will is 

lacking for 

improving 


process 

No clear policy on 


clinical services 

process MOH be difficult due to 

improvements 

required 

Improve access, 

quality and 

efficiency of PHC 

services, especially 

to the deprived and 

vulnerable 

population 

Experience of 

contracting for the 

past 3 decades 

Cost and price 

analysis for some 

projects 

MOH has 

experience in 


Contracting is 

highly fragmented 

Does not limit cost 

of health care 

MOH has 

experience in 


Loose partnership 

23 

Private sector in 

health care 

markets is not fully 

developed and is 

mainly involved 

with hospitals in 

cities 

Lack of experience 

with PHC services 

Advanced 

information 

systems 

Experience in 

negotiating 

contracts 

Lack of skilled and 

professional 

managers 

Major provider of 

services 

Oversupply of 

specialists and 

services 

Advanced 

diagnostic and 

therapeutic 

services 

Health managers and 

their private sector 

counterparts lack 

necessary skills for 



demonstrates 

opportunistic 

behaviour 

Delay in payments 

from the MOH 

Concerns of quality 

of care in private 


Number of providers 

is above requirement 

Contracts are not 

performance based 

Difficulty in ensuring 

quality of services 

Used at pilot centres 

Performance based 

service contracting 

with measurable 

standards and 

negative incentives 

for non-performance 

Weak monitoring 

mechanisms are a 

challenge 

Political 

environment affects 

monitoring of 

contracts 

Capacity to monitor 

contracts is poor at 

MOH 

Monitoring 

indicators not welldefined 

Adequate

services 

Overcome budget 

constraints for 

capital projects 

Pakistan Enhance 

implementation of 

planned activities 

Improve access to 

services 

Expand service 

provision for 

culturally sensitive 

issues, e.g. 

HIV/AIDS 

Syrian Arab 

Republic 

Public provision of 

services, clinical 

services not 

contracted out 

Tunisia Reduce cost of 

foreign treatment by 

contracting with 

national providers 


partnering with 

public sector 

Enhanced 

recognition of 

NGOs by 

population 

Expansion of 

programme 

activities 

Access to 

government 

funds 

Most contracts 

between MASS 

or MOH and 

private facilities 

are only adherent 

to the 

agreements 

Political 

commitment for 

public–private 

partnerships exists 

Bureaucratic 

support is 

ambivalent 


is being adapted 

No bureaucratic 

and political 

support for 



Only non-clinical 

contracts 

Political and legal 

framework 

supportive 

MOH: Ministry of Health; MASS: Ministry of Social Affairs and Solidarity 

arrangements with 

public sector 

No dedicated 

contracting unit in 

MOH 

Limited 

experience of 


Experience limited 

to specific national 

programmes 

Major provider of 

care 

Expanding service 

infrastructure 

Social Security 

Fund has long 

experience with 


Contracts not 

directly given to 

private facilities 

24 

Limited experience 

in contracting of 


Different providers 

(NGOs, private 

practitioners) 

Technical, 

financial capacities 

vary widely 

Advanced 


therapeutic 

services 

Advanced 


therapeutic 

services 

Payments are 

normally block 

payments concerned 

with only quantity 

Delay in release of 

payments adversely 

affects contracts 

Difficulty in ensuring 


Reimbursements 

made on flat rate 

determined by MOH 

and no co-payment 

can be charged 

information system 

not in place 

Information system 

has limited capacity 

to assist in 

monitoring contracts 

Most programmes 

use separate 

reporting systems 

not used to monitor 


Information system 

has limited capacity 

to assist in 

monitoring contracts 

Medical inspection 

for assessing 

condition of 

hospitals and 

treatment facilities


The capacity of private sector providers also varies among countries of the Region. 

Nongovernmental organizations are more actively involved in the delivery of primary 

health services in some countries, especially Afghanistan and Pakistan. Other countries 

such as Egypt are piloting internal contracts with the reformed district provider 

organizations, as well as external contracts with private providers. There is abundant 

experience with contracting out of secondary and tertiary services to private providers in 

Jordan, Lebanon, Morocco and Tunisia. 

There are several issues with the private providers. The most important of these are 

the quality of services provided, and the accreditation of the providers. This is especially 

the case in Afghanistan, Egypt, Lebanon Morocco, Pakistan and Tunisia. Skilled 

managerial capacity is lacking among private providers, and their technical and financial 

capacities also vary widely. Private providers in Egypt, Jordan, Lebanon, Morocco and 

Tunisia have access to advanced medical technologies that make them attractive to 

contract with for secondary and tertiary care services. 

There are a number of risks inherent in the contracting process. These include 

delayed payments; differing interpretations of loosely-worded contracts; limited number 

of providers in rural areas; capture of contracting process by vested interests; and limited 

capacity for monitoring and evaluation. Of these, monitoring and evaluation is especially 

problematic, as the capacity to monitor contracts effectively is weak in most countries. 

With the exception of Egypt, performance indicators are not adequately included in the 

design of contract and, if included, often are not used. Management information systems, 

especially those covering private providers, are largely inadequate to meet the 

requirements for monitoring of performance and evaluation. Payment methods for most 

contractual arrangements are in the form of fee-for-service or block grants. Afghanistan 

has experience with payment based on capitation for a specified package of health 

services. 

Interventions with contracting as the implementation strategy 

Table 3 gives a summary of the specific interventions with contractual 

arrangements. All countries have experience with contracting out of non-clinical services; 

however, Bahrain, Morocco and Syrian Arab Republic purchase mainly non-clinical 

support services. Morocco also has experience with purchase of clinical services. 

Afghanistan, Egypt, Islamic Republic of Iran, Lebanon and Pakistan have experience 

with contracting out primary health care services, and Jordan, Lebanon and Tunisia 

extensively contract out hospital and ambulatory care services to private as well as public 

providers. 

25


Table 3. Assessment of an intervention with contractual arrangements 

Country Project/programme 

selected 

Non-clinical services 

Bahrain Contracting out of 

non-clinical services 

Morocco Contracting out of 

maintenance in 

hospitals 

Syrian Arab 

Republic 

Contracting out of 

maintenance in 

hospitals 

Primary care services 

Afghanistan Contracting out of 

PHC services 

Egypt Contracting through 

Family Health Fund 

Islamic 


Iran 

Contracting out by 

medical universities 

Lebanon Contracting out of 

primary care services 

Purchaser Provider Contract 

Intervention 

MOH Private sector Maintenance of 

medical equipment 

SEGMA 

Hospital 

Centres 

Private 

providers 

MOH Private 

providers 

MOH 

Donor 

agencies 

International 

and national 

NGOs 

MOH District 

provider 

organizations, 

private 

providers 

Medical 

Universities 

Private 

providers 

Non-clinical 

services: catering, 

security gardening, 

bandage 

Maintenance and 

cleaning of 

hospitals in three 

governorates 

Delivery of basic 

pack age of health 

services 

Package of primary 

health care services 

Variable – 45 

clinical and 10 

non-clinical 

services 

MOH NGOs Primary care 

service package 

26 

Population 

covered 

Payment methods Performance 


Not applicable Block payments 

made on quarterly 

instalments 

Not applicable 10%–40% of 

annual budget 

Not applicable Agreed payment 

made quarterly 

16.5 million Capitation at US$ 

4.5 as the cost of 

BPHS 

Five pilot 

governorates 

covering 5.0 

million 

Not clearly 

defined 

Fee-for-service 

Some piloting with 

capitation 

Block payment 

Cost–volume 

contracts 

50% eligible Reimbursement on 

fee-for-service 

Standards of 

service stipulated 

in contract 

Not well defined 

Indicators related 

to timeliness and 

quality of cleaning 

Based on BPHS 

Monitoring 

system unclear 

11 monitoring 


Elaborate system 

of performance 

evaluation, 

None specified


Country Project/programme Purchaser Provider Contract 

Population Payment methods Performance 

selected 

Intervention covered 


for uninsured Lebanese basis 

Pakistan Contracting out of PHC 

services in Rahim Yar 

Khan district, Punjab 

Hospital services 

Jordan Contracting with Royal 

Medical Services 

Contracting with 

Jordan University and 

King Abdullah 

hospitals 

Lebanon Contracting for 

hospitalization of 

uninsured Lebanese 

Tunisia Contracting out of 

hospital services 

District 

government 

MOH 

Punjab Rural 

Support 

Programme 

Royal Medical 

Services 

Autonomous 

hospitals 

MOH 103 private 

hospitals 

National 

Pension and 

Social Security 

Fund 

(CNRPS) 

Private 

hospitals 

Provision of 

services through 

104 PHC centres 

Emergency and 

hospital care 

Emergency 

referrals and 

tertiary care 

Hospital care to 

uninsured 

population 

Provision of 

haemodialysis 

services 

27 

≈3 million – 

district’s rural 

population 

Not specified 

Annual budget 

Block payment 


Annual balancing 

of accounts 


50% eligible Reimbursement on 

fee-for-service 

basis 

Chronic renal 

failure patients 

Health facility 

utilization 

Not well defined 

None specified 

Fee-for-service Not well defined


Afghanistan is the only country where, in addition to the Ministry of Public Health, 

donors are the direct purchasers of health services from nongovernmental organizations. In 

other countries, the Ministry of Health, Ministry of Social Affairs and the Social Security 

Department are the main organizations that purchase primary care as well as hospital services. 

There is a wide range of providers, which depends largely on the nature of the service 

purchased. Primary care services are provided mainly by nongovernmental organizations in 

the case of Afghanistan and Pakistan, by private providers in the case of the Islamic Republic 

of Iran and Lebanon and by the district provider organizations and private providers in Egypt. 

Hospital services are purchased from private hospitals in Jordan, Lebanon and Tunisia. In the 

case of Jordan, the Ministry of Health also has a contractual arrangement with the Royal 

Medical Services for the provision of secondary and tertiary services to the Jordanian 

population. 

Factors influencing contracting out of health services in the Region 

Many of the reasons for contracting out of health services in countries of the Region are 

well-known and similar to other regions. Disillusionment of the general public with directly 

provided public sector services; the concern of the public sector to improve efficiency, access, 

utilization and quality of services; optimization of the hospital bed occupancy in public and 

private sectors; and better targeting of special populations, such as those infected with HIV, 

are among the main reasons. 

Most governments have engendered national policies that promote increased 

engagement with the private sector and, in some countries such as Bahrain, actively promote 

privatization of services. These policies influence social sector ministries to outsource health 

services to the private sector. The national policies have in themselves been influenced by the 

current movement of globalization and international trade. A robust legal framework and 

supportive bureaucratic environment are also important for contractual arrangements to 

succeed. 

In some countries, Afghanistan in particular, the driving force for contracting out of 

health services has been the donor agencies, especially the World Bank. In contrast, 

contracting in Pakistan between the district government of Rahim Yar Khan and the Punjab 

Rural Support Programme, a government-organized nongovernmental organization often 

called GONGO, was purely an indigenous initiative. Similarly, in the Islamic Republic of 

Iran, the Third Socioeconomic Development Plan of 1999 authorized the Ministry of Health 

and Medical Education and its institutions to contract out health services. 

2.4 Discussion 

Contracting out of health services is receiving increasing attention among low- and 

middle-income countries in almost all regions of the world, but evidence relating to the 

advantages and disadvantages of the approach, while accumulating [11,12], is far from 

conclusive. This effort is the first in the Eastern Mediterranean Region, which covers a large 

part of the Middle East and North Africa, as well as countries of South Asia, to review the 

subject systematically across 10 countries. Given the diversity in the Region, it is no surprise


that there is wide variation among countries in the form of contractual arrangements and the 

type of services outsourced. 

Contracting out of health services is an evolutionary process. All countries, both 

industrialized and developing, pass through a learning curve before contracting is recognized 

as an effective management and regulatory tool in the hands public sector managers. 

However, there are two important caveats. First, contracting is a complex process that must 

not be regarded as a panacea for all the ills of a health delivery system. Second, not 

everything can or should be contracted out. Jordan, Lebanon, Morocco and Tunisia have 

decades of experience with contracting out hospital and primary care services, yet more time 

is needed before the capacities among the purchasers and providers are adequately developed 

and procedures streamlined. The experience with outsourcing in Afghanistan, Egypt, Islamic 

Republic of Iran and Pakistan is relatively recent and is mostly in the area of primary care 

services. In these countries, the long-term sustainability of the approach has yet to be 

ascertained. 

Assessment of the overall contracting process in countries of the Region (Table 2) 

shows that several key issues need to be considered before contracting out health services 

becomes accepted as a viable alternative to direct provision. First, there needs to be a 

supportive overall public policy in favour of engaging with the non-state sector. The policy on 

the private sector has seen a substantial change over the past decade in the Region; perhaps 

the only exception among the countries studied is the Syrian Arab Republic. 

Second, the legal and administrative framework for contracting out clinical services 

needs updating in many countries. Many ministries of health lack a dedicated unit for 

contracting. The general contract management unit in Afghanistan and the contracting unit 

under the Family Health Fund in Egypt, both established under donor-financed projects, are 

two recent examples. In some middle-income countries, this function falls under the 

departments of social health insurance. The Ministry of Health or the provincial health 

departments in Pakistan lack such a unit and the responsibility has been left to the individual 

programmes, although health services are being increasingly outsourced to the private 

providers. 

Third, the limited capacity of the public sector in many countries to undertake the 

necessary components of outsourcing is a challenge that has not been adequately addressed. 

These components include the capacity to design, negotiate and award contracts; undertake a 

cost, price and volume analysis of services; optimize payment methods; and effectively 

monitor contract performance. Unless such capacities and skills are enhanced, the value of 

services contracted out will remain questionable in terms of improving access, equity, 

efficiency and quality of services. Equally important is the capacity of the private providers in 

successfully meeting the requirements of the contractual arrangement in terms of an effective 

process and successful outcome. The relationship between the purchaser and the provider is 

an important determinant of the success of the contracting process. Do the providers see the 

purchasers as intimidating because the latter have greater negotiating power, or does there 

exists mutual trust and cooperation in their relationship [10]? The perception of 

29


nongovernmental organizations as profit-making entities needs to be dispelled among public 

sector managers in many countries. 

Fourth, there may be substantial transaction costs involved in creating and maintaining 

the contracts. The study could not document the estimated transaction costs of contracting in 

the countries reviewed; this is a reflection of the capacities of the public sector institutions 

engaged in the contracting process. While it is clear that contracting may incur high 

transactions costs, it is important to compare these costs with the explicit and hidden costs of 

directly managed public systems, rather than to view them as entirely incremental. The public 

agencies may face large costs in monitoring staff and output quality, and there may also be 

significant costs involved in bureaucratic administrative mechanisms and in the effects of 

political interference [23]. 

Finally, another challenge is to assess objectively whether providers are actually 

providing the contracted out services on the ground. There are several points to be considered: 

whether monitoring indicators been included in the contract; whether the information will be 

reported by the providers or collected by an independent agency; whether the public sector 

has the means for assessing the reliability and validity of the information provided; and how 

will that information be used. The monitoring and evaluation aspects of the contractual 

arrangement seem to be deficient in many countries of the Region. Health information 

systems in many of the low- and middle-income countries are not well performing, and even 

when functional, they do not cover services provided by the private providers. A monitoring 

and evaluation of contracts for health services in Costa Rica showed that the data gathered do 

not provide the purchaser with information directly related to all of the contract objectives or 

of the contract performance [24]. 

In addition to assessment of the overall capacity, the study also assessed a specific 

intervention contracted out in each country (Table 4). Although the primary interest was in 

contracting out clinical services, at least three countries, Bahrain, Morocco and Syrian Arab 

Republic, have more experience with outsourcing non-clinical services. Afghanistan contracts 

out primary health care services that cover 70% of its population. In Pakistan, following the 

initial success with contracting out of health services in one district, the project is being scaled 

up rather prematurely in several other districts of the province of Punjab. Most contracting out 

of primary health care services in the Region is done with nongovernmental organizations, 

especially in Afghanistan, Lebanon and Pakistan, and to a lesser extent Egypt. There is more 

experience of contracting primary health services with nongovernmental organizations than 

with for-profit providers in the Region, as is the case with other regions [3,25,26]. As 

observed in Afghanistan, population coverage indicators, though favoured by policy-makers, 

can give misleading information regarding access to basic health services, rather than 

informing about the actual services being received by the population. It is thus important that 

service coverage indicators, such as effectiveness of treatment, quality of treatment or 

efficient resource use, are considered while preparing contracts [24]. 

Multilateral and bilateral donor agencies, especially the World Bank, have actively 

promoted contracting out of health services in some countries of the Region, particularly 

Afghanistan. This phenomenon has also been seen in other countries in conflict or early post- 

30


conflict period in the Region. Under such circumstances, the health systems are disrupted, 

nongovernmental organizations take over as significant providers of health care, ministries of 

health weaken, and donor funds become readily available. Ministries of health are sometimes 

influenced by donors to contract out health services to the private sector, though the ministry 

might have limited capacity to ensure that contracting out of health services is managed and 

monitored effectively. There is risk that a process which is donor-driven in the short term may 

be less sustainable over the longer term, when donor funding dwindles. What is overlooked is 

that sustainable health improvement is unlikely be achieved unless the physical infrastructure 

and human resources are revitalized for effective service delivery to the poorest and the 

vulnerable populations. 

Lebanon suffered a civil war in the 1970s and provides lessons on the long-term 

consequences of contracting out services in the absence of a cautious approach. During and 

following the civil war, there was rapid expansion of the private health sector in the 1980s and 

1990s, sometimes at the cost of the public sector. The result was that the Ministry of Public 

Health had limited role in service provision and regulatory capacity and contracted out most 

services to the private health sector. Given that Lebanon spends more than US$ 500 per capita 

on health, its health system is arguably the most inefficient in the Region. 

The study had several potential limitations. First, it was a challenge to coordinate the 

collaborative research across 10 countries given the diverse experience within the Region. 

The common proposal and the checklist as a guide to undertaking countries studies, the 

establishment of an electronic network for country researchers, and on-site monitoring during 

country visits allowed a fair comparison across countries. Second, the wide range of services 

contracted out, both clinical to non-clinical, was an additional challenge that needed to be 

addressed. During analysis this did not pose a problem, as there were several examples of 

different types of contracting of various services from among the countries. In addition, 

clinical and non-clinical contracting have been considered together in a previous study [2]. 

Finally, the focus of the multi-country study was not on the outcome but on the process of 

contracting, which could be argued as a possible limitation. Since the purpose of the study 

was to assess the capacity of the public sector and private providers to respectively finance 

and monitor, and to provide health services and to review at least one intervention per country 

that has contractual arrangement as the implementation strategy, it was better assessed 

through a review of the contracting process. This does not underestimate the importance of 

assessing the impact of contracting out of health services in the Region in future studies. 

Contracting is not an end in itself, nor does it mean that the state divests itself from its 

responsibility for health. Used prudently, it can be an effective tool to serve and promote 

public health objectives. When applied judiciously as a purchasing tool, contracting could 

contribute to the improvement of health system performance. Five supporting elements have 

been proposed for effective contractual arrangements: 1) a few clearly defined deliverables; 2) 

supportive stakeholders; 3) trust between contractor and agency contracted to deliver services; 

4) a source of independent monitoring information; and 5) a legal system and political 

environment which persuades both sides that the contract will actually be enforced [26]. 

31

2.5 References 


1. Jack W. Contracting for health services: an evaluation of recent reforms in Nicaragua. 

Health policy and planning, 2003, 18(2):195–204. 

2. Mills A. To contract or not to contract? Issues for low and middle income countries. 

Health policy and planning, 1998, 13(1):32–40 

3. Abramson WB/Latin American and Caribbean Health Sector Reform Initiative. 

Partnerships between the public sector and nongovernmental organizations: 

contracting for primary health care services. A state practice paper. 1999. 

http://www.americas.health-sector-reform.org/english/25hsrpren.pdf. 

4. Loevinsohn B. Practical issues in contracting for primary health care delivery: lessons 

from two large projects in Bangladesh. Washington DC, World Bank, 2002. 

HThttp://rru.worldbank.org/Documents/PapersLinks/746.docTH 

5. Vining AR, Globerman S. Contracting-out health care services: a conceptual 

framework. HTHealth policy, TH1999, 46: 77–96 

6. Ashton T, Cumming J, MacLean J. Contracting for health services in a public health 

system: the New Zealand experience. Health policy, 2004, 69: 21–31 

7. Williams G, Flynn R, Pickard S. Paradoxes of GP fundholding: contracting for 

community health services in the British National Health Service. Social science and 

medicine. 1997, 45(11):1669–78 

8. llen P. A socio-legal and economic analysis of contracting in the NHS internal market 

using a case study of contracting for district nursing. Social science and medicine. 2002, 

54:255–66 

9. Christiansen T. Organization and financing of the Danish health care system. Health 

policy, 2002, 59(2):107–18 

10. Contracting for health services, lesson from New Zealand. Manila, WHO Regional 

Office for the Western Pacific, 2004. 

HThttp://www.wpro.who.int/NR/rdonlyres/B7DB4D58-7E19-4884-BD63- 

6F90D2DC1C47/0/Contracting_for_health.pdfTH 

11. Liu X et al. Contracting for primary health services: evidence on its effects and a 

framework for evaluation. Partnership for Health Reformplus 2004; 

HThttp://www.phrplus.org/Pubs/Tech053_fin.pdfTH 

12. Loevinsohn B, Harding A. Buying results? Contracting for health service delivery in 

developing countries. Lancet. 2005, 366:676–81 

13. Perrot J. The role of contracting in improving health systems performance. Discussion 

paper No. 1. Geneva, World Health Organization, 2004 (EIP/FER/DP/E.04.1). 

14. Health system priorities in the Eastern Mediterranean Region: challenges and strategic 

directions. Cairo, WHO Regional Office of the Eastern Mediterranean, 2004. (Technical 

paper EM/RC51/5). HThttp://www.emro.who.int/RC51/media/EMRC5105.docTH 

15. Taylor RJ. Contracting for health services. In: Harding A, Preker A, eds. Private 

participation in health services. Washington DC, The World Bank, 2003. 

16. England R. Contracting and performance management in the health sector: some 

pointers on how to do it. Health Systems Resource Centre (HSRC). London, 

Department For International Development, 2000. 

HThttp://www.dfidhealthrc.org/shared/publications/Toolkits/Contracting.PDFTH 

32


17. Ministry of Public Health, Transitional Islamic Government of Afghanistan. 

Afghanistan National Health Resources Assessment (ANHRA). Prepared for the 

Ministry of Public Health by MSH, HANDS and MSH Europe. 2002. 

HThttp://www.msh.org/afghanistan/ANHRA_2002_LITE.pdfTH 

18. A Basic Package of Health Services in Afghanistan. Ministry of Public Health, 

Afghanistan 2003 

19. Future privatization options and issues. Australian Hospital Design Group (AHDG). 

Manama, Ministry of Health, Bahrain, 2004 

20. Ministry of Health and Population, Egypt. Family Health Fund and Contracting 

Strategy: Health Finance and Insurance Group. Cairo, Health Sector Reform 

Programme, 2003 

21. Management and Plan Organization, Islamic Republic of Iran. The Third 

Socioeconomic Development Plan of 1999 

22. An external evaluation: Chief Minister’s initiative on primary health care, Rahim Yar 

Khan district Punjab (discussion draft). The World Bank, South Asia Human 

Development Unit, August 2005. 

23. Mills A, Broomberg J. Experience of contracting health services: an overview of the 

literature. HEFP working paper 01/98. London School of Hygiene and Tropical 

Medicine, 1998. 

HThttp://www.hefp.lshtm.ac.uk/publications/downloads/working_papers/01_98.pdfTH 

24. Abramson WB. Monitoring and evaluation of contracts for health service delivery in 

Costa Rica. Health policy and planning. 16(4):404–11 

25. Mercer A et al. Effectiveness of an NGO primary health care in rural Bangladesh: 

evidence from the management information system. Health policy and planning, 

19(4):187–98. 

26. Macka B, Azariah S. Contracting NGOs: DFIDs five supporting elements. Futures 

Group, 2005. HThttp://www.futuresgroup.com/Documents/Contracting_NGOs.pdfTH 

33


3. CONCLUSIONS AND RECOMMENDATIONS OF THE REGIONAL MEETING 

ON THE ROLE OF CONTRACTUAL ARRANGEMENTS, CAIRO, APRIL 2005 

The following conclusions and recommendations to countries are based on the analysis and 

principal findings of the country studies and on the proceedings of the three day regional 

consultative meeting of researchers, policymakers and representatives of academic and 

international agencies, held in April 2005, in which the country studies were presented and the 

subject of contracting out debated at length. 

Contracting is being recognized as an increasingly important tool for implementing health 

polices and programmes in the Region. 

Contracting depends on the overall governance features of the country, such as the legal 

frameworks, rule of law and enforcement mechanisms in place. To be effective, 

contracting requires ministries of health to have capacity to design, award and manage 

contracts. 

Enhanced capacity of the private sector to implement contracts and of ministries of health to 

monitor is equally important. 

Contracting is a means and not and end in itself, and should be used primarily to promote public 

health objectives. 

Continued research is needed for evaluating the impact of contracting on health outcomes in the 

Region. 

Recommendations 

1. Review the political, legal and administrative structure of ministries of health and 

ensure the presence of well functioning information systems that allow effective 

monitoring and supervision of the contracted out services. 

2. Define public health goals in national health policies and use contractual arrangements 

primarily to help achieve these goals. A guiding principle is that delivery of health 

services may be contracted out, but not the authority and responsibility, or other aspects 

related to governance and oversight of the health system. 

3. Ensure that contracting with the private sector seeks only to harness its role in 

achievement of public policy goals and is not considered as privatization of health care. 

4. Review legislation and play a proactive part in development of legislation for 

contracting of services in the country. 

5. Consider use of contracting in national programmes to promote equity of health services 

through targeting the poor and vulnerable populations. 

6. To improve quality of health services and to ensure that clinical guidelines are followed, 

include in the contractual arrangement clearly defined indicators that assess quality of 

health care.


7. Enhance capacities at national level to better implement and understand contracting. 

Managerial: contract design, information systems, accreditation of contractors 

Technical: knowledge of the areas under consideration 

Monitoring: developing indicators, measuring performance, protocols, standards 

Financial: cost–benefit analysis, health accounts 

Consumer satisfaction 

Governance capacity 

Relevant and adapted legal, economic and financial frameworks 

Human resource capacities 

Human resource negotiation capacities 

35

Afghanistan 

PART TWO: COUNTRY STUDIES

Afghanistan 

AFGHANISTAN 

37

INTRODUCTION 

Background 

Afghanistan 

Afghanistan’s history of the past two decades is characterized by war, anarchy, 

insecurity, political instability and international neglect. During this time drastic changes in 

regimes have disabled the country from making strides towards structural development. 

Although peace has prevailed since 2002, the country faces real challenges in the form of 

extreme poverty, insecurity, political instability, lack of infrastructure and large gender 

disparities. In addition, the lack of social and human capital, absence of government income 

through taxation or natural resources and the volatile political system are adding to the 

complexity of health sector development. Civil society (non-profit) organizations in 

Afghanistan have had a major role in provision of mainly primary health care in rural parts of 

the country for more than two decades. 

The Government of Afghanistan, in the post-conflict period, has embarked on a policy 

of contracting out primary health care services to the nongovernmental organizations instead 

of directly providing essential health services, which has been a subject of debate in the 

country and outside. The purpose of this study is to document the experience of outsourcing 

publicly financed health services to the private or nongovernmental organization sector in 

Afghanistan, identify strengths and weaknesses and apply the lessons learnt within and in 

other post-conflict countries. 

Health system in Afghanistan 

Current health and social indicators 

The overall health and social indicators, including life expectancy and infant mortality, 

are among the worst in the world. In addition, maternal mortality and the literacy rate among 

women are particularly bad. Table 1 shows some of the main health and social indicators. 

Table 1. Selected health and social indicators for Afghanistan 

Total population 23.85 million 

Life expectancy at birth (average) 44.5 years 

Total fertility rate 6.3% 

Contraceptive prevalence rate (modern methods) 22% 

Maternal mortality ratio (per 100 000 live births) 1600 deaths 

Delivery assisted by health professional 14% 

Under 5 mortality rate (per 1000 live births) 257 deaths 

Infant mortality rate (per 1000 live births) 165 deaths 

Stunting due to chronic malnutrition 45%–59% 

Literacy among women 12.7% 

Household access to safe drinking water 13% 

Households with adequate sanitation facilities 12% 

Sources: Afghanistan Health and Social Indicators Fact Sheet (Updated March 2005), Ministry of Public Health 

Afghanistan Human Development Report, United Nations Development Programme, February 2005 

38

Current health services delivery 

Afghanistan 

The Ministry of Public Health has focused its attention on the delivery of a Basic 

Package of Health Services (BPHS) and an Essential Package of Hospital Services (EPHS) to 

which the Ministry of Public Health and its partners are committed. Until 2002, around 80% 

of the health facilities were functional through nongovernmental organization setups, which 

were contracted by the donor and received funds directly. The Ministry of Public Health was 

not involved in the contracting process. The situation has changed since then. Currently, the 

external grants, especially those of the World Bank, are provided either through the Ministry 

of Public Health or in close collaboration with the Ministry of Public Health, as in the case of 

the United States Agency for International Development (USAID), European Commission 

(EC), Asia Development Bank (ADB). 

There are two service delivery mechanisms for the BPHS, contracting out to 

nongovernmental organizations and direct provision by the Ministry of Public Health through 

its strengthening mechanism. By January 2005, the funds committed for implementation of the 

BPHS could ensure delivery of this package to a population of roughly 71% through 

nongovernmental organizations and about 5% through the Ministry of Public Health. Financing 

and delivery of secondary-level health care is still the main responsibility of the government. In 

order to have a standard package for hospital services in the country, the Ministry of Public 

Health developed a hospital policy and recently finalized the Essential Package of Hospital 

Services (EPHS). Although donors and the Ministry of Finance have shown less interest in 

supporting hospitals during the past two years, the Ministry of Public Health has secured a 

commitment of US$ 10.4 million for implementing this package during 2005–2006. 

Programmes such as routine immunization, nutrition and malaria, tuberculosis and HIV 

AIDS control are not yet fully integrated into the BPHS and their implementation mechanisms are 

through vertical approaches. United Nations agencies such as UNICEF, WHO, UNFPA and the 

Global Fund are supporting the Ministry of Public Health in this regard technically and to some 

extent financially. 

Civil society (non-profit organizations) in Afghanistan had a major role in provision of 

mainly primary health care in rural parts of the country for more than two decades. Currently 

they are working under mutual agreement and close coordination with the Ministry of Public 

Health. They are contracted to provide BPHS for 71% (16.5 million) of the population. The 

government has not yet decided whether, in the long run, it wants to take on responsibility for 

delivering public health services itself or to continue contracting with nongovernmental 

organizations. The decision on this will be made based on rigorous evaluation of current 

contracts, grants, and the Ministry of Public Health strengthening mechanism in late 2006. 

National health policy and strategy 

The National Health Policy 2005–2009 guides the overall context for all health and 

health-related work and outlines the priorities for accelerating implementation for the fiveyear 

period, 2005–2009 (Box 1). 

39

Afghanistan 

Box 1. National health policy priorities 2005–2009 

Delivery of health services 

1. *Implement the basic package of health services 

2. *Implement the essential package of hospital services 

3. *Establish prevention and promotion programmes 

4. Promote greater community participation 

5. Improve coordination of health services 

6. Strengthen the coverage of quality support programmes 

Reducing morbidity and mortality 

7. *Improve the quality of maternal and reproductive health care 

8. *Improve the quality of child health initiatives 

9. *Strengthen the delivery of cost effective integrated communicable disease control programmes 

10. Reduce prevalence of malnutrition, increasing access to iodized salt and micronutrients, and increase 

exclusive breastfeeding 

Institutional development 

11. *Promote institutional and management development 

12. *Strengthen human resources development, especially of female staff 

13. *Strengthen health planning, monitoring and evaluation 

14. Develop health financing and national health accounts 

15. Strengthen provincial level management and coordination 

16. Continue to implement priority restructuring and reform 

17. Establish quality assurance 

18. Develop and enforce public and private sector regulations and laws 

*Top priority 

Source: National health policy 2005–2009 and national health strategy 2005–2006, Ministry of Health Afghanistan, April 

2005 

OBJECTIVES AND METHODOLOGY 

This study aims to document the experience of outsourcing publicly financed health 

services to private organizations or the nongovernmental organization sector in Afghanistan. 

The specific objectives of the study are to: present an overview of the context in which 

contracting out is functioning in the health sector; highlight actual experiences including 

factors that influence contracting in health; share the findings about the contracting of Basic 

Package of Health Services (BPHS) as a specific public health programme that has taken up 

contractual arrangements as its principal implementation strategy; and summarize lessons 

learnt to date regarding the contractual arrangements in post-conflict Afghanistan. 

An extensive review was undertaken of the reports developed by the Ministry of Public 

Health and international development agencies involved in health. Donor mission reports on 

the role of contracting out of health services were reviewed, in addition to published and 

unpublished literature on contracting out of health services. Detailed discussions were held 

40

Afghanistan 

with the staff of the Ministry of Public Health and those directly involved in contracting, 

especially international advisers to the Ministry of Public Health. The checklist provided by 

the WHO Regional Office for the Eastern Mediterranean for assessing the overall capacity 

for contracting out of health services was used as a guide for data collection. 

FINDINGS 

Wider governmental context for contracting 

As a result of war, no legislation was passed during the past 25 years and the existing 

laws were largely irrelevant to the current situation in the health sector. The legal framework 

was thus obsolete. Such a situation provides a new opportunity for updating legislation to 

support contracting out of health services in Afghanistan. With an elected government in place 

the environment is conducive to developing legislation to support health sector reforms. 

The policy of the government on contracting out of health services was developed and is 

being implemented within the framework of the 2004 Constitution of Afghanistan and the 

Public Investment Programme (2004). The Constitution is supportive of the private sector and 

its further development in the country. 

In recent years the government worked to prepare legislation to support the role of 

nongovernmental organizations in the country, which is to be submitted to the country’s 

president for endorsement. This legislation has been subject to heated discussion in the 

cabinet, especially one of the articles which prohibits the nongovernmental organizations 

from participating in construction and other profit-making bidding processes. Although the 

proposed bill prohibits the nongovernmental organizations from participating in any kind of 

bidding, it has yet not been approved by the president, and discussions continue in the media 

as there are diverse views on the experience of working with nongovernmental organizations. 

Of specific concern is the issue of nongovernmental organizations, which by nature are nonprofit 

entities, being involved in profit-making ventures. 

Contracting policy 

The Ministry of Public Health is closely following the legislative process, since its 

experience of working and coordinating with nongovernmental organizations has been 

successful in the past. The Ministry of Public Health has also gained considerable experience 

in monitoring and evaluation and regulation of nongovernmental organizations. The Ministry 

believes that nongovernmental organizations can play effective roles in the development of 

Afghanistan through delivery of essential health services, while the Ministry itself can focus 

on effectively regulating the organizations and on further strengthening its monitoring and 

evaluation capacity. 

A key priority in the Public Investment Programme (2004) is expansion of delivery, 

coverage and quality of both basic health services and hospital services. The public 

investment programme calls for strengthening and accelerating implementation throughout 

government, since it acknowledges that ‘implementation will make or break Afghanistan’s 

41

Afghanistan 

reconstruction efforts’. The programme also takes into consideration that while 

implementation strategies will vary across sectors, reflecting specific circumstances, there 

will be key common elements (such as priority restructuring and reform of facilities) that 

accelerate ministerial reforms. The Ministry of Public Health is closely involved in this 

process. 

Rationale for contracting 

A Joint Donor Mission conducted in early 2002, based on the estimate that that some 

80% of health facilities were being operated by nongovernmental organizations, 

recommended that the government should move from direct involvement service provision in 

favour of a stewardship role while focusing on policy development and regulation. The 

Ministry of Public Health favoured the option of contracting in or contracting out health 

services through establishment of performance-based partnership agreements between the 

Ministry of Public Health and nongovernmental organizations. The rationales for this decision 

included the devastated public health system and infrastructure; large and credible presence of 

nongovernmental organizations with a long history of experience with health services in 

Afghanistan; better flexibility of nongovernmental organizations in management of resources; 

lack of human resources and capacity within the Ministry; openness of the new ideas and 

approaches of the new Ministry of Public Health administration, with many of its staff coming 

from nongovernmental organization backgrounds; global experience of efficiency in 

contracting, especially in post-conflict Cambodia; donors’ interest and influence. 

A performance-based partnership agreement strategy was designed based on the lessons 

learnt from a similar project in Cambodia which tested the performance of two different 

contracting models against service delivery by the government itself. Afghanistan’s transition 

to post-conflict status coincided with the completion of the pilot evaluation in November 

2001, which concluded that government contracting of the provision of health services to nongovernment 

entities was: feasible, cost-effective, high performing and equitable. Eventually, 

this concept became the backbone of the national health policy, and served to steer policy 

development in such a way that would facilitate health service delivery through performancebased 

partnership agreements. 

During the many years of war, health services were delivered in fragmented pockets of 

isolation by different providers. The limited health services that were available were provided 

by humanitarian agencies, including local and international nongovernmental organizations 

and United Nations agencies. 

In the immediate post-conflict period, the government in general and the Ministry of 

Public Health in particular had three possible options. 

1) The Ministry of Public Health could be the main provider while also developing its 

stewardship role. 

2) A balance could be developed between the provision of public sector health services and 

contracted-in or contracted-out health services to the private sector; in this instance, 


42

Afghanistan 

3) Greater emphasis could be placed on either contracted-in or contracted-out health 

services through establishment of performance-based partnership agreements between 

the Ministry of Public Health and nongovernmental organizations which would allow 

the Ministry of Public Health to utilize existing nongovernmental organization capacity 

to deliver services while still maintaining control over the strategic direction of the 

health sector. 

The Basic Package of Health Services 

The government has committed itself to ensuring that the BPHS is delivered to all 

Afghans, regardless of location, ethnicity or gender, as soon as possible. The government will 

continue to pursue this over-arching goal as its first priority, as a means to provide a peace 

dividend to Afghans and to achieve the Millennium Development Goals (MDGs). The BPHS 

was defined in early 2003 with the assistance of WHO. The key elements included: those 

services which would have the greatest impact on the major health problems; services that 

were cost-effective in addressing the problems faced by many people; and services which 

could be delivered to give equal access to both rural and urban populations. 

The BPHS has two purposes: to provide a standardized package of basic services which 

forms the core of service delivery in all primary health care facilities; and to promote a 

redistribution of health services by providing equitable access, especially in underserved 

areas. The BPHS provides a comprehensive list of services: maternal and newborn health; 

child health and immunization; public nutrition; communicable disease control; mental health 

care; and disability. It also includes a supply of essential drugs to be offered at four standard 

levels of health facility: the health post, basic health centre comprehensive health centre, and 

district hospital. These facility categories replace a number of different nomenclature systems, 

and will help create a more uniform system of classifying and denoting health facilities. 

Once the current content of the BPHS has been successfully delivered to all Afghans, 

the government intends to broaden the scope of the BPHS to include additional services such 

as mental health, community care for the disabled, and prevention of HIV/AIDS. This will 

likely be implemented in 2010, but could begin earlier if progress continues at current rates. 

43

Implementation of BPHS 

Afghanistan 

The Ministry of Public Health based on its decision to contract out, the potential 

funding possibility of donors and the preliminary costing of the BPHS at US$ 4.5 per capita 

has defined separate geographic regions to use donor fund for the delivery of the package. 

Initially the World Bank committed to use US$ 46.3 million of its grants, USAID committed 

US$ 60 million and the EC Euro 8 million, with possible additional annual grants for 

implementation of BPHS. The Ministry of Public Health agreed to identify certain number of 

provinces out the 34 provinces for the earmarked funds (Figure 1). Through this process, 11 

provinces are covered by World Bank funds, 13 by USAID and 10 provinces by the EC 

(Table 2). The Asian Development Bank, KfW (German Credit Bank) later joined this process 

as well, covering 11 districts. 

Source: Ministry of Public Health, Afghanistan (updated 20February 2005) 

Figure 1. Distribution of geographical regions for delivery of BPHS by funding 

agency 

44

Afghanistan 

Table 2. Implementation of BPHS 

Donor WB ($ 47 million) USAID 

($ 58 million) 

EC (€ 25 million) ADB ($ 3 million) 

Pre selection EOI Pre qualification Eligible 

nongovernmental 

organizations 

EOI 

Tender RFP RFA RFP RFP 

Selection QCBS QBS QBS QCBS 

Type of Performance-based Grant Agreement Grant Contract Performance 

contract service contract 

based service 

contract 

Payment Lump sum Expenditure based Expenditure based Lump sum 

Management Ministry of Public Ministry of Public Ministry of Public Ministry of Public 

Health 

Health–MSH Health–EC 

Health– 


organization 

trustee 

size of 

implement 

Province wide District wide Mix District wide 

Evaluation Third Party + Ministry of Public Health + Donor 

EOI – Expression of interest; RFP – Request for proposal; RFA – Request for application; QCBS – Quality and cost based 

selection; QBS - Quality based selection; 

After identification of geographical coverage, the second issue was the size of 

individual contracts. The World Bank favoured contracts with wider coverage size (province 

wide); USAID favoured relatively smaller sizes (districts or a cluster of districts); and the EC 

proposed provincial and district levels, considering the realities of different provinces. 

Contracting mechanisms 

The initial agreement between the Ministry of Public Health and donors was for 

contracting out, preferably through performance-based partnership agreement contracts. The 

five primary donors that support contracting out use different mechanisms to contract out to 

nongovernmental organizations. For example, the Ministry of Public Health is responsible for 

contracting nongovernmental organizations who compete for World Bank funds. The 

Ministry’s Grant and Contract Management Unit (GCMU), which was established in April 

2003, manages these contracts. The Asian Development Bank and USAID have each tasked a 

nongovernmental organization to undertake the contracting process, and the EC and KfW 

undertake this work by themselves. The Ministry, through the GCMU, is fully involved in the 

contracting processes of other donors as well. So far, BPHS implementation and third party 

monitoring and evaluation are the only service delivery contracts for health in Afghanistan. 

Monitoring performance of contracts 

The monitoring of contracts and the assessment of performance has been a challenge for 

the GCMU because of the absence of a functional health information system. Monitoring and 

45

Afghanistan 

evaluation is primarily undertaken through third parties. A Monitoring and Evaluation Board 

has been established for this purpose; however, it is not fully functional. The public health 

managers in provinces report feeling marginalized and disconnected from the entire process 

of contracting out. 

In collaboration with the Johns Hopkins School of Public Health, the Ministry of Public 

Health introduced a health sector balanced score card in 2004. The balanced score card 

provides comprehensive baseline information on service provision, the assessment of which is 

generally quite low. The perceptions of health workers that use good outpatient care practices 

and basic health centres that see a targeted number of outpatients were particularly low 

(median 10% each). Providing delivery care according to the BPHS guidelines was also quite 

low (median 14%). 

Analysis of the strengths, weaknesses and risks of the contracting process 

Purchaser 

Strengths 

• The Ministry of Public Health has a clear policy for outsourcing the basic health care 

delivery to nongovernmental organizations and has remained committed to it; 

• The Ministry of Public Health has established a Grants and Contracts Management Unit 

which is independently managing the US$ 60 million grant of World Bank for 

performance-based partnership agreement contracts to nongovernmental organizations 

and has enabled the Ministry to: 

help expand the delivery of the BPHS; 

strengthen its stewardship role in the health sector; 

integrate donor, multilateral, and nongovernmental organization efforts; and 

develop its capacity to work effectively with stakeholders in establishing an effective 

and efficient public–private mix. 

• The Ministry of Public Health has made every effort to ensure transparency in the 

contracting process through which donor funds are channelled for the delivery of BPHS. 

• The effective leadership and coordination skills of the Ministry of Public Health has 

played a key role in the success of the contracts. 

• The Ministry of Public Health has worked to create a friendly working environment with 

nongovernmental organizations and to deal with them as partners rather than 

implementers. 

Weaknesses 

• There is a huge dependence on external grants for purchasing services. 

• The government has little previous experience in contracting. 

• Reliable data for decision-making are lacking. 

• Capacity for health planning is low. 

• A monitoring and evaluation system has not yet been developed. 

46

Provider 

Strengths 

Afghanistan 

• Nongovernmental organizations working in Afghanistan have long experience with 

contracting and familiarity with purchaser–provider relationships. 

• A large number of national and international nongovernmental organizations are present 

in the health sector. 

• Many providers have rich experience in health service delivery, especially in rural areas, 

and better understanding of what is meant by a defined package of services. 

• Some nongovernmental organizations have good technical and managerial capability. 

Weaknesses 

• Nongovernmental organizations have experience in contracting directly with donors and 

are new to contractual arrangements with the government. 

• Many nongovernmental organizations may lose interest once donor funding dries out. 

• The overhead administrative costs of nongovernmental organizations may be high, which 

may compromise the quality of services. 

• Nongovernmental organizations are focused on the curative aspects of the benefit package 

and can easily overlook the promotive and preventive element. 

Risks 

• Emergency withdrawal leading to collapse of contracted out services. 

• Reductions in external donor funds for contracting out with nongovernmental 

organizations. 

• Increasing demands on central government funds for hospital services. 

• Rising expectations in the population for access, quality and range of services. 

• More services provided by private medical services in the main urban centres. 

• Scarcity of skilled health workforce in the country. 

• Problems of security, especially in rural and remote areas. 

Lessons learnt 

The experience of contracting out health services to nongovernmental organizations in 

Afghanistan has produced several lessons, which are summarized below. Box 2 gives the 

prerequisites for successful contracting based on experiences from Afghanistan. 

• In post-conflict countries, “buying the capacity” for contract management is only a short 

term solution. “Building the capacity” is essential over the long term. 

• The contract management entity should be autonomous . 

• The roles and responsibilities of the purchaser and provider should be absolutely clear and 

should be stated in the contract document. 

• Involvement of related departments in all stages ensures broad acceptance. 

47

Afghanistan 

• Change in thinking of public officials towards contracting requires “change management” 

rather than only directives. 

• Local contractors should be preferred over international ones, and their capacity should be 

developed to ensure sustainability. 

• Independent performance evaluation is a key for determining health outcomes as well as 

ensuring transparency. 

• The better defined scope of work, the better coordinated the approach the more successful 

the contract. 

Box 2. Prerequisites for successful contracting–Afghanistan experience 

• Country regulations and procedures are well developed 

• Officials are committed 

• National capacity is present 

• Targets are clear 

• Roles and responsibilities of all are well defined 

• Appraisal is regular 

• Compensation mechanism is effective 

• Transparency is ensured 

• Security is present 

48


BAHRAIN

INTRODUCTION 


This study was conducted as part of an initiative by the WHO Regional Office for the 

Eastern Mediterranean to assess the role of contractual arrangements in improving health 

sector performance in countries of the Eastern Mediterranean Region. The scope of this 

initiative is to undertake exploratory case studies to document experience with outsourcing of 

publicly financed health services to private sector organization in those countries of the region 

that have a large private and/or nongovernmental organizations sector, and to assist in 

developing a regional strategy on public private partnership in health in the Eastern 

Mediterranean Region. The specific objectives are: to assess the overall capacity for 

contracting out health services to private sector in the country; to assess a project/programme 

in health that had taken up contractual arrangement as an implementation modality; to 

organize a national meeting of the concerned stakeholders on contractual arrangements for 

improving the performance of the health sector and present the finding of the study; and to 

participate in a regional meeting on the subject to present the findings of the study. 

METHODOLOGY 

After an extensive review of the literature, two data collection tools were designed to 

facilitate assessment (one for overall country capacity, and the other for contract/agreement 

case study). The information was gathered by the following approaches: 

Extensive review of available reliable documents, including: 

Related legislative decrees. 

Tender Central Board rules and regulations. 

Civil Service Bureau rules and regulations. 

Ministry of Finance and National Economy rules and regulations. 

Ministry of Health rules and regulations. 

Contracts/agreements and related reports. 

Consultants reports (KPMG, International Monetary Fund and Arthur Anderson). 

King Hamad General Hospital Committee documents on Future privatization options 

and issues. 

Australian Hospital Design Group reports. 

Meeting with concerned officials in the Ministry of Health Headquarter, Directorate of Finance, 

Directorate of Medical Equipment, Directorate of Services and Salmania Medical 

Complex. 

Meeting with concerned managers in private sectors (private hospitals and private companies). 

RESULTS AND DISCUSSION: OVERALL CAPACITY 

Internal factors affecting capacity to contract 

Human resources 

Sufficient staff with appropriate skills are essential prerequisites for successful 

contracting process. In particular, skilled staff are needed at the outset to identify potential 

50


services to be contracted-out, deciding whether to undertake contracting-out, and ensuring 

high quality contract design. 

Identification of services to be contracted 

The Ministry of Health currently does not contract out any of the clinical health 

services; however, many of the support services (such as cleaning of facilities, maintenance of 

medical and other equipment and incineration of medical waste) are contracted out to the 

private sector. The Ministry, jointly with Ministry of Finance and National Economy and 

external consultants, is currently studying the possibility of contracting out catering and 

laundry services. 

Although previous contracted-out services were based on a partial analysis as an ad hoc 

solution to some problems, the Ministry of Health is currently studying with the Australian 

Hospital Design Group (AHDG) the future privatization options and issues for the new King 

Hamad General Hospital (KHGH), which is at its final stage of design [1]. The AHDG 

concluded that the full or partial privatization of KHGH is possible on a number of levels 

including: 

Full or partial privatization of the operational management of the hospital. 

Privatization of various hospital clinical support services such as pathology and radiology. 

Privatization of any or all of the various general support services such as catering, cleaning, 

engineering, linen services, security, car parking. 

Consideration could be given to undertaking a form of limited private practice which 

not only provides greater rewards to the best doctors and keeps them fully or predominantly in 

the public health system, but also offers a greater range of medical skills to those Bahraini 

citizens who choose to use the private system. Hospitals such as KHGH with a strong 

emphasis on a speciality such as women’s and children’s health have typically offered greater 

opportunities for private practice development than general hospitals. 

Some of the rationales for the Ministry of Health to enter into health services contracts 

with nongovernmental organizations or the private sector are given below: 

Cost effectiveness and improved efficiency. 

Reduced management work to allow it to focus on more important services. 

Better accountability. 

Developing the private sector. 

Utilization of economies of scale enjoyed by the contractor (maintenance of equipment). 

Avoiding investment in expensive tools and diagnostic equipment. 

Access to highly skilled personnel (especially in information technology) without employing 

them. 

In the case of cleaning of hospitals, health centres and other facilities, the Ministry had 

experienced problems in supervising the cleaning of its facilities, which resulted in 

51


deterioration in quality. With 20 health centres spread across the country, it was very difficult 

to closely supervise the cleaning without putting a foreman in each health centre. Absenteeism 

was another major factor which prompted the Ministry to look for contracting alternatives. At 

the time when cleaning was contracted out, it was less expensive to use contractors, as they 

had access to the expatriate workforce. This has now changed as new regulations require 

contractors to employ only Bahrainis and to pay them a minimum wage. This has resulted in 

an enormous increase in the contract cost (an increase of between 150% and 200%). 

In the case of maintenance of equipment, the maintenance of highly specialized 

equipment is contracted out because the repair and maintenance requires expensive tools and 

software and highly skilled personnel. Employing such personnel is not economical. 

Maintenance of computer networks, hardware and software has also been contracted-out for 

similar reasons. Similarly, in the case of medical waste disposal, the old incinerator needed 

replacement and the amount required for a new incinerator was substantial. It was therefore 

decided to contract out this service. The Ministry has a 10-year contract. 

In the case of vehicles, the Ministry used to buy vehicles from the private sector. 

However, high maintenance and repair costs and frequent breakdowns resulted in the 

Government changing its policy. It was decided that all the Ministries would lease vehicles 

from the private sector. The contractor has to maintain and service the vehicles and provide 

replacement vehicles when a vehicle is out of service. This has removed a significant financial 

burden from the Ministry. The Ministry has secured better rates by offering longer contracts. 

Quality of contract design 

Poorly specified contracts, particularly with respect to quality, were found in virtually 

all cases analysed in a 1998 study on contracting in the health sector [2]. The various 

contracts signed by the Ministry of Health were generally designed very well and contained 

standard and specific clauses in consultation with legal experts from the Ministry and Finance 

and National Economy. 

Contract legal framework. The legal framework is quite strong and robust enough to facilitate 

contracting between the public and private sectors. All the contracts contain on the 

governing law and on arbitration clauses. 

“This agreement is made in Bahrain subject to the laws of Bahrain. All dates and 

periods mentioned in this agreement shall be reckoned according to the Gregorian 

Calendar.” 

“All disputes and differences which may arise between the Ministry and the 

Contractor touching on the provisions of this agreement or any part thereof or 

operation or construction thereof or the rights or liabilities of the parties hereunder 

shall be amicably settled, but failing such amicable settlement shall be referred to 

arbitration to be held in Bahrain by one or more arbitrators agreed upon between the 

parties or appointed by the competent Court in Bahrain on the application of either 

party in case they fail to agree on such appointment. The award to be made by the 

arbitrator or arbitrators shall be final and binding on the parties and the persons 

52


claiming under them respectively and shall not be the subject of any objection or 

appeal by either party.” 

Dispute recourse. The contractor as well the Ministry can pursue the stipulated legal process in 

case of dispute. Contracts contain different mechanisms to recourse in the event of a 

dispute between the two contracting partners. Arbitration is the preferred option and it is 

clearly stated in the contracts. Various laws are currently being reviewed by the 

Government to provide options to the parties to the contract. (Note: to be expanded after 

speaking to legal experts). 

Implementing sanctions and termination for non-performance or poor performance. Although 

the contracts were lacking performance indicators and quality assurance mechanisms, 

term and conditions for sanctions and termination of contract were clearly built in the 

contracts. 

Fair distribution of risks. Risks are fairly distributed between contractors and the Ministry of 

Health in all contracts. The biggest risk for the Ministry is “contractor failure,” in which 

case there must be fallback options. Various dimensions of this risk relate to the type of 

contract. Are the assets owned by the Ministry? Can the Government take over the 

operations without much dislocation? Who employs the staff? Is the service delivered 

from the Ministry’s premises? 

Contracts containing appropriate performance incentives. Although an appropriate performance 

incentive enhances contractors’ performance, none of the contracts included such 

incentives. Sanctions are generally used to ensure a certain level of performance of the 

contractors. 

Strategic functions/awareness of broader system-wide implications. Since all contracts were for 

non-clinical support services, there were no significant impacts on broader system-wide 

implications. All, except the contract for incineration for medical waste, were of short 

duration (two years). This is unlikely to place the incumbent in a monopoly position for 

future contracts. 

Management and information system 

Adequate information systems are key to successful contracting. They help the 

contracting agency to decide which services to contract, help ensure appropriate design and 

suitable incentives, and facilitate proper monitoring of contracts. 

Cost and price analysis 

The public and private sectors are quite capable of undertaking cost and price analysis 

for support services prior to negotiations. In some cases the public sector takes the help of 

external consultants to advise it on these aspects. Traditionally, hospitals in countries such as 

Bahrain have been funded on an input method based on what it will cost to operate the 

hospital/health centre for the coming year, for example 20 million Bahrain dinars (BHD) for 

salaries, BHD 5 million for medical supplies, maintenance and other supplies and so on. The 

problem with this type of input-based funding is that there are no incentives for efficiency and 

improvement. Indeed, the opposite effect often develops, in which the perception is that if 

53


allocations are not fully spent one year, less will be allocated the next year. Furthermore, 

rewards for inefficiency might predominate. 

Existing information systems (sources) 

The Ministry of Health does not have comprehensive information system to 

dynamically compute costs of various services however it has adequate cost information for 

“make or buy” decisions. The new Bahrain Health Information System Project (BHIS) 

currently in its early stage of implementation will adopt some form of output or casemix 

method of payments based on predetermined index of payment in its third and last phase 

(Business Intelligence) [3,4]. One group of products, for example, being discharged inpatients 

classified into diagnosis related groups (DRGs). By adopting this payment method health 

services could (for some less complex services) be purchased in the private sector for public 

funded patients. This might not only help to better utilize private health sector capital stocks 

(currently underutilized in Bahrain), but also limit the amount of future public capital 

expenditure required for new bed stocks and should further increase access to public funded 

health services in areas of need. 

Budgetary framework and financial control mechanism 

The financial system needs to provide information on the total budget for contracting 

and on expenditure against the budget. For cleaning and maintenance services, this will be 

relatively straightforward; however, for clinical services the requirements are more complex. 

Before deciding to contract out, the Ministry studies the cost of providing the service inhouse. 

The costs are divided into different categories such as manpower, materials, utilities 

and maintenance. The costs are further classified as direct and indirect costs. It is also 

determined whether there are any costs that will still remain (fixed overheads) if the service is 

contracted out. “Relevant cost” is then calculated, and compared with the expected cost of 

contracting out the service. While cost is a major factor, due consideration is also given to the 

opportunity to improve efficiency. If it is felt that efficiency will improve then the importance 

given to the cost factor is reduced. 

Performance indicators for monitoring quality 

A detailed set of contractor performance criteria, quality assurance and customer 

satisfaction standards needs to be put in place with regular surveys of customers via 

questionnaires and audits of contractor performance. This sort of quality assurance surveying 

should be put in place for both in-house and external options but becomes especially critical 

when using an external contractor. The Ministry of Health has established a Directorate of 

Quality and intends to implement a system of performance management, performance 

measurements/indicators and performance evaluation/assessment. Although expected outputs 

are specified in the contracts, outcomes are not built in, and in some cases evaluation is 

cumbersome because of lack of detail. 

54

Financing 


There is a clear doubt whether the contracted services are a priority one. Despite the fact 

that cleaning and maintenance services are protected by the contracts, the hospital budget has 

not been severely cut. This gives the hospital flexibility to transfer funds from low-priority to 

high-priority areas. The contracted services are financed by the Ministry of Health regular 

budget. In many cases, as the cost of contracts goes up from year to year, it is easier to secure 

additional budget from the Ministry and Finance and National Economy to cover the increase, 

although additional justification has to be provided. The Ministry of Health continues to have 

the flexibility to manage its budget from the services provided in-house. 

Communication between task networks 

All parties at all levels are involved at different stages of the process including 

concerned directorates in the Ministry of Health and concerned departments in the hospital. 

Furthermore various responsibilities for contracting are assigned. This has meant that 

contracts are strongly specified and enforced and well implemented at the local level, where 

authority for monitoring the contract exists. 

External factors affecting capacity to contract 

Institutional context 

Bureaucratic structure 

The bureaucratic establishment supports contracting out of services to the private sector. 

Long before the government announced the policy of privatization and contracting out, the 

Ministry of Health proactively contracted out services like maintenance and cleaning. The 

bureaucratic structure poses no hindrance to this process. On the contrary, it supports and 

encourages such initiatives. There are clear laws, rules, regulations and procedures. These are 

quite transparent and provide sufficient opportunities for contracting out. It should be noted, 

however, that any contracting out requires prior approval of the Civil Service Bureau, because 

it involves contracting human resource services, as well as the Tender Board. The renewal of 

such contracts must also be approved by both agencies. This procedure is well defined in the 

Standard Finance Manual [5] and the Government Tender and Purchases law [6]. It appears 

that the existing Civil Service Bureau regulations do not prevent further contracting out, 

although it might delay the overall contracting process. 

Capabilities of the purchaser (Ministry of Health) for successful contracts 

The Ministry of Health follows the national laws, rules and regulations for entering into 

contracts. Any contract for a sum of BHD 10 000 (US$ 26 500) or more has to be tendered. 

Based on a set of tender specifications, the contractors submit their competitive bids in closed 

envelopes to the Tender Board. The bids are opened in public and handed over to the 

respective ministry for evaluation. The Ministry of Health has a separate department that 

deals with materials management (i.e. purchasing, storing, distributing and contracting). The 

55


department is headed by a director. Other directors are also members of various tender 

evaluation committees, to bring together expertise from different areas. In the case of major 

new contracts, the Ministry appoints outside consultants (such as KPMG, Arthur Anderson) to 

help it with the process of developing specifications, tendering and evaluation. The Ministry 

and Finance and National Economy has a dedicated section which looks after contracting out. 

The assistance of this section is available as and when required. In studying the possibility of 

contracting out catering and laundry services, the Ministry of Health has worked very closely 

with this section as well as external consultants. The Ministry has also been working on a 

major health information system project to contract out building and maintenance of 

information systems for the Ministry. External consultants were appointed at initial stages of 

the project. Experts from the Central Informatics Organization and the Financial Information 

Directorate of the Ministry and Finance and National Economy have shared their expertise in 

this regard. 

After requisite approvals are received from the Tender Board for awarding the contract, 

the materials management department in coordination with the user department and Finance 

Directorate prepares a draft contract. The Ministry and Finance and National Economy 

provides standard contract formats; however, many contracts require specific provisions to be 

inserted. These are negotiated with the proposed contractor in the presence of legal experts 

from the Ministry and Finance and National Economy. The interest of the government is 

looked after by the legal experts. The Ministry itself has limited expertise on legal matters. 

After necessary approvals, the contract is awarded. 

Monitoring mechanisms and evaluation systems 

The standards of service expected from the contractor are specified in the contract. The 

monitoring depends on type of contract. For example, in a contract for maintenance of 

computer equipment and a help desk, the monitoring is on a day-to-day basis. The Health 

Information Directorate ensures that adequately qualified staff specified in the contract are 

provided to the Ministry. The curriculum vitae of various contract staff are sent to the 

Ministry in advance for evaluation and approval. In other cases, such as medical equipment 

maintenance, daily monitoring is not appropriate as the technicians and engineers are not 

required to be present every day. However, the standards of service are stipulated in the 

contract. The service reports require authorization by the Medical Equipment Directorate 

before they can be accepted by Directorate of Finance for payment. The Medical Equipment 

Directorate ensures that preventive service is carried out as scheduled. This Directorate also 

certifies whether the contractor has responded within the stipulated time to the repair requests 

of the Ministry of Health. In the case of cleaning contracts, the Directorate of Services 

maintains a log of service reports duly signed by the users. The users are asked to rate the 

service at the end of each month. The contractors are served notices if the service is not as per 

the contract and to the satisfaction of the user. The contractor is asked to improve the service 

within a certain number of days. Payment for contractors is based on monthly/quarterly 

invoices submitted by the contractors. The invoices must be certified by the respective 

directorates and then sent to the Directorate of Finance for payment. The Directorate of 

Finance reviews the payment request and forwards it to the Ministry and Finance and 

National Economy for payment. Most contracts allow 40 days for payment from the date of 

56


receipt of the invoice. The payments are generally on time unless some of the documentation 

is missing. The performance of a contractor is taken into account before renewing any 

contract. Even when the contracts are re-tendered, prior poor performance can disqualify a 

contractor. 

Private sector institutional context 

The private sector is interested in receiving public sector financing for the primary 

reason of a making profit. Assured regular payment, stability of business, leveraging the 

existing capital investment and creating economies of scale are some of the additional benefits 

which keep the private sector interested in receiving public sector financing. 

The strengths and weaknesses of the provider that should be taken into consideration 

when entering into a contractual agreement depend on the type of contract. The size of the 

Bahrain market makes it difficult for the private sector to provide some of the services. 

Recent analysis by the KHGH Committee showed that the private sector can accommodate 

outsourcing grounds, agriculture and transport services, but it cannot supply laundry and 

linen, catering and dietary and housekeeping services. However, international and regional 

companies have expressed interest in operating from Bahrain, and their interest may increase 

if the main hospital (Salmaniya Medical Complex) is included in this outsourcing. 

Economic factors 

It is doubtful that the Government of Bahrain in the future will be able to provide all of 

the capital and recurrent resources for health services (without diverting expenditure from 

other areas), or can increase the tax base to be able to increase the supply of public funded 

hospital beds to meet all possible needs. Consequently in order to limit the demands on 

government capital and recurrent hospital and health care expenditure, the private sector may 

play an increasing role in helping to meet the future health care needs of the country, 

particularly in developing and bringing more hospital beds to the market. 

Political and social factors 

Government policy on contracting 

Recognizing the persisting budgetary deficit beginning in the 1990s, the Government of 

Bahrain invited the International Monetary Fund (IMF) to undertake a comprehensive review 

of public finance in the country and to recommend reforms that would promote efficiency and 

economy in the government and suggest ways in which the reforms could be implemented. 

Based on the IMF report [7], the Cabinet of Ministers approved a memorandum on Public 

Expenditure Management Strategy (PEMSY), 1997–2006” in March 1996 [8]. The Cabinet 

memorandum envisaged that the role of the Government would gradually shift from that of 

“control” to “direction” and that the public sector should create opportunities for added 

investment in the private sector so as to enhance employment generation, expand exports, 

improve the GDP, and accelerate economic growth. 

57


One of the components of PEMSY is contracting out. The basic principle of this 

strategy is to divest the government of activities and services which could be provided by the 

private sector more competently and at lesser cost. This will not only result in savings but will 

also enable the government to concentrate on more important and core areas of work. It will 

also contribute to the development of the private sector. Before deciding to contract out an 

activity, the actual running cost of the operation must be calculated by costing each and every 

component of the activity. In contracting out, the activity is thrown open to the private sector 

for market competition. The concept is similar to outsourcing of goods and services, and is 

sometimes referred to as “strategic contracting” to differentiate it from “market testing or 

market orientation” under which the Ministry also competes with private sector bidders. 

Bahrain is a signatory to the World Trade Agreement and is negotiating the Free Trade 

Agreement with the United States of America. These provide an easily accessible investment 

environment for some international companies in the local market. 

Political environment 

The political environment is enabling for the execution of contractual arrangements in 

the health sector and it influences the negotiation and execution of contracts. A legislative 

decree (Government Tender and Purchase Law) was issued by the government October 2002 

making privatization a part of the economic policy of Bahrain [9]. The International Monetary 

Fund, in a review report of public finance in Bahrain, clarified that privatization could be 

implemented in four directions: 

1) Transferring all commercial agencies to the private sector; 

2) Allowing the private sector to operate all the new projects; 

3) Selling the government shareholdings to the private sector; 

4) Transferring to the private sector those activities which could be managed better by the 

private sector. 

The role of contracting will be vital in the case of 1), 2) and 4) above. A clear indication 

of the government’s resolve to transfer the services to the private sector is shown in the 

recently approved compulsory health insurance for expatriates in the country, in which it is 

proposed that health insurance will be provided by the private sector. 

The Government Tender and Purchases law is comprehensive and provides complete 

transparency. All the powers related to tendering for purchase of goods and services (such as 

overseeing tender transactions, endorsing technical specifications, receiving bids, approving 

and awarding bids) are vested in the independent Central Tender Board which reports directly 

to the Council of Ministers. Execution of the contracts is based on well written contracts. The 

Standard Finance Manual contains clear procedures with regard to management of contracts. 

The contracting Ministry is authorized and accountable for the performance as per terms of 

the contract. Sanctions are clearly defined in the contract for poor performance or nonperformance. 

The political environment does not interfere with the process of contracting and 

its execution. Adequate transparency is maintained at each stage. 

58


RESULTS AND DISCUSSION: CASE STUDIES 

Description 

To better understand some of the practical issues with contracting, the experience of two 

support service projects in the Ministry of Health that employed contracting is described. 

These projects were the contracting out of medical equipment maintenance [10] and 

contracting out of cleaning services [11] of Salmaniya Medical Complex. No contracting 

projects for medical services were available to be included in the review. 

Reasons for contracting 

The reasons why the Ministry of Health contracted out medical equipment maintenance 

were: government policy of contracting out non-core services and promoting the role of the 

private sector; concentrate on core health services; provide efficient cost-effective services 

with better accountability; make use of economies of scale created by the contractor, avoid 

investment in spares and tools, including software for advanced medical equipment; reduce 

“down” time due to breakdown of equipment; and reduce workforce and avoid recruiting 

more personnel for maintenance of new equipment. Reasons why the contractor accepted to 

contract with the Ministry of Health for this service were: profit-making; building economies 

of scale; building relationship with the Ministry of Health for other business, such as supply 

of medical equipment and pharmaceuticals; leveraging relationships with the principals (i.e. 

manufacturers of the equipment); and better utilization of inputs which are required to meet 

warranty requirements for medical equipment supplied to various health facilities in Bahrain 

(including Ministry of Health). 

Reasons why the Ministry of Health contracted out cleaning services were providing 

better quality of cost-effective services with better accountability; government policy of 

contracting out non-core services; concentrating on core health services; improving staff 

efficiency; reducing supervision requirements; avoiding disruption of service due to 

absenteeism; and reducing workforce and avoid recruiting more personnel for cleaning 

services. The reasons for contractors to provide this service were: profit-making; building 

economies of scale; utilization of cheap foreign labour (this situation has now changed); better 

utilization of equipment, as it can be used across various contracts; and assured payment. 

Bidding and selection process 

The experience of contracting equipment maintenance showed that the process of the 

specifications required for contracting out this services started with reviewing existing 

maintenance contracts and new equipment for which the warranty was expiring out. After 

review, the Ministry of Health prepares tender specifications to enable bidders to submit their 

offers. These specifications are kept as general as possible. The specifications also contain 

requirements such as: response time (i.e. service/repair call must be responded within a 

certain time frame); the cost of spare parts required (in some cases major parts like X-Ray 

tubes are excluded from the specifications); presence of a qualified service engineer stationed 

59


in Bahrain or in the region to attend to calls; provision of replacement equipment in certain 

cases until the equipment is repaired; and carrying out preventive service every quarter. 

Clarity of bidding and selection process 

The Ministry publishes the tender in local newspapers in both Arabic and English. 

Through this advertisement, the contractors are asked to collect tender documents (on 

payment of stipulated fee) from the Ministry. A closing date for submission of bids by the 

contractor is stated in the advertisement, which also gives the date and time of opening the 

tender and invites the contractors to attend the opening of bids. The contractors can seek 

further information and clarification in writing. Responses to queries by any contractor are 

sent to all contractors who bought the tender documents. 

Contractor selection process 

After the advertisement is placed, the following steps are taken. 

Bids are accepted in a sealed envelope at the Ministry and Finance and National Economy and 

National Economy on behalf of the Tender Board until the closing date. 

The day after the closing date, the bids are opened by the Tender Board in the presence of 

bidders. 

All the bids are listed on a display board showing the price quoted by each bidder. 

Each page of these bids is stamped and punched with the Government logo so that no pages can 

be added later. 

All the bids are handed over to the contracting Ministry, i.e. the Ministry of Health in this case, 

for evaluation. 

The bids are carefully studied by the Directorate of Medical Equipment for completeness and to 

determine whether the bids meet the Ministry of Health specifications. 

The findings are then presented to the Tender Evaluation Committee, which comprises members 

of the Directorate of Finance, Directorate of Materials Management and Directorate of 

Medical Equipment. 

The committee makes final recommendation for award of the contract to a bidder. Various 

factors considered by this committee include prices quoted, ability of the contractor to 

meet requirements, contractor’s past history of reliability, Ministry’s past experience with 

the contractor etc. 

The recommendation of the Tender Evaluation Committee is then sent to the Minister of Health 

for approval. Once it is approved by the Minister, the award of contract is sent to the 

Tender Board for their final approval. After receiving the approval from the Tender Board, 

the contract is awarded to the selected contractor. 

The contract is then signed between the Ministry and the contractor. 

The format of the contract is standard, as approved by the Ministry and Finance and National 

Economy. 

In both case studies, the selection was based on bid price as well as on the quality of 

technical proposal. No scoring criteria were used for bidders’ proposals. Involvement of an 

expert third party (Tender Board) ensures transparency and fairness of the selection process. 

60


The competitive bidding process used was successful in keeping the cost of the contracts low 

(controlling bidding price). 

Contract management and implementation issues 

Linking contracts to tangible results 

Although detailed specifications and requirements were built into the equipment 

maintenance contract, no tangible achievement outcomes were specified in either case study. 

There was no performance bonus included in the contracts which could motivate contractors 

to improve their outputs. 

Duration of contract 

Both contracts were of short duration (2 years), which will help avoid monopoly with 

regard to future contracts. However, in the contractual arrangements for incineration of 

medical waste, a 10-year contract was signed because of the huge investment made by the 

contractor for equipment [12]. 

Payment of contractors 

Delayed/slow payment to contractor is a serious risk and can easily lead to the 

breakdown of the contracting process. Experience in the Bangladesh Integrated Nutrition 

Project showed that the delayed payment to contractor lead to the suspension of services for a 

few weeks. As a result of this issue some nongovernmental organizations decided not to 

participate in subsequent phases of the project [3]. In both case studies in Bahrain, one of the 

main motives for private for-profit organizations to participate in bidding process was the 

assurance of payment from the government. In the equipment maintenance contract the 

payment was made in regular quarterly instalments in arrears, while under the cleaning 

services contract the payment was made monthly in arrears. 

Field supervision and monitoring 

Field supervision was built up in both contracts. Monitoring of contractor performance 

was carried out by contractor field supervisors. The equipment maintenance contract placed 

responsibility on the contractor to require their engineers/technicians to report to the 

respective department engineers in the Medical Equipment Directorate in all maintenance 

matters, but there was no clear mechanism for contactor performance monitoring. It is 

relatively easy to monitor service quality for non-clinical services without a sophisticated 

information system. Although the outputs and standard of services expected from the 

contractors were specified in the contracts, no clear performance indicators were built into the 

contract. 

61

Type of disputes and ways of handling 


Disputes were clearly addressed in both contracts in the form of a step-wise mechanism 

for the settlement of disputes: amicable settlement, or arbitration to be held in Bahrain by one 

or more arbitrators agreed upon between the parties or appointed by the competent court. The 

award made by the arbitrator/s is considered to be final. 

Sanctions and termination of contract 

Term and conditions for sanctions and termination of contract were built into the 

contract. Giving the Ministry of Health the right of 90 days notice of termination without 

specifying a reason in writing to the contractor has a serious drawback of losing bidders’ 

interest and might lead to fewer bids in the future. 

REFERENCES 

1. Future privatisation options and issues. Manama, Australian Hospital Design Group 

(AHDG), Ministry of Health, April 2004. 

2. Bennett S, Mills A. Government capacity to contract: health sector experience and 

lessons. London, London School of Hygiene and Tropical Medicine, Health Economics 

and Financing Programme, 1998. 

3. Health information and communication technology strategy: health services without 

walls. Manama, Bahrain, Ministry of Health, Health Information Directorate, 2003. 

4. Bahrain health information system project. Manama, Bahrain Ministry of Health, 

Health Information Directorate. 

5. Standard finance manual. Manama, Bahrain, Ministry of Finance, 1984. 

6. Government Tender and Purchases Law. Manama, Kingdom of Bahrain, April 2002. 

7. International Monetary Fund (IMF) Report. Manama, Bahrain. 

8. Mr. Sethumadhawan, Advisor to Budget Directorate. Public Expenditure Management 

Strategy (PEMSY) for 1997-2006. MOFNE, Manama, Kingdom of Bahrain, March 

1996. 

9. Legislation Decree no. 41 of 2002 with Respect to Policies and Guidelines of 

privatisation. Riffa Palace, Kingdom of Bahrain, 14 October 2002. 

10. Medical Equipment Maintenance Contract. Service Agreement no. 159/2003. Manama, 

Ministry of Health, 25 June 2003. 

62


11. SMC Cleaning Services Contract. Service Agreement No. 239/2003. Manama, Ministry 

of Health, 1 July 2003. 

12. Incineration of Medical Waste Contract. Service Agreement no. 106/2000. Manama, 

Ministry of Health, 26 September 2000. 


from two large projects in Bangladesh. Washington DC, The Word Bank, 1996. 

FURTHER READING 

Abramson W. Partnerships between the public sector and non-governmental organizations: 

contracting for primary health care services, a state practice paper – an analysis of 

contracting primary health care services to NGOs in five Latin American and Caribbean 

countries. Latin American and Caribbean Health Sector Reform (LACHSR), Primer for 

Policymakers. Bethesda, Maryland, Partnership for Health Reform (PHR) Resource Center, 

Abt Associates Inc., August 1999. 

Barr D. Research protocol to evaluate the effectiveness of public private partnership in 

enhancing health and welfare system development. Palo Alto, California, Stanford University 

Center for Health Policy Institute for International Studies, February 2004. 

Jack W. Contracting for health services: an evaluation of recent reforms in Nicaragua. Health 

policy and planning, 2003, 18(2): 195–204. 

McPake B. et al. Is the Colombian health system reform improving the performance of public 

hospital in Bogota. Health policy and planning, 2003, 18(2): 182–94. 

Public private partnership policy: achieving value for money in public infrastructure and 

service delivery. Brisbane, Department of State Development, Queensland Government, 21 

November 2003. 

Webb R, Pulle B. Public private partnerships: an introduction. Canberra, Australia, 

Department of the Parliamentary Library, September 2002 (Research Paper No. 1 2002–03). 

63

Egypt 

EGYPT

INTRODUCTION 

Egypt 

The health sector reform programme established the Family Health Fund to act as the 

main contracting and purchasing agency for quality health care services on behalf of the 

beneficiaries, the population of Egypt, with the following objectives: 

• to separate service finance from service provision, which will ensure both high-quality 

service and competition between service providers to contract with the fund on equal 

criteria based upon quality of service. 

• to act as an agent and contractor to purchase health services for families (both under 

social insurance and non-insured individuals) through health units (Public, NGO and 

Private). 

• to ensure sustainability of finance. 

• to act as the precursor to the National Health Insurance Fund. 

The Family Health Fund is a financially independent body established as a pilot 

financing and insurance unit to put into effect the separation between service provision and 

finance. Its policy and strategy were developed by the Ministry of Health and Population and 

it is being implemented as technical support and projects in the current phase. This phase is 

pending forthcoming legislation and establishment of the National Family Health Insurance 

Fund as a national goal to be gradually realized progressively, in conformity with the strategic 

plan for health sector reform. 

The Family Health Fund is permitted to contract with a wide range of public and private 

providers. The main role of the Fund is to purchase curative and preventive primary health 

care to be extended to secondary care in the future. The process takes place by contracting 

health service providers in both governmental and nongovernmental sectors through current 

and future health care provision organizations designated for all family members in the 

community, within the framework of recognized quality standards. Thus, it is actually paving 

the way for competition and availability. 

The Fund applies necessary finance mechanisms to collect and disburse resources in a 

cost effective manner within the framework of regulations, legislation and the Constitution. 

Currently the Fund is contracted directly with public and nongovernmental organization 

health facilities. The Family Health Fund also has several contracts with the District Provider 

Organizations in which the latter provide a defined packages of services to the district 

population. This is achieved through public, private and nongovernmental organization 

providers according to the national standards of quality and with agreed upon prices subject to 

monitoring and evaluation mechanisms. 

Including the private and nongovernmental organization sectors in the programme adds 

a significant dimension, compared with working only with the Ministry of Health and 

Population facilities. Improving the quality of health services during the implementation of 

the module is the first priority for the Ministry facilities, followed by the cost and revenue of 

services. Typically, private and nongovernmental organizations facilities put cost and revenue 

65

Egypt 

as the top priority. Taking this difference in consideration, it is a challenge to use the same 

model of the family physician concept and standards of quality to be implemented in private 

and nongovernmental organization health facilities. 

Current contracts of the Family Health Fund with private and nongovernmental 

organization providers present a great opportunity for the Ministry of Health and Population 

towards the development of effective partnership for the health sector reform programme. 

Deploying the same monitoring and evaluation indicators used with the public sector should 

allow fair competition between the two sectors. 

The scope of this study is to document the experience of Ministry of Health and 

Population through the health sector reform programme in contracting with the private and 

nongovernmental organization sectors to provide packaged health services. 

The study focuses on assessing the overall capacity for contracting out health services to 

the private/nongovernmental organization sector, and assessing the Family Health Fund, 

which has taken up contractual arrangements as an implementation modality. 

BACKGROUND 

Providers 

Health services in Egypt are currently managed, financed and provided by agencies in 

various sectors of the government under different laws, operating with variable levels of 

independence. They are also offered by private providers of variable categories and at 

inconsistent levels of intervention with variable quality standards. 

Public governmental sector 

The public governmental sector represents the activities of ministries that receive funds 

from the Ministry of Finance. Government health services in Egypt are organized as an 

integrated delivery system in which the financing and provider functions are subsumed under 

the same organizational structure. This means that government providers receiving budgetary 

support from the government general revenues (Ministry of Finance) are also subject to the 

administrative rules and regulations that govern all civil service organizations. 

Public institutional sector 

The public institutional sector comprises parastatal, or quasi-governmental, 

organizations in which government ministries have a controlling share of decision-making. 

These include the Health Insurance Organization, Curative Care Organization, and other 

public sector organizations providing mainly hospital services. 

Though a distinction between the government sector and the parastatal or quasigovernmental 

sector is usually made when describing the Egyptian health sector, both sectors 

are in practice run by the state. From an operational and a financial perspective, the parastatals 

66

Egypt 

are governed by their own set of rules and regulations, have separate budgets, and exercise 

more autonomy in daily operations. However, from a political perspective, the Ministry of 

Health and Population has a controlling share of decision-making in parastatal organizations. 


Private sector provision of services includes for-profit and non-profit organizations and 

covers everything, including traditional midwives, private pharmacies, private doctors and 

private hospitals of all sizes. Also in this sector are a large number of nongovernmental 

organizations providing services, including religiously affiliated clinics and other charitable 

organizations, all of which are registered with the Ministry of Health and Population as well 

as the Ministry of Social Affairs. 

There is another category of health care providers belonging to professional syndicates. 

Most of these are operating through an insurance scheme consisting of a per-capita fee 

combined with co-payments from beneficiaries, and their services are subject to a restricted 

range of inclusions as well as a ceiling level of cost per contract period. 

Private facilities 

After the declaration of an open economic policy in 1974, the private health sector 

began to grow. Between 1975 and 1990, the total number of private beds grew significantly. 

Private care providers in Egypt range from large modern hospitals to smaller hospitals, day 

care centres, polyclinics and individual clinics. 

Religious clinics operated by religious social agencies, a predominant type of 

nongovernmental organization, are perceived to be popular and successful providers of 

ambulatory health care in Egypt. 

Nongovernmental organizations for health services are increasingly localized in the 

larger provincial cities, particularly those governorate capitals with medical universities and 

teaching hospitals. Those in metropolitan Cairo are known for their quality medical care, 

thriving on low-cost services that are readily accessible to low-income households. These are 

mostly staffed by senior to mid-level university medical staff. 

Recently, nongovernmental organizations have started to hire university consultants and 

to introduce modern technology. This situation not only increases their power and 

participation in the health care system, but also enhances access and the willingness of the 

population to utilize their facilities. 

Nongovernmental organization health care providers rarely offer health education, 

provide public information and awareness campaigns, conduct health outreach to their 

patients and communities or promote preventive care. 

67

Egypt 

The nongovernmental organization health sector is financially self-supporting through 

user fees. Overall, the nongovernmental organization sector receives only a very small 

share—just 1%––of health care expenditure in Egypt. 

The nongovernmental organization health sector’s overall contribution to health care 

across Egypt is marginal when measured objectively against the share of health care 

expenditure that goes to private physicians, pharmacies and public-sector and university 

hospitals. 

Private providers 

At present there is very little organized financing of the private health services. 

Most of the transactions occur as household out-of-pocket payments to the provider on a 

fee-for-service basis for both ambulatory and inpatient care. There is no formal mechanism in 

place to monitor and evaluate the rates being charged and the quality of the health care service 

offered by different categories of private providers, although the Medical Syndicate may have 

some information on medical fees charged by member physicians. 

On a very limited scale, private firms and private insurance companies enter into 

contractual arrangements with private providers. With the proposed expansion of the Family 

Health Fund over the coming years, it is expected that an increasing number of private 

providers will enter into provider–payer arrangement. 

The number of health service providers joining the nongovernmental organization sector 

within the few past years has increased dramatically as a result of socioeconomic pressures. 

Some of the factors related to this phenomenon are attributed to certain characteristics of this 

sector: 

There are no strict rules or regulations governing this sector. 

Nongovernmental organizations are tax exempt. 

It is considered an attractive sector for physicians who are not capable of financing their private 

practice. 

It is considered an alternative sector for individuals and businessmen to enhance their reputation 

by the donations they provide. 

The Health Sector Reform Programme 

In early 1996, the Ministry of Health and Population initiated an assessment of the 

health sector situation and recognized a need to explore alternatives for a comprehensive 

reform. As a result of these discussions, the government adopted a health sector reform 

programme (HSRP) which lays out a framework for undertaking comprehensive reform of the 

health sector over the medium and long term. 

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Egypt 

One of the key objectives of the HSRP is to achieve universal insurance coverage for all 

Egyptians. In addition to the reform and expansion of the social health insurance functions, 

the HSRP includes the following objectives. 

Redefining the role of the Ministry of Health and Population to develop its regulatory functions, 

notably to establish quality norms and standards, to establish a mechanism of 

accreditation and licensure to enforce those standards, and to consolidate the multiple 

vertical public health programmes. 

Strengthening the programme for training and retraining of family health care doctors, nurses 

and allied health professionals, with greater emphasis on preventive health care. 

Decentralizing management of government health delivery system to the governorate and 

district level, and introducing greater managerial autonomy at the facility level. 

Rationalization of the public investment in health infrastructure and health workforce based on 

governorate and district health plans that identify the actual needs and the availability of 

resources to sustain the investments. 

The first phase of the HSRP was developed as a programme jointly financed by the 

Government of Egypt, World Bank, European Union and Unites States Agency for 

International Development. In 2000, the African Development Bank joined the financial 

stakeholders of the programme. 

DISCUSSION 

What is the rationale for the Ministry of Health and Population to enter into health 

services contracts with nongovernmental organizations or private sector providers? 

The main goal of the health sector reform programme is to support the health system 

that assures universal coverage of the population with a pre-defined package of health 

services based on universality, equity, affordability, and sustainability. 

The public sector in Egypt cannot provide all health care services because of the 

continuous increase of health services cost. The intention is to provide a hybrid model of both 

public and private sector provision. The aim is to encourage private sector investment where 

the local market conditions make it sustainable. 

The health sector reform programme, through the pilot governorate’s master plans, is 

preparing to cover 35%–40% of the urban population through the Ministry of Health and 

Population health services, while the rest will be covered by private or nongovernmental 

organization providers. Partnership with these providers will give the opportunity for HSRP to 

enable the coverage of underserved areas with the family health model and basic benefits 

package. 

Having a contract with the private sector will help maintain national quality standards 

among different types of health service providers. These standards are being implemented in 

the health sector reform programme pilot sites. This will provide an equity dimension for both 

public and private sector patients. 

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Egypt 

The health sector reform programme organized a provider survey and several focus 

groups for nongovernmental organization providers to assess the size of their market. The 

following is a summary of findings, which indicate a recent increase in the magnitude of 

nongovernmental organization work. 

Nongovernmental organizations serve a wide rage of beneficiaries, mostly at the low and mid 

socioeconomic levels, which represent the majority of the population. 

Well-trained university professors increasingly join the nongovernmental organization sector. 

Nongovernmental organizations are based on a non-profit concept, which gives more trust in 

dealing with population versus the private sector targeting to profit. 

Several nongovernmental organizations have introduced the diagnostic services technology 

including MRI, CATscan and ultrasonography, resulting in an increase in the utilization 

rate. 

Most nongovernmental organizations receive donations, which maintain their financial 

sustainability. 

What is the interest of nongovernmental organizations/private sector in receiving public 

sector financing? 

According to the District Provider Organization approach, all district populations have 

to be covered with the family health model. The Ministry of Health and Population primary 

health care facilities cover only a percentage of this population; nongovernmental 

organization and private facilities will cover the remaining population. Montazah Health 

District in Alexandria Governorate, with a population of 1 million, is a good example for such 

approach, in which the Ministry facilities will cover 35%–40% of the population, and private 

and nongovernmental organization facilities will cover 60%–75% of the population. 

Contracting with private clinics will guarantee the registration of a number of families 

to the clinics based on the size of the facility. Refusing the contracting issue will waste a 

chance for the private/nongovernmental organization to have a pool of families in its 

catchment area. 

Does the political environment enable/disable the execution of such contractual 

arrangements? 

The approach of the District Provider Organization within the health sector reform 

programme’s long-term objectives is to encourage contractual arrangements between the 

Ministry of Health and Population and the private sector. The Ministry of Health and 

Population carried out several studies assessing: the capacity of private sector services, 

including mosque and church clinics; the Family Heath Fund contracting strategy, and SWOT 

(strengths, opportunities, weaknesses, threats) analysis for private–public partnership. The 

Ministry has highlighted on several occasions the urgent need for partnership between the 

public and private sectors, and ministerial decrees have been issued to emphasize the role of 

the Family Health Fund in supporting contractual arrangements with private and 

nongovernmental organization providers. 

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Egypt 

Is the legal framework robust enough to facilitate contracting between the public and 

private sectors? 

The Family Health Fund was established according to Ministerial decree no. 294 of 

1999. The Decree acknowledged opening a bank account named “Family Health Fund of the 

Health Sector Reform Programme”. This Decree was followed by Ministerial decree no. 160 

of 2001 regarding the constituency of the governing bodies of the Fund, which laid the basis 

for management of this account and its responsibilities. 

Ministerial decree no. 109 determined the organizational structure of the Family Health 

Fund at the central and peripheral levels, as well as its organigram, financial and 

administrative system and sources of revenue and expenditures. The decree gives legal 

support for contracting with private and nongovernmental organization providers. 

What is the nature of the public sector organization that is outsourcing its services? 

The Ministry of Health and Population has firm policies to enhance the level of health 

care for all Egyptians in cities, villages and rural areas. The Ministry of Health and Population 

aims to extend health insurance to all citizens and for all public categories. It also aims to 

distribute health services fairly, in addition to presenting the services within a quality 

framework and with the participation of the community to achieve maximum effectiveness. 

To accomplish this, it is important to separate the service provision from its finance. 

Separation of these functions ensures that the level of health services can be upgraded and 

offered according to quality standards. 

With this in mind, the Ministry of Health and Population decide to create a body 

responsible to finance health services and make agreements with all those providing these 

services, including the private sector and nongovernmental organizations. It was also decided 

to apply the family physician system at all levels. In 1999, an account, the “Family Health 

Fund”, was established by the Ministry of Health and Population decree no. 294. 

What are the financing sources of the Family Health Fund? 

In order for the Family Health Fund to perform its function, legislation had to be put 

into place to organize the Fund activities. The sources of financing were identified through the 

Ministry of Health and Population decree no. 160 for 2001. 

Revenues that result from all contracted bodies including the Health Insurance Organization 

with its branches and the health affairs directorates in the governorates. 

Amounts given by the Ministry of Health and Population to support the Fund’s budget for the 

performance of its tasks and commitments to execute the health reform programme. 

Other donations and grants offered by different organizations. 

Amounts given by the Ministry of Finance to support the Fund’s account. 

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Egypt 

Later legislation (Ministerial decree no. 147) added another source of funds through the 

adoption of a co-payment system, in which the beneficiaries (at Ministry of Health and 

Population health facilities) share in covering the cost of service provision. 

What is the capacity of the purchaser (Family Health Fund) in order to successfully 

enter into a contract? 

To augment the capacity of the Family Health Fund in terms of monitoring and 

supervision and regulation and payment mechanisms, each of the five pilot governorates, 

Alexandria, Menoufia, Sohag, Suez and Minya, created six internal units affiliated with Fund. 

These have the technical capacity to follow up with contracting procedures and their 

implementation. These units are the: Policy and Planning Unit; Monitoring and Evaluation 

Unit; Information System Unit; the Contracting and Quality Unit; Finance, Administration 

and Legal Unit; and Information, Education and Communication Unit. 

What types of contract does the Family Health Fund have? 

At present, the Family Health Fund has two types of working contract, per-capita and 

fee-for-service. 

What are the strengths/weaknesses of the Family Health Fund that should be taken into 

consideration when entering into a contractual agreement? 

The Family Health Fund is a single purchaser on behalf of the district population. This 

strengthens its position in contractual agreements with the private sector. However, it is still a 

new concept, and one to which private and nongovernmental organization providers may be 

hesitant to commit. As well, the contractual requirement of following quality standards, is 

costly and may limit the number of private or nongovernmental organization providers willing 

to accept such a commitment. 

What are the strengths/weaknesses of the provider taken into consideration when 

entering into a contractual agreement? 

The private/nongovernmental organization sector has a very strong negotiating position, 

as it controls most of the outpatient services (more than 80% in Egypt). However, it is likely 

that the patient will prefer to go to public health services as long as they provide good quality 

service at a lower price. This will create strong competition for the private local facility and 

weaken the negotiation power of private and nongovernmental organization providers. 

What risks and incentives does each party incur when entering into a contract? 

There are risks for the Family Health Fund in the case of a contract termination. In this 

case, the assigned population must be moved to other providers, who might insist on higher 

cost of services. Incentives for the Family Health Fund to contract with private and 

nongovernmental organization providers include: 

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Egypt 

The opportunity for the HSRP to enable the coverage of the underserved areas with family 

health model and basic benefits package. 

Unification of all health services under one system. 

Dissemination of quality concepts among different types of health service providers. 

It is beneficial for the Ministry of Health and Population to have private 

nongovernmental organization providers to provide health services. This approach removes an 

enormous burden from the Ministry, including the cost of infrastructure and management, and 

overhead costs. 

A risk for the private and nongovernmental organization providers is pursuing facility 

accreditation, which is a costly procedure. Failure to maintain the contract could lead to the 

loss of the investment without any returns. The incentive for such facilities is the guaranteed 

number of families in their catchment area. 

What is the payment mechanism of the contract with private nongovernmental 

organization, and to what extent does it promote efficiency, equity and quality? 

The percentage of incentives is determined based on the monthly performance of the 

health team whose performance is appraised through a set of performance indicators. These 

cover all aspects of service provision, whether curative or preventive, and reflect the 

efficiency and quality. There are eleven performance indicators, each with a target standard as 

shown in Table 1. 

The performance indicators are divided into two main categories according to their 

importance: 

The first category comprises those indicators with the “all or none” rule, which means that if the 

facility fails to achieve the targeted standard for these indicators, no incentive will be 

paid, e.g. family planning, immunization, antenatal care and drug rationalization. 

The second category comprises indicators with second priority, where the facility receives only 

half of the amount of incentives allocated for these indicators if it fails to achieve the 

targeted standards, e.g. referral rate, completing medical records, number of visits per day, 

and patient waiting time. 

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Table 1. Performance indicators 

Egypt 

Serial Indicator Target standard 

1. Number of visits/day 20–48 

2. Number of drugs per visit < 2 

3. Referral rate 1%–8% 

4. Completion of visit encounter forms Over 98% 

5. Patient satisfaction rate Over 90% 

6. Completion of medical records data Over 90% 

7. Family planning (protection years) Over 50% 

8. Immunization 95% 

9. Patient waiting time < 20 minutes 

10. Antenatal care (visit/pregnant woman) Over ½ visit per month 

11. Following medical protocols Over 98% 

Do all performance indicators have the same weight? 

Each performance indicator has a certain “weight” according to its importance, which 

serves to encourage the providers to give more attention to indicators that have nationwide 

impact, such as family planning and immunization. The weights are as follows. 

Family planning (35%) 

Immunization (35%) 

Drug rationalization (30%) 

Patient satisfaction (30%) 

Referral rate (30%) 

Number of visits per day (30%) 

Patient waiting time (20%) 

Completion of encounter form (20%) 

Completion of registration (20%) 

How would performance indicators maintain the equity for private/nongovernmental 

organization patient and Ministry of Health and Population patients? 

The performance indicators are used at the primary health facilities in the pilot 

governorates to evaluate the staff for the monthly incentive. The HSRP is strongly interested 

in using the same indicators in both private and public facilities to maintain equity for the 

public health facility patient and the private or nongovernmental organization health facility 

patient. 

Is the Family Health Fund capable of undertaking a cost and price analysis prior to 

negotiations? 

Through the Research Unit at the Family Health Fund, several studies have been 

conducted to estimate the cost of services per visit and the average number of visit per family. 

74

Egypt 

The Research Unit includes Family Health Fund staff and groups of university staff in 

addition to short-term and long-term consultants from HSRP donors. The unit has focused its 

activities on the issues affecting the implementation of the reform, including changes that 

could be reflected in the purchasing activities of the Family Health Fund, provider, patient 

perspective, cost and quality management. Results of these studies are available during the 

negotiations with private and nongovernmental organization providers. 

Which information systems are used by FHF to carry out the contract and assess 

performance of the contracting private agency? 

The National Information Centre of Health and Population at the Ministry of Health and 

Population has designed the Patient-Based System (PBS) application, which requires a local 

area network with a minimum of three workstations, one in each of the following: registration 

and filing room, family physician clinic and pharmacy. 

Sources of data for the PBS are the various forms enclosed in the family folder. The 

main areas include but are not limited to: 

essential family data 

house status description 

patient demographic data 

encounter visits data 

family planning visits 

antenatal care visits 

neonatal follow-up data 

infants vaccination data 

all pharmacy and drug store transactions data. 

The system is extremely flexible and easily adapted to the conditions and needs of each 

facility. This is achieved through flexible setup menus for all main variables within the 

system. 

The system produces weekly reports that contain the following data: number of visits 

per physician; number of visits by age group; list of prescribed drugs; number of cases for a 

specific diagnosis; number of laboratory investigations; number of X-ray investigations; and 

number of referral cases. 

BPS provides the Family Health Fund with all data needed to evaluate the performance 

of health facilities. The system undergoes a continuous upgrading process according to 

experience and feedback from field implementation. 

What monitoring mechanisms and evaluation systems are in place for the Family Health 

Fund and what challenges exist in this area? 

Using the same monitoring and evaluation indicators in both the public and private 

sectors allows fair competition between the two sectors and presents challenges in contractual 

arrangements. 

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Egypt 

The Monitoring and Evaluation Unit at the Family Health Fund employs skilled and 

experienced staff to achieve the unit objectives, which include: 

Ensuring the accuracy of data regarding the performance status of the contracted facilities. 

Identifying the obstacles to performance in the contracted facilities, working out their resolution 

and training the staff in these facilities to prevent recurrence of the obstacles in the future. 

Ensuring the application of the required performance standards and studying the capabilities of 

the contracted facilities to perform health services according to the pre-set and agreedupon 

quality standards. 

Coordinating with the Policies and Planning Unit of the Family Health Fund to update the 

performance standards as necessary to improve the quality of health services delivered at 

the contracted facilities. 

Internal periodical monitoring of the Fund’s operation to support and assist the administration in 

ensuring effectiveness and compliance to the pre-set plans (quarterly). 

Who is the purchaser and who is the provider? 

The Family Heath Fund represents the purchasing agent, on behalf of the population 

that lives in the health district. The providers include private clinics and polyclinics, 

university clinics and religiously-affiliated nongovernmental organizations. 

There are two approaches to signing the contract, which is a one-year renewable 

contract. 

For providers located in districts and working under the District Provider Organization (DPO) 

approach, the Family Health Fund signs the contract with the DPO, where the latter has a 

service level agreement with the provider. 

For providers located in districts but not working under the DPO approach, the Family Health 

Fund signs the contract directly with the provider. 

What is the basis of disbursement from the Fund account? 

The internal rules and regulations of the Family Health Fund control the disbursements 

from the Fund account. 

The Fund signs contracts with governmental and nongovernmental health institutions to buy 

health care services. However, these institutions must fulfil the conditions and standards 

of accreditation determined by the Ministry of Health and Population. 

The Fund pays a monthly incentive to the bodies it contracts with, the health service providers, 

depending on the performance rates required. 

The Fund will be committed to cover its managerial and operating expenses. 

The Fund manager can invest any excess funds through the Fund’s financial department. 

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Egypt 

How was the nongovernmental organization or private provider selected? How 

transparent was the entire selection process? 

Selection of a private or nongovernmental organization provider as a pilot needs to pass 

through several steps. The following is a summary of the steps. 

Select a health district. It is preferable to select the district with the lowest number of HSRP 

health facilities to be the pilot district. This is because private and nongovernmental 

organization facilities cannot reduce their prices to compete with HSRP health facilities, 

which provide services with a high level of quality. Thus it could be futile for them to join 

the reform programme since they will be immediately out of the competition. For this 

reason, it is advisable to start the first contact with private nongovernmental organization 

providers in a district that has not yet started the implementation of the programme. 

List all interested private and nongovernmental organization facilities. The Governorate Health 

Directorate have lists of all active privates and nongovernmental organization facilities 

sorted by district. The selection process starts by sending the facilities a copy of the 

Manual for Contracting with Non Public Organizations. The manual is designed by the 

Quality Improvement Department at Ministry of Health and Population in coordination 

with Family Health Fund. The manual includes summary of the HSRP and the family 

health model, steps for contracting with the Fund, criteria for health facility selection, 

quality improvement indicators, scoring system and a model contract. 

Request feedback from these facilities in order to limit the number of field visits. 

Conduct field visits. The objectives of field visits to the facilities that have sent positive 

responses, are mainly for preliminary assessment to decide if the sites meet the quality 

standards. Hence, it is quite beneficial to have a member of the quality improvement team 

in these visits. It is also advisable to meet the director of the facility and evaluate the 

management capacity. The facilities will usually fall into one of the following patterns: 

− facilities that need major renovation such as equipment and furniture to meet the 

quality standards and are not willing to undertake such expenses and changes. 

− facilities that are willing to stage the needs to meet the quality standards. 

− Facilities that are ultimately unwilling to accept the new model. 

Develop a score for each facility based on the criteria for selection. According to this score, the 

selection decision will be taken. 

Does the Family Health Fund play a role in the marketing and communication with the 

community? 

The Family Health Fund plays a major role in communication and raising awareness 

about the HSRP among both service providers and beneficiaries. This includes raising 

awareness of the family medicine concept and its potential for alleviating health and financial 

burdens from citizens, especially the poor. The Family Health Fund coordinates in producing 

brochures and other materials for the mass media, advertisement and social marketing of the 

HSRP. 

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Egypt 

How are the issues of expected services, monitoring and evaluation, performance 

assessment, transfer of funds, and settlement of disputes addressed in the contract? 

Expected services are addressed in item 5 of the contract: “The primary health care services 

delivered by Second Party to individuals related to First Party include services defined by 

the Primary Health Care Services basic benefit package, and clarified in the attached 

schedule except immunization services which are carried out through the related health 

office. Second Party is committed to deliver all data of the individuals who will take 

immunization.” 

Monitoring and evaluation are addressed in item 18 of the contract: “Second Party is committed 

to facilitate the processes of reviewing for the evaluation and monitoring department 

affiliated to First Party on monthly basis. They are also committed to all the policies and 

work procedures of HSRP and any modification or updates that may become valid.” 

Performance assessment and transfer of funds are addressed in item 17 of the contract: 

“Payments are succeeded on four terms quarterly per year, such that each term will be 

paid as follows: 

− 50% of the term in return for contracting (Flat Rate) 

− Remaining 50% in return for service performance, based on quality and 

performance indicators defined in the Family Health Fund (First Party).” 

Settlement of disputes is addressed in item 24 of the contract: “Any differences in 

implementing, executing or explaining any item of the contract or any dispute that may 

occur should be referred to the Governorate Administrative Legal Authorities (State’s 

Council Courts). In case of referring back to court or to any other side, Second Party 

should continue providing services for beneficiaries and with the same conditions of the 

contract until the dispute is settled by a court decision or by a final decision from the 

specialized authority or by paying all the sums of money obtained in return for cancelling 

the contract”. 

What are the types of services offered by the provider? On which basis have they been 

selected, e.g. for a specific population? 

The basic benefits package is designed to prevent and treat the most prevalent and 

pressing health problems among individuals in a population. The basic benefits package 

includes: child health services, women’s health services, health services for all age groups and 

laboratory work. 

In order to design and select health services in the package for Egypt, four criteria were 

used: 

The most common health needs of the population to reduce suffering and improve well-being. 

Severity of illnesses and diseases affecting the population. 

Cost-effectiveness of interventions to treat or cure those illnesses and diseases and attain the 

most health value for money spent. 

Availability of financial resources. 

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Egypt 

How did the approved list of services evolve? 

The design of the basic benefits package has gone through several steps to reach its final 

form: 

Precise data collection for all outpatient visits for a number of primary health care facilities. The 

data represent three months of utilization for urban and rural health districts. 

Discussions with Ministry officials and local experts in epidemiology. The discussions included 

top health needs of the population according to gender and age groups. Representatives of 

HSRP donors also attended the meetings. 

Completing a draft list of contents for the basic benefits package, which has continued evolving 

through several updates to meet the needs of urban and rural areas. At the same time, the 

available financial resources have been taken into consideration for the long-term 

sustainability of the programme with good standards of quality. 

Would the service quality standards have a role in the contract? 

Health facility accreditation is mandatory prior to contracting with the Family Health 

Fund. Primary assessment is made of the facility to evaluate the current situation and the 

required needs to fulfil the accreditation programme. This is followed by training of the staff 

on quality improvement, infection control, leadership, accreditation programme and clinical 

guidelines. The third step is pre-accreditation through on-the-job training to evaluate the 

current performance and to set the improvement plan. The technical support team in each 

governorate is responsible to follow up the implementation of the improvement plan. 

Final accreditation is based on measuring eight categories: patient rights, patient care, 

management of the facility, management of human resources, management of support 

services, management of information, quality improvement programme and infection control 

programme. Each category includes several standards that focus on key processes, activities, 

or outcomes that facilities should achieve. During the accreditation survey, facilities are 

assessed to determine their compliance with standards in each category. 

Item 1 of the contract presents the role of accreditation in the contract: “Second Party 

should provide primary health care services for the individuals related to First Party through 

obtaining accreditation from the General Department of Quality in the Ministry of Health and 

Population and according to the standards issued concerning private and nongovernmental 

organizations units. This accreditation should remain valid during the contracting period and in 

case of withdrawing this accreditation, this contract would be automatically invalid and void.” 

What is the outcome of the facility quality improvement process? 

Based on the evaluation of the facility: 

Facilities with a score of less than 50% are not accredited and an improvement plan is set to 

include the standard score, responsible person/team, the needs, and the required time. 

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Egypt 

Facilities scoring 50%–80% will be accredited for one year, and an improvement plan will be 

set to be followed up by the technical support team. 

Facilities scoring more than 80% will be accredited for two years with continuous follow-up by 

the technical support team for two years. After this, the facility must be re-accredited and 

will not be permitted to achieve less than 80% in subsequent assessments. 

What kind of procedures followed for providers not adhering to quality standards? 

The Family Health Fund has the right to break the contract with any contracted facility, 

even fully accredited, if under any circumstances the facility does not follow or abide by the 

stated performance indicators. See item 1 of the contract (Annex 1). 

CONCLUSIONS AND RECOMMENDATIONS 

The political environment is supportive of contractual arrangements in the health sector. 

The Ministry of Health and Population continues to highlight the need for partnership 

between public and private sectors, and ministerial decrees have been issued to help 

emphasize the role of the Family Health Fund in supporting the contractual arrangements with 

private and nongovernmental organization providers. 

The Ministry of Health and Population is responsible for the health and welfare of the 

Egyptian population and is committed to carrying out this obligation. Indeed, it may be that 

the partial privatization process under way in other areas of the public sector will result in 

making available greater government resources and capacity to strengthen the social sectors 

such as health care. Instead of privatization, the Egyptian health sector reform programme 

needs to strengthen the private health care sector in order to support those set goals and 

priorities in an effort to adhere to universally accepted standards of quality of care in Egypt. 

Currently, the role of the Family Health Fund is developing and moving towards 

purchasing health care services at the level of the health district. The Family Health Fund is in 

the process of contracting with the District Provider Organization (DPO) in parallel to 

contracting directly with family health facilities. The Family Health Fund will pay a global 

budget to the DPO according to the health needs assessment of the population, pending the 

negotiations between the two parties of the contract, putting in consideration the age 

distribution and other risk factors of roster population. The DPO will use different payment 

mechanisms (per capita, fee for service, etc) to compensate the facility. 

The Family Health Fund, acting on behalf of the district population, is supporting its 

position in the contractual agreement with the private or nongovernmental organization 

provider as a single purchaser. The Family Health Fund needs to use this opportunity to 

design a dynamic marketing campaign to promote the concept of contractual agreement with 

the private and nongovernmental organization sector. 

As the next step, the Family Health Fund needs to expand its contracting with the 

private sector to a much larger scale, especially outside the pilot governorates, in urban 

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Egypt 

districts, where private and nongovernmental organization facilities control the outpatient 

health service market. 

The Fund needs to establish a plan of action for approaching the private and 

nongovernmental organization sector. At the same time, efforts need to be directed towards 

encouraging private and nongovernmental organization providers to contract with the Family 

Health Fund through offering some incentives, such as 

Reducing taxes levied on private providers when joining the Health Sector Reform Programme. 

Setting-up an information system and providing private and nongovernmental organization 

providers with family folders. 

Supporting the marketing plans of private and nongovernmental organization providers. 

Encouraging private and nongovernmental organization facilities to provide public health 

services as a long term objective. 

The World Bank, through the Social Fund, has established a new project with the 

Quality Improvement Department at the Ministry of Health and Population focusing on 

support and training of nongovernmental organizations. Ten nongovernmental organizations 

in three governorates have been selected for accreditation as the first step in contracting with 

the Family Health Fund. Donors need to support this approach in order to help spread the 

concept to other governorates. 

The Ministry of Health and Population through Health Sector Reform Programme and 

Family Health Fund needs to study the legality of renting or leasing primary health care 

facilities to the private sector. Such an approach would remove the enormous managerial 

burden of running the facilities and allow the Ministry of Health and Population to work as a 

regulator rather than as a provider. 

To date, the Family Health Fund is contracting only for outpatient services. It needs to 

move towards inpatient services and address the relevant issues with the private and 

nongovernmental organization sector with regard to contracting, especially given that the 

Quality Improvement Department has now developed tools for accreditation of inpatient 

services. 

REFERENCES 

1. Alexandria Governorate master plan. 

2. Sen, Dave. Case studies of mosque and church clinics in Cairo, Egypt. Report of a study 

supported by the United States Agency for International Development, Egypt. 

December 1994. 

3. El-Zanaty F, Way AA. Egypt Interim Demographic and Health Survey, 2003. Cairo, 

Ministry of Health and Population, 2004. 

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Egypt 

4. Egypt Health Sector Analysis and Future Strategies, HSRP. 2003. 

5. Donaldson, DS. Egypt: Health Sector Brief, Partnership for Health Reform Plus, Data 

for Decision Making (DDM) Project, November 1993. 

6. Ministry of Health and Population, El-Zanaty Associates, and ORC Macro. Egypt 

Service Provision Assessment Survey. Calverton, Maryland, ORC Macro, 2002. 

7. Stepnick L, Rice JA. Leadership in public–private partnership for heath. Seventh 

Annual International Summit on Public–Private Partnership for Health Gain, 8–11 

December 2002. 

8. Family Health Facility Implementation Manual, HSRP. 

9. Family Health Fund and Contracting Strategy. Health Finance and Insurance Group. 

HSRP. 

10. Reich, M. Political mapping of health policy: a guide for managing the political 

dimensions for health policy. Data for Decision-Making Project, Harvard School of 

Public Health, 1994. 

11. Private–public partnership study. Mission report. Health Sector Reform Programme/ 

Family Health Fund. June 2002. 

12. SWOT analysis for public private partnership. Health Sector Reform Programme, 

Family Health Fund. 2003. 

13. Rice, A. Toward a new public–private mix for health gain. Plymouth, Minnesota, 

Lakeland Color Press, 1995. 

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Egypt 

Annex 1 

Contract copy between FHF and private/NGO 

Contract for providing the basic benefits package for primary health care services 

with the family health centre in governorate 

Signed on …………., between 

1- FHF, legally represented by Dr. ………..(First Party) in ……… 

And, 

2- The Legal representative of the FHC, legally represented by …….., Director of 

………. Centre/Unit (Second Party) 

Preface 

Ministry of Health and Population is currently implementing the Health Sector Reform 

Programme policy by providing primary health care for all Egyptians through the concept of 

Family Physician. The ministry is effecting this policy by the separation between service 

provision and its financing, in cooperation with the private sector and NGOs. 

The two parties have agreed on: 

Item 1: Second Party should provide primary health care services for the individuals related 

to First Party through obtaining an accreditation from the General Department of Quality in 

MOHP and according to the standards issued concerning private and NGOs units (Attachment 

1). This accreditation should remain valid during the contracting period and in case of 

withdrawing this accreditation, this contract would be automatically invalid and void. 

Item 2: Second Party should inform First Party of the names of all physicians and nurses 

legally registered to provide primary health care services and who are clarified in Item (1) of 

the contract. 

Item 3: Second Party should inform First Party about any change of employees that may 

occur within a maximum time limit of seven days from the change date. 

Item 4: Second Party is committed to notify all its employees with the items and conditions of 

this contract and to confirm the completion of this process to the First Party in writing. 

Item 5: The primary health care services delivered by Second Party to individuals related to 

First Party include services defined by MOHP Primary Health Care Services BBP, and 

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Egypt 

clarified in the attached schedule (Attachment 2) except immunization services which are 

carried out through the related health office. Second Party is committed to deliver all data of 

the individuals who will take immunization. 

Item 6: Health services provided by Second Party are available for 12 hours a day, all days of 

the week and through two 6-hour shifts from: 

Shift 1: ………………… AM – Until ………………… PM 

Shift 2:.………………….PM – Until ……………….. ...PM 

Emergency services are provided out of these times and during official holidays. 

Item 7: Second Party is in charge of (1500 – 2000 families) for each family medicine room, 

as each family physician is committed to serve (750 – 1000 families). 

Item 8: Physicians are defined for each family medicine room by (2 physicians for each room 

in the morning + evening). A patient is allowed to visit the room during working hours (12 

hours), as the available physician is committed to provide the patient with the medical service 

they need. No other physician is allowed to provide the same service except during long 

vacations, transfer or training. 

Item 9: Second Party is committed to provide complete and accurate data about the names of 

registered service beneficiaries in the centre and distributing them according to their insurance 

categories (Attachment 3). Second Party should inform First Party with patients’ visits as per 

the visit form prepared by First Party on a monthly basis (Attachment 4). 

Item 10: Second Party is committed to provide the necessary teamwork needed for service 

provision during the contracted working hours in case of absence of any member of the 

teamwork for any particular reason such as: annual leave, emergency leave or training. 

Item 11: Second Party is committed to follow the referral procedures whether internal to the 

specialist or external to …….. Public District Hospital (for non-insured patients) or to the 

Comprehensive Health Insurance Clinic (for the insured) according to the referral regulations 

of the BBP and HSRP (Attachment 5). 

Item 12: Second Party will bear the responsibility of any professional oversights that may 

occur from the medical team for any registered beneficiaries, as there is no responsibility on 

First Party regarding these mistakes. 

Item 13: Second Party is committed to implement all the items of HE Minister of Health and 

Population’s Decree No 147 of 2003 (Attachment 7), and the regulations related to any 

organizational procedures that follow (Attachment 8) and decree 239 of 1997 (Attachment 9) 

and health insurance laws (For the insured people) while keeping revenues of medical 

examination (LE …) examinations and check ups (according to the attached regulation) and 

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Egypt 

deposit the fees of opening new files and 1/3 of the price of drugs to the fund on monthly 

basis. A monthly report is to be provided to the fund as well. 

Item 14: First Party should provide medications according to the Essential Drug List of the 

programme. Second Party is committed to follow the rules and regulations for drugs 

prescription systems according to the Programme’s special regulation (Attachment 11) and 

(Attachment 13). Dispensing drugs is applicable only for those registered who paid for the 

opening of files and are listed in the fund. Violations to this rule will be penalized by 

collecting the violation fee and informing the authorized legal authority. 

Item 15: This contract is valid during the period of accreditation and will be renewed 

automatically with the authorization renewal from the General Department of Quality in 

Ministry of Health and Population, unless any of the two parties are informed otherwise 3 

months before end of contract. 

Item 16: First Party is committed to pay the sum of LE ….. in return for an annual service 

provision of medical service for each registered beneficiary (who has paid for opening the 

file) in the unit / centre (of the Second Party). 

Item 17: Payments are succeeded on four terms quarterly per year, such that each term will be 

paid as follows: 

• 50 % of the term in return for contracting (Flat Rate) 

• Remaining 50% in return for service performance, based on quality and performance 

indicators defined in FHF (First Party) (Attachment 12 of Performance Indicators). 

Item 18: Second Party is committed to facilitate the processes of reviewing for the evaluation 

and monitoring department affiliated to First Party on monthly basis. They are also committed 

to all the policies and work procedures of HSRP and any modification or updates that may 

become valid (Attachment 6). 

Item 19: Second Party is committed to establish a Costing Unit to monitor the actual cost of 

service. They are also committed to provide any data to the costing unit of the fund to 

exchange information and data related to this cost (Attachment 10). 

Item 20: Family folders are considered a private property of the Family Health Fund. They 

are kept at the centre in a safe and confidential location. The fund has the right to review them 

whenever needed and without any objection from Second Party. 

In case of end of contract for any particular reason, Second Party is obliged to deliver all the 

folders that he has and all the data available in the Family Health Fund immediately after the 

end of contract, while keeping all data and information confidential. In case the Second 

Party’s abstention, Second Party has to pay for a penalty of paying the sum of LE 100,000 for 

temporary compensation until all legal procedures are taken against him for violating 

trusteeship. 

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Egypt 

Item 21: Second Party should inform specialized authorities about any found or suspicious 

epidemic cases. 

Item 22: Any of the two parties has the right to cancel the contract under the provision of 

notifying the other party (in writing) 3 months before end of contract. 

Item 23: This contract is valid once the accreditation is received from the General Department 

of Quality Improvement in Ministry of Health and Population, and the centre is committed to 

start working within 3 months from contract signing date. 

Item 24: Any differences in implementing - executing or explaining any item of the contract 

or any dispute that may occur should be referred to the Governorate Administrative Legal 

Authorities (State’s Council Courts). In case of referring back to court or to any other side, 

Second Party should continue providing services for beneficiaries and with the same 

conditions of the contract until the dispute is settled by a court decision or by a final decision 

from the specialized authority or by paying all the sums of money obtained in return for 

cancelling the contract. 

Item 25: This contract is issued in three copies. One copy for each party and the third to the 

Technical Support Tem at Ministry of Health and Population (Central FHF). A copy of 

attachments to be delivered to Second Party. 

First Party Second Party 

Dr…………… Dr. …………….. 

FHF…….. Director of …….., …….. 

86


ISLAMIC REPUBLIC OF IRAN

ABBREVIATIONS 


1. MOH/MOHME: Ministry of Health/Ministry of Health and Medical Education 

2. UHSR: Unit of Health Sector Reform 

3. SSO: Social Security Organization 

4. MSIO: Medical Services Insurance Organization 

5. ICCU: Intensive/Cardiac Care Unit 

6. GDP: Gross Domestic Product 

7. PBO/MPO: Plan and Budget Organization/Management and Planning Organization 

8. TQM: Total Quality Management 

9. TUMS: Teheran Medical Sciences University 

10. MUMS: Meshed Medical Sciences University 

88

INTRODUCTION 


Financing health care is a critical concern for rich and poor countries alike, as health 

care systems account for about 9% of global production. Developing countries face 

particularly serious challenges as they attempt to improve the well-being of their populations, 

achieve economic development objectives, and integrate themselves with the global economy. 

Health care financing is a particular concern for these developing countries, which account for 

about 84% of the world’s population and around 93% of its disease burden, but only 18% of 

its income and 11% of its health expenditure (Schieber, 1997). 

Rebuilding of financial resources is a major component of health sector reform policies. 

In this respect, the adoption of market-based performance approaches in health care service 

provision, in other words, marketization and privatization, were supposed to be a panacea. 

Arguments in favour of the use of market incentives in health care may be summarized as 

follows: 

Contracting/outsourcing may increase competition among health care providers; 

Increased provider competition may increase technical efficiency on the supply side and 

therefore allocative efficiency within the system; 

Contractual relationships enhance efficiency on the purchaser and provider sides via the 

incentive structure inherent in the contract; 

The contracting process itself may promote transparency in trading and decentralization of 

managerial responsibility, both of which may have beneficial effects on efficiency 

(Palmer N, 2000). 

Even where there is competition, there is no evidence that the private sector invariably 

provides greater efficiency or quality (Witter et al, 2000). For example, in the United States of 

America, competitive markets have been shown to have higher costs, more duplication of 

services, longer length of stay, and higher staff ratios than non-competitive markets. In the 

national health service, implementation of purchaser–provider split and quasi-market policies 

in the public sector have not yet been successfully evaluated. However, there are no 

generalized findings from studies conducted in health sector and health financing reform, 

therefore, the applicability of these assumptions to health care services, especially in 

developing countries, must be questioned. Indeed, attempts to translate such points of view 

into practice have highlighted several questionable assumptions, particularly that: 

Enough potential providers exist to enable the creation of provider competition; 

Provider competition, without any change on the purchasing side, can enhance efficiency; 

The benefits of introducing market incentives outweigh the costs of their implementation and 

maintenance; 

Government has adequate capacity to enter into and manage contractual relationships with the 

private sector (Palmer, N. 2000). 

Effective utilization of resources seems to be central in health sector reform. Internal 

market competition introduced in the United Kingdom and New Zealand, and managed care 

competition implemented in the United States of America, are known as two major strategies 

89


in this respect. However, none of them have been fully adopted for the purpose of reform in 

health care markets of the Islamic Republic of Iran. 

The objectives of the study were to identify: 

types of care for contracting, 

the way of choosing contract counterparts, 

methods of payment for their services, and dealing with problems arising during the period of 

contract, 

evaluation of contract counterparts’ performance, 

conditions in which nullification or renewing of contracts are met, 

financial risk-bearing by contract counterparts, 

effects and outcomes of contracts in terms of cost containment, increasing access and improving 

quality, 

characteristics of the group who is responsible for management, implementation and evaluation 

of contracting out in each medical sciences university. 

2. APPROACH AND METHODOLOGY 

For the purpose of data collection from medical sciences universities, a questionnaire 

was developed including both closed and open-ended questions. The questionnaire was based 

on lists of questions provided by WHO with regard to the study. The type of services 

contracted, conditions for renewing or nullifying contracts, ways of conflict management 

between contract parties, selecting/choosing counterparts, and strength and weakness’ of 

contractual arrangements in practice, as well as wider social and organizational environment, 

were determined as the questions of the study (Annex 1). 

An attempt has been made to send the questionnaires to the universities of medical 

sciences through Health Sector Reform Unit of the Ministry of Health and Medical Education, 

but it failed. Parallel to this attempt, a request submitted to “Health Economics and Program 

Budget” office of the Ministry of Health and Medical Education, to facilitate and help data 

collection process. It was also unsuccessful. 

Personal relations and direct contacts with officials of universities were the last option 

to data collection. The questionnaire was mailed to Tabriz, Teheran, Meshed, Lorestan, and 

Uromieh, medical sciences universities to be filled and returned. Contact information was also 

provided for question and requests for clarification by the respondents. 

To expand on information provided by the universities, semi-structured interviews were 

conducted with officials in Ministry of Health and Medical Education and universities, both 

individually and in small groups. The questionnaire was considered as a framework for 

interviews. Collected data were analysed qualitatively and quantitatively. 

90


OVERVIEW OF THE IRANIAN HEALTH SYSTEM 

The health system in the Islamic Republic of Iran is structured into three levels. 

Specialty and super-specialty curative services are located and delivered at the upper level, 

mainly in mega cities and urban areas. The bottom two levels belong to primary health care 

services, and their activities cover rural, deprived, and remote areas’ populations as well as the 

urban poor. 

The health system is highly centralized, and almost all decisions regarding general 

goals, policies and allocation of resources are made at the central level by the Ministry of 

Health and Medical Education. The Ministry has the legal authority to oversee, license and 

regulate the activities of the private health sector (Mehriar et al, 2004). 

Primary health care services are basically delivered by the public sector and are almost 

free of charge, particularly for the poor. Upper-level services (specialty and super-specialty 

curative services), are the area in which private sector plays a distinctive role. There are about 

123 well-equipped, urban-centred, private delivering specialty and super-specialty service 

hospitals in the Islamic Republic of Iran. 

Emergency, curative, diagnostic and pharmaceutical services are delivered by private 

hospital. Although there is a tariff schedule for health care services determined by High 

Council of Medical Services Insurance (headed by the Minister of Health and Medical 

Education), the private sector does not apply it consistently. Among these hospitals, almost all 

practise fee-for-service payment and charge their patients according to their own fee 

schedules. Regulation and monitoring of private sector performance are not as effective as 

expected. The well-known physicians and specialists of the public sector work in the private 

sector as well. Nursing and technical staff of private hospitals also come mainly from the 

public sector. There is not a clear division between public and private sectors with regard to 

health care service delivery in the Islamic Republic of Iran, creating confusion in the area of 

public–private partnership. The overlapping of human resource functions can affect quality of 

care, effectiveness of regulations and management of services on the whole. The issue of 

public sector resources exploitation by the private sector remains to be studied. 

The private sector, due partly to its inherent for-profit orientation and partly to poor 

organizational behaviour of public sector, does not participate actively in providing and 

delivering primary health care services. Private hospitals also do not show keenness to 

contract with the Ministry of Health and Medical Education, because of low tariffs, extra 

paperwork and delays in payment. 

Structurally, and apart from the private sector, there are other organizations and 

institutions which play a leading role in health care management of Islamic Republic of Iran, 

in terms of policy-making, tariff-setting, and service provision and delivery. The Social 

Security Organization (SSO) and Armed Forces Health Services Insurance are examples. 

Moreover, charity organizations, which focus mainly on outpatient services, Imam Khomeini 

Relief Committee, which serves mainly the poor, and several units of health care delivery 

91


affiliated with banks, municipalities, and other organizations further complicate the system, 

and perhaps make it less efficient. 

Table 1 shows the number and types of hospitals in terms of the sectors to which they 

belong. 

Table 1. Number and types of hospitals 

Type of Hospital No 

University 484 

Private 123 

Charity 238 

Social Security Organization 50 

Others 33 

Total 928 

Source: Ministry of Health and Medical Education, 2001 

It is worth noting that most private hospitals are well-equipped with modern technology 

and are located in major cities, particularly in Teheran. 

Whereas conflict of interests, inefficiency, inequity, poor management and public 

dissatisfaction characterize the costly, urban-oriented curative services (public and private 

sector), primary health care services run satisfactorily. 

The main reasons for the notable success of the primary health care system of Islamic 

Republic of Iran are believed to be the firm commitment of the government to health and the 

relatively proactive public health approach adopted since the development of the primary 

health care network. Allocating a relatively modest share of government budget (around 7%) 

and GDP (around 1.7%) to public health, and using low cost, culturally appropriate and 

acceptable public health strategies, the Islamic Republic of Iran has succeeded in reaching 

almost universal levels of immunization, breastfeeding and use of iodized salt, in providing 

safe drinking-water to almost all communities and extending relatively inexpensive (if not 

entirely free) but efficient public health services to the remotest corners of the country. In 

addition to training low-cost community-based primary health workers, the country has also 

managed to expand opportunities for classical medical education opportunities at both general 

practice and specialized levels and has developed its pharmaceutical industry to a level that 

can meet the basic needs of the country (Mehriar et al, 2004). Figure 1 shows the structure of 

Islamic Republic Iran’s health care system (public sector) in which the lowest levels of the 

system (health houses, and rural/urban health centres) mainly deliver primary health care 

preventive services under supervision of the public sector. The private sector has not been 

involved or participated in delivery of services in these areas. Only during recent years, after 

the waves of privatization which were legalized through the third major socio-economic 

development plan, have universities of medical sciences begun to contract primary health care 

services or part of them to the private sector (see Annex 2). At district level, however, the 

private sector does participate actively, even dominantly, in hospital-based service delivery. 

92

Delivery 

Facility 

Health 

House 

Source: Abolhasani, 2001 


Ministry of Health and 

Medical Education 

School of … Director of District 

University Teaching 

Health Network 

Hospital 

District Health Centre District General 

Hospital 

Rural Health Centre Urban Health Centre 

Health 

House 

Health 

House 

Medical University of the 

Province 

Health 

Post 

Figure 1. Organigram of the public health care system of 

the Islamic Republic of Iran 

93 

Health 

Post 

Health 

Post


CURRENT STATUS OF CONTRACTING OUT HEALTH CARE SERVICES 

Legal status of contracting out 

Contracting out in the Iranian health care system commenced with the introduction of the 

Third Socio-economic Development Plan in 1999. The Plan authorized the Ministry of Health 

and Medical Education to adopt policies by which public–private partnership was to be 

achieved. Article 192, included in the law of the Plan focused on privatization in general, and 

outsourcing in particular, in health care delivery. Another similar regulation (Circular 88) was 

later promulgated by the Planning and Budget Organization (PBO now MPO) to facilitate 

purchasing services from private sector. While Article 192 emphasized mainly privatization and 

contracting out clinical services, no clear distinction was made between clinical and non-clinical 

services, in terms of contracting out, in Circular 88. Consequently, medical sciences 

universities, as contracting agents, were faced with at least two guidelines with remarkable 

differences. The universities utilize the guideline they prefer, creating a complex environment in 

terms of performance evaluation, homogeneous information generation and policy continuity. 

An attempt has been made to pilot Article 192, in the catchment areas of 7 selected 

universities of medical sciences in different provinces of the country (UHSR, 2003). In 

practice, unified performance has not been observed in this respect. Some of universities 

rushed to contract out almost all clinical and non-clinical services, while others did so within 

a very limited framework, and the rest remained indifferent. 

According to a report in 2004, 46 units of health care delivery were transferred to the 

private sector through contracting. Contracting for purchasing 45 items of clinical services, 

together with 10 items of non-clinical services, was also reported. Tabriz Medical Sciences 

University is the pioneer among the universities in terms of contracting out clinical services 

and privatization. Shiraz and Gilan universities in contracting out health services. 

Apart from well-known medical sciences universities in major cities, the remaining 

universities have mainly chosen to purchase non-clinical services from the private market; 

this approach seems to be similar with other countries’ experiences in privatization (Witter’s 

et al. 2000). 

Experience of the Ministry of Health and Medical Education 

Performance-based service contracting 

The Ministry of Health and Medical Education has decided to provide health care 

services for a large segment of the population (mainly rural and deprived) through contracting 

out, establishing a referral system, and employing family physicians. This is a new approach 

in Islamic Republic of Iran’s health care delivery policy which the Ministry has adopted in 

response to a parliamentary requirement for health insurance coverage of the rural population. 

Among different types of contracting, the Ministry of Health and Medical Education 

relies on performance-based service contracting (PBSC), defined as follows. 

94


PBSC involves strategies, methods and techniques that describe and communicate measurable 

outcomes rather than direct performance processes. It is structured around defining a service 

requirement in terms of performance objectives and providing contractors the latitude to determine 

how to meet these objectives. In other words, it is simply a method of acquiring what is required 

and placing the responsibility for how to accomplish it on the contracts. In this respect the 

government has developed measurable standards of performance together with negative incentives 

for non-performance, and fee for performance, as major characteristics, or key concepts of PBSC. 

It seems that within the PBSC poorly managed contracts could be big money losers. 

Stages of implementation 

An administrative and technical committee has been organized in the Ministry of Health 

and Medical Education for the purpose of designing the service packages, performance 

monitoring system, and contracting and process standards. A database was designed for 

devolved units and for financial processes and a training package was provided and training 

workshops conducted in this respect. A situation analysis was also conducted in order to 

operationalize Article 192. 

Types of services contracted out/devolved 

The following categories of services have been devolved: 

Outpatient services (general practitioner, specialist and dentist) 

Pharmacy 

Rehabilitation services 

Laboratory services 

Diagnostic radiology services 

Hospitals’ wards 

Primary health care services 

Table 2 shows the trend of devolved units of health care services in 3 successive years. 

Table 2. Number of devolved units, 2002–2004 

2002 2003 2004 

Urban health centre 83 120 11 

Health post 19 86 172 

Rural health centre 8 14 24 

Radiology 10 23 15 

Laboratory 6 14 101 

Pharmacy and paramedical clinic 4 11 14 

Hospital wards 5 57 271 

Emergency wards 6 36 51 

Total number 140 360 568 

Three steps were taken by the Ministry of Health and Higher Education with regard to 

designation of performance-based contracting for family physicians’ activities as follows: 

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Job analysis, which determines needs, services and outputs expected. 

Performance work statement (PWS), which meets defined and precise contractual agreements 

with family physicians in relation to measurable performance standards for their activities 

(output). 

Performance assessment plan (PAP), which enables the Ministry of Health and Higher 

Education to evaluate and assess the performance of the contracts. 

The size of population covered by a family physician, patients’ satisfaction, quality of 

data records are used as part of quantitative and qualitative measures for performance 

evaluation. Input criteria, such as human resources, equipment and building, also have been 

employed in this respect. These three categories of criteria, together with a coefficient which 

meets differences and diversities of service delivery settings, provides a total score for 

performance of a FP in a specific period of time and helps to the Ministry of Health and 

Higher Education to manage payment for contracted family physicians. The relationship 

between performance total score and percentage of payment is as follows: 

Performance score % of payment 

90–100 100 

80–89 90 

70–79 80 

60–69 70 

The contract is nullified if the total performance scores of a family physician remain 

below 60% after three evaluations. 

General environment and public–private sectors 

As is expected from a centralized, mixed and undeveloped socioeconomic structure, the 

private sector in the Islamic Republic of Iran, particularly in health care markets, is not yet 

fully developed. As a for-profit sector, it is mainly involved in the hospital industry, located in 

major cities, and has been reluctant to invest in preventive care and in remote or deprived 

areas. The performance of the private sector is not effectively regulated. This sector rarely 

uses the Ministry of Health and Higher Education’s tariff schedule, or evaluates services 

delivered, and accreditation of institutions/hospitals in this sector, seem to be less effective in 

improving public–private relationship. At the tertiary level of health care delivery in the 

Iranian system, the private sector is highly active and seems to exploit the public sector’ s 

resources, particularly human resources. 

In contrast, the public sector suffers from inadequate managerial skills and capacity, 

inappropriate executive and legal context and insufficient knowledge and experience with 

respect to the health care industry. These deficiencies are possible reasons for the significant 

change in approach reflected in Article 192. For example, while in the early days of 

implementation it was officially documented that the health houses and package of services 

delivered there must be privatized (in any way), this policy was proposed to be nullified 

beginning in March 2004. Lack of stability in policy leaves room for individual preferences of 

96


authorities of medical sciences universities, which in turn may increase complexity of the 

system and reduce its efficiency. 

A very comprehensive guideline, including the philosophy of privatization and 

decentralization, decentralization in health care systems, standards for contracting and 

methods of payment, examples of bidding and contracting forms, packages of services and 

monitoring and evaluation of services, has been developed by the Unit for Health Sector 

Reform in the Ministry of Health and Higher Education. However, there is still room for more 

clarification and elaboration of Article 192, possibly for the unification of approaches used by 

medical sciences universities to privatization and contractual arrangements. An executive 

guideline is being developed in the Ministry in order to move ahead in efforts to achieve the 

goals of the Third Socioeconomic Development Plan. However, contracting for health care in 

the Islamic Republic of Iran is in its nascency and may require time and other resources to be 

successfully implemented and managed. 

In terms of types of contracts, and methods of payment, it can be said that block 

contracts and cost-volume contracts are dominant. Per capita, global and even capped fee-forservice 

methods of payment are practised for services purchased from the private sector 

(Appendix 2). 

Contracting out or purchasing services from the private sector is a new approach to 

dealing with health care market problems in developing countries in general, and in the 

Islamic Republic of Iran in particular. Attempts to adopt policies regarding reform in health 

care services in the Islamic Republic of Iran date back only three years, and contracting out in 

health care markets suffers from lack of organizational and managerial capacities in both the 

public and private sectors. Because of this environment, there is no uniformity among the 

medical sciences universities (as agents of the Ministry of Health and Higher Education) with 

regard to purchasing services from the private sector. 

At the present, preventive care, paramedical services and dentistry are the most common 

services, contracted respectively. The universities contract out for packages of (mainly) 

preventive services, and are generally satisfied with this strategy. Improvements in access to 

services, increased efficiency, promotion of quality of services and responsiveness are given 

as outcomes of this strategy (Appendix 2). 

DISCUSSION 

In management of contracts for purchasing any/clinical services from the private sector, 

transaction costs, methods of payment, competition and risk-sharing, opportunistic behaviour 

on purchaser and provider sides, and contract goals and nature are discussed in relevant 

literature. The efficiency and types of contract, conditions for setting successful contracts, 

links with total quality management, renewal positions (if any), penalties for nonperformance, 

process for resolving disagreements, and advantages and disadvantages of contracts are also 

important concepts in this respect (Witter S. et al. 2000; Flood M.C, 2000). 

97


In health sector reform policies, the impact of contracting is thought to be dependent on 

how it is implemented. Done well, it can improve technical efficiency (by promoting cost 

control), allocative efficiency (by redirecting resources), and clinical and service quality (if 

the contract includes measurable performance goals). As well, contracting to improve access 

by requiring a volume of free care on thereby improve the equity of system performance 

(Robert JM et al, 2004). 

Contract implementation and management, however, particularly in a complex health 

care environment in a developing country such as Islamic Republic of Iran, require 

managerial capacity and skills, adequate human and financial resources, intersectoral and 

intrasectoral coordination and collaboration, and broad cultural, legal and political 

agreements. 

The Iranian health care system faces a number of institutional, financial and 

administrative gaps: gaps between the public and private sectors, levels of health care delivery 

(disrupted referral system), payments and remuneration, physician and staff earnings in 

hospitals (between different groups of physicians and between physicians and non-physician 

staff), and rules and laws as practice guidelines in provision and delivery of health care 

services. 

Neither health care managers nor their counterparts in the private sector have been 

trained and acquired necessary skills for quality contracting Meshed Medical Services 

University. The private sector is not yet very well organized and on occasion demonstrates 

opportunistic behaviour. For example, according to some of interviewees, the private sector 

still interested in having a middle man’s role instead of actively participating in production 

and productive processes Teheran Medical Services University. 

Lower payment, together with oversecurity of employees’ positions in public sector 

(and lack of economic thinking among managers in different organizational level 

(Momensaraie and Pourreza, 2002), are indicated as the main reasons for inefficiency in 

public sector performance. 

It is a fact that the nations least equipped to make their public sector function effectively 

are often those least able to discipline private markets to achieve public ends (Robert, M. et. 

al). However, even in an environment with these better characteristics, on some occasions 

contracting out produces more results. For example, out sourcing of a laboratory in one of 

Teheran’s hospitals led to more tests and greater income (TUMS). 

CONCLUSION AND RECOMMENDATIONS 

Conclusions 

Contracting out of health care services in the Islamic Republic of Iran was initiated 

under the Third Socioeconomic Development Plan introduced in 1999. In fact it can be 

considered a privatization policy emphasized in the plan and its legislation (Article 192). 

98


From an administrative point of view, contracting parties, both medical sciences 

universities and the private sector, suffer from relevant background, experienced staff, and 

organized uniform approach in terms of services to be contracted, methods of payment, and 

rules and laws practised. 

Providers’ playing both sides of the street contaminate public–private partnership, and 

lack of reliable information, or regular evaluation of private sector/providers hinder decisionmaking 

regarding contract renewal and continuity of the policy. 

A volatile bureaucratic decision-making environment has led to an individualistic 

approach in purchasing services from private sector by the universities (lack of uniformity and 

homogeneity). Some universities rely on the Article 192 and others on Circular 88. While 

Article 192 emphasizes marketization of clinical services Circular 88 permits all clinical and 

non-clinical services to be contracted out. This may be a reason for the different approaches to 

purchasing services from the private sector. 

Services contracted by the universities mainly cover primary health care, outpatient and 

non-clinical services. Limited and mostly inexpensive types of service are contracted out. 

Information resulting from evaluations of the performance of private providers, has not yet 

been organized. Such information remains unavailable, though it has been emphasized in 

Circular 88 that every medical sciences university should submit a copy of contracting parties’ 

performance to the Management and Planning Organization. 

Privatization and contracting out in Islamic Republic of Iran has mainly focused on 

primary health care services and expensive specialty urban-oriented curative services have 

remained almost untouched. Since primary health care services in Iran are delivered almost 

free in rural and poor urban areas, this approach, if accompanied by user fees, may in the long 

term widen gaps in equity between rural and urban areas, and limit access to health care 

services. 

It seems that unemployment of numbers of young physicians and paramedical graduates 

has played a significant role in developing contractual arrangements in health care services 

delivery in the Islamic Republic of Iran. It means that adoption of privatization, and in some 

extent contracting out policy, is determined by force rather than choice. Other reasons should 

also be taken into account in this respect. However, implementing a policy which designed 

and developed in industrialized countries decades ago in a developing country with poor 

organizational structures and management will hardly work effectively, at least in a short 

period of time. In relevant literature, individualism, rationalism, utilitarianism and legalism 

have been indicated as the bedrocks of socioeconomic development of industrialized 

countries. “Organizational cultural lag” as a dominant characteristic of developing countries, 

including Iran, may hinder these essential components of development. 

Actions to be undertaken 

As a first step, the long-term process of reform, particularly in the health sector, should 

be appreciated and acknowledged by policy-makers. However, the reform itself seems to be 

99


the product of the experience of industrialized countries’, and its applicability in the context 

of a developing country such as Islamic Republic of Iran with traditional, religious, 

fragmented and complex structures, is yet to be determined. 

At strategic level 

Justification among top decision-makers about the necessity, importance and usefulness of 

contracting out; 

Achieving commitment high-ranked managers and politicians; 

Providing appropriate, updated and evidence-based legal environment, as well as financial 

resources, for its successful implementation. 

At operational level 

Identification of capable individuals/institutions in private sector as counterpart for contracting; 

Identification of services purchasable from the private sector; 

Standardization of delivery of purchasable services; 

Publicizing necessity for reform in health care/social marketing; 

Designing and implementing a management information system for recording and evaluating 

private sector performance; 

Capacity-building in/empowerment of both the public and private sector, requiring training the 

right personnel for the purpose of managing contractual arrangements in health services; 

Capacity-building for teamwork and utilizing other specialties, capacities and capabilities 

instead of monopolizing reform plans and activities by only one group of professionals 

(physicians or the others). 

SOURCES 

1. Roberts JM et al. Getting health reform right: a guide to improving performance and 

equity. Oxford University Press, 2004. 

2. Flood MC. International health care reform: a legal, economic and political analysis. 

London, Routledge, 2000. 

3. Palmer N. The use of private-sector contracts for primary health care: theory, evidence 

and lessons for low-income and middle-income countries. WHO Bulletin, 2000, 78, (6): 

821–830. 

4. Witter S et al. Health economics for developing countries: a practical guide. BUPA, 

Macmillan Education Ltd, 2000. 

5. Mehryar AH et al. Primary Health Care and Rural Poverty Eradication in the Islamic 

Republic of Iran. Population Studies and Research Centre for Asia and the Pacific, 

Working Paper No: 10. 

100


6. Shieber JG. (1997), Innovations in Health Care Financing, Proceeding of a World Bank 

Conference, World Bank Discussion Paper No. 365. 

7. Laws and Regulations of MOH and Iran’ s government including: 

− Article 192 in “Law of the third socio-economic plan 2000-2004”, MPO 

publications, 2001, Teheran, Iran. 

− Circular 88, MPO, 2002, Teheran, Iran. 

8. Momensaraie M, Pourreza A. The status of economic thinking among hospital managers 

and decision makers. Journal of School of Public Health, Teheran Medical Sciences 

University, 2002, 2: 1. 

9. Regulations for implementation of Article 192. Teheran, Unit for Health Sector Reform, 

Ministry of Health and Medical Education, 2003. 


Slack K, Savedoff D W. Public purchaser–private provider contracting for health services, 

examples from Latin America and the Caribbean. Washington, D.C, Inter-American 

Development Bank, Sustainable Development Department, Technical Papers Series, 2001. 

McPake B, Hongoro C. Contracting out of clinical services in Zimbabwe, Soc. Sci. Med. 

1995, 41(1): 13–24. 

England R. Contracting and performance management in the health sector: some pointers on 

how to do it. London, DFDI Health Systems Resource Centre, 2000. 

McPake B et al. Is the Colombian health system reform improving the performance of public 

hospitals in Bogota? Health policy and planning, 2003, 18(2). 

Loevinsohn, B.(?), Practical Issues in Contracting for Primary Health Care Delivery: Lessons 

from Two Large Projects in Bangladesh, World Bank, USA. 

Barr D. Research protocol to evaluate the effectiveness of public/private partnerships in 

enhancing health and welfare systems development. Center for Health Policy, Institute for 

International Studies, Stanford University, 2004. 

Jack W. Contracting for health services: an evaluation of recent reforms in Nicaragua. Health 

policy and planning, 2002, 18(2). 

101


Annex 1 

QUESTIONNAIRE 

1. Do you have any contract(s) for health care purchasing from private sector? If yes, 

would you please specify the services in this respect? 

2. How do you choose your private sector partner for contracting out? Based on previous 

familiarity, colleagues’ advice, bidding, good reputation or else? 

3. How do you pay for services purchased from private sector? Fee for service, global, per 

unit, or else? 

4. Have you ever experienced problems/difficulties (legally or administratively) in 

conducting contracts with private sector (such as delay on payments and so on)? If yes 

how did you solve the problem(s)? Through referring them to the court, arbitrary, or 

other ways? 

5. Do you use any evaluation process for services purchased from and delivered by private 

sector? How? What is your instrument and who does (do) conduct the process? 

6. How renewing of contracts takes place? On what conditions/circumstances? 

7. How and when a contract is nullified? 

8. Which part of the contract (university or private sector) gains more profit/benefit from 

contracting processes? 

9. What was/were the consequences of out-sourcing and purchasing services from private 

sector? Decrease in unit cost, increase in accessibility, increase in quality of services, 

increase equity, or else? 

10. Is there any specific team/group or unit in your university responsible for contracting 

out and purchasing services from private sector? If yes, please explain more about its 

structure in terms of its personnel work and educational experience. 

11. On the whole what is your prediction about the future of this process (out sourcing and 

contracting out of health care services? 

102

Medical 

Sciences 

University 


Annex 2 

UNIVERSITIES CONTRACTING PRIMARY HEALTH CARE SERVICES TO THE PRIVATE SECTOR 

Contracts 

with private 


Teheran Yes ICU, pharmacy, 

dentistry, 

laboratory, 

radiology, and 

health posts 

services 

Name of services Way of choosing 

private 

contractor(s) 

Methods of 

payment 

Bidding Fee-for-service 

+ global 

Difficulties 

during contract 

period 

Method of 

problem solving 

Yes Negotiation, 

dialog and 

persuasion 

Orumieh Yes PHC services Bidding Global Yes Negotiation, 

dialog and 

persuasion 

Meshed Yes Laboratory and 

pharmacy services. 

Bidding Per-capita Yes Negotiation, 

dialog and 

E 

v 

al 

u 

at 

io 

n 

of 

se 

r 

vi 

ce 

s 

p 

u 

rc 

h 

as 

e 

d 

Tools and 

responsibilitie for 

evaluation 

Yes Through a 

questionnaire/ 

checklist + field 

visit and process 

evaluation 

Yes Checklist/team 

Yes Checklist/team

PHC services 

Open heart 

services 

Tabriz Yes Screening/preventi 

ve care 

Lorestan Yes -Nursing, theatre, 

laboratory and 

radiology services 

WHO-EM/XXX/XXX/E 

Page 104 

104 

persuasion 

Bidding Capitation No – Yes Checklist/team 

Familiarity 

Colleagues’ 

advice 

Global yes Negotiation, 

dialog and 

persuasion 

Because of limited number of private contractors in the province (semi-monopolistic situation), bidding is not applicable . 

Yes Checklist/weekly 

reports

Jordan 

JORDAN

ACRONYMS 

Jordan 

GDP Gross Domestic Product 

JD Jordanian Dinar 

WHO World Health Organization 

MOH Ministry of Health 

RMS Royal Medical Services 

JUH Jordan University Hospital 

KAH King Abdullah Hospital 

CHIP Civil Health Insurance Plan 

JUST University of Science and Technology 

HID Health Insurance Directorate 

UNRWA United Nations Relief and Works Agency for Palestine 

Refugees in the Near East 

MCH Maternity and Child Health 

JNHA Jordan’s National Health Accounts 

NGO Nongovernmental organizations 

PHR Partners for Health Reform 

MOF Ministry of Finance 

MOP Ministry of Planning 

SWOT Strengths, Weaknesses, Opportunities, Threats 

MHIP Military Health Insurance Plan 

HCC Al-Hussein Cancer Center 

CH Crescent Hospital 

HIPP Health Insurance Pilot Project 

IU Implementation Unit 

106

INTRODUCTION 

Jordan 

This study documents the experience of the Ministry of Health in Jordan in 

contracting out services with the private sector and the other autonomous public 

sectors such as the Royal Medical Services, Jordan University Hospital and King 

Abdullah University Hospital. The study also includes a general assessment of these 

contractual arrangements to identify areas of strengths, weakness and opportunities 

for improvement. The specific objectives of the study were to: 

• Acquire in-depth understanding of nature, extent and presence of 

enabling/disabling factors that promote/prevent public–private partnership in 

health in Jordan. 

• Develop a base for a national strategy on public–private partnership in health that 

would promote access, efficiency, equity and quality. 

A special data collection tool (Annex 1) was developed by the researcher to 

assess the contractual arrangements between the Ministry of Health and other health 

care providers. This tool covers the following areas: 

Type of service covered 

Selection mechanism and length of contract 

Regulation, who enforces and what level 

Payment mechanism 

Financial and other incentives for the purchaser and provider 

Level of performance based measures 

Purchasers level of effort in management and administration 

Providers level of effort in management and administration 

Geographical scope of contract 

Monitoring and evaluation characteristics. 

This report presents a brief analysis of the health care financing and delivery in 

Jordan, assessment of the overall capacity for contracting health services, and 

assessment of the contractual agreements between the Ministry of Health and other 

health care providers. Conclusions and recommendations are presented in the last 

section. 

OVERVIEW OF HEALTH CARE FINANCING AND DELIVERY IN JORDAN 

Socioeconomic background 

Jordan is low middle-income country, with a population of 5.3 million in 2002. 

It is a relatively small country of only 91 100 km 2, 90% of which is desert. Its Gross 

Domestic Product (GDP) amounted to JD 6259 (US$ 9308) billion in 2002 with per 

capita income of JD 1237 (US$ 1747). Approximately 40% of the population is under 

the age of 15 years, and the total fertility rate (TFR) is 3.7, one of the highest in the 

107

Jordan 

region. This, coupled with the continued decline in infant mortality (22 deaths per 

1000 live births for 2002) and the rise in life expectancy at birth (70.6 and 72.4 years 

for males and females, respectively), represents a significant social and economic 

challenge to the government (Ministry of Health Annual Book, 2002). 

Jordan has a small economy with limited natural resources, arid land mostly 

unsuitable for agriculture, and chronic water shortages. It imports most of the energy 

it consumes. The economic situation is aggravated by the political environment, 

which makes efforts to revive the economy difficult task. Although the GDP growth 

rate slightly improved between 2001 and 2002 (4.2% versus 4%), the cost of living 

also increased. The unemployment figure is still high between 14.7%–16% according 

to different estimates. Nearly 12% of the Jordanian population is below the national 

poverty line (World Bank Group, 2002). 

Based on the commonly used development indicators, Jordan fares better than 

most countries in the low–middle income category. The majority of the population 

has access to basic infrastructure such as safe water, sanitation and electricity, and 

lives in permanent dwelling structures. Government commitments to improve the 

overall quality of life and the social standards of its people have borne impressive 

results. Primary and secondary health care services are distributed all over the country 

with 98% to 100% population access to local health services (WHO, Country 

Profiles, 2003). The total literacy rate is 89.7% and Jordan has a well developed 

human resource base. 

Health sector brief 

Jordan has one of the most modern health care infrastructures in the Middle 

East. Jordan’s health system is a complex amalgam of three major sectors: public, 

private and donors. The public sector consists of two major public programmes that 

finance as well as deliver care: the Ministry of Health and Royal Medical Services. 

Other smaller public programmes include several university-based programmes, such 

as Jordan University Hospital in Amman and King Abdullah Hospital in Irbid. In 

2001, the total expenditure on health services accounted for about JD 598 million, 

9.5% of the GDP. Health expenditure per capita was JD 115 (Jordan’s National Health 

Accounts, Draft Report, 2004). Each of the health care sub-sectors has its own 

financing and delivery system that reflects directly on contractual arrangements 

among these sectors. The following description gives an institutional overview of the 

health care financing and delivery of each sector. 


The Ministry of Health is the major single institution financer and provider of 

health care services in Jordan. It is the largest in terms of the size of its operation and 

utilization as compared to Royal Medical Services, Jordan University Hospital, King 

Abdullah Hospital, or others in the private sector. The Ministry owns and operates 27 

hospitals in 11 governorates, with 3462 hospital beds accounting for 37% of total 

108

Jordan 

hospital beds in Jordan. In terms of utilization, 44% of inpatient care and 41% of 

outpatient care occur within its hospitals. The bed occupancy rate in Ministry 

hospitals was 72% for 2002 (MOH Statistical Book, 2002). The Ministry employs 

25% of all practising physicians in Jordan. 

In 2001 and 2002, the Ministry of Health budget accounted for 6% and 5.7% of 

the general budget respectively (MOH, 2002). The Ministry of Health is the largest 

Ministry in terms of expenditures, which accounted for 29.3% of total health 

expenditures in 2001. Over 76% of the Ministry of Health expenditures are financed 

through the government budget, some 11% from insurance premiums from Civil 

Health Insurance enrolees, and the reminder from user charges and donors. In 2001, 

the Ministry of Health allocated 85% of its fund (JD 175 million) to facilities it owns 

and operates, and the remaining amount (JD 26 million) was spent on reimbursing 

private and other public providers for their services (Jordan’s National Health 

accounts, Draft Report, 2004). 

In addition to its general public health functions, the Ministry of Health has a 

dual financing function. First, it is responsible for administering the Civil Health 

Insurance Plan (CHIP) which covers civil servants and their dependents. Individuals 

certified as poor, the disabled, children below the age of six years and blood donors 

are also formally covered under the CHIP, which covers a total of 20% of the 

population. Second, the Ministry is in effect the insurer of last resort for the entire 

population, since any individual can come to the Ministry of Health facilities and pay 

highly subsidized rates (15% to 20% of the costs) for the entire range of Ministry 

services (World Bank Group, 1997) 

Royal Medical Services 

Royal Medical Services (RMS) is the second largest public programme in terms 

of expenditures (15% of total expenditures on health in 2001), but largest in terms of 

individuals covered by health insurance. Its main role is to provide primary and 

curative health care to the armed forces through 5 outpatients centres and 10 main 

hospitals spread all over the country. These benefits are extended to the dependents of 

military personnel, to public security and civil defence personnel and their 

dependents, and to retired personnel and their dependents. This system covers about 

1.52 million individuals, accounting for 29% of the population (RMS Annual Report, 

2002). 

RMS also acts as a referral centre through providing high quality care, 

including some complex procedures and specialty treatment to Jordanian (including 

Ministry of Health beneficiaries) and other patients. It plays a major role politically 

by sending medical teams and field hospitals to disaster and conflict area such as 

Afghanistan, Croatia, Eritrea, Iraq and West Bank. The RMS has 1791 hospital beds 

(20% of total beds in Jordan) with occupancy rate of 76%. It employs 8% of all 

practising physicians (RMS Annual Report, 2002; MOH Annual Report, 2002). 

109

Jordan 

The RMS, like all other public providers, receives most of its annual budget (JD 

87 million in 2001) from the Ministry of Finance, almost 61%. The remaining source 

of funds comes from other government entities including the Ministry of Health 

(27.5%), households (9%), donors (1.1%) and private firms (1.4%), (Jordan’s 

National Health Accounts, Draft Report, 2004). 

Jordan University Hospital 

Jordan University Hospital (JUH) was established in 1971 under the name of 

Amman Grand Hospital. Its name was changed in 1975 after it was affiliated with 

Jordan University and its medical school. With over 531 beds, its one of the most 

specialized and high-tech medical centres in the public sector, along with King 

Hussein Medical Centre and King Abdullah Hospital. 

JUH patients are referrals from the Ministry of Health, employees of Jordan 

University and their dependents, employees of private firms with whom JUH has 

contractual agreements, as well as some independent private patients. It has 5.8% of 

the total number of hospital beds in Jordan and accounted for 3.8% of the hospital 

admissions for 2002 (MOH Statistical Book, 2002). JUH has an occupancy rate of 

68% and employs 2% of physicians. Approximately 42% of the JUH revenue in 2002 

was from the Ministry of Health resources (Health Insurance Dept., 2002). 

King Abdullah Hospital 

King Abdullah Hospital (KAH) was established in 2002 by Jordan University of 

Science and Technology (JUST). The total capacity of the hospital is 650 beds and the 

operating (opened beds) are 200 beds. The hospital serves as a teaching hospital to the 

Faculty of Medicine at JUST and as a referral hospital for all public sectors in the 

northern region. More than 85% of the hospital admissions are for patients referred by 

the Ministry of Health and the RMS (KAH Annual Report, 2002; HID Annual Report, 

2003). Thus, the two agencies are the main source of funds for KAH. 

United Nations Relief and Works Agency for Palestine Refugees in the Near East 

The United Nations Relief and Works Agency for Palestine Refugees in the 

Near East (UNRWA) is a relief and human development agency that was established 

by the United Nations General Assembly in 1949 to carry out direct relief works 

programmes for Palestine refugees. It provides education, health care, social and 

emergency aid. 

UNRWA provides care to over 600 000 Palestinian refugees in Jordan, many of 

whom are also covered through the Ministry of Health and RMS (World Bank, 1997). 

UNRWA provides basically community-oriented health programmes that offer 

comprehensive health care to eligible refugee population including preventive, and 

curative cure and family planning services. Its services also include school health and 

110

Jordan 

health education programmes. It also provides environmental health services to the 

refugee camps. 

Currently, UNRWA operates 23 health centres and maternal and child health 

centres, 17 noncommunicable disease clinics, 23 family health clinics, 13 specialist 

clinics, 21 laboratories and 21 dental clinics. For inpatient services, it used to contract 

with the Ministry of Health, RMS and some private hospitals for this service. UNRWA 

health expenditure amounted to almost JD 8 million in 2001 and accounted for 1.3% of 

total health expenditures (Jordan’s National Health Accounts, Draft Report, 2004). 


The private sector plays an important role in terms of both the financing and 

delivery of services. Many private firms provide health care coverage for their 

employees either through self insuring or the purchase of private health insurance. 

According to the Jordan’s National Health Accounts (JNHA), 49% of health 

expenditure went to private sector physicians and hospitals in 2001. Many 

individuals, including those with public coverage, purchase services privately through 

direct out-of-pocket payment. The JNHA reported that the total out-of pocket 

expenditure from households amounted to JD 274 million in 2001. The private sector 

received 81% of this amount, while the public sector received only 19%. 

In terms of service delivery, the private sector accounts for 36% of hospital 

beds and 59% of hospitals in Jordan, with an occupancy rate of 44%. In addition, the 

private sector employs 63% of all physicians, 94% of all pharmacists, 71% of all 

dentists, and 52% of all professional physicians (MOH Statistical Book, 2002). 

The private sector contains much of the country’s advanced diagnostic capacity. 

This sector continues to attract significant numbers of foreign patients from nearby 

Arab nations. The JNHA reported that the private sector received about US$ 600 

million in revenue from foreign patients in 2001. This sector under the absence of 

strict regulatory environment is flourishing and growing steadily. 

Profile of the health subsystem 

Table 1 provides a brief overview of the Jordanian health sector in terms of 

health services coverage, source of financing, prevailing provider–payer 

relationships, and the size of each of the health care subsystems. This profile serves as 

a background for better understanding of the contractual arrangements among the 

various health care providers in Jordan. 

111

Table 1. Profiles of health subsystems in Jordan 

Benefits by health 

subsystems 

Describes types of services 

and benefits available. 

Government services/Ministry of Health 

Provides comprehensive 

public health services; 

primary, preventive, and 

curative care through its 

facilities 

Performs the following 

financing functions: 

Administers Civil Health 

Insurance programme 

(CHIP) 

Insurer of last resort for the 

poor 

Jordan 

Coverage/special categories Principal financing 

source 

Describes coverage and 

eligibility criteria, special 

programmes for specific 

population groups. 

Civil servants and dependents; 

and individuals certified as poor, 

the disabled, children under age 

of six, and blood donors 

Highly subsidized primary and 

curative care for the entire 

population 

Describes main 

sources of financing 

Ministry of Finance 

(general tax 

revenues) 

Ministry of Social 

Affairs 

Services fees 

collected at health 

facilities 

Co-payment for 

services and 

pharmaceuticals 

Payroll deductions 

Donor assistance 

World Bank loan 

112 

Provider–payer relationship Percentage of 

population covered 

or eligible 

Describes relationship between 

financing and service delivery 

functions 

Ministry of Health integrated 

delivery system-services 

provided by government 

facilities financed through 

budget and salaried civil services 

staff 

Number of people 

covered or eligible by 

health system 

nationwide 

20% (persons enrolled 

in CHIP) 

Under public law, 

MOH is required to 

provide subsidized 

care to all Jordanian 

citizens 

Size of operation 

As indicated by 

staff, beds, or 

number of facilities 

Operates 

53 comprehensive 

health centres 

336 primary health 

centres 

258 village health 

centres 

351 maternity and 

child health care 

centres 

247 dental clinics 

11 chest diseases 

centres 

27 hospitals 

3462 hospital beds 

(37%)

Jordan 

Benefits by health subsystems Coverage/special categories Principal financing 

source 


Primary and curative care 

services 

Jordan University Hospital 

Serves as a fee-for-service 

referral centre for other public 

programmes and private payers 

Owns and operates outpatient 

clinics and inpatient facilities 

for primary and curative care 

King Abdullah Hospital 

Serves as a fee-for-service 



Owns and operates outpatient 

clinics and inpatient facilities 

for primary and curative care 

Military personnel and their 

dependents 

Other referrals From MOH and 

contractual agreements with 

public firms 

Covers its employees and 

dependents 

Covers its employees and 

dependents 

Government budget 

User fees 

Premiums 

(based on army rank 

and status) 

Minor cost sharing 

for pharmaceuticals 



User fees 



User fees 

RMS 

113 



or eligible 

Integrated delivery system 

comprising RMS outpatient 

clinics and hospitals 

Referrals to MOH facilities 

Serves as fee-for-service 



Serves as fee-for-service 




25.5% Operates: 

5 health centre 

10 hospitals 


(19.7%) 

1.33% Operates 

1 hospital 

531 beds (5.8%) 

1.0% Operates: 

1 hospital 

650 hospital beds (the 

hospital operates now 

200 beds only)

Benefits by health subsystems Coverage/special 

categories 

United Nations Relief Works Agency 

Owns and runs primary health 

care centres 

Refers hospital care to the 

Ministry of Health or private 

facilities 

Private health sector 

Owns and operates private 

clinics and hospitals for 

primary and curative care 

Own and operates pharmacies 

Provides care to 0.6 million 

Palestinian refugees 

Beneficiaries of any private 

health plan self-insured 

Company employees and 

their dependents 

All citizens with 

willingness to pay 

Sources: Jordan National Health Account, Draft Report, 2004. 

Ministry of Health Annual Report, 2002. 

Jordan 

Principal financing 

source 

Financed through 

outside donor 

contributions 

Direct out-of-pocket 

payment 

Payments from 

insurance plans 

Payments from 

employees and 

employers 

114 



or eligible 

Operates and owns primary 

health care clinics managed by 

its staff 

Private hospitals and clinics, by 

contract 

Fee-for-service, or through a 

third-party payer (insurance 

company or employer) 


9% Operates 

23 health centres 

30 clinics 

23 family health 

clinics 

21 dental clinics 

All citizens with 

willingness to pay are 

eligible 

Operates: 

Number of clinics 

not available 

56 hospitals 


(36.2%) 

1564 pharmacies

Jordan 

Table 2. Summary of health expenditure statistics, Jordan, 2001 

Total population 5 182 000 

Total health care expenditures JD 597 834 320 

Per capita health care expenditures JD 1154 

Gross domestic product (GDP) JD 6 258 800 000 

Gross national product (GNP) JD 6 391 500 000 

Per capita GDP JD 1221 

Health care expenditures as percent of GDP 9.5% 

Health care expenditures as percent of GNP 9.4% 

Percentage of government 

budget allocated to health 

9.6% 

Sources of health care financing (percent distribution) 

Public 

37.0% 

Private 

58.1% 

Donors 

Distribution of health expenditure 

4.9% 

Public 

45.0% 

Private 

48.7% 

UNRWA 

1.3 

Nongovernmental organizations 

5.1% 

Public health expenditure as percentage of GDP 3.5% 

Private health expenditure as percentage of GDP 5.6% 

International health expenditure as percentage of GDP 0.5% 

Total expenditure on pharmaceuticals JD 184 630 938 

Per capita pharmaceutical expenditure JD 35.6 

Pharmaceuticals as percentage of GDP 

Pharmaceuticals as percentage of 

3.0% 

total health expenditure 

Distribution of pharmaceuticals expenditure 

30.9% 

Public 

18.5% 

Private 

81.5% 

Source: Jordan National Health Account, Draft Report, 2004. 

115

Table 3.Sources of funds to financing agents, JD, 2001 

Financing Agents 

MOF MOP Other Government 

entities 

Jordan 

116 

Primary sources of funds 

Private firms Household UNRWA Other donors Total 

MOH 134 543 792 1 195 784 1 000 000 21 799 453 8 934 422 167 473 451 

RMS 53 917 300 393 700 23 996 600 1 180 000 5 601 360 85 088 960 

JUH 185 000 3 067 259 350 000 95 000 431 000 4 128 259 

Other Gov. Entities 2 478 000 2 478 000 

Public Universities 2 852 300 1 429 700 4 282 000 

Social Security 1 836 000 1 836 000 

Private Insurance Enterprises 21 688 716 1 934 612 23 623 328 

Household 241 940 021 241 940 021 

NGOs 8 868 413 8 868 413 

Private Firms 47 535 544 990 200 48,526,744 

Private Universities 1 022 850 712 150 1 735 000 

UNRWA 7 836 144 7 836 144 

Total 188 461 092 1 774 484 30 916 159 73 613 110 273 512 296 7 836 144 21 721 035 597 834 320 

Source: Jordan National Health Account, Draft Report, 2004.

Jordan 

ASSESSMENT OF OVERALL CAPACITY FOR CONTRACTING HEALTH 

SERVICES 

Introduction and rationale for contracting 

Since 1970, private for-profit hospitals and other autonomous public sector 

bodies, mainly the RMS, have witnessed remarkable expansion and development in 

secondary and tertiary medical care. In contrast, the Ministry of Health hospitals have 

been less advantaged, less developed and under-funded. The government health care 

facilities provide highly subsidized (80%–85%) services for the uninsured and free of 

charge services for the insured and the poor. As Ministry facilities clearly form the 

backbone of the Jordanian hospital “safety net”, they have been over-burdened and 

have concentrated on primary and secondary medical care. The hospital bed 

occupancy at the Ministry of Health hospitals in major cities (Amman, Zerqa, Irbid) 

ranged from 78% to 83% in 2002, while the occupancy rate in private hospitals was 

44% (MOH Annual Report, 2002). Therefore, the Ministry of Health has been heavily 

involved during the past three decades in contracting with the private sector and other 

autonomous public sectors (i.e. RMS and JUH) to meet the health needs of its 

beneficiaries and uninsured poor people. 

This section assesses the overall capacity for contracting out health services in 

Jordan. The main topics covered include: the rationale for the Ministry of Health and 

other providers to contract; the political, legal, economic and social factors related to 

contracting; the strengths and weaknesses of purchasers and providers; and the 

administrative and technical capabilities of each party. 

The reasons behind the policy decision of the Ministry of Health in Jordan to 

contract out health services are related directly to the provision of health services or 

to health and social policy. 

Reasons related to the provision of services include: 

Unavailability of services (mostly tertiary level services as: cardiology and 

cardiovascular surgery, neurosurgery, plastic and constructive surgery, organ 

transplants, etc…) 

Shortage of beds, mainly in Amman, Zerqa and Irbid. 

Shortage of private rooms. 

Emergency cases. 

Patients’ preference (restricted for some private hospitals and usually involves copayment). 

Lack of the Ministry of Health hospitals (Aqaba, Taffilah, some areas in Amman). 

Shortage of diagnostic facilities. 

Shortage of medicine. 

Long waiting lists. 

With regard to health policy reasons for contracting out include: 

117

Jordan 

• Enhancing equity by referring insured patients to other sectors in order to provide 

access to the Ministry of Health services for poor and disadvantaged people who 

cannot afford treatment cost in private hospitals. 

• Taking into consideration the high unemployment rate (16%) and the high 

percentage (12%) of people below the poverty line, contracting out health 

services is becoming a social policy tool in Jordan. 

• Containing health costs by using underutilized hospital beds in private and other 

public sectors, instead of investing in building new hospitals. 

• Providing incentives for private hospitals to stay in the business and develop their 

services to attract more patients from other countries. This will have a positive 

impact on macroeconomic level and increase the national income from “medical 

tourism” which was about JD 400 million in 2002. 

• Relieving the Ministry of Health of the provision of some highly specialized 

medical services that require costly investment of capital and human resources. 

This will allow the Ministry of Health to divert resources, develop and extend 

primary health care services. 

• Changing the negative role of the government towards private hospitals to a more 

positive and supportive role. Instead of buying the bankrupt private hospitals (e.g. 

Queen Alia Hospital in Amman, Al-Nadim Hospital in Madaba, and the Specialty 

Hospital in Mafraq) the government policy now encourages purchasing services 

from private hospitals to help them prosper and stay in business. 

• Building partnership between the public and private sectors based on serving 

mutual interests of both parties. 

Reasons for the private sector to enter into contractual arrangements with the 

Ministry of Health include the following. 

• Fully utilizing the bed capacity (1905 beds) and the advanced diagnostic 

technology in private hospitals in order to achieve better return for investment 

and increase net profit. 

• Ensuring regular cashflow to meet recurrent hospital expenses. 

• Strengthening the competitive situation of the private hospital. It is considered as 

government accreditation. 

• Securing a stable and continuous revenue. Contracting with the public sector 

increases the revenue mix of the private hospitals and safeguards them against 

economic fluctuation. 

Political and legal environment 

Jordan began adopting a liberal economic policy as early as 1985 based on the 

redefinition of the roles of the government and the private sector. The primary 

responsibility is being assigned to the government for supervision, follow-up, 

regulation, safeguarding rights and ensuring equality of opportunities and 

competition. In 1996, the Jordanian privatization programme was officially 

announced. The main objectives of the programme were: attracting private 

investment; improving the efficiency of enterprise; and developing the local market to 

118

Jordan 

attract foreign investment, technology and know-how. Strengthening public–private 

partnership is one of the major policy directions of his majesty King Abdullah to 

successive governments. 

Privatization and partnership policies in Jordan are not intended to replace the 

traditional role of the Ministry of Health in the provision of health services. Rather, 

they aim to complement this role by opening wide doors into the private sector to 

utilize its health resources in an effective and efficient way that reflects positively on 

both parties and on the overall economy of the country. 

Contracting out services with the private sector is used by the government, to 

extend highly subsidized and free the Ministry of Health services to the poor and the 

vulnerable. The increasing number of contracts between the Ministry of Health over 

the past three years (e.g. King Abdullah Hospital, Al-Hussein Cancer Centre, Lozmila 

Hospital, Al-Mowasah Hospital, Al-Hayah Hospital) is evidence of the high political 

commitment towards the execution of contractual agreements. 

The existing legal mandates and regulations give authority to the Ministry of 

Health to contract with private and autonomous public health providers. This legal 

authority is stated explicitly in Article 26 of the Civil Health Insurance law number 

10, issued in 1983. This article reads: “The Minister of Health has the authority to 

contract out health services with private and autonomous public sectors (hospitals, 

doctors, laboratories, etc.) to provide health services for CHIP enrollees.” 

Article 4 of the high Health Council Law states that the Council should develop 

policies to strengthen the partnership between public and private health sectors and 

ensure that the two sectors complete and support each other. Policy number 6 in the 

Strategic Health Plan for 2004–2006 reflects high commitment of the government 

towards building robust relationships among the different health sectors to provide 

high quality, effective and efficient health services. The plan includes for the first time 

some projects related to the private sector. 

Jordan also has an advanced and independent judicial system. The Jordanian 

Constitution guarantees the independence of the judicatory authority. Thus, there are 

efficient and transparent mechanisms to recourse in the event of a dispute between the 

Ministry of Health and any contracting partner. 

Ministry of Health capabilities, strengths and weaknesses regarding contracting 

Due to its accumulated experience in contracting, the Ministry of Health has 

developed essential administrative and financial skills in contract management over 

time, especially within the Health Insurance Directorate (HID). The majority of the 

existing contractual arrangements are merely agreement protocols that lack 

competitive bidding procedures, performance evaluation or integrated computerized 

information systems. Therefore, most of the experience accumulated in the HID is 

limited to reviewing providers’ claims, processing reimbursement transactions and 

119

Jordan 

monitoring administrative arrangements to ensure that providers adhere to the 

conditions specified in each agreement. 

The fee-for-service system, which is prominent at the Ministry of Health, 

creates incentive for conducting multiple, sometimes unnecessary procedures, as well 

as over-billing by providers. As this type of payment mechanisms has proved to be 

less efficient worldwide and does not promote equity and quality (Hsiao W., 1997), 

the Ministry of Health has introduced new payment mechanisms such as leasing 

private hospital beds for a fixed payment per bed or a defined payment for a bundle 

fee per episode. The HID has also initiated steps to computerize its entire accounting 

system and network it with other governorates. 

The Ministry of Health, with technical support from PHRplus project (funded by 

USAID), is now implementing a Health Insurance Pilot Project (HIPP) to expand the 

administrative and technical capacity of the staff of the HID in the areas of contract 

design, contract monitoring and contract enforcement. This pilot project is based open 

bidding procedures and is expected also to have a positive impact on improving 

contracting skills of private hospitals. 

The existing bureaucratic set-up of the Ministry of Health does not provide the 

Health Insurance Directorate (HID) with sufficient authority and flexibility to manage 

contracts efficiently. The laws governing the HID are inflexible and the decisions 

related to contractual arrangements, including reimbursement rates, are taken at the 

central level of the Ministry of Health. The civil health insurance budget is also 

managed at the central level and it is outside the control of its managers. This 

exogenous budgeting system affords very little control or independence in financial 

decision-making or monitoring expenditures (Jordan’s National Health Accounts, 

Draft Report, 2004) 

Some genuine efforts have been made recently by the HID to undertake cost 

and price analysis prior to negotiations for new contracts. The lack of comprehensive 

and advanced computerized information system is a real obstacle facing the 

development of these efforts. Capacity to undertake a price and cost analysis also 

needs urgent strengthening in order to expand health insurance coverage through 

health insurance reform which is considered now a top national health priority. 

Monitoring and controlling the quality of the contracted services is one of the 

major challenges facing the Ministry of Health. Current monitoring procedures for 

contracts are not efficient, especially for measuring the quality and appropriateness of 

the health services provided by the private sector. 

Private sector capabilities, strengths and weaknesses regarding contracting 

Compared with the public sector, the private sector has better capabilities and 

experience in terms of technical and financial management capacity. Most private 

hospitals have introduced computerized information systems to manage their 

120

Jordan 

businesses efficiently. The managers of the private hospitals are more powerful and 

can adapt easily to the changing environment. Since 55% of the country health 

expenditures are in the private sector, this sector has developed contractual 

arrangements with different insurance companies, third party administrators and 

private firms. Therefore, private hospitals have better contracting skills and financial 

management that could reflect positively on its partnership with the public sector. 

The following are the main strengths and weaknesses of the private sector that 

should be taken into consideration when entering into a contractual agreement: 

Strengths: 

Advanced medical equipment of large hospitals. 

Skilled technical workforce. 

Good reputation outside Jordan, since one third of private hospitals’ revenue is 

from foreign patients. 

Good quality services especially hotel services. 

Relatively advanced computerized information system, especially financial and 

management systems. 

Good experience in negotiating contracts, especially with private health 

insurance companies. 

Weaknesses: 

Most private hospital beds (75%) are located in Amman (mainly in West 

Amman). 

Cashflow problems. 

Low bed occupancy rate (44%). 

Excess capacity in certain medical equipment and services. 

Less advanced equipment for small hospitals compared with large hospitals. 

Shortage of qualified nurses and paramedical personnel. 

Lack of treatment protocols and systematic quality control programmes. 

Inefficient role of the Private Hospital Association. 

Lack of skilled and professional managers. 

Inefficient cooperation within the sector. 

A strategic analysis showing strengths, weaknesses, threats and opportunities 

(SWOT) of the private sector is given in detail in Figure 1. 

121

• Advanced medical equipment of large 

hospitals. 

• Skilled technical workforce. 

• Good reputation outside Jordan, since 

32% of hospital revenues are from 

foreign patients. 

• More quality services compared with 

government hospitals. 

Direct effect 

Outside environmental effect 

• Relations with other players in the sector 

(public sector, insurance and 

pharmaceutical companies). 

• Misleading information regarding the 

performance of private hospitals. 

• Laws and regulations that organize the 

sector with related parties. 

• Low income levels per capita. 

• Potential competition. 

Jordan 

Jordanian private hospitals 

• Inefficient role for the Private Hospitals Association. 

• Cash flow problems. 

• Shortage in qualified nurses. 

• Less advanced equipment for the small hospitals 

compared with large hospitals. 

• Excess capacity and overlapping in certain medical 

equipment and services. 

• The bed occupancy rates are low (44%) compared with 

other health services providers. 

• Lack of skilled management expertise. 

• Inefficient cooperation within the sector. 

Source: Adapted from Deloitte & Touché (M.E.) “Financial and Regulatory Study of Jordanian Private Hospitals”, 

2001. 

Figure 1. Strategic analysis of the private hospital sector in Jordan 

122 

Direct effect 

Outside environmental effect 

• Privatization of public institution creates 

additional demand on private hospital sector. 

• The Higher Health Council, headed by the 

Prime Minister, is determined to regulate the 

hospital sector to maintain its competence and 

excellence on the regional level. 

• The implementation of a national health 

insurance plan is expected to increase demand 

on health care services, which will directly 

influence the performance of private 

hospitals. 

• Investment incentives and tax exemptions.

Expected risks and incentives 


Risks 

Jordan 

• The amount of financial claims from contracted hospitals may exceed the amount 

allocated in HID budget. 

• The tendency of the private hospitals to provide unnecessary or low quality health 

services to maximize revenues. 

• Some private qualified providers may be reluctant to participate in the contracting 

process due to anxiety over working with the public sector. 

• There is a possibility that private providers may change their behaviour and give 

priority to private patients. This may create long waiting lists and increase 

waiting time for the Ministry of Health patients. 

• There is a possibility that some political parties may misunderstand the objectives 

of the government from contracting. They may consider contracting as a way of 

“privatizing” health care and allowing government to avoid its responsibilities to 

provide services for the poor. 

Incentives 

• Improves accessibility for the Ministry of Health beneficiaries and poor patients. 

• Decreases pressure on and over-utilization of Ministry of Health facilities, 

especially in Amman. 

• Optimizes the utilization of health care resources in the country. 

• Could provide, if well negotiated and managed, better quality services with less 

cost. 

• Builds skills and experience in negotiation, preparation, management, monitoring 

and evaluation of contracts. 


Risks 

• Delay in accounts settlement due to bureaucratic procedures or shortage of 

budget allocations. 

• Due to competition, discounted contract prices may not be economically feasible. 

• Abrupt changes in government directions could incur financial loss for private 

hospitals. 

Incentives 

• Increasing bed occupancy rates and revenues. 

• Acquiring public financing and cash flow. 

• Improving the competitive position of the hospital. 

123

Jordan 

ASSESSMENT OF THE CONTRACTUAL ARRANGEMENTS BETWEEN 

THE MINISTRY OF HEALTH AND OTHER HEALTH CARE PROVIDERS 

Overview 

The Ministry of Health has more than 10 contracts/agreements with private 

hospitals and autonomous public providers, as shown in Table 4. According to these 

contracts, hospital services are provided to Ministry of Health beneficiaries according 

to the terms specified in each contract and funds are transferred by the Ministry of 

Health to each provider, as shown in Figure 2. The Health Insurance Directorate 

(HID) manages these contracts and agreements on behalf of the Ministry of Health. 

The management process includes negotiating, specifying terms and conditions of the 

contract or agreement, controlling and monitoring performance, reviewing and 

authorizing claims and reimbursement. 

The different contractual arrangements between the Ministry of Health and 

other health care providers may be grouped into three categories according to method 

of payment: 

1) Fee-for-service contracts 

Royal Medical Services. 

Jordan University Hospital. 

King Abdallah Hospital. 

Al-Hussein Cancer Centre. 

Lozmila Hospital. 

Crescent Hospital. 

Other private hospitals (for emergency cases only). 

2) Bed leasing contracts 

Al-Mowasah Hospital. 

Al-Hayah Hospital. 

3) Bundling of services contracts. 

124

Jordan 

Table 4. Profile of contractual arrangements between the Ministry of Health and other health care providers 

Provider Type of 

provider 

Date of 

contract 

Length 

of 

contract 

RMS Public/military 1982 Open Tertiary/secondary 

levels 

JUH Public/university 1973 Open Tertiary/secondary 

levels 

Al- 

Hussein 

Cancer 

Centre 

Philanthropy/notfor-profit 

2001 Annual Haematology and 

cancer cases 

KAH Public/university 2002 Annual Mainly tertiary 

level 

Al- 

Mowasah 

and Al- 

Hayah 

Hospitals 

Lozmila 

Hospital 

Red 

Crescent 

Hospital 

Other 

private 

hospitals 

Private/for profit July 

/2003 

Services covered Geographical 

scope of 

contract 

Annual Mainly secondary 

(General 

medicine+ General 

Surgery 

Private/for profit 2001 Annual Secondary care 

level 

Philanthropy/notfor-profit 

1999 Annual Secondary care 

level 

125 

Payment 

mechanism 

All regions Fee-for-service 

(30% discount) 





North regions Fee-for-service 


East Amman Bed leasing (all 

services 

included/MOH 

specialist 

physicians 

provide care for 

referred patients) 

Amman area Fee-for-service 


Amman area Fee-for-service 

(30% discount) + 

prospective (per 

case) 

Copayment 

Performance 

measures 

Management 

and financial 

effort 

------- ------ High 5 

If selfreferred 

------ High 11 

----- ------ High 1.7 

If self 

referred 

------ 

------ Direct 

supervision 

and monitoring 

of Ministry of 

Health 

physicians 

If self 

referred 

If self 

referred 

High 6 

Low 1.5 

------ High 0.5 

------ High 0.4 

Private/for profit ------ ------ Emergency cases All regions Fee-for-service ------ ------ Very High 6 

Annual 

cost/JD 

million

Other private 

hospitals 

Al-Hussein Cancer 

Centre 

Flow of Services 

Flow of Funds 

RMS 

Jordan 


KAH 

Figure 2. Contractual arrangements between the Ministry of Health and other health care providers 

126 

JUH 

Al-Mowasah and 

Al-Hayah 

hospitals 

Lozmila and Red 

Crescent hospitals

Fee-for-service contracts 


Jordan 

The agreement with Royal Medical Services (RMS) was signed in 1982. It defines and 

organizes the relationship between the main two public providers of health care in the country. 

According to this agreement, patients and funds flow from both directions (Figure 2). Thus, 

beneficiaries of civil and military health schemes can have access within certain conditions, to 

the Ministry of Health and RMS health facilities. 

Main features 

• Beneficiaries of the Civil Health Insurance Plan (CHIP) may be referred by the Ministry of 

Health hospitals for treatment at King Hussein Medical Centre. 

• Beneficiaries of the CHIP who live in Aqaba and Tafilah governorates are treated at RMS 

hospitals (Ministry of Health does not have hospitals in either governorate). 

• Beneficiaries of the Military Health Insurance Plan (MHIP) are treated at any Ministry of 

Health health centres near their residence. 

• Beneficiaries of the MHIP can be treated in the Ministry of Health hospitals in cities that lack 

RMS hospitals (i.e. Ajlun, Ma’an, Jarash, Mafraq). 

• Charges will be paid by each party according to fee-for-service as specified in the official fee 

schedule for the Ministry of Health and RMS, with 30% discount. 

• Emergency cases for beneficiaries of both sides are treated in the Ministry of Health or RMS 

facilities. 

• A joint committee from both sides meets every three months or ad hoc to review claims, 

settle accounts and resolve problems. 

• The annual financial balance for the past three years has been almost zero, with a total cost of 

approximately JD 5 million for each party. 

Strengths 

• Improves patients’ access to Ministry of Health and RMS health facilities. 

• Improves equity to beneficiaries from both parties by giving them the chance to benefit from 

health resources available at the Ministry of Health and RMS facilities. 

• Minimizes duplication of services and improves economic efficiency in the Ministry of 

Health and RMS. Thus, the Ministry of Health does not have to invest in tertiary medical 

services available in RMS hospitals, and RMS does not have to invest in establishing health 

centres or hospitals in locations served by MOH facilities. 

• Needs minimum monitoring and auditing efforts from both sides as the two parties are public 

not profit driven organizations. This is reflected clearly in Table 5, which shows that the cost 

per admission in RMS was JD 295, while it was JD 1563 in private hospitals with no formal 

contracts and JD 583 in all hospitals.

Weaknesses and limitations 

Jordan 

• With the absence of an effective referral system and co-payment, eligible patients may abuse 

the services available in the two sectors. 

• The accounting systems in both sectors, especially at the Ministry of Health, are not 

sufficiently well developed to trace and document all services provided to patients and the 

due charges. Therefore, the reported claims do not represent the real bill that should be 

reimbursed. 

• Some terms and articles in the agreement are not well stated and may have different 

meanings and interpretations. 

Table 5. Admissions and outpatient visits for insured patients treated outside Ministry of 

health facilities and their cost, 2003 

Organization/hospital Admissions Cost 

(JD) 

128 

Cost per 

admission 

(JD) 

Outpatient 

visits 

Cost 

(JD) 

Total costs 

(JD) 

RMS 8088 2 404 250 297 65 477 1 218 157 3 622 407 

Prince Zeid Hospital/RMS 1832 203 526 111 27 717 508 300 711 826 

JUH 14 349 6 166 458 429 245 923 4 806 258 10 972 716 

KAH 7209 4 432 719 614 30 796 1 399 806 5 832 525 

Al-Hussein Cancer Centre 745 1 407 305 1889 2602 259 855 1 667 160 

Red Crescent Hospital 445 245 833 552 --- --- 245 833 

Lozmila Hospital 627 419 600 669 --- --- 419 600 

Al-Mowasah Hospital* 1450 480 000 331 --- --- 480 000 

Al-Hayah Hospital* 547 292 500 535 --- --- 292 500 

Other private hospitals 

(emergency cases) 

2682 4 192 014 1563 --- --- 4 192 014 

Total 37 974 20 244 205 533 372 515 8 192 376 28 436 581 

Source: Directorate of Health Insurance. 

*The data for both hospitals cover the period from July–December, 2003 

Jordan University Hospital and King Abdullah Hospital 

Jordan University Hospital (JUH) was built in 1973 by the Ministry of Health as a referral 

hospital. In 1975 it was handed over by the government to Jordan University to function as 

teaching hospital to the Faculty of Medicine. The law by which the hospital was handed over to 

the University stated that the JUH should continue to act as referral hospital to the Ministry of 

Health and that the government should finance 50% of the hospital budget. The financial 

arrangement between the government, represented by the Ministry of Health, and JUH has 

changed frequently. The existing agreement, which was signed in 1998, specifies the obligations 

and responsibilities of JUH as health care provider and the Ministry of Health as purchaser and 

payer.

Jordan 

King Abdullah Hospital (KAH) was opened in 2002 to function as a teaching hospital to 

the Faculty of Medicine at Jordan University for Science and Technology. It serves as a referral 

hospital for all health sectors in Irbid and Northern Region. The Ministry of Health and KAH 

signed an agreement in 2001, similar to the JUH agreement, to provide medical services to the 

beneficiaries who are referred to KAH by the Ministry of Health hospitals in the Northern 

Region. 


• Emergency cases and patients referred by the Ministry of Health hospitals are treated without 

any co-payment. Self-referred patients pay 10%–30% of the hospital costs, depending on the 

category of their insurance plan. 

• The Ministry of Health pays each hospital according to its official charge scheme with 25% 

discount excluding medicines. 

• The Ministry of Health pays a monthly deposit to JUH and KAH (JD 400 000 and JD 

200 000, respectively). 

• The two agreements contain some caps to rationalize the utilization of services and contain 

costs (e.g. the referral letter expires after three months, the Ministry of Health pays only for 

two outpatient visits per month for each patient). 

• The Ministry of Health appoints a full-time liaison committee in each hospital. The 

committee reviews and authorizes claims and acts as coordinator between the hospital and 

the Ministry of Health in all aspects related to the agreement. 

• A higher joint committee headed by the Minister of Health with senior members from both 

parties is formed for each hospital to resolve problems, settle disputes and suggest changes 

on the terms and conditions of the agreement. 

Strengths 

• Provide access for the Ministry of Health beneficiaries to tertiary and presumably higher 

quality patient care available in teaching hospitals. 

• Minimize pressure and over-utilization of the two major Ministry of Health hospitals located 

in Amman and Irbid (Al Bashir Hospital and Basma Hospital). This reflects positively on 

social equity by giving the poor and uninsured people a chance to be treated in highly 

subsidized public hospitals almost free of charge. 

• Improve the utilization rates in the two teaching hospitals and provide them with regular 

cashflow to meet their recurrent financial obligations. In 2002, 64% of the total admissions in 

JUH and KAH were the Ministry of Health beneficiaries (JUH and KAH Annual Reports, 

2002). 

• Treating beneficiaries of the Ministry of Health in public teaching hospitals is more cost 

effective than treating them in private hospitals. The average cost of admission in private 

hospitals is almost three times higher than in JUH or KAH (Table 5). 

• It is more cost effective for the Ministry of Health to purchase tertiary care for its enrollees 

(beneficiaries) than to provide this service directly. In 2003, the Ministry of Health utilized 

129

Jordan 

60% of JUH beds (300 beds) with an average cost of JD 429 per admission, while the 

average cost of admission in all hospitals with which the Ministry of Health has formal and 

informal contracts was JD 533 (Table 5). 

• The agreements have some built-in mechanisms (utilization caps, liaison committees) to 

monitor overall performance, control costs and solve problems. 


• The liberal referring practice in the Ministry of Health hospitals is increasing the financial 

pressure on the Ministry of Health budget. In 2003, the cost of Ministry of Health 

beneficiaries treated at JUH and KAH was 58% of the total costs paid for all non-Ministry of 

Health hospitals (Table 5). 

• Teaching hospitals, especially in the absence of practice protocols, tend to provide more 

services than patients need. Thus, costs are more likely to increase. 

Al-Hussein Cancer Centre 

Al-Hussein Cancer Centre (HCC) was opened in 1997 as philanthropic, not-for-profit 

hospital. The centre has 131 beds. It provides diagnostic, treatment and rehabilitation services for 

cancer patients, including chemotherapy and radiotherapy. In 2001, the Ministry of Health and 

HCC signed an agreement for medical and scientific cooperation. 


• HCC provides medical services for the enrollees of the CHIP and uninsured patients who are 

referred by the Ministry of Health. 

• The Ministry of Health pays the treatment cost of its beneficiaries and the Ministry of 

Finance pays the cost of the uninsured patients. 

• Charges are paid according to HCC official charge scheme with 20% discount excluding 

medicines. 

• The Ministry of Health has a liaison office at HCC. The office checks eligibility of referred 

patients, reviews and authorizes bills and coordinates all matters related to the 

implementation of the agreement. 

• HCC allocates 10% of its revenues from this agreement for the Cancer Research Fund. 

• A joint cancer research committee from the Ministry of Health and HCC develops the cancer 

research agenda, approves research projects and recommends the budget for each project. 

• A higher coordination committee, headed by the general secretary of the Ministry of Health 

with two senior members from each party, is formed to resolve problems and settle disputes 

that may arise. 

130

Strengths 

Jordan 

• Provides access to integrated and highly specialized cancer services for insured and 

uninsured patients. This reflects positively on equity and quality of patient care. 

• Decreases pressure on and over-utilization of the two public cancer units at King Hussein 

Medical Centre and Al-Bashir Hospital. 

• Improves scientific cooperation between oncologists in the Ministry of Health and HCC and 

enhances cancer research in the country. 

• Improves the utilization rate at HCC and provides it with reasonable cashflow. The 

occupancy rate at HCC was 84% in 2003 (MOH Annual Report, 2002). 


• Reimbursement according to fee-for-service, the lack of co-payment and the absence of 

treatment protocols are incentives to increase the government bill of cancer patients. If this 

continues, it may force the government to reconsider its commitment regarding free 

treatment of cancer patients. 

• Scientific and research cooperation is not yet activated. 

• There are delays in reimbursement. 

Crescent Hospital 

Crescent Hospital is a 64-bed not-for-profit philanthropic general hospital situated in East 

Amman. According to the agreement which was signed in 1999, Al-Bashir Hospital, the largest 

Ministry of Health hospital, can referee beneficiaries to be treated at Crescent Hospital. 


• Only Al-Bashir Hospital can refer patients. 

• Crescent Hospital should only provide patient services related to the medical diagnosis 

specified in the referral report. 

• Except delivery cases, hospital charges are calculated according to minimum official fees 

authorized by the Ministry of Health and other medical authorities 

• Except delivery cases and medicines, the hospital offers 30% discount on the total charges. 

• Normal delivery, caesarean section and complicated delivery are charged fixed fees on a per 

case basis (JD 80 and 100 respectively). 

• Medicines are priced according to the drug store prices plus 20% 

• The director of Al-Bashir Hospital should review and authorize all claims before sending 

them to the HID for payment. 

• The Ministry of Health has the right to review the medical and financial records for any 

patient. 

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Strengths 

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• The agreement practically provides Al-Bashir Hospital with 64 beds to be used when needed 

without capital or fixed costs. At the same time, it improves the bed utilization rate at 

Crescent Hospital. Thus, efficiency is improved for both parties. 

• It involves as a first some prospective payment mechanisms (per case) as an endeavour by 

the Ministry of Health to contain cost of services. 


• As with other agreements, it lacks practice protocols and quality control mechanisms. 

• It does not provide the beneficiaries with the choice to be treated at this hospital and share 

part of the cost as co-payment. 

• There are delays in reimbursement. 

Lozmila Hospital 

Lozmila Hospital is 58-bed private for-profit general hospital situated in the middle of 

Amman. The current agreement was signed in April 2001. According to this agreement, Ministry 

of Health hospitals can refer beneficiaries to Lozmila Hospital and beneficiaries can go directly 

to the hospital and share part of the cost as co-payment. 


• Ministry of Health hospitals mainly Al-Bashir Hospital can refer insured patients to Lozmila 

Hospital. Beneficiaries can be treated without referral and pay 30% of the hospital fees. 

• Lozmila should only provide services related to the medical diagnosis as specified in the 

referral report. 

• As with Crescent Hospital, prices are allocated according to the minimum fees set by official 

authorities, with 25% discount excluding medicine. 

• The Ministry of Health appoints a committee to monitor and follow up all administrative and 

technical matters related to this agreement. The committee has the right to review medical 

and administrative records to audit all procedures and services related to the referred patients. 

• A hospital stay of more than five days requires approval from the committee. 

• If the Ministry of Health refers a patient for specific procedures, the hospital cannot charge 

any investigation without approval of the committee. 

Strengths 

• As with other agreements, it improves the access of Ministry of Health beneficiaries to health 

services and improves the utilization rate at Lozmila Hospital. 

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• The minimum charge scale, in addition to the discount rate and the co-payment mechanism, 

provide the Ministry of Health with relatively low cost health care services at (presumably) 

accepted quality. 

• The agreement has some caps on services ordered by the provider (e.g. approval of payer if 

the patient stay exceeds 5 days). 

Weakness and limitations 

• As other agreements, it lacks performance measures to assure quality of services. 

• Dependence on a committee to monitor performance does not guarantee always good results, 

as members of the committee change frequently and may lose interest if they do not have 

incentives or are not exposed to close supervision from higher authorities. 

• There are delays in reimbursement procedures. 

Other private hospitals 

All private hospitals including those who have formal contracts with Ministry of Health 

may admit emergency patients enrolled in the Civil Health Insurance Plan. For hospitals that do 

not have formal contractual relationships with the Ministry of Health, the Ministry will provide 

reimbursement only for those patients who are assessed as emergency cases. The burden of proof 

is on the hospital that provides the treatment, as well as on the patient. 

Specific and detailed procedures should be followed within 24 hours of any emergency 

admission in order that the Ministry of Health provides reimbursement. In 2003, the cost of 

beneficiaries treated in private hospitals as emergency cases was about JD 4 million (Table 5). 

The cost of an emergency admission in a private none contracting hospital is about three 

times as the cost of admission in a contracting hospital (Table 5). This provides evidence that 

contracting has significant effect on cost containment and thus increases efficiency. 

Bed leasing contracts 

Introduction 

The Ministry of Health has recently begun contracting out services with two private 

hospitals in East Amman on the basis of fixed payment against leasing a specified number of 

beds. In March 2003, the Ministry of Health signed a contract with Al-Mowasah Hospital to 

lease 40 beds, and in July 2003 the Ministry signed another contract with Al-Hayah hospital to 

lease 30 beds. The two contracts have been effective since July 2003. Because both contracts 

have the same conditions, the Ministry of Health contract with Al-Mowasah hospital will be 

presented here as example for this type of contracting. 

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Al-Mowasah hospital 

Jordan 

Al-Mowasah hospital is a private for-profit 160-bed hospital. It was opened in 2000 in 

Marka Region, east of Amman. The hospital is located in a low- to middle-income, highly 

populated area that lacks public and private hospitals. It is well built and equipped to 

accommodate most medical and surgical specialties. 

The hospital economic feasibility study was based on the assumption that the people living 

in East Amman will not go to hospitals in west Amman if they have modern and well-equipped 

hospital near to their residency. 

Before signing the contract with the Ministry of Health, the hospital was operating 48 beds 

with 20% average occupancy. As a result of the low occupancy rate, the hospital faced financial 

problems. The monthly loss was about JD 50 000 (US$ 75 000), as shown in Figure 3. 

Figure 3. Net loss of Al-Mowasah hospital before contracting with the Ministry of 

Health 

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The main reasons behind the low utilization rate, as expressed by the hospital director and 

highlighted by the results of a recent unpublished study (Baniawad, M., 2004) are summarized as 

follows: 

• Large percentages of people living in the hospital area are insured by the Ministry of Health 

and RMS and they go to public hospitals. 

• Uninsured poor people also seek treatment in highly subsidized public hospitals, mainly in 

Al-Bashir Hospital. 

• People who are wealthy and willing to pay usually go to private hospitals in West Amman, 

for reasons of social prestige. 

• The hospital site is inconvenient (high traffic, overcrowded, near a sewage treatment plant 

and slaughterhouse) and does not attract patients from other areas in the region. 


• The hospital provides the Ministry of Health with the full services of 40 beds (except 

medicines and services of attending physicians). 

• The Ministry of Health pays the hospital a flat rate of JD 1950 per bed per month (JD 65 per 

day). 

• The 40 leased beds are distributed by medical specialty as follows: 

18 beds for medical cases. 

18 beds for surgical cases. 

4 beds for intensive care cases. 

• One of the hospital floors with 36 beds is designated for the Ministry of Health patients. 

Thus, the Ministry of Health patients do not mix with other private patients. 

• The beds on the Ministry of Health floor are distributed equally among private, semi-private 

and regular rooms to accommodate the different categories of Ministry of Health 

beneficiaries. 

• The hospital provides the following services for the leased beds: 

Nursing services. 

In-house doctors. 

Diagnostic investigations excluding hormone tests, histopathology, MRI and angiography. 

All services needed to perform surgical procedures including anesthesia agents and 

medical gases. 

Medical and non-medical supplies excluding artificial implants and limbs. 

Administrative facilities and services, such as reception area, offices for Ministry liaison 

staff, lounge and rest facilities for Ministry physicians, pharmacy, store, medical 

records area, telephone facilities, patient transportation among hospitals in Amman. 

• The Ministry of Health provides the following: 

Attending (specialized) physicians to provide medical and surgical care for the Ministry of 

Health patients. 

Medicines and pharmacists. 

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Administrative staff to coordinate, supervise and monitor the implementation of this 

contract on daily basis. 

• A committee from the Ministry of Health is assigned to control and monitor all 

administrative aspects related to this contract. The committee reports directly to the Minister 

and should assure full utilization of the leased beds, high quality of services for the Ministry 

of Health patients and that all contracted services are met by the hospital. 

• If the hospital does not meet any of its obligations as specified in this contract, the Ministry 

of Health control committee has the right to make the necessary arrangement to compensate 

for this and deduct the cost from the hospital payment. 

• The Ministry of Health pays the hospital at the end of each month. 

• The hospital provides the Ministry of Health with six outpatient clinics for JD 2000 per clinic 

monthly. The services provided by the hospital for outpatient clinics include physical 

facilities and nursing services only. Diagnostic services are provided to Ministry of Health 

outpatients according to the minimum rate, with 25% discount. 

• The Ministry of Health has the right to rent all the beds of the hospital. In this case, the 

hospital must evacuate its patients within 24 hour notice. 

• The duration of the contract is one year. It is self renewed. However, each party has the right 

to discontinue the contract or change its contents against written request before two months 

of the expiry date. 

Strengths 

For the Ministry of Health 

• It provides instant expansion to Al-Bashir Hospital (40 beds which could be increased to 160 

beds) without bearing any capital investment. The average capital cost per hospital bed in a 

modern general hospital in Jordan is about JD 100 000 to JD 150 000. Thus, the contract 

saves about JD 5 million for the Ministry of Health budget. 

• It improves the access of insured patients to relatively high quality hospital care and 

minimizes the pressure on Ministry of Health hospitals in East Amman (mainly Al-Bashir 

Hospital). This has a positive impact on the access of the poor to highly subsidized hospital 

services offered by the Ministry of Health. 

• The average cost per admission is JD 331. This is about 50% of the costs that the Ministry of 

Health pays to other private hospitals with fee-for-service contracts (Table 3). 

• The general feedback from patients reflects better satisfaction levels. This is likely because 

of: 

Better standards of hotel services. 

Flexible visiting hours. 

Short waiting lists. 

Better response of the staff to patients needs. 

Geographical accessibility. 

Availability of private and semi-private rooms. 

No crowds. 

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• Interviews with the Ministry of Health staff working at Al-Mowasah Hospital (five 

physicians and five administrative and technical staff) reflect high morale and job 

satisfaction. 

• Since payment is based on a flat rate, the Ministry of Health administrative and financial 

costs are low. 

• Budgetary allocations are specified in advance and financial fluctuations are not permitted. 

• As the Ministry of Health physicians are available most of the time in Al-Mowasah Hospital 

and participate in the provision of patient care, the Ministry of Health can monitor directly 

the quality of care and guarantee that insured patients receive proper care. 

In brief, this contract provides the Ministry of Health with effective, efficient, good quality 

and accessible patient care with high satisfaction of both patients and the Ministry of Health 

staff. 

For Al-Mowasah Hospital 

• The 40 beds leased by the Ministry of Health increased the working hospital beds to 83 and 

guarantee 48% bed occupancy year-round. Taking into consideration the beds operated by 

the hospital for private patients (43 beds), the average occupancy rate during 2003 was about 

58%. It was reported by many hospital administrators that most private hospitals in Amman 

usually reach the break-even point at 40% bed occupancy rate. 

• Due to the significant increase in bed occupancy rate, the hospital was able to avoid loss and 

achieve net profit (10%–12%) as shown in Figure 4. 

• The contract involves minimal administrative costs. 

• The contract provides the hospital with regular income and cash flow. This reflects positively 

on: 

The financial reputation of the hospital. 

The maintenance of physical facilities and equipment. 

Job security and morale of the hospital employees. 

The general public image towards the hospital. 

Overall productivity of the hospital. 

Strengths related to economics 

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• This contract provided the Ministry of Health with accessible and cost-effective patient care 

with acceptable quality standards. It also provides Al-Mowasah hospital with reasonable 

return for investment (income) to stay in business and prosper. Thus, the microeconomics of 

both parties was improved. 

• On macroeconomics level, Al-Mowasah hospital, as other private hospitals, is considered a 

national asset. Thus, keeping the hospital in business saves about JD 10 million (the hospital 

investment) for the country. The contract helps the hospital keep about 200 employees on the 

job. It improves equity and access of insured and uninsured poor patients living in less 

advantageous areas in East Amman. 

• This type of contracting represents a model for public–private partnership that achieves the 

interests of both parties (a win–win model). 

• It creates a joint venture partnership between the public and private sectors. It opens the 

doors for the Ministry of Health physicians to practise in private hospitals to serve public 

insured patients. The contract proves and demonstrates that “public wards” can exist in 

private hospitals, changing the traditional model of having “private wards” in public 

hospitals. It is an endeavour to bridge the gap between public and private sectors. It creates a 

positive atmosphere which both sectors complete, rather than compete with, each other. 


• The contract was not based on open bidding process. Therefore, other private hospitals, 

especially in East Amman, claim that they were not given equal opportunity. 

• Some conditions and articles of the contract were general and not stated in explicit terms. 

• As other contracts and agreements, it lacks performance indicators to monitor quality of 

services. 

Figure 4. Net profit of Al-Mowasah hospital after contracting with the Ministry of Health 

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• This type of contracting is not yet robust and may not stand against pressures that could be 

exerted upon the Ministry of Health to abandon it. 

Bundling of services contracts 

Background 

The Ministry of Health seeks to expand the administrative capacity of the Health Insurance 

Directorate (HID) in the areas of contract design, contract monitoring, and contract enforcement. 

Therefore, the Ministry is implementing a Health Insurance Pilot Project (HIPP), with support 

from the Partners for Health Reformplus (PHRplus) project, Amman, Jordan. It was decided that 

obstetric services, which are frequently contracted out to private sector hospitals, should 

constitute the preliminary bundle of services to be contracted under the HIPP (Khasawneh A., 

PHRplus, 2003). 

Preliminary steps 

Prior to implementation, several steps were taken as follows. 

• An advisory committee of senior-level the Ministry of Health executives was appointed to 

oversee the development and operation of the HIPP. 

• An implementation Unit (IU) was established within the HID to manage the contracts. 

• An ongoing training programme was initiated for the IU staff with technical assistance from 

the PHRplus project. This programme covers contract design, implementation, monitoring 

and enforcement. 

• Two geographical sites were selected (East and West Amman) for the project. 

• A bundle of maternity and maternity-related services was specified, which includes pre-natal, 

delivery and postnatal services. 

• A list of potential enrollees was established (250 women). 

• Clinical guidelines and standards for prenatal, delivery, post natal and neonatal were 

developed. A series of focus groups were conducted for physicians to assess the technical 

merits of the guidelines as well as their prospects for implementation. 

• Focus group discussions were conducted by a private market research organization to 

establish baseline consumer opinions and expectations. 

• A private hospital survey was conducted to gather information about the capacity of private 

hospitals for providing reproductive health services and their interest in participating in the 

project. All hospitals surveyed stated that they would be willing to participate in the HIPP. 

• A final HIPP contract was drafted and reviewed by the office of legal affairs within the 

Ministry of Health. 

• A management information system (MIS) was installed and tested. The system will support 

the contacting process by maintaining patient-specific enrollment, payment and utilization 

databases and by supporting provider billing and payment functions. 

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• A qualification process was completed, and the bidding contracts will be distributed to the 

qualified hospitals (see Annex 2 for “Request for Qualification” form). 

Assumptions of the pilot programme 

• General programme assumptions 

250 insured women, married, seeking to be pregnant. 

2–3 hospitals contractors competitively selected, each accepting a fully bundled fee per 

episode. 

Episode includes all prenatal care, delivery, newborn care while in the hospital, and postnatal 

care for the mother including family planning. 

Hospital is paid the entire fee by the HID, and hospital is responsible for contracting with 

physicians and other necessary services. 

Protection from provider incentives to under-serve patients by imposing quality standards. 

• Enrollment assumptions 

Enrollees assigned to a hospital and a specific physician on enrollment (with enrollee 

getting a choice). 

Participation in pilot is in lieu of other HID benefits pertaining to the episode of pregnancy. 

Woman may select to opt out of the pilot by appeal to HID at any time. 

Enrollees and husbands will sign an agreement to establish terms and conditions of 

participation. 

• Pricing assumptions 

Payment is a fixed price per episode, as set forth in a payment schedule by HID. 

8–10 separate rates define the rate schedule, according to the difficulty of the pregnancy, 

delivery, and neonatal care needs. 

All hospitals will be paid the same rates. 

Payment will be paid in three sums, after first ante natal visit, after delivery, and after the 

episode is complete. 

Payment is contingent on proper HIS data submission, and proper documentation of quality 

care. 

Special provisions need to be made for equitable risk sharing between HID and the 

contracting hospitals: outlier supplementary payments, and exclusions for 

catastrophic cases. 

• MIS assumptions 

All encounter forms and enrollment forms will come to the IU in hard copy, and will be 

entered into the MIS at the IU offices by IU staff. 

Medical coding will be done by IU based upon narrative descriptions provided on 

encounter forms, verification may require phone call to provider. 

IU will prepare monthly reports for delivery to each contract provider: received bills not 

yet paid; total programme activity and payments to date; and enrollees by status. 

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Conclusions 

The results of the study show that the Ministry of Health has at least 8 formal contracts or 

agreements for purchasing health services, 5 with private hospitals and 3 with autonomous public 

providers. Six contracts were reimbursed according to fee-for-service and two contracts were 

paid a fixed payment against leasing a specific number of hospital beds (Al-Mowasah and Al- 

Hayah hospitals). In addition to these formal contracts, the Ministry of Health has informal 

contracts with private hospitals to admit insured patients in case of emergency. About 38 000 

Ministry of Health enrollees were admitted to the hospitals with which the Ministry has formal 

and informal contractual agreements. The total annual cost for these admissions is about JD 28 

million, with an average cost of JD 535 per admission. 

The Ministry of Health, with the support of PHRplus, is implementing a Health Insurance 

Pilot Project (HIPP). The main objective of this project is to expand the administrative and 

technical capacity of the Ministry of Health in the areas of contract design, contract monitoring, 

and contract enforcement. Obstetric services constitutes the preliminary bundle of services to be 

contracted under the HIPP, and payment will be according to a fixed price per episode. Several 

steps have been taken prior to implementation of the project, such as: the establishment of 

implementation unit, development and testing of computerized MIS, development of clinical 

guidelines and protocols and preparing final contracts. The qualification process was completed 

recently and bidding documents will be distributed to the qualified hospitals very soon. 

The results of the study showed that most of the contractual arrangements have positive 

impacts on the purchaser (the Ministry of Health) and the providers (private and autonomous 

public hospitals). As this report shows, contracting has improved access, efficiency, 

sustainability, promoted public health goals, and created an environment conductive to public– 

private collaboration. Although there is no evidence base, the quality of contracted services is 

likely to be satisfactory. This may be attributed to the fact that most of the contracted hospitals 

have highly skilled and well trained health personnel, advanced medical equipment and 

advanced diagnostic facilities, and have achieved a good medical reputation both inside and 

outside Jordan. 

On the macroeconomics level, contracting out services is successfully being used by the 

government as a social and economic policy tool in dealing with the effects of poverty and 

unemployment. Indeed, the admitting of 38 000 insured patients outside the Ministry of Health 

facilities in 2003 for example, has provided almost equal number of admissions for uninsured 

poor patients in the Ministry of Health hospitals nearly free of charge. Utilizing some of the idle 

beds in the private sector will reflect positively on the government’s efforts to contain the rising 

health care expenditures and encourage the private health sector to grow and participate 

effectively in the national economy. 

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The study also identified some challenges that may hinder public–private partnership and 

should be jointly addressed. These challenges include: 

• Shortage of national administrative and technical skills in contract design, monitoring and 

management. 

• Lack of inadequate computerized management information system in both sectors. 

• Lack of treatment protocols and guidelines to control and monitor the quality of services. 

Even in the presence of these protocols, several private hospitals stated that they would be 

unwilling to participate in the HIPP if clinical guidelines were proposed (Banks D. and 

Shahrouri M., PHRplus, 2003). 

• Lack of cost analysis and proper pricing mechanisms. 

• Creation of incentives for conducting multiple unnecessary procedures by the fee-for-service 

system, which reflects negatively on cost and quality of contracted services. 

• Lack of open and competitive procedures used for awarding contracts. Sole source 

recruitment may result in “fat and happy contractors” who do not have to innovate or 

improve their efficiency and have lucrative contracts. 

• Delay in payment due to bureaucratic procedures or short budget allocations. This delay was 

a main cause of poor levels of satisfaction with the Ministry of Health as a client (Banks, D. 

and Shahrouri, M., PHRplus, 2003), (Fahmi Alaostah, 2004). 

• Oversupply and duplication of expensive services caused by the uncontrolled growth of the 

private sector. Aggravated by the inefficient role of the Private Hospital Association, this 

situation is likely to weaken the bargaining position of the private hospitals and may lead to 

severe discounted prices. This eventually may have a negative impact on the quality of 

contracted services. 

• The existing bureaucratic set-up and centralization of decision-making and budgetary 

allocations that prevail in the Ministry of Health, as well as in other government 

organizations, which could be an obstacle to develop innovative and business like 

management in the Health Insurance Directorate. 

• Mutual trust and confidence do not always dominate the relationship between the Ministry of 

Health and the private sector. 

Recommendations 

The following recommendations are proposed to meet the above challenges and create an 

environment conductive to public–private collaboration in Jordan. 

1. A national programme for capacity building in contract design, monitoring and 

management should be developed. This programme would help further strengthen the 

capacity of the private providers to deliver services effectively and efficiently. 

2. Treatment protocols and guidelines should be developed to control the quality and 

appropriateness of the contracted services. The private sector should participate in the 

development of these standards. 

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3. Prospective payment mechanisms (i.e. capitation, leasing of services, case payment, 

bundling of services) should be explored and tested. 

4. The Health Insurance Directorate should be given greater autonomy, to increase 

operational efficiency. 

5. Patients should be given more freedom to choose among contractors (autonomous public 

and private hospitals) with co-payment, in order to create market competition and improve 

efficiency and quality of contracted health services. 

6. Competitive and open bidding based on both technical responsiveness and price should be 

extended and encouraged. The major advantages of competitive bidding are that it will 

provide the least cost approach for the delivery of services, spark competition based on 

effectiveness and efficiency, and provide an objective basis for selecting contractors. 

7. A cost analysis system should be developed to provide real cost information for negotiating 

fair contract prices. The Jordan’s National Health Accounts Project could provide valuable 

information and technical assistance to develop a cost analysis system in public and private 

hospitals. 

8. The public and private sectors should develop and implement a computerized health 

information system to manage contracts effectively and efficiently. 

9. On-time payment should be made a top priority for the Ministry of Health. Some of the 

options to achieve this include: removing bureaucratic barriers, securing budgetary 

allocations, providing incentives to HID staff for on-time payment, and paying monthly 

installments to providers. 

10. The private hospitals should work together and share experiences and identify areas (e.g. 

quality assurance, utilization review, cost analysis) where they may require additional 

training, technical assistance or operational research. Strengthening and activating the 

Private Hospital Association should be of high priority for the private health sector. 

11. Government incentives (e.g. continuing education, tax incentives, training opportunities, 

soft loans and fair prices) are important to the viability of the private sector and should be 

tailored to match the needs and stated health policy of the country. These incentives will 

also set the platform for true partnership between the two sectors; a partnership that is built 

on mutual interest and confidence. 

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SOURCES 

Jordan 

Al-Aostah F, 2004. The Relationship between the Civil Health Insurance and the Private 

Hospitals in Jordan. Unpublished study, The Arab Academy for Financial and Banking Sciences, 

Amman, Jordan. 

Baniawad M, 2003. Assessment of the Contract between the MOH and Al-Mowasah Hospital, 

unpublished paper, Jordan University of Science and Technology, Jordan. 

Banks D, Shahrouri M, 2003. The Provision of Reproductive Health Services in Private 

Hospitals in Amman, Jordan, Partners for Health Reformplus, Amman, Jordan. 

Gaumer G, Murphy M, 2003. Health Insurance Pilot Project: Technical Assistance for the 

Implementation of Management Information System. Trip Report, Partners for Health 

Reformplus, Amman, Jordan. 

Health Insurance Directorate, 2002. Health Insurance Directorate Annual Report, 2002. 

Hsiao W. How Should A Nation Finance Its Health Care? Paper presented to the World Bank 

Regional Seminar on Health Sector in Middle East and North Africa, 8–11 June, 1997, Cairo, 

Egypt. 

Jordan National Health Accounts, 2001. Draft Report, 2004. 

Kasawneh A, 2003. Review of Work Plan, Technical Accomplishments, Health Insurance Pilot 

Project, Partners for Health Reformplus. Amman, Jordan. 

King Abdullah Hospital, 2003. King Abdullah Hospital Annual Report, 2003 

Ministry of Health, 2002. Annual Report, 2002. Amman, Jordan. 

Royal Medical Services, 2002. Royal Medical Services Annual Report, 2002. Amman, Jordan. 

World Bank Group, 1997. Hashemite Kingdom of Jordan: health sector study. Washington, DC. 

World Bank Group, 2002. Country profile tables. Hhttp://www.worldbank.orgH 

World Health Organization, Regional Office for the Eastern Mediterranean 2003. Country 

profiles. Hhttp://www.emro.intH 

World Health Organization, Regional Office for the Eastern Mediterranean 2003. The Role of 

Contractual Arrangements in Improving Health Sector Performance in Countries of Eastern 

Mediterranean Region, Proposal Document, 2003. 

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Annex 1 

CONTRACT/AGREEMENT ASSESSMENT TOOL 

Name of organization/hospital: 

Date of contract: 

Duration of the contract: 

Reason of contracting (from both sides’ perspectives): 

Persons eligible: 

Services covered by the contract/services not covered: 

Patients’ referral system: 

Method of reimbursement (i.e. fee-for-service, per capita, etc….) 

Co-payment (if any): 

Claims and financial reviews: 

Quality control methods (if any): 

Types of disputes: 

Ways of handling disputes: 

Contract amendments (if any): 

Information provided to beneficiaries about terms and benefits of the contract: 

Strengths (from both sides’ perspectives): 

Weaknesses (from both sides’ perspectives): 

Suggestions to improve the contract: 

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Annex 2 

REQUEST FOR QUALIFICATION 

Hashemite Kingdom of Jordan 

Health Insurance Pilot Project (HIPP) 

(RFQ-HIPP-001) 

The Government of Jordan via the Ministry of Health (MOH), and the partners for Health 

Reform Plus, is seeking expressions of interest from qualified private hospitals in Jordan to 

participate in the Health Insurance Pilot Project (HIPP). 

The HIPP seeks to promote partnership between the public and private sectors, through the 

provision of hospital-based obstetric and newborn services to MOH beneficiaries. Private 

hospitals that participate in the HIPP will be selected through a competitive bidding process. 

Interested private hospitals, located in Amman, are asked to submit the following information: 

A statement of qualification that details 1) the length of time that the hospital has been 

conducting business in Amman; 2) its location; 3) organizational chart, which clearly list 

the number of department within the hospital; 4) utilization information: 5) number of 

deliveries and C-sections performed during the last year; 6) staffing patterns, to include 

number of nurses, midwives, physicians and ancillary staff; 7) description of the medical 

records system currently being used; 8) relevant equipment inventory, to include numbers 

and types of incubators; 9) types of services provided (e.g.’ onsite pharmacy, radiology); 

10) number of operating rooms, including the availability of separate operating from for Csections; 

and 11) the availability of outpatient clinics for obstetrics and pediatrics. 

Statements of qualifications must be delivered to address below by 9 January 2004: 

PHRplus/HIPP 

P.O. Box 831152 

Amman 11181 Jordan 

Interested hospitals may obtain further information by contracting the person listed below, 

during office hours: 

PHRplus/HIPP 

Tel: 567-5507/09 Extension 14 

E-mail: akhasawneh@phr.com.jo 

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Lebanon 

LEBANON

INTRODUCTION 

Lebanon 

Contractual arrangements play an important role in the health sector in Lebanon. This owes 

to two main historical developments in post-independence Lebanon: the organization of 

Lebanon’s economy and social structure along a liberal model; and the profound consequences 

of the civil war (1975–1991). Since its independence in 1943, Lebanese society has been 

organized along a liberal model, emphasizing relatively open markets and encouragement of 

private initiative, leading to gradual growth of the nongovernmental health sector. 

Concomitantly, during the relatively prosperous years prior to the civil war, i.e. the 1950s–1960s, 

the state took steps towards ensuring and protecting citizens’ interests in the health area, such as 

the establishment of the National Social Security Fund (NSSF) in 1961 and developing 

legislation to provide free health care for the indigent. 

The outbreak of civil war in 1975 put an end to ambitious plans for public health 

protection, for example through expanding the coverage of the NSSF to include the entire 

Lebanese population as well as establishment of a strong public health system. During the civil 

war years, the role of the government was severely limited. This affected both the provision of 

health services, with profound deterioration of governmental health facilities, as well as 

regulation of the health sector, including the stewardship role of the Ministry of Public Health. 

The nongovernmental sector grew tremendously to fill the gap. For example, nongovernmental 

oragnizations played an important role in providing essential services in different areas in 

Lebanon, across the lines of divide. With the dismantling of the economy and worsening of 

social conditions, the government played an increasingly important role as a financer of health 

services for uninsured Lebanese. 

In the post-civil war years since 1991, the growth of the private sector continued while the 

re-construction efforts of the successive governments took precedence over rebuilding the health 

care sector. The nongovernmental health sector (e.g. private practitioners, hospitals, 

nongovernmental organizations) became the dominant providers of increasingly complex, more 

expensive and high-tech specialist-based health care services, while governmental and public 

agencies (e.g. NSSF) became increasingly the financers of these services. Health care costs skyrocketed 

(Lebanon spends 12%–13% of its GDP on health, second only to the US), but this was 

not associated with commensurate improvements in health outcomes. This led in the mid 1990s 

to increasing calls for health sector reforms and culminated with the formation of an interministerial 

reform committee to design large-scale reforms, aided by a US$ 37 million loan from 

the World Bank. Due to multiple factors, large-scale reform efforts have not proved successful. 

While discussions on the scope of reform continue today, there is increasing recognition of 

the importance of smaller scale reforms. For example, the Ministry of Public Heatlh has tried to 

assume a more visible and more effective regulatory role, which corresponds to its important 

roles as a financer of health care services for a large segment of the Lebanese population and as a 

steward of the health system. Other financing agencies also increasingly see the need to use tools 

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Lebanon 

at their disposal for regulating health care services and improving quality of care, while 

controlling health care costs. Contractual arrangements are among the main tools that these 

agencies have for carrying out these tasks. The main objective of this report, therefore, is to 

evaluate how well this is done given the available opportunities. 

The specific aims that correspond to this objective include: 

1. Describe current contractual arrangements in which the main public agencies are involved. 

Focus on contractual arrangements of the MOPH. 

Examine case studies of hospitalization and ambulatory care. 

2. Evaluate contractual arrangements in terms of their ability to meet the stated needs in terms 

of: 

Responding to demands of financing agencies. 

Fulfilling essential public health functions, especially public health protection. 

3. Address the questions posed in the study questionnaire distributed by the WHO Regional 

Office for the Eastern Mediterranean.. 

Contractual arrangements are but one tool in the hands of health policy-makers to enhance 

performance of the health sector. Therefore, evaluation of contractual arrangements must 

consider other tools and mechanisms. Nevertheless, in a country like Lebanon, where 

nongovernmental parties dominate the health sector, the contractual arrangements by themselves 

merit evaluation as a key tool for regulating performance of the different functions of health care 

delivery. This is the main rationale for this effort. 

APPROACH AND METHODS 

Conceptual framework and approach 

The first aim of the report is to provide a technical overview of contracting arrangements in 

Lebanon. The report attempts to synthesize data from multiple resources to understand, and when 

possible assess, the contribution and performance of contractual arrangements in the health 

sector. The report utilizes commonly available indicators, such as those of process indicators, 

utilization patterns and expenditures, to achieve this purpose. 

The report also aims to review contractual arrangements in light of broader health care 

sector and health system issues in Lebanon. To this end, the report evaluates contractual 

arrangements in relation to two overarching concerns, social protection and equity. 

Consequently, the report attempts to look beyond cost and technical and administrative efficiency 

into how contracting arrangements are able to serve foremost those most in need. Many of the 

available indicators, however, do not tell the whole story of the ability of the contracting 

arrangements, or for that matter the health sector, to contribute to social protection and to 

improving equity. Other indicators, e.g. those exposing inequalities, are needed but are 

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Lebanon 

commonly missing. In such a situation, exposing equity-sensitive deficiencies of knowledge, 

attitudes, practices by contracting partners, and areas where data needs to be collected, become 

important in itself and this has been the approach taken here. 

Many of the major determinants of health lie outside the health sector. Choices and 

contents of contractual arrangements are directly affected by the positions of regulating bodies 

(i.e. government) on the relevance of broad determinants to health and health sector 

performance. Such determinants are rarely reflected, however, in discussions of contractual 

arrangements. Analyzing contractual arrangements in light of sociopolitical determinants 

requires understanding of the performance of the Lebanese economy and social and political 

organization. While such a broad analysis may be beyond our focus, they constitute the context 

within which contractual arrangements must be understood. As such, an attempt must be made to 

bring these perspectives in discussions of contractual arrangements. The Report attempts to do so 

in a modest way. 

If “health sector” is interpreted broadly to mean “health system”, then contractual 

arrangements must be evaluated in a much broader context. This would necessitate evaluation of 

how contractual arrangements relate not only to health care delivery but also to performance of 

other, broader, components of the health system, such as nutrition and basic social services. 

Because this endeavour is potentially complex and very wide in scope, limited reference is made 

to health system issues beyond care delivery. 

While there are opportunities to improve the use of contractual arrangements as a tool, 

recommendations for so doing cannot be separated from the broader issues of health sector 

reform in Lebanon. A detailed consideration of health sector reform in Lebanon is beyond the 

focus of this report. However, an attempt is made to contextualize recommendations for 

improving use of contractual arrangements in relation to previously made recommendations for 

health sector reform in Lebanon. 

Considering the sheer number and breadth of contractual arrangements in Lebanon, there 

are multiple ways of classifying and summarizing these arrangements. This can be done 

according to which agency is involved (e.g. MOPH or NSSF), contracted party (e.g. hospitals, 

primary care centres, or other parties), types of service provided (e.g. hospitalization versus 

outpatient services), or other criteria. In this Report, an attempt was made to provide insights into 

contractual arrangements from different angles to enhance understanding of the complexity of 

the issues. A mixed approach is taken in which contracts are briefly mentioned according to the 

different governmental agencies involved, while case studies investigate specific aspects of 

service delivery. 

Finally, an attempt is made to proceed beyond identification of problems into recognizing 

aspects of good performance and opportunities for improving performance. 

150

Research methods and data sources 

Lebanon 

The following methods were in light of the conceptual framework and approach. 

1. Review of literature on contracting arrangements. Literature on contracting arrangements 

supplied by the Eastern Mediterranean Regional Office was reviewed. Additional peerreviewed 

literature was sought on Medline as well on the internet using two independent 

search engines. 

2. Review of literature and reports on health sector in Lebanon. Literature concerning health 

sector in Lebanon was reviewed to better summarize the current Lebanese situation, 

develop the conceptual framework in light of literature on contractual arrangements, and 

identify key performance indicators which are relevant to the Lebanese context. Several 

sources of data were searched. 

Peer reviewed literature on and health and health sector in Lebanon was sought on 

Medline. The Lebanese Corner at the Saab Medical Library at the American 

University, the largest health library in Lebanon, was manually searched as it contains 

articles that are not electronically indexed. 

The internet was searched for relevant documents using two different search engines. 

The health information centre recently created at WHO country office in Beirut was also 

searched for additional literature. 

Regional journals, such as the Eastern Mediterranean Health Journal, which are not fully 

indexed by Medline were manually searched and issues covering the past 5 years 

were screened for articles concerning health and health sector performance in 

Lebanon. 

Documents concerning public health in Lebanon produced by different governmental 

offices, especially the Ministry of Public Health, international agencies, e.g. WHO 

and World Bank, academic institutions were reviewed for material relevant to 

contractual arrangements. 

3. Key informant interviews. Interviews were conducted with key informants from the 

different public financing agencies (e.g. Ministry of Public Health, Ministry of Social 

Affairs, National Social Security Fund), international agencies (e.g. World Health 

Organization), academia, public health experts, and consumers. The scope of interviews 

could have been expanded quite considerably to include all partners, but time and 

resources were limited. Furthermore, the report draws on the intimate knowledge of the 

author of health sector issues in Lebanon, which fills some of the gap in the interview 

schedule. Although the study could have solicited more consumer voices as well as more 

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Lebanon 

input from contracted parties, the study was not designed for this purpose and therefore this 

was limited in scope. 

4. Synthesis of data. Information from multiple sources was synthesized. In light of the 

breadth of contractual arrangements in Lebanon, several case studies were conducted, 

rather than focusing on one study, to examine the performance of different levels of the 

health sector in Lebanon. Reviewing several case studies jointly also allowed for 

identification of important opportunities for improving performance through strategies of 

coordination and integration. 

5. Summary of findings and recommendations. Based on examination of current situation, a 

scorecard is developed to illustrate where contractual arrangements have succeeded and 

failed, and to identify future steps that can be taken to improve performance. A set of 

recommendations are provided. These build on identified strengths and weaknesses. They 

represent a point for discussion with different stakeholders in Lebanon. 

The checklist provided by the Regional Office for assessing the role of contractual 

arrangements was useful both in guiding in the actual research and in developing the report. 

However, it was not possible to answer all questions in the checklist meaningfully for all the 

different contractual arrangements in Lebanon. This is mostly due to the sheer number of these 

arrangements. 

FINDINGS 

Health sector in Lebanon 

Lebanon is a middle-income country of approximately 4 million inhabitants (80% 

urbanized) who live in 6 administrative regions, or mohafazat. The greater Beirut area houses 

more than 40% of the population. Around 45% of Lebanese are under the age of 21 years and 

10% are over age 65. Lebanon has favourable health indicators compared with other countries of 

the Eastern Mediterranean Region: life expectancy is 72 years for females and 69 years for 

males; overall and infant mortality rates are 7 and 28 per 1000, respectively (regional health 

inequalities are notable). Lebanon has undergone an epidemiological transition, with over 80% 

of the current mortality burden due to noncommunicable diseases and 10% due to injuries. The 

morbidity profile, compiled in the context of a national burden of disease study, suggests a 

similar pattern. 

Health is an important component of economic activities, consuming 12%–13% of GDP. 

Most health spending, however, is out-of-pocket (around 70%–75%), more heavily shouldered 

by the poorer segments. Slightly more than 10% of all public expenditures go to health. The 

main public financers are: the Ministry of Public Heatlh (receives 4% of the total budget and 1% 

of GDP), NSSF, Civil Service Cooperative (CSC), Ministry of Defense, Ministry of the Interior 

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Lebanon 

and local municipalities. Enrollees and beneficiaries of these financing schemes are discussed 

later. 

Due to past unregulated growth of the private sector, which dominates the provision of 

health services, and various malfunctions of the public sector, the health sector suffers from 

chronic inefficiency, poor mix of providers and waste. This is true for both ambulatory care as 

well as hospitalization. Over 160 hospitals are licensed, of which more than 85% are private. 

There is gross oversupply of small (less than 100 beds) hospitals (73%). Only 5 hospitals have 

more than 200 beds. Hospital beds are in oversupply, with 12 000, beds or around 26 per 1000 

population. The low occupancy rates (45%–50%) further contribute to poor economies of scale. 

There is oversupply of high technology in Lebanon (please see section on CABG under Case 

studies) which humbles the limited availability of similar technologies in many industrialized 

countries. Correspondingly, there is oversupply of specialized physicians. Indeed, over 70% of 

physicians in Lebanon are specialists, the inverse of the ratio in the United Kingdom, where the 

specialist/generalist mix is 30/70. Over 11 000 physicians are currently registered in the two 

Orders of Physicians in Lebanon. The exact number of practising physicians is not known, but 

probably 15%–20% are practicing abroad. Medical practices are not commonly organized 

according to groups of either single or multiple specialties, thus increasing overhead and cost of 

care and reducing efficiency. Medical care is mostly fee-for-service or flat-rate based. There are 

no managed care or capitation plans in Lebanon. Non-physician clinicians are undersupplied in 

Lebanon. For example, the nursing rate per capita in Lebanon is among the lowest in the world. 

Health care utilization is relatively high in Lebanon. Because Lebanon is a small country, 

access to medical services is not a major problem, although some areas remain plagued with low 

health care access rates. Around 12% of the population is hospitalized per year. Because of 

multiple factors, including undersupply of public hospitals, perceived low quality and social 

stigma in a culture that is image-conscious, most hospitalization is in the private sector. Around 

28% of Lebanese uses ambulatory care services per month; the average number of ambulatory 

care visits per year is 4. There is an abundance of public and nongovernmental organization 

ambulatory health centres, over 110 primary care centres and over 400 dispensaries. However, 

most ambulatory care takes place in the private sector where it is problem-oriented and 

specialist-provided. Emphasis on prevention and health promotion is severely lacking. 

There have been multiple attempts at health sector reform in Lebanon since the end of the 

civil war. This has included a large World Bank-funded project. Large ambitious reform 

packages have not received political support, despite their perceived urgency. In this climate, 

public agencies, especially the Ministry of Public Health, are trying to regain regulatory powers 

and improve their stewardship of the health sector. This has proved to be challenging considering 

the large and powerful private sector, the limited political support, lack of citizen engagement 

and limited capacities of the public sector. 

153

Contracting arrangements: An overview 

Lebanon 

Contractual arrangements in Lebanon cover a broad range of services. These include direct 

health care services, such as hospitalization and ambulatory care, indirect health care services, 

such as procurements of essential drugs and vaccines, and public health services, such as 

administration of programmes and supply of public health expertise. 

Table 1 summarizes contractual arrangements for direct health care services, the main form 

of services provided through contracting in Lebanon. The 5 major public financing schemes, 

supported by the Ministry of Public Health, NSSF, CSC, Ministry of Defence, and Ministry of 

Interior (note these reflect 3 separate funds), cover roughly 80% of the Lebanese population. The 

rest of the population is covered by private insurance and mutuality funds. Health care through 

these schemes is mostly based on contracting, which underscores the important role of 

contracting in Lebanon. 

The contractual arrangements cover a range of heath care services (Table 2). The largest 

three financing schemes, those of the Ministry of Public Health, NSSF and CSC, all include 

some level of co-payment by beneficiaries. All non-Ministry of Public Health funds include 

coverage for family members. For Lebanese eligible for the Ministry of Public Health scheme, 

application for coverage must be done on a personal basis. Therefore, family coverage is not 

applicable. The Ministry of Public Health coverage, a last resort for the uninsured and for 

services for catastrophic illness not covered by those insured under other schemes, is considered 

a temporary solution to improve equity until a more long-term financing scheme can be 

developed that includes the whole population. Unfortunately, this has proved difficult to 

accomplish despite several attempts at reform over the past decade. 

The costs of contractual arrangements in Lebanon are substantial (Table 3). Hospitalization 

receives the largest share of expenditures, when taking into account all schemes. For non- 

Ministry of Public Health contractual schemes, hospitalization services account for 

approximately 52%–55% and ambulatory care for 45%–48% of direct health care costs. What is 

most noticeable is the several-fold difference in the cost per beneficiary among the different 

funds. 

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Lebanon 

Table 1. Contractual arrangements involving direct health care services 

Responsible 

governmental party 

Ministry of Public 

Health 

Financing body 

(Fund) 


Health Fund 

Ministry of Labour National Social 

Security Fund – 

Maternity and 

Sickness Fund 

Presidency of Council 

of Ministers 

Civil Servant 

Cooperative Health 

Fund 

Contracted party(ies) Type(s) of contracted 

party(ies) 

Public and public 

hospitals, primary care 

centres 

Private hospitals, 

private generalist and 

specialist physicians, 

midwifes, pharmacies 

Mix (governmental/for 

profit/non-profit/NGO) 

Mix (for profit/non-forprofit) 

Number of 

beneficiaries 

% of population 

covered 

1 934 415 48 All regions 

712 890 18 All regions 

Same Same 180 225 5 All regions 

Ministry of Defence Armed Forces Fund Same Same 260 000 7 All regions 

Ministry of the 

Interior 

Internal Security 

Fund 

General Services 

Fund 

Secret Services 

Fund 

Same Same 53 000 1 All regions 

Same Same 9000 0.2 All regions 

Same Same 2405 0.1 All regions 

Geographical 

coverage

Lebanon 

Table 2. Coverage of contractual arrangements of health care services 

Financing body (Fund) Eligibility Coverage Payment by 

government (%) 

Ministry of Public Health 

Fund 

National Social Security 

Fund - Maternity and 

Sickness Fund 

Civil Servant Cooperative 

Health Fund 

156 

Co-payment by 

beneficiary (%) 

Uninsured Lebanese Hospital care 85 15 NA 

Uninsured Lebanese and insured 

Lebanese whose plans do not cover 

drugs 

Any Lebanese presenting to primary 

care centre 

Dispensing expensive drugs 

for catastrophic illness (e.g. 

cancer) 

Providing vaccines and 

essential drugs to primary 

care centre 

100 0 NA 

100 0 NA 

Formal and service sector employees, 

public wage earners, employees of 

independent public orgs. 

Hospital care 90 10 Yes 

Same Ambulatory care 85 15 Yes 

Public sector staff and dependents Hospital care 90 10 Yes 

Same Ambulatory and dental care 75 25 Yes 

Armed Forces Fund Army staff and dependents Hospital and ambulatory 

care 

Ministry of Interior - 

Internal Security Fund 


General Services Fund 

Ministry of Interior -Secret 

Services Fund 

Staff and members Hospital and ambulatory 

care 

Same Hospital and ambulatory 

care 

Same Hospital and ambulatory 

care 

100 0 Yes 

100 0 Yes 

100 0 Yes 

100 0 Yes 

Coverage of 

family 

members

Lebanon 

Table 3. Costs of contractual arrangements of health care services 

Financing body (Fund) 


Health Fund 

Source of financing Total expenditures 

(US$) 

National Social Security 

Fund-Maternity and 

Sickness Fund 

Civil Servant 

Cooperative Health 

Fund 

Expenditure per 

beneficiary 

Government budget 138 766 667 72 

Government budget, 

employers, employees * 

131 600 000 185 

Government budget 29 674 000 165 

Armed Forces Fund Same 38 978 000 150 


Internal Security Fund 

Same 24 666 667 465 


General Services Fund 

Same 3 373 333 375 


Secret Services Fund 

Same 1 525 333 634 

Contractual arrangements of public agencies 

Ministry of Public Health 

As shown in Table 4, the Ministry of Public Health engages in different types of contracts 

to accomplish its public health mission. Key aspects of these contracts are highlighted below. 

• Support of primary care services. More information about this is included under case studies. 

• Under-writing costs of hospitalization for the uninsured: more information about this is 

included under case studies. 

• Support of NGO work on health and health determinants. The Ministry of Public Health has 

contracts with several social/health nongovernmental organizations to support their work 

provided they spend the allocated funds on health or health-related aspects, even if the focus 

is not directly on primary care services. For example, Dar al Aytam al Islamiah (Islamic 

House of Orphans) is given support for nutrition and other aspects of social support that is 

considered by the Ministry of Public Health to influence important health determinants. The 

Chronic Care Centre, which serves patients with conditions such as type 1 diabetes and 

thalassemia, presents an example of direct support for health services Around 12 

centres/organizations receive such support (each typically in the range of US$ 300 000), 

which is important for their overall functioning. In return, these organizations submit an 

annual report of contract-related activities. Choice of nongovernmental organization is 

commonly influenced by political considerations. Thus, these contracts, which are diversified 

in nature and duration, are not based on an open bidding or competitive process. 

Furthermore, the Ministry of Public Health has not developed criteria for assessing

Lebanon 

Table 4. Contractual arrangements of Ministry of Public Health 

Area of contract Contracted 

party(ies) 

Hospital services Private hospitals 

(103) 

Public hospitals 

(20) 

Primary care 

services 

Essential drugs for 

chronic diseases 

PCC (45 centres 

in 2003) 

Type(s) of 

provider 

Mix (for 

profit/non-/NGO) 

YMCA International 

NGO 

Start of contracting 

arrangement 

Length of 

contract 

Ongoing Annual, 

renewable 

Public Ongoing Annual, 

renewable 

Public/NGO Ongoing–national 

plan initiated 1996 

1991 Annual, 

renewable 

Immunization UNICEF UN Agency 1991 Annual, 

renewable 

Basic social services NGO’s NGOs Ongoing Annual, 

renewable 

National health 

programmes 

Public health 

expertise 

WHO UN Agency 1991 Annual, 

renewable 

Health 

professionals 

Maternal care Makassed Health 

System 

Various health 

professionals 

Ongoing Annual, 

renewable 

NGO/non-profit 2003 Annual, 

renewable 

Services covered Geographical 

coverage 

Hospitalization All regions 

Hospitalization All regions 

5 years Primary care services All regions 

Procurement and distribution of 

essential drugs for chonic diseases 

to PCCs 

Procurement and distribution of 

vaccines to PCCs 

All regions 

All regions 

Basic health and social services All regions 

Administration of several national 

programmes 

Furbishing primary health 

consultations 

Provide normal delivery in addition 

to primary care services 

NA 

NA 

Akkar

Lebanon 

performance or mechanisms for monitoring such performance. Nevertheless, the Ministry of 

Public Health sees these contracts as serving the public good and as serving multisectorality 

in health protection and encouraging inclusion of various civil society partners. 

• Procurement of drugs for chronic diseases. The Ministry of Public Health contracts out to the 

local branch of a large international nongovernmental organization, the Young Men’s 

Christian Association (YMCA), for procurement of essential drugs for chronic diseases. The 

YMCA purchases essential generic drugs for conditions such as diabetes, hypertension, and 

heart disease from international markets at bulk rates which are much lower compared with 

rates for similar drugs in the Lebanese market. The YMCA stores and distributes these drugs 

using a network of around 400 health care outlets (health centres and dispensaries). There are 

attempts to interlink these using a computerized system. Around 150 000 people are served 

through this network a year, at a cost of about US$ 15–20 a year. This offers substantial 

savings compared with costs of the private market. The total cost for the programme is about 

US$ 2.5 million a year. The YMCA is not allowed to turn anyone away for financial reasons. 

The contract covers a small part of the overhead for the YMCA and dispensing outlets. 

Chances for abuse in this system are low. Of note, YMCA procurement of essential drugs 

started during the civil war with the aid of foreign donors who filled an important gap after 

the breakdown of the government-supported primary care and drug delivery infrastructure. 

After the end of the civil war, foreign donations of drugs stopped, so the Ministry of Public 

Health decided to continue to sponsor this programme because of its efficiency and its ability 

to promote equitable access to essential drugs. This sponsorship will continue for the 

foreseeable future. 

• Securing immunization material. The Ministry of Public Health has a contract with UNICEF 

to procure vaccines. UNICEF purchases immunization kits on behalf of the Ministry of 

Public Health in the international market and then gives them to the Ministry of Public 

Health which distributes them to its PCC network. This programme has proved to be very 

efficient and a source of considerable savings, as UNICEF is able to secure immunization 

material at much lower discounted rates than the Ministry of Public Health would be able to 

(UNICEF purchases vaccines on behalf of many other low- and middle-income countries). 

UNICEF perceives this programme as providing opportunities to promote preventive 

services. 

• Upgrading maternal care. The Project in Wadi Khaled is being implemented through a 

contract with Makassed Health System in an underserved area in north Lebanon which is 

part of the Akkar district. This area has low maternal health indicators, including high use of 

traditional birth attendants. The aim of the project is to encourage better antenatal care and 

offer facilities for normal delivery while ensuring that more complicated cases are referred to 

other hospitals using well established referral networks. A currently-operational primary care 

centre, with well-trained staff, opened in May 2003. In additional to the usual set-up 

designed for primary care services, this centre also offers specially-designed facilities for 

normal delivery. The centre is manned around the clock. For complex or high risk deliveries 

or when problems arise unexpectedly during normal delivery, the centre has established 

protocols and procedures for evacuation patients to hospitals. Doctors are expected to deliver 

the usual primary care services other than antenatal care, including safe motherhood and

Lebanon 

postnatal care, vaccination and other reproductive health services, such as family planning 

and infertility services. The centre receives a capitated fee per pregnant woman for antenatal 

visits and a capitated fee per delivery. This is the only contract that involves monetary cash 

flow with a local nongovernmental organization in Lebanon. It is too early to assess this 

contractual project but several aspects invite optimism that it represents a useful model for 

other Ministry of Public Health contracts: the clear terms of reference, including 

performance indicators, adequate staffing, training of personnel, and the interest within the 

Ministry of Public Health in pilot and innovative projects of a limited scope than can be later 

expanded. 

• Contracts with individuals. The Ministry of Public Health contracts on an as-needed basis 

with individuals to deliver certain consultative or operational services. This is done 

especially in areas with inadequate staffing, for example in reproductive health. There is no 

dedicated reproductive health programme at the Ministry of Public Health, and therefore the 

Ministry contracts periodically with public health experts to provide programmatic-like 

services in this area. Contracts are typically awarded to known qualified people rather than 

based on an open process that involves competitive applications. Payments are typically 

based on cash transfers upon meeting the terms of reference for the contract. There has not 

been an assessment of the quality of outcomes of these contracts, but the Ministry of Public 

Health sees such contracts as allowing it to secure public health expertise, which is abundant 

in Lebanon, at reasonable costs without the need to enlarge its professional body. 

• Contracts with international organizations. The Ministry of Public Health contracts with 

international organizations operating in Lebanon to achieve certain public health goals. 

Contracting with UNICEF has already been discussed. The Ministry also contracts with the 

country office of WHO to support several programmes such as the national tobacco control, 

noncommunicable disease, and AIDS control programmes. Typically, the Ministry of Public 

Health provides the bulk of the financial support for these programmes (around 70% if only 

cash support is considered but up to 90% if indirect costs are also considered) while WHO 

contributes the rest. WHO administers these programmes under a special “trust fund.” The 

Ministry of Public Health gets these funds back in the form of expenditures on programme 

activities. WHO charges 13% for administering the funds. 

The collaborative programmes allow for local expertise to be secured as valued public 

health professionals are paid at WHO scale, which is higher than the MOPH pay scale. Thus, 

Lebanon is able to both retain these professionals and benefit from their experience. Programme 

staff are recruited by the WHO Representative but are usually proposed by the Ministry of 

Public Health. However, this is subject to political and other considerations, which limits the 

usefulness of the open process of application and appointment. However, most of the staff have 

been of high quality and have undergone adequate training by WHO. Therefore, these contracts 

have allowed for the building of strong human resource teams. Nevertheless, considering that 

Lebanon is a small market that has abundance of qualified health professionals and that many 

such professionals have already had a lot of training in public health through the different 

programmes, the Ministry of Public Health can probably handle these programmes on its own 

with some help from WHO on an as-needed basis. 

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Lebanon 

Overall, the contracts allow the concerned national programmes to receive WHO expertise 

on the basis of cooperation. In addition to the actual activities of programmes, several examples 

illustrate that the outcomes of cooperation with WHO may go beyond the programmes 

themselves. This is shown, for example, in the contribution of WHO to immunization campaign 

following the detection of the polio case in Akkar in 2003 and training of the Ministry of Public 

Health personnel and pharmacists in different aspects related to rational dispensing. While the 

contracting arrangements with WHO have given important benefits, it is difficult to ascribe all 

of these fruits to the use of the contract as a tool. Rather, many of the activities are based on the 

voluntary participation of WHO as a concerned agency in Lebanon. 

There are certain limitations to the collaborative arrangements between the Ministry of 

Public Health and WHO. The different national programmes commonly contract with other 

parties, e.g. consultants or other agencies, to carry out specific tasks on WHO consultancy pay 

scales. Additional overhead is paid to these third parties, increasing the overall overhead of the 

programmes. Furthermore, it is not clear that the different programmes have had the desired 

effects. This is seen with regard to the interlinked programmes of tobacco control as well as 

noncommunicable disease control, which have not been closely coordinated and have not been 

able to effect the desired policy change. The AIDS control programme is the only collaborative 

programme that has a written and declared national strategy. None of the other programmes 

have clear strategy with indicators, annual reports, performance assessment. Similarly, none of 

the programmes have sub-strategies for the different components of the programme. For 

example, a primary health care strategy cannot be implemented without a sub-strategy on 

reproductive health, which does not currently exist. 

Other publicly-financed agencies 

Several public organizations (Table 1) cover a range of social services, e.g. health and 

education, which may or may not be maintained beyond the age of retirement. These 

organizations have health funds which use contracts to secure health care services for their 

beneficiaries. Covered health services typically include hospitalization, ambulatory care 

(physician- and non-physician provided), drugs, and various health enabling aids. The exact 

types of services, class of services, and amount of co-payment by beneficiaries do vary among 

the different funds. However, all funds have similar mechanisms for contracting for 

hospitalization and ambulatory care; these will be discussed under “case studies”. 

It may be worthwhile here to make a brief introduction to the largest two of these 

organizations, the National Social Security Fund (NSSF) and the Civil Servant Cooperative 

(CSC). The NSSF was set up in 1961 and covers employees of the formal sector, contractual and 

wage earners of the public sector, employees of autonomous public institutions and others (e.g. 

physicians, public school teachers) and family dependents. The number currently enrolled at 

NSSF is around 430 000 Lebanese, and the total number of beneficiaries (including dependent 

family members) is estimated to be around 1.3 million, or around a third of the Lebanese 

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Lebanon 

population. The CSC was set up in 1970 and covers all civil servants and their dependents, 

numbering around 190 000. 

The NSSF and CSC share several characteristics. Administratively, both maintain relative 

administrative autonomy and financial independence and have independent advisory boards. 

Health spending at NSSF and CSC is different in scale (US$ 251.5 million versus 48.3 million) 

but similar in kind (48.2% ambulatory care and 51.8% hospitalization). Health care costs borne 

by these organizations continue to rise. For example, between 2000 and 2002, health spending at 

NSSF increased by a whopping 65% but the relative contribution of outpatient versus inpatient 

spending to the total bill remained the same. It must be noted that prior to the civil war, there 

were ambitious plans to expand the coverage of NSSF to the whole Lebanese population but the 

outbreak of the civil war put an end to these plans. With this, Lebanon missed a historic 

opportunity to provider national health coverage. 

CASE STUDIES 

Contracting for ambulatory and primary care services 

Contracting primary care services for uninsured Lebanese 

Primary care services are provided by four main parties in Lebanon: health centres 

belonging to the Ministry of Public Health (these are either operated by the Ministry or managed 

by other parties but contracted out by the Ministry); centres belonging to other public institutions 

(such as the Ministry of Social Affairs (MOSA) and local municipalities); health centres 

belonging to local or international nongovernmental organizations operating in Lebanon; and 

private practitioners (whether hospital or community-based). Health care utilization surveys 

indicate that private practitioners provide the largest bulk (over 75%) of ambulatory care services 

for the uninsured population in Lebanon. However, in this section, we will examine services that 

are partly or fully publicly funded, through either the Ministry of Public Health or the Ministry 

of Social Affairs, and where contracting is implemented with a wide scope of nongovernmental 

organizations. 

a) Ministry of Public Health 

In response to fragmentation of primary care delivery for the uninsured, inadequacy of 

geographical coverage, and absence of control measures and regulatory mechanisms, the 

Ministry of Public Health has developed a national strategy for primary health care and has 

attempted to implement it through engaging and contracting with public and nongovernmental 

organizations health centres. While the strategy document is not yet publicly available, the stated 

aim is to ensure the availability of primary care services to the population in all of Lebanon using 

a network of primary care centres. The network was launched in 1996 with around 30 centres. 

Expansion has been slow, and at present about 45 primary care centres are in the network. Three 

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Lebanon 

belong to the Ministry of Social Affairs, 20 to the Ministry of Public Health and the rest belong 

to local or international nongovernmental organizations. Another 50 primary care centres are 

about to join soon. The target is to include 150–160 centres by the end of 2005, which is 

expected to fill the primary care needs for the uninsured in all of Lebanon. 

The Ministry of Public Health uses a standard contract with the primary care centre which 

describes responsibilities and expectations. Responsibilities of the Ministry of Public Health 

include provision of essential drugs, health information system, and continuing education and 

training for staff of the centre. The responsibilities of the centre include commitment to provision 

of preventive and health promotion services, emphasis on essential drug list, use of health 

information system, and adequate staffing of the centre (in terms of physicians, non-physician 

health staff and administration). The contract duration is 5 years, (with 6-months’ notice required 

for the centre to break the contract without incurring penalties). The contract is non-monetary, 

i.e. it does not involve exchange of cash flow. Supporting this network, including underwriting 

the operations of its centres, accounts for about 2%–3% of Ministry of Public Health budget. For 

primary care centres owned by the Ministry of Public Health and operated by either 

nongovernmental organizations or local municipalities, the Ministry pays basic expenses 

(including water and electricity) while the centre is responsible for other operating expenses 

(such as telephone). Contracting is not based on competitive bidding. The Ministry of Public 

Health chooses primary care centres based on need in geographical areas, centre facilities, and 

anticipated success of contracting based on engagement and quality of staff. 

The Ministry of Public Health has recently contracted out an independent evaluation of the 

Ministry–nongovernmental organization contractual arrangements. Review of this evaluation is 

beyond the scope of this report, but the following points are relevant. 

• Centres belonging to different parties, whether the Ministry of Public Health, Ministry of 

Social Affairs, or nongovernmental organizations, have widely differing allegiances, 

agendas, capacities and resources. Contracting with such diverse groups requires emphasis 

on the minimum common denominator. This limits the usefulness of the contracting 

mechanism as a means to introducing drastic changes in the functions of the contracted 

parties. 

• The performance of primary care centres belonging to nongovernmental organizations 

depends on the agendas, resources and commitments of nongovernmental organizations. For 

example, for some nongovernmental organizations with local political affiliations, primary 

care centres serve mainly as vote-maximizers and thus the emphasis has been on delivery of 

services that impress the public. 

• The contractual arrangements are mostly about “organizing” the relationships between the 

two parties, since many primary care centres are not under the influence of the Ministry of 

Public Health (having long existed), and thus the Ministry of Public Health does not have 

great leverage over them. Nevertheless, the organizing aspect of the contract allows 

reasonable manoeuvring by the Ministry of Public Health to introduce some change. 

Expectedly, this change has been slow. 

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• Quality control is difficult, as adherence to stated commitments is not easy to measure. 

Furthermore, there are no clear mechanisms, or adequate capacities, for follow-up 

assessment by the Ministry of Public Health since it is not clear who will follow up on the 

different aspects of the performance of both parities. 

• Frequently, the key to effective execution of the contractual arrangement has been the 

presence of the right individuals/personalities at the primary care centre, reflecting the 

inadequacy of long-term organizational or institutional structures. 

• There is lack of coordination between the primary care network and other health 

programmes. For example, there is need for greater coordination with the national tobacco 

control and AIDS control programmes. 

b) Ministry of Social Affairs 

The Ministry of Social Affairs provides primary care services through two types of centres: 

Development Services Centres (DSCs), of which there are currently 67, with an additional 76 

branches, and contracted nongovernmental organization centres (currently 148). The Ministry of 

Social Affairs estimates that up to 450 000 Lebanese benefit from its health services, 70 000 of 

which are served through contracting with nongovernmental organizations. 

DSCs provide a range of basic social services including primary care services, e.g. general 

and preventive care, paediatrics, maternal and child health/reproductive health, and dental care 

(not provided in the Ministry of Public Health network), although not all centres provide the 

same range. Only 3 of these centres are in the Ministry of Public Health primary care centres 

network. The MOSA does not implement contracting with its own DSCs (in contrast to the 

Ministry of Public Health approach, with its own primary care centres). Health services account 

for around 17% of the DSC budget. An additional 5% covers medical equipment and related 

material. As for nongovernmental organization centres contracted with the Ministry of Social 

Affairs, a standard contract (Appendix) has been in use since 1996. The contracting arrangement 

emphasizes flexibility and minimization of bureaucratic burden, at the same time ensuring 

mutual transparency. Similar to what is done by the Ministry of Public Health, there is 

delineation of responsibilities (nongovernmental organization health centre provide similar 

services to DSCs) but the Ministry of Social Affairs has not had the capacity to develop and 

implement clear standards and procedures for its contracts with nongovernmental organizations. 

A plan is under development to better spell out the legal, financial and operational aspects of the 

contracts emphasizing criteria and standards. Unlike the Ministry of Public Health, the Ministry 

of Social Affairs provides cash support for health services provided by nongovernmental 

organization centres (two-thirds of health services costs are borne by the Ministry of Social 

Affairs). Consequently, the operational framework is also different with the Ministry of Social 

Affairs having a more direct influence on centre operations through the Ministry of Social 

Affairs–nongovernmental organization committees that oversee the work of centres (2 from 

each, headed by a Ministry of Social Affairs representative). 

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Perhaps the more obvious difference relates to the model of care emphasized by the 

Ministry of Social Affairs, which comes closer to the original primary health care through 

emphasis on social health rather than on provision of a limited set of primary care services or 

essential drugs. Such a model presents a challenge for Ministry of Public Health network centres, 

many of which are not equipped to deal with what is needed to implement this model. 

Nongovernmental organization health centres also rarely implement this model, although the 

Islamic Health Council presents a bright exception. 

Contracting ambulatory care services for publicly insured Lebanese 

As previously noted, the majority (with the exception of the Ministry of Public Health) of 

public financing agencies cover their beneficiaries for a variety of ambulatory care services. 

These include, for example, those provided by physicians, both generalists and specialists, 

physical therapists, midwives, radiology and laboratory centres, physical therapy centres, and 

hearing aid centres. The contracted parties must apply to the financing agency with documents 

certifying training, qualifications and other aspects. Almost all licensed providers are accepted if 

they apply and meet eligibility criteria. In some cases, e.g. contracts with radiology and 

laboratory centres, field visits are carried out to ensure the accuracy of data presented in the 

application. Contracted parties sign a standard brief contract. These contracts do not involve 

direct cash transfers. Rather, the beneficiary, having received and paid for the service out-ofpocket, 

presents documentation of the service and is reimbursed by the contracting agency 

according to a pre-set fee schedule minus the deductible. 

There is dissatisfaction by all parties with this arrangement. Providers complain of low 

fees. Beneficiaries complain of having to pay over fee schedules to obtain the services. The 

financing agencies complain of corruption involving both consumers and providers and of 

inability to manage the tremendous responsibilities of oversight with a limited staff and large 

workload. Other limitations of current arrangements will be discussed later. 

4.2 Contracting for hospitalization and related services 

Around 12%–12.5% of the Lebanese population gets hospitalized per year. Contracting for 

hospitalization is described below according to insurance coverage of citizens. 

The uninsured population 

Prior to the start of the civil war in 1972, the Ministry of Public Health had begun covering 

costs of hospitalization for the indigent, which consumed no more than of 10% of its budget. 

Eligibility was extended to include the uninsured as a result of consumer and political pressure 

(but not legislature) starting in 1982. After the civil war ended in 1991, this coverage was 

conceived to be a temporary measure while plans for national health insurance coverage, which 

were in draft stage before the war erupted, were developed. Unfortunately, the latter goal proved 

difficult to accomplish. With the escalating cost of hospitalization, this issue has been at the 

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forefront of discussions of health sector reform. At present, hospitalization accounts for over 

80% of the budget of the Ministry of Public Health. 

While 50% of the Lebanese population is eligible for Ministry of Public Health coverage 

for hospitalization, it is not known what portion takes advantage of this coverage. This is 

reflected in the number of covered hospitalizations: the Ministry of Public Health currently 

covers around 135 000–140 000 per year, while the expected number would be 240 000– 

250 000. This may reflect social stigma associated with use of Ministry of Public Health 

coverage and the perceived difficulties in the application process for eligibility. 

Because of the inadequacy and short supply of public hospitals, hospitalization for citizens 

covered by the Ministry of Public Health has been provided mostly by private hospitals. The 

Ministry has historically encountered many difficulties in dealing with private hospitals. Some of 

these difficulties include inappropriate or false admissions, un-indicated procedures, 

overutilization of services, spending over allocations, spending allocations early in the month 

and lack of protection of assigned allocations for emergency room visits throughout the month. 

All of these problems reflect the opportunity for the contract to be used as a tool for regulating 

the Ministry of Public Health–hospital relationship, while at the same time improving 

performance and containing costs. 

In the 1990s, the Ministry of Public Health contracted with most of the licensed private 

hospitals that had applied for a contract. In 2000, the Ministry of Public Health began an 

accreditation programme for hospitals with the purpose of ensuring quality of services provided 

to patients covered by the Ministry. In 2001, 46 were accredited, but an additional 30 were added 

due to political pressure or lack of accredited hospitals in certain areas, so the total number 

reached 76. In 2003, the total number increased to 103, as more hospitals sought to meet 

accreditation standards. These 103 hospitals provide around 2000 beds in total. 

In contracting with hospitals and health care facilities, the Ministry of Public Health 

currently uses two types of contracts. Group 1 contracts are intended for acute care. The 103 

accredited hospitals are currently included. More details about these contracts are provided 

below. Group 2 contracts are intended for long-term care facilities (such as those that provide 

rehabilitation and care for the aged and for patients with long-term debilitating conditions such 

as Alzheimer’s). There are around 50 hospitals and facilities (with a total of 4500 beds) in this 

group. The total expenditures/MOPH allocations for these facilities amount to 30 billion 

Lebanese pounds (BLP) per year. Payment to these Group 2 facilities is based on flat rates set 

according to condition. Dealing with these hospitals is generally much simpler than the acute 

care hospitals and, therefore, transfer of payment (which is usually smaller than that made to 

acute care hospitals) is usually done more speedily. 

For Group 1 contracts, the Ministry of Public Health uses a standard contract that has 

replaced the contracts used prior to 1997 (improvements have been introduced yearly). The 

contract has been a powerful tool for the Ministry of Public Health to regulate spending and 

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quality of care in the contracted hospitals. The main features of the current contract areas as 

follows. 

Contracts are generally awarded to hospitals that meet accreditation standards. 

Allocations are assigned based on Ministry of Public Health calculations that take into account 

number of beds, expected MOPH patient volume, location, hospital services, etc. 

The supervising physician has a greater role in ensuring appropriateness of care and transparency 

of billing. 

More detailed specification of the responsibilities of the contracted hospitals 

Penalties are stipulated if contracted hospitals do not adhere to the terms of the contract. 

Payment to the contracted hospital is distributed over the whole month. 

A certain percentage of the payment is secured for emergency room visits. 

The Ministry of Public Health perceives that implementing of contracts has already had an 

impact. In previous years, expenditures of contracted hospitals exceeded assigned allocations by 

around 50%. This has come down to 5% recently. Furthermore, data collected as part of the 

contract have allowed the supervising physicians to put together a monthly report about services 

and expenditures for Ministry of Public Health patients. This has empowered the Ministry of 

Public Health by providing a stronger evidence base for its policies. 

Among the 103 hospitals are 10 public hospitals (which have become autonomous after 

Lebanese Law 544/96). Another 10 hospitals provide hospitalization services to Ministry of 

Public Health patients but are not formally covered by contract for political and other reasons. 

For example, Tyre Governmental Hospital, which is located in al-Rashidiyya refugee camp, 

cannot afford to impose co-payments on its users as this may lead to social and political 

instability. 

In terms of payments, the Ministry of Public Health reimburses private and public hospitals 

85% and 95% of the bill, respectively. The remaining balance represents co-payments by 

beneficiaries. Payment is based on cash transfer upon approval of the bill. The Ministry of Public 

Health commonly reduces submitted bills by up to 25% because of the known inflation of actual 

costs. 

Using the contract as a tool, the Ministry of Public Health introduced the concept of the flat 

rate for a variety of surgical procedures in 2001. This has further reduced costs, although there 

are no data currently on the financial impact of this change. There are plans to introduce flat rates 

in 2004 for medical treatments and procedures. Revenues from the Ministry of Public Health are 

important for many hospitals, especially the smaller ones and those in certain urban and rural 

areas where the uninsured dominate. 

While there are indications that the Ministry of Public Health is gradually and more 

effectively using the contract as a regulatory tool, many problems remain with the current 

arrangements. The Ministry of Public Health still has little leverage over hospitals; it has limited 

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supervision of quality of care, and no way of enforcing certain standards or to link 

hospitalization with preventive services. There is also bilateral distrust; the Ministry of Public 

Health worries about abuse, while private hospitals see undue financial and regulatory pressures 

by the Ministry at a time of fiscal difficulty. With the lack of sufficient political support for better 

use of contractual arrangements to change the public health agenda, many see current 

arrangements for hospitalization as facilitating public–private cash transfers that do not serve the 

public in the long term. 

The publicly insured population 

Contractual arrangements for hospitalization are remarkably similar across the different 

financing agencies, such as NSSF, CSC and others. These agencies contract with most private 

hospitals licensed by the Ministry of Public Health (they do not use the Ministry’s accreditation 

system). Interested hospitals apply to the concerned agency to provide services for beneficiaries. 

Most of these hospitals are private, as public hospitals account for less than 5%. Site visits are 

carried out to ensure eligibility. Hospitals sign standard contracts which stipulate responsibilities 

of each party. Financing agencies have rotating or stationary supervising physicians who approve 

indication for admission, assess appropriateness of care, and review bills either on-site (done by 

the same supervising physician) or at central offices (done by different physicians). Some 

agencies, like NSSF, use advisory committees to review applications for coverage of expensive 

cases. Medical admissions are reimbursed on a fee-for-service basis. Different agencies have 

different pay scales but all commonly use flat rates for many (but not all) surgical procedures and 

fee-for-service for medical hospitalization. 

The case of invasive interventions for coronary heart disease 

Lebanon has undergone an epidemiological transition, and chronic diseases, especially 

cardiovascular diseases, account for an important portion of mortality, morbidity and health care 

expenditure. Coronary heart disease consumes considerable resources. Invasive interventions for 

coronary heart disease, including coronary artery bypass surgery (CABG) and percutaneous 

interventions (PCI) such as balloon angioplasty and stent implantation, account for a 

considerable portion of the costs related to coronary heart disease. Nevertheless, coronary heart 

disease is a medical, not surgical, disease and much can be accomplish to reduce related 

mortality, morbidity and health care costs through well-proven and cost-effective secondary 

prevention approaches. These approaches include medical therapies, such as aspirin, blood 

pressure and cholesterol lowering agents, and behavioural and lifestyle modification, such as 

smoking cessation and physical activity. Secondary prevention approaches are, however, grossly 

underutilized in patients with coronary heart disease. This is especially striking considering the 

well-described overuse of invasive interventions. Furthermore, lack of adequate emphasis on 

secondary prevention leads to more costly invasive interventions in people with established 

coronary heart disease. In addition to high costs and missed opportunities to improve health 

outcomes, overuse of invasive interventions exposes potential conflict of interest in which the 

health care facilities and physicians may be entangled to secure more lucrative benefits. 

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Lebanon 

Correcting this imbalance by emphasizing secondary prevention should be a main focus of 

public health action to control coronary heart disease. 

In Lebanon there is a gross oversupply of high-tech facilities for performing invasive 

interventions for coronary heart disease, and oversupply of super-specialists to perform them. As 

a result, Lebanon has much higher than expected rates of CABG and PCI for coronary heart 

disease. 

• There are 35 centres for PCI and 22 centres for CABG. For CABG, this oversupply (1 per 

180 000 population) contrasts with the availability of similar facilities in an industrialized 

country such as France, where there is currently 1 CABG centre for each 700 000 population. 

More recently, there is a move to consolidate centres in France to the ratio of 1 per 2 million 

people. These large centres reduce costs and offer great opportunities for research and 

development. The situation in Lebanon is not expected to change, even after the 

implementation of the health map, due to the dominant effect of current oversupply. 

• In Lebanon, 4000–4500 CABGs are carried out per year at a cost of around US$ 5500 per 

procedure for the Ministry of Public Health, and up to US$ 10 000 for other financing 

agencies. The Lebanese rate of CABG (1/900) exceeds that of France (1/1000). This is 

surprising because France has a population that is considerably more aged than Lebanon, and 

thus Lebanon would be expected to require CABG far less often (1/1300–1/1500). 

The Ministry of Public Health and other financing parties can use the contract with 

hospitals to encourage utilization of secondary prevention services to achieve several goals: 

improve outcomes, improve quality of care, reduce costs, and link inpatient with outpatient care. 

There are several steps that can be taken. 

• An additional amount per patient can be appended to the hospital bill per CABG to ensure 

follow-up of key risk factors such as cholesterol, blood pressure and smoking practices on 

regular intervals during the first year (the most risky period) after hospitalization. Such 

services can be added at bare cost price and would prove to be very cost-effective for 

improving outcomes. This is especially important for citizens covered by the Ministry of 

Public Health who lack insurance for ambulatory care. Alternative mechanisms for linking 

hospitalization with care provided at primary care centres also need to be explored. 

• The current oversupply of centres which offer CABG must be consolidated. For example, a 

minimum number of CABGs per centre per year must be demonstrated before a hospital is 

contracted for CABG services. 

• Compliance in provision of secondary prevention care before the patient leaves the hospital 

and after hospitalization needs to be demonstrated. 

• The ability of the supervising physicians to ensure proper utilization must be improved. 

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DISCUSSION 

Lebanon 

This Report has reviewed the contracting arrangements in health engaged by the different 

public organizations in Lebanon. Contracting for health services, both hospitalization and 

ambulatory care, dominates public–private contracting in the health sector and serves over 80% 

of the Lebanese population. Hospitalization gets the lion share of contracting. 

There are several features and limitations which are common to all contracting 

arrangements for health services: each agency carries out its own contracting, but the nature of 

contracts is remarkably similar across agencies; agencies contract with a large number of 

providers, well beyond the needs of the contracting agencies, thus limiting the possibility of 

effective oversight and monitoring; there are political influences on the contracting process; the 

private sector has more manoeuvring power within current contractual arrangements than the 

public agency; contracts have no emphasis on performance or outcomes; contracts are not 

designed, and thus are unable, to limit the escalation of health care costs. 

We have already discussed the strengths and weaknesses of the different contracting 

arrangements of the Ministry of Public Health. As for publicly funded insurance schemes, it may 

be instructive to discuss limitations common to contractual arrangements for both ambulatory 

care and hospitalization. These arrangements reflect a historical development whose time is past, 

as is well recognized by the financing agencies themselves. There are many limitations in the 

current situation. Contracts are neither strong nor clear in terms of quality of care or liabilities. 

Contracting with a very large number of service providers offers beneficiaries choice, although 

not necessarily quality service. The financing agencies have little leverage over the contracted 

parties. Different agencies have common interests, contract with the same providers, and use the 

same contracting mechanisms. However, agencies do not seem capable or willing to combine 

efforts to improve their bargaining positions or improve the contracting mechanisms. For 

example, with regard to hospitalization, several simple measures are likely to make an impact: 

unification of pay schedules across the different financing agencies; introduction of flat rates for 

all hospitalizations, medical and surgical, or preferred providers judged on both quality and 

costs, or selection of sites for certain types of hospitalizations. Attempts are under way to unify 

pay schedules (especially for surgical procedures), but this has proved difficult for various 

political reasons. With regard to ambulatory care, changes that are seen as most urgent include: 

listing preferred providers; gate-keeping through primary care physicians; introducing methods 

of risk sharing by providers; instituting health information systems; and documenting health care 

outcomes. As with the Ministry of Public Health scheme, many worry about the public–private 

cash transfers that current arrangements provide without the anticipated returns for citizens. 

The current fragmentation of health care financing in Lebanon is a recognized obstacle. 

However, contracting need not be so fragmented. All public agencies contract with the same 

providers using the same arrangements. Unification of contracting, for example through the 

creation of a central contracting body which contracts with providers on behalf of the different 

agencies, can minimize costs and improve effectiveness and bargaining power. Additionally this 

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Lebanon 

could be a first step towards ending the fragmentation of health financing. This step will entail 

some challenge in terms of consolidation of administrative structures of different agencies, but 

would be well worth the effort. 

Identified problems with current contractual arrangements, whether they concern the 

Ministry of Public Health or other public financing agencies, mostly reflect two key factors. 

• Lack of political support. A wide range of reforms are urgently needed in the health sector. 

These include, most urgently, ending the current fragmentation of health care financing. Use 

of contractual arrangements as a tool for reform requires political support as contracted 

parties, whether hospitals or physicians or other providers, have large powers and can exert 

them very effectively over the public sector. This is compounded by their dominance of 

health service delivery. The difficult economic conditions of over-supplied provider groups 

in the midst of ongoing economic difficulties in Lebanon further complicates the situation. 

Nevertheless, visionary public health policies and stewardship and more pressures from 

beneficiaries can bring on profound changes. 

• Lack of adequate capacities. It is commonly indicated that current capacities in the different 

public health agencies are not adequate to oversee and monitor a different scope of 

contracting arrangements that emphasize quality of care and which are outcome based. For 

example, most agencies do not have the needed number of highly qualified supervisory 

physicians. A different and new set-up is needed for contractual arrangements with different 

focus. This includes a health informatics system, interlinked financing agencies and 

providers and enhanced transfers of data and payment. 

CONTRACTUAL ARRANGEMENTS: A SCORECARD 

Table 5 summarizes strengths and weaknesses of contracting arrangements according to 

financing agency. It might be also useful here to provide a general overview of what contracting 

arrangements can and cannot do. Contractual arrangements provide important contributions to 

the performance of the health care system in Lebanon. These arrangements: 

Provide the legal and organizational framework for public–private interactions to provide health 

care and health-related services to large segments of the Lebanese population (both the 

insured and uninsured). 

Cover uninsured portions of the Lebanese population, thereby contributing to improving equity. 

This is especially important with regards to coverage of hospitalization and acute care 

services. Coverage of primary care services is gradually improving. 

Support selected nongovernmental organizations which provide basic social services beyond health 

care. 

Improve the capacity of the Government of Lebanon to monitor performance of contracted health 

care institutions. 

Can lead to upgrading standards and performance of contracted parties. 

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Table 5. Scorecard of contractual arrangements in Lebanon 

Lebanon 

Contractual arrangement What the arrangement achieves Challenges to meet 

MOPH 

1) Primary care (primary 

care centres) 

2) Hospitalization (private 

and public hospitals) 

3) Social welfare 

(nongovernmental 

organizations) 

• Provide primary care services to uninsured Lebanese 

• When network is complete, it would cover all geographic areas 

• Provide nongovernmental organizations with needed support (e.g. 

essential drugs and vaccines) and help them improve performance 

• Provide hospitalization services to uninsured Lebanese, promoting 

equity 

• Cover all geographical areas 

• Beneficiary chooses provider 

• Accreditation system helps select the better hospitals 

• Flat rates for many surgical procedures decrease costs 

• Supervising physicians ensure indications, appropriates of care, and 

appropriate billing 

• Support work of nongovernmental organizations on heath and health 

determinants 

• Promote equity 

4) Chronic drugs (YMCA) • Procure, store and distribute essential drugs for chronic conditions 

• Decrease cost of care 

• Improve access and thus promote equity 

5) Immunization 

(UNICEF) 

• Secure immunization material 

• Decrease costs 

• Improve access and thus promote equity 

• Monitor and ensure quality 

• Assess impact 

• Impact the different agendas of primary care centre 

• Implement a true primary health care model (i.e. 

beyond primary care) 

• Prevent abuse 



• Control escalating costs 

• Apply flat fees to all hospitalizations (surgical and 

medical) 

• Resist political pressures for inclusion of more 

hospitals 

• Hospitals have tremendous leverage 

• Monitor performance 


• Monitor and ensure quality of prescribing 

• Link to proper management of chronic conditions (e.g. 

algorithms) 

• Develop alternative mechanisms in case NGO 

withdraws 

• Find alternative sources if UNICEF withdraws

Lebanon 

Table 5. Scorecard of contractual arrangements in Lebanon (cont.) 

Contractual arrangement What the arrangement achieves Challenges to meet 

6) Maternal services 

(Makassed) 

7) Primary health expertise 

(consultants) 

8) Programme 

management (WHO) 

Other public organizations 

1) Ambulatory care 

(mostly private providers) 

2) Hospitalization (Mostly 

private hospitals) 

• Provide community access to facilities for normal delivery 

• Link primary and maternal care 

• Link community maternal care and referral services 

• Secure public health expertise in needed areas 

• Avoid adding more regular staff 

• Ensures proper management of important programmes 

• Secures WHO expertise and intimate involvement 

• Retains primary health professionals (on WHO pay scale) 

• Provide ambulatory care for beneficiary 



• Provide hospitalization services to beneficiaries 



• Flat rates for many surgical procedures decrease costs 

• Supervising physicians ensure indications, appropriates of 

care, and appropriate billing 

173 

• Too early to assess performance and impact 

• Ensure quality of contributions 

• WHO overhead plus additional overhead when consultants are 

recruited 

• MOPH can independently manage programmes with support of 

WHO 

• Assess impact of programmes 

• Link programmes with other MOPH activities (e.g. primary 

care and hospitalizations) 

• Implement primary care model (including gate-keeping) 



• Assess outcomes 

• Control escalating costs 

• Resist political pressures by strong provider groups. 

• Coordinate a common contracting mechanism with other 

financing agencies 



• Assess outcomes 

• Apply flat fees to all hospitalizations (surgical and medical) 

• Resist political pressures by hospitals (e.g. for inclusion of 

more hospitals) 

• Coordinate a common contracting mechanism with other 

financing agencies

Lebanon 

However, the effectiveness of contractual arrangements as a tool for improving health 

sector performance can be improved. These arrangements: 

Are not yet part of a clear national strategy for health sector reform, therefore their use as a tool can 

only be limited in effectiveness and scope. The main limitation today is the fragmentation of 

health care financing. Without a uniform financing scheme, which should be the outcome of 

a political process, contracts can only have limited success in giving the government the 

needed leverage to manage care. Furthermore, considering that 65%–70% of all health care 

expenditures in Lebanon are borne by the citizens (with the poor spending disproportionately 

high percentages of their income), even with optimization of contracting mechanisms, there 

is a limit to what can be done and the main focus should be on improving public financing of 

the health care delivery. 

Remain fragmented with different agencies contracting with the same providers using different 

terms and tariffs. 

Are not based on evaluation of measurable indicators for both processes and outcomes. Therefore, 

there are very limited capacities at present for evaluation of performance of contracted 

parties. 

Favour an ever stronger private sector over the public sector, which has been undermined. 

Do not provide the government with adequate leverage to shift emphasis from acute care to 

preventive and outpatient care. In this sense, contracts serve more to “manage” the current 

health sector crisis in Lebanon rather than contribute to effective long term solutions. 

Place little emphasis on broad determinants of health. Related to this point, there is little 

coordination with other governmental agencies that work on these determinants, such as the 

Ministry of Social Affairs. 

Rarely solicit the consumer perspective and do not meaningfully involve citizens in choice or 

monitoring of contracts. This relates to issue of need for democratization of health care 

policy processes. 

Do not adequately emphasize models of integration (e.g. prevention–treatment, in-hospital– 

community). 


Contractual arrangements in the health sector are abundant in Lebanon. They are used 

mostly for hospitalization and ambulatory care services, with over 80% of the Lebanese 

population covered through these contracts. However, contracts also cover a variety of public 

health functions. The breadth of these contracts reflects the dominant role of the 

nongovernmental sector as compared with the public health sector. Contracting allows the 

different public agencies to obtain services needed for beneficiaries in all of Lebanon. The 

Report has reviewed the different contractual arrangements of different public organizations and 

identified strengths and weaknesses. These are summarized in Table 5. The review also identified 

the main obstacles to improving contractual arrangements, which include lack of political

Lebanon 

support for wide reform and lack of capacities within current agencies for substantial upgrading 

of contractual arrangements. 

Based on this review, the following steps are recommended to improve the use of 

contractual arrangement in improving health sector performance in Lebanon. Although many 

recommendations can be made, these steps are highlighted because of their perceived feasibility 

and potentially large impact. 

1. In light of the fragmentation of the contracting mechanisms, create a central contracting 

body which contracts with different providers on behalf of the financing agencies. 

2. If the previous step is not immediately feasible, at the very least unify tarification for 

similar services contracted by different agencies. 

3. Extend the use of flat rates to include all surgical procedures and introducing flat fees to a 

variety of medical conditions. 

4. In light of the accumulated experience at the Ministry of Public Health through the 

successful partnership with WHO in the joint management of several national health 

programmes, the gradually transfer these programmes to be fully managed at the Ministry 

of Public Health. 

5. Considering the current fragmentation of health care, use current contracts to link inpatient 

and outpatient care. The case of management of coronary heart disease could be a pilot 

study in this regard. 

6. Incorporate consumer perspectives and meaningful representation and input into the 

contract-making processes. 

7. Although implementing the mechanisms does not appear to be politically feasible at this 

point, study the potential contribution of mechanisms such as primary care gate-keeping 

and preferred providers to improving contractual arrangements. 


Note: The aim of this expanded bibliography is to serve as a potentially usefully resource beyond 

contractual arrangements into broader issues in health sector organization and reform in 

Lebanon. 

Books concerning health sector in Lebanon 

1985 

ﺔﻳرﺪﻨﻜﺳﻻا . ﻂﺳﻮﺘﻤﻟا قﺮﺸﻟ ﻲﻤﻴﻠﻗﻹا ﺐﺘﻜﻤﻟا – ﺔﻴﻤﻟﺎﻌﻟا ﺔﺤﺼﻟا ﺔﻤﻈﻨﻣ . نﺎﻨﺒﻟ ﻲﻓ ﺔﻴﺤﺼﻟا ﺔﻳﺎﻋﺮﻟا . ﻞﻔﻧﺮﻗ ﻞﻴﺒﻧ . د و ةوﺮﻣ نﺎﻧﺪﻋ . د 

175 

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Lebanon 

ﺔﻌﺒﻄﻟا ،نﺎﻨﺒﻟ ،توﺮﻴﺑ . ﻲﺑﺮﻌﻟا ﺮﻜﻔﻟا راد . ﺔﻴﺤﺼﻟا ﺔﺳﺎﻴﺴﻟا رﺎﺴﻤﻟ ﺢﻴﺤﺼﺗ و ﻲﺤﺼﻟا قﺎﻔﻧﻹا ﺪﻴﺷﺮﺗ ﻮﺤﻧ . لﻮﻠﺣ و ﻊﻗاو : ﺔﺤﺼﻟا . ﺪﻴﺑﺮﻋ ﺞﻴﻬﺑ . د 

2000 ﻰﻟوﻷا 

Tabbarah R. The health sector in Lebanon. MADMA, Beirut, 2000 

Ammar W. Health system and reform in Lebanon. Beirut, World Health Organization, 2003 

Peer–reviewed literature concerning health sector performance and reform in Lebanon 

Kronfol NM, Bashshur R. Lebanon’s health care policy: a case study in the evolution of a health 

system under stress. J Public Health Policy 1989; 10(3): 377–96 

Van Lerberghe W et al. Reform follows failure: I. unregulated private care in Lebanon. Health 

Policy and Planning 1997; 12 (4): 296–311 

Van Lerberghe W et al. (1997). Reform follows failure: II. pressure for change in the Lebanese 

health sector. Health Policy and Planning 1997, 12(4): 312–319 

Ammar W, Mechbal AH, Awar M. Organisation des services de soins, système de couverture et 

contribution du ministère de la santé publique. Leb Med. J 1998; 46: 43–46 

Ammar W, Jokhadar A, Awar M. Health sector reform in Lebanon. Lebanese Medical Journal. 

1999; 46(6); 328–334 

Ammar W, Awar M. What does the World Health Report 2000 bring to Lebanon? 

J Med Liban. 2001, 49(3):123–5 

Ammar W, Kasparian R. What is fair in financing fairness? J Med Liban. 2001 May-Jun; 49(3): 

126–8 

Reports of major surveys on health and health care in Lebanon 

Deeb M, ed. Beirut: A health profile 1984–1994. American University of Beirut, Beirut 1997 

Ministry of Social Affairs. Population and Household Survey, 1996 

Central Administration of Statistics. Household living conditions, 1997 

Ministry of Social Affairs. National Household Health Expenditure and Utilization Survey, 1999 

Major reports and documents concerning health sector performance and reform in Lebanon 

176 

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Lebanon 

Sabri B et al. Health sector reform in Lebanon. Report of a WHO preparatory mission. World 

Health Organization, Eastern Mediterranean Regional Office, June 1996. 

The World Bank, Human Development Group, Middle East and North Africa. Health sector in 

Lebanon: Issues and prospects. MNSHD Discussion Paper Series No.4. 2000 

Ministry of Public Health, Office of the Director General. Annual Report, 2000 

Kronfol NM. The Lebanese Health Care System. Options for Reform. Ministry of Public Health, 

2000 

Kronfol NM. The Rebuilding of the Lebanese Healthcare System: Successes and Failures. 

December 2002 

Hajjar H. Evaluation of the agreement between the Ministry of Public Health and the NGOs 

related to primary heath care services. December 2003. 

Selected papers from Regional Social Protection in an Insecure Era: A South-South Exchange on 

Alternative Social Policies Responses to Globalization. Inter-Regional Workshop, February 

27th–March 1st, 2001, Beirut 

Background/general papers on contractual arrangements 

Lavoie JG. Governed by contracts: The development of indigenous primary health services in 

Canada, Australia and New Zealand. Journal of Aboriginal Health January 2004, 6–24. 

Barr D et al. Research protocols to evaluate the effectiveness of public/private partnerships in 

enhancing health and welfare systems development. Center for Health Policy, Institute for 

International Studies, Stanford University, February 2004. 

Papers provided by EMRO concerning contracting arrangements. 

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Morocco 

MOROCCO

INTRODUCTION 

Morocco 

During the past few years, public organizations have become increasingly open to 

working with the private sector. As part of public sector reform, this openness is the result of 

growing interest in resource efficiency and performance improvement. In the field of health, 

contracting is considered a new mechanism that can enable the health sector to improve its 

responsiveness to changes in the health system environment and the national context. 

The contractual arrangement offers an opportunity to adapt interventions to a wide range 

of health objectives, as well as to bring together different actors in the field of health. Given 

their active roles, these actors (service providers, insurance agents, industry, technology, civil 

society) are known as stakeholders 

In the meantime, the systematic use of this new mechanism has become more difficult 

due to the diversity of its forms and contents. This study attempts to document and analyse the 

experiences of the Ministry of Health of Morocco in the area of contractual arrangements for 

health. 

OBJECTIVES AND METHODOLOGY 

Objectives 

This study is a part of a regional initiative by the WHO Regional Office for the Eastern 

Mediterranean aimed at exploring the potential of the countries of the Region to contract with 

the private sector for provision of health services. Such exploration responds to the need of 

ministries of health to develop strategies for public–private mix as a way to improve health 

system performance. 

Specifically, the study aims at documenting the experience of the Ministry of Health in 

undertaking contractual arrangements, and analysis two specific experiences of contracting 

with the private sector that represent important potentials for outsourcing health services in 

Morocco. The first is a traditional experience of subcontracting of hospital support services. 

The second is an innovative experience recently started that consists of contracting for 

equipment and supplies required for the care of end-stage renal disease. 

Definition of contractual arrangements 

The contractual arrangement is a type of a public–private mix that takes the form of a 

partnership between two or more organizations belonging to different activity sectors and 

seeking to reach common objectives. 

The rationale for involving the private sector is the fact that this sector accumulates 

resources, competencies and management styles sufficiently innovative to contribute to the 

improvement of the health system performance. The growing need to modernize public 

services and to respond with efficiency to population expectations is incentive for the public 

sector to turn to the private or nongovernmental organization sector. 

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The type of contractual arrangement depends on the nature of the relationship (purchase, 

leasing, delegation, cooperation) and the subject (support services, care, etc.). The nature of 

1 

the contractual relationship allows for three types of contractual arrangementTP PT: purchase or 

leasing; delegation of responsibility; and cooperation. 

Methodology 

To implement this work, several data collection methods were used. 

Document review. Internal documents were compiled on the experience of the Ministry of 

Health in dealing with contractual arrangement. These mainly comprised legal regulations 

and instruction guides and information related to the case studies, such as statistical data 

and contract documents. 

Interview with key personnel. Six persons were interviewed from the Department of 

Regulations and Conflicts, Department of Planning and Financial Resources and the 

Department of Hospitals and Ambulatory Care. 

A survey mailed to public hospitals. The survey sought to document the experience of hospitals 

in subcontracting. It covered all 74 state hospitals under autonomous management 

(SEGMA) gathered in 46 provincial hospital centres. A questionnaire was elaborated for 

this purpose and tested in a hospital prior to its use (Annex 1). A summary of survey 

results are attached as Annex 2. 

Focus group discussions. These were held with strategic actors of the Ministry of Health and 

with private operators having experience in contracting with the Ministry of Health. 

2.4 Limits and constraints of the study 

The short time allocated for implementing the study constituted the main constraint to 

the study. Given the originality of the research topic and the diversity of the resources 

information to be consulted, it was difficult to implement the study within three months. 

The definition of contractual arrangement provided in the reference statements is 

narrow. The contractual arrangement is a kind of strategic alliance that leads to the creation of 

value. In the business world, such value refers either to a profit or to a privileged position in 

the market. In the field of health, the added value must necessarily have a social and ethical 

aspect. Therefore it must be protected by one of the actors concerned in the contractual 

arrangement. This should be the State, given that the State is in charge of protecting the 

general public interest. Therefore the contractual arrangement in the field of health must be 

submitted to law; this means necessarily that its definition must include the public 

organization as initiator. 

Building on the proposed structure to identify the actors involved in the governance of 

health systems (State, private sector and civil society), the following definition is put forward: 

1 Classification by Perrot J, Carrin G, Sergent F. (1997) L’approche contractuelle: de nouveaux partenariats pour 

la santé dans les pays en développement. WHO/ICO/MESD.24 

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A contractual arrangement is a partnership between a public organization, representing the 

State, and one or many stakeholders that aims to creating an added social value or an earning 

opportunity. The stakeholders can be private, for-profit organizations or non-profit 

organizations representing civil society. 

RESULTS AND DISCUSSION 

Background 

Evolution of the Moroccan Health System 

Since the formulation of the first health policy in 1959, the Moroccan health system was 

dominated by the public sector and characterized by the centralization of management. The 

State was positioned in the heart of the health system, performing at once the functions of 

financing, administration and provision. The private sector developed independently of the 

public sector, and with complete autonomy. 

In the early 1990s, the problem of health financing brought hospitals to the forefront of 

national health agenda, despite the fact that hospitals were the main beneficiaries of health 

spending. The need for hospital reform became associated with the need for overall reform of 

the health financing system. As a result, a number of reform fields are currently being carried 

out in the health system, focusing on four main areas: 

decentralization 

reform of public spending 

reform of financing 

reform of public hospitals. 

These reforms created a receptive environment for the establishment of partnerships 

with local actors (local collectives, private and civil society sectors) aimed at providing a 

timely and appropriate response to the real needs of citizens. 

The decentralization initiative, expressed through a number of sector-wide measures, 

has three main objectives: 

bring the administration closer to people in order to respond to their needs and ensure equal 

access to public services; 

strengthen the dialogue between the State and the local partners in order to use reach all levels 

of society; 

reinforce coherence and coordination with the peripheral levels in order to achieve optimal 

programming at the local level. 

One of the main elements of the public management reform concerns the administrative 

function of the State, of which, appeared the necessity to elaborate and apply a new budget 

management style focusing on results, known also as contracting. 

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Experience of the Ministry of Health in contracting 

Contracting arrangement based on purchase or leasing 

Purchase of cares services 

This is one of the oldest types of contractual arrangements between the private and 

public sectors in Morocco, initiated as a way to address a deficit in human resources, 

particularly medical, in the public sector. The goal of this contracting agreement was to assign 

physicians, pharmacists and dentists to public health institutions in areas with limited health 

care coverage. Such contractual arrangement becomes an agreement. This agreement was 

formalized by Ministerial decree in 1972, which defined the legal status of these human 

resources. 

Such agreements may be signed jointly by the local representative of the Ministry of 

Health at the province level, and the health workers practising in the private sector, subject to 

approval by the Minister of Health. In 1996, new legislation was introduced requiring 

additional approval for such agreements by the National Council of the Medical Professional 

Association. 

The private practitioner is employed as a part-time health worker within a public health 

institution on the basis of the conditions set by the relevant decrees. He or she receives a 

monthly salary provided through the budget of the Ministry of Health. The use of such 

contractual arrangements is declining considerably with the expansion of public health 

services. 

Purchase of non-medical services 

Contracting for the purchase of non-medical services applies to the purchase by local 

public health authorities of equipment or supplies as part of health care (biomedical 

equipments, pharmaceutical products), or support services that are not part of health care. This 

is regarded as subcontracting, and applies in this case to contracts for services such as 

maintenance, cleaning, catering, laundry or security, between the hospital and a private 

company. 

Such purchasing contracts have a strong legal framework. They are executed in 

compliance procedure laid out in the public bids regulations. Depending on the amount 

involved, the administration purchases services either through public bid offers or through 

purchase orders, with due respect to transparency and fairness in competition. The procedures 

require an early financial review prior to implementation of the public bid or purchase order to 

be submitted to the Office of Budgeting and Expenditures Control of the Ministry of Finance. 

Support and logistic services are subcontracted in accordance with the public bids 

procedure. The administration identifies the nature and the quantity of the services, the 

payment calendar and conditions, as well as the quality indicators for evaluation of the 

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services, as the administration is responsible for the monitoring and evaluation of the different 

operations. 

The evaluation of the different subcontracting experiences that have been introduced in 

the public health services showed that these services were of higher quality due to their level 

of professionalism, and that the cost to quality ratio was optimal. Subcontracting also allowed 

the development of small and medium businesses and for the employment of youth. 

Various problems persist. In remote areas, far from towns, the competition is limited. In 

general, there is only one company that often comes from a distance and may not have the 

required competency. The contracts do not include conditions for the proper evaluation of the 

service provided. 

In order to address these problems, in 2002 the Ministry of Health issued an Act 

(No. 49/DHSA/20/21) setting the terms and conditions for subcontracting bids. Model 

contract specifications were attached to this Act. These specifications were developed in order 

to unify the basic contracting documents and to make use of longer-term bids, contracted for 

more than a year. In general the length of such bids is about 5 years. The conditions and 

procedures for these bids are set by the public bids regulations. 

Regardless of the service purchased, as soon as the Office of Budgeting and 

Expenditures Control signs the public bid agreement, the private company receives a service 

order requesting the implementation of the conditions agreed upon in the bid document 

(contractual agreement). Payment is effected after the execution of the terms of the contract 

agreement (delivery of goods, implementation of work, etc.) within the time-frame specified 

in the contract and after check-up by the administration and review by the Ministry of 

Finance. Such contract agreements have been made at the national, regional and local levels, 

and occasionally at the international level. 

Leasing of medical equipment and supplies 

Since 2003, Morocco has engaged in leasing as a form of contracting arrangement with 

the private sector. This decision was brought about by difficulties faced by the Ministry of 

Health in mobilizing funds to purchase equipment or in providing certain services in the 

context of limited resources. Examples are the provision of haemodialysis, tomography or 

hospital solid waste handling. The experience of Morocco of leasing equipment to treat 2000 

patients with end-stage renal disease is reviewed later in this report as a case study. 

Contracting arrangements based on delegation 

The external institutions depending of the Ministry of Health are organized basically on 

two statutes: 

The functional decentralization (delegation) regarding hospitals; 

The territorial decentralization regarding administrative entities of the Ministry of Health. 

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In the context of reinforcing the responsibility of the external institutions, legislators 

considered two types of contracting arrangements adapted to these two statutes: the work-plan 

contract and the program budget. 

The work-plan contract 

The first contracting experience between the Ministry of Health and autonomous public 

institutions was carried out in 2002. Two work-plan contracts were made between the State, 

represented by the Ministry of Health and the Ministry of Finance and Privatization, and two 

university hospitals, Ibn Sina (Rabat) and Ibn Rochd (Casablanca). 

These two work-plan contracts were developed to reinforce the links between the State 

and these centres. Therefore, the objectives assigned to these centres are defined for the period 

of the contracts as well as the periodic evaluation of the degree of fulfilment of the terms of 

these contracts. 

These two work-plan contracts illustrate the willingness of the State to introduce new 

contracting relations aiming at: 

supporting the university hospitals in focusing on their statutory responsibilities for care, 

education, training and research; 

maintaining these university hospitals as national hospital centres of reference providing health 

care services at the tertiary level; 

adoption of modern management based on accountability; 

optimization of the university hospitals’ resources and expenditure; 

adapting the institutional and judicial contexts of these two centres to ensure harmonious 

development with their environment. 

A special monitoring committee conducts monitoring of the work-plan contract. Its 

membership includes representatives of the contracting parties, with the Minister of Finance 

and Privatization as its president. The monitoring committee meets at least twice a year to 

examine: 

reports of independent experts regarding the quality of services, the hospital hygiene 

programme and the environmental protection measures; 

external auditors’ reports; 

annual reports of the work-plan contract implementation 

performance and results obtained by the hospital centre. 

The programme budget 

The programme budget is the second form of contracting between the State, represented 

by the central health administration, and external services. It is an outgrowth of public 

spending reform in the form of results-based budget management. 

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The programme budget is like a programme contract that lays down every year the 

central administration’s and the external departments’ responsibilities with regard to achieving 

agreed-upon objectives, but within the context of flexible three-year programming with an 

annual budget. 

In accordance with the Guide for results-based budget management (July 2001), the 

programme-budget is “a formal process aiming at determining every year, but within a 

flexible three-year programme, the respective responsibilities of the Central Administration, 

having the decision power to govern a Ministry, and the decentralized Services belonging to 

the same Ministry and benefiting from a delegation of power in order to achieve the 

2 

commonly agreed upon objectives”TP PT. 

The programme budget allows the central administration and the external services to 

identify the objectives to be attained during a three-year period and to provide the necessary 

resources to these external services. It also allows for follow-up of the implementation 

through performance indicators and for giving special attention to treatment results and to the 

terms for use of resources. 

The programme budget is a management tool that particularly allows for: 

bringing together the public health administration and the citizens; 

improving the quality of health services; 

facilitating decentralization of management powers; 

establishing an equilibrium between the Ministry’s accountability for results and the necessary 

autonomy of the responsible field managers. 

It includes three components: 

An overall document prepared by the central administration that complies with health objectives 

set by the government; 

An agreement between the central administration and the decentralized services of the Ministry 

of Health which covers: general terms, engagement of the external services, engagement 

of the central administration and monitoring and evaluation terms; 

Performance indicators and control charts. 

Results-based budget management is a participatory process in which communication 

plays an essential role and represents its main strength. 

The monitoring system is based on two elements: meetings of the monitoring organs 

and use of supporting documents. Organs responsible for monitoring are the orientation 

council, which meets once a year; the central committee for guidance, monitoring and 

evaluation, which meets twice a year; and the regional committee of monitoring and 

evaluation, which meets every two months. 

2 Ref. Primature, Circulaire n° 12/2001 

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There are many supporting documents available at the level of the decentralized 

services, including reports on the advancement of activities and projects, statistical tables, and 

annual activity reports. 

Contractual arrangements based on cooperative relations 

Partnership with nongovernmental organizations 

The nongovernmental organizations active in the field of health were created by civil 

society in an effort to address difficulties in health care and the emergence of chronic diseases, 

the costs of which are a heavy burden for families in the absence of social services coverage. 

In general, the nongovernmental organizations were created by health professionals to 

mobilize efforts towards a public health problem, such as kidney disease, infant diabetes, 

infant cancer, AIDS, etc. Sometimes these nongovernmental organizations work in the public 

hospitals side by side with the professionals of these health institutions. 

The efforts of nongovernmental organizations in these cases are intended to augment the 

efforts of the State, not to replace them. Their actions in general complement each other. The 

public health institutions turn to nongovernmental organizations to carry out different actions, 

such as: 

Providing diagnostic and treatment activities: cancer, sexually transmitted infections, heart 

disease, kidney disease, diabetes) 

Providing family planning, such as through supplying contraceptive products, training health 

professionals and counterparts (e.g. on AIDS) and providing public information, 

education and awareness (trachoma control, etc.). 

The public contribution to the financing of health-related activities of nongovernmental 

organizations include the provision of annual subsidies and medical supplies (medicines, 

contraceptives, various other supplies), assignment of facilities, equipment and office 

furniture, and sharing of human resources. 

The nongovernmental organizations work with the public health institutions. An 

agreement is established for this purpose stating the contribution and engagements of both 

parties as well as the duration of this agreement. However, such agreements usually do not 

include the means and tools necessary to control, monitor and follow up the input of 


In 2003y, the Prime Minister issued an Act (no. 7/2003) establishing a new partnership 

environment intended to be more flexible and to improve coordination and control through 

use of a results-based management framework. Through this Act, the government seeks to 

develop new relationships with nongovernmental organizations through the renewed 

partnership policy on one hand, aimed at optimizing the working environment of partners, and 

on the other hand, defining with precision the intervention framework in order to optimize the 

use of resources, focus the partnerships on needy populations and guarantee transparency. 

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According to his Act, each time the State’s contribution is equal or more than 50 000 

Moroccan dirhams per project, both parties should sign an agreement similar to the model 

attached to the Act. The acquisition of public financing is conditional upon the compliance of 

the planned activity or project with the purpose for which the nongovernmental organization 

was created and priority actions of the government, particularly, combating poverty, assisting 

needy women and infants and developing infrastructure and basic social services. 

Partnership with international organizations 

Within the framework of their cooperation programmes with the Government of 

Morocco, international partners also work with national organizations carry out a number of 

activities. 

United Nations agencies 

UNDP, UNFP, WHO: family planning actions, maternal and child health and prevention 

of HIV/AIDS and sexually transmitted infections 

UNAIDS: prevention and control of HIV/AIDS 

UNICEF: maternal and child health, information and awareness, especially for the poor 

or those in remote areas, and prevention of iodine deficiency 

Bilateral cooperation services 

Research activities 

Family planning services, HIV/AIDS and sexually transmitted disease prevention, 

eradication of trachoma 

Diagnosis and treatment of certain diseases 

Training of health professionals 

Public education, information and awareness. 

The financial contributions of the international organizations may be in the form of 

financial grants, medical supplies and equipment, office supplies, transportation means and 

logistic support. 

Financing is usually acquired on the basis of a project financing request that is 

submitted by the national organization and that meets the national public health objectives and 

the orientation of the cooperative programme agreed upon between the international 

organization and the Ministry of Health. The contractual arrangements stipulate requirements 

for a monitoring and evaluation process. 

Partnership with local collectives 

Since the early 1990s, a number of partnerships with local collectives have been formed 

through the establishment of multi-year agreements (from 1 to 5 year period). 

In 1990, the budgets related to health investment projects were transferred to local 

collectives. The amount transferred, about 118 621 510, covers two components: projects 

meeting local needs as planned by the Ministry, and a special programme of rehabilitation and 

equipment of the Ibn Rochd University Hospital Centre in Casablanca. 

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In 1997, a seminar on cooperative development with local collectives recommended, as 

a health measure, the establishment of a partnership with local collectives in the fields of 

construction, equipment and maintenance of health care facilities. Currently, partnerships with 

local collectives cover: 

Health care facilities construction: hospitals, health centres 

Support for basic health care services; 

Purchase of equipment and transportation means; 

Provision of medicines and medical goods; 

Part-time assignment of health workers. 

The partnerships are in general defined by the agreements. In the absence of monitoring 

and evaluation tools, it is difficult to evaluate the work of the collectives within the 

framework of these agreements. 

Some organization and improvement perspectives for partnership with local collectives 

are justified by: 

The government willingness to carry out a proximity policy in the context of decentralization; 

The government statement regarding the opportunities to create employment at the local level; 

The willingness of the Ministry of Health to strengthen partnership with local collectives in 

order to better respond to the population health needs; 

The extension of the local collectives competencies in accordance with the decentralization law. 

With the launch of public spending reform, the Government of Morocco announced the 

opening towards forming strategic partnerships seeking improved efficacy of public sector 

action. This reform implies four components: globalization of the allocated budget, as a prerequisite; 

contracting; partnership; and delegation of responsibility in favour of regulation. 

The Ministry of Health was among the first sectors to adopt this process. 

Although the legal context and political willingness exist, the collective partnership 

system suffers from lack of technical supervision and legal tools. Before they are 

institutionalized through legislation, more organizational experience with such agreements is 

needed. Such organizational learning will entail its share of problems, and will also require a 

new attitude towards the different partners active in the field of health, including the private 

sector. 

Case study 1: Providing care for end-stage renal disease through leasing of equipment 

and supplies 

End-stage renal (kidney) disease is considered a public health problem in Morocco. The 

growing number of cases requiring treatment, compounded by high treatment costs, has made 

renal disease a priority on the agenda of the Ministry of Health. 

The incidence of end-stage renal disease in Morocco is about 3000 new cases per year. 

The demographic and epidemiological transition under way in the country predicts a 

progressive increase in the number of cases requiring treatment. 

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The number of patients currently receiving treatment is about 3500, of which 1420 are 

in the public sector. Another 2135 patients are in need of treatment and are on the waiting lists 

of public haemodialysis centres. 

Treatment for end-stage renal disease is provided in two ways: kidney transplantation 

and haemodialysis. In Morocco, haemodialysis constitutes the principal treatment, with 

kidney transplantation limited to a few cases per year. Morocco has about 95 haemodialysis 

centres, of which 28 are in the public sector. The equipment of these centres includes 1023 

artificial kidneys, of which 351 are in the public sector. 

A haemodialysis generator cost between US$ 12 500 and 16 500. The water treatment 

unit costs about US$ 4000. Treatment for end-stage renal disease in a hospital costs about 

3 

US$ 187 20TP PT. Care for the 2135 patients waiting treatment will cost, as a recurring cost, 

4 

US$ 40 000 000 a year plus an initial investment of US$ 6 450 000TP PT. 

The high cost of infrastructure and treatment for renal disease makes it difficult to 

respond to the expressed need within a context of competitive priorities and budgetary 

constraint. 

In order to provide haemodialysis services required by patients with end-stage renal 

5 

disease two different forms of contractual arrangements were consideredTP PT: 

1) Contracting for support from non-profit associations 

This form of contracting was to support treatment provision to end-stage renal disease 

patients. The partnership with the non-profit associations is organized as follows: 

The Ministry of Health assigns staff to the centre and covers some fixed charges (water, 

electricity, etc.), blood products and some medicines and pharmacy products (heparin). 

The associations cover expenses related to equipment, medicines and consumables, including 

equipment maintenance. 

The majority of patients contribute to their care expenses (200 to 500 Moroccan dirhams per 

session, depending on the case). 

This arrangement depends largely on the availability of an association willing to 

undertake the investment. The number of beneficiaries of care is often limited, and does not 

include all patients in need of treatment. This contracting option basically amounts to 

participation in end-stage renal disease care, and is not sustainable. 

2) Contracting for the lease of equipment and supplies 

3 Etude sur l’analyse des coûts par activité à l’hôpital d’Agadir, PFGSS, DHSA, Ministère de la Santé du Maroc. 

4 Cost of 336 generators and 50 water treatment units. 

5 

The care strategy regarding final kidney deficiency includes also prevention and kidney transplantation that are not 

discussed in this paper. 

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Since the health authorities have to respond to the expressed need for final kidney 

deficiency care, which is cumulating in different levels, and to supervise the different 

interventions in this field, the Ministry of Health launched a leasing bid with the private sector 

to provide care to patients. This orientation is justified by the difficulty to mobilize together 

human, financial and logistic resources (supply and maintenance) and in a recurrent way 

throughout the national territory. Complying with the public–private contractual 

arrangements, the private organization is responsible for supplying 240 haemodialysis 

generators (artificial kidneys), 34 water treatment units and 225 000 haemodialysis kits per 

year for 32 centres at the national level. 

The contract is between the Ministry of Health (buyer) and a private organization 

specialized in haemodialysis equipment (supplier), and deals with the lease of haemodialysis 

equipment including consumable products (kits). The contract was established as a five-year 

contract. The contract is financed through the general budget of the Ministry of Health, for 

about US$ 5 000 000 per year. 

The supplier is committed to furnish 32 haemodialysis centres and to: install, operate 

and test the new haemodialysis equipment and ensure that this material is recently 

manufactured, with attached guarantee certificates delivered by the manufacturer; furnish 

consumable haemodialysis products (kits); and provide preventive and curative maintenance 

of the haemodialysis equipment, including training of personnel on this equipment. 

Specifically, the supplier must provide the following services: 

delivery of the rented operational equipment, including installation, utilization and testing at 

each haemodialysis centre indicated on the list of centres; 

employment of all the material and human resources required to carry out the contract within 

the deadline set for the installation; 

appointment of a competent engineer to supervise the installation and the maintenance of 

equipment; 

supply of consumable haemodialysis products (kits) in compliance with the technical and 

quantity specifications described in the estimated price table, included in the contract, to 

the designated centres for one year, renewable and valid during a 5-year period; 

regular preventive and curative maintenance of the equipment installed at each haemodialysis 

centre during the contacting period, including the supply of all labour and parts necessary 

to repair equipment; 

training of 4 persons in each of the haemodialysis centres for at least 5 days; 

updating of the haemodialysis equipment and consumable products in line with technological 

progress in this field. 

The buyer (Ministry of Health) is obligated to take all appropriate measures to enable 

the supplier carry out the required services in terms of access and storage of materials and 

tools and supply of water and electricity for the machinery. The Ministry will put at the 

disposal of the contract beneficiary: 

technical data and information needed to ensure the success of the implementation of the 

contract requirements; 

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Morocco 

facilities and the technical installations to realize the commitments in the contract; 

water and electricity supply to the haemodialysis equipment; however, water and electricity fees 

are at the expense of the supplier. 

The advantage of this form of contractual arrangement is that it delegates responsibility 

for supply and maintenance to the private sector, while enabling the health administration to 

focus on the regulatory and control function. It also helps ensure appropriate timeliness and 

efficiency of treatment. As well, this experience shows that the private sector can mobilize its 

experience and technology in order to offer solutions to specific health problems. 

6 

Case study 2: Subcontracting support services for SEGMATP PT hospital centres 

Hospitals face significant pressure to undertake a wide range of activities that they are 

neither ready nor equipped to carry out. In 1996, outsourcing of support services by the 

SEGMA hospital centres started with the subcontracting out of cleaning services for 

emergency facilities at Al Hoceima hospital. Since then, the experience has extended to other 

fields such as catering, groundskeeping and security services and to other hospital centres (41 

out of 46 SEGMA hospitals). These hospitals allocate between 20% and 40% of their 

functioning budgets to subcontract support services. 

According to the results of a survey (Annex 2) conducted among the 46 hospitals 

currently subcontracting out support services, the subcontracting experience has contributed 

to: 

improvement in the quality and efficacy of services; 

improvement of the standing of the hospital centre; 

improvement of the hospitalization conditions of the patients; 

The adjustment of the deficit in personnel or its reassignment; 

resolution of some personnel management problems facing the administration; 

better control of the costs related to these activities; 

improves control of support services; 

reduction of costs due to the competitive nature of the bidding process. 

The constraints reported by survey respondents are related to legal, financial and 

management aspects of subcontracting. The principal constraints are: 

Financial pressures that can result in hospitals choosing companies on the basis of cost rather 

than quality; 

Absence of reference norms for quality control; 

Absence of clear procedures to evaluate the provided services; 

Absence of experience among the agents in charge of monitoring, implementation and control 

of the conformity of the services and the products provided by the companies; 

6 Service d’Etat Gérés de Manière Autonome 

191

Morocco 

Employment by the companies of unqualified and underpaid personnel, which affects profits 

and competitiveness. 

Suggestions proposed by the contract managers included the following: 

Providing additional financial resources; 

Maintaining and extending the application of subcontracting to other administrative activities 

and to other types of support services, such as radiology, laboratory, etc. 

Disseminating standard means and tools for control, monitoring and evaluation; 

Developing a manual for management of subcontracted activities; 

Evaluating the experience; 

Improving supervision of the different stakeholders by the Ministry of Health; 

Transfer of activities that the hospital’s resources cannot cover to the central administration. 

Despite the relative limited experience in hospital subcontracting, the majority of 

managers regarded it as an opportunity to overcome the difficulties caused by the demand for 

better health care quality and the frequent turnover of qualified personnel. Indeed, the 

majority also requested its extension to other activities. However, this would require the 

adoption of a systematic approach and the elaboration of clear contracting strategy. 


Contractual arrangements represent an important phenomenon in the area of health 

services organization and management. Though the experience of Morocco is recent, this 

phenomenon is a promising means for improving health system performance while 

maintaining the regulatory position of the State with regard to the health system. 

The contributions of contractual arrangements to the health system can be analysed at 

different levels. 

Stewardship level 

The contracting arrangements constitute an instrument for implementing health policy 

and a means for regulating the health system. As a political instrument, the contracting 

arrangements enable the State to recover a measure of efficacy and competitiveness lost due to 

bureaucracy. Through contracting arrangements, the State: 

acknowledges the role of the partners in the health system performance; 

delegates responsibility directly to the different actors of the health system, 

becomes open to potential choices, thereby allowing better responsive to health problems; 

develops a sense of obligation towards results. 

As a regulatory means, the contractual arrangements enable the State to strengthen its 

position as the steward of stewards and to guarantee the general interest by establishing rules 

for contractual arrangements (legal context). These rules must permanently seek the added 

social value and provide the opportunity for profit. 

Health management organization level 

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Morocco 

Evaluation of the subcontracting experience and the description of the new contracting 

networks constituted by the planning contract and the programme budget yielded two 

important observations: 

Such arrangements respond to an evident need of the managers. They serve as a means for 

hospitals to express their needs and to compel the State to consider them as full partners. 

The opening of the private sector through subcontracting was not technically supervised and has 

not been accompanied by associated change in management style or attitude. 

Care services level 

At this level, the State remains hesitant to outsource services. This may be explained by 

the ethical and social implications of health care services and the contrast between these 

implications and the profit-making ethos. It is likely that in the future the State will have no 

choice but to open its health system to the private sector, as the State will not be able to 

respond to all resource deficits and reform needs with its own resources. To ensure that this 

opening is carefully considered and planned rather than imposed ad hoc by external forces, it 

will be necessary to develop a clear policy and long-term vision that clarifies the 

responsibility of the private sector and civil society, and that puts the State in a position to 

regulate contractual arrangements. Such a policy will help ensure that health remains in the 

middle of political, economic and social interests. 

Contracting arrangements appear to be an opportunity to strengthen health systems in 

order to improve their performance. However, certain prerequisites are necessary for their 

implementation: 

The commitment to a clear contracting policy that acknowledges the role of actors other than 

the public organizations in the implementation of the health objectives and that defines the 

legal context of the health contractual arrangements and the means of control necessary to 

protect the quest for added social value and the opportunity for profit; 

The exploration of the potentials offered by the private sector with regard to the health problems 

encountered; 

The development of transparency and communication and coordination tools suitable to respond 

to the requirements of the contracting parties; 

The presence of regulatory measures enabling public organizations to successfully open up to 

the private sector with no negative effects on health. 

193

Contract Purchaser of 

service 

(hospital) 

Supplier 

(private 

company) 

Object of 

the 

contract 

Morocco 

Annex 1 

Questionnaire for use in the hospital survey 

Form and 

length of 

contract 

Questions about the appreciation of the experience: 

Inputs of subcontracting for the functioning of the hospital 

Limits and constraints of subcontracting 

Suggestions. 

Types of 

services 

provided 

Value of contract 

/functioning budget ratio 

Payment procedure 

Payment 

frequency 

Voucher 

system 

Monitoring and evaluation 

process

Morocco 

Annex 2 

EVALUATION OF THE EXPERIENCE OF SUBCONTRACTING BY THE MANAGERS OF THE SEGMA HOSPITAL CENTRES 

Public 

hospital 

centre (PHC) 

Principal inputs Limits and constraints Suggestions 

Ouarzazate Positive quality improvement of services provided by 

PHC, reassignment of personnel 

Inezgane Quality improvement of services, clients and personnel 

satisfaction, providing additional technical material, 

compensate the deficit in personnel, reassignment of 

personnel, considered as creating jobs along the 

hospital reform, Availability of services 6 days a week 

Taroudant Satisfaction of personnel, respecting the deadline to 

provide services, availability 24/24, steadiness of 

agents in charge of subcontracted activities, recovering 

and reassigning the personnel 

Subcontracting constitutes an important burden on the 

budget, supervision needs and selection of companies 

taking into account hospital special status 

Absence of reference norms, to control the quality of 

the products in use, lack of qualified members of the 

committee in charge of monitoring, execution, control 

of products conformity, absence of clear procedures to 

evaluate the services, lack of professionalism of the 

companies in hospital lodging, instability of their 

underpaid personnel 

Laundry does not figure among the services considered 

for a bid, lack of professionalism of some companies, 

hiring personnel less qualified and underpaid, which 

could harm a loyal competitiveness 

Tiznit Improvement of lodging conditions in hospital Delay in budget allocation leads to a delay in the 

approval of bids, payment for provided services 

depends on the date of the approval 

El Kalaa Quality improvement and reassignment of personnel Profits not very important, subsidies deficient, 

subcontracting remains limited to some provided 

services 

195 

Maintain the subcontracting activities 

Implication of managers in the control 

of services delivery, availability of 

qualified structures of control, and of 

the evaluation norms and means, 

elaboration management manual for 

subcontracted activities, requirement 

of the payment statement, elaborate 

legislation requiring a minimum of 

professionalism in subcontracting, 

extend subcontracting to other 

administrative activities 

Recommend laundry services to be 

subcontracted through a bid, involve 

labor inspection to control 

subcontracted companies around the 

health structures 

Extend the application to other fields: 

radiology and laboratory

Essaouira Better provided services, reassignment of assisting 

personnel and agents, satisfaction of patients and 

visitors 

Morocco 

Budget insufficient, competitors are limited Extend the application to other fields: 

radiology and laboratory, elaboration 

of charges booklet centralized type, 

related to different services provided 

El Jadida No comment No comment No suggestions 

Safi Disengage from logistic functions, improvement of 

quality services helping clear the hospital image, settle 

the personnel deficiency , reassignment of personnel, 

master of costs management related to these activities 

Khouribga Settlement of lack of human resources, no assignment 

of certain categories, no replacement of retiring people, 

discipline, punctuality and quality of provided services 

are satisfactory 

Settat Improvement of services quality, concentration of 

managers on other less important activities 

Incidence of generated costs on the budget, lack of 

society professionalism, to turn to qualified companies 

is not covered by the budget 

Subcontracting constitutes an important burden on the 

budget: 50% (lack of financial resources) outsourcing 

groundskeeping is not profitable, reassignment by the 

organization of unqualified personnel 

Activities represent an important part in budgeting 

between 10% and 23% 

Boulemane No comment No comment No comments 

Sefrou Subcontracting allows the satisfaction of hospital 

resources deficiency, ensure the continuity and 

durability of permanent services, guarantee the efficacy 

and efficiency of provided services 

Delay of budget approval influences the start of 

providing services and the execution rate in regards to 

the amounts of the bids 

Kénitra No comment No comment No comments 

Sidi Kacem Improvement of subcontracting provided services, 

settle the lack of personnel 

Competitiveness of small and large organizations in 

subcontracting field 

196 

Increase budget allocated to hospitals 

Encourage subcontracting in all 

assistance activities, standardize the 

typical charges booklets, inject 

financial resources, standardize the 

monitoring and control tools 

Review the awarding procedures of 

the bids in order to proceed to their 

approval before the budget allocation 

Directorate of Hospitals and 

ambulatory care should provide a list 

of organizations that did not fulfil their 

engagements

Chefchaouen Reassignment of agents, positive impact of provided 

services on the improvement of the general functioning 

Larache Improvement of services quality, efficacy control, focus 

the efforts on the hospital mission 

Tanger Service quality, settlement of the problem of lack of 

personnel, disengage the administration from certain 

problems related to personnel 

Tétouan Improvement of the image of PHC responding to 

internal functioning needs better conditions, focus on 

actors of PHC, improvement of reception conditions, 

work frame, optimize the resources 

Errachidia Improvement of provided services quality, satisfaction 

of internal and external clients, reassignment of 

hospital agents to other activities, good image of 

hospital 

Morocco 

Limited budgeting does not allow regular and 

satisfactory subcontracting, training, competencies and 

profiles of agents reassigned by the organizations, 

remain inappropriate, low salaries to be reviewed 

197 

Increase of subsidies in order to 

subcontract other activities 

Financial limits Extend the experience to catering 

biomedical maintenance, etc. 

Budgeting constraints do not allow the choice of 

qualified organizations, the professional secret is not 

protected, and the personnel representative institutions 

protest against the subcontracting 

No respect of labour regulations, lack of personnel 

training (hospital wastes, nosocomial infections) budget 

limitations, high water consumption, delay in starting 

work 

Subsidies do not allow engagement of performing 

organizations, remoteness of the province, and 

inexistence of local organizations, lack of regulations 

regarding the gardening function, catering takes more 

than 22% of budgeting 

Ifrane No comments No comment No suggestions 

Khénifra Personnel profit, ease the procedures, improvement of 

provided services quality, acquirement of good 

experience related to subcontracting 

Al Hoceima Permanent availability of agents at the level of services, 

execution of works in and out of the bid 

Budgeting constraints, complexity of the commitments 

in the charges booklets, lack of expertise of the 

providers and monitoring agents 

Limited allocated budget thus the quality remains low, 

execution of works out of the bid causes some conflicts 

Taza No comments No comments No comments 

Intervene in order to organize the 

existing organizations in the market, 

organizations classification, creation 

of accreditation certificates for these 

organizations 

Insist on typical charges booklets, 

training the personnel on hospital 

wastes and nosocomial infections, 

monitoring and evaluation of the 

organization 

Regulate subcontracting of health 

services, review of subsidies increase 

Proceed to an evaluation by the 

national institute of health 

administration, increase of subsidies in 

order to encourage subcontracting 

Increase the allocated budget of 

subcontracting to improve quality, 

supervision of different actors by the 

Ministry of Health

Figuig Improvement of the hospital cleanness, free agents 

reassigned in needs positions 

Morocco 

Delay of organization employees salaries, quality of 

used products, delay of budget approval influences the 

engagement and the start in the context of a bid, 

employees are not registered at the social security 

Nador Profiting the personnel number Lack of regulations in this field responding to national 

norms for the selected partners (audits, controls) 

Berkane Service availability (personnel, material, products) 

execution efficacy 

Problems of awarding procedures (approval delay, 

unavailability of funds) no respect of the technical 

commitments 

Oued Eddahab None None None 

Laayoune Better service quality, reassignment of personnel, 

service continuity, improvement of the institution 

image 

Lack of organization experts, limitation of 

competitiveness, limitation of financial resources do 

not allow subcontract other activities 

Tan Tan No comment No comment No comment 

Beni Mellal Quality improvement, personnel reassignment Additional costs, week supervision of organization’s 

personnel 

Agadir Qualitative input of subcontracted services, personnel 

reassignment, less management problems regarding the 

subcontracted activities, subcontracting is a must given 

the lack of personnel 

Marrakech 

Médina 

Subcontracting can not be extended to other functions 

due to budgetary constraints 

No comments No comments None 

198 

Approve budget in good delays, imply 

regional inspection of labour to 

supervise the employees and preserve 

their rights 

Gardening should depend from the 

local collectives 

Extend subcontracting to all assistance 

services, elaborate typical charges 

booklets respecting the organization’s 

conditions and resources. 

Improve the financial system of PHC, 

increase of subsidies, review of the 

price system and implement an equal 

system regarding the exoneration of 

organizations from taxes 

Encourage subcontracting by 

subsidies, organizations should have 

an agreement certificate provided by 

the state 

Give a special attention to the 

elaboration of the booklets of charges

Ain Seb. Hay 

Moh. S. B. 

Zenata 

El Fida Derb 

Soltan 

B.S Sidi 

Othmane 

Morocco 

Reassignment of the personnel Hospital’s budget does not allow to hire qualified 

organizations, since they require prices higher than the 

administration estimation 

Costs control, simple procedures, adaptation to quality 

norms, flexibility in reacting to unpredictable events, 

advantage of advanced management techniques, 

adaptation in respect to competitiveness 

Financial resources unsatisfactory, weakness of the 

allocated budgets does not allow the hiring of qualified 

organizations 

Reassignment of the personnel High costs increasing every year and consume a large 

part of the budget, absence of efficient control 

procedure avoiding budget misuse 

Casa Anfa No comment No comment No comment 

Mohammadia Disengage hospitals from missions performed badly 

due to the number and the profile of the personnel, 

which was recuperated. the quality of services is high 

Salé Compensate the lack of personnel, due to leave, 

retirement, invalidity, sickness, death, recruitment 

difficulty. Search for quality of professionalism, 

economy, technicality, quality, settle the problem of 

lacking personnel 

Skhirat 

Témara 

Better control of the activity, possibility to change the 

contractor 

Khémisset Flexibility of the process, availability of the personnel, 

improvement of the services 

The costs represent a large part of the budget, activities 

of security agents are limited by the behaviour of the 

visitors (aggressiveness), the behaviour of the 

personnel of the organizations is sometimes doubtful 

with the patients 

Unavailability of organization limits competitiveness, 

personnel not trained in gardening and cleaning, lack of 

desired professionalism 

199 

Given that there differences in the 

financial resources allocated to 

different hospitals, it would be better 

to select the providers at the local level 

Define a motivating system through 

budget assistance measures 

Subcontracting must be subsidized, 

acquire an efficient control method 

Extend subcontracting to other 

services, establish supervision by 

technicians (hygiene and dietician), 

administration must be react firmly in 

case of violation 

Establish sheets on evaluation, 

experience, seniority, and price 

estimation. Turn to bids over 1 to 5 

year period; subcontract other services 

(plumbing, electricity, carpentry, 

construction, etc) 

The price is very excessive Extend subcontracting to catering and 

to bandage services if the budget is 

increased 

Companies do not respect their commitments and 

disturb the functioning of the institution 

Establish a list of approved companies

Fès Jdid Dar 

Dbibegh 

Zouagha My 

Yacoub 

Meknès El 

Manzah 

Morocco 

No comments No comments No comments 

No comments No comments No comments 

Hygiene and cleanness conditions compatible with 

PHC’s requirements, improvement of security 

conditions 

Qualified security and bio-cleaning personnel cannot be 

hired due to financial constraint, instability of the 

personnel of the organizations 

Oujda Angad No comments No comments No suggestions 

Ain Chok hay 

Hassani 

Solve the problem of lacking personnel, assign 

personnel to strictly health activities, the services are 

provided by specialists 

Bid awarded on the basis of the best offer (quality / 

price ratio), administration not informed on the 

personnel changes, require a permanent supervision if 

not the quality of the service will decrease, delay in 

approving the bids 

200 

Availability of sufficient budget to hire 

qualified organizations, extend the 

experience to facilities maintenance 

biomedical materials in order to cope 

with the lack of personnel 

No suggestions

Pakistan 

PAKISTAN

BACKGROUND 

Country profile [1] 

Pakistan 

Pakistan has an area of 307 374 square miles (796 095 square kilometres), with an 

overall population density of 182 persons per square kilometre. There are four provinces, 

Punjab, Sindh, North West Frontier Province (NWFP) and Baluchistan, and two regions Azad 

Jammu Kashmir (AJK) and Federally Administered Northern Area (FANA). Afghan refugees 

reside in certain areas of the country in significant numbers. 

Punjab is the most populous province of Pakistan, with a population of 80.3 million and 

an area of 205 345 square kilometres. About two-thirds of its population resides in rural areas 

and agriculture is the chief source of income and employment in Punjab. Similarly the 

population of Sindh is 33.8 million. Asian Punjab most people like live in rural areas and 

work in fields to earn their livelihood. The population of NWFP is 19.4 million, and 

Baluchistan is 6.5 million. Baluchistan is the largest province in area. The population of AJK 

has been estimated at 3.5 million people, most of whom live in scattered hilly areas which are 

not accessible at times during the year due to weather. 

The human development indicators for Pakistan, particularly for health, are still low 

despite progress made in recent years. The national health status is characterized by high 

population growth (2.2%), low life expectancy (64.0), high infant mortality (82 per 1000live 

births) and child (under 5 years) mortality rates (105 per 1000 live births). This is due to the 

shortage of health care personnel, uneven distribution of health facilities in the country, lack 

of medicines, regional disparities in the health care services and scarcity of administrative 

health care capabilities. 

The health system of Pakistan is one of the largest in south-east Asia. The system 

comprises an extensive network of primary, secondary, and tertiary health facilities and 

specialized health institutes. Medical facilities in the country have improved significantly over 

the years. However, there still remains a very large gap between the availability and 

requirements. At present, there are 108 062 registered doctors, 5530 dentists and 46 331 

nurses in the country, equivalent to ratios of 1404 persons per doctor, 27 414 persons per 

dentist and one nurse per 3296 persons. There are about 906 hospitals, 4554 dispensaries, 

5290 basic health units and 552 rural health centres. The availability of hospital beds in all 

medical facilities has been estimated at 98 684, equivalent to a population–bed ratio of 1536 

persons per bed. The figures available for the medical facilities clearly indicate the need for 

further expansion or alternative arrangements for provision of health care. 

Both public and private spending on health in Pakistan are very low. However, over the 

years spending has increased steadily. During 2003–2004, the total expenditure on health was 

estimated at 32.8 billion Pakistani rupees (PKR) (PKR 8.5 billion development and PKR 24 

billion as recurring), which amounts to 0.84% of GNP and shows an increase of 13.8% over 

the previous year. 

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Pakistan 

To improve the health status of people and to reduce the burden of disease, a series of 

programmes and projects under way. These include the programme for family planning and 

primary health care, Expanded Programme on Immunization, national AIDS control 

programme, malaria control programme, tuberculosis control programme and drug abuse 

control programme. 

Contracting in health care [2,3] 

Contracting is used by the public sector for the purchase over time of specified services 

from the private sector, or in some cases through internal contracts with autonomous public 

facilities. Contracting is an increasingly important element of many countries’ health sector 

reform programmes because it provides governments with a management tool that creates 

incentives for improved performance and increased accountability. Contracting can improve 

access, quality, efficiency, and sustainability; promote public health goals; and create an 

environment conducive to public–private collaboration. However, the process is challenging 

and requires transparent bidding procedures, well-designed contracts, clear performance 

obligations and credible funding mechanisms. In addition, governments need to be able to 

monitor the contracts and have credibility as a trustworthy partner. 

Resolution WHA56.25 endorsed by the World Health Assembly in 2003 urges Member 

States to assess the role of contractual arrangements in improving health systems’ 

performance. There is limited experience or documentation of public–private partnership in 

health among countries of the Eastern Mediterranean Region, although several countries are at 

various stages of implementing health sector reforms. There is increasing realization within 

the Eastern Mediterranean Region of the importance of awareness creation and capacitybuilding 

within ministries of health in contracting out publicly financed health services to the 

private sector. 

As regards the production of health services in the developing countries, neither the 

public nor private sector provides full satisfaction, and there is a need to explore new avenues 

in order to capitalize on the strengths of both sectors and eliminate their weaknesses. A 

modern health system brings in a large number of parties, each of which can play a different 

role. Those who have divergent objectives and interests may negotiate, so as to find 

agreement that will allow action to be taken: the contract is the element that seals the 

agreement and confers legal force to it. A contractual agreement is an agreement between two 

or more economic agents through which they undertake or assume or relinquish, do or not do 

certain things. A contract is therefore a voluntary alliance of independent partners. The 

alliance must give the partners an advantage or surplus that would not have existed had the 

two partners not been allied. A contract is therefore collaboration between partners. It is an 

instrument which institutes roles or clauses that establish the possibility of cooperative 

behaviour in the interest of both parties. 

The purchaser, or contracting agency, uses the contracting relationship to obtain a 

service or product. The range of government purchasers will reflect a country’s underlying 

health system. National level ministries of health, or their regional and local equivalents may 

contract directly for health care. The public sector may also contract private providers through 

203

Pakistan 

a variety of health insurance mechanisms, which again may be national, regional or local in 

nature. Other non-health government entities such as state owned companies or groups may 

also directly contract for health care. The contractor, also referred to as provider or vendor is 

an individual or organization that sells its services or products via the contracting agreement. 

Private sector contractors generally fall into the for-profit and non-profit categories. The forprofit 

providers of health care exist to earn profit for their owners and include private practice 

physicians, nurses, midwives; traditional medical practitioners; hospitals clinics and health 

centres; and pharmacies and other retail drug and medical supply outlets. The non-profit 

providers, many of which are known as nongovernmental organizations, are private but define 

their mission in terms of social or public health goal. They also include professional medical 

and nursing associations or philanthropic groups. Community organizations, sometimes also 

included under the nongovernmental organization category, usually are smaller and less 

formally constituted than a nongovernmental organization, serve a limited geographical area, 

and are formed to serve the interests of their members alone. Public parties can also be 

contractors, for example when the Ministry of Health contract with quasi-governmental 

medical stores for drug procurement. 

Need for contracting [4] 

The general theoretical rationale for contracting out relates to theories of why 

governments fail in their provision of services. There are two main schools of thought. The 

property rights theory contends that the main source of inefficiency in the public sector is the 

weakening of property rights, so that decision-makers face few incentives to allocate 

resources efficiently. This is contrasted with the incentives facing entrepreneurs or 

shareholders in the private sector. The public choice theory contends that politicians and 

bureaucrats who control public bureaucracies cannot be assumed to be acting in the public 

interest, since they are more likely to serve their own interests, or those of powerful interest 

groups. In response to these analyses, the “new public management” envisages the use of 

market mechanisms to generate appropriate price and demand signals, and to weaken the 

influence of politicians and professionals over public service delivery, thus ensuring that these 

services are more responsive to market signals and to customers. It is also argued that private 

organizations can bring the advantages of functional specifications, as well as speed and 

flexibility in adjusting to changing factor prices, technology and demand conditions. A central 

theme of this thinking is thus the view of the state as responsible for enabling or ensuring 

service delivery, rather than for direct delivery of service itself, except in certain identifiable 

circumstances. 

Types of contractual agreements [5] 

Contractual agreements come in various forms. Two important forms are contracting-in 

and contracting-out. The former refers to bringing in outside private management to operate 

an internal government service. The latter refers to purchasing services from a private source 

that provides the service, using primarily an external workforce and resources. In this latter 

situation, contractors have complete responsibility for service delivery, including hiring, 

firing, setting wages, and procuring and distributing essential drugs and supplies. Other 

contractual options for purchasing health services are franchising and leasing. In franchising, 

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Pakistan 

the government grants a contractor the right which may or may not be exclusive) to provide 

specified services, for which the patient pays, to a particular population. In leasing, the 

government secures the use, but not ownership, of facilities or equipment from an outside 

source under a lease agreement. Furthermore, it is important to recognize that the government 

can contract with public providers. For example, governments can establish a contractual 

agreement with autonomous institutions, which remain under public ownership. 

Potential advantages and disadvantages of contracting [4,5,6] 

The potential advantages and disadvantages of contracting from a public sector 

perspective as documented in literature are summarized as follows. 

Benefits 

Links financial allocations to health services outputs, outcomes and consumption patterns and 

thus facilitates measurement of and improvement in efficiency and equity 

Clarifies the roles and responsibilities of both parties and thus facilitates greater accountability 

Can generate pressure on both public and private providers to improve their performance in 

terms of both service and price 

Requires and may promote better planning and policy development by improving the flow of 

information about volumes of goods, services, costs, quality, responsiveness, population 

served, health needs and other issues 

Provides government with a mechanism for purchasing needed health services at an agreed-on, 

and therefore, predictable price 

Improves equity in distribution of health services because government can establish contracts 

that focus on delivering services to vulnerable populations. 

Disadvantages 

The costs involved may be increased substantially. However, the proponents of 

contracting claim, often implicitly, that the overall benefits of contracting will outweigh the 

costs involved in their creation and maintenance. These costs include transaction costs, the 

higher costs that may result from the loss of monopsony purchasing power, and the social 

costs arising from equity problems. There may be substantial transaction costs involved in 

creating and maintaining the contracts. The extent of costs will depend on the number of 

contracts that have to be written, the extent of detail in their specification, and the intensity 

with which implementation is monitored. While it is clear that contracting may incur high 

transactions costs, it is important to compare these with the explicit and hidden costs of 

directly managed public systems, rather than to view them as entirely incremental. The public 

agencies may face large costs in monitoring staff and output quality, and there may also be 

significant costs involved in bureaucratic administrative mechanisms and in the effects of 

political interference. 

A second set of costs may come from the loss of monopsony power resulting from 

fragmentation of the single purchasing agency in the traditional public health sector. This will 

not however be a problem where a single agency contracts for services. 

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Pakistan 

There may be a potential conflict between efficiency requirements of the market 

environment and equity goals, which may act to undermine equity goals. This may include 

loss of comprehensiveness of local service provision and potential loss of consumer choice. 

Equity may also be threatened through the practice of provider or purchaser selection of low 

risk patients where payment does not adequately compensate for the level of risk of specific 

patients or types of patient. 

Selective contracting may also have substantial impact on the wider health system. 

Introduction of contracted providers may lead to fragmentation or lack of coordination within 

the broader public health system. Contracting could also lead to competition between 

contractors and public providers for staff resources, leading to increased salaries and to public 

hospitals being drained of key personnel, or suffering from increased staff turnover. Contracts 

can lock scarce resources into a particular allocation, even when changed circumstances 

dictate a reallocation. 

SCOPE, OBJECTIVES AND METHODOLOGY 

The scope of this study is to undertake situation analysis, including exploratory case 

studies, and document experiences as well as recommendations for outsourcing of publicly 

financed health services to private sector organizations in Pakistan. The study in Pakistan is 

part of a regional initiative to develop an evidence-based regional strategy on public–private 

partnership in health in the Eastern Mediterranean Region. 

The objectives of the study are to review the arrangements and experiences of 

“contracting out” and provide recommendations for future programming by: 

assessing the environment and overall capacity of providers and purchasers in terms of 

contracting out health services to the private sector, its implementation as well as 

evaluation; 

assessing the arrangements and experiences of a project/programme in health that has taken up 

contractual arrangements as an implementation modality; and 

discussing findings on contractual arrangements with the key stakeholders to inform the study 

recommendations. 

The qualitative study uses a mix of methods to address the multiplicity and complexity 

of dimensions of the contractual arrangements for health services. The methods used in the 

study are: a) literature review; b) focus group discussion; c) key informant interview; d) case 

study; and e) a consensus-building workshop. 

a) Literature review 

The relevant international and national literature was identified through library and 

internet searches. The literature was screened and relevant material was selected for in-depth 

review by the researcher. The documented arrangements and experiences in the countries 

were reviewed to identify key areas of information about various dimensions of contractual 

arrangements. The guidelines and schedule for focus group discussion and key informant 

interviews were developed, in the light of literature review. 

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The relevant documents were identified and collected from various national, provincial 

and district level stakeholders, including public and private sector partners. The documents 

included organizational profiles, statement of operating procedures, contract documents, 

annual reports etc. The review of documents helped the researchers to learn about the 

environment, arrangements and experiences of contractual arrangements in health services. 

b) Focus group discussions 

The focus group discussion was designed (format attached as Annex 1)and held with 

representatives from national programmes, Ministry of Health, Ministry of Population 

Welfare, nongovernmental organizations, a postgraduate institute, district health, and a tertiary 

hospital. The focus group discussions helped the researcher to learn about various dimensions 

of contractual arrangements, including perceptions, experiences, future vision and suggestions 

of the participants representing the key stakeholders. The discussion also helped in further 

refining the interview schedule and in developing preliminary suggestions for further 

discussion with individual interviewees. 

c) Key informant interviews 

A number of key informants, representing various key stakeholders, were interviewed to 

learn more about the structure, operations and relevant contracting experiences of their 

respective organizations. In addition, key personnel from the Ministry of Health as well as 

from Planning and Development were interviewed to discuss the findings and critically 

review and modify the preliminary recommendations. 

d) Case study 

A list of contractual arrangements in health services was prepared on the basis of formal 

and informal information collected from governmental and the nongovernmental sources. The 

governmental sources of information included the Ministry of Health, provincial Department 

of Health, provincial Department of Social Welfare. The nongovernmental sources included 

the World Bank, Department for International Development (United Kingdom), other 

international and national nongovernmental organizations. 

The selection of project for detailed study of contracting arrangements was done on the 

basis of: current geographical coverage; nature of services; duration of experience; and 

scaling-up potential. The project selected for detailed study was the Punjab Rural Support 

Programme in Rahim Yar Khan district. The selected project was studied in detail for its 

contractual agreement, management arrangements and implementation experience. 

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e) Consensus-building workshop 

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The researcher prepared a draft study report based on document review, focus group 

discussion and interviews. The draft report was discussed with the representatives of key 

stakeholders, and in light of discussions the final draft of the study report was produced. 

FINDINGS [7–14] 

Overall findings 

Range of contractual arrangements 

In health services, the contractual arrangement is being recognized as a potential way to 

optimize the use of available resources. The contractual arrangements between a public sector 

purchaser and a private sector provider at various levels of hierarchy vary widely in the type of 

contract and the set of services to be provided. The contracts are made at federal, provincial and 

district levels. The public sector purchasers include mainly the Ministry of Health, the provincial 

Departments of Health and Social Welfare, and the district governments. The private providers 

include mainly the international and national nongovernmental organizations, institutions as well 

as private firms. The contract types include mainly contracting out, cost sharing agreements, 

grants and loans. The set of activities covered in contractual arrangements include mainly the 

primary health care services, research and development services, technical and management 

services. Table 1 lists several examples of the ongoing contractual arrangements in Pakistan. 

Rationale and interest 

The government sector rationale for contractual arrangements generally varies with the 

size and nature of health problem, current coverage and capacity of public and private sector 

health services, perceived need for service development and innovation, and consumer 

perceptions and expectations. 

The size and nature of health problem refers to issues of disease prevalence, diseaserelated 

stigma, high-risk population(s), and special social and technical requirements. The 

coverage and capacity of services refers to the issues of limited geographical and social 

access, inadequate health infrastructure and resources, lack of competition leading to low 

efficiency, inadequate outreach services, poor staff motivation and support. The innovation 

refers to the issues of limited flexibility in operations, limited ability to respond to new 

situations/challenges, delayed decisions, and lack of market mechanisms. The consumer 

perspective refers to the issues of low perceived quality of care, social acceptability, and 

ability and willingness to pay for a set of services. 

The private sector rationale for contractual arrangements generally includes enhanced size 

and scope of current activities, recognition and financial support, and humanitarian concerns. 

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Table 1. Examples of contractual arrangements in the health sector in Pakistan 

Contract type Payment mode Purchaser Provider Focus area 

Contracting 

out 

Service 

contract 

Contracting-in 

Social 

franchising 

Concession 

(Build-operate 

-transfer) 

Block payment National AIDS control 

programme 

Block payment Ministry of Population 

Welfare 

Block payment DoH Punjab 

(Rahim Yar Khan) 

Cost per case Ministry of Population 

Welfare 

Block payment National Programme for 

primary health care and 

Family Planning, lady 

health workers 

Programme 

Block payment Participatory 

Development 

Programme 

1994–2001 

Block payment National Trust for 

Population Welfare 

Block payment 

(Grant plus 

loan) 

Political environment 

Punjab Health 

Foundation 

Indemnification Malaria Control 

Programme 

Block payment Department of Health 

AJK/FANA 


NWFP 


Sindh 

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Private partners Management services, 

Third party evaluation 

Population Council Management and 

technical assistance 

services 

Punjab Rural 

Support 

Programme 

Family Planning 

Association of 

Pakistan 

Management of PHC 

services 

Provision of family 

planning services 

UNICEF Delivery of certain set of 

services for programme 

(e.g. partial evaluation) 

Community-based 

organizations/ 


organizations 

Nongovernmental 

organizations 

Nongovernmental 

organizations and 

private 

practitioners 

Institute of Public 

Health 

Marie Adelaide 

Leprosy Centre 

AIMS 


organization) 

Sindh Graduates 

Association 

Service delivery 

Service delivery 

Service strengthening and 

delivery 

Technical services 

Tuberculosis service 

delivery 

Rural health care 

management and service 

delivery 

Management of basic 

health units 

Block payment Ministry of Health Greenstar Reproductive health 

services 

Pre-payment Department of Health 

Punjab 

Munshi Trust 


organization) 

Hospital services 

There is increasing recognition and interest in developing public–private partnerships 

for better coverage and quality of health services. There is evidence of political commitment 

at the highest level, as shown by various statements by the Prime Minister and the Federal 

Minister of Health in which they have encouraged and projected public–private partnership as 

a major step in right direction. The introduction of transparent arrangements for collective

Pakistan 

decision-making, such as the Inter-Agency Coordination Committee and Country 

Coordinating Mechanism, has helped build understanding and trust among public and private 

partners. The transparent decision-making process has enabled the managers to avoid 

unnecessary political and other external influences. At provincial level there is an increasing 

number of health services delivery and research projects based on public–private partnership, 

e.g. a primary health care services project in Rahim Yar Khan district, followed by replication 

in other districts of Punjab. Global initiatives such as Global Fund to Fight AIDS, 

Tuberculosis and Malaria (GFATM), Global Alliance for Vaccines and Immunization (GAVI), 

and Global Alliance for Improved Nutrition (GAIN) have also contributed to bringing positive 

change in the environment for public–private partnership development. 

Bureaucratic setup support 

There is a growing number of pro-contracting bureaucrats at all levels. Some managers 

believe that the current set of government procedures can be used effectively in a contractual 

environment, provided managers have the commitment and capacity to use the procedures. 

However, not all managers seem to be equally competent in managing public–private 

partnership in the current situation. The experiences at national and provincial level show that 

there have been process delays, primarily due to lack of precedence and guidelines for 

managing contractual arrangements. At the same time, programme managers have expressed 

appreciation for the non-interference of higher officials in the contract awarding process. 

The institutional arrangements for managing the public–private partnership are poorly 

developed. However, as an increasing number of contracts become operational, the tools and 

mechanisms for managing public–private partnership are being improved. The disease control 

programmes have started developing financial and logistic management mechanisms for 

channelling funding from the government as well as the GFATM and other sources, to support 

the activities carried out by private sector partners. An example is the AIDS control 

programme, in which about two-thirds of the allocated programme funds are being spent 

through private partners. These developments still are in preliminary stages, and more 

concerted and sustained efforts are required at all bureaucratic levels. 

Private sector partners have expressed their satisfaction with the support received during 

planning, implementation and monitoring of the project activities. However, unexpected 

disturbances and delays have also been reported. 

Legal framework and mechanisms to recourse disputes 

A legal framework exists to guide the contractors and contractees as well as safeguard 

their interests. The general legal framework is workable and adaptable for government sector 

partners, including the health sector. The health sector contracts are reviewed by the finance 

as well as law and justice ministries. An example is the contracting out of a malaria control 

programme study, in which the proposed fiduciary management arrangements were reviewed 

by the ministries of finance and law and justice. 

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Each contract generally spells out the agreed mechanisms for resolving any disputes, if 

they arise, between the partners. However, the description of the proposed arrangements is not 

always sufficiently comprehensive to cover all dimensions of potential dispute between the 

partners. There is a need for strengthening the capacity of managers to make effective use of 

the current legal framework for smooth operations under the contractual environment. 

Capacity: strengths and weaknesses 

Purchaser 

Many national programmes (such as the AIDS control programme, tuberculosis control 

programme, malaria control programme, lady health workers programme), through 

experience, have developed arrangements for preparing bid details, inviting bids through open 

as well as selective bidding process, evaluating the technical and financial proposals, 

negotiating the terms, preparing the documents and awarding the contracts. 

The complexity of government financial procedures sometimes delay the release of 

funds according to the agreed schedules. The fiduciary management arrangements do vary 

across contracts. This implies programme ability to manage the diversity of financial flow 

mechanisms across projects. An example is the AIDS control programme effectively working 

with multiple sets of financial flow mechanisms, according to the source of funds, e.g. 

government, World Bank or GFATM. 

Some of the programmes have started strengthening their staff capacity and 

arrangements to supervise and monitor the implementation of contracted out projects, 

including the financial performance of projects. The programmes have also developed 

arrangements for designing and conducting third-party evaluation and evaluation through a 

team of experts from within and outside the programme. 

Many of the programmes, especially at provincial level and below, are currently 

working with a sub-optimal mix of technical and administrative expertise for managing the 

contracting process, monitoring and evaluating the performance, and managing finances in a 

contractual environment. The limited capacity is related mainly to in-adequate number and 

skills of the programme staff, but also includes sub-optimal resources and operational 

systems. However, these capacities do vary widely across the programmes. At present the 

organizational development plans seem inadequate to address the capacity challenges by 

making optimal use of potential opportunities. 

Provider 

There is wide variation in the technical, managerial and financial capacity of private 

sector providers. Technical capacity refers to the ability to analyse situation, develop 

strategies and interventions, plan and implement activities etc. Managerial capacity refers to 

the ability to write proposals, negotiate contracts, manage resources including staff and 

materials, and prepare business plans and reports. Financial capacity refers to: financial 

position including assets and incomes, financial systems including accounting and auditing, 

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financial plans etc. Deficiencies in technical and managerial capacity are generally addressed, 

where feasible, through hiring short-term and medium-term expert inputs. The majority of 

private sector organizations rely mainly on project funding, which makes their long-term 

sustainability less certain. Some organizations receive supplementary income from assets, 

endowment funds, and other income-generation activities such as micro-credit and raffle 

schemes. The financial systems generally vary according to the size and scope of the 

organization’s work. All registered organizations are required to have their accounts audited 

by a qualified auditor on an annual basis. 

Risks and incentives 

Purchaser 

The contracting process implies enhanced programme management capacity through 

staff and systems development, as well as availability of required material resources. There is 

a risk that the purchaser may fail to enhance its organizational capacity for effectively 

managing the contracting process. Weakness in the contracting process may lead to the 

selection of inappropriate provider, delayed award of contract and initiation of project 

activities, and conflict with the provider on size or scope of work. 

The complexity of fiduciary management arrangements may lead to decisions for which 

the purchaser can be held accountable in later stages. There is a risk that the financial 

procedures as agreed in the contract may conflict with government financial procedures. The 

auditors may not agree to the purchaser’s interpretation of the financial procedures followed 

in the contractual arrangement. 

The unavailability of an adequate number of potential providers may lead to a 

monopoly or a no-choice situation for the purchaser. As well, public sector providers may 

resist the idea of involving private sector providers in the development and/or delivery of 

services. 

Unforeseen constraints related to the purchaser or environment might result in the 

provider’s failure to deliver the agreed outputs. Purchaser-related constraints may include 

radical change in government priorities and policies, and delays in financial flows. 

Environment-related constraints may include change in global, regional or country emphasis 

and support for contractual arrangements. 

The main incentives for the purchaser may include rapid expansion of services, shared 

load of service delivery, and improved quality of services. Expansion can refer to enhanced 

geographical or social access to services. An example of expanded services is the AIDS 

control programme contracting out interventions with high-risk groups. Shared load of 

services refers to contracting out a sub-set of services through private sector partners. An 

example is the Punjab Rural Support Programme sharing the responsibility for primary 

health care delivery in Rahim Yar Khan district. Improved quality refers to a set of services 

meant to improve the quality of public sector services (e.g. microscopy quality control in a 

province contracted to a nongovernmental organization) as well as to avail the specialized 

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services. The specialized services may include communication and advocacy (e.g. 

communication strategy and material development for tuberculosis and malaria control 

programmes), systems analysis and development (e.g. tuberculosis control programme for 

microscopy quality control), development and conduct of training (e.g. women’s health 

project), third-party monitoring and evaluation (e.g. routine immunization programme) etc. 

Provider 

Changes in the focus or management of purchasers over time may pose threats to the 

agreed set of provider’s activities. The purchaser may also fail to provide the agreed support, 

including timely release of payments, during the project development and implementation. 

The purchaser may have a tendency to put the blame on the provider for delays in progress 

that are mainly due to purchaser-related factors. 

The non-availability of committed human inputs from outside the organization, due to 

delays in scheduled activities or other changed circumstances, may affect the provider’s 

ability to deliver the agreed outputs. Similarly, the non-availability of required material 

resources, due to changes in the market or in other circumstances including pricing, may 

affect the provider’s ability to fulfil commitments in terms of quantity and quality of services. 

Exceptional changes in physical environment, such as those resulting from disasters and 

emergencies, may also affect the provider’s commitment. 

The providers’ failure to deliver the expected outputs, due to purchaser- or environment- 

related factors, may affect goodwill towards the organization which would in turn affect its 

prospects for future work. The client response deviation, i.e. difference from the anticipated or 

assumed response, may result in the provider’s failure to deliver the outputs. 

The main incentives for the provider include achievement of organizational goals and 

objectives, enhanced size and scope of work, enhanced recognition by public and private 

sector partners and communities, and enhanced capacity and sustainability. An example of 

enhanced size and scope of work is the National Rural Support Programme expanding into 

more communities and districts as well as new areas of work. An example of enhanced 

recognition and capacity is the Marie Adelaide Leprosy Centre, working with the government 

in AJK and the Northern Areas. 

Payment arrangements 

Contracting in, contracting out and service contracts are the main types of contractual 

arrangements used in the country. There are occasional examples of social franchising and 

concession contracting between the public sector purchaser and a private sector provider. 

The most common mode of payment in contractual arrangements in Pakistan is block 

payment, made against an agreed set of activities and outputs. However, there are examples of 

payments to private sector providers on the basis of fee-for-service, indemnification and 

prepayment. 

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The block payment seems to be an appropriate payment mode under the current 

circumstances. In block payment, the data requirements and management efforts are relatively 

limited compared with other payment modes such as indemnification and fee-for-service. 

Block payment may be more suitable for ensuring timely and uninterrupted availability of 

required inputs, which in turn can affect the quality of services. 

Indemnification relies on the provider’s financial input for service delivery, which is 

then reimbursed. Organizations with a strong reserve of resources are likely to qualify; 

however organizations that are potentially able but have limited resources in reserve may opt 

not to compete for the contract. This has potential equity and quality implications. 

The fee-for-service payment made relies on more elaborate record-keeping as well as 

advanced accounting and financial management arrangements. There are also potential 

difficulties in rationalizing the provision of services and limiting its administrative cost. 

Public sector managers are aware of but have a relatively limited ability to undertake 

cost and pricing analysis. The national programmes have tried to carry out unit costing for 

various sub-components, and these unit costs have been used in the contracting process. Only 

few larger private sector organizations have the capacity to conduct full cost and price 

analysis for contracting purposes. 

Monitoring and evaluation systems 

The Federal Ministry of Health has an information system in place for nationwide 

collection and analysis of health care delivery data from public sector facilities. This general 

system is also supplemented by disease-specific data collected by respective programmes, e.g. 

tuberculosis, malaria. The data are focused mainly on disease reporting and on service input 

and output monitoring. These core data are supplemented by periodic community and health 

surveys, e.g. integrated household survey. Some of the available information can be helpful 

during the contracting and implementation, in particular service delivery through government 

health facilities. Each contract also defines specific information needs as well as arrangements 

to monitor the performance and the outcomes by collecting and extracting the required 

information. However, the quality of performance indicators and data vary across projects. 

There are tools for recording financial data, and generally the records are adequate for 

periodic financial audits. 

The Ministry does have arrangements to evaluate the ongoing projects through peer 

review (i.e. internal), external review (i.e. third-party review and international missions), and 

scientific research studies. A mix of these approaches is used in the projects, according to the 

situation. 

The Federal Ministry of Health does not maintain a database of private sector partners 

according to their areas of expertise, including working experience. The Ministry also lacks 

reliable data on which to base the costing and pricing analysis for contracting. There is no 

regular arrangement for collecting data on care delivery activities or outputs of the private 

sector partners. 

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Case study: contractual arrangements for provision of PHC services 

Introduction 

In March 2003, a contract was signed between the Punjab Rural Support Programme 

(PRSP) and the District Government of Rahim Yar Khan for the efficient delivery of an 

agreed health services package at local basic health units (BHU). According to the agreement, 

104 BHUs of district Rahim Yar Khan are managed through public–private partnership with 

the support of the beneficiary local communities. The duration of the contract is five years. 

The agreement between two parties was reviewed by the health, finance, local government 

and law departments of Government of the Punjab. 

The 104 BHUs of district Rahim Yar Khan were taken over and assigned into clusters in 

July 2003. Each cluster of three BHUs has a Medical Officer In-charge. The Medical Officer 

was given a new contract with the PRSP with an enhanced compensatory package, along with 

agreement that the original contract with the government is protected. The Medical Officer is 

required to reside at the “Focal BHU” and is not allowed to have a private practice. The 

Medical Officer spends two days a week at each of the three BHUs in the cluster. The 

availability and efficient management of medicines complements the presence of a doctor. 

Since July 2003, the monthly outpatient attendance at BHUs has increased significantly. 

Many collateral services are now being developed to supplement the growing outpatient 

service. School health programmes, immunizations and preventive interventions are some of 

the services that add value to the initiative. With the introduction of female doctors into the 

service, many new vistas are expected to open. Prominent among these will be population 

planning services, mother and child health services and gynaecological services. 

Purchaser and provider 

The District Government of Rahim Yar Khan is a public sector organization under 

devolved arrangements. The elected District Assembly, led by a District Nazim, is the key 

decision-making body in the district. The financing source is the direct government funds, 

without any donor inputs. 

The PRSP was incorporated in 1997 as a non-profit-making organization. It is currently 

operating in 20 districts of Punjab through 8 regional offices located at Lahore, Gujranwala, 

Sialkot, Faisalabad, Sargodha, Sahiwal, Multan and Muzzafargarh. The PRSP is a replication 

of the rural support programmes approach, proven successful in Pakistan through two decades 

of community organization, capacity building and empowerment. The process is designed 

around organization of poor village communities through rediscovery of community 

consciousness, common aspirations and ambitions before providing skill development, 

financial and technical support. The purpose of such a support system is to initiate and sustain 

a process of diversified growth of economic, human and natural resources specifically for the 

poor. The main features of the PRSP package are: 

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Social organization 

Human resource development 

Natural resource management 

Physical infrastructure building 

Capital formation/savings/credit 

Linkages (with government departments, private agencies, nongovernmental organizations). 

The programme acts as a support organization for whatever the community wishes to do 

for its own welfare. The PRSP, unlike most nongovernmental organizations, does not present 

any preconceived package to the community, and the delivery of support depends entirely on 

the identification of need by the communities themselves. Social organization is the lynchpin 

of the PRSP approach and guarantees sustainable capacity building. There are three levels at 

which need and interventions are conceived: household, group and village level. The 

communities are sensitized through “social guidance” to believe in themselves, and this 

process gradually leads to a point where the community is ready to take up responsibility for 

individual, group and village level initiatives and become organized in the form of 

homogenous solidarity groups or community organizations. 

The PRSP operates an endowment of PKR 500 million provided by the Government of 

Punjab. With this money, PRSP secured a PKR 500 million credit line for delivery of microcredit 

to communities. Almost 100% of the PRSP funding comes from public sources. PRSP 

also initiated a major partnership with the Pakistan Poverty Alleviation Fund (PPAF), 

financed jointly by the World Bank and Government of Pakistan. In the project under study, 

the BHU budget, other than the salaries of the permanent support and auxiliary staff, was 

transferred by the District Government of Rahim Yar Khan to the PRSP. In the first six years 

of its operations, the PRSP has generated, caused the creation of or applied significantly more 

than PKR 3 billion from the use of its endowment. 

Contracting process and contract 

Basically, the PRSP has a special relationship with the government. It is more of a 

paragovernmental organization than a nongovernmental organization. It performs its functions 

in support of the government. The provincial government assisted in establishing the PRSP 

through an endowment fund. Therefore, the PRSP is a community mobilization arm of the 

provincial government. 

The project concept is based on the pilot experience of National Rural Support 

Programme (NRSP) in Lodhran district. The encouraging results in Lodhran led the provincial 

and district government authorities to consider its replication in Rahim Yar Khan district. The 

PRSP was the obvious choice for the Punjab government to test the rural support programme 

based model in a district. 

The agreement defines the duties, and roles of parties, i.e. district government and 

PRSP. The set of services to be provided is described in broad terms, i.e. delivery of the 

services which are expected to be provided by the BHUs, as per national and provincial 

policies and strategies. As per agreement, the public sector monitoring tools and systems are 

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used in the project to collect and regularly report the data on disease occurrence and service 

provision. Designated officials of the district government have the right to inspect the 

facilities, and the PRSP is obliged to respond to the written observations made. The agreement 

also requires an independent third party assessment of the BHU performance at the 

completion of first project year. The continuation of interventions for the next four years is 

subject to improved BHU performance during the first project year. 

As per agreement, the day-to-day operational difficulties are addressed by mutual 

agreement between the District Coordination Officer (district government) and an authorized 

representative of the PRSP. The resolution of disputes between the parties is addressed by 

referring the matter to a sole arbitrator, mutually acceptable to both parties. In case of failure 

to resolve the dispute or inability to continue, both parties have the right to terminate the 

agreement through agreed arrangements. 

The agreement says that the BHU budget, other than the salaries of the permanent 

support and auxiliary staff, is transferred by the District Government to the PRSP. The annual 

budget includes the salary of doctors and other contract employees, medicines, maintenance 

and repair of building and equipment, utilities, store and office supplies. 

The agreement covers the provider’s risk of increased budget requirements for 

medicines and supplies by provisions for readjustment of budget allocations by public sector 

officials in light of requests or proposals by PRSP. The agreement forbids PRSP to charge a 

fee for the performance of the relevant management functions. However, PRSP has the right 

to claim reimbursement for actual costs incurred on management functions from the district 

government. 

Service package 

The preventive and curative health services, which the BHUs are already designated to 

provide, are intended to address the local health needs. The increased outpatient attendance 

reflects the relevance of services to the local health care needs. Many collateral services are 

now being developed to supplement the growing outpatient service. The addition of school 

health services (i.e. doctor’s regular visit to schools and schoolchildren’s monthly visit to 

BHU) and planned provision of female doctor services (for reproductive health as well as 

maternal and child health) are valuable additions to the set of core curative and preventive 

health care services at BHUs. 

The services are for the rural population of the entire district. The priority target group 

is poor women and children, for whom alternate sources of health care are inaccessible. The 

nature of the services being offered is relatively more relevant to the health needs of the poor 

population. 

Monitoring and evaluation 

The agreement broadly states the agreed approach to public sector monitoring and 

evaluation of project performance. However, the public sector has not yet developed a set of 

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specific indicators and arrangements for monitoring the performance of PRSP. So far the 

district officials rely on routine data provided by the programme, and district health officials 

have not been regular about visiting the BHUs and providing written feedback, as agreed in 

the contract. The evaluation of PRSP performance, to be conducted at the completion of the 

first year, was not yet due at the time of study. 

Financial management 

The administrative and transaction cost is about one tenth of the project cost. The public 

sector reimburses the cost. The public sector provides the agreed financial inputs as a block 

grant to PRSP. There has been no delay reported in the release of funds. 

As a company, the PRSP is required to maintain financial records for audit purposes. 

The annual audit of accounts is conducted by a qualified auditing firm, as required under the 

corporate law. The PRSP submits a copy of an annual audit report to the district government. 

There has been no reported incident of any fiduciary dispute between the PRSP and district 

government. However, the agreed process for dispute resolution is considered valid for 

fiduciary as well as other issues related to contractual arrangements. 

DISCUSSION 

The study is meant to focus on the contracting process and experiences of the public 

sector purchasers and the private sector providers. The study is based mainly on qualitative 

information gathered from interviews, discussions and document reviews. The scope does not 

include study of cost or quality comparisons between the services provided by the government 

and the private sectors, nor efficiency and equity gains over time. 

The rationale given by the public and private sector partners in Pakistan covers most of 

the key dimensions observed in other countries. Not all the rationale cited is based on valid 

scientific evidence or programme experience. The issue of enhanced effectiveness and 

efficiency through the introduction of market mechanisms has not emerged as an important 

justification for contracting in health. Furthermore, the lack of resolution of potential equity 

issues and the preference for providing a certain set of services require attention. 

In contrast to other developing countries, where the contracting experience focuses 

more on non-clinical services, Pakistan has focused more on clinical and preventive services 

including primary health care. 

Political support seems to be reasonable at the higher level of government hierarchy. 

There is a need to translate the political commitment into a set of transparent institutional 

arrangements which can facilitate the planning, implementation and evaluation of health 

interventions through contractual arrangements. In absence of such transparent arrangements, 

there is a risk of inappropriate use of political influence in the contracting process. 

Recognizing this, Pakistan has already started developing arrangements for optimizing these 

political, technical and bureaucratic influences. These arrangements include an Inter-Agency- 

Coordinating Committee for tuberculosis and AIDS, Country Coordinating Mechanisms for 

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GFATM support, and a National Fortification Alliance for nutrition. The early experience with 

these multi-partner forums seems encouraging. 

Bureaucratic support for the contracting process has been increasing gradually during 

the past few years. Multiple factors may have contributed to the change in bureaucrats’ 

attitude including political commitment at the highest level, repeated failure of the 

government-only approach to health care delivery, enhanced abilities of private sector, 

international initiatives such as GFATM, GAIN, and GAVI. However, the bureaucratic 

commitment is more individual-based than institutionalized, which makes its future prospects 

uncertain. There is a need for expediting the development of standardized guidelines and tools 

for transparent management of various health interventions through contracting arrangements. 

The general legal framework is workable and adaptable for guiding and safeguarding 

the private as well as the public sector contracting partners in health. The finance as well as 

law and justice ministries do assist the Ministry of Health in the contracting process, by 

technically assessing and vetting their contracts. The agreed mechanisms for resolving any 

dispute, if arises, are generally documented in the contract. However, the description of 

arrangements is not always detailed enough to cover all the important dimensions of potential 

dispute between the partners. Multiple factors that might contribute to inadequate description 

of dispute resolution arrangements include inadequate understanding and experience of 

partners, influence of private and public partners, and deficiencies in current legal and 

bureaucratic framework. 

Contracting is meant to promote an optimal use of available resources by the private 

sector as a supplement, rather than a substitute, for public sector efforts. The contracting 

implies enhanced capacity of the public sector to deliver its own set of services effectively as 

well as to support the private sector in supplementing public sector efforts in certain defined 

geographic or service areas. The success of contracting and the efficiency gains depend on the 

government capacity to act as an efficient purchaser, and more specifically to decide on the 

need for contracting, prepare contract related documents, support the implementation, and 

monitor the performance. The enabling process of public sector purchasers requires 

comprehensive analysis, planning, preparation and operationalization of efforts, which in turn 

means investment of time, energy and resources. Timely arrangement of the required inputs 

for building the purchaser capacity of public sector is a challenge with no simple answer. The 

public sector organizational development plans need to address the purchaser capacity 

challenges at various levels by giving attention to areas such as planning, cost and price 

analysis, contract design and negotiation, regulatory capacity including licensing and 

accreditation. 

There is wide variation in the technical, managerial and financial capacity of private 

sector providers. Based on the very limited information available, the number of capable 

private sector providers, i.e. with the right mix of strengths required for various types of 

activities, seems relatively limited. The capacity limitation of providers can adversely affect 

the performance as well as the future prospects of the contractual arrangements. One key 

requisite for building private sector capacity is an “enabled public sector” for coordinating the 

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required support. The assessment and building of private sector capacity need to be included 

and coordinated with the public sector organizational development plans. 

Rapid expansion, shared load and improved quality of services are generally the stated 

incentives for the public sector purchasers to consider contracting. However, the possibility of 

important unstated motives such as personal interest, political pressure, and technical and 

management incompetence cannot be ruled out. Contractual arrangements do offer certain 

potential incentives for the private sector providers such as enhanced size and scope of work, 

enhanced recognition and sustainability. However, there are also some real risks, such as 

failure to achieve the targets due to purchaser inefficiencies or other environmental factors 

which in turn can adversely affect the prospects for future business. The availability of 

alternate non-government purchasers of the provider’s services (i.e. donors) can alter the 

threshold for deciding between the perceived incentives and the potential risks. In case of 

purchaser competition, many competent providers may opt to stay away from the public 

contracting, especially if the government arrangements are perceived as inefficient, 

inconvenient or unreliable. Non-participation of more competent providers may adversely 

affect the quality of outputs achieved through contractual arrangements. 

The block payment, which is the usual mode of payment in contractual arrangements in 

Pakistan, seems to be an appropriate payment mode for ensuring timely and uninterrupted 

availability of required inputs. This is in contrast to the observations made in Bangladesh 

where a study found that contract management issues, including problems with prompt 

payment of contractors, procurement, and field supervision have been significant [15]. Both 

the public and private sectors have limited ability to carry out cost and price analysis. This 

limitation may lead to the purchaser purchasing services at abnormally high rates or the 

provider committing services at very low prices. There is evidence that under conditions of 

inadequate financial resources, contracting may not lead to efficiency gains as government 

may focus on short term contracting or prices may be set too low. Enhanced capacity of public 

and private sector partners to conduct cost and price analysis will lead to rationalized payment 

decisions for long-term benefits of the contracting process. 

The availability and use of relevant information about health needs, quantity and quality 

of health services, cost and price of various care delivery strategies determines the efficiency 

of allocative as well as managerial decisions. The database available with the government is 

inadequate and needs enhancement to support the key decisions made in the contracting 

process. The selection of indicators, development and use of standardized monitoring tools, 

periodic evaluation, and documentation as well as dissemination of early experiences with 

contractual arrangements will be important for further developing and expanding the 

contracting processes in Pakistan. To conclude, as in other countries contracting using a 

competitive bidding approach is feasible in Pakistan and the experience of PRSP of managing 

primary health care, as experienced in Romania, can be scaled up to other parts of the country 

provided the final evaluation confirms the efficiency and equity gains [16,17]. 

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RECOMMENDATIONS 

Pakistan 

1. Conduct a further study covering the quality, effectiveness, cost-analysis, efficiency and 

equity aspects of the services provided through contractual arrangements. 

2. Assess the needs and plan for building capacity of public and private sector partners for 

effective working under contractual arrangements. 

3. Develop transparent processes and tools for awarding and managing contracts. 

4. Encourage documentation and dissemination of experiences with contractual 

arrangements in the country and region. 

REFERENCES 

1. Economic survey of Pakistan 2003–2004. Ministry of Finance, Government of Pakistan. 

2. Jean Perrol et al. The contractual approach: new partnerships for health in developing 

countries. Geneva, WHO, 1997. Macroeconomics, Health and Development series 

number 24. 

3. Rosen JE. Contracting for reproductive health care: a guide. Reproductive Health 

Thematic Group of The World Bank, December 2000) 

4. Mills A, Broombergs. Experiences of contracting: an overview of literature. Geneva, 

World Health Organization, 1998. Macroeconomics, Health And Development series 

number 33. 

5. Harding A, Preker A, eds. Private participation in health services. Washington DC, 

World Bank, 2003. 

6. England R. DFID, Health Systems Resource Centre, Contracting and performance 

management in the health sector. April 2000. 

7. Punjab Health Foundation, Govt. of the Punjab, Lahore- Pakistan 

8. Social Welfare, Women Development and Bait-ul-Mal Punjab, Govt. of the Punjab, 

Lahore- Pakistan 

9. Northern Health Project, Memorandum of Understanding, 1996–2000. 

10. Shakil S. Analysis of experience of government partnerships with non government 

organizations. Mutilateral Donor Support Unit for SAP/World Bank, 2002. 

11. Research Protocol To Evaluate The Effectiveness Of PPPs In Enhancing Health And 

Welfare Systems Development) 

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Pakistan 

12. Report on the proceedings of the consultation on public private partnership in the health 

sector, Bhurban, 10–11 October 2003. Sponsored By DFID). Available at 

www.idd.bham.ac.uk/serviceproviders/downloads/literature/health/pakistanppp%20health.doc 

13. Introduction – Punjab Rural Support Programme, Lahore-Pakistan 

14. Primary health care service in the rural Punjab. Lahore, PRSP (RYK), March 2004. 


from two large projects in Bangladesh. Washington DC, World Bank, 2002. 

16. Loevinsohn B. Contracting for the delivery of primary health care in Cambodia: design 

and initial experience of a large pilot-test. Washington DC, World Bank, 2000. 

17. Vladescu C, Radulescu S. Primary health services: output-based contracting to lift 

performance in Romania. Public Policy for the Private Sector, Note no. 239 Washington 

DC, The World Bank, September 2001. 

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Pakistan 

Annex 1 

GUIDELINES FOR DISCUSSION 

Question Discussion points Source 

1. What is the rationale for 

Ministries of Health to enter 

into health services contracts 

with nongovernmental 

organizations or the private 

sector? 

2. What is the interest of the 


organizations/private sector in 

receiving public sector 

financing? 

3. Is the political environment 

enabling/disabling for the 

execution of contractual 

arrangements in health sector? 

Does the political environment 

influence the negotiation and 

execution of contracts? 

Does the bureaucratic set-up 

support contracting out of 

services to the private sector? 

Is the legal framework robust 

enough to facilitate 

contracting between the 

public and private sectors: 

Extend basic services to underserved areas 

Inability of to provide specific service by the public 


Efficiency and effectiveness in delivery of services 

Why? 

Ownership 

Incentives 

Flexibility in decision making 

Use of market mechanisms 

Weakening of wested interest influence 

Functional specialization rather hierarchical tall 

organizational structures 

Role of state enabling rather service delivery 

Transparency 

Decentralization 

Distancing from political process 

Increased competition resulting in quality 

Challenge to established power of organized labour 

Dangers 

Equity 

Increased staff turnover 

Fulfil social mission/Enhance size and scope of 

activities 

Other sources not available/accessible 

Financial sustainability 

Recognition from government 

Enabling 

Political commitment 

Disabling 

Influence 

Explicit procedures; Comprehensiveness and 

transparency 

Processing time 

Standard contracting tool 

Responsibility of decision making 

Statutes/ordinance 

Frameworks developed by autonomous organizations 

Legal mechanisms/status of nongovernmental 

organizations 

Joint community contracting 

Accreditation 

National standards 

223 

Federal 

Secretary 

DG 

Programme Managers 

DFA 

Law and Justice 

Senior Joint Secretary 

Chief Planning Health 

Registration Authorities 

Provincial 

DGs 

Planning Officers 

Organizations 

NRSP 

PRSP 

IPH 

Punjab Health Foundation 

Others 

Selected nongovernmental 

organizations 

Private hospitals? 

Federal and provincial 

Planners and managers/ 

Experts in the field 




EDOs 


Planers and managers/ 





Federal Law and Justice Dept. 

Provincial Regulation Dept. 

Are there efficient Availability of guidelines for arbitration of disputes Federal and provincial

Pakistan 


mechanisms to recourse in the 

event of a dispute between the 

two contracting partners? 

What are the capabilities of 

the purchaser (Ministry of 

Health) in order to 

successfully enter into a 

contract in terms of: (i) 

competitive bidding; 

(ii)awarding contracts; (iii) 

monitoring and supervision; 

(iv) regulation; (v) payment 

mechanisms; (vi)performance 

evaluation; (vii) other 

aspects? 

What are the capabilities and 

experiences of the providers 

(private sector organizations) 

in terms of: (i) developing a 

proposal; (ii) technical 

capacity to implement; (iii) 

financial management 

capacity in order to fulfil the 

terms of the contracts? 

What are the strengths and 

weaknesses of the purchaser 

(public sector) that should be 

taken into consideration when 

entering into a contractual 

agreement? 

What are the strengths and 

weaknesses of the provider 


organizations/private sector) 

that should be taken into 

consideration when entering 

into a contractual agreement? 

What risks and incentives 

does each party incur when 

How defined, agreed Planners and managers/ 


Federal Law and Justice Dept. 

Provincial Regulation Dept. 

Capabilities of the purchaser in terms of trained 

human resource for project 

preparation/analysis/costing and performance of 

following activities: 

(i) competitive bidding; Development of bidding 

documents 

(ii)awarding contracts; project proposal assessment 

in terms of service-cost-quality comparability and 

negotiations 

(iii) monitoring and supervision; resources, logistics 

and Information systems 

(iv) regulation; guidelines, procedures 

(v) payment mechanisms; disbursement procedures, 

accounting and auditing systems and promptness and 

flexibilities. 

(vi) performance evaluation; methods and 

procedures, quality assurance system development 

(viii) other aspects? 

Capabilities and experiences of the providers 

(i) developing a proposal; 

(ii) technical capacity 

Organizational structure and human resources, 

Operational systems, culture to adjust to public 

sector norms 

Strategic purchasing plan 

Annual business plan 

Linking plans to budgeting 

Performance evaluation 

Specifications 

(iii) financial management 

Strengths and weaknesses of the purchaser in terms of; 

Managerial 

Organizational/structural 

Human 

Material 

Financial /transaction costs 

Functional/service sharing 

Credibility 

Level of purchaser autonomy 

Provider competition 

Incentive 

Strengths and weaknesses of the provider in terms of; 

Managerial 

Organizational/Structural 

Human 

Material 

Financial 

Functional/service provision 

Credibility and acceptance 

Timely payments/releases 

Bureaucratic Attitudes 

224 







Providers of Services 







Providers 


Planners and managers/

Pakistan 


entering into a contract? Adherence to schedules 

Quantity of Services 

Quality of Services 

What are the prevalent 

payment mechanisms of each 

contract? To what extent do 

they promote efficiency, 

equity, and quality? How 

transparent are these? 

Is there capacity among the 

public and private sector to 

undertake a cost and price 

analysis prior to negotiations? 

What information systems/ 

sources exist in the Ministries 

of Health in order to 

successfully carry out the 

contract and assess 

performance of the contracting 

private sector agency? 

What monitoring mechanisms 

and evaluation systems are in 

place in the public sector and 

what challenges exist in this 

area? 

Capitation 


Block contracts 

Labour and materials 

Cost-and-volume contracts 

Cost-per-case contracts 

Set price 

Prepayment 

Indemnification 

Awareness 

Skilled human resource 

Availability of finances for the analysis 

Availability of a system/mechanism, tools and 

procedures 


Finances 

Availability of a system/mechanism, tools and 

procedures 


Finances 

225 


Providers 




Providers 




Providers 




Federal and Provincial 

Planers & Managers/ 

Experts in the field

Tunisia 

TUNISIA

INTRODUCTION 

Tunisia 

The health insurance system in Tunisia includes a multitude of schemes. The legal schemes 

managed by social security funds cover about 2 200 000 socially insured people and their 

dependents (spouses ascendants and children). Health coverage varies from one year to another, 

with an average rate of 5.14% (2002). 

With the constant aim of improving health care provided to the socially insured, the social 

security funds have reached agreements with public, parapublic and private health care providers. 

Through these agreements, the socially insured can benefit from the services provided in public or 

private facilities. Growing openness towards the private sector is reflected in the agreements 

between the social security funds and private hospitals. 

Concern to improve the quality of health coverage has driven the funds to develop a system of 

health service contract based on lump sum settlement of fixed-cost packages covering the costs of 

thermal (spa) treatment, scans, laser treatment and lithotripsy. 

These agreements also cover the financing of some other, more extensive health care 

treatments or investigations: 

Cardiovascular surgery (in the public sector, and then extended to the private sector) 

Transplants (kidney, bone marrow) 

Magnetic Resonance Imaging (MRI) and other medical imaging procedures 

Severe burns (Military Hospital of Tunis) 

In this report, we describe the major agreements signed by the social security funds and the 

health care providers in Tunisia (public and private facilities). These agreements make it possible 

for those covered by the funds to benefit from extensive health care that was not included in earlier 

agreements. Of course, the agreements are based on the evolving demand for health care resulting 

from demographic, epidemiological and technological changes. 

The report provides a description of the terms of reference of these agreements as well as the 

expenditure of the funds in this area. It starts with a description of the Tunisian health system, then 

presents an evaluation of these agreements along with comments on the process. 

OVERVIEW OF THE TUNISIAN HEALTH SYSTEM 

Institutional and legal framework of the Tunisian health system 

The system of health care provision 

The current framework was defined by the Health Organization Law of 29 June 1991. This 

law set the general principles concerning the functioning of the health system, the architecture of 

the public and private health care facilities and their objectives and the fundamental conditions of 

orientation of the health system by the authorities in charge and the advisory bodies that have been 

set up. 

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Tunisia 

Health care is provided by public, parapublic and private health care facilities. The public 

health facilities are usually classified according to three levels: primary, secondary and tertiary. 

Primary level comprises basic health centres and district hospitals. Basic health centres provide 

preventive care and curative health care services as well as health education for: 

Treatment of common diseases 

Mother and child care, including family planning 

Prevention and control of communicable and infectious diseases, particularly through immunization 

Pre-school, school and university medical services 

Dissemination of hygiene principles and practices and rules relating to environmental protection 

through health education 

Collection and use of epidemiological and statistical health data. 

At the end of 2000, there were 1981 basic health care centres throughout the country with a 

national average of 1 centre per 4826 population. 

District hospitals, beside the services similar to those of the basic health centres, also provide 

general, maternity and emergency services, and have hospital beds. At the end of 2002, there were 

106 district and maternity hospitals with a total capacity of 2711 beds. 

The secondary level comprises regional hospitals that provide specialized medical and 

surgical care, in addition to those services mentioned for primary, or first-line, facilities. Every 

county town has one or two regional hospitals, which makes a total number of 32 hospitals and 

5126 beds for Tunisia as a whole. 

The tertiary level comprises the university-oriented health facilities which, while sharing 

some attributes with first-line and second-line facilities, have as their primary objective to provide 

high specialized care, graduate and post-graduate education of health personnel as well as to 

develop research in the medical, pharmaceutical and dental areas. 

Almost all of these third-line institutions have the legal status of public health institutions, as 

specified in the Health Organization Law and defined in detail in a specific decree issued on 

2 December 1991, granting autonomy to these facilities in their administrative and financial 

management, as with public facilities. They are 20 such institutions. The number of departments in 

these teaching hospitals is 177 with 40 specialties totalling 8305 beds (2002). 

In total, there are 167 public health facilities under the supervision of the Ministry of Public 

Health with a capacity of 16 142 beds (1.69 beds per 1000 population). 

Another component of the public sector, although often called parapublic, comprises 

ambulatory care centres that are under the supervision of public bodies for their affiliated members 

or salaried employees. These are mainly the private general hospitals of the National Social 

Security Fund (six private general hospitals). 

The development of the public health care provision system is guided by the “health map” 

established by the Ministry of Public Health. This map, which is updated at the beginning of every 

national development plan, determines the territorial areas and health sectors where health care and 

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hospital facilities may be established. These directions are usually based on the trend of the demand 

for care, resulting from demographic, epidemiological and technological changes. 

The private health facilities are classified according to the Health Organization Law into four 

categories: 

multidisciplinary private hospitals (polyclinics) (43 private hospitals with a capacity of 1835 beds in 

2002) 

single-disciplinary private hospitals (clinics) (27 private hospitals with a capacity of 184 beds in 

2002) 

private practice offices (3293 offices with a ratio of 2903 population per office in 2002). 

Health coverage system 

In Tunisia, the structure of health coverage theoretically allows the inclusion of the entire 

population, regardless of income, social category or place of residence. This is a fundamental 

principle of the Tunisian health policy, the effective implementation of which is the driving force 

behind the reforms regularly undertaken in this area. 

Currently, the health care coverage is managed by three major categories of facilities: a) social 

security funds; b) the State; and c) the mutual insurance companies and group or private insurance. 

a) The social security funds 

The National Pension and Social Security Fund (CNRPS) covers all public sector employees 

(state and public bodies), including retired employees. It provides a compulsory legal scheme and 

an optional scheme. The compulsory legal scheme provides two exclusive options for health 

coverage: 

Option 1: reimbursement limited to long illness and surgical operations, for which or private health 

care providers can be used. 

Option 2: health card scheme providing full coverage (long illness, surgery and common diseases) in 

Ministry of Public facilities. 

The additional, optional scheme is financed by additional contributions made by the affiliated 

members (3%) and their employing institutions (1.5%). This scheme allows those having opted for 

the reimbursement system to be reimbursed for expenses incurred for common diseases. 

The National Social Security Fund (CNSS) covers, in addition to employees of the private 

sector, other categories of the population such as students, workers abroad and, recently, selfemployed 

workers. 

Its compulsory scheme is based on the health card system, and allows its affiliates to have 

access to public health facilities and to benefit from the services provided in the private general 

hospitals of the Fund itself. 

In return for the services provided to its affiliates in the health facilities under the supervision 

of the Ministry of Public Health, the Fund makes lump sum payments to the Treasury, participates 

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Tunisia 

in the investment of these facilities and, since 1996, has made bill payments. This last mode of 

payment was introduced first in the university teaching hospitals. Since 1999, it has been gradually 

extended to regional hospitals. 

The continued growth of health care needs has pushed the social security funds to diversify 

their interventions and coverage for some specialized services, under agreements with public or 

private institutions: cardiology and cardiovascular surgery, kidney transplants, CAT scan, magnetic 

resonance imaging, lithotripsy, bone marrow transplant, heart transplant, haemodialysis procedures, 

spa treatment and functional rehabilitation, medical devices, prostheses, medicines and care abroad. 

b) The State’s contribution to health coverage 

Some segments of the population benefit either from free health care and hospitalization in 

public facilities or from reduced fees. This is stipulated in the Health Organization Law and detailed 

in decrees, orders and specific circulars for implementation. Ambulatory care and hospitalization 

are entirely free of charge for any citizen considered destitute and for his/her family. 

It concerns mainly individuals and families in need who benefit from permanent assistance 

under the following programmes: 

National Programme of Assistance to families in need, defined as those families with income below 

the poverty line, equivalent to 8.3% of the population in 2002 (162 650 families). 

Programme of assistance for deprived elderly people living in their families, which involves 3225 

elderly people (2002). 

Programme of assistance for disabled people, unable to work, which involves 3456 people. 

The free health care scheme also concerns children without family support, including: 

Children residing at the National Institute for the Protection of Childhood 

Children living in units managed by other associations for the protection of children under agreement 

with National Institute 

Children living in foster families that cannot afford to provide them with health coverage. 

The benefit of reduced costs for health care and hospitalization in public facilities is granted 

to some categories of households with limited income. The criteria take into consideration both the 

income level and the size of the family. Other categories of the population benefit from health care 

and hospitalization in public facilities entirely free of charge. They are mainly: 

persons covered within the framework of scientific research and prevention campaigns or those 

suffering from epidemic diseases. 

certain professional categories who benefit from the full health coverage in the institutions under the 

supervision of the Ministry of Public Health or in facilities specific to them; they are the 

personnel of the army, national security forces, customs, and health personnel and veterans. 

c) Mutual insurance companies and group insurance 

The mutual insurance companies provide optional health coverage and accompanies the legal 

obligation of affiliation with the Social Security Fund. Mutual insurance companies are governed by 

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Tunisia 

the regulations of the mutual benefit associations going back to 1954, and are in conformity with a 

standard statute set up in 1961. Currently, there are 50 mutual insurance companies and 130 000 

affiliated members. The resources of the mutual insurance companies come from contributions of 

the affiliated members, which usually range from 1% to 7% of their gross salaries, and subsidies 

from administrations and enterprises that vary according to cases. 

Group insurance covers the personnel of enterprises in the public and private sectors on a 

contractual basis. These companies are governed by the insurance code, and the resources also 

come from the salaried employees and the employers’ contributions. 

The contribution rate ranges from 6% to 15% according to the contracts. This rate is shared 

between the employer and the employee. The employer’s share varies between 67% and 80% and 

the employee’s share ranges from 20% to 33%. The number of affiliates reached 200 000 in 2001. 

The extent of health coverage by mutual insurance and group insurance companies varies; it 

depends on internal regulations for the mutual insurance companies and on the clauses of the policy 

for group insurance. 

Support to the health system 

In order to ensure the proper functioning of the health care system and its sustainability, 

Tunisia regards the development of support sectors considered to be strategic, particularly, the 

sectors of education and of the pharmaceutical industry. 

The medical education sector 

At present, Tunisia has: 

4 medical faculties, which provide basic medical and specialty education in more than 40 medical 

specialties. 

3 schools of science and technology which train senior health technicians in more than 10 specialties. 

19 nursing schools, distributed throughout the country. 

The pharmaceutical sector 

This sector, which is considered to be strategic in terms of securing medicine supply and 

reducing its cost, has greatly developed over the past 10 years. The number of units producing 

medicines increased from 3 in 1987 to 27 in 1999; this resulted in an increase in the rate of 

coverage of needs by local production from 7.6% in 1987 to 43.7% in 1999. Accompanying the 

development of the pharmaceutical industry, was the establishment of infrastructure for quality 

control, particularly the national laboratory for control of drugs and the drug monitoring centre, 

which performs testing before licensing and at the marketing (systematic control of batches) and 

post-marketing stages. 

Other support actions 

Apart from the education and pharmaceutical industry, several actions were carried out or are 

being implemented as essential support to the system. These include establishing a computer centre 

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Tunisia 

in the Ministry of Health, which is an important element for structuring the health information 

system, and re-structuring the National Centre for Biomedical Maintenance which is now an expert 

unit serving the Ministry of Health. 

2.4 Resources allocated to the health system 

Financial resources 

The trend in overall health expenditures is characterized by a steady increase, from about 574 

million Tunisian dinars (TND) in 1990 to approximately 1670 in 2002 and 1821 in 2003. 

In the early 1990s, overall health expenditures represented about 4.5% of the GDP, and then 

starting from 1994, a markedly more rapid progression than that of the GDP brought it to an 

average level of about 5.6% (2002). Per capita expenditure in current dinars rose from about 70 in 

1990 to about 105.5 in 1995, 150.5 in 2000 and 180.0 in 2003. 

Within this overall trend, important changes have affected the structure of health care 

financing. They concern mainly the respective roles of out-of-pocket payment by the state’s 

beneficiaries and the social security funds. As from 1990, there has been a steady decline in the 

share financed by the state to reach about 23.9 in 2003, resulting in an average annual growth rate 

of 8.2% (1995–2000), lower than that of the total expenditure. 

The share of the social security funds has steadily increased from about 15% in 1990 up to 

about 20% in 2000 (22.5% in 2003), increasing at an average annual rate of 12.5%. 

The gradual adjustment of the contributions of these two major funds has started from the 

beginning of 2000 with the revaluation of the lump sum contribution made by the funds to the 

public health budget for health care provided to their affiliates in public facilities, along with the 

reform of hospital management. However, a much more substantial change has taken place with the 

introduction of single-act billing in public health facilities. This will expand with the extension of 

this mechanism to regional hospitals. 

Other approaches of the social security funds have also contributed to increasing their share in 

the health care financing: 

Specific agreements for the coverage of some diseases increased from about TND 2 million in 1990 to 

TND 19 million in 2000. 

The coverage of some health care categories (haemodialysis, devices, care abroad, spa treatment) 

increased during the same period from TND 23 to 61 million. 

Other direct actions, notably health care in the CNSS private general hospitals and reimbursements 

made by the CNRPS, increased from TND 12 to 32 million and from TND 9 to 24 million, 

respectively, between 1990 and 2000. 

The contributions of mutual insurance companies, private insurance companies and enterprise 

services have also increased rapidly, at an average annual rate of 13%. However, they remain 

marginal compared with total expenditure. 

Out-of-pocket household expenditure has increased at a rate that is slightly more rapid than 

total expenditure, estimated at an average of 10.3% per annum. However, the increase of out-of- 

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Tunisia 

pocket household expenditure in health care has been relatively more sustained throughout the 

second half of the 1990s, bringing this share to about 49.1% in 2000 and 52.3% in 2003. 

The regular increase of financial resources allocated to health care reflects a larger 

consideration of the demand for health care and the efforts to meet this demand in the best 

conditions. However, it also leads to concern over bringing expenditure under control and managing 

health care with a maximum of efficiency while safeguarding equity of access to health care. As 

mentioned earlier, this is a major objective of health and social policies, present in all the reforms of 

health care and health insurance systems. 

Health facilities 

The health infrastructure has steadily developed throughout the past decade for the different 

categories of health centres: first-line, second-line or highly specialized health care provided in 

specialized centres and university teaching hospitals. This represents an important prerequisite for 

improving the citizens’ access to health care throughout the country and for all the segments of the 

population. 

This development of health facilities was accompanied by structural adjustments within the 

system of health care provision, reflecting the objectives of the reforms being implemented during 

the past ten years. This involved readjusting the respective roles of the public and private sectors 

and targeting their efforts and their interventions. Thus, whereas the public sector hospitalization 

capacity has increased very little (especially in the specialized centres and the university teaching 

hospitals), from about 15 400 beds in 1989 to about 16 142 beds in 2002, the private sector capacity 

more than doubled during the same period, from 950 to 2040 beds. 

On the whole, the combined actions of both sectors have stabilized the average overall 

indicator of the number of beds per 1000 inhabitants at 1.9, with a total number of 18 182 beds 

(2002). 

At the same time, it is clear that public efforts have substantially extended the regional and 

basic coverage. The number of regional and district hospitals increased from 24 and 98 in 1989 to 

32 and 106 in 2002, respectively, and the network of basic health centres expanded from about 1300 

centres in 1987 to 1981 in 2002 (4826 people per centre in 2002). 

This increase in the number of places providing basic and specialized services is also clear in 

the private sector. The number of private single and multidisciplinary private hospitals grew from 

28 in 1989 to 70 in 2002, as well as the number of dialysis centres, health laboratories, and 

radiology units. The total number of private practice offices increased from about 2800 in 1992 to 

more than 3293 in 2002, and pharmacy dispensaries increased from 1087 in 1992 to 1392 in 2002. 


Along with the health infrastructure and the facilities and technical resources related to it, 

human resources are a major component of the health system. Ultimately, the performance of the 

system depends largely on the knowledge, skills and motivations of those in charge of health care 

provision. Given the health needs, the social priorities and the expectations of care seekers, all the 

know-how in the management of human potential lies in achieving and maintaining several 

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Tunisia 

balances: proper specialty mix; consistency of the structure of the personnel (medical, paramedical, 

technical and administrative); balance in the geographical distribution; and matching competencies 

and functions. The system of basic and continuing education makes a crucial contribution towards 

reaching these balances; the same holds for the organization of remunerations and incentives. 

These concerns for appropriate education and efficient management of human resources 

(Table 1) are strongly emphasized, as mentioned earlier, in the national programmes for the health 

sector reform. They contribute, along with the relevant quantitative indicators, to reflect the efforts 

made and actions undertaken for strengthening and promoting health personnel. 

Table 1. Human resources in the Tunisian health system, 2002 

Category Private sector Public sector Total 

Physicians 3297 4147 7444 

Dentists 940 375 1315 

Pharmacists 1614 337 1951 

Paramedical personnel 726 27 392 28 118 

The overall indicators underline the steady and substantial improvement of medical 

∗ 

supervision. The population per physicianTP PT decreased steadily from about 1900 in 1990 to 1100 in 

2000; so, for 1000 population, we had 0.5 physicians in 1990 and 0.9 physicians in 2000. This 

improvement is found both in the public and private sectors. The population per public sector 

physician decreased from about 3100 in 1990 to approximately 2100 in 2000. For private practice 

physicians, this ratio decreased from about 4750 to approximately 2300 during the same period. 

Paramedical supervision remains exclusively limited to the public sector, with a population per 

paramedic of about 340. Indeed, the private sector has only 726 staff belonging to this category of 

human resources, compared with 27 147 in the public sector (June 2000). Conversely, the number 

of dentists and pharmacists has substantially increased in the private sector, from 684 and 1087 in 

1992 to 928 and 1508 in 2000, respectively, i.e. an average annual growth of 3.9% and 4.2% 

respectively. 

2.5 Performance indicators of the health system 

The assessment of the performance of a health system aims at evaluating the actions 

undertaken within the framework of health policies, i.e. to which extent the objectives set in these 

policies have been achieved. 

This concerns mainly the degree of improvement in the population’s health status and the 

conditions of such improvement, particularly in organizational and financial terms. It involves 

addressing not only the costs of health care services, but also the responsiveness of the health 

system and its capacity to meet patient demands, and to anticipate changes in demand resulting 

from demographic and socioeconomic factors or even those caused by major unexpected events. It 

also involves assessing the accessibility of health care by all the segments of the population, i.e. the 

equity of the health system. 

∗ Including dentists; if dentists are excluded, the population/physician ratio is 1284 (Source DEP/MSP) 

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Tunisia 

The Tunisian health strategy, as expressed in the programmes carried out and reforms under 

way, follows this approach and aims at developing ways for its comprehensive implementation. 

Within this framework, certain data are regularly produced on the main to assess results of the 

health policy. 

The basic demographic indicators highlight a steady improvement of the overall health status 

and the decrease in the disease burden. 

Life expectancy at birth has increased from an average of 67.4 years in 1984 to 72.9 years in 2002. 

This increase is greater for women, who gained about 6 years during the period 1984–1999, 

than for men who gained 4 years. It is true that the increase has levelled off in the past few 

years, most probably calling for expansion of health care coverage. The probabilities of death 

before 60 and 40 years of age also illustrate this tendency and gender differences. 

After a continued decline during the 1960s, 1970s and 1980s, the overall mortality rate has stabilized 

around 5.6%. According to demographic projections, it should remain at this level until 2015, 

when ageing of the population will start to show substantially and lead to an increase in overall 

mortality rates. 

The targeted programmes on reproductive health, mother and child health and family planning 

that are integrated within basic health centres have achieved very tangible and quite outstanding 

results. 

The infant mortality rate (per 1000 live births) was reduced from 60.5 in 1995 to 26 in 1998 (23.4% 

for girls and 29% for boys). 

For children under 5 years, the mortality rate is 31.5 (28.4 for girls and 34.6 for boys). 

The percentage of one-year-old children immunized is 96%–97%. Immunization programmes have 

been strengthened, with a view to eliminating measles and sustaining poliomyelitis eradication. 

In addition to the 6 target diseases identified by WHO, the national Expanded Programme on 

Immunization also includes the routine immunization of children against viral hepatitis. 

The rate of low birth weight for neonates was 5.4% in 1999; the rate of oral rehydration therapy use 

reached nearly 95% at the same period. 

Care of pregnant women has improved: the number of those having at least one antenatal visit 

exceeded 85% of the total in 1999; the proportion of attended deliveries in hospitals and private 

hospitals also increased, reaching over 90%. The proportion of pregnant women with anaemia 

was about 32% in 1999. 

The impact of the family planning policy is apparent through several key indicators. The 

contraceptive prevalence rate, which was about 59.7% in 1994 increased to 65.5% in 1999. The 

total fertility rate decreased to 2.09 in 1999 compared with 2.7% in 1995. The crude birth rate 

decreased from 25.2% in 1990 to 16.9% in 1999. Stabilization of the mortality rate has resulted in a 

slowing down of population growth, with the growth rate decreasing from 1.96% in 1990 to 1.12% 

in 1999. According to demographic projections, this rate will range from 0.8% to 1.05% in 2004 

and from 0.6 to 1.03% in 2009, depending on the tempo of fertility changes. 

The communicable disease reporting system confirms the eradication of several diseases 

causing major health problems in the past, such as malaria, schistosomiasis and cholera. The 

surveillance system has been strengthened so as to maintain these achievements and prevent the 

introduction of emerging or re-emerging diseases. The national programmes and prevention and 

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Tunisia 

control interventions are provided with specific systems for permanent data collection to allow for 

epidemiological surveillance of diseases such as malaria, schistosomiasis, HIV/AIDS, rabies, 

tuberculosis, leishmaniasis and leprosy. 

CONTRACTUAL ARRANGEMENTS 

History 

The Tunisian health system has made extensive use of contractual arrangements since 1970, 

when the social security funds and the public health care providers agreed upon the payment of a 

lump sum to the Treasury for health care provided to their affiliate members and their dependents. 

This process of contracting has greatly developed in the past decade, with the objective of managing 

the relationships between the health insurance (social security) and the health care providers (both 

public and private) and to bring together the often conflicting interests of these two actors. 

Several extensive health care and specialized services are not provided for in the initial 

agreements made between the social security funds and the Ministry of Public Health. Most of these 

services are the subject of later agreements and memoranda of understanding with the Ministry of 

Public Health and are adhered to by some private specialized care institutions and the Military 

Hospital. These agreements are useful as there is no act or decree allowing the socially insured to 

receive health care in private health facilities. 

Legal foundations 

Generally, the Ministry of Social Affairs and Solidarity (MASS) establishes the agreement 

with the Ministry of Public Health or the Military Hospital attached to the Ministry of Defence. The 

private facilities are only adherents to the agreement. The legal foundations of these agreements are 

shown in Table 2. 

Table 2. Distribution of agreements 

Subject of the agreement Service providers concerned by the agreement Year of signature 

Cardiovascular intervention 1- MASS, MSP (2002) and the Military Hospital of Tunis 1995 

- Taoufik Private Hospital 1991 

- Bergé du Lac Private Hospital 2000 

- Cardiovascular Surgery Private Hospital 1995 

- Social Security Private Hospital, Sousse 1997 

- El Basatine Private Hospital 2000 

- El Manar Private Hospital 1997 

- Chams Private Hospital, Sfax 2000 

- Ibn El Neffis Private Hospital, Sfax 2000 

- El Korniche Private Hospital, Sousse 2003 

2- MASS, MSP : Public Facilities only 2001 

Heart transplant MASS and Tunis Military Hospital 1998 

Services of myocardial 

MASS and Tunis Military Hospital 2000 

scintigraphy Mejdi El Mahrsi Radiology and Nuclear Medicine Centre 2002 

Kidney transplant MASS, MSP and the Tunis Military Hospital 2002 

236

Table 2. Distribution of agreements 

Tunisia 

Subject of the agreement Service providers concerned by the agreement Year of signature 

Lithotripsy 

Scanner 

MASS and MSP 1995 

- El Manar Private Hospital 1998 

- El Menzah Private Hospital 1998 

- Abou Libaba El Ansari Private Hospital, Gabès 2000 

- Social Security Private Hospital, Sfax 2002 

- Hamouda El Aouani Private Hospital, Kairouan 2003 

MASS, MSP and Tunis Military Hospital 1995 

- El Kef Centre of Radiology 2001 

- Dr Anis Chebbi Radiology and scanner Centre 2002 

- El Nakhil private Hospital, Gafsa 2003 

- Ceres Centre, Bizerte 2001 

- Jendouba Radiology Centre 2002 

- Beja Radiology Centre 2003 

Bone marrow ransplant MASS and MSP (Bone marrow Transplant Centre) 1998 

MRI 

MASS and MSP 1996 

- El Manar Private Hospital (IMS company) 2003 

- Tunis Centre, Soukra 2003 

- Tunis Military Hospital 2001 

Major burns Social Security Funds and Military Hospital 1993 

Thermal cures 

Social Security Funds and the Mineral Waters Agency 1997 

- Djebel Oust Centre 

- Korbous Centre 

- Hammam Bourguiba Thermal Centre 

Functional rehabilitation 

- Djerbal Thermal Centre 

CSS and the Djebel Oust Professional Rehabilitation Centre 1993 and 1997 

Haemodialysis MASS and MSP 2001 

Details of implementation of the agreements 

Every agreement covers specific health care services, whether for the CNSS or the CNRPS. 

The affiliate members of both funds are eligible for coverage for all health care services provided in 

the terms of the agreements. The conditions for benefits vary according to several criteria, as 

detailed below. 

The CNRPS agreements 

Whatever the scheme of the health care coverage (health cards or reimbursement), the affiliate 

is entitled to direct coverage for certain services such as lithotripsy, scanning, bone marrow 

transplant, kidney transplant, cardiovascular interventions, thermal treatments, Magnetic Resonance 

Imaging, heart transplant and haemodialysis. Most of these services have been the subject of 

memoranda of agreement with the Ministry of Public Health, to which some private specialized 

health care facilities have been party. Except where otherwise noted,coverage for the procedures 

listed below requires a file including an application for prior approval filled by the affiliate member 

237

Tunisia 

and the attending physician, and the administrative documents of the beneficiary concerning the 

coverage. The latter must not be affiliated with another social security or social welfare scheme. 

This application should be submitted to the regional centre that is nearest to the affiliate member’s 

residence. The coverage can only be granted upon the advice of the CNRPS medical committee. 

• Lithotripsy. Coverage is provided for any treatment for kidney stones that does not require a 

surgical procedure. 

• Computerized axial tomography. The CNRPS covers the expenses of computerized axial 

tomography (CT) scan procedures performed for the socially insured in public health facilities 

on a lump sum basis covering all the operations related to this procedure. Coverage includes 

expenses for CT scans of the skull and of other parts of the body. 

• Bone marrow transplant. Coverage by the CNRPS is provided for bone marrow transplant 

performed at the National Centre for Bone Marrow Transplant of the Ministry of Public Health. 

Coverage for bone marrow transplant requires the constitution of a file including: an application 

for prior approval on a special form provided by the National Centre for Bone Marrow 

Transplant, filled by the affiliate member and the attending physician. 

• Kidney transplant interventions. Coverage includes the medical procedures related to the 

clinical, biological and radiological preparations of the donor and the recipient, the surgical 

procedures of removal and transplant as well as the clinical, biological and radiological followup, 

length of stay and post-surgical care. Coverage can only be granted upon the advice of the 

CNRPS medical committee. 

• Cardiovascular surgical interventions. Coverage includes cardiovascular surgical procedures 

performed in public health facilities and hospitals, in Tunis Military Hospital as well as in the 

private facilities that adhere to the memorandum of agreement made between the Ministry of 

Social Affairs and the Ministry of Public Health. Specific procedures covered are: 

Open-heart interventions 

Vascular interventions of arterial restoration with or without prosthesis 

Open-heart interventions requiring cardiopulmonary bypass, instrumental dilatation, arterial 

dilatation, insertion of intracardiac or intravascular material, costs of pre-surgical 

investigations and post-surgical care, upon the advice of the CNRPS medical 

committee. 

• Thermal (spa) treatment. Coverage includes medical procedures relating to thermal cures 

(rheumatology and otorhinolaryngology), medical visits and accommodation expenses in hotels. 

Coverage is provided to a limit of 85% of care expenses, plus a ceiling of TND 8.5 per 

overnight stay. The thermal treatment centres are: 

thermal centre of Hamman Bourguiba 

thermal centre of Korbous 

health complex of Djebel Oust 

thermal centre of Djerba 

Coverage for thermal care requires the submission of an application made on a special “ST” 

form, filled by the affiliate member and the attending physician. 

• Magnetic Resonance Imaging (MRI). Coverage is provided for MRI procedures performed in 

the following facilities: 

Centre of Bab Sâadoun (Tunis) 

Tunis Military Hospital 

Habib Bourguiba Hospital (Sfax) 

Sahloul Hospital ( Sousse) 

238

Tunisia 

Coverage of MRI procedures requires the submission of an application made on a special 

form available in the above-mentioned facilities. 

• Heart transplant. Coverage of heart transplant expenses is provided to the socially insured 

undergoing treatment in Tunis Military Hospital. This coverage includes: the cost of clinical, 

biological and radiological preparations of the donor and recipient; the surgical procedures 

(removal and transplant); and the clinical, biological and radiological follow-up as well as the 

treatment of possible complications during the first year and the immunosuppressive treatment 

during the first year. Coverage of heart transplant requires: an application for prior approval 

submitted on a special form provided by Tunis Military Hospital. 

• Haemodialysis. In order to get coverage for haemodialysis sessions, the affiliate member hould 

submit to the CNRPS. An application for prior approval made on a special form available in one 

of the following hospitals: 

Charles Nicole Hospital 

The Military Hospital (Tunis) 

Fattouma Bourguiba Hospital (Monastir) 

Hédi Chaker Hospital ( Sfax) 

Also necessary are a written request specifying the haemodialysis centre selected by the 

patient, and an application for coverage of long illness made on a special form provided by the 

CNRPS. 

2 

The CNSSTP PT agreements 

Except where otherwise specified, coverage requires a file consisting of an application made 

on a CNSS form, and a medical report. Prior approval is usually required before the procedure is 

provided. 

The conditions to be eligible for coverage vary according to the socio-professional status of 

the person insured; in general the requirements for prior approval areas follows: 

Retirees: must be a recipient of a pension from the CNSS. 

Salaried employees from the non-farm sector: must have accrued 50 days of work during the past two 

terms or 80 days of work during the past 4 terms preceding submission of the application. 

Salaried employees from the farm sector: must have paid contributions for at least one term during the 

2 terms preceding the submission of application or contributions for at least two terms during 

the 4 terms preceding submission of the application. 

Non wage-earning workers: must have paid contributions for at least 2 terms during the 4 terms 

preceding submission of the application. 

Workers abroad: (not covered by a social security bilateral agreement) must have paid contributions 

for at least 2 terms during the 4 terms preceding submission of the application. 

Students under 28 years: must hold a valid student card during the current academic year. 

Students over 28 years or married: must be registered at the CNSS. 

Some categories of workers with low income must have paid contributions for at least 3 months in the 

2 months preceding submission of the application. 

A socially insured person’s spouse: must not have a professional activity or social coverage. 

2 For the two social security funds, the agreements relate to the same services for the different conditions/diseases covered. 

239

Tunisia 

A dependent child: must be a minor or an orphan under 20 years of age or disabled without any paid 

activity (without age limit) or a girl without any income and unmarried (without age limit). 

A socially insured person’s ascendant beneficiary: must be dependent upon the socially insured 

person. 

Conditions of contractual arrangements 

The agreements are governed by criteria for coverage required to be fulfilled by the recipient 

(beneficiary) and by conditions to be met by the signatory health facilities, particularly private ones. 

The criteria for coverage vary according to the CNSS or the CNRPS. 

In order to conclude an agreement with the Ministry of Social Affairs and Solidarity, private 

institutions are obliged to accept the following conditions. 

Reimbursement is made on the basis of a flat rate determined at the level of the Ministry of Public 

Health. 

Private facilities are committed not to increase these rates and to require no payment from the patient 

covered under the agreements. 

For cardiovascular interventions, a definition of requirements has recently been established 

concerning only private institutions. 

The public or private facilities are subject to a medical inspection, provided for in the agreements. The 

inspection concerns the hospitalization and treatment conditions of the CNSS insured patients. 

In order for an affiliate who applies for coverage to receive health care under the contractual 

arrangements, the following conditions should be met. 

Prior approval of the social security fund medical committee is mandatory, except for emergencies. 

A request from the hospital is required and should be in accordance with the form developed by the 

social security funds. It should be accompanied by a medical report describing the patient’s 

health condition and his/her need for care. For every agreement, the social security funds have 

devised an application form for prior approval. 

Resources involved in implementation 

Contributions of the social security funds 

The agreements are divided into two categories: the first category concerns the funds’ 

contribution to the financing of the public institutions providing health care to their affiliate 

members. Three forms of financing are currently applied: strengthening of public health institutions, 

contribution to the budgets of the regional hospitals and the system of billing. 

The second category concerns the coverage of health care services provided by parties under 

contract with the social security funds, the Ministry of Public Health, the Military Hospital and the 

private health institutions. 

Tables 3 and 4 show the trend of social security fund contributions to the Ministry of Public 

Health during the period 1995–2004. 

Table 3. Trend of social security fund contributions to the financing of public health facilities 

240

under the agreements, 1995–2004 

Tunisia 

Scheme 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 

Contribution to CNSS 43.5 43.5 43.5 43.5 43.5 43.5 43.5 43.5 43.5 43.5 

the State budget CNRPS 11.0 11.0 11.0 11.0 11.0 11.00 11.0 11.0 11.0 11.0 

Direct 

contribution to 

the budgets of 

Regional 

Hospitals 

Billing system 

Total 54.5 54.5 54.5 54.5 54.5 54.5 54.5 54.5 54.5 54.5 

CNSS 0.5 0.5 0.5 0.5 3.6 8.3 21.1 30.1 41.6 47.660 

CNRPS 0.3 0.3 0.3 0.3 1.2 2.7 6.9 9.9 12.4 14.340 

Total 0.8 0.8 0.8 0.8 4.8 11.0 28.0 40.0 54.0 62.000 

CNSS 2.6 10.7 18.8 26.5 33.3 37.3 48.5 62.3 75.0 81.200 

CNRPS 1.7 3.6 5.4 7.8 9.0 10.7 13.5 17.7 21.0 21.800 

Total 4.3 14.3 24.3 34.3 42.3 48.0 62.0 80.0 96.0 103.0 

Table 4. Trend of social security fund total contributions, 1995-2004 

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 

CNSS 46.5 54.6 62.8 70.4 103.9 102.4 113.1 135.9 160.1 172.3 

CNRPS 13.0 14.9 16.7 19.1 27.1 27.7 31.4 38.6 44.4 47.1 

Total 59.5 69.5 79.5 89.5 130.9 130.1 144.5 174.5 204.5 219.4 

The strengthening of public health institutions has taken place since 1990, following an 

agreement made between the Ministry of Social Affairs and Solidarity and the Ministry of Public 

Health. This agreement aims at improving hospital care and reducing the need for health care 

abroad. 

Two types of interventions have been implemented. They help ensure financing of the 

infrastructure and purchase of medical equipment and new technology. The first intervention is a 

contribution of 55 million dinars for the period 1990–1994, distributed annually: 20 million for 

1990–1991, 24 million for 1992–1993 and 11 million for 1993–1994. The second intervention 

coincided with the Ninth Development Plan. The two funds have contributed 50 million dinars, 40 

million of which are supported by the CNSS for strengthening public health institutions. 

In total, the contribution of the social security funds has increased at an average annual rate of 

30%. 

The National Social Security Fund (CNSS) 

For the period 1987–2001, the CNSS spent 345.8 million dinars for all the health care 

provided under agreements; 72% of this expenditure was for coverage of haemodialysis sessions. 

Haemodialysis expenses increased at an average annual rate of 21%. 

Cardiovascular interventions have accounted for 18% of total expenditure by the CNSS on 

health care provided under the agreements. During the period 1988–2001, cardiovascular surgery 

expenses increased at an average annual rate of 43.3%. 

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Tunisia 

There has been a significant increase in the number of persons benefiting from health care 

provided under the agreements. The number of beneficiaries for cardiovascular interventions has 

increased from 24 to 14 016 (1988–2001). For the scanner, this number reached 58 100 in 2001 

compared with 171 in 1988. 

According to Table 5, the policy of reducing the need for care abroad, which was the reason 

for adopting contractual arrangements, has been successful. In 15 years, the number of beneficiaries 

receiving health care abroad has been reduced about ninefold. The CNSS expenses have been 

reduced by 3.5 million dinars, without adjusting for international inflation but with coverage 

maintained at a high level. 

Since 1987 the largest share of expenses for health care provided under agreements for 

haemodialysis sessions. Haemodialysis expenses exceed 60% of total expenditure during the period 

1987–2001. The gradual increase of cardiovascular surgery expenses, from 2.7% in 1988 to 20.7% 

in 2001, is also noted. 

242

Tunisia 

Table 5. Beneficiaries (BEN) and expenses (EXP) under CNSS agreements, 1987–2001T (million dinars) 

Agreements Year 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 

Cardiovascular BEN 24 35 35 62 513 735 819 966 1396 1331 1585 1930 2057 2528 

surgery EXP 0.100 0.250 0.422 1.012 2.009 3.054 3.224 3.929 6.022 6.147 7.132 8.732 9.296 10.793 

Kidney transplant BEN 13 5 12 4 9 15 9 21 27 9 25 46 20 8 

EXP 0.060 0.084 0.060 0.152 0.126 0.210 0.126 0.323 0.491 0.164 0.455 0.649 0.534 0.316 

Bone marrow 

transplant 

BEN 15 34 25 30 

EXP 0.720 1.913 1.595 1.815 

Scanner BEN 171 113 388 2067 2176 3470 3927 3009 3255 4731 6744 6935 8931 12183 

EXP 0.013 0.009 0.01 0.061 0.13 0.208 0.236 0.215 0.234 0.342 0.483 0.493 0.635 0.882 

Lithotripsy BEN 709 571 695 824 971 1118 

EXP 0.280 0.221 0.267 0.317 0.375 0.432 

MRI BEN 1418 2042 2870 3376 3923 4570 

EXP 0.425 0.613 0.861 1.013 1.177 1.371 

Haemodialysis BEN 268 361 385 492 717 891 1047 1258 1369 1552 1747 2081 2224 2385 2703 

EXP 2.338 3.334 3.866 6.183 7.422 9.640 13.993 16.681 18.935 18.793 22.132 26.850 29.408 33.951 35.035 

Thermal cure BEN 968 1210 1465 1650 1958 2702 3635 3295 3795 2820 2046 1640 1634 1776 1699 

EXP 0.151 0.249 0.223 0.368 0.494 0.741 0.988 0.857 0.948 0.675 0.474 0.374 0.390 0.434 0.716 

Military Hospital EXP 0 0 0.178 0.889 0.804 0.926 0.815 0.600 0.000 0.026 0.028 0.079 0.031 0.746 0.834

Tunisia 

Figure 1 shows the distribution of expenses for health care provided under CNSS agreements. 

In 2001, 66% of the CNSS expenses under agreements were for haemodialysis sessions, 21% for 

cardiovascular interventions and 13% for remaining items or procedures covered by the agreements 

(thermal treatment, bone marrow transplant, kidney transplant, scanning, MRI, lithotripsy and the 

Military Hospital). 

CTH 

1% 

HEM 

66% 

HMI 

2% 

CCV 

21% 

HEM: Haemodialysis; CTM: Thermal Cure; HMI: Military Hospital; CCV: Cardiovascular interventions; 

GR: Kidney transplant; GMO: Bone marrow transplant; SCA: Scanner; LIT: Lithotripsy; IRM: MRI 

Figure 2. Distribution of health care expenses under the CNSS agreements (2001) 

The resources of all the schemes managed by the CNSS are steadily increasing, they increased 

threefold between 1990 and 2000 alone. The Fund resources have increased by 10.8%, from 383.5 

million dinars in 1990 to 1075.2 million dinars in 2000. The Fund expenditures on medical care 

under health insurance (health and social actions), in comparison with the global expenditures, 

represented 20% in 1991 and 31% in 2000. 

Table 6 shows an increase in the CNSS contractual arrangements. Indeed, the CNSS devoted 

only 2.7% in 1990 and then 5.4% in 2001 of its total expenditures to agreements. The share of the 

expenditures under contractual arrangements in comparison with health insurance expenditures 

increased twofold during the 1990s, from 15.4% to 30.0%. 

Table 6. Share of CNSS expenditure allocated to health care provided under contractual 

agreements (parties under contract) in comparison with health insurance expenditure (health 

and social actions) 

Expenditure 1990 2001 

Health insurance expenditures(1) 51.7 173.0 

Expenditures under contractural 

agreements(2) 

7.9 52.2 

Ratio: (2)/(1) 15.4% 30.0% 

GR 

1% 

IRM 

3% 

GM 

3% 

SCA 

2% 

LIT 

1%

Tunisia 

The National Pension and Social Security Fund (CNRPS) 

The social security scheme managed by the CNRPS is based on two mutually exclusive 

schemes, the direct health care provision scheme (health card) and the reimbursement scheme. 

Regardless of scheme, the affiliate member is entitled to direct care services mentioned in the 

introduction. Most of these services have been the subject of memoranda of agreement with the 

Ministry of Public Health, to which some specialized health care facilities adhere. 

For the period 1987–2001, the CNRPS spent 169.5 million dinars for all the health care 

provided by parties under contract: 68% was for coverage of haemodialysis sessions. 

Haemodialysis expenses increased at an average annual rate of 15.9% (Table 7). 

Cardiovascular surgery interventions accounted for 18.7% of the total expenditures by the 

CRPS on health care provided under agreements. During the period 1988–2001, cardiovascular 

surgery expenses increased at an average annual rate of 28.8%. 

Moreover, there has been a significant increase in the number of persons benefiting from the 

health care provided under the agreements. The number of beneficiaries for cardiovascular 

interventions has increased from 75 to 1373 (1988–2001). For the scanner, this number has reached 

7034 in 2001 compared to 141 in 1990. 

According to Table 7, the policy of reducing the need for health care abroad, which was the 

reason for CNSS adopting contractual arrangements, has been successful. In 14 years, the number 

of beneficiaries receiving health care abroad had been reduced about sixfold. CNRPS expenditures 

have been reduced by 3.1 million dinars, without adjusting for international inflation and with 

coverage maintained at a high level. 

Since 1987, the largest share of expenditures on health care has been for haemodialysis 

sessions. Haemodialysis expenditures exceed 60% of total expenditures for the period 1987–2001. 

In 1987, the share haemoialysis expenditures 83%, decreasing to 62% in 2001 (Figure 2). 

In 2001, 62% of CNRPS expenditures under agreements were for haemodialysis sessions, 

21% for cardiovascular interventions and 13% for remaining items and procedures (thermal 

treatment, bone marrow and kidney transplants, scanner, MRI, lithotripsy and the Military 

Hospital). 

245

Tunisia 

Table 7. Trend in number of beneficiaries (BEN) and expenses (EXP) under CNRPS agreements, 1987–2001T (million dinars) 

Cardiovascular 

surgery 

Year 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 

BEN 75 110 100 248 368 475 486 584 793 754 890 989 1231 1373 

EXP 0.188 0.306 0.253 0.445 1.477 1.380 1.455 2.035 2.969 3.394 4.0084.335 4.352 5.035 

Kidney transplant BEN 2 5 4 3 7 3 8 6 7 12 15 9 7 9 11 

EXP 0.024 0.0060 0.048 0.036 0.094 0.042 0.112 0.084 0.098 0.165 0.273 0.164 0.187 0.164 0.200 

Bone marrow transplant BEN 9 7 15 11 

EXP 0.370 0.187 0.6650.590 

Scanner BEN 141 1173 1365 2173 2453 2695 2962 3357 4145 

EXP 0.009 0.031 0.061 0.096 0.111 0.165 0.211 0.235 0.3 0.282 0.385 

Lithotripsy BEN 2 192 190 546 536 462 464 447 444 

EXP 0.002 0.048 0.149 0.168 0.099 0.140 0.163 0.17 0.169 

MRI BEN 885 1177 1755 

EXP 0.279 0.353 0.527 

Haemodialysis BEN 138 142 199 256 314 393 492 593 715 784 798 966 1043 

EXP 1.931 2.045 2.440 3.058 4.016 5.154 6.341 7.639 8.856 9.497 10.966 11.257 

Thermal cure BEN 1936 2440 2670 2799 3557 2049 3379 3610 3690 3668 2536 2050 

EXP 0.361 0.429 0.461 0.482 0.741 0.467 0.759 0.820 0.846 0.686 0.522 0.412 

Military Hospital EXP 0.242 0.455 0.273 0.170 0.016 0.114 0.070 

:[ 

1h] 

Comment

Tunisia 

Table 8 shows an increase in CNRPS expenditures under contractual arrangements. 

Indeed, the CNRPS devoted only 3.1% in 1992, and 3.4% in 2001, of its total expenditures to 

agreements. The share of expenditures under contractual arrangements in comparison with 

health insurance expenditures increased by 1.6% during the 1990s, from 25.7% to 27.3%. 

Table 8. Share of CNRPS expenditures allocated to health care provided under 

contractual arrangements in comparison with health insurance expenditures 

(compulsory scheme) 

Year 1992 2001 

Health insurance expenditures (1) 29.7 89.2 

Expenditures under agreements (2) 7.6 24.4 

Ratio: (2)/(1) 25.7% 27.3% 

Importance of contractual arrangements for the CNSS and CNRPS 

During the period 1990–2001, the agreements have gradually taken a major place in the 

coverage activity of the two Funds. The number of beneficiaries increased from 5878 to 

39 791, i.e. an increase of 6.7%. Expenditures also increased significantly, from 12. to 

MD 71.9 million dinars, equivalent to an average annual increase rate of 17.7%. 

Figure 2 shows the trend of expenditures of the two Funds under agreements. The 

CNSS spends more than the CNRPS. The share of the CNSS expenditure represented 66% of 

the total expenditure of the two Funds in 1990 and 72.6% in 2001. 

EXP (in million dinars) 

60 

50 

40 

30 

20 

10 

0 

CNSS CNRPS 

1987 1989 1991 1993 1995 1997 1999 2001 

Year 

Figure 2. Trend of expenditures on health care provided 

under agreements, 1987–2001

Tunisia 

Haemodialysis accounts for more than 70% of the expenditures under agreements made 

by the two Funds. In 1987, it accounted for 83%. Cardiovascular surgical interventions are 

gaining increasing importance under the agreements both in terms of beneficiaries and 

expenditures. 

Resorting to health care abroad for the insured is gradually decreasing in both Funds. 

The expenditures of the two Funds for health care abroad have been reduced by more than 

half, as measured in current dinars (Table 9). 

Table 9. Coverage of beneficiaries resorting to health care abroad in the two Funds, 1987–2001 

Year 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 

CNRPS BEN 395 292 230 259 171 206 207 160 125 89 74 72 52 34 63 

EXP 4.88 2.523 3.205 3.306 2.046 3.565 2.751 2.698 2.840 2.514 2.405 2.095 1.672 1.235 1.760 

CNSS BEN 692 598 495 314 198 222 224 259 141 113 123 138 81 48 66 

EXP 5.904 5.890 5.526 6.784 3.957 4.2054.169 6.174 3.173 3.500 3.397 3.780 2.737 1.238 3.042 

CSS BEN 1087 890 725 273 369 428 431 419 266 202 197 210 133 82 129 

EXP 10.784 8.413 8.731 10.09 6 7.77 6.92 8.87 6.01 6.014 5.8 5.88 4.409 2.473 4.802 

EVALUATION OF CONTRACTUAL ARRANGEMENTS 

Advantages of contractual arrangements 

The agreements have contributed to: 

• The reduction of health care abroad, which represents a very high cost for the social 

security funds and for the economy of the country. 

• The development of public and private facilities which have become well-equipped 

medical centres with advanced technology (Table 10). The expansion of the private sector 

is also remarkable as it attracts a large number of patients from neighbouring countries. 

• Contributing to improve health care provision throughout the country. Equipment such as 

scanners and lithotripters are now more available in the private sector in most 

governorates of the country and have become accessible to the insured. 

• The creation of new jobs in the medical field, contractual arrangements guarantee 

potential clients and solvent demand for the private health facilities. 

• De facto regulation of the private sector. The social security funds intervene through 

agreements so as to ensure the best treatment conditions (role of medical inspection of the 

CSS) on the basis of flat rates. 

• A fundamental change in public hospital management (management of the system of 

billing) and in budget preparation procedures, which have developed from procedures 

based on a systematic annual increase to procedures linked to hospital activity. 

Disadvantages of contractual arrangements 

With regard to individual behaviour, health professionals from the public sector who are 

allowed to practice privately, may find it to their own advantage to refer the insured patients 

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to the private sector. The insured also find it to their best interest to go to the private sector 

known for better quality services. Under the agreements, the patients can choose between the 

public and the private sectors. 

With regard to the behaviour of private hospitals the private hospitals charge: a fee per 

hospital day which is supposed to cover accommodation and intermediate care; a fee for 

service to be paid to medical practitioners, as doctors’ fees are not included in the private 

hospital budget; and lump sums for expensive procedures such as scans. 

This combined formula may lead to increasing the number of stays and reducing their 

average duration so as to accelerate bed rotation and maximize the output of the technical 

equipment and the volume of surgeon fees. It can prompt private hospitals to specialize in 

routine surgery, maternity, medicine, or in dialyses and cancer treatment, all of which are costeffective 

activities, taking into account the fee structure. 

Private hospitals have also found it in their interest to acquire technical equipment, for 

the purposes entering into an agreement. Table 10 shows the higher number of equipment in 

the private sector compared with the public sector. 

The influence of the fee structure appears, for example, in the choice of the treatment 

formula in the case of a private hospital. 

Table 10. Advanced technical equipment in hospital facilities, 2003 

Equipment Public Private Total Density 

Population per piece of equipment 

MRI 3 5 8 1 236 000 

Scanner 15 54 69 143 000 

Lithotripter 3 12 15 660 000 

Tele-cobalt 4 5 9 1 100 000 

Digital vascular imaging machines 6 10 16 618 000 

Catheter 9 10 19 520 000 

CEC 6 12 18 550 000 

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Tunisia 

With regard to the Funds, current trends indicate that the agreements are responsible for 

higher costs, which is likely to create a fiscal imbalance of the Funds. The cost of contractual 

arrangements may become unbearable for the following reasons: 

Patients benefitting from two or three different types of coverage. 

The extension of private facilities that are joining in the agreements. 

Table 11 shows the upward trend in the agreement costs for the two Funds over five 

years (1996–2001). 

Table 11. Trend of CNSS and CNRPS expenditures on health care provided under 

agreements between 1996 and 2001T (in million dinars) 

CNSS CNRPS 

1996 2001 1996 2001 

Ben Exp Ben Exp Ben Exp Ben Exp 

Lithotripsy 709 0.280 1118 0.432 464 0.163 706 0.268 

Scanning 3255 0.234 12183 0.882 2962 0.211 7034 0.508 

MRI 2042 0.613 4570 1.377 885 0.279 2995 0.889 

For lithotripsy, the CNSS and CNRPS expenditures have increased by 50%. For 

scanning procedures, they have increased by 3.8 and 2.4, respectively. 

On their part, the Funds will have to ask for an increase in the contribution rate, which 

is likely to further increase the households’ contributions to health financing and to cause 

problems for private employers (increase in production costs). Indeed, in 1987 the Funds 

contributed to 13.5% in 1987 of the total expenditure before the agreements, and about 21.1% 

in 2002. 

The increase in the costs of contractual arrangements stems from the fact that they are 

involved only in care requiring advanced technological equipment. Such equipment enables 

rapid and effective diagnosis of disease, hence the significant increase in the number of 

beneficiaries. 

It has been observed that the agreement system, based on flat rates, has prompted the 

actors––health care providers––to adopt the principle of costing so as to be able to adjust 

themselves to the new context of contractual arrangements aiming at payment of the true costs 

of health care. The Ministry of Public Health has adopted, since 1999, the principle of health 

care costing which is conducted yearly by the directorate responsible for supervising 

hospitals. The objectives of the routine costing exercise are to: 

measure the performance of the various activities. 

establish the basis for charging the services provided. 

explain and account for the results of each exercise. 

facilitate budgeting and budget control. 

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CONCLUSIONS 

Tunisia 

Three closely intertwined factors have contributed to the emergence of contractual 

agreements in the Tunisian health system: 

epidemiological and demographical transition 

over dependence on health care abroad 

development of the complementary role of the private sector in the management of emerging 

diseases and in investment in health. 

modernization of management procedures of the public health facilities. 

On the whole, the private initiative incentive policy has also encouraged to undertake 

this type of contractual arrangements so as to ensure the continuity of private investment. 

The social security funds play a very important role in the financing of the health sector. 

The Funds aim at ensuring the quality of health care and improvement of the health status of 

the insured who are provided health care in public and private health institutions. In order to 

ensure the continuity of this role, the Funds have concluded special agreements. The Funds 

have also adopted modes of financing the public health institutions that are essentially based 

on lump sum payment, users charges (single-act billing) and strengthening of hospitals. 

In this perspective, the charging procedure has become more and more important, 

generating the practice of unit cost calculation that forms the basis for setting lump sum tariffs 

which are increasingly refined. 

It is to be noted that, apart from the procedures specific to the public sector, the 

expenses incurred in the special agreements for coverage are absorbed by the health 

institutions of the private sector. The managers in charge of the Funds estimate the proportion 

of these expenditures made in the private sector to be about 80%. 

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The role of contractual arrangements in improving health sector ...

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