Provider Purchasing and Contracting for Health Services_The Case

Table 13 shows the expenditure by the Lusaka District Health Management Team, which
does not have district hospital. Despite the high concentration of private for-profit health care
providers that provide the first-level referral services in the city, the District Health
Management Team does not contract with them for any clinical services (as evidenced by the
expenditure pattern in table 13). Rather, it refers its clients to the University Teaching
Hospital, which is a third-level hospital.
Table 13: Expenditure by the Lusaka DHMT
Expenditure 2005 Expenditure 2007
District Health Office 1,164,336,557 1,312,587,821
First level (University
Teaching Hospital) 613,195,148 800,180,119
Health centers 9,366,169,234 6,905,925,635
Public health programs 1,071,197,074 1,293,588,215
Total 12,214,898,013 10,312,281,790
Source: Lusaka DHMT Action Plan.
Constraints to contracting-out
There are a number of reasons that contribute to limited contracting between the private forprofits,
on the one hand, and public and mission hospitals, on the other. The constraints arise
mainly from two sources:
• The manner in which contracts are designed, funded, and administered
• The attitude of managers toward private sector contracting.
The design and administration of contracts: Most managers at District Health Management
Teams observed that although contracting with private for-profit health care providers is
allowed, it is in principle difficult to enter into any subcontracts with them because of the
way the contracts between District Health Management Teams or Hospital Management
Boards and the Ministry of Health are designed.
First, the contracts specify where services have to be purchased. The design of the referral
system encourages contracting-in as opposed to contracting-out. For instance, the contracts
specify that the District Health Management Teams have to purchase health services from
second- and third-level providers. At the budgeting stage, these facilities factor in these funds
as part of their budgets and merely claim for the funds during the implementation of budgets
although commensurate services may not have been delivered.
Second, government funding is not only inadequate but also uncertain in terms of
disbursement. This makes strategic purchasing of health services from the private sector
difficult. Moreover, the private sector may not agree to lower prices to those applicable under
the contracts. 8
Attitudes of managers toward private contracting
Some managers reported that the private sector in their catchment areas does not provide
services that cannot be procured from other government and mission facilities. One of the
8 Private for-profit providers do not follow the Basic Health Care Package costing.
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