The purpose of this study is to review the research literature on the effectiveness of contracting-out of primary health care services and its impact on both programme and health systems performance in low- and middle-income countries. Due to the heightened interest in improving accountability relationships in the health sector and in rapidly scaling up priority interventions, there is an increasing amount of interest in and experimentation with contracting-out. Overall, while the review of the selected studies suggests that contracting-out has in many cases improved access to services, the effects on other performance dimensions such as equity, quality and efficiency are often unknown. Moreover, little is known about the system-wide effects of contracting-out, which could be either positive or negative. Although the study results leave open the question of how contracting-out can be used as a policy tool to improve overall health system performance, the results indicate that the context in which contracting-out is implemented and the design features of the interventions are likely to greatly influence the chances for success.
This paper analyzes the distortion effects of the hospital pricing policies in China. To help maintain equitable access to hospital services, the Chinese government regulates prices of hospital services, and provides subsidies to public hospitals. Comparing the regulated fees of selected hospital services with their average unit costs indicates that the average cost-recovery rate of the fees is only 50%. The fees for 90% of the services are less than their average unit costs, while the fees for the high-tech services exceed their costs. Moreover, the State Price Commission allowed a drug profit margin of 15-20% over the wholesale price. The distorted fee schedule affects the behaviour of hospitals. Empirical evidence revealed problems of violation of price regulations (charging a fee exceeding the regulated fee), over-provision of profitable high-tech services and over-prescription of drugs. The Chinese experience shows that low regulated fees cannot reduce the economic burden on patients, and that distorted medical fees can result in distorted service provision and low efficiency of medical resources. Strategies to correct for the price distortions are discussed.
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