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CHAPTER -Ill

THE NEW PUBLIC MANAGEMENT (NPM) AND THE EMERGING

TRENDS IN HEAL THCARE SERVICE PROVISION:

A REVIEW OF EXPERIENCE

In this Chapter an attempt has been made to review the New Public Management

(NPM) strategy that is employed in healthcare service provision. In the last three

decades, welfarism has suffered a setback worldwide in the form of downsizing or

cutback in the social sectors, especially expenditure on health, being viewed as

'unproductive' expenditure. In the field of professional public management, the

concept of downsizing is referred to as rightsizing, an ideological orientation towards

assumption to achieve efficiency, economy and effectiveness in the public system. As

a result, government of both developed and developing countries cut social welfare

expenditure. Their focus is on mobilization of the alternative resources to balance the

financial crisis at the macro level. It also includes increased accountability in

perfonnance management, introduction of performance-related budgeting, creation of

autonomous organizations, managed competition and contracting-out, corporatization

and introduction of user charges. In public health, these strategies focused on value

for money, and outcome of the programme and unit cost calculation.

The NPM is concerned with injecting business-like practices into public agencies with

the expectation that the results will be more effective and more permanent in

improving the performance of health systems. ln the initial stages of the refom1

process, both United Kingdom (UK) and United States of America (USA) played a

significant role in the fonnulation and implcmentatiun of the NPM strategies in the

hcalthcare services clcli\crv svstcm. lhmc\LT. it \\as implemented first in I atin

,~

_I

America, later in Africa, and then finally in Asia. Thereafter a number of similar

trends have emerged in the development of major reform programmes in all the

developed and developing countries.

In the 1980s privatization of certain social services, including medical care, had been

proposed as a means of increasing both allocative and technical efficiency in

financing and provision of services, and in providing greater choice and responses to

consumer preferences (Belmartino: 2000). During 1980s, there was serious focus on

the aspect of public health management which gave importance to mobilizing

resources, managing health and disease of the population and restructuring the whole

healthcare system (WHO: 2002). There was a need for structural and functional

change in the existing public system to make the services more accountable to the

taxpayers, since all policies and programmes of a state are public financed. It was

grounded for provision of a meaningful and tangible service to the citizens

(tax payers).

Organizations and Institutions Promoting NPM in Healthcare Service Provision

The following agencies promote the NPM strategies in heaithcare service provision:

The World Bank (IBRD), The Commonwealth Secretariat, the International Monitory

Fund (lMF), the World Health Organization (WHO) and management consultant

groups. All these agencies provide donor-based public sector reforms with

conditionality (Singh: 2003). The Organization for Economic Co-operation and

Development (OECD) also endorsed the doctrines of the NPM practice. It was

assumed that the public sector reforms could be achieved through aid-based

programmes (Moore: I 996 ). which focused mostly on \ alue for money approach. The

World Bank and Government of India (GOI) initiated a policy dialogue on healthcare

in 1992. Discussed below are certain areas of thrust imposed on the Indian health

system by the World Bank.

World Bank Prescriptions to the Indian Health System

The World Bank recommended certain measures as a part of its reform measures for

the public-funded healthcare system in India. Bennet and Muraleedhran (1998) cited

that the World Bank approach towards Indian health system includes resource

allocation with an assumption of greater use of cost effectiveness, cost recovery,

especially with respect to the hospital services, outsourcing of services to cut cost and

increase efficiency and establishment of independent autonomous organizations. In

late 1990s, the World Bank report on 'Healthcare Financing' recommended policy

measures which would shift both financing and provisioning responsibilities to the

non-government sector. Four major principles of mechanisms were proposed: user

charges for government services, insurance, de-restriction of the private sector and

decentralization within the government sector (Belmartino: 2000).

NPM Strategies in Healthcare Seryices

The doctrine of the NPM turned its concentration to the public-funded healthcare

system in the fonn of creating semi-government bodies or autonomous agencies,

contracting-out, user charges, decentralization, voucher schemes, Public Private

Partnerships (PPP), and outsourcing of healthcare services. This favored a new form

of entrepreneurial state intervention, which operated in many countries, viz.,

economically advanced members of the Organization for Economic Co-operation and

De\clopmcnt (OECD). developing countries, newly industrialized countries ;md

developing countries at vanous points of time. Most of them were persuaded to

restructure the finance of public provision in the name of economic reform. Most of

the industrialized countries implemented the NPM principles in the public health

service delivery at different levels of practice (McPake: 2000 and Sen: 1998). This

resulted in a steady decline of state welfare approaches to healthcare.

The first region to be affected by the new economic policies was Latin America in the

late 1970s. The African countries followed during the late 1980s and early 1990s.

Much of Asia also witnessed refonns of Structural Adjustment Programmes (SAP)

aimed at reforming the public-funded healthcare service provision. Similarly, during

the 1980s, the OECD countries also reassessed their commitment to public service

provision as a part of an ideological shift from welfare to markets. After the reforms,

the power ofhealthcare financing has brought down more from the governing private

sector.

Within the last three decades, the NPM has emerged as a major reform strategy tool

and is applied in varying degrees to public sector agencies in a growing number of

developed and deve1cpiDg countries (Taroni: 2003). It has become one of the

dominant paradigms of public management across the world (Yamamoto: 2003). As

the NPM reforms forge ahead in countries like the United Kingdom, New Zealand,

the United States of America, govemments worldwide have been eager to experiment

with similar policies. The same is also happening in countries like Columbia, Mexico

and Zambia (McPakc: 2000), which are introducing different varieties of a purchaser­

provider split to enhance public sector pcrf()Jlllance through the separation of policy

and service delivery roles. The NP!\1 mon:mcnt hegan to develop in the 1970s ;:md

early 1980s in order to improve effectiveness, responsiveness and perfonnance of the

state to benefit the larger population.

The UK has pioneered the refonns under the Prime Minister Margaret Thatcher, who

resolutely introduced the concept of NPM in the public system. The USA, which

suffered heavily from recessive developments and tax revolts of its citizens, also

became part of their drive. Also, the national governments of other Commonwealth

countries, mainly New Zealand and Australia, joined later on and after that the refonn

was put on the agenda of almost all OECD countries. A series of other countries in the

world too followed suit (OECD: 1998). Until the early 1980s, the public sector was

criticized as being monopolistic, centralized, hierarchical, inflexible, unrealistic and

unresponsive to users.

Based on the recommendation of multilateral and bilateral organizations, competitive

contracting with private sector was supported, which was intended to improve

efficiency in provision of services. Before introducing this system, it was found that

there were deep-rooted inefficiencies and inequities within many public-funded health

systems. These countries v1~re attracted by the NPM ideas thnt promised greater

efficiencies through encouraging competition and increased clarity in relationships

between donors and service providers (Walsh: 1 995).

The NPM focused on improving Responsibility, Accountability and Perfonnance

(RAP) in public funded health system, which is considered as the major building

blocks of the NPM. In hrief Responsibility questions ""What managers and

organizations are responsible f(H··· and it is concerned with "uncoupling· govemmcnt

functions into policy and regulation. Accountability raises the question "To whom

should an organization be held accountable for delivery and quality". And

Performance remarks "How managers of departments can be mobilized to improve

the delivery of agreed outcomes". The following Table provides a brief sketch of the

relevance of the NPM in health services organization. It shows the synthesis of the

doctrines used in public-funded healthcare service delivery across the globe.

Table 4: New Public Management and Healthcare Service Provision:

International Context

Name of the Country Form of the NPM Practice in Healthcare Services United States of America (USA) Free market economy and downsizing Australia Agencification Sweden Corporatization and contracting out United Kingdom (UK) Agencification and outsourcing New Zealand Output budgeting and corporatization China Decentralization Japan Public Private Mix (PPM) Ghana, Uganda, Tanzania, Kenya Public Private Partnerships (PPP), outsourcing and and Zambia agencification Brazil Health agency programme France Devolution of regional hospitalpower Mexico Reforming budget system Germany Local government participation with perfom1ance-based

programmes Canada, France, Australia, Norway Creation of executive agencies and autonomous

agencies Malaysia Total Quality Management (TQM) India Public Private Partnerships (PPP), outsourcing (both

clinical and non clinical services), autonomous agencies I

and decentralization Singapore, Hong Kong Outsourcing, corporatization, decentralization and

agencification Indonesia, Kenya Autonomization of public hospitals Argentina, Brazil, Mexico, Columbia Managed competition, contracting out and El Salvador ---· Mongolia, China and Thailand Corporatization

Source: Developed from Hood: 1991; Mills: 1995; Bennett and Muralccdhran: 1998

and 2000: Navano: 2004; Sen: 2003: Homedes and Ugade: 2005: Bhat: 1991;

Grimmcisen and Rothgang: 2004: Griftlth: :WOO: OECD: :2000: and Wait: 1908.

The table given above provides a concise review of the NPM model of practice in the

public funded healthcare service delivery system. It is evident that the business model

of the NPM practice emerged both in the clinical and non-clinical services of the

public funded healthcare organizations. The literature shows that the current model of

the NPM has originally emerged in the developed countries and transferred to the

developing countries. The introduction of market principles operated either wholly in

the public sector or among the Public Private Mix (PPM). This was aimed to improve

performance and efficiency in the public healthcare service delivery system

(Belmartino: 2000).

NPM in the Context of Developed or Industrialized Countries

Although the literature shows that the NPM had its origin in both clinical and non-

clinical services in the developed countries, limited empirical evidences is available

on the implications of the NPM in healthcare service provision. According to Vining

(1999), 'internal market' healthcare contracting is widespread in a number of

developed countries. In the US, particularly, the reforms are popularly known as

'Managerialist' or 'Reinventing Government' (Frant: 1996), with the same notions

being taken up in the U!1ited Kingdom, Finland, Netherlands, New Zealand, Sweden

and Canada. For example, in 1993, the largest Hospital in Canada, the Toronto

hospital had contracted out a broad range of services, including nutrition services,

house keeping, plant operations, maintenance, transportation (both patients and

goods), material management and logistics and laboratory services (Vining: 1999).

Contracting-out has emerged as a management tool that has some relevance to all

types of public health systems. Everyone desires new changes in almost all aspects

and that is true in the public system also. People expected modernization and

innovation (Borins: 2001) to occur in the public sector, primarily in response to

internal problems. The experience in selected OECD countries, where the financing

and delivery of health and other social services is heavily socialized with a strong

public sector role, taxpayers expressed dissatisfaction with the traditional modes of

public sector management, based on their overall observation.

According to Defever ( 1995), OECD and nearly all industrialized countries have

shown that they broadly share three objectives for their health system. Macro

economic efficiency, including the cost of healthcare, should not exceed the

acceptable share of national resources regarding micro economic efficiency; the mix

of services chosen should secure health gains and consumer satisfaction at minimum

cost. The OECD nations' refonns were focused on micro economic efficiency, choice

and autonomy (Carr-Hill: 1994).

United States of Ame.-ica (USA)

The NPM process was initiated for the first time in the US by the then Vice President

AI Gore in early 1990s. Sha'.v (2004) reveals that the USA has not been involved with

the major structural changes in the public system as a part of the NPM strategy.

However, the reform process focused mostly on the management and administrative

aspect within the central government organizations. This includes streamlined

bureaucracy, downsized public service workforce, consolidated and modified

infonnation technology ( e-governance ), user charges and procurement reform. It was

more focused on the core practice of areas of management in order to strengthen the

healthcarc delivery system.

United Kingdom (UK)

The U.K provided a model of jurisdiction m which the Traditional Public

Management (TPM) model was developed in the 1850s, and not removed and

distributed as a paradigm until the 1980s. UK had introduced major changes in the

public system, assuming the future vision to rebuild the public system. Within the

British public sector, apparently since the early 1980s, there was a movement for deep

restringing (Pollit: 1990, Hood: 1991, Polidano: 1999), often seen as the rise of the

'The New Public Management'. In the UK, the efficiency drive model that had the

objective to make the public sector more business had been in operation like, which

involved the downsizing and decentralization model, focused on desegregation. At the

same time, it had introduced financial targets in the public sector, quasi-markets,

creeping privatization, Public Private Partnerships (PPP) and outsourcing of services

(Shaoul: 2003). The introduction of the NPM was reflected in the restructuring of the

publicly provided healthcare, that is, the National Health Services (NHS). The above­

mentioned 'refonn' was described as a value-driven attempt to restructure public

systems and it is not assumed that the outcomes of such reform have necessarily

benefited the users.

In 1982, the reform process was further enhanced to more than 1800 performance

objectives, and most of them focused on cost and efficiency (Shaw: 2004). Further, in

1991, purchaser and provider split were moved. Three decades ago Margaret Thatcher

initiated the steps to introduce the NPM kind of practices in the public system to

reduce the size of the government and to improve the perfonnance of civil servants.

The government considered the system as too big, inefficient and wastefuL and nearly

12000 positions were eliminated. The recurrent annual savings of about

million reflected continuous improvement in management and performance.

Spain and Sweden

$ 400

Belmartino (2000), in Spain, emphasized European health system changes, including

the practice of coordination of all public health resources into a single organization,

and experiences of developing management control systems aimed at monitoring

resource utilization. In general several departments were contracted-out in the

European nations. In Sweden, food services, emergency care, housekeeping, laundry,

clinical diagnosis and equipment maintenance, pharmacy, plant operation,

rehabilitation, physiotherapy, financial management, psychiatry, sub-acute care,

security, radiology, gift shops, managed care, substance abuse, materials

management, surgery and anesthesia were outsourced (Moore 1996:61, as cited in

Vining and Globem1an: 1999).

Since mid-1970s, a wider change in the political economy was linked to macro level

reorganization within the public sector. The first attempt was to reduce public

expenditure, introduce monetary targets and sell state assets, which was evident,

following the pressure from the International Monetary Fund (IMF). The main

strategies were to downsize the public sector in order to reduce the power of the union

and to increase that of the management. It emphasized increasing pressure to secure

efliciency and value for money.

The new political economy was based on a drive for refom1 in the public sector. The

basic objectives nf the reform process are pi lotcd under li\ e objectives: (I) improve

accesses to services, (2) improve quality of services, (3) improve efficiency in the use

of resources and avoid waste, (4) improve amount of contribution within the

programmes, and (5) improve amount of funding for the delivery of healthcare

serv1ces.

New Zealand

In New Zealand, during mid 1980s, the radical market-oriented economic reforms

were implemented. Later, in 1993, the public healthcare system was restructured with

the NPM doctrines. Howden-Chapman and Ashton (2000) cite some of the reform

strategies followed by New Zealand, including downsizing and restructuring of the

public system, separation of roles and responsibilities of purchaser and provider,

splitting of health services, especially secondary services and the separation of

ministerial responsibilities. The reform process focused on the relevance and

significance of the establishment of a separate agency, including the establishment of

regional health authorities and the establishment of a separate public health

commission to purchase public health services.

Even after the NPM, certain issues which include accountability, corruption, poor

performance, etc. still exist in developed countries. After the introduction of the

business model of practice in healthcare, taxpayers indirectly have to pay more money

to access healthcare facilities. Since the new system proposed cost benefit analysis

and unit cost calculation as a part of financial feasibility in the public healthcare

delivery system: complete cost is transferred to the patients in the fonn of user

charges. Therefore. the NPM practice in the developed countries brought certain

changes in the public health system and also, it had both positive and negative

impacts on the healthcare service delivery.

NPM in the Context of Developing Nations

Developing countries also witnessed the NPM model of practice in publicly funded

healthcare service delivery. In Malaysia, the medical equipment, food supplements,

etc. are contracted out (Knoon: 2003) and Total Quality Management (TQM) has

been initiated as well. Result-oriented management, privatization and downsizing

(Polidano: 1999) are a few examples of the NPM in developing nations.

In the Cambodian experience, contracting in the public health system was introduced

in order to ensure a greater focus on the achievement of measurable results in the

public system (McPake: 1995). In Cambodia, the system has brought in more

flexibility in the healthcare service provision by deploying private service providers

and NGOs in unapproachable areas. Several Latin American countries like Argentina,

Brazil, Chile, Colombia, Costa Rica and Mexico attempted similar ways to finance

and organize the delivery of health services to the poor (Abrantes: 199_9). In

Colombia, the reform process had an objective to increase the solidarity of the health

system by amalgamating public and social sub-sectors and to initiate contracting-in

the public health system.

In Bangladesh, the govemment practiced competitive bidding to identify providers of

Primary Health Center (PHC) services, which would be less costlier than contracting­

out ( Loevinsohn: 2002). A study conducted by Begum (200 I) on collaboration of

CJc)\ crnmcnt and NGOs in Bangl<ldcsh shows a positive impact and the O\'Crall finding

of the study indicates that the project has indeed added a new management style in the

delivery of public health services. It had significantly improved planning capabilities

of the receiving partners. Table 5 shows a broad classification of the NPM in

healthcare services.

Table 5: Contracting Arrangements in the Health Sector of

Developing Countries

Type of Service Covered Country/Region Involved Contract Non-clinical Laundry, cleaning, India, Malaysia, Sri Lanka, Zimbabwe, services security, Thailand, Jamaica

maintenance Lesotho, South Africa, Venezuela and billing and catering Zimbabwe.

Clinical services Acute care, Peru, Zimbabwe, El Salvador, Peru, ambulatory, Namibia, long tenn care, Cambodia, Bangladesh, South Africa (TB diagnostic and psychiatric care), India, Thailand (CT, laboratory and MRI) Malaysia (CT, X-ray), Nigeria, public health Mumbai (Vector control) and programmes Malaysia (CT, X-ray)

Whole hospital High technology China, Bolivia and India management diagnostic Leasing Diagnostic and Thailand and India

superspecialty care Joint Ventures Superspecialty care India, Columbia, Brazil and Peru

and telemedicine Single purpose Drug delivery, India delivery AIDS control agencies Programme (Autonomous bodies) Decentralization Rogi Kalyan Samiti India

(Patient Welfare Society)

Source: Developed from Batie: 1999; Bennan and Bossert: 2000; Bennett and Mills:

1998; McPake and Hongoro: 1995; Mills: 1990; Nandraj: 2000; and Venkat Raman

and Bijorkman: 2006.

It was in the 1 960s that the World Bank-funded projects in the African public health

system first coined the word 'Good Governance'. African countries implemented a

wide range of refom1s, aimed at overhauling the public service for greater

effectiveness, responsiveness and performance (Olowu: 2002). Quality improvement

activities in healthcare system focused on patient care in hospitals, disease prevention,

health promotion and care deployment at population level. Some African countries,

notably Ghana, Kenya, Zambia, South Africa, Malawi and Zimbabwe, started the

process of corporatizing their health systems (Mills: 1 997).

Autonomous Hospitals in Kenya

The Kanyatts National Hospital (KNH) was established during the 1 980s to facilitate

autonomization of individual facilities. Bennet and Muraleedhran (1998) cite that the

KNH had major control over its budgetary affairs. The pilot experiment results had

shown improved financial management, which had succeeded in improvement in

service delivery. Further, the system attracted highly qualifit?d and experienced

doctors. The clinical management improved with a clear definition of roles and more

delegated responsibilities at the department levels. Furthermore, it has shown the

flexibility of decentralization of budget management and improvement in technical

efficiency. ln Zambia, a purchasing agency, the Central Board of Health, has been set

up at central levels, separated from the MOH but conceived as the implementing

agency of the ministry (Mills et al: 2002).

District Hospitals in South Africa (Contracting-out)

The district hospital in South Africa was built by the homeland govemment, which

was unahle to run it and this approached the private company to run a 170 and :Z50-

-!0

beded hospitals under contract. This hospital is located in the rural area. It offered a

nonnal range of secondary level care by using general medical officers employed by

the state. Mills, et. Al., study (1997) shows that the private sector is indeed capable of

providing district hospital care more efficiently than the public sector, with focus on

control of staff and costs to ensure greater productivity.

Countries including Ghana, Uganda, Tanzania, Kenya and Zambia, received

substantial donor support to implement the doctrines of the NPM in public-funded

hcalthcare service provision. There was added emphasis on tax refonns, civil service

refonns, modernization of public system, regulation of the private sector and

economic management, and the creation of autonomous agencies to strengthen social

welfare policies. Most importantly, the refonn process reflected in the fonn of social

marketing, accreditation, franchising and contracting (Mills, et. al., 2002). In Ghana, a

little progress was achieved through contracting-out.

District Hospital Care in Zimbabwe (Contracting-out)

Mills, et. al., ( 1997) highlight the fact that the government provided 100 per cent

salary grant for the approved staff, 80 per cent for the recurrent expenditure and 100

per cent grant for approved infrastructure development projects. Overall, the

government covers about 90 percent of mission institutions recurrent expenditure. As

a result, the mission institution has to provide curative and preventive services, and

user charge was also introduced. The cost analysis of this case shows that consistently

in the two-govemment hospitals were costlier than the mission institution. The results

show that the hospital performance improved and especially antenatal coverage was

higher for the mission hPspitals. Also the mission hospital played a complementary

-ll

role to the government. A particular standard of clinical service provided by a mining

hospital in Zimbabwe, under contract from the Ministry of Public Health indicated

that the prices charged to the government by the mining hospital was comparable to

the costs of government run public hospitals, but the quality of care at the Mining

hospital was considerably higher.

According to Abramson (2001 ), while modernizing the public health system,

contracting was used as a first step to improve coverage, quality and efficiency in

Costa Rica. The role of the public sector was considered in terms of setting up

perfonnance objectives and monitoring. Two large-scale projects in Senegal and

Madagascar were based on community nutrition programme and provided alternatives

to the contracting-out services in rural and in urban areas. Both the projects were

contracted for service delivery and combining private administration with public

finance. There are also examples of outsourcing of non-clinical and clinical services

in hospital including preventive services such as pre-natal care and baby clinics

provided by missionary health centers and hospitals, in the name of modernizing the

existing public health system (Marek: 1999). These focused on the development of

information system and efficient use ofhuman resources.

In Africa, the government workers were on the payroll even though they had not been

present in the office for a long duration. An enquiry revealed that several hundreds of

these civil service ghost workers had died. Yet, someone was still receiving and

cashing on their payroll cheques. In southern Asian countries, it was found that many

officials were not in the office. In Latin American countries, there was huge overlap

and possible duplication of functions among health workers. The NPM proposed to

address the above-mentioned issues in the form of civil service refonn, including

performance based pay and promotions. Public Personnel Performance Management

(PPPM) is a process that engages both employees and managers in an interactive

process to identify perfonnance goals, criteria of accountability and developmental

actions to improve skills and performance in the future. PPM reflects business-like

practices because it rewards performance, responsibility and accountability of

employees and line managers with consequences and incentives.

Over the past three decades, criticisms about government performance have surfaced

across the world from different political quarters. Critics have alleged that

governments are too large, too costly, over bureaucratic, and failing in the provision

of either the quantity or quality of services deserved by the taxpaying public (Jones:

2003).

In order to reduce over bureaucratization, management over load; it is expected to

provide cheaper service, avoid duplication of work, provide better quality of services,

obtain the latest equipment and encourage stakeholders participation in the public

services delivery through private or NGO participation. There ;1re a few studies that

show the positive outcome of the reforms in management aspects, especially efficient

management practice, but in service delivery, the problems of equity and

sustainability still prevail.

Malaney (2000) asserts that combining government financing with private provision

to help market system could promote etliciency. Since 1990s, India has also

witnessed enormous reform strategies in the public hcalthcare service delivery. Box 1

exhibits vanous doctrines of the NPM practice m the public healthcare delivery

system of India.

Indian initiatives

Box 1: India- Some Initiatives

States Nature of Practice

Andhra Pradesh Outsourcing non-clinical serv1ces, PPP in Revised National TB

Control Programme (RNTCP) and autonomous organizations

(APVVP).

Gujarat

Himachal

Pradesh

Karnataka

Kerala

Madhya Pradesh

Maharastra

Delhi

Rajasthan

Tamil Nadu

Tripura

West Bengal

Management of community health center by NGOs, management of

PHC by NGOs, Chiranjevi Yojana and social marketing.

Hospital autonomy and contracting-out (diet, scavenging and

laundry).

Management of PHCs by NGOs, telemedicine, health insurance for

farmers, outsourcing and Joint venture.

Modernizing Government Programme (MGP).

Rogi Kalyan Samiti (RKS).

Contracting-out catering services (KEM Hospital m Govandi and

Kandivili).

Contracting-out non-clinical services; lease and joint ventures.

Contracting-out non clinical services (CT/MRI scan), creation of

medical relief society, creation of lifeline fluid stores and

agencification.

Contracting-out (diet, catering, laundry, security, and lnfonnatiou,

Education and Communication (IEC); creation of autonomous bodies

for greater financial flexibility, functional autonomy and to speed up

implementation; Industry and PHC collaborative initiatives and

outsourcing ambulatory care.

Hospital autonomy. Contracting-out (maintenance service).

Contracting-out (Non-clinical services), telemedicine and

outsourcing of mobile health clinic.

Source: Developed fi·om Ministry of Health and family Welfare, GO!: 2009,

EPOS: 2000, Venkat Raman and Bijorkman: 200g; Sigamani: 2005, Muraleedhran:

1995, GOI: 2005; Nayar: 2004.

Andhra Pradesh Vaidya Vidhan Parishad (APVVP): Andra Pradesh

The APVVP was formed in 1986 in order to manage the secondary level hospitals

with the aim to raise revenue through user fees. APVVP's major objective is to ensure "

efficiency, patient satisfaction, financial sustainability and to improve the quality of

healthcare. It was created due to lack of funds and declining standards in the

government hospital services. APVVP' s role is to grant financial and administrative

autonomy to the secondary hospitals. The autonomy to the hospitals was aimed at

reducing the financial burden on the government through efficient use of existing

resources and mobilizing additional resources. As a result, it appears to have achieved

considerable improvement in the funding of public hospitals at the secondary level

(Narayana: 2003). This system is also referred to as having flexible manpower policy.

The Modernizing Government Programme (MGP): Kerala

The MGP is a loan package of Asian Development Bank (ADB) to Kerala. It has five

components- ensuring a level of basic public services to the poor, building ail

enabling environment for growth, achieving fiscal sustainability and fiscal targets

agreed on with the central government, enhancing effectives and efficiency on core

government functions, and building on decentralization for efficient and etTcctive

access to local self government (Nayar: 2004). Nayar argues that the MGP is a nco-

liberal developmental strategy, and it is largely irrelevant in the state of Kerala with

respect to the social and economical conditions. He concludes that it is a near total

deviation hom the earlier administrative principles b:1scd on equity.

Bombay

In Bombay, hospitals catering serv1ces offered by privately contracted compames

appeared to offer better value for money (Mills: 1997, 1998). To improve the

performance of public hospitals, increased autonomy and improvement in the

allocative efficiency of government health spending are some of the highlighted areas

of modernizing public health system in India.

Tamil Nadu

India is an example of the public integrated model ofhealthcare in which services are

financed through general taxation. In India, the NPM model of intervention in

healthcare began in the early 1990s, and market-based refonns were introduced in

public healthcare service provision. For example, many state governments introduced

a diverse kind of reform process in the public healthcare system, such as government

of Tamil Nadu introduced PPP in clinical and non- clinical services, outsourcing of

mobile clinic and ambulance service, agencification and PPM in national health

programmes. All the changes were introduced to improve the current health system by

ensuring quality medical care services to the poor patients.

There are several attempts by the government of Tamil Nadu to further develop the

health infrastructure through investment in the construction of PHCs or by extending

hours of certain PHCs. It seems to provide a quality of service based on the ability of

the health system to serve the needs of the population. In public health system, there

is a great need for an assessment of utilization pattern of the public and private

healthcarc provision in the state. An efficient public healthcarc delivery system is an

I

essential tool to serve the poor, especially, when one third of the population is well

below the subsistence level.

Basically, there are three major reasons for the sub-optimal functioning of the public

healthcare system in Tamil Nadu. Firstly, the system itself is imperfect and does not

-

fit into the desired normative framework (GOI: 1997). For instance, the actual

number of Community Health Centers (CHC) falls short of the required number by

81.1 per cent and the extent of deviation is such that each CH C in the state serves a

much higher proportion (5.5 times) of population than its own capacity would allow

(a CHC is meant to serve 100,000 population). Table 6 exhibits the manpower

requirements in rural PHCs in India.

Table 6: Manpower Requirement in Rural Primary Healthcare Institutions in India

Category of Manpow·er Requirement In Position Number

for Census 30June 2000 Sanctioned

1991

Specialists at CHCs 22348 3741 6579

Doctors at PHCs 22349 25506 29702

Health Educators 22349 5508 6534

Pharmacists 27936 21077 22871

Lab Assistants 27936 12709 15865

X-ray Technicians 5587 1768 2137

Nurses/ Midwife 61548 17673 22672

Health Assistants- Male 22349 22265 26427

Health Assistants- 22349 19426 22479

Female

Health Workers- Male 134108 73327 87504 -------

Health Workers- 156457 134086 144012

Female

Posts

Needed

(Gap)

18607

3157*

16841

6859

15227

3819

43785

84

2923

60781

22371

- j ____ . ··------ . _! ______ -···· - ----- ____ L_ ·----------- - .. -----

--17

I . .J

Source: Developed from GOI: 2008. *indicates surplus and has not been added to Gap

Secondly, the existing public healthcare units lack certain essential infrastructure

facilities. Nearly 40 per cent of the sub-centers do not have a proper building and

about 5000 (out of8681) ofthem are without male health workers. Similarly, 58.6 per

cent of the Primary Health Centers (PHC) do not have laboratory technicians. The

supply of materials is based on the availability of resources. than on any demand

assessment. The level of inadequacy in the state is estimated to be in the range of

0.8-48.8 (World Bank: 1999 and 2005).

Thirdly, there is no optimum balance in the use of resources and the use of manpower.

The share of manpower in the total healthcare expenditure in the state has increased

from 51.6 per cent in 1975-78 to 63.0 per cent in 1985-88. As against this, certain

facilities remain idle, either due to lack of complementary inputs or due to lack of

maintenance. An imperfect system induces selective over-utilization of some centers

and other facilities, ultimately resulting in crowding, poor quality, corruption and

nepotism at the centers.

Resource shortage, on the other hand, creates idle capacity in the form of unused

buildings and underused manpower and machinery. Unbalanced use of resources

excludes a specific sub-group of population from using the services. As a result,

patients either have to pay repeated visits to the healthcare centers or are forced to

seek care from the private sector.

As large amount of resources are required for scaling up public investment in health

sector, some suggest the need to look at several options to generate funds (Bajpai and

Goyal: 2005). In India, GDP allocation to healthcare still remains minimal as

compared to other developing countries. Between 1951 to 2007 the GDP allocations

to healthcare in India sharply declined as is indicated in Table 7. There are two main

reasons for this problem; the most important is insufficiency of resources and political

and administrative corruption, which led to poor policymaking capacity or policies

based on political ideology that did not consider the needs of the community.

Table 7: Government Spending on Health (Pattern of Public Investment in

Health as a Proportion Percentage of the Total Plan Investment)

Plan & Period GDP Allocations to Healthcare

Allocations (%)

First Plan 1951-1956 3.3

Second Plan1956-1961 3.0

Third Plan1961-1966 2.6

Annual Plan1966-1969 2.1

Fourth Plan1969-1974 2.1

Fifth Planl974-1979 1.9 c----

Annual plan1979-1980 1.8

Sixth Planl980-I985 1.8

Seventh Plan1985-1990 1.7

Annual Planl990-1992 1.6

Eighth plan 1992-1997 1.7

Ninth Planl997-2002 1.3

Tenth Plan 2002- 2007 0.9

Eleventh Plan 2007-2012 I (Appr.) --

Developed from Nayar: 199S

._f l)

Table 7 shows that the public health expenditure in India has declined from 1.3 per

cent of GDP in 1990 to 0.9 per cent in 2002. The significance of the above table is

that the government spending on health is declining and social sector is being

de-promoted since 1990s. Overall health spending in India is estimated at 4.5 per cent

of the GDP, which is below the average of 5.6 per cent in low and middle-income

countries. Public spending on health in India is 0.9 percent of the GDP, which ranks

among the lowest in the world. Out-of-pocket private spending dominates, with 82 per

cent of all health spending from private sources. And also National Rural Health

Mission 2005 (NRHM) ensured certain doctrines of the NPM in public healthcare

service delivery including outsourcing of non-clinical services, PPP, social marketing,

decentralization (GOI: 2005 and 2007).

Hospitalization frequently results in financial catastrophe and only about 10 per cent

of the Indian population mostly in the formal sector and among government

employees has some form of health insurance. The gap in public financing for health

is widening between rich and poor states, also widening the gap in outcomes. Bajpai

and Sangetha ( 1995) highlighted that the very low level of public health expenditure

remain a root cause of the poor performance of the health sector in India.

Tamil Nadu is one of the front-runner states implementing the New Economic Policy

(NEP) of 1991, concentrating its efforts on industrial sector while neglecting the

social sector, with an overall aim of enhancing the economic growth. The state is

trying hard to inject certain refonn elements into the health sector. The main case

study (see Chapter V) shows TNMSC model of drug distribution to government

healthcare centers which is now done through a separate autonomous hody \vithin the

government. The health centers can now place the order directly with this body,

bypassing several other intermediaries, resulted in uninterrupted drug supply. In 2001,

the government also introduced user fee on certain services such as parking, visiting

patients during certain timings, etc. The whole approach is to enhance productivity

with equity in the public system.

Research by a consortium of five UK institutions coordinated by the International

Development Department in the School of Public Policy, University of Birmingham,

explored the changing role of government in the health sector in Tamil Nadu. The

study report concludes that despite the lack of an overarching policy framework, the

pace of change in the Tamil Nadu healthcare sector was rapid. Further, it says that

reforn1 should strengthen, the future role of the government. Partly because of its

sheer size, India's healthcare system is very complex. Whilst government policy

assigns a significant role to the public sector, government has actually played a very

limited part in financing, service provision and regulation of health services.

In Tamil Nadu the private sector amounts to 73 per cent of qualified physicians and

57 p~r cent of hospitals. In addition, payment is often required for entry to 'free'

government healthcare facilities. Services appear to be provided more efficiently if

contracted out, but the absence of reliable regulatory checks means that standards and

quality of care remain patchy in private facilities (Varatharajan: 1 999). State

governments control the bulk of resources going to health and are also allowed much

discretion as to whether or not to adopt central policies.

51

In Tamil Nadu, the administration has forged ahead with reform in three areas. Firstly,

contracting-out of health services, previously provided by the state to private

organizations, is now fairly common though the total value of activities contracted-out

is small. Secondly, new laws have strengthened regulation of the private sector but

their implementation has faced substantial obstacles and the system is still not

effective. Finally, 'autonomous organizations' have been found receiving substantial

government support and performing tasks previously undertaken by the government,

but functioning, in fact as private entities.

There is conspicuous lack of staff accountability at all levels. For example, local level

health workers tend not to feel responsible to the communities they serve, but to

remote authorities at the state level. The growing concern to make the governments

more effective in achieving their overall policy goals has led to quite a broad based

refonn of government organizational structure. The services can be divided into two

types, namely, direct provision of services and indirect services. Under the direct

provision government undertakes the service in an efficient and equitable manner.

Contracting private providers for direct provision of services therefore needs

regulation.

The Tamil Nadu health system project extent supports to improvement of hospital

buildings, repair of buildings and provision of new buildings, provision of equipment

and hospital supplies, provision of ambulances, provision of training to the doctors

and paramedical staff, and improvement of management of the hospitals. The

hospitals to be included in the project \Vere 26 districts headquarter hospitals and 244

taluk and non-taluk hospitals. In Tamil Nadu. as a part of the NPM reform. a number

of changes were brought out with regard to the role of government, including

contracting-out, the establishment of an autonomous organization and strengthening

of regulatory mechanisms.

Implications of NPM in Healthcare Services

The following are some of the implications of the NPM practice in health care services

provisions. The most important change that has taken place in the public health

system is the outsourcing of clinical and non-clinical services; and downsizing of

medical and paramedical staff. As part of the unit cost calculation, the overall cost has

gone up, especially the administrative cost, and later this cost is transferred to the

patients. Mostly, many countries have established autonomous organizations to

manage public health service provision.

Too much emphasis on result-based perfonnance is likely to create a mentality in

which the short-tenn delivery of outputs may be achieved at the expense of long-tenn

outcomes. Market type mechanisms, such as outsourcing and partnerships, may

threaten public accountability because of the split that is created between the

purchaser and providers of services, and public is confused regarding who is actually

responsible for service delivery. The NPM emphasizes perfom1ance measurement, but

many public sector outputs or outcomes are not suitable for precise and accurate

measurement.

The NPM reform model effected cost cutting which has led to a decline in the rate of

social sector expenditure. ln the case of Zimbabwe, user fees had zero impact upon

the quality or healthcare. Transp01i and administrative costs are Vt'ry high. \vhich are

later transferred to the patients. 'The ability to pay' concept was introduced in

healthcare service provision. ln reality, the economically less privileged groups are

experiencing the greatest disease burden. A case study from Georgia finds that after

the introduction of rapid privatization and price liberalization, there was no

improvement in terms of quality, efficiency and access to the healthcare system as a

whole (Collins: 2003).

Evidence from Chile and Colombia shows that the neo-liberal reform resulted in

increasing user dissatisfaction and decreasing quality of care (Homedes and U gade:

2005). Also, Rangan's (2004) study on TB control in rural India mentioned the

pa1iicipation of private medical practioners in treating TB patients by providing easy

access, reducing waiting time and facilitating availability of doctors and drugs. As a

result, this study shows that the partnership contributed to the detection of 30 per cent

of the cases in the TB unit over a five-month period. Therefore, the PPM interventions

in the TB control programme have showed positive result.

It is visible that an autonomous agency is a strategy of the NPM for restructuring

government by separating policy formulation and policy implementation. The

autonomous agency delivers public services directly by making them more effective,

efficient, accountable and performance oriented services. It involves transfer of

activities from the government to the agency. It is now clear that the concept of

'autonomy" 1s legally independent but financially dependent on the ministry or

department. lt operates a separate bank account and has separate financial rules and

procedures.

There are studies which have explored the different components of the NPM practice,

but only little empirical evidence of the implications of the NPM on healthcare

service provision is available. In India, non-clinical services like dietary services,

laundry, etc. have been contracted-out to private parties in Rajasthan, Maharashtra,

Tamil Nadu, etc. Autonomous bodies like Medicare Relief Societies (Rajasthan),

Rogi Kalyan Samitis (Madhya Pradesh), Andhra Pradesh Vaidya Vidhana Parishad

APVVP (Andhra Pradesh), have been formed, giving public hospitals greater control

to Improve their efficiency and power to create their own resources (user fees,

donations, etc).

Tamil Nadu has set up autonomous -bodies like Tamil Nadu Medical Services

Corporation Limited (TNMSC), Tamil Nadu AIDS Control Society (TNACS) and

Tamil Nadu Blindness Control Society (TNBCS) to work closely with the private

sectors/NGOs and be free of bureaucratic clutches. Industries and NGOs have been

requested to adopt PHCs and other health facility institutions in Gujarat, Andhra

Pradesh and Tamil Nadu.

In India, those Below the Poverty Line (BPL) continue to rely heavily on the public

health sector for public healthcare service delivery i.e. 93 per cent of immunization

needs, 74 per cent of antenatal care, 66 per cent of in-patient bed days, and 63 per cent

of delivery-related in-patient bed days (Mahal: 2001 ). Access to healthcare is

increasingly becoming difficult, especially for the poor, due to the concept of value

for money in the public system.

It is very difficult to measure output and immediate results in the social sector,

especially in healthcare. The private sector can complement public health provision

and provide some type of services better, but it cannot lead the health sector in the

direction that is likely to maximize its services for the health of the population.

According to Koivusalo (200 1 ), the main intention of the reform had always been to

provide greater opportunities for the private sector rather than to improve the services.

High cost of management has tended to increase the overall unit costs, which are

being transferred to the patients.

In Bombay, the quality of services has become poor after they have been contracted

out despite introduction of user charges and quantitative and qualitative increase in

transportation cost (WHO: 2001 ). The NPM stressed on measuring efficiency and

quality in public service, but in real, it is difficult to quantify the result, especially in

healthcare, in the developing nations since there are many factors determining

healthcare, which include socio, economic and environmental factors. In countries

like India, vulnerability and living conditions make the poor more ill and illness

makes them even poorer.

In conclusion, the NPM is neither all bad nor all good for public healthcare service

provision. If properly, managed the NPM can lead to important health gains (Collins:

2003). McPake and Mills (2000) highlighted that the private sector can complement

public health provision and provide some type of services better; it cannot lead the

health sector in a direction that is likely to maximize its contribution to the health of

the population. As mentioned by Prabhu ( 1998). "The preference of the patient is to

visit the hospitai/PHC at the taluka HQs \\here more than one doctor was available so

that the patient is sure of getting some treatment." Jt is significant to provide the

essential facilities, including human resources, at the health facility.

Thus, it can be said that the characteristics and operational aspects of the autonomous

organizations are a part of the framework of the NPM. Therefore, we have

conceptualized that the TNMSC model is a part of the broader framework and one of

the strategies of the NPM. With this conceptual framework, we have explored the

evidence based practice of the NPM in healthcare services provision through a case

study of drug management in the Tamil Nadu public health service delivery. In the

following chapter, we shall look into the research methodology adopted for this study.

57