The role of purchasing in hospital performance.

In this article the authors review the core messages on getting value for public money spent on healthcare presented in a recent World Bank publication, Spending Wisely: Buying Health Services for the Poor, edited by the same authors. The authors discuss how interest of the poor would often be better served through a fundamental shift in the way public money is spent on the health services--notably by moving away from passive budgeting within the public sector towards strategic purchasing or contracting of services from non-governmental providers. The shift from hiring staff in the public sector and producing services "in house" to strategic purchasing of non governmental providers--outsourcing--has been at the centre of a lively debate on collective financing of healthcare during recent years. Its underlying premise is that it is necessary to separate the functions of financing from the production services to improve performance and accountability. Promoting good health and confronting disease challenges of course requires action across a broad range of activities in the health system. This includes improvements in the policymaking and stewardship role of governments, better access to human resources, drugs, medical equipment and consumables, and a greater engagement of both public and private providers of services. Managing scarce resources and healthcare effectively and efficiently in the hospital sector through more strategic purchasing is an important part of this story. This is the second in series of articles on the economics of hospital care. In the first article on the "Economics of organizational reform" the authors, Alexander S. Preker and April Harding, examined the role of economic incentives to good governance and performance in the hospital sector. A more detailed discussion on this topic can be found in the World Bank publication Innovations in Health Care: The Corporatization of Public Hospitals, 2003, edited by the same authors.