Budgeting For Efficient Health Delivery

BUDGETING FOR EFFICIENT HEALTH DELIVERY. A CASE STUDY ON ZAMBIA’S HEALTH REFORMS

By: Bernard N Phiri Submitted in partial fulfillment of the requirement for the degree MASTER IN BUSINESS ADMINISTRATION School of business UNIVERSITY OF INDIANAPOLIS 1400 Hanna Avenue Indianapolis IN 46227 USA

Supervisor: Prof. Greg Reinhardt 2006

Foreword

The Zambian public health sector is in the process of massive reforms. New policies have been defined and many new initiatives have successfully developed. A macro-economic frame has been developed by the ministry of health within the policies of government are being delivered. The difficulty managers’ face in this transformation process is having a Budgeting tool to measure change. The budgeting system the government inherited does not account for delivery and impact. The existing system only accounts for expenditure according to standard items as defined by historical budgets. As a result actual impact on the quality of life of people, improved health, more children educated, is often not measured in relation to expenditure. “Budgeting for efficient health delivery-Zambia’s health reforms” proposes a new frame work for budgeting and financial planning which could enable Government deliver health services to people in line with the philosophy and spirit of health reforms. This philosophy defines the principles of the new public service as value for money. Moreover, the system is extremely complex and budgetary reform cannot be done easily or quickly.

DECLARATION BY CANDIDATE “I hereby declare that the dissertation submitted for the degree; Master of Business of Administration at the University of Indianapolis is my own original work and has not previously been submitted to any other institution of higher learning and further declares that all sources cited or quoted are indicated and acknowledged by means of a comprehensive list of references.”

Bernard N Phiri

Copyright© University of Indianapolis 2006

DEDICATION I dedicate this study to my son Chinoya, who showed a lot of interest and kept quiet when I constantly sat and typed the manuscript. To my late father who religiously believed in education and taught me the connotation “education is the key that opens doors” I wish you were here to see me, you would have been proud of me.

ACKNOWLEDGEMENTS I would like to acknowledge my appreciation and gratitude for the contributions made towards this study to the following people: ○

I am deeply indebted to my Supervisor, Prof.G Reinhardt for his tireless and positive guidance throughout the project. His guidance was invaluable.

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Financial support of the Diversity grant, George Bluefield Institute;

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Pell grant for the financial support,

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Ministry of Health HQ staff, too numerous to mention for their support and providing some material and information.

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Dr.B Wilson for her critique on the draft material.

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Dr.Everisto Mpabalwani at University Teaching Hospital

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The UINDY staff, for their encouragement and support during presentation,

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Lastly to all who helped in putting this research study together, I cannot thank you enough.

ABSTRACT The study seeks to find out if budgeting in health centers would contribute and lead to delivery of efficient health services in relation to the new health reforms being implemented. It was hypothesized that budgeting could lead to efficient health delivery especially in our rural health centers. The research methodology had a sampling frame of entire health institutions in the country. The sample size included senior health management officials, middle health management officials, and employees at lower levels. The sampling procedure used was purposive judgmental sampling and the instruments used to collect data were questionnaires, personal interviews, as primary source and reports operational guidelines for health workers and other manuals as secondary data. However, the major findings were that budgeting at individual rural centers was nonexistent. The health services delivery has been so inefficient a concern to many stakeholders including donors. The analysis was mainly qualitative based on findings and some data was also analyzed quantitatively in form of overall information gathered. It was concluded that many rural health centers do not budget for their medical requirements, including drugs, equipment, and human personnel resource. This led to numerous problems of under or over delivery in these health institutions. The research recommends that budgeting be introduced in health centers to improve the delivery of health service in the institutions.

CHAPTER ONE INTRODUCTION Budgeting maybe simply defined as a plan of how expected income will be expended over a number of days or years to meet intended objectives or goals. Professor Iraj Abedian in his “Performance Management” defines budgeting as the compiling of a plan for acquiring resources and deploying them in economically in pursuit of policy objectives. Zambia spends a large portion of its GDP in health sector as compared to most Sub-Sahara developing nations and yet it has poorer health status. Life expectancy is in the lower 37% (Zambia Daily Mail dated 29/09/99 GRZ/UNICEF Midterm review report). In the past, priorities have not been reflected in budgets nor have they been put into operation to meet the real needs of the people concerned. Resources including money, people, facilities, transport, drugs, the private sector and NGOs have not been used efficiently, economically, and effectively and have certainly not produced “value for money” compared to the amount of money spent for the service. Because of the complexity of the service being rendered, budgeting should be implemented together with appraisals from the health centers. BACKGROUND The Zambian Government and its cooperating partners introduced health reforms in 1994.This meant that new delivery systems, procurement of drugs, were to be developed with the new policy of reforms. In the previous systems of health delivery services, individual health centers or hospitals used what they called requisitions to order drugs and their requirements directly through a quasi-government company called Medical Stores Limited. The requisitions would then be forwarded to the ministry of health for payment. This, according to government (NORAD Consultancy Health Reforms Report ,1992) created a huge expenditure as certain requirements or drugs claimed were not authentic and perhaps not needed, in the end most of the drugs gathered dust and expired on the shelves at the health centers, as fewer and fewer patients would require those medicines. Although this research will not dwell on the macro-economic activities that may have led to the decline and acute shortages of drugs, it will be important to mention them in a general sense as this had a direct effect on health delivery in Zambia.

Budgeting system is very broadly defined in this research to cover the role players involved in public resource allocation plays. It concerns the structure of the decision making process around the acquisition, allocation and management of public resources. The health reforms introduced what is known as Extended Drug Programme, (EDP). Essential drug kits (pre-packed drugs) are distributed informally to all health centers from the Central Board of Health (CBOH) regardless of their needs or geographical location. That may explain the lapse of time it takes in times of epidemics like cholera as some drugs may not be readily available in the kits. On 29th August, 1994(Sunday Daily Mail) the then Minister of Health Hon.M.C.Sata introduced the health scheme, a token payment of K2,500 patients were asked to pay quarterly as a contribution to help pay for medication but this has not helped the situation either.

STATEMENT OF THE PROBLEM Although the government adopted the health reforms programme, many agree that it has not addressed the needs of the people. The research revealed that in the absence of budgeting by concerned health centers people are still dying of curable illnesses like malaria. Hence the need for the researcher to establish whether needs assessment budgeting would contribute to efficient health delivery.

HYPOTHESIS The researcher hypothesized that needs assessment budgeting could lead to efficient health delivery. Variable = Budgeting Dependant Variable =Efficient health delivery OBJECTIVE OF THE STUDY 1. To find out whether budgeting as a tool of measure of (KPI) Key performance Indicator was being done in the delivery of health services. 2. To establish whether performance of health services in regard to health reforms were successful. 3. To establish whether needs assessment could be used in the delivery of health services. 4. Whether recipients or stakeholders were getting value for money services in the health delivery.

SIGNIFICANCE OF THE STUDY I) This research is a partial fulfillment of an award of a degree: Master of Business Administration (MBA) in the school of business at the University of Indianapolis. ii) The research will help future students who may research on a similar topic. iii) The recommendations may be of interest to the Public Health Sector to improve the delivery of health services. iv) Financial managers, Members of parliament and Ministers will also find the research relevant to task of transforming the health sector and improving the status of the people of Zambia. v) It may help the lecturing staff to emphasize the need for budgeting with “needs assessment approach”

RESEARCH METHODOLOGY Sample Frame: The entire health institutions in Zambia. Sample Size: 10 Health centers were chosen,

A.

6 managers from 3 clinics in Eastern Province, namely Kalichero Health Center, Msoro Rural Health Center, Nyimba Rural Health Center.

B. namely;

8 Managers from 4 clinics in the Southern Province Mazabuka rural HealthCenter, Nakambala Ruaral Health Center, Kalomo Health Center, Monze Health Center.

C

6 Managers from 3 clinics in Luapula Province, namely Chifunabuli, Samfya, and

Chembe. 2 managers from University teaching Hospital SAMPLING METHOD The sampling method used was purposive judgmental sampling because data from the right authority had to be collected, e.g. Clinical managers in Charge of clinics on information concerning budgeting for their medical requirements e.g., drugs, and medical equipment etc. Instruments used to collect primary data were questionnaires (22). More secondary data was collected by going through various publications and other medical periodicals and consultancy reports.

CHAPTER TWO LITERATURE REVIEW A frame work for policy intervention This chapter examines the role of a budget and its explicit objectives as well as some of the fundamental requisites for good budget. According to Abedian, Iraj and M.Biggs in their paper “Reforming South Africa’s budget process: some lessons from international experience,” Discussion paper no. 5 at university of Cape Town. They classify the budget in three concepts as; 1. The financial planning system 2. The financial management system 3. The budget process A budget is a plan for allocation of resources. The financial management system is more concerned with implementing the budget. The budget process refers to the different phases in compiling a budget, their sequence and different roles players involved at each stage. From each department’s view point however, a budget is a management tool. This holds true in many organizations it be private or public sector. The common

feature however of all organizations is that resources available are never sufficient to permit the achievement of every desirable aim. In other words, there is always a budget constraint. Profit maximization in the private firm as well as the provision of health services by government to the needy has to be achieved within the frame work of the actual and expected budget constraints. The effect of not budgeting cannot be overemphasized. It is stating the obvious that due to the imperatives of new dispensation as highlighted in the government health reform policy papers within which public service delivery is to take place is changing. The key aspects that are particularly relevant are the new constitutional distribution of functions among spheres of government, intergovernmental finance and governance structure and the budget process reform within the thrust of broader public sector reform.

The reforms established three distinctive but inter related spheres of government: 1. National 2. Provincial 3. Local districts Health services have been designed as a concurrent activity on national and provincial sphere of government.”Accordingly, several functions that used to be performed at national level have been devalued to the provincials. Therefore the district health services, general hospital services and maintenance of clinics, community health centers and districts hospitals are now reflected on provincial departmental heads,”Prof. Nkandu Luo then Minister of health observed during a seminar on health reforms. she went on to add that “the ministry of health was reviewing national needs for drugs and it will soon be presenting a policy paper on needs assessment to the ministry of health on the procurement of drugs.” she further noted that , “ it was important for all medical practitioners responsible for drugs to acquire knowledge on their management. While she admitted that there was a problem in the management of drugs in most health institutions and that a course in Kabwe was started to help equip all concerned practitioners with skills.

She observed that the budget for drugs was very high and there should be accountability for them. The decentralization of governance means each sphere of government has to establish, enhance and improve its delivery service capacity. Hospitals are complex organizations. In Zambian context they are inevitably situated along the line of rail in cities and towns and have over centralized management, resulting in a number of inefficiencies particularly in financial, planning and control. Essentially the hospital system does not adequately meet the health needs of the Zambian population. At present, the primary emphasis is on tight procedure control of finances, which entails monitoring to ensure money was being used for authorized purposes only, and not misappropriated or misapplied. But while the overriding concern is to be able to account for each Kwacha spent, scant attention is paid to whether Value for money is obtained from every Kwacha spent. Financial control, therefore, concentrates on procedural control whether authorization for spending had complied with the procedures prescribed by the treasury. For instance, the Auditor General would find no irregularities in building of residence at “the Mulungushi Rock of Authority” which will only be used once in every four years during some UNIP congress so long as the correct procedures for authorizing this expenditure were followed .If this is not a waste of tax payer’s money then we need to re-examine our accounting roles. In a performance budgeting system, financial control is still important, but instead of focusing on compliance with authorization procedures before spending, the main emphasis is on accounting for the effectiveness of every kwacha spent. It would be important to control outputs (performance control) than (financial resources) inputs. This researcher observed that presently, public sector managers “administer” their budgets; they do not “manage” them. Personnel cost, which often constitute a larger percentage in the (yellow books), departmental and provincial budgets, are determined in the department of Public Service Commission. Accommodation appeared on the department of works and supply (until the sale of government houses) vote. Tendering and procurement s are notoriously slow and cumbersome. in decentralized systems globally, the current trend is to allow managers latitude to spend within their budgets allocated to them in order to acquire inputs they deem appropriate for producing the outputs that are of managerial objectives .you will note that financial control is still an important feature in this system. On the other hand there is often insufficient political input in the budget process which degenerates into a technical process where civil servants take allocation decisions by default. On the other hand there is often excessive ministerial and political interference and interventions in the day to day operation of departments once budgets have been drawn up. Budgeting is inevitably about making choices and dealing with trade-offs. this is true as much for a family budget as for government budget. If resources were unlimited, budgeting and resource allocation would have been unnecessary.

However monetary resources are invariably limited, hence options have to be weighed up and hard decisions need be made.

FINDINGS The following are some of the findings based on questionnaires prepared for health management officers. 1. 100% of rural health personnel said they do not budget for their

medical supply needs.

2. 82.5% said they would like individually budget for their medical supply

3. 4.

5. 6.

needs. 19.6% were not sure if budgeting individually as a clinic would improve the efficient running of their centers. It was revealed in the research that 100% respondents felt the medical scheme had not assisted in alleviating the drugs shortages as funds were not directly applied to the procurement of drugs. 96% respondents acknowledged that budgeting would definitely improve health delivery. 1005 respondents felt that clinics were not adequately stocked with drugs.97 5 felt that the system of drug kit should be reviewed to improve the general problem of drug shortages.