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Privatization of Health Care Provision in a Transition Economy: Lessons From the Republic of Macedonia

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Publication Date: January 2000

Publisher(s): Pardee Rand Graduate School

Author(s): Robert Nordyke

Topic: Health (Health care planning)

Type: Report


The Republic of Macedonia is undertaking sweeping reforms of its health sector. Funded by a World Bank credit, the reform program seeks to improve the efficiency and quality of primary health care (PHC) by significantly strengthening the role of the market in health care provision. On the supply-side, one of the key HSTP proposals is to implement a capitation payment system for PHC physicians. By placing individual physicians on productivity-based contracts, these reforms will effectively privatize all PHC provision. In addition, the Ministry of Health is considering the sale of public PHC clinics to private groups, indicating the government's commitment to marketization of health care provision. Macedonia is in a unique position to develop a new role for the private sector in health care provision. The private provision of outpatient care was legalized soon after independence in 1991; private physicians now account for nearly 10% of all physicians and 22% of PHC physicians. If the reforms are fully realized, all PCH physicians -- over 40% of all physicians -- will be financially responsible for their clinical practices. This dissertation draws on the experience with the partial privatization 1991-1997 and offers significant lessons for the ongoing reforms. The author seeks to inform the reform debates on two levels, employing a dual analytic approach. First, the policy environments governing primary care, both currently and as proposed by the reforms are examined with respect to their ability to support the introduction of market forces in health care. Secondly, data from a survey of public and private PHC physicians is anlyzed in a novel production function framework to investigate how physician workload and resource decisions are influenced by the financial and regulatory incentives that they face. Together, these approaches yield a rich set of recommendations to improve the effectiveness and fairness of the introduction of market forces into health markets in a transition economy.