Contracts can be used to govern the relationship between the public and the private sectors where the private sector delivers services on behalf of the state. On occasion, this allows the state to offer services such as basic medical provision where public sector provision does not reach. Researchers examine the case of primary care in South Africa where such contracts are being utilised. They argue that understanding the relationship between client and contractor requires a thorough understanding of some of the factors that govern the relationship, such as the role played by individual motivation.

In some rural parts of South Africa, primary care is provided by private doctors contracted by the state. A better understanding of the factors that govern this relationship can help the development and implementation of appropriate policy for managing these contracts. Neo-classical approaches assume that an impersonal process takes place between the contracting parties, with a clear set of rules carefully set out that become the main governing tool of the relationship. In contrast, a relational model of analysis sees the contract as a tool designed to harmonise conflict between two contending parties and one in which preserving the relationship between client and contractor is paramount. As a result, the relational model takes account of the range of non-financial motivational factors that might shape the relationship.

The study, by the London School of Hygiene and Tropical Medicine, examined the contractual relationships of 11 practices in two different South African provinces. 31 semi-structured interviews took place with purchasers, providers, government officials and other relevant stakeholders. The study also examined issues related to the contracts by analysing specific documentation like contracts, monitoring reports and correspondence between the purchasing authorities and the health providers. The research found that:

• The contracts governing the relationship between purchasers and providers were incomplete and open to interpretation. Also, monitoring of provision was found to be very limited.
• Contract sanctions specified to control provision were rarely used due to the unwillingness of contractual parties to enter into disputes that may harm their long-term relationship.
• In the absence of formal controls, the principal element that governed the contractual relationship was not trust, as might be expected, but mutual dependence. Both provider and purchaser needed each other in order to fulfil a duty of health provision on the one hand and to secure a minimum income on the other.
• Where trust was an element that governed the relationship between purchaser and provider, it was based in a belief in the professional competence and ethical standards of behaviour of the providing doctors.

From these findings it appears that the relational model for explaining the contractual arrangements between purchaser and providers in South African health system offers a more valid explanation of this relationship. The study calls for:

• an acknowledgement of the possibility of more relationally controlled, or mutually dependent contracts in some settings
• a continued use of contracts as a means of securing medical services in under-served populations
• development of ways of controlling the contractual arrangements such as encouraging the development of professional standards and social responsibility among providers.

Source(s):
'Classical versus relational approaches to understanding controls on a contract with independent GPs in South Africa', Health Economics 12(12): 1005-1020, by N. Palmer and A. Mills, 2003
HINARI subscribers can access the full-text article here. Full document.

Funded by: UK Department for International Development

id21 Research Highlight: 20 May 2004

Further Information:
Natasha Palmer
Health Policy Unit
London School of Hygiene and Tropical Medicine
Keppel Street
London WC1E 7HT
UK

Tel: +44 (0) 20 7636 8636
Contact the contributor: Natasha.Palmer@lshtm.ac.uk

London School of Hygiene and Tropical Medicine, UK

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