Publication: Applying the Decision Rights to a Case of Hospital Institutional Design
Loading...
Published
2001-11
ISSN
Date
2014-08-19
Author(s)
Editor(s)
Abstract
Corporatization, a hybrid between public sector ownership and privatization, is an organizational form that is increasingly being adopted in the social sectors. In the health sector, the high costs of public hospitals, new technological developments, changes in demand for primary and secondary health care, and efficiency considerations have necessitated shifts in organizational boundaries, leading to conversions in hospital ownership. In the past decade hospitals have been converted from public to nonprofit and from nonprofit to for-profit in industrial and developing countries alike. The debate around these conversions has centered mostly on the tradeoff between equity and efficiency involved in the shift from public to private provision of services. Eid argues that more important than this dichotomy is creating appropriate incentives and matching incentives with goals through institutional design. Because corporatization combines elements of both private and public ownership, it is difficult to design. Among the challenges is deciding where on the spectrum from a budgetary unit to a privatized enterprise a hospital should lie. Another challenge is aligning incentives-not just within the hospital but also between the hospital and the ministry of health. Eid draws on the decision rights approach to analyze how an innovative hospital in Lebanon, H�ital Dahr El-Bachek (HDB), corporatized itself and became the best in the public sector over a period of seven years. To study HDB's experience, she develops a decision rights analysis framework that tracks the formation, evolution, and dilution of decision rights. She finds that: There are important lessons from bottom-up, demand-driven institutional design that can inform the design of top-down, supply-driven institutions, such as laws and regulations. An understanding of mechanisms of risk sharing and high-powered incentives created from the bottom up can inform the design of corporatized organizations. Key to good design are decision rights complementarities that provide the most complete (and flexible) contract possible, regardless of where ownership lies. In designing systemwide institutions for corporatization, Eid argues, risk transfer is important in satisfying the two most important objectives of the reform. The first objective is establishing hard budget constraints to control sectoral costs. At HDB, the decision right to raise revenue through user fees was complemented by decision rights that created accountability and legal liability. Together, these decision rights kept spending within HDB's means-in contrast with international experience with corporatization, where budget deficits have been a perennial problem. However, the informality of the decision rights precluded the exercising of those created to design long-term financial policy, resulting in timid capital expenditure plans. The second important objective of corporatization is improving hospital performance, including providing better service at a low cost for the patient. Eid argues that high-powered incentives are key. Among the most interesting of HDB's decision rights allocations was the pairing of claimant and control rights to produce high-powered incentives for the director. Not surprisingly, the most successful examples of corporatization worldwide have experimented with incentive schemes for hospital managers that seek to provide high-powered incentives in this way.
Link to Data Set
Citation
“Eid, Florence. 2001. Applying the Decision Rights to a Case of Hospital Institutional Design. Policy Research Working Paper;No. 2726. © http://hdl.handle.net/10986/19422 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Rigging the Scores: Corruption through Scoring Rule Manipulation in Public Procurement Auctions(Washington, DC: World Bank, 2025-12-02)Public procurement is highly susceptible to corruption, especially in developing countries. Although open auctions are widely adopted to curb it, this paper finds that corruption remains prevalent even within this procurement format. Procurement officers can collaborate with firms to manipulate scoring rules, ensuring predetermined winners, while corrupt firms submit noncompetitive bids to meet minimum bidder requirements. Using extensive data from Chinese public procurement auctions, the paper introduces model-driven statistical tools to detect such corruption, identifying a corruption rate of 65 percent. A procurement expert audit survey confirms the tools’ reliability, with a 91 percent probability that experts recognize suspicious scoring rules when flagged. Firm-level analysis reveals that local, state-owned, and less productive firms are favored in corrupt auctions. Lastly, the paper explores policy implications. Analysis of the national anti-corruption campaign since 2012 suggests that general investigations may be insufficient to address deeply ingrained corrupt practices. Using counterfactuals based on an estimated structural model, the paper shows that implementing anonymous call-for-tender evaluations could improve social welfare by 10 percent by eliminating suspicious rules and encouraging broader participation.Publication Labor Demand in the Age of Generative AI: Early Evidence from the U.S. Job Posting Data(Washington, DC: World Bank, 2025-11-18)This paper examines the causal impact of generative artificial intelligence on U.S. labor demand using online job posting data. Exploiting ChatGPT’s release in November 2022 as an exogenous shock, the paper applies difference-in-differences and event study designs to estimate the job displacement effects of generative artificial intelligence. The identification strategy compares labor demand for occupations with high versus low artificial intelligence substitution vulnerability following ChatGPT’s launch, conditioning on similar generative artificial intelligence exposure levels to isolate substitution effects from complementary uses. The analysis uses 285 million job postings collected by Lightcast from the first quarter of 2018 to the second quarter of 2025Q2. The findings show that the number of postings for occupations with above-median artificial intelligence substitution scores fell by an average of 12 percent relative to those with below-median scores. The effect increased from 6 percent in the first year after the launch to 18 percent by the third year. Losses were particularly acute for entry-level positions that require neither advanced degrees (18 percent) nor extensive experience (20 percent), as well as those in administrative support (40 percent) and professional services (30 percent). Although generative artificial intelligence generates new occupations and enhances productivity, which may increase labor demand, early evidence suggests that some occupations may be less likely to be complemented by generative artificial intelligence than others.Publication Investment Policy Reforms and Foreign Direct Investment Inflows(Washington, DC: World Bank, 2025-12-01)Foreign direct investment has the potential to introduce much-needed capital and expertise in emerging and developing economies. To attract foreign direct investment, many countries have eased restrictions on foreign ownership in various sectors, reformed their institutions, and set up investment promotion agencies. Until the mid-2010s, Ethiopia remained one of the few countries that resisted this trend, with several stringent restrictions in place on foreign direct investment entry and operations in the country. This study employs a synthetic control method to examine patterns in foreign capital inflows following a series of investment policy reforms that were substantively introduced in the mid-2010s (circa 2015). The study offers evidence that investment policy reforms contributed to a significant foreign direct investment inflow in Ethiopia, compared to what would have occurred in the absence of these policies. An alternative strategy that conservatively specifies the donor country pool using an AI-assisted deep search technique changes the donor pool weighting matrix of the synthetic control method, but the estimated policy effects largely remain robust to this specification. The findings highlight the importance of targeted reforms in promoting foreign direct investment inflow in developing countries.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Hospital Governance and Incentive Design : The Case of Corporatized Public Hospitals in Lebanon(World Bank, Washington, DC, 2001-11)There are three potential levels of government activity in the health sector: regulation, finance, and direct provision of services, with the government owning and managing hospitals and primary care clinics. Eid focuses on service provision. In recent years corporatization has been introduced as an institutional design for public hospitals-as a means of improving efficiency and reducing transfers in a publicly owned, decentralized health system. Eid treats decentralization as a reallocation of decision rights to lower levels of the public sector. She shows how such a strategy creates new needs for monitoring and control of decentralized units. To improve the understanding of the role of governance and incentives in corporatized hospitals, Eid explores the design of corporate boards of public hospitals, the institutional linchpin of such systems. She shows how principal-agent theory, particularly the multitasking and common agency approaches, can provide a useful analytical lens in understanding hospital board design in the case of Lebanon. She also shows the implications of corporatization for health policy and management.Publication Hospital Sector Reform in Uzbekistan : A Policy Note(World Bank, Washington, DC, 2012-01)Since the mid-1990s, Uzbekistan has undergone reforms in the health sector focused on restructuring of primary health care in Uzbekistan as well as the establishment of an emergency medical care network. Reform and development initiatives in at secondary and tertiary care level have been limited to gradual downsizing of sub-national hospitals, with the exception of the emergency medical care network, and expansion of Republican specialized tertiary centers. Recent years have seen increases in out-of-pocket payments (both official and informal) for hospital and other health services, which now present a barrier to accessing health services and pharmaceuticals for some patients. The Ministry of Health (MOH) is implementing a program of development of new standards for diagnostic/curative services at each level of care that are intended to modernize practice and increase quality and efficiency. Twenty disease areas have been covered to date. Standards for equipment requirements at each level are also being defined. The Ministry now faces the challenge of developing a strategy to changing clinical and managerial practice in hospitals to bring them into line with the new standards. Uzbekistan has a large and fragmented network of hospitals and specialist clinics, characterized by multiple vertical programs and many single-specialty facilities. There is lack of clarity regarding the specific roles and linkages between the numerous hospitals and specialized care facilities. The Government has pursued a policy of increases in official user fees or "self-financing", alongside offsetting reductions in budget provision for non-salary operating costs in Republican hospitals and many Oblast hospitals in recent years. City and oblast hospitals have self-financing beds. User fees are projected to amount to an average of 18 percent of revenue in 2008 for oblast hospitals (compared to an average of 1.4 percent in 2000). Republican Specialist Centers (tertiary level hospitals) now obtain up to around 65 percent of revenue from user fees, and have a target of 80 percent. By contrast, rayon hospitals collect little user revenue (projected to be a little under 1percent in 2008, a level that is approximately unchanged since 2000). Budget funds for oblast hospital now cover little more than the costs of staff salaries and benefits, following budget reductions that offset increases in user fees.Publication Fixing the Public Hospital System in China(Washington, DC, 2010)In recent years, Chinese health care has improved rapidly, especially in the areas of equity and accessibility of services, as well as the movement toward universal coverage. A new round of health care reform, which was announced in April 2009, began implementation in 2010, with reform pilots in 16 urban areas. This paper analyzes a key pillar of this ongoing reform process, public hospital management. First, the paper reviews the history of public hospital reform, discusses hospital functions and responsibilities, and describes the structure and supply of health services. Second, it describes the main policy issues facing public hospitals, including financing sources and the hospital market environment. Third, it examines organizational arrangements in public hospitals, focusing on decision rights and governance. Fourth, the paper offers an international perspective and framework for assessing hospital reform. Finally, it summarizes the main policy issues and suggests next steps for policy reform. The paper draws on recent publications, grey literature, media reports, and interviews with key stakeholders.Publication Lessons for Hospital Autonomy(World Bank, Washington, DC, 2011-07)The Government of Vietnam sees hospital autonomy policy as important and consistent with current development trends in Vietnam. It is based on government policies as laid out in government Decree on financial autonomy of revenue-generating public service entities; and to 2006, it is replaced by decree on professional, organizational, human resource management and financial autonomy of revenue-generating and state budget-financed public service entities. These policies apply to public service entities in all sectors, including the health sector and hospitals. This policy is an important element of public administration reform in Vietnam, helping service entities survive and develop under the socialist-oriented market mechanism. It aims to help hospitals in fulfilling assigned professional tasks by allowing them to restructure their organization and staffing. The government has also allowed public service entities to mobilize private capital and joint ventures to organize activities and services responding to social and people's needs. This study will show that since the implementation of decrees, a number of improvements have been demonstrated within hospitals with respect to physical facilities, service provision, medical techniques, service quality and staff incomes, thus creating stability and satisfaction among hospital workers. But it also describes the international evidence that implementation of hospital autonomy comes with a risk of unintended outcomes driven by powerful financial incentives from the market place to increase revenue. These include supply induced demand, cost escalation, inappropriate care. There are some indications that such risks may be emerging in Vietnam as well, although these would need further research. Fortunately, there is also international evidence about policies that can mitigate such risks, and these are also described in this report. This report will inspire further studies and encourage policymakers to think about continuous improvement of policies.Publication Getting Incentives Right : An Impact Evaluation of District Hospital Capitation Payment in Vietnam(World Bank, Washington, DC, 2013-11)With the movement toward universal health coverage gaining momentum, the global health research community has made significant efforts to advance knowledge about the impact of various schemes to expand population coverage. The impacts on efficiency, quality, and gaps in service utilization of reforms to provider payment methods are less well studied and understood. The current paper contributes to this limited knowledge by evaluating the impact of a shift by Vietnam's social health insurance agency from reimbursing hospitals on a fee-for-service basis to making a capitation payment to the district hospital where the enrollee lives. The analysis uses panel data on hospitals over the period 2005-2011 and multiple cross-section data sets from the Vietnam Household Living Standards Surveys to estimate impacts on efficiency, quality, and equity. The paper finds that capitation increases hospitals' efficiency, as measured by recurrent expenditure and drug expenditure per case, but has no effect on surgery complication rates or in-hospital deaths. In response to the shift to capitation, hospitals scaled down service provision to the insured and increased provision to the uninsured (who continue to pay out-of-pocket on a fee-for-service basis). The study points to the need to anticipate the intended and unintended effects of any payment reform and the trade-offs among policy objectives.
Users also downloaded
Showing related downloaded files
Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.