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The implication of contracting out health care services: The case of service level agreements in Malawi


  • Mpakati Gama, Elvis
  • McPake, Barbara
  • Newlands, David


Background: The Malawi government in 2002 embarked on an innovative health care financing mechanism called Service Level Agreement (SLA) with Christian Health Association of Malawi (CHAM) institutions that are located in areas where people with low incomes reside. The rationale of SLA was to increase access, equity and quality of health care services as well as to reduce the financial burden of health expenditure faced by poor and rural communities. This thesis evaluates the implications of SLA contracting out mechanism on access, utilization and financial risk protection, and determines factors that might have affected the performance of SLAs in relation to their objectives. Methods: The study adopted a triangulation approach using qualitative and quantitative methods and case studies to investigate the implications of contracting out in Malawi. Data sources included documentary review, in-depth, semi-structured interviews and questionnaire survey. The principal agent model guided the conceptual framework of the study. Results: We find positive impact on overall access to health care services, qualitative evidence of perverse incentives for both parties to the contracting out programme and that some intended beneficiaries are still exposed to financial risk. Conclusion: An important conclusion of this study is that contracting out has succeeded in improving access to maternal and child health care as well as provided financial risk protection associated with out of pocket expenditure. However, despite this improvement in access and reduction in financial risk, we observe little evidence of meaningful improvement in quality and efficiency, perhaps because SLA focused on demand side factors, and paid little attention to supply factors: resources, materials and infrastructure continued to be inadequate.

Suggested Citation

  • Mpakati Gama, Elvis & McPake, Barbara & Newlands, David, 2013. "The implication of contracting out health care services: The case of service level agreements in Malawi," MPRA Paper 52980, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:52980

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    References listed on IDEAS

    1. Arrieta, Alejandro & García-Prado, Ariadna & Guillén, Jorge, 2011. "The Private Health Care Sector and the Provision of Prenatal Care Services in Latin America," World Development, Elsevier, vol. 39(4), pages 579-587, April.
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    More about this item


    Contracting out; financial risk protection; health financing; transaction costs; incentives; revealed objective;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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