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.

○ Financial support of the Diversity grant, George Bluefield Institute;

○ Pell grant for the financial support,

○ Ministry of Health HQ staff, too numerous to mention for their support and

providing some

material and information.

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

○ Dr.Everisto Mpabalwani at University Teaching Hospital

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

○ 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. 8 Managers from 4 clinics in the Southern Province

namely;
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
needs.
3. 19.6% were not sure if budgeting individually as a clinic would improve
the efficient running of their centers.
4. 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.
5. 96% respondents acknowledged that budgeting would definitely
improve health delivery.
6. 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.