Delinking Non-Core Hospital Services

Strengthening hospitals to do their core function

Malawi has 4 central hospitals that take the function of tertiary hospitals. Currently, Central Hospitals
also provide EHP services, which should ideally be provided by district health services (primary and
secondary level care). This results in a high caseload at central hospitals, with OPD visits being high
(see table 1).
2014

Beds

OPD visits

Avg.
daily
attendance
KCH
1000
158,067
433
ZCH
514
162,663
446
QECH
1300
384,120
1052
MCH
375
171,043
468
Table 1: Admission statistics for central hospitals 2014

Total inpatient
nights
47,371
28,892
81,151
84,333

Average length
of stay (nights)
5.2
5.8
4
4.8

When combined with high staff vacancy rates across all work areas and low budget allocations, it
becomes clear that central hospitals are at risk of being overburdened. Overburdening will ultimately
lead to deterioration in the quality of services being provided. Failure to address existing challenges
with central hospital is to impact the quality of services of the entire
To redress this the Ministry of Health is interested in considering the feasibility of scaling up the
outsourcing of non-core services at hospitals, with the idea behind this being that by through the
outsourcing of ancillary services hospital management will be better able to focus on their principle
task; patient care.

What is delinking of services?

The delinking of services is often referred to as outsourcing, which in business terms refers to the
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contracting out of business practices to another party . Often delinking is carried out as through
specialised, larger scale operations, cost efficiencies will be realised.
Non-core services definition
Hospital non-core services encompass all support services that are required to ensure that a hospital is
able to deliver properly. Non-core services have no clinical function and providers do not engage in the
treatment of patients.

Why delink services?

Prior to entering into the process of delinking services, it is important to consider the implications,
both positive and negative that delinking could have on service provision.
Opportunities
Quality of services
Increased Competition
Potential efficiency gains as each party does what they do best and can invest resources into
developing their core competencies.
Risk Reduction - risk is effectively outsourced within the contract, if well defined service standards
are put in place then the contractor.
Cost Efficiency - savings can be brought about through the introduction of competition, and greater
efficiency on the part of service providers for whom greater efficiency entails greater profits.
Challenges of implementing strategic outsourcing
Improper or Inadequate Planning - There is no one size fits all approach to outsourcing, and the
requirements of every hospital, service area, and contractor will be different this takes time.
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http://www.cio.com/article/2439495/outsourcing/outsourcing-definition-and-solutions.html

Delinking Non-Core Hospital Services

Strengthening hospitals to do their core function
Organizational Culture - Managers and workers may resist outsourcing for a variety of reasons, not
understanding the strategy, fear of losing their jobs, privileges or responsibilities
Capacity of Employees
One of the major factors that affect the implementation of strategic outsourcing is the capacity of
employees of suppliers i.e. the firm from which the buyer is outsourcing services from there may be
a less competitive market present.
Financial Resources there may be challenges in regularly paying contractors and some services
considered cost effective to outsource (e.g. ambulances) may only be so if there is significant capital
investment by Government first (purchasing the ambulances first).

Factors for consideration

Access
The Ministry of Health is charged with providing health services for all within Malawi. If outsourcing
can result in a reduction in the costs of providing care at central hospitals it could potentially improve
access to services through:
1. Allowing for greater spending on the provision of services at central hospitals,
2. Reducing patient time at hospitals (both in- and out-patient) through improvements in the
efficiency of hospital operations
3. Allow for greater budget allocation to primary and secondary facilities through utilisation of
central hospital budget savings within the overall health sector
Experience from India (Raman & Bjrkman 2007) has shown that some forms of private sector
engagement have had a direct positive impact on access at Primary Health care level, through the
provision of innovative means of outreach services in remote areas, and it is foreseeable that the
outsourcing, and eventual up scaling of ambulance services could improve access to tertiary care for
those living in more remote areas.
Coverage
Impacts of outsourcing of ancillary services on the overall coverage of the health system are likely to
be indirect at best. Through the potential redeployment of workforces (see below) who are no longer
required because of contractors it may be possible to improve the delivery of non-core services at
primary and secondary levels. Decisions on the redeployment of staff will have to be taken by the
MOH.
Efficiency
Organisations principally outsource in order to improve efficiency in the delivery of services, and
there is no reason to suggest that properly implemented outsourcing at central hospitals would not
improve efficiency. What is currently lacking at central hospital level are value for money
assessments, which would give a clearer picture of the current costs of service delivery, thereby
allowing for a baseline to be set in order to improve efficiency. On a macro level, decisions will have
to be taken as to what role staff currently employed by the Ministry of Health in services to be
outsourced will take on. If they remain on the payroll of the MOH but are not redeployed or retrained
in a productive manner this may impact negatively on the efficiency of the overall health system.
Equity
As it stands there is currently a large disparity in the types of services available to residents of rural
and urban areas in Malawi. Central hospitals are arguably better staffed and better resourced than
hospitals in rural areas, and for many urban citizens central hospitals serve as the gateway to the
health system. The introduction of outsourcing could have two potential impacts on health equity, 1.
Increase inequity through the improvement of central hospital services, whilst rural services remain at
the same level. 2. Increase equity to some degree through achieving cost savings in the delivery of
central hospital services, thereby freeing up financial resources to allow for investment at primary
and secondary level.

Delinking Non-Core Hospital Services

Strengthening hospitals to do their core function

Quality
Currently there are not comprehensive national standards for many of the non-core services
proposed for outsourcing, and those that do exist, such as the infection prevention standards are in a
suitable format to be utilised as part of a contract. As services to be considered for outsourcing will
remain the same across all central hospitals it would be wise to establish national standards for all
services being considered for outsourcing, which contain minimum service standards, and redress
mechanisms in case of non performance.
Sustainability
Hospitals will ultimately lose skills and experience in the provision of non-core services, which may
make it difficult to bring services back in house at a later date if desired. This could potentially be
avoided by including a first right of refusal on contracted staff into agreements with contractors,
meaning that central hospitals would be within their rights to offer contracted staff direct
employment at the end of the contract if the decision was taken to move back to direct provision of
services.
Cost of Care
Global outsourcing practices tend to focus on reducing the cost of service provision, however
feedback from QECH indicates that rather than decreasing costs, prices of outsourcing contracts have
tended to increase over time due to prolonged negotiation periods and inflationary effects.
Client Satisfaction
Global experiences have been mixed in terms of client satisfaction, and there is currently not enough
data on client satisfaction in Malawi. However, hospitals outsourcing services need to remain aware
that the public will still view them as responsible for service provision and will hold hospitals, rather
than contractors accountable.

Experiences in Malawi
Central hospitals were asked to respond to a questionnaire on the current status of outsourcing of
services in their facilities. The following services have been outsourced to date at central hospitals.
Services
Catering services
Laundry
Mortuary
Estate and facilities management
Landscaping
Security
Pharmacy services management
Waste disposal,
Equipment supply and maintenance
Portering
Revenue collection (e.g. paying services)
Ambulance (excluding on-board patient care)
Administration
Information technology
Accounts/Financial management
Hospital cleaning services
Facilities Maintenance
Medical forms printing services
Cleaning
Table 2: Current Outsourcing arrangements

KCH

QECH
X

ZCH
X

MCH
X

X
X

X
X

X
X

X
X
X
X

X
X

X
X

Delinking Non-Core Hospital Services

Strengthening hospitals to do their core function
OPPD guidelines were used in the outsourcing of services, and services were tendered on an open
market basis. The reasons given for outsourcing mostly centred on the current costs of service
provision, and the perceived inefficiencies, or lack of skills in in-house operation of the services; it is
not clear whether value-for-money analyses were conducted prior to tendering out.
All hospitals report the use of performance standards in outsourced service provision, in line with the
OPPD guidelines, however several hospitals felt that
1. The performance standards needed revision as they were not always sufficient to monitor and
sanction performance; and
2. That in-house capacity on the monitoring of contractors required further improvement and
resource allocation, as not all hospitals felt they could adequately supervise contractors.

Ways forward
Should the proposed reforms with regard to the delinking of services be approved, the following steps
should be considered prior to implementation of further delinking contracts:

Value for money assessments on all proposed services

Development of generic standards for all proposed areas of service to ensure quality of
services provided

Market Appraisals to better understand the provider landscape we are encountering

How to best deal with human resources as a result of contracting out non-core service
providers needs to be considered by the Government of Malawi.

Development of contract management skills

Questions

What would be the motivation behind outsourcing?

(e.g. reduction in workloads, improved satisfaction of patients)

What would you hope the hospitals would achieve through outsourcing?

What services would you see as most suitable for outsourcing and why?

What risks do you think there might be?