Discretion leads to corruption in Indonesian Public Service Agency Hospitals: Governance challenges and control mechanisms

This study examines the relationship between the abuse of discretion and corruption in regional public service agency (PSA) hospitals in Indonesia, focusing on five specific cases. The objective is to raise awareness among stakeholders about how discretion can facilitate corruption, which can have serious legal consequences. The study uses qualitative secondary data analysis, including statutory regulations, court decisions, and academic literature, to explore the effects of the reinventing government concept on hospital management. This concept grants PSA hospitals autonomy in managing their revenues and expenditures, bypassing traditional bureaucratic procedures to improve healthcare quality. However, this financial management flexibility has also increased opportunities for corruption, including fund misappropriation, procurement collusion, and unauthorized resource allocation. Using Klitgaard’s corruption equation, the study reveals that while increased discretion offers benefits, existing oversight mechanisms are insufficient. The study concludes that to reduce corruption risks, it is crucial to enhance accountability through more robust internal controls, local government oversight, and external auditing. These measures align discretion with good governance principles and legal frameworks. This study provides novel insights into the link between administrative discretion and corruption in the public health sector, highlighting the need for comprehensive control systems in PSA hospitals to balance autonomy with accountability.