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Contracting for health services in New Zealand: A transaction cost analysis

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  • Ashton, Toni

Abstract

The splitting of the functions of purchaser and provider in the New Zealand health system in 1993 necessitated the use of explicit contracts between the two parties. This paper examines contracting experiences during the first two years of operation. The study focuses on four services: rest homes, primary care clinics, surgical services, and acute mental health services. The insights of transaction cost economics form the theoretical framework. The objective of this study was to examine whether the transaction costs associated with contracting vary across the four different services, and whether different types of contracts and contractual relationships are emerging as transactors attempt to reduce these costs. Information was collected in a series of 53 interviews with purchasers and providers, together with any relevant documentation. The results suggest that the costs of contracting are indeed greater for some services than for others. Other variables such as the style of negotiations, the type and specificity of contracts and the degree of monitoring also differ across the four services. At this early stage of the reform process, there was little evidence that purchasers and providers were attempting to reduce transaction costs by negotiating more flexible, longer-term, relational contracts. The main benefit from contracting to date has been improved accountability of service providers.

Suggested Citation

  • Ashton, Toni, 1998. "Contracting for health services in New Zealand: A transaction cost analysis," Social Science & Medicine, Elsevier, vol. 46(3), pages 357-367, February.
  • Handle: RePEc:eee:socmed:v:46:y:1998:i:3:p:357-367
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    Citations

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    Cited by:

    1. Dew, Kevin & Roorda, Mathea, 2001. "Institutional innovation and the handling of health complaints in New Zealand: an assessment," Health Policy, Elsevier, vol. 57(1), pages 27-44, July.
    2. Jan, Stephen & Pronyk, Paul & Kim, Julia, 2008. "Accounting for institutional change in health economic evaluation: A program to tackle HIV/AIDS and gender violence in Southern Africa," Social Science & Medicine, Elsevier, vol. 66(4), pages 922-932, February.
    3. Donato, Ronald, 2010. "Extending transaction cost economics: Towards a synthesised approach for analysing contracting in health care markets with experience from the Australian private sector," Social Science & Medicine, Elsevier, vol. 71(11), pages 1989-1996, December.
    4. Bernhard Eicher, 2016. "Selection of asset investment models by hospitals: examination of influencing factors, using Switzerland as an example," International Journal of Health Planning and Management, Wiley Blackwell, vol. 31(4), pages 554-579, October.
    5. Gabriel OBERMANN, 2007. "The Role Of The State As Guarantor Of Public Services: Transaction Cost Issues And Empirical Evidence," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(3), pages 475-500, September.
    6. Howden-Chapman, Philippa & Ashton, Toni, 2000. "Public purchasing and private priorities for healthcare in New Zealand," Health Policy, Elsevier, vol. 54(1), pages 27-43, November.
    7. Guinness, Lorna, 2011. "What can transaction costs tell us about governance in the delivery of large scale HIV prevention programmes in southern India?," Social Science & Medicine, Elsevier, vol. 72(12), pages 1939-1947, June.
    8. Petsoulas, Christina & Allen, Pauline & Hughes, David & Vincent-Jones, Peter & Roberts, Jennifer, 2011. "The use of standard contracts in the English National Health Service: A case study analysis," Social Science & Medicine, Elsevier, vol. 73(2), pages 185-192, July.

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