Hospital Governance and Incentive Design: The Case of Corporatized Public Hospitals in Lebanon

Abstract

Representation of community and government interests on hospital boards can balance the competing concerns of reducing costs and increasing the quality of service provision in corporatized hospitals.

There are three potential levels of government activity in the health sector: regulation, finance, and direct provision of services, with the government owning and managing hospitals and primary care clinics. Eid focuses on service provision.

In recent years corporatization has been introduced as an institutional design for public hospitals - as a means of improving efficiency and reducing transfers in a publicly owned, decentralized health system. Eid treats decentralization as a reallocation of decision rights to lower levels of the public sector. She shows how such a strategy creates new needs for monitoring and control of decentralized units.

To improve the understanding of the role of governance and incentives in corporatized hospitals, Eid explores the design of corporate boards of public hospitals, the institutional linchpin of such systems. She shows how principal-agent theory, particularly the multitasking and common agency approaches, can provide a useful analytical lens in understanding hospital board design in the case of Lebanon. She also shows the implications of corporatization for health policy and management.

This paper - a product of the Country Evaluation and Regional Relations Division, Operations Evaluation Department - is part of a larger effort in the department to evaluate the performance of public sector institutions. The study was funded by the Bank's Research Support Budget under the research project "Analyzing Problems in Public Hospital Corporatization Using Information Economics." The author may be contacted at [e-mail].