Strategic Purchasing Theory in Weak Governance Contexts: Evidence from Pakistan's Sehat Sahulat Program

This study evaluates Pakistan's Sehat Sahulat Program to demonstrate that strategic purchasing theory fails in weak governance contexts due to fundamental institutional capacity deficits, leading the authors to propose a four-stage Strategic Purchasing Capacity Stages (SPCS) model to ensure international reforms are aligned with a system's actual governance maturity rather than assuming high-capacity prerequisites.

The Gist

The Big Idea: Buying Health Care vs. Just Paying Bills

Imagine a country trying to set up a massive health insurance plan for its people. The goal is to make sure everyone gets good medical care without going broke.

In the world of health experts, there is a fancy concept called "Strategic Purchasing." Think of this like a smart, savvy shopper. A smart shopper doesn't just buy whatever is on the shelf; they check the quality, compare prices, negotiate deals, and only buy things that actually work. They fire the bad sellers and reward the good ones.

This paper argues that Pakistan's "Sehat Sahulat" health program is trying to be this "smart shopper," but it's actually stuck acting like a mindless vending machine. It takes money, puts it in, and hopes a healthy person pops out, but it has no way to check if the machine is actually working.

The Problem: The "Pre-Condition" Failure

The authors say the problem isn't that the people running the program are lazy or bad at their jobs. The problem is that the foundation is missing.

Imagine trying to build a high-tech, self-driving car (Strategic Purchasing) in a garage that has no electricity, no roads, and no mechanic (Weak Governance). No matter how much money you pour into the car, it won't drive because the conditions to make it work don't exist yet.

The paper calls this "Precondition Failure." You can't run a marathon if you haven't learned to walk yet. Pakistan is trying to run a marathon (Strategic Purchasing) while it is still learning to walk (Basic Administration).

The 6 Ways the Program is Stuck (The "Vending Machine" Glitches)

The paper breaks down the program into six parts, showing how each one is broken:

1. What's Covered (The Menu):

   • The Theory: The menu should be based on what people actually need (like treating diabetes or heart disease).
   • The Reality: The menu is decided by politics. If a politician wants to look good, they add expensive heart surgery. If a disease is common but boring (like diabetes), it gets ignored. It's like a restaurant adding a $100 steak because the owner likes steak, but removing the rice because it's "boring," even though everyone is hungry for rice.

2. Who Gets to Sell (The Shop List):

   • The Theory: Only the best, highest-quality hospitals should be allowed to sell to the insurance.
   • The Reality: Anyone can join. If a hospital has a bed and a sign, they are in. There is no way to kick them out if they do a bad job. It's like letting anyone open a restaurant in town without a health inspector.

3. How They Get Paid (The Price Tag):

   • The Theory: Hospitals should get paid more if they do a great job and less if they cheat.
   • The Reality: They get a flat fee for everything. This encourages hospitals to "game the system." They might pretend a simple cold is a complex flu to get more money (called "upcoding"). Since no one checks the receipts, they keep doing it.

4. Checking the Results (The Report Card):

   • The Theory: The insurance should track if patients actually get better.
   • The Reality: They only track money. They know how much was spent, but they have zero idea if the patients got cured. It's like a teacher who only grades how much homework was turned in, but never checks if the answers are right.

5. Who Gets Help (The Guest List):

   • The Theory: The poorest people should be on the list.
   • The Reality: They are using a guest list from 2011. The city has changed, new poor people have moved in, but the list is frozen in time. About 30-40% of the urban poor are left out because the computer system is outdated.

6. The Police (The Regulator):

   • The Theory: There should be a boss who can punish bad actors.
   • The Reality: The "police" are the same people running the program. It's like the fox guarding the henhouse. They have no power to stop the insurance company or the hospitals from cheating.

The Real Culprit: The "Federal vs. Provincial" Tug-of-War

The paper points out a huge structural issue in Pakistan. In 2010, the country changed its constitution, giving the Provinces (like states in the US) total control over health. But the Federal Government (the national center) still tries to run the national insurance program.

• The Analogy: Imagine a Franchise. The National Headquarters (Federal) designs the menu and pays the bills, but the Local Store Managers (Provinces) are supposed to run the kitchen.
• The Problem: The Local Managers say, "We own the kitchen! You can't tell us what to do!" The National HQ says, "But we are paying for the food!"
• The Result: Everyone is doing their own thing. The menu in one city is different from the next. If you move from one province to another, your insurance might stop working. They can't agree on rules, so the whole system is messy.

The Solution: The "Stages of Maturity" Model

The authors created a new model called the Strategic Purchasing Capacity Stages (SPCS) to fix this. Think of it like a video game with levels:

• Level 1 (Administrative): Just collecting money and paying bills. (This is where Pakistan is).
• Level 2 (Selective): Starting to pick good hospitals.
• Level 3 (Performance): Paying hospitals based on how well they treat patients.
• Level 4 (Full Strategic): The perfect, smart shopper system.

The Big Lesson: International agencies keep telling Pakistan to jump straight to Level 4. But you can't play the final boss level if you haven't beaten Level 1.

What Should Happen Next?

The paper tells the world (and international donors) to stop trying to force a high-tech solution on a low-tech system.

1. Stop the "One Size Fits All": Don't tell a Level 1 country to do Level 4 things. It's like telling a toddler to do calculus.
2. Build the Foundation First: Before trying to be "strategic," Pakistan needs to fix the basics: update the data, hire experts who understand insurance, and get the Federal and Provincial governments to agree on a plan.
3. Accept Reality: Admit that the system is currently just a "passive payer" (a vending machine) and work on upgrading it slowly, rather than pretending it's already a "smart shopper."

In short: The paper says, "We aren't failing because we are trying hard enough; we are failing because we are trying to build a skyscraper on a swamp. Let's drain the swamp first."

Technical Summary

1. Problem Statement

The paper addresses a critical gap in global health financing theory: the applicability of Strategic Purchasing in Low- and Middle-Income Countries (LMICs) with weak institutional capacity.

• Theoretical Gap: Strategic purchasing theory (exemplified by frameworks like Cashin & Gatome-Munyua) assumes high-capacity institutions, purchaser autonomy, professional management, and stable governance. It lacks explicit governance capacity thresholds below which its six core functions become structurally infeasible.
• The Case: Pakistan's Sehat Sahulat Program (SSP), a national health insurance scheme covering over 100 million people, serves as a "boundary condition test." Despite significant funding and political will, the program suffers from systemic failures.
• The Core Issue: The paper argues that current failures in the SSP are often misdiagnosed as "implementation failures" (lack of political will or management skill). Instead, the authors posit these are precondition failures—the structural absence of the institutional capacity required to execute strategic purchasing functions.
• Contextual Complexity: The study highlights how Pakistan's 18th Constitutional Amendment (2010), which devolved health authority to provinces without establishing coordinated federal mechanisms, creates a unique governance barrier where policy windows must align simultaneously at both federal and provincial levels.

2. Methodology

The study employs a qualitative comparative case study design, utilizing a converging triangulation methodology to ensure rigor.

• Data Sources:
  1. Key Informant Interviews (KIIs): 22 semi-structured interviews with stakeholders across five groups: Federal officials, Provincial officials (Sindh), Insurance administrators, Healthcare providers, and Academic/Technical experts.
  2. Documentary Review: Analysis of operational frameworks, provincial benefit packages, empanelment criteria, performance reports (2019–2022), and parliamentary discussions.
  3. Modified Delphi Method: A four-round process with 10 experts (5 federal, 5 provincial) to validate findings and reach consensus on institutional barriers.
• Analytical Framework:
  • Data was coded using a hybrid deductive-inductive approach based on the Cashin and Gatome-Munyua six purchasing functions (Benefit Package, Provider Selection, Payment, Performance Monitoring, Enrollment, Regulatory Oversight).
  • An additional domain, Federal-Provincial Coordination, was added to account for the 18th Amendment context.
  • Reliability: Intercoder reliability was established with a Cohen's Kappa of 0.83.
  • Consensus: Delphi consensus was defined as ≥75% agreement, with Kendall's W > 0.7 indicating strong consensus.

3. Key Results

The analysis revealed persistent deficits across all six strategic purchasing functions, driven by four structural institutional constraints.

A. Deficits in the Six Purchasing Functions

1. Benefit Package Definition: Decisions are driven by political negotiation rather than Health Technology Assessment (HTA) or burden of disease data. High-visibility procedures (e.g., cardiac surgery) are covered, while high-burden chronic conditions and primary care are excluded. The package has remained static since 2016.
2. Provider Selection: The system uses passive open empanelment. Any hospital meeting minimal infrastructure criteria is accepted; there is no quality assessment, and no mechanism exists to deselect underperforming providers.
3. Payment Mechanism: Uses a flat-rate Case-Based Payment System without risk adjustment or inflation updates. This creates perverse incentives for "upcoding" (billing for higher-level care than provided) and cost-cutting, with no audit capacity to detect fraud.
4. Performance Monitoring: Data collection is limited to financial flows (claims volume and expenditure). There is zero monitoring of clinical outcomes, patient satisfaction, or quality indicators. Data is not used for decision-making.
5. Beneficiary Enrollment: Relies on the National Socioeconomic Registry (NSER), last comprehensively updated in 2011. This results in the systematic exclusion of 30–40% of the urban poor due to outdated rural-centric criteria and documentation barriers.
6. Regulatory Oversight: There is no independent regulatory body. The Ministry of Health contracts with the State Life Insurance Corporation but lacks the technical capacity to oversee it, creating a "fox guarding the henhouse" scenario.

B. Four Institutional Capacity Constraints

The study identifies four structural barriers preventing the SSP from functioning:

1. Lack of Statutory Authority: The program is managed by a temporary Project Management Unit (PMU) without independent legal power to sanction providers or insurers.
2. Human Resource Shortages: Staff lack specialized expertise in actuarial science, health economics, and strategic purchasing; they are primarily generalist doctors and administrators.
3. Information System Limitations: While claims data is collected, the analytical architecture to convert this into "purchasing intelligence" is absent.
4. Federal-Provincial Coordination Failure: Post-devolution fragmentation has led to non-compatible programs across provinces (Punjab, Sindh, KP), creating duplication, inconsistent eligibility, and a lack of portability for patients.

4. Key Contributions

The paper makes four major theoretical and practical contributions:

1. Precondition Failure Theory: It reclassifies SSP failures not as implementation errors but as precondition failures. Strategic purchasing cannot function without specific governance thresholds (autonomy, data capacity, regulatory power).
2. Strategic Purchasing Capacity Stages (SPCS) Model: The authors propose a four-stage maturity model:
   • Stage 1 (Administrative): Financial intermediation only; political benefit setting; passive provider selection. (Pakistan SSP is here).
   • Stage 2 (Selective): Quality-based selection begins; basic data collection.
   • Stage 3 (Performance): Outcomes influence payment; autonomous purchasing body.
   • Stage 4 (Full Strategic): Evidence-based design, pay-for-performance, strong regulation (e.g., Thailand, New Zealand).
   • Implication: Recommending Stage 4 reforms to Stage 1 systems guarantees structural failure.
3. Extension of Kingdon's Multiple Streams Framework: The study argues that in devolved federal systems, policy windows require simultaneous convergence at both federal and provincial levels. The lack of this dual convergence is a unique failure mechanism in federal contexts.
4. Hierarchical Degradation Pattern: The findings show that under capacity constraints, administrative functions (claims processing) survive, while performance accountability functions (quality monitoring, deselection) collapse first.

5. Significance and Policy Implications

• For International Agencies: Recommendations for strategic purchasing must be calibrated to the system's actual capacity stage. Prescribing complex reforms (e.g., performance-based contracting) to Stage 1 systems is ineffective and wasteful.
• Sequenced Capacity Building: Investments must prioritize foundational infrastructure (statutory authority, specialized HR, data systems) before attempting advanced purchasing reforms.
• Federalism and Health: In devolved systems, intergovernmental coordination mechanisms are not optional enhancements but structural prerequisites for any purchasing function beyond Stage 1.
• Global Relevance: The findings are applicable to other LMICs with weak governance, particularly in South Asia, Sub-Saharan Africa, and post-conflict states, suggesting that "one-size-fits-all" health financing models are fundamentally flawed in these contexts.

Conclusion: The paper concludes that strategic purchasing theory must evolve to include a precondition theory that explicitly defines the minimum governance capacity required for its prescriptions to be feasible. Without this, international health financing efforts risk legitimizing prescriptions that are structurally impossible to implement in weak governance environments.