Purchaser-Provider Split

The term purchaser-provider split refers to a model of public service delivery where the functions of paying for and delivering goods and services are separated. [Page 779]The purchaser-provider split model of service delivery entails two components. First, it involves the existence of dedicated purchasing agencies with responsibility for financing services and for ensuring the needs of the population entitled to services that are covered, but who are not directly involved in the provision of services. Providers of services relate to purchasers through contracts rather than direct forms of accountability, and these contracts specify their roles and responsibilities in delivering the public goods or services. The second component involves giving purchasers and providers a degree of autonomy and responsibility with respect to their functions in purchasing or providing services. Both components stand in contrast to an integrated model of service delivery, where a single organization or set of organizations is responsible for financing, planning, and providing services and accountable for the overall structure of the service.

The separation between purchasers and providers of public services has long existed in a number of continental European countries and the United States, where social or private insurers or governmental agencies have responsibility for purchasing services but not directly providing them. For instance, many publicly financed health care systems have been built around a split between social insurers who are responsible for funding health care services and the hospitals and doctors who provide these services but are independent of the insurers.

In recent years, a number of countries that have traditionally relied on integrated models of service provision have introduced purchaser-provider splits in public services. These reforms have been particularly popular in the health care sector, where countries like the United Kingdom, New Zealand, Italy, and Sweden have experimented with them as a way of moving away from an integrated health care delivery system. However, these reforms have also been introduced in a range of other areas, from child welfare to prison services, and across a range of countries.

The introduction of a purchaser-provider split generally aims to accomplish two sets of goals. First, it is intended to stimulate clearer lines of management accountability by clarifying different functions in the production of public services. Second, it is often introduced as part of a larger movement toward stimulating competition among the providers of services. This move toward competition may occur primarily within the public sector, thus creating an internal market where public providers compete for contracts from public purchasers. However, purchaser-provider splits often occur alongside greater contracting and purchasing from the private sector. These reforms, then are a key component in the marketization of the public sector and are often part of the prescription for public service reform advocated by proponents of new public management. This movement is intended to stimulate a more marketlike governance of services, rather than directing government steering.