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Figure 5.2
Framework 1:
Key decisions to be made in the strategic purchasing process

1 Whether to provide or purchase

2 Who should be purchasing and what are the roles of the individual, and
complementary agents including the government, third-party payers, and
employers in the context of pluralistic nancing and provider health systems

3 For whom to purchase in the context of different nancing and
provider health systems

4 What interventions or services should be purchased,
taking into consideration population needs, national health goals &
priorities and cost-effectiveness

5 From whom to purchase, whether to produce or to select and
contract service providers, giving consideration to capacity and supply,
service quality, ef ciency and equity

6 How services will be purchased and at what price, including contractual
arrangements and how providers will be paid taking into account
the inherent incentives in different provider payment mechanisms

Sources: WHO, 2000; Yeoh, 2020

The first system framework captures key decision steps in the policy formulation process in
the strategic purchasing of health programmes and services. The six key steps include:
i) whether to provide or purchase, ii) who to purchase, iii) for whom to
purchase, iv) what to purchase, v) from whom to purchase, and vi) how to
purchase (WHO, 2000, 2017b, 2019b). This process is summarised as follows:

• First, the Government should decide whether it would provide health services themselves
or purchase the services from other provider organisations.

• Second, the Government should identify an appropriate purchaser that is equipped to
focus on the type and level of health services of interest and define its role in the health
system (see Element 3 in Section 5.3 for further discussion).
• Third, when designing a strategic purchasing-oriented programme, the purchaser should
identify a target group in need of the programme’s services would benefit from the
purchasing programme.
• Fourth, the Government should assess what service gaps exist in the current health
system and which health goals may be met through the services purchased.
• Fifth, the purchaser should carefully select service providers based on their capacity,
availability, and accessibility, and the appropriateness of the services they provide relative
to the population health goals set out by the Government.

• Sixth, to draw participation in the purchasing programme, the purchaser should utilise
demand-side and supply-side instruments, contractual terms and agreements, and provider
payment mechanisms that effectively incentivise patients and providers to meet health goals.
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