Geographically-decentralized planning and management in health care: Some informational issues and their implications for efficiency

Geographically decentralized planning and management is an emerging theme within the health sector in many OECD countries. Advocates of decentralization argue that providing greater authority to local decision-making bodies can improve both the technical and allocative efficiency with which health care systems operate. Using concepts drawn from organizational theory and the economics of organizations, we examine the potential of centralized and decentralized planning and management structures to be efficient in light of the informational problems that must be overcome to allocate resources efficiently. We focus in particular on the need to integrate information regarding: (1) the effectiveness and efficiency of alternative clinical interventions and of alternative ways organize the delivery of health care; (2) the needs, values, and preferences in the population; and (3) local circumstances that affect delivery of care across regions. Informational concerns suggest that decentralized structures have greater potential to be efficient. We then briefly discuss some principles for the design of decentralized structures to aid in realizing these potential efficiency gains.