Increasing transparency and financial accountability in the health sector: Why performance-based budgeting is not the answer

Performance-based budgeting (PBB) is a public finance reform meant to increase accountability, transparency, and effectiveness of government resource allocation. The purpose of this study is to describe and model the factors affecting progress of performance-based budgeting reform in hospitals in Lesotho. We analyzed four case studies each centered on a single hospital's implementation of PBB. Data included document review (budgets, plans) and 52 in-depth interviews. We apply an organizational change theory--the Transformational Change (TC) model--to describe progress in implementing PBB reform in Lesotho. The hospitals showed little progress in budget reform which means that the researchers cannot relate the model's constructs to differences in outcomes. However, the TC model provides a lens to understand why the reforms may have failed. Factors of particular relevance include absence of reform leadership, lack of alignment of the structures, resources, and capabilities needed to implement the reform, and poor integration of different professional groups and organizational units. Contrary to the model, we found that progress in public finance reform efforts requires prerequisites, including impetus to change and budget basics. Impetus to change includes Ministry of Health ownership of the reform and donor coordination. Internal pressure for reform may also be increased if managers see relative advantages to the new system. Budget basics are essential in order to strengthen financial accountability, which will in turn make sound financial information more widely available, increase trust, and allow greater control of corruption. These are essential ingredients in the pursuit of government accountability for performance.