Background: As an upper-middle-income country with a gross domestic product per capita of US$16,060 and per capita expenditure on health of US$444, a significant challenge for Botswana’s health system is the efficient and effective allocation of health resources. Operational reforms in the hospital system focus on privatization and outsourcing of non-clinical services.

Objective: To documenting costs and budgetary implications of Botswana’s outsourcing policy.

Methods: Cross sectional data of hospital size, occupation rates, length of stay, and hospital budgets were analyzed and complemented with standardized surveys from the staff at seven district and referral hospitals.

Results: Hospitals in Botswana spent 53% of the US$789 million in total health expenditures (THE) in 2010. District and referral hospitals accounted for 26.6 percent of THE; three major hospitals (S’brana, Nyangabgwe and Princess Marina), with a combined recurring budget of US$11.7 million (excluding capital and labor) were operating contracts for laundry, cleaning, security and landscaping services. On average, these contracts represented 37% of the recurring budget. These contracts are output-based and operate under fixed-rate reimbursement for delivery of services; however, without cost benchmarks, paying lower prices has the potential to affect quality and undermine the development of a nascent market thrive.

Conclusions: Outsourcing non-core health services represents a major change in hospital operations.  Health systems can drive economic development through local procurement of goods and services, however, it is first necessary to determine fair prices and evaluate changes in efficiency, cost, and quality. Public-private partnerships are essential to the design of a value-based system of health-care delivery.