About the Author(s)


Thanduxolo Fana symbol
Department of Public Management and Leadership, Faculty of Humanities, Nelson Mandela University, Gqeberha, South Africa

Mosekama O. Mokhele Email symbol
Department of Public Management and Leadership, Faculty of Humanities, Nelson Mandela University, Gqeberha, South Africa

Citation


Fana, T. & Mokhele, M.O., 2025, ‘Centralisation of financial decision-making on public hospitals in the Eastern Cape province’, Africa’s Public Service Delivery and Performance Review 13(1), a827. https://doi.org/10.4102/apsdpr.v13i1.827

Original Research

Centralisation of financial decision-making on public hospitals in the Eastern Cape province

Thanduxolo Fana, Mosekama O. Mokhele

Received: 12 Dec. 2023; Accepted: 30 Aug. 2024; Published: 31 Jan. 2025

Copyright: © 2025. The Author(s). Licensee: AOSIS.
This is an Open Access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

Background: The formal introduction of national health insurance in 2011 is making significant progress in South Africa. However, coronavirus disease 2019 (COVID-19) and the current financial situation pose a new challenge to South Africa’s ailing public health system, especially the centralisation of financial decision-making.

Aim: This article examines the implementation of centralisation of financial decision-making and its impact on the functioning of public hospitals to deliver public healthcare services.

Setting: The study’s research focussed on three public hospitals in the Eastern Cape province, South Africa.

Methods: This article followed the qualitative research method using semi-structured interviews and focus groups.

Results: Budget cuts, inadequate audit results, poor financial management and a lack of leadership support and management were the main reasons for centralising the financial decisions of public healthcare services to the Provincial Department of Health. The results further show that the chief executive offices in those hospitals do not have the power to make financial decisions, which affects hospital operations.

Conclusion: This article concludes that the centralisation of financial decision-making leads to delays in decision-making and poor public hospital functionality in delivering public healthcare services.

Contribution: It is crucial for public hospital leadership to understand which decision-making powers are centralised and which are decentralised. This understanding will assist public hospital leadership in assessing their respective hospitals’ specific needs and capabilities and strike a balance between the appropriate level of decentralisation, service performance, adequate staff availability and hospital functionality. Lastly, continuous monitoring and evaluation of the impact of centralised decision-making on public hospital operations could help public hospital leadership identify and promptly address any potential drawbacks.

Keywords: centralisation; public healthcare; service delivery; decision-making; public hospital.

Introduction

Public healthcare systems, especially in developing countries, face severe challenges to quality, cost, access and utilisation (Winchester & King 2018). These very issues adduce arguments for Universal health coverage (UHC) and, aligned with Goal 3 of the Sustainable Development Goals (SDGs) for 2030, have been the stimulus for many countries to undertake public health sector reforms. The 2008 global financial crisis further deepened the economic pressure on developing countries: foreign financial aid decreased with the result that healthcare spending subsequently decreased, reaching an average of 3% of the GDP in 128 low- to middle-income countries (LMICs) between 2008 and 2010 (Maley 2019; Overmans & Noordegraaf 2014). As healthcare costs spiralled and more so in developing countries such as South Africa, an essential drive was undertaken to reduce the money spent on hospitals while maintaining and ensuring the quality and safety of services (Le Guillou, Chrusciel & Sanchez 2021). Most governments acted with the introduction of austerity programmes designed to decrease rampant deficits and unsustainable levels of debt (Blecher et al. 2017).

The increasing emergence of these challenges has necessitated various strategies that will ensure efficiency in public healthcare. One of the most prominent strategies is decentralisation in decision-making, which contrasts with traditional centralism (Winchester & King 2018). Decentralisation is a public sector strategy in which lower-level administrative services, including those responsible for the lowest levels, are granted greater autonomy for public healthcare services (Le Guillou et al. 2021). The concept aligns with the National Health Insurance’s (NHI) aim to provide equitable access to quality healthcare for all South Africans, which enables local healthcare units to tailor services to community needs and improve accessibility and responsiveness. This is through decentralisation – transferring planning and decision-making powers from the national level to the sub-national or local administrative units in order to accord more management autonomy in the delivery of public health care services (Wishnia & Goudge 2020).

This model objective would correspond to NHI objectives with the following: equitable access to quality healthcare, enabling local units to meet community needs better and bettering responsiveness towards service. To ensure improved service delivery and access to quality services, the decentralisation process empowers local entities, elevating the level of quality, coverage and access to services while ensuring efficiency in the utilisation of public funds (Harris et al. 2011; WHO 2011). However, decentralisation could not work well because of a lack of capacity or mechanisms for accountability and control at lower administrative levels. Centralisation, therefore, continues to be pervasive in cases such as requirements for spending control on public expenditures and budget cuts. Centralisation involves pulling up the authority for decision-making at a central level, which is often driven by a desire for uniform standards and efficient allocation of resources with sacrifice at the altar of adaptability and local responsiveness (Wishnia & Goudge 2020). In some cases, symbolic decentralisation may be practised whereby actual local roles get extended while corresponding financial autonomy is not given, and this might hamper the overall functioning of the public healthcare system, thus losing their capacity to deliver value and maximise benefits from limited resources (Christiansen & Vrangback 2018:322).

This research focussed on three hospitals in the Eastern Cape province. The purpose of this study is to examine the implementation of centralised financial decision-making in public hospitals within the Eastern Cape province of South Africa and its impact on their ability to deliver essential healthcare services. This research, therefore, was guided by three objectives, namely: (1) to analyse the impact of centralisation of financial decision-making on the functioning of hospitals, (2) to assess the relevance of centralisation on hospital functionality and (3) to investigate challenges faced by hospitals on delivering their legislative commitment (namely, public healthcare service).

Background

Historical trends in disinvestment, outmigration of healthcare workers and structural determinants that produce inequalities in opportunities for effective and efficient public healthcare systems management have hindered and constrained efforts to access and maintain health and well-being (Winchester & King 2018). The South African public healthcare system is still facing formidable challenges of staff shortages, insufficiently skilled people occupying leadership and management positions, poor staff attitudes, ill-treatment of patients and unavailability of drugs and medical equipment (Govender, Proches & Kader 2018:205). In addition, media reports and community dissatisfaction have shown that services at public healthcare institutions fail to meet the basic requirements of care and patient expectations (Hendricks et al. 2014:60). Cost increases in human resources (HR) and medical supplies that are higher than inflation, as well as the proliferation of medical negligence litigations (Maphumulo & Bhengu 2019) coupled with fruitless and wasteful expenditure, corruption, internal inefficiencies, irrational decision-making, have contributed to poor public healthcare outcomes and financial difficulties (Mvalo 2023; Van Rensburg 2014:12). Although South Africa’s government has been spending nearly 8.8% of the national income on public healthcare, poverty, unemployment and elimination of tuberculosis (TB), human immunodeficiency virus (HIV and acquired immunodeficiency syndrome (AIDS) and non-communicable diseases have culminated in little progress made in public healthcare outcomes (Maphumulo & Bhengu 2019).

In the context of fiscal challenges, including a counter-cyclical approach post-2008 financial crisis, South Africa has seen a decline in terms of public healthcare financing from 2013 to 2020. Recent cost-cutting measures, including post-freezing and reduced infrastructure spending, have renewed interest in public financial management (PFM) as a strategy for supporting essential service delivery while managing costs (Eagar, Versteeg-Mojanaga & Cooke 2019). The World Bank and the World Health Organization (WHO) emphasise the need for autonomy and flexibility among public healthcare personnel, particularly hospital managers and district health offices (DHOs), to optimise public expenditures (Wishnia & Goudge 2020). However, South Africa’s public healthcare system is highly centralised, with the National Department of Health (NDoH) setting policies and standards and overseeing budget allocations to the Provincial Departments of Health (PDoH) and DHOs (Mlotshwa et al. 2017; Mvalo 2023). The South African government across spheres consists of a NDoH, 9 PDoH and 52 DHOs (Mlotshwa et al. 2017; Mvalo 2023). Centralisation involves the NDoH overseeing the implementation of national healthcare policies and resource distribution, which may limit the DHOs’ and PDoH’s ability to respond to local healthcare needs effectively. Although there have been efforts to decentralise certain functions through ‘delegations’, these measures remain limited (Winchester & King 2018). The introduction of the NHI brings new expectations for decentralisation, aiming to enhance the responsiveness and efficiency of healthcare services.

National Department of Health is responsible for establishing and developing national health legislations, frameworks, policies, norms and standards and playing an oversight role (functioning) for the healthcare system across the country (Barron et al. 2018). In other words, while coordinating and monitoring the implementation of public healthcare policies, the NDoH also oversees the budget allocation or resources to the PDoH and DHOs, ensuring that they have adequate funding and support to deliver public healthcare services effectively. In provinces, each PDoH is delegated planning and implementation responsibility for the national public healthcare policies, programmes and regulations of healthcare providers, as well as the management of healthcare facilities, to ensure that NDoH efforts are effectively implemented. At the same time, the DHOs are primarily responsible for delivering public healthcare services to the general public as entrenched at the national and provincial levels.

This means that the PDoH is responsible for delegating the financial decision-making powers to the DHOs. Over the years, efforts were made to deconcentrate power from provincial departments to districts and facilities through ‘delegations’, allowing officials to be legally responsible for tasks delegated to their respective levels. However, delegation is limited despite its benefits (Fana & Goudge 2021; Winchester & King 2018). With the implementation of NHI, decentralisation is expected to be a norm. Therefore, this study examines the impact of centralised financial decision-making on public hospital functioning in the Eastern Cape province. It seeks to understand the reasons behind the centralised approach and its effects on hospital operations, including resource allocation, service delivery and overall healthcare outcomes. The research focuses on the implications of centralised decision-making for achieving the goals of the NHI and improving public healthcare services in the Eastern Cape province of South Africa.

Research methods and design

Theoretically, the research approach refers to the blueprint or procedural plan adopted by a researcher to address research questions objectively, economically, accurately and with validity (Kumar 2014). Research design, in turn, provides the overall structure for data collection and analysis (Bryman & Bell 2015). This study adopts an interpretive paradigm (Creswell 2013) to explore the circumstances surrounding the centralisation of financial decision-making in public hospitals. The interpretive approach aims to understand how individuals interpret and make sense of their everyday experiences in natural settings, which, in this study, pertains to the workplace environment in public hospitals.

To achieve this, the research employed qualitative methods, specifically semi-structured interviews, to gather in-depth insights from participants. This methodology is well suited for exploring the nuanced effects of centralised financial decision-making on the functionality of three public hospitals in the Eastern Cape province. Thus, by engaging directly with individuals involved in or affected by these decisions, the study seeks to uncover the lived experiences, perceptions and challenges encountered in the healthcare setting. This qualitative approach allowed for a comprehensive understanding of the impact of financial centralisation on hospital operations, providing a rich, contextual analysis of its implications on public healthcare delivery in the region.

Target population, data collection and analysis

This study was conducted in three public hospitals located in two Metropolitan Municipalities in the Eastern Cape province, South Africa, a region characterised by high unemployment and poverty levels. Specifically, Buffalo City Metropolitan Municipality has an unemployment rate of 31.1%. In comparison, Nelson Mandela Bay Municipality has an unemployment rate of 33.6%, with the area also holding the second-highest poverty rate in the country (Statistics South Africa [StatsSA] 2022).

The selection of the three hospitals for this study employed a non-probability sampling approach, utilising both purposive and convenient sampling methods. Participants were deliberately chosen to respond to specific questions relevant to the research objectives. This sampling strategy, as noted by Baker, Edwards and Doidge (2012), is appropriate for qualitative research as it allows for the selection of a sample that reflects the characteristics of the target population. Edmonds and Kennedy (2016) further emphasise that purposive sampling enables researchers to choose participants based on specific needs related to the research objective, design and population targeting.

From the researcher’s perspective, the first author (TF) had extensive experience working in the province, providing familiarity with two of the hospitals, which facilitated access to staff for interviews. The third hospital was selected because of its reputation for outstanding performance, allowing the study to explore effective practices. The hospitals involved were: Hospital A, a 350-bed specialist TB hospital with 200 employees; Hospital B, a 900-bed tertiary hospital with approximately 2000 employees and Hospital C, a 200-bed district hospital with 600 employees (see Table 1).

TABLE 1: Hospital populations: Selection of participant and data collection methods.

This study’s focus on these hospitals provides a diverse perspective on the impact of centralised financial decision-making on public hospital functioning, encompassing different types of healthcare facilities and varying operational scales. This approach aligns with the study’s aim to understand how centralised financial control affects the functionality and service delivery of public hospitals in the Eastern Cape province, providing insights into the broader implications for public healthcare management in similar socio-economic contexts.

A total of 12 focus group discussions with 84 employees, as well as 47 interviews, which were conducted for the study from April 2019 to January 2020. The sample was considered sufficient, given Creswell’s (2013) deliberation that a sample of 8–60 is sufficient for data saturation for qualitative research. The sample was categorised as shown in Table 2.

TABLE 2: Hospitals’ interviews sample size.

Among the sample, shop stewards, clinical (public health practitioners) and non-clinical (support) staff participated in focus group sessions. These were supplemented with an in-depth interview with one group member to counteract the group effect. In conducting the discussions, the participants were allowed to briefly introduce themselves (such as their educational level, position or designation and tenure) and describe their goals, years of experience working in the hospital, obstacles and triumphs during the interviews. The researcher sought informed consent from the participants before digitally audio recording the interviews and discussions. Furthermore, the study reviewed existing reports on recruiting and selection policies, supply chain and financial management circulars and policies, hospital organograms and minutes of top management meetings were reviewed.

Data analysis

In line with the qualitative research approach, a qualitative data analysis process was employed to inductively capture and probe the elicited research findings (Maree 2007). The inductive analysis commenced during data collection, during interviews and focus group discussions, where participants’ reactions and behaviour were observed. During this stage, the researcher identified concepts and issues that would likely assist with understanding the situation under study. Also, data were extracted onto a data extraction sheet for each hospital as verbatim or condensed versions of events, which were checked for accuracy by the researchers, TF and MOM.

In this regard, thematic data analysis was employed to analyse the elicited findings. Upon execution, the familiar and divergent themes were identified across numerous data sources for the three cases and across hospitals to find differences and similarities. The researcher familiarised with the findings, developed codes that emerged from patterns of meanings and recurrence of arguments and generated subthemes that corresponded with the predetermined themes. Once the key themes have been identified, existent literature on centralisation and decentralisation was analysed to establish points of divergence and convergence with the findings and to ensure research rigour. To safeguardrigour, we proactively went back and forth between the literature and the data, alternating between understanding the data on its terms and using the higher-level perspective needed for informed theorising (Gioia, Corley & Hamilton 2012).

For data trustworthiness, the findings from in-depth interviews and focus groups were checked against the findings from various studies identified in the literature review. For this study, using one tool (Atlas.Ti Software) against an existing one (verbartim) contributed to the study’s reliability and validity, as argued by Sekaran and Bougie (2013).

Ethical considerations

The University of the Witwatersrand’s Human Research Ethical Committee (Medical) granted the ethical approval clearance certificate (No M181143) for the study. In addition, informed consent was obtained from all participants.

Results

According to the data, participants expressed several challenges and frustrations in their roles within the hospital, many of which are linked to centralised financial decision-making. These challenges included a lack of support from management and unions, staff and resource shortages, issues with HR and disciplinary procedures, poor communication and accountability and difficulties with equipment and infrastructure. Participants also reported challenges in meeting hospital goals and providing quality care to patients, exacerbated by the centralised allocation of resources, which limited local decision-making and responsiveness to specific needs.

The study’s findings highlight both the reasons for centralising financial decisions and the resulting positive and negative impacts on hospital functionality. Centralisation often aimed to standardise procedures and control costs. However, it also led to inefficiencies and dissatisfaction among hospital staff, who felt constrained by decisions made at higher levels without sufficient consideration of local conditions. This discussion provides a significant view of how centralised decision-making has influenced hospital operations, resource allocation and the overall ability to deliver effective healthcare services in the Eastern Cape province, aligning directly with the study’s title and objectives. It is worth noting that the use of percentages in this study was not to reflect statistical purposes. However, numbers were to give the overall statement, which shares the same meanings as far as interview responses are concerned. Hence, to ensure that the study complies with the selected approach (qualitative), the narratives were selected.

Reasons for centralisation

The study revealed various reasons for centralising public hospital service system decision-making. Those are discussed as follows.

Challenges faced by hospitals in delivering their legislative commitment

In delivering their legislative commitment, the hospitals encounter various challenges such as budget cuts, resource constraints and often poor leadership. As the public health department was in financial trouble, management had to make tough decisions to try and remedy the situation. In all, 49% of the participants mentioned that the situation in Hospital A was so bad that:

‘[N]ot only the Hospital A, but also in some of the hospitals the cost of employment alone is almost 70% of the overall budget, and they are trying to push it down at least to 60%.’ (CEO-Hospital B, 2020)

Moreover, 51% of the participants from Hospitals B and C indicated how challenges such as lack of leadership and financial and HR management skills contributed to the problems. For example, ‘The hospital has constantly received poor audit outcomes, and they are trying to improve that by introducing this new control mechanism and instituting disciplinary actions to those who transgress’ (Hospital C). The participants at Hospitals A, B and C indicated that these challenges affected their intentions to meet hospitals’ goals and provide quality healthcare services to patients. The participants expressed frustration, demotivation and dissatisfaction with their workplace’s current state of affairs owing to the centralisation of financial decision-making powers to PDoH.

Calls for improved financial management control and efficient use of public resources

Therefore, to remedy the situation and respond to calls for better and improved management of state resources and to act in compliance with the Public Finance Management Act, 40% of the participants at Hospital A indicated that ‘the provincial department decided to centralise all financial decision-making, by introducing a provincial cost containment committee (PCCC) that reviewed every expenditure decision for all the hospitals in the province’. Moreover, 32% of the participants at Hospital B further clarified the differences between cost containment committees by stating that:

‘… While the cost containment structures were decentralised and available at all the three levels of the public healthcare system [facility, district, and provincial level], the final authority or decision to approve or disapprove rested with the Provincial Costs Containment Committee, and this is done to allow the province to have overall and proper control of the expenditure.’ (DDHR-Hospital B, 2020)

Impact of centralisation of financial decision-making on hospital functionality: Positive impacts

The centralisation of financial decision-making has a positive impact on the functionality of hospitals.

Enables Provincial Departments of Health to gain an understanding of needed resources

Less than half (45%) of the participants indicated that the centralisation of financial decision-making through the PCCC had also drawn the attention of the provincial staff to the challenges faced by staff at the facility level or hospitals. Participants at Hospital A argued that the centralisation of financial decision-making forced them to seek a provincial department’s approval on the resources that drive the functionality of the hospitals. At the same time, such a process allows PDoH to gain an understanding of what resources are needed or available in hospitals as far as daily operations are concerned:

‘[B]y submitting hospitals requests to the head office for their perusal approval or disapproval, and this gives them a better picture in terms of what is needed or happening at the hospital in terms of resources, for the achievement of their goals and objectives as well as functionality of the hospital.’ (ASDHR-Hopsital A, 2020)

This allowed them better to understand the day-to-day needs and challenges at facility levels so that the hospitals could function optimally, even if they could not address them.

Improves stakeholder engagements, communication and accountability at facility level

Thirty-eight per cent of the participants indicated that the PCCC had improved stakeholder engagement, communication and accountability between management teams, unions and membership members. This furthers the optimality of the functioning of hospitals, given that hospital operational procedures are deliberated and planned accordingly. Hospital A found, ‘We have unions representing employees in the hospital, and we meet with them and discuss certain issues that affect their membership regularly’:

Nineteen per cent of the participants at Hospital C reiterated the need for consistent information sharing by stating:

‘Unions are constantly asking questions about when we are addressing staffing shortages and payments of outstanding benefits in the joint union and management meetings. So, we have to constantly update them as partners in the hospital’s governance so they can share the information with their members, especially when there are constant changes when the financial decision is centralised.’ (DDHR2-Hospital C, 2020)

On the other hand, 21% of the participants expressed how unions’ demand for answers and accountability had formed a bilateral forum between HR and finance section staff. A bilateral forum allowed finance and HR managers to share information and resolve challenges that have a bearing on hospital functionality. Hospital B shared:

‘We agreed in principle to meet and update each other regularly, as our work is interdependent. It is not a formally regulated structure, but something that we initiated, and its success depends on our willingness to cooperate to resolve issues.’ (OPM3-Hospital B, 2020)

Staff connected and learned more about how their duties fit into more significant processes and how problems develop. Furthermore, participants said that compensation inquiries were answered more quickly, and employee satisfaction increased.

Financial outlook or position

Thirty per cent of the participants indicated that the PCCC enabled finance officials at the provincial office to control expenditures and thereby improve the financial outlook of the hospitals and the PDoH. In this regard, centralisation allows provincial finance officials to control hospital expenditures tightly, given that the provincial office can ensure that spending aligns with broader budgetary constraints and policy goals, potentially preventing financial mismanagement and promoting fiscal discipline. Hospital C explained the provincial office’s control as:

‘[T]he provincial office is in control of everything. They are the ones that are approving all the transactions [buying and payment]. They are saving on employment costs as the process for filling vacant funded posts is prolonged, and, in some cases, requests for filling vacant funded positions are declined. The facility managers also have no chance to overspend on the budget.’ (Finance-Hospital C, 2020)

By and large, centralised decision-making can create efficiencies by standardising processes and reducing duplication. However, it can also lead to bureaucratic delays, especially if approval processes are lengthy or if there is a disconnect between provincial decision-makers and the realities faced by individual hospitals.

Impact of centralisation of financial decision-making on hospital functionality: Negative impacts

Centralising the financial decision-making also had a negative impact on the functionality of the hospitals.

Long turnaround time: Approval of supplies or equipment

Twenty-six per cent of the participants indicated that the centralisation of financial decision-making increased the turnaround time for filling positions, procurement and payment of suppliers for goods and services rendered. This was explained by Hospital A as:

‘[I]f you need to replace an employee or to buy just a simple thing like electrodes which only costs R1000, we have to go through a long process with many steps.’ (Finance-Hospital A, 2020)

Moreover, 19% of the participants showed frustration with the lack of essential equipment; for example, ‘There is no mouth gauge, no scissors, there is only one stitch holder, and we need two stitch holders’ (Hospital A). On the other hand, 36% of the participants indicated that the equipment they had was not operable, for example, ‘The sucking machine is not working, and the urinary cap is too big for the patients’ (Hospital B), and this was despite their having submitted their requisitions 2 months previously. These delays had affected service standards and the quality of service provided, thereby impeding the efficiency and effectiveness of hospital functionality.

At Hospital B, 36% of the participants reiterated and explained the recruitment process followed as:

‘[T]he recruitment officer takes all the requests for the filling of posts that were done and presents them to the institutional cost containment committee [ICCC], which sits on Monday. The ICCC looks at the submission and recommends that it proceeds to the district if satisfied. The District Cost Containment Committee [DCCC] will sit on Tuesday and look at the submission from the facilities. Once the DCCC is satisfied, it recommends it for submission of requests to the province on Wednesday. The Provincial Cost Containment Committee [PCCC] looks at it and decides whether to approve or decline the request.’ (DDHR-Hospital B, 2020)

Additionally, 19% of the participants at Hospital C participants had reiterated and explained their expectations from the PCCC processes, which were often delayed, as:

‘[T]he PCCC is supposed to meet every Wednesday, but they do not, you will wait for their response, and sometimes it may take up to six weeks or more before you get it, approved or not approved.’ (DDHR-Hospital C, 2020)

which compromised services during that period. Hospital A participants also re-emphasised the slowness of the ordering process:

‘The process is slow that sometimes it does not even make sense … they can take 2 to 3 months to order the supplies we used to get within a week to a month.’ (OPM-Hospital A, 2020)

Moreover, Hospital A participants expressed how the prolonged process affected services. For example, the unavailability of medical supplies delayed the care provision:

‘We do not have a haemoglobin (HB) monitor. We take blood, send it to another regional hospital, and wait until the following day to see if the patient needs transfusion.’ (CMO-Hospital A, 2020)

Longer turnaround time: Recruitment

All the hospital participants indicated that the biggest challenge in the HR department was the lengthy process of obtaining approval from the PCCC for recruitment processes, including advertising job posts and appointing candidates, which has resulted in lengthy delays. The participants explained the impact of the protracted process on service delivery by stating that the PCCC approval was necessary for recruitment, including advertising job posts and appointing candidates. Because of the prolonged approval times, hospitals often face extended periods with vacant positions, leading to staff shortages. However, the challenge was that the PCCC approval process could take up to 3 months, causing delays in filling vacant positions and resulting in staff shortages.

The participants further mentioned that when a candidate was selected for a position, but the PCCC approval was not obtained in time, it leads to unnecessary issues and delays. The delays also mean that when approval is finally obtained, the preferred candidates might have already accepted positions elsewhere, necessitating the restart of the recruitment process. This led to frustration and affected service delivery at Hospitals A, B and C. The inability to fill crucial roles in a timely manner affects hospital operations and contributes to a demoralising work environment, where staff are overburdened, and patient care may suffer.

The participants indicated a high vacancy rate in respective hospitals, which negatively impacted the delays in service delivery, especially as experienced staff members retired or left and were not easily replaced. Overall, the participants had expressed frustrations with the PCCC approval process and its challenges for the HR department and service delivery in public hospitals in the Eastern Cape province. Other issues relating to staff included dealing with staff members who were experiencing potential post-traumatic stress and the difficulties encountered when communicating with them. The participants also mentioned challenges with staffing shortages in critical positions, such as healthcare professionals and determining their hospital’s official designations. For example, most participants further indicated that the provincial department did not recognise the mental health unit as a speciality, limiting their ability to appoint speciality staff in that designation.

Limited stakeholder engagement in the provincial cost containment committee

Hospitals A and C participants stated they had informed stakeholders, such as labour unions, of their staffing challenges. However, they felt little could be done locally as the most critical decisions were centralised at the PDoH. The participants further mentioned that the hospitals had no representation at the PCCC meetings, and decisions were made without their input. This lack of engagement means that decisions are made without fully understanding on-the-ground realities and specific needs of each hospital. On the other hand, the participants from Hospital A indicated that this lack of representation has led to the perception that the committee’s decisions were purposefully delaying appointments to save money. This centralisation leaves local stakeholders feeling excluded and ineffective in addressing critical issues. The participants reported their concerns and challenges in monthly HR and forum meetings at the district level, and they felt that there needed to be more action to address the issues concerning the lack of stakeholder engagement due to centralisation. This ineffective communication and feedback loop further frustrates hospital staff and undermines confidence in the governance and responsiveness of the PCCC and the PDoH.

Non-adherence to recruitment, selection, supply chain and financial management policies

The centralised financial decision-making had led to non-adherence to recruitment and selection, supply chain and financial management policies. One of the participants from Hospital A indicated that the hospital did not comply with the hospital policy on recruitment. The participants mentioned that the policy stipulated that a vacant position must be filled within 6 months. However, Hospital A had only managed to fill one position in 2 years:

‘[T]he position of a Human Resources Practitioner after two years. The person left in January, and we got PCCC approval to fill the position in December. Then, when we tried to advertise, they said the position was no longer eligible to be filled in the province as there was no money. So, I resubmitted again, and when the PCCC rejected it, I sent the memo they had previously approved, and they granted us approval after two years.’ (DDHR-Hospital A, 2020)

According to Hospital A, during this period, the hospital had to re-arrange sections and allocate the work of the official who had left the hospital to other officials. Three participants (senior officials) from Hospitals B and C explained how the centralised financial decision-making and prolonged processes had resulted in staff shortages in the hospital. For example, at Hospital B, one of the participants shared that:

‘During this financial year, we lost two human resources department employees; one was transferred to another district, and the other was hired as a human resources practitioner in one of the hospitals in our district. We then tried to fill those vacant funded positions, but after following all the PCCC approval processes, we were told that both positions were no longer eligible to be filled. So, we have lost them for good, and we are two people short.’ (DDHR-Hopsital B, 2020)

One participant from Hospital A shared the frustration concerning the slow pace at which things were done in the PCCC:

‘In our facility, we had lost about 15 nurses over the past three months because by the time we got approval to appoint the applicants, the selected applicants had already accepted appointments elsewhere, and we have to re-start the recruitment process again.’ (OPM2-Hospital A, 2020)

This situation led to desperation and compromise in the quality of the candidates appointed, which might negatively impact the quality of the services offered in the long run.

Moreover, three participants from Hospitals A, B and C expressed frustration and confusion with the lack of consultation and autocratic decision-making caused by the centralisation of financial decision-making, for example, ‘The Head Office now dictates to us. They are deciding what food to buy, determining the quantities and who should provide services’. The participants indicated that the more challenging issue was when patients ran out of food. Although, at the same time, the hospital was not a decision-maker, ‘those in the management space got into trouble’ (OPM1-Hospital A, 2020). In addition, patients protested, demanding food even though hospitals were not part of the centralisation of financial decision-making.

Moreover, a participant from Hospital A mentioned that delegations of financial decision-making powers to the local level were significant; however, at provincial levels, this had become a ‘nightmare’, namely:

‘When we had delegations at facility level, we could do most of these things within the prescribed time frames, except in cases where the supplies failed to submit on time. Now that the powers lie with me at the provincial office, in most instances, they pay after the 21 days prescribed in the policy. This is a nightmare. I cannot wait to leave this place.’ (PAO2-Hospital A, 2020)

The decline in the number of employees and services, increased workload and unmet needs

One of the participants at Hospital A mentioned that the staff complement had been reduced owing to the delays from the PCCC approval, namely, ‘All positions that were not filled by 31 December were no longer eligible to be filled. We had more than 200 staff, but now we have 180’. This has reduced service delivery; for example:

‘We have 227 inpatients and more than 600 outpatients at the clinics, but we are only left with three doctors. They are supposed to go and monitor the outpatients, but we have stopped that service in some areas.’ (ASDHR-Hopsital A, 2020)

While these challenges existed in Hospital A, Hospitals B and C faced similar challenges.

The participants in Hospital B explained their primary responsibilities as support staff. These personnel provided various services such as recruiting; onboarding new teams; managing staff performance and discipline; handling payroll and benefits; building and training employees and attending management, staff and union meetings. As a result, Hospital B described their workload as ‘huge, and we are short staffed, because here in the HRM section, there are only four employees, and we are serving 600 staff members’. These sentiments were reiterated, and other employees felt the effects within the same hospital:

‘We are unable to meet their needs as we have too much workload.’ (ASDHR-Hospital B, 2020)

Moreover, Hospital B participants explained the workload impact:

‘If people that you intended to appoint get appointed elsewhere while waiting for your approval to appoint from the PCCC, you must re-start the recruitment process all over again, and that is more work and a waste of time. It is killing us.’ (DDHR-Hospital B, 2020)

Hospital C further reiterated and explained that the staffing impact challenge was severe on employees’ well-being by stating that ‘we are not coping; we are short-staffed. Those in the province do not feel what we feel at the facility level. Doing two- or three-people’s job is not a child play’.

As a result, the participants from Hospital A indicated their discontent with the quality of services provided by the HR management staff, stating:

‘We have expressed dissatisfaction with the quality of the services our members receive from human resources management. Overtime and night allowance monies are paid late, staff grading or promotions and performance evaluations are done late, and employee queries, grievances, and disciplinary proceedings are not attended to on time.’ (NM1-Hospital A, 2020)

A participant from Hospital C explained their dissatisfaction with the staffing shortage:

‘We need to be true to ourselves; centralisation has affected us badly as we have lost two staff members. To add more to our problems, I was booked off sick for three months, and only three staff members were left in that period. Moreover, they had to service 600 employees, and certain things were not done because there was no one to do them.’ (NM3-Hospital C, 2020)

The participant from Hospital C further explained the consequences of late or non-attendance on employee issues:

‘There is an increase in complaints, grievances, and dissatisfaction with human resources management services, and all those issues are submitted to the same short-staffed human resources department.’ (CM2-Hospital C, 2020)

As a result, tensions and mistrust increased between the union, employees and management, with one participant explaining:

‘We are here for the patients, and human resources management staff is here for us. They are supposed to make us happy, but it seems they do not understand that, and they do not want to take the union seriously in this hospital; we will fight for our members’ rights.’ (AM-Hospital C, 2020)

Discussion

The aim of this article was to examine the reasons for and the effects of the centralisation of financial decision-making on public hospitals in Eastern Cape province. The findings are discussed guided by three objectives, namely: (1) to analyse the impact of centralisation of financial decision-making on the functioning of hospitals, (2) to assess the relevance of centralisation on hospital functionality and (3) to investigate challenges faced by hospitals on delivering their legislative commitment (namely, public healthcare service).

Challenges faced by hospitals in delivering their legislative commitment

The centralisation of financial decision-making has introduced several challenges that undermine hospitals’ ability to fulfil their legislative commitment to providing quality public healthcare. Resource constraints arising from budget cuts and stringent control measures have led to critical shortages in supplies and equipment, which has adversely affected service quality. This observation concurs with the findings of Harris et al. (2011), who highlighted how financial constraints limit healthcare facilities’ capacity to deliver optimal services.

Additionally, the lengthy and bureaucratic approval processes for recruitment have resulted in prolonged vacancies and staff shortages, thereby increasing the workload on existing personnel and compromising patient care (Barasa et al. 2016). In the study conducted by Barasa et al. (2016), it was noted that bureaucratic delays exacerbate staff shortages and impact care quality. Also, operational delays in procurement and payment further disrupt hospital functions, leading to patient dissatisfaction, a finding consistent with London (2013), who identified such delays as significant barriers to effective healthcare delivery. Moreover, the lack of local representation in decision-making bodies has intensified these issues, as decisions made without local input often fail to address specific operational needs (Erasmus et al. 2014). This aligns with Erasmus et al. (2014), who argued that local engagement is crucial for addressing operational challenges effectively.

Impact of centralisation on hospital functionality

Centralisation of financial decision-making within public hospitals in the Eastern Cape province has yielded mixed effects on hospital functionality. Thus, the centralisation of financial decision-making and the introduction of a cost containment committee had positive and negative effects on the functioning of public hospitals. On the positive side, centralisation has facilitated enhanced financial oversight and control, allowing the provincial health department to align expenditures with broader budgetary goals and mitigate financial mismanagement (Wishnia & Goudge 2020).

This perspective resonates with Barasa et al. (2017), who found that centralisation can improve financial discipline and resource allocation. However, centralisation has also introduced significant delays in operational areas such as procurement and recruitment, leading to shortages of essential supplies and staff, thereby compromising service delivery (Evelyn 2004). This finding is in agreement with Harris et al. (2011), who observed that centralisation often leads to inefficiencies and operational delays. Bureaucratic delays and reduced local autonomy have led to inefficiencies, underscoring the need for a more balanced approach that integrates central oversight with adequate local decision-making authority to address specific needs and operational realities. Halkjær and Lueg (2017) argue that while centralisation can streamline processes at a macro level, it may undermine local responsiveness and flexibility.

Relevance of centralisation on hospital functionality

Centralisation aims to provide consistent financial oversight and policy implementation across hospitals, ensuring adherence to budgetary constraints and compliance with the Public Finance Management Act. This approach is crucial in managing financial strain and preventing mismanagement, a view supported by Barasa et al. (2016), who emphasised the importance of financial control in public health contexts. However, the practical implications of centralisation challenge hospital operations. While it streamlines financial processes at the macro level, centralisation often sacrifices responsiveness and flexibility at the facility level, leading to delays and a disconnect between provincial policies and local needs (Erasmus et al. 2014). This observation concurs with Barasa et al. (2016), who found that centralisation can result in inefficiencies and reduced adaptability at the local level. The study’s findings are consistent with previous research indicating that while centralisation enhances financial control, it may also lead to inefficiencies and reduced staff motivation because of decreased autonomy and increased bureaucratic delays (Harris et al. 2011; Maley 2019).

Implications of centralisation for hospital leadership and staff

Centralisation has had both positive and negative effects on hospital leadership and staff. While it has drawn attention to facility challenges, improved stakeholder engagement and enhanced financial accountability, it has also led to increased turnaround times, non-compliance with recruitment policies and decreased staff morale. This finding aligns with Evelyn (2004), who reported that reduced autonomy weakens leadership and management capacity. The lengthy recruitment processes and restrictions on filling vacancies have strained hospital operations and fostered dissatisfaction among staff, consistent with Barasa et al. (2016), who found that reduced autonomy can lead to weakened leadership. Transitioning to a more participative environment may be challenging in organisations with a top-down decision-making culture, as observed in the hospitals investigated. According to Barasa et al. (2017), increased hospital autonomy is crucial for improving healthcare services, addressing staff shortages and ensuring alignment between provincial and local priorities.

Future research

This study suggests that to get the rationale behind the centralisation of financial decision-making, further research could be conducted on all PDoH staff, which could provide new insights into the topic at hand. Another potential future research topic would be to examine leadership’s impact on delivering public healthcare services in urban and rural regional hospitals in the Eastern Cape province. As this brought to the fore the significance of financial decision-making as an integral part tied to the success of serviced delivery in public hospitals, this study further recommends that future research should address: (1) what needs to be managed centrally (PDoH) and locally, (2) which roles and responsibilities are subject to centralisation and decentralisation and (3) to what extent should centralisation occur. Moreover, this study comprehends the need for strong leadership development or support across all management levels in the public healthcare sector. Thus, research on leadership development in this area is needed, especially in public hospitals in the Eastern Cape province.

Conclusion and recommendations

The centralisation of financial decision-making influenced the functioning of the public hospitals positively by bringing the attention of the provincial managers to the day-to-day service delivery challenges facing hospital management, as well as improving stakeholder engagement, accountability and the financial position of the PDoH. The study found that the centralisation of public hospitals in the Eastern Cape province has increased financial control and accountability but is also coupled with significant operational difficulties, including critical resource constraints, chronic shortage of staff and general delays in bureaucracies, all of which collectively compromise the ability of hospitals to deliver quality public healthcare. What has even further exacerbated these problems is that with the exclusion of local representation in such a decision-making process, the decisions made at a distant level only serve to create suboptimal solutions to the concrete operational needs of the hospitals in question. Naturally, therefore, although centralisation helps reduce overly fragmented fiscal policies and provides a high level of fiscal consistency, centralisation ultimately serves to weaken any level of responsiveness and flexibility on the part of the hospital, which further detrimentally affects healthcare delivery as well as the overall operation of the hospital.

Based on the findings, it is recommended that a more balanced approach to financial decision-making be adopted. This should involve devolving certain decision-making powers to local hospital authorities to enhance responsiveness and operational efficiency. There should be a streamlined process for recruitment and procurement to reduce delays and ensure that hospitals can promptly address staff shortages and supply needs. Additionally, increasing local representation in decision-making bodies can help ensure that decisions are better aligned with on-the-ground realities and specific needs. Therefore, such measures are essential for improving healthcare service delivery and staff morale, ultimately contributing to better patient outcomes.

Acknowledgements

Competing interests

The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.

Authors’ contributions

Although the authors worked together on the whole manuscript, T.F. was mainly responsible for the literature review, conceptualisation of the research and writing the draft version of the article. M.O.M., on the other hand, worked on the research methodology and validation of information. Moreover, T.F. and M.O.M. worked together on the article’s analysis, reviewing and editing.

Funding information

This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.

Data availability

The data that support the findings of this study are available from the corresponding author, M.O.M. upon reasonable request.

Disclaimer

The views and opinions expressed in this article are those of the authors and are the product of professional research. The article does not necessarily reflect the official policy or position of any affiliated institution, funder, agency or that of the publisher. The authors are responsible for this article’s results, findings and content.

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