This dissertation has been accepted by the RAND Graduate School in partial fulfillment of the
requirements for the degree of Doctor of Philosophy in Policy Analysis.
In 1996 the Government of Macedonia began a comprehensive Health Sector Transition Project
(HSTP) under a World Bank credit. The RAND Corporation was under contract to provide
technical assistance to the Government of Macedonia on aspects of the health sector financial
reforms for primary health care (PHC). The author was part of the RAND project team, living in
the country from 1996 to 1998. The survey research conducted as part of the HSTP Technical
Assistance project was supplemented with additional fieldwork and research to examine the
behavior of physicians in the existing private sector in PHC and the prospects for further
To address these issues, this study employs a dual research approach. First, the policy
environments governing primary care, both currently and as proposed by the reforms, are
examined with respect to their ability to facilitate the introduction of market forces in health care.
Secondly, data from a survey of public and private PHC physicians is analyzed in a novel
production function framework to investigate how physician workload and resource utilization
are influenced by the financial and regulatory incentives that they face. Together, these
approaches yield a rich set of recommendations to improve the effectiveness and fairness of the
introduction of market forces into health markets in a transition economy.