Effects, Challenges, and Preconditions for Implementing Direct Health Facility Financing and the Prime Vendor Model in Low-Resource Settings: The Experience from Tanzania

Primary health care (PHC), while critical to achieving universal health coverage, remains underfunded and often delivers poor-quality care. In response, Tanzania introduced two innovative and complementary reforms—Direct Health Facility Financing (DHFF) and the Prime Vendor Model—to improve PHC financing and commodity availability by decentralizing financial management and granting greater autonomy to align financing with local needs. DHFF involves direct transfer of funds to PHC facility bank accounts, enabling timely access to resources and strengthening local decision-making. The Prime Vendor Model reduces stock-outs of essential drugs by allowing facilities to use available funds in their bank accounts to procure commodities from accredited private vendors when the central medical store is out of stock. This paper presents a critical reflection on the effects of these reforms on PHC autonomy, quality of care, and strategic healthcare purchasing. This analysis draws on a targeted review of the literature and the authors’ implementation experience as researchers and ministry officials overseeing the reforms. It also highlights key implementation challenges, including delays in disbursement, rigid financial regulations, and limited facility-level capacity. This paper concludes by outlining key enabling conditions and implementation lessons for other LMICs considering similar reforms, emphasizing the importance of policy integration, strong public financial management systems, capacity building, and navigating political dynamics to ensure successful implementation.