Federalism and Health System Performance: Lessons From Sub‐National Case Studies in Nepal

ABSTRACT Background Nepal's sub‐national health systems face persistent capacity gaps requiring assessments beyond World Health Organization (WHO) building blocks to capture system performance, effectiveness, efficiency, and equity. Methods This short communication synthesizes three case studies: (1) technical assistance evaluating WHO framework capacity gains in municipal learning sites (pre/post scores) in two municipalities; (2) participatory institutional capacity assessments across seven domains in 79 municipalities of Karnali Province; and (3) a mixed‐methods study using 166 household surveys, 12 key informant interviews, and one focus group discussion in a rural municipality of Bagmati Province applying extended WHO framework. Results Targeted technical assistance yielded rapid municipal capacity gains, particularly in low‐baseline sites in Koshi and Madhesh; Karnali assessments showed legacy functions (supply, budgeting) outperforming new governance roles (policy, monitoring, and evaluation); rural municipality in Bagmati's moderate performance linked effectiveness, efficiency, and equity to geographic access barriers, staff shortages, gender biases, insurance gaps, and disaster impacts. Conclusions Federalism's early phase demands urgent tier‐to‐tier collaboration and bottom‐up assessments incorporating community realities, gender, and social inclusion, which are not captured in the WHO's building blocks. Streamlined, harmonized support across federalized role division is essential to build responsive, people‐centered sub‐national health systems meeting Nepal's evolving demands.