This component will improve the governance and management of the HIF, as the organization responsible for purchasing health care services for its beneficiaries under the compulsory health insurance scheme. 

                There is widespread recognition that the HIF has been performing poorly to date and that its operations are lacking in transparency and accountability. Poor practices in financial management, procurement and purchasing of health services, high staff turnover and insufficient attention to human resources, combined with weak oversight arrangements, have resulted in a poorly performing organization, which is also considered by the Government to be a significant fiduciary risk.  Thus, any efforts to improve the performance of the health system in FYR Macedonia as a whole must include initiatives to improve the functioning of the HIF and provide better value for money under the compulsory health insurance scheme. The investments supported in this component are closely aligned to the HIF conditionalities included under the PSMAL (namely, the establishment of an internal audit unit and the implementation of hospital contracts). The component will support international and local technical assistance, health information systems upgrading in the form of hardware and software and training.  Without the development of these systems and processes, any investments in hardware are likely to go unused and wasted.