Maternal and newborn health is one of the main indicators of a good health system. The study wished to develop a strategy to improve the referral system for maternal and newborn care. To identify issues for improvement, the researcher explored the appropriateness of referrals, referral pathways and challenges, and provider costs for maternal and newborn care at health centres and hospitals levels. The researcher selected a sequential explanatory mixed method research design. Two primary hospitals and six health centres were purposively selected for participation. The first phase collected quantitative data by reviewing the health facilities’ medical records for services provided and health service costing, respectively. Data collection covered one Ethiopian fiscal year (8 July 2017 to 7 July 2018). Based on the existing human resource arrangement and care needs, the health service costing found that a single midwife at health centre level spent half of the expected time for delivery care. The cost estimates of various types of care delivery care indicated that delivery care at health centre and hospital levels cost $27.5 to $30.2, and $34.7 to $37.8, respectively. The primary hospitals incurred four times the cost for newborn intensive care units and Caesarean sections compared to normal delivery care. In the second phase, the researcher collected qualitative data from 26 purposively selected key informants in interviews. The findings indicated that the selected hospitals and health centres had a referral system, but several factors impeded its effective implementation. Knowledge of referral pathways determined the referral practices at the lower level of the system. The number of inappropriate referrals to primary hospitals indicated a need to mobilize and educate the community on the services available and protocols of care. In general, most referrals could have been managed at health centre level. Emergency medical transportation is a critical component of the referral system; delays in transportation determine the outcome of care at hospital level. Ambulance management was generally poor, lacked a tracking system, and was negatively affected by confusion and lack of coordination between facilities. The available ambulances were not well equipped or well-staffed for emergency management. Moreover, there were frequent breakdowns due to limited budget for maintenance and running costs. The quality of maternal care depends on the quality of the labour monitoring. However, partograph utilization was not consistently practised. Admitted cases were not properly monitored because of the high caseload and limited supervision support. In many cases, healthcare professionals tended to “treat charts” rather than promote evidencebased practice while providing care. The quality of practice was challenged by insecurity in the working environment but strengthened by good teamwork and available consultation support. The implementation of the existing referral system depended on the people involved; the use of performance indicators; follow up by management, and an accountability framework. The findings of the two phases of the study and review of other countries’ experiences on the identified problems, led to the development of draft strategy and then a consultation with relevant experts produced the final strategy. The strategy includes interventions to improve the practices at the sending and receiving facilities as well as suggestions to improve the communication, transportation and overall governance system. Then, taking into consideration all the phases of the study, the researcher makes recommendations for practice and further research. / Health Studies / D. Litt. et Phil. (Healht Studies)