The performance of a health system hinges upon effective and efficient allocation of resources. The nature of governance within the health system, including critical components such as purchasing mechanism of health care services, also determines the health status of program beneficiaries. This article investigates an existing purchasing mechanism of a state-funded health care scheme through the lens of governance. We applied framework method on an adapted version of a tool developed by the World Health Organization (WHO), Organizational Assessment for Improving and Strengthening Health Financing (OASIS), to draw four themes to study the status of purchasing mechanism in Madhya Pradesh (MP), India. We used purposive sampling to select subjects from the state, district, and block levels and conducted 32 in-depth interviews. Subjects from the district and block levels were drawn from a sample of three out of 51 districts in MP. We found that although the scheme is functional, it has immense scope for improvement, thereby bettering the health outcomes of its beneficiaries.