What explains the variation among public hospitals in implementing the free healthcare policy of the Philippines? We draw on Ostrom’s theory of polycentric governance, which assumes that policy actors’ autonomous interactions at various levels produce better policy implementation when managing the provision of public goods. To explain the various degrees of implementation, we analyse the effects of face-to-face horizontal and vertical interactions between public hospitals and other policy actors by employing sequential explanatory mixed methods. Using originally collected survey data of public hospitals in two regions of the Philippines, we quantitatively demonstrate that the vertical interactions between hospitals and implementing agencies at local levels as well as monitoring and prompt disbursement of the costs by the implementation agency matter when seeking to enhance the delivery of free health care at public hospitals in the Philippines. We further qualitatively explore why horizontal and vertical interactions are made possible by comparing three public hospitals.