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Strategic Purchasing and PFM Rules
WHO SYMPOSIUM ON HEALTH FINANCING FOR UHC PUBLIC FINANCING FOR UHC: TOWARDS IMPLEMENTATION 31 October - 2 November 2017, Montreux, Switzerland
CHERYL CASHIN, RESULTS FOR DEVELOPMENT INSTITUTE
1
What does sustainable financing for progress toward UHC mean?
• Sufficient resources are made available within the country’s macroeconomic and fiscal realities to make continuous progress toward UHC objectives
• Resources are used equitably and efficiently to reach to priority populations and services
• Spending can be accounted for against UHC objectives
Strategic Purchasing 2
Health financing policy addresses the unique challenges of the health sector
NEEDS: Health needs vary across individuals, geography, and through time.
UNCERTAINTY
A large share of health service utilization and the purchase of medicines takes place in the private sector.
ROLE OF THE PRIVATE SECTOR
The health services that are delivered and the inputs used to produce them are greatly influenced by providers—who may have a financial interest.
THE AGENCY PROBLEM
COSTS: Service utilization is determined by choices of individuals.
Pooling
Accumulate and redistribute health funds
Provider Autonomy Providers internalize
incentives
Purchasing Incentives for quality and efficiency
Opportunity for regulation
PFM System
3
From passive to strategic health purchasing
• Resource allocation using norms or historical budgets
• Open-ended fee-for-service • Little/no selectivity of
providers • Little/no quality monitoring • Price and quality taker
Passive Strategic
Deliberate decisions about what to buy, from whom to buy, and how to buy services to achieve health system objectives: Manage overall costs in the system Payment systems that create
deliberate incentives Selective contracting Quality improvement and rewards Price and quality maker
4
When purchasing is not strategic—from the provider’s perspective
Salaries
Drugs and supplies
Local government funds
EPI and other program funds Performance-based financing
OOP
Multiple payment streams… each with its
own requirements
Health facility receives noisy or no signals about who to serve, what to provide, and quality
Health insurance fund payments
Limited flexibility to use funds to respond to patient needs
Accountable for $ more than health outcomes
Risk aversion-- penalized for using funds in innovative ways
Ultimately leads to under-execution of funds
Funds often held by district health office or other local government intermediary and do not
reach frontline providers 5
Under-execution of health budgets in Africa
0%10%20%30%40%50%60%70%80%90%
100%
Unspent budget Realised expenditure
Average 25% unspent health budget in sample of African nations (typically 10-30%) … … and similar applies to India
∅ 25%
Source: “Public Financing for Health in Africa: from Abuja to the SDGs” (WHO 2016); “Resource Tracking and Management” (M Bhawalkar and R Jha, 2016)
6
Foundational elements of strategic purchasing
Defined package of services
What is being purchased?
A clear definition of the package of services that is accessible to covered individuals.
Output-based provider payment
How is the package purchased?
Payment is made to providers for services with incentives to improve efficiency and quality of care.
Provider autonomy
How can providers manage?
Providers should have some autonomy over management decisions.
Monitoring and accountability
How to track what is purchased?
A good monitoring and accountability system is needed so all actors answer to achieving objectives.
Improving purchasing capacity
Institutional home for purchasing
7
8
Strategic purchasing in Ghana for small share of government health expenditure
16%44%
Out-of-PocketNationalHealthInsuranceScheme
Total Health Expenditure:
40%
Ministry of Health Budget
54%
4%
38%
4%
Salaries Administration Service Investment
Inputs
Services and medicines in the NHIS benefits package
Other services
and medicines
Uninsured
Source: Schieber, Cashin and Saleh (2012).
9
The share of funding through the purchasing agency is growing
21.3%34%
Out-of-PocketNationalHealth
InsuranceScheme
Total Health Expenditure:
35.5%
Ministry of Health Budget
Inputs
Services and medicines in the NHIS benefits package
Other services
and medicines
Uninsured
World Bank (2017) Ghana Public Expenditure Review.
Personnel Other
10
Potential challenges in the PFM system for strategic purchasing
Strategic purchasing function PFM functions Potential challenges
Decide what to purchase and with which funds
Budget formulation Budget execution
and payment Accounting and
reporting
Different purchasing arrangements for different revenue sources
Budgets classified, formed and disbursed based on inputs with facility as the budget unit
Important inputs (e.g. staff time) outside of purchasing
Lack of provider autonomy to respond to incentives
Challenges purchasing from the private sector
Inefficient procurement rules Delayed or unpredictable release of
funds—makes contracting difficult Poor information systems and
monitoring capacity
Decide how to purchase and with which payment mechanisms Monitor what has been purchased
11
Aligning the budget for strategic purchasing of PHC in Armenia
Activity-based budget (4 separate activities)
Program-based budget (4 programs)
Therapists
Outpatient specialists
Gynecologists
Diagnostics
Fragmented purchasing of
PHC
Still fragmented purchasing—
4 contracts with 1 polyclinic or rural
health center
Program-based budget (1 PHC program)
PHC
Capitation payment with performance
incentives
Prior to 2013 2013 budget reform 2018
12
A way forward and points for dialogue
Strategic purchasing requires being clear and deliberate about what is being purchased
Is the service package reflected in the budget structure?
Paying health providers specifically to deliver these service
Does the PFM system allow strategic output-based payment?
Contracting to clarify the obligations of the purchaser and providers
Do PFM rules allow for contracting with public and private providers?
Providers have some autonomy to make decisions to respond to incentives
Do providers have autonomy and are there appropriate accountability measures?
Thank you.
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