Strategic Purchasing and PFM Rules...PFM functions . Potential challenges . Decide what to purchase and with which funds Budget formulation Budget execution and payment Accounting

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

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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

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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

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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)

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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

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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).

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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

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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

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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

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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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