Purchasing health services for universal health coverage: how to make it more strategic?

PURCHASING HEALTH SERVICES FOR UNIVERSAL HEALTH COVERAGE: HOW TO MAKE IT MORE STRATEGIC? HEALTH FINANCING POLICY BRIEF NO. 6 Inke Mathauer Elina Dale Matthew Jowett Joe Kutzin © Copyright World Health OrganizaƟ on 2019 Some rights reserved. This work is available under the CreaƟ ve Commons AƩ ribuƟ on-NonCommercial- ShareAlike 3.0 IGO licence (CC BY-NC-SA 3.0 IGO; hƩ ps://creaƟ vecommons.org/licenses/by-nc-sa/ 3.0/ igo). Under the terms of this licence, you may copy, redistribute and adapt the work for non-commercial purposes, provided the work is appropriately cited, as indicated below. In any use of this work, there should be no suggesƟ on that WHO endorses any specifi c organizaƟ on, products or services. The use of the WHO logo is not permiƩ ed. If you adapt the work, then you must license your work under the same or equivalent CreaƟ ve Commons licence. 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Purchasing health services for universal health coverage: How to make it more strategic? / Inke Mathauer, Elina Dale, MaƩ hew JoweƩ and Joe Kutzin WHO/UCH/HGF/PolicyBrief/19.6 Key messages Acknowledgments 1. What is purchasing and when is it strategic? 2. Why is strategic purchasing important for universal health coverage and how feasible is it? 3. Strategic purchasing policy options: What do we know from theory and practice? 4. How does strategic purchasing link with other issues related to health fi nancing? 5. The perspective of WHO References Annex 1: Main payment methods used in health systems and expected incentives 4 4 5 7 8 13 15 16 18 TABLE OF CONTENTS Valuable comments from Agnes Soucat, MeliƩ a Jakab, Yves Souteyrand, Fahdi Dkhimi, Bayarsaikhan Dorjsuren, Julius Murke and Aurelie Klein are gratefully acknowledged. We also thank the colleagues from the Department of Health Systems Governance and Financing for their useful suggesƟ ons and feedback during a departmental review meeƟ ng. The authors also gratefully acknowledge fi nancial support received from the United Kingdom Department for InternaƟ onal Development and the EU-Luxembourg-WHO UHC Partnership Program. – Purchasing refers to the allocaƟ on of pooled funds to healthcare providers for the delivery of health services on behalf of certain groups or enƟ re populaƟ on. Purchasing of health services is to be disƟ nguished from the procurement of medicines and other medical supplies in bulk. – Purchasing is considered to be strategic when these allocaƟ ons are linked, at least in part, to informaƟ on on aspects of provider performance and the health needs of the populaƟ on they serve, while managing expenditure growth. – Strategic purchasing involves several core areas that should be aligned and addressed jointly, namely: • specifi caƟ on of services and intervenƟ ons (“what to buy”); • choice of providers (“from whom to buy”); and • design of fi nancial and non-fi nancial incenƟ ves (“how to buy”) – this refers to provider payment mechanisms and contractual arrangements. – InformaƟ on is intrinsic to strategic purchasing and needed for the above quesƟ ons and a key enabler for eff ecƟ ve governance of strategic purchasing to enable progress towards UHC objecƟ ves. – For the purchasing funcƟ on to contribute to progress towards UHC, it must be strategic. Strategic purchasing transforms budgets into benefi ts, with the aim of distribuƟ ng resources equitably, realizing gains in effi ciency and managing expenditure growth and improving quality. – Reforms which enhance the strategic nature of purchasing can be incremental and packaged rather than radical or big-bang. Many of these reforms are within the realm of the health sector and can oŌ en be guided by the Ministry of Health. Nonetheless, it is important not to ignore the poliƟ cal economy behind strategic purchasing reforms. ACKNOWLEDGMENTS Key Messages 4 HEALTH FINANCING POLICY BRIEF NO. 6 What is a purchasing agency? Purchasing agencies can take many forms, such as the Ministry of Health, subnaƟ onal authoriƟ es (e.g. at provincial or district levels), a mandatory or voluntary health insurance agency (or mulƟ ple insurance agencies), a community-based health insurance organisaƟ on, a non-governmental organizaƟ on, etc. 5 This policy brief aims to show how strategic purchasing contributes to progress towards universal health coverage (UHC)1 and how countries can make their purchasing more strategic. Purchasing is a core health fi nancing funcƟ on that refers to the allocaƟ on of pooled funds to public and private health care providers for the health services they provide. Medicines and other medical supplies included in the provision of care or as part of inpaƟ ent or outpaƟ ent benefi ts are included in this defi niƟ on. Importantly, purchasing of health services must be disƟ nguished from procurement of medicines and medical supplies. Procurement refers to the process of selecƟ ng vendors, establishing payment terms and negoƟ aƟ ng contracts for obtaining commodiƟ es in bulk [1]. Similarly, whilst investment, infrastructure and human resources are important for the provision of health services, human resource management and the planning of investments and infrastructure are not part of this paper on purchasing. The purchasing landscape is oŌ en complex due to the existence of mulƟ ple purchasers and an ever-growing and diverse private sector of health care providers, including for- profi t and not-for-profi t providers. There is a growing consensus that purchasing of health services must be more acƟ ve or strategic if countries are to make progress towards UHC. However, purchasing of health services is oŌ en rather passive – i.e. resources are allocated to any providers without disƟ ncƟ on, without consideraƟ on of their performance, and for a package of benefi ts that is poorly defi ned. There are hence few if any fi nancial incenƟ ves for providers to do beƩ er. Strategic purchasing means aligning funding and incenƟ ves with legal enƟ tlements to health services and must therefore be guided by detailed informaƟ on on the performance of providers and the health needs of the populaƟ on served [2]. Strategic purchasing aims to maximize health system objecƟ ves through an acƟ ve, evidence-based process that defi nes which specifi c health services should be bought from which providers, how the services should be paid for and at what 1. WHAT IS PURCHASING AND WHEN IS IT STRATEGIC? 1 Universal health coverage (UHC) means that all people can access health services of good quality without experiencing fi nancial hardship [2]. WHAT IS PURCHASING AND WHEN IS IT STRATEGIC? Figure 1: Core areas of strategic purchasing and policy quesƟ ons rate they should be paid. Strategic purchasing is not only relevant to dedicated purchasing agencies, e.g. health insurance funds. While strategic purchasing may be easier when the funcƟ ons of purchasing and provision are separated, it does not necessarily require an insƟ tuƟ onal purchaser-provider split [3]. Strategic purchasing involves several interrelated areas, which need to be aligned and addressed jointly. These are presented together with their respecƟ ve policy quesƟ ons in Figure 1 below and are further outlined in SecƟ on 4. A country’s purchasing arrangements are usually neither completely passive, nor fully strategic. Countries at all income levels are seeking to progress on this conƟ nuum towards more strategic purchasing [4]. Improvements in any of the areas outlined above contribute to making purchasing more strategic. * Governance is an overarching health system funcƟ on, but is parƟ cularly relevant for strategic purchasing. Source: Authors compilaƟ on2 2 The three core quesƟ ons “what to buy”, “from whom to buy” and “how to buy” are based on the World Health Report 2000. 6 HEALTH FINANCING POLICY BRIEF NO. 6 Revenue raising and eff ecƟ ve pooling of funds for health are important, but strategic purchasing is vital for countries to be able to progress towards UHC. Strategic purchasing transforms budgets into eff ecƟ ve coverage, with the aim of realizing gains in effi ciency and managing expenditure growth. This frees up resources and, as such, is an important revenue source for expanding service or cost coverage. It also seeks to improve quality by giving signals to health providers. Strategic purchasing can also improve fi nancial protecƟ on through reduced out-of- pocket expenditure, make the distribuƟ on of resources more equitable and enhance the transparency and accountability of providers and purchasers [5]. Numerous countries have made progress towards UHC through improvements in strategic purchasing in the past two decades [2]. Examples include ArgenƟ na, Ghana, Kyrgyzstan, Philippines, Thailand and Turkey [6-11]. Yet, many low- and middle-income countries face poliƟ cal, insƟ tuƟ onal and technical challenges to improving the way they purchase health services. Moreover, new developments (e.g., new health technologies, new prioriƟ es, changes in provider behaviour or greater availability of data) conƟ nually emerge, requiring the adaptaƟ on of purchasing arrangements. Because of its signifi cance, strategic purchasing for UHC needs to receive much more aƩ enƟ on [1]. Strategic purchasing reforms do not have to be big-bang changes but can be gradual and in several packages. Reforms aimed at making purchasing more strategic are not always easy but, importantly, they can be introduced step-by-step: building the informaƟ on management system, specifying benefi ts to align with payment methods and vice versa, modifying payment methods and rates to improve service provision, and puƫ ng in place an accreditaƟ on system, etc. These measures can drive system change and, being within the realm of the health sector, can oŌ en be steered by the Ministry of Health. These steps can be undertaken before tackling broader issues such as pooling or increased revenue raising to fi nance expansion of coverage to the informal sector [12]. 2. WHY IS STRATEGIC PURCHASING IMPORTANT FOR UNIVERSAL HEALTH COVERAGE AND HOW FEASIBLE IS IT? 7WHY IS STRATEGIC PURCHASING IMPORTANT FOR UNIVERSAL HEALTH COVERAGE AND HOW FEASIBLE IS IT? The agencies responsible for purchasing play a pivotal role in further operaƟ onalising the stated benefi ts within a given budget, by further specifying which health services or intervenƟ ons to purchase. However, decisions on the benefi t design,3 i.e. those benefi ts to be covered by public funds, are in many cases made by higher levels of government. This brief does not go further in the criteria and process used to defi ne benefi ts, as this is described elsewhere.4 This operaƟ onalisaƟ on of the stated benefi ts involves choices for example on specifi c treatment opƟ ons for a specifi c health condiƟ on (e.g., peritoneal dialysis or hemodialysis for renal replacement therapy) The most widely used framework for understanding purchasing arrangements is based on the principal-agency theory. The agent (i.e. the health care provider) undertakes to perform various tasks (i.e., service provision) for the principal (the purchaser who is in turn an agent for the people), in exchange for a mutually agreed award (i.e., primarily the provider payment), because the principal needs the eff orts and experƟ se of the agent [13]. However, the interests of the agent (provider) may diff er from those of the principal (purchaser). Moreover, the principal cannot always observe the agent, resulƟ ng in informaƟ on asymmetry between the two parƟ es. The central problem for the principal is how to ensure that the agent acts in the way that is desired by the principal [13]. Thus, the key tasks for strategic purchasing include specifying the intervenƟ ons to purchase, whilst seƫ ng the right incenƟ ves through provider payment methods plus accompanying informaƟ on systems for monitoring performance and decisions on resource allocaƟ on. All this also depends upon eff ecƟ ve governance arrangements that need to be improved concurrently. Policy makers need to carefully think through the sequencing of strategic purchasing reforms for successful implementaƟ on. Such reforms must be designed and implemented with a system perspecƟ ve, rather than trying to opƟ mise the purchasing funcƟ on of a specifi c scheme only. For instance, many performance-based fi nancing iniƟ aƟ ves have been designed and implemented as isolated projects, oŌ en without adequate consideraƟ on of the rest of the health system and, more specifi cally, of how it can link to exisƟ ng provider payment systems [14, 15]. Moreover, as the key areas of strategic purchasing are interrelated, they must be aligned and addressed jointly not only for a specifi c health fi nancing scheme but, more importantly, across the enƟ re health fi nancing system and all purchasers and providers. The following secƟ ons outline in detail the respecƟ ve strategic purchasing policy opƟ ons. 3. STRATEGIC PURCHASING POLICY OPTIONS: WHAT DO WE KNOW FROM THEORY AND PRACTICE? SPECIFYING BENEFITS 3 Benefi ts may be defi ned along level of care (e.g. primary health care, secondary and terƟ ary care), types of care (outpaƟ ent, specialized outpaƟ ent care, inpaƟ ent care), and/or along diseases and health condiƟ ons or intervenƟ ons. 4 The topic is addressed in greater detail in a forthcoming WHO Health Financing Policy Brief. 8 HEALTH FINANCING POLICY BRIEF NO. 6 Purchasers need to further defi ne and specify from which levels of providers and provider types covered services, intervenƟ ons and medicines will be available and whether and how these can be accessed from the public sector and/or the private sector. Again, in some cases, such decisions may have been taken by higher government levels, but nonetheless purchasers need to concreƟ se and align this with the access condiƟ ons referred to above. SelecƟ ve contracƟ ng as well as accreditaƟ on are key instruments in strategic purchasing to select from which providers to buy. AccreditaƟ on is a process of review that allows healthcare providers to demonstrate their ability to meet defi ned quality related standards (e.g., related to structure, process and/or outcomes), and as such the accreditaƟ on results provide relevant informaƟ on to the purchaser about provider performance [16]. SelecƟ ve contracƟ ng5 means that a purchaser can select among (compeƟ ng) providers, i.e. it has hence a right not to contract with all available providers. This selecƟ on can be based on predefi ned criteria or a provider’s accreditaƟ on results in order to further incenƟ vise quality and good performance [17]. The use of selecƟ ve contracƟ ng is however limited pracƟ ce for various reasons. On the one hand, especially in rural and remote areas, there may only be one provider for people to access health services in a given catchment area. On the other hand, including certain providers, but not contracƟ ng with other providers may be poliƟ cally challenging. In many LMIC, it is found that all licensed providers are contracted by a naƟ onal health insurance programme. The appropriateness of each payment method depends on the health system’s objecƟ ves, idenƟ fi ed challenges, the type of services to be paid for and contextual factors, such as the level of provider autonomy. Payment methods and the set of incenƟ ves may thus have a slightly diff erent eff ect on private for-profi t providers. The main provider payment methods are line-item budgets, per diem payments, case-based payments, SELECTING PROVIDERS COHERENT INCENTIVES IN MIXED PROVIDER PAYMENT SYSTEMS AND CONTRACTUAL ARRANGEMENTS or which medicines are covered (e.g. generics only). Another important element is to specify the condiƟ ons of access to these services, i.e. paƟ ent cost-sharing and referral rules. As such, purchasers can choose for example to give greater priority to primary health care, focus on cost-eff ecƟ ve services or on the disease burden of vulnerable populaƟ on groups, and set higher cost-sharing rates for higher levels of care to reduce self-referral to hospitals and specialists. OperaƟ onalising benefi ts requires a regular revision and updaƟ ng process, with uƟ lisaƟ on reviews inter alia being an important tool. It also entails the specifi caƟ on of service and medicines standards, although this may in some cases be undertaken by the Ministry of Health. Benefi ciaries need to be aware of their enƟ tlements and related access condiƟ ons. A common challenge is that benefi ts may not be clearly defi ned in terms of either enƟ tlements or condiƟ ons of access. This is where the purchaser plays an important role in further specifying and clarifying these. 5 A contract involves a prospecƟ ve and explicit agreement between the purchaser and an individual provider regarding the terms and condiƟ ons of payments. A contract would specify the provision of the type and volume of services over a defi ned period, with specifi ed objecƟ ves and indicators to measure contract fulfi lment (e.g. on quality) [24]. 9STRATEGIC PURCHASING POLICY OPTIONS: WHAT DO WE KNOW FROM THEORY AND PRACTICE? global budgets, fee-for-service and capitaƟ on payments. Each provider payment method has advantages and disadvantages; as such, each creates its own (fi nancial) incenƟ ves. Annex 1 explains these payment methods and outlines their respecƟ ve incenƟ ves. For example, when the objecƟ ve is to increase uƟ lizaƟ on of specifi c services, fee-for-service payment can be useful to incenƟ vize providers to provide more of those services, as it was a case in Ghana and Indonesia [18]. However, open-ended fee-for-service payments may easily lead to over-provision of health services and result in accelerated expenditure growth. Purchasers must manage dynamically and anƟ cipate changes (e.g. in cost structures, technology, provider behaviour) while regularly adjusƟ ng and opƟ mizing payment methods [19]. As payment methods and rates send signals to providers, purchasers can use them to infl uence provider behaviour and their resource use. For example, purchasers can pay relaƟ vely high amounts for primary health care services to refl ect their priority and incenƟ vise providers to put greater focus on these, and pay relaƟ vely lower prices for high-cost but low-priority services as an incenƟ ve to limit the provision of these services [20]. There is growing evidence and increased consensus that purposive alignment of payment methods – balancing the undesirable incenƟ ves of a single payment method and harmonizing the range of incenƟ ves – is the opƟ mal approach to improving the payment system [21]. Blended payment methods are one way. Blending means two or more payment methods are combined purposively. For example, case- based payment is combined with a global budget as a way of controlling overall spending, or a base payment (e.g. salaries, fee-for-service, capitaƟ on) is blended with a pay-for-performance mechanism [22]. This laƩ er opƟ on is a way to link some part of the payment to the performance of providers, measured in terms of quanƟ ty or quality. Estonia provides a good example of a blended payment system [23]. Another opƟ on of purposively aligned payment is bundled pay, whereby several components of health care for a specifi c intervenƟ on are put together and paid for together, based on the expected costs of paƟ ent cases, episodes or care over a specifi ed Ɵ me-period. Depending on its design, bundled payment can provide incenƟ ves for integraƟ on of care [22]. Pay-for-coordinaƟ on arrangements are also gaining importance. The idea is to incenƟ vise conƟ nued care and care coordinaƟ on across providers and care levels (from primary to specialist and hospital care), while incenƟ vizing the use of primary health care [22, 24]. This must also be geared to establishing an eff ecƟ ve provider network. Even in a well aligned mixed payment system, there is need for complementary administraƟ ve mechanisms to ensure that payments over Ɵ me conƟ nue seƫ ng the right incenƟ ves to providers. UƟ lisaƟ on reviews are important not only to revise and update what services and medicines to cover, but also to have informaƟ on to adjust payment methods and rates. AdministraƟ ve controls include for example audit, claims review and fraud control measures. Moreover, regular revisions of payment methods and rates serves to respond to provider behaviour caused by a provider payment method itself (e.g., the tendency of “upcoding” in a Diagnosis Related Groups (DRG) payment system) [19]. ContracƟ ng is a key policy instrument for strategic purchasing and eff ecƟ ve payment systems by puƫ ng greater focus on the achievement of measurable results. While there are sector-wide agreements and accords on payment methods and rates for a whole group of providers reimbursed by a purchaser, e.g. a health insurance agency, the idea behind contracƟ ng is to provide clear specifi caƟ ons to an individual provider. 10 HEALTH FINANCING POLICY BRIEF NO. 6 A growing number of countries across all income levels set up payment methods in combinaƟ on with explicit contracƟ ng arrangements to address concerns about health care quality and pursue performance targets [25]. ContracƟ ng may also include non-fi nancial incenƟ ves, e.g. reputaƟ onal benefi ts or support supervision. For providers to be able to respond to any incenƟ ves they need suffi cient managerial and fi nancial autonomy and capacity. If providers are supposed to receive case- based payments but the public fi nancial management (PFM) rules do not allow them to change the mix of inputs, the expected effi ciency gains will not be realized and the quality of care will suff er [26]. Detailed and up-to-date informaƟ on is criƟ cal for a purchaser to be able to allocate funds according to populaƟ on needs and provider performance, to design payment methods as well as to monitor provider behaviour. The needed informaƟ on includes both clinical and fi nancial data as well as data on quality and service-delivery outputs, all of which will require harmonized or interlinked data systems. However, such detailed informaƟ on is not readily available or accessible in many low- and middle-income countries, making it diffi cult to use evidence as the basis for strategic purchasing decisions (e.g. in contract design). One decisive challenge is that several informaƟ on subsystems operate in isolaƟ on. Although these subsystems may contain informaƟ on relevant to the design of provider payments and the monitoring of providers’ behavioural responses, they are not interoperable [19]. Countries can and should move towards strategic purchasing, even when their informaƟ on management system is not yet comprehensive or integrated [21]. For instance, in several countries, as in Kyrgyzstan, diagnosis-related group (DRG) payment systems started simply, were organized for example by clinical departments, and then were progressively diff erenƟ ated as data allowed for further refi nement [27]. Finally, as countries gradually improve their capacity to generate, analyse and translate data into policy decisions about purchasing, they will face increased challenges to safeguard paƟ ent privacy and guarantee the system’s accountability. These two consideraƟ ons should be addressed from the start and should remain constant concerns throughout the process. Governance as an overarching health system funcƟ on is equally criƟ cal for strategic purchasing. Governance arrangements, including regulatory frameworks, need to be improved in a complementary way to support the shiŌ to strategic purchasing through the above policy opƟ ons. First, eff ecƟ ve governance arrangements are needed to coordinate a mulƟ ple healthcare purchasing market and to manage diff erent interests of the involved stakeholders. In many countries, governance is constrained by lack of clarity about roles and responsibiliƟ es across diff erent ministries, government levels INTEGRATED OR INTEROPERABLE INFORMATION MANAGEMENT SYSTEMS EFFECTIVE GOVERNANCE ARRANGEMENTS FOR STRATEGIC PURCHASING 11STRATEGIC PURCHASING POLICY OPTIONS: WHAT DO WE KNOW FROM THEORY AND PRACTICE? and purchasing agencies [19]. Streamlining accountability and reporƟ ng lines, as well as strengthening the capacity of both the Ministry of Health and the purchasing agencies, are ways to support a system’s ability to perform strategic purchasing [21]. There have been debates on the theoreƟ cal merits of compeƟ Ɵ on between mulƟ ple health care purchasers, yet the outcome depends on how well the healthcare purchasing market is regulated. This could result, for example, in a drive for higher quality and responsiveness to ciƟ zens’ preferences. However, there are also strong disadvantages of compeƟ ng purchasers – including an increase in managerial costs, loss of market power of a single purchaser, and fragmentaƟ on in the health care system – that could potenƟ ally lead to inequiƟ es in resource distribuƟ on and access to health services [28]. CoordinaƟ on and regulaƟ on of a healthcare purchasing market is even more challenging when health services are purchased with both public and voluntary prepaid funds. Second, eff ecƟ ve governance at the level of a purchaser agency is needed to ensure that a purchaser acts strategically. This includes having eff ecƟ ve oversight mechanisms, stakeholder parƟ cipaƟ on, clear accountability and reporƟ ng lines, and a clear legal mandate for strategic purchasing. In many countries, the oversight body of the purchasing agency is weak and puts insuffi cient focus on the actual performance by the purchaser [29]. On the other hand, various countries (e.g. Chile, Moldova, Thailand) have managed to strengthen purchasers’ accountability both to the government and to the populaƟ on. This has been achieved, for example, by widening representaƟ on, allowing for public parƟ cipaƟ on, conducƟ ng internal and external audits, careful selecƟ on of the Board Chair, and saƟ sfacƟ on surveys [1, 30-32]. Governance actors must also empower ciƟ zens and paƟ ents through informaƟ on on their enƟ tlements and rights, funcƟ onal feedback channels and complaints mechanisms. Finally, purchasers need to have the autonomy commensurate with their capacity to act strategically [33] and to address and respond to the external environment and context factors [34]. 12 HEALTH FINANCING POLICY BRIEF NO. 6 There are important issues regarding the alignment of purchasing policy with other health fi nancing policies and health system funcƟ ons. Table 1 outlines these alignment issues relaƟ ng to strategic purchasing and suggests how these can be addressed. 4. HOW DOES STRATEGIC PURCHASING LINK WITH OTHER ISSUES RELATED TO HEALTH FINANCING? Table 1. Alignment issues between strategic purchasing and other health (fi nancing) system-related elements and ways to address them Alignment issues in relaƟ on to: Ways to address alignment issues Revenue raising: • Paying for promised benefi ts must not exceed revenues raised, so as to avoid implicit raƟ oning and informal payments, persistent defi cits in health insurance funds, or non-payment of providers, which ulƟ mately erode coverage. • Align the specifi caƟ ons of benefi ts with available funding and/or adjust the funding and priority given to health to bring it in line with benefi ts that should be covered. Pooling: • A good pooling architecture creates the potenƟ al for an equitable distribuƟ on of resources according to needs. The purchasing arrangements need to ensure that this potenƟ al is maintained and is further enhanced by creaƟ ng the right incenƟ ves for effi ciency, equity and fi nancial protecƟ on. In a single pool: • Introduce allocaƟ on formulas with the purpose of risk adjustment to refl ect health needs/risks, independent of the revenue- raising capacity of the catchment area populaƟ ons. In a system with mulƟ ple pools: • Harmonize benefi ts, payment methods and rates. Public fi nancing management (PFM): • The budget may not refl ect the service package when presented on the basis of inputs (e.g. salaries, uƟ liƟ es, medical supplies) and/or by facility (health centres, district hospitals, university hospitals). • More acƟ ve purchasing is constrained where input-based line-item budgets capped at facility level do not allow for full implementaƟ on of output-based payment methods. • There may be diff erent purchasing arrangements and accounƟ ng procedures for diff erent revenue streams. • PFM rules may not allow the use of public funds to pay private providers. • ShiŌ away from detailed input-based budget formulaƟ on, appropriaƟ on and expenditure management to programme-based budgeƟ ng to allow for clear idenƟ fi caƟ on of purchased services. • Use the same accounƟ ng and reporƟ ng procedures regardless of the revenue stream. • Adjust PFM rules to enable contracƟ ng with private providers. 13HOW DOES STRATEGIC PURCHASING LINK WITH OTHER ISSUES RELATED TO HEALTH FINANCING? Alignment issues in relaƟ on to: Ways to address alignment issues Service delivery: • Purchasing arrangements, and parƟ cularly payment methods, may not be aligned with service delivery objecƟ ves (e.g., care coordinaƟ on and integraƟ on, focus on primary health care) or defi ned benefi ts and may contribute to fragmentaƟ on of service provision. • Payment methods may favour health service provision in urban over rural areas, or secondary care over primary care. • Clearly defi ne benefi ts in terms of priority services and related condiƟ ons of access; allocate resources towards these prioriƟ es, with payment mechanisms that incenƟ vize beƩ er quality, equity and effi ciency. • Introduce bundled payment or add-on performance incenƟ ves for care integraƟ on and coordinaƟ on. DevoluƟ on6 • The division of expenditure authority and purchasing responsibiliƟ es between central and local levels is oŌ en unclear. • Purchasing at subnaƟ onal levels may not be in line with economies of scale, externaliƟ es and capacity in PFM and purchasing, and may thus be ineffi cient. • Resource allocaƟ on to health is not always a local poliƟ cal priority, and there may be less focus on health prevenƟ on. CondiƟ onal fund allocaƟ ons may not be in line with needs either. • Adjust the division of responsibiliƟ es between the central and local levels. • Organize bulk purchasing at central level based on local needs. • Use condiƟ onal funding for core health prioriƟ es, coupled with block grants to allow for local resource allocaƟ on decisions in line with needs and preferences. 6 DevoluƟ on is understood as the transfer of decision-making powers and resources to subnaƟ onal governments [35]. 14 HEALTH FINANCING POLICY BRIEF NO. 6 Table 1 (cont.) There is a range of measures and policy opƟ ons that a country can apply to move more towards strategic purchasing, as outlined in SecƟ on 3. Capacity to carry out strategic purchasing tasks and to introduce these measures must be developed if governance actors and purchasers are to be eff ecƟ ve. First, this involves the operaƟ onalisaƟ on of benefi ts to specify enƟ tlements and obligaƟ ons and to select providers to deliver these, while making sure that people are aware of their enƟ tlements. Secondly, payment methods need to be adjusted and aligned on a regular basis to create a coherent set of incenƟ ves in line with the health system objecƟ ves and the country text [36]. Thirdly, an integrated or interoperable informaƟ on management system is required to have appropriate data to take purchasing decisions. Finally, eff ecƟ ve governance arrangements for purchasing are decisive for purchasers to act strategically and for managing the dynamics in purchasing. The mulƟ tude of issues calling for change and reform also raise the quesƟ on of sequencing health fi nancing reforms. Experience suggests that geƫ ng the incenƟ ves right for provider payment and service provision is essenƟ al before pulling in more money through revenue-raising reforms. Hence, countries can start health fi nancing reforms for UHC with strategic purchasing. This is a “technical” issue in that not all changes may need to be approved by parliament or by high-level legislaƟ on. The reforms do not have to be sudden major changes but can be gradual. Many of these reforms are within the realm of the health sector and can oŌ en be guided by the Ministry of Health. It is argued that, parƟ cularly in countries with a large informal economy and limited fi scal capacity, it makes sense from a technical and poliƟ cal perspecƟ ve to start with purchasing reforms to progress towards UHC. But it is important to consider the poliƟ cal economy that lies behind “technical” issues such as payment methods and rates, and poliƟ cal and insƟ tuƟ onal feasibility challenges need to be understood and addressed. The move towards strategic purchasing thus needs to be supported by eff ecƟ ve governance arrangements [37]. Moreover, strategic purchasing policies must be carefully considered in the light of other health system and health fi nancing policies and should be aligned with them. Finally, it is important that health fi nancing strategies provide detailed orientaƟ on for the various areas of strategic purchasing reform to ensure that budgets translate into promised benefi ts that are eff ecƟ vely delivered. 5. THE PERSPECTIVE OF WHO 15THE PERSPECTIVE OF WHO REFERENCES 1. RESYST - Resilient and Responsive health systems, What is strategic purchasing for health? , in Topic overview. 2014: London, UK. 2. World Health OrganizaƟ on, Health systems fi nancing: the path to universal coverage, in The world health report. 2010: Geneva. 3. Preker, A.S., et al., Stewardship, Governance, and Management, in Public Ends, Private Means: Strategic Purchasing of Health Services, A.S. Preker, et al., Editors. 2007, The World Bank: Washington, DC. 4. Robinson, R., E. Jakubowski, and J. Figueras, IntroducƟ on, in Purchasing to improve health systems performance, J. Figueras, R. Robinson, and E. Jakubowski, Editors. 2005, Open University Press: Berkshire, England. 5. McIntyre, D. and J. Kutzin, Health fi nancing country diagnosƟ c: a foundaƟ on for naƟ onal strategy development, in Health fi nancing guidance. 2016: Geneva. 6. Gertler, P., P. Giovagnoli, and S. MarƟ nez, Rewarding Provider Performance to Enable a Healthy Start to Life : Evidence from ArgenƟ na’s Plan Nacer, in Policy Research Working Paper. 2014: Washington, DC. 7. Jakab, M. and E. Manjieva, The Kyrgyz Republic: Good PracƟ ces in Expanding Health Care Coverage, 1991–2006, in Good PracƟ ces in Health Financing: Lessons from Reforms in Low- and Middle-Income Countries, P. GoƩ ret, G.J. Schieber, and H.R. Waters, Editors. 2008, The World Bank: Washington, DC. 8. Tangcharoensathien, V., et al., Achieving universal health coverage goals in Thailand: the vital role of strategic purchasing. Health Policy Plan, 2015. 30(9): p. 1152-61. 9. World Bank, Turkey: Performance-Based ContracƟ ng Scheme in Family Medicine – Design and Achievements. 2013, The World Bank: Washington, DC. 10. Honda, A., et al., Strategic Purchasing in China, Indonesia and the Philippines. ComparaƟ ve Country Studies, 2016. 2(1). 11. Schieber, G., et al., Health Financing in Ghana. 2012, World Bank: Washington, DC. 12. Josephson, E., NaƟ onal Health Insurance in Low and Middle Income Countries: A suggesƟ on for a component-based sequencing. 2017, Health Financing in Africa: Le Blog. 13. Liu, X. and A. Mills, Agency Theory and Its ApplicaƟ ons in Health Care, in Public Ends, Private Means: Strategic Purchasing of Health Services, A.S. Preker, et al., Editors. 2007, The World Bank: Washington, DC. 14. Soucat, A., et al., Pay-for-Performance Debate: Not Seeing the Forest for the Trees. Health Systems & Reform, 2017. 3(2): p. 74-79. 15. Kutzin, J., Health fi nancing for universal coverage and health system performance: concepts and implicaƟ ons for policy. Bull World Health Organ, 2013. 91(8): p. 602-11. 16. Velasco-Garrido, M., et al., Purchasing for quality of care, in Purchasing to improve health systems performance J. Figueras, R. Robinson, and E. Jakubowski, Editors. 2005, Open University Press Berkshire, England 17. Duran, A., et al., Purchasers, providers and contracts in Purchasing to improve health systems performance, J. Figueras, R. Robinson, and E. Jakubowski, Editors. 2005, Open University Press: Berkshire, England. 18. Maeda, A., et al., Universal Health Coverage for Inclusive and Sustainable Development: A Synthesis of 11 Country Case Studies. DirecƟ ons in Development. 2014, Washington, DC: World Bank. 16 HEALTH FINANCING POLICY BRIEF NO. 6 19. Mathauer, I., E. Dale, and B. Meessen, Strategic purchasing for Universal Health Coverage: Key policy issues and quesƟ ons. A summary from expert and pracƟ Ɵ oners’ discussions, in Health Financing Working Paper. 2017: Geneva. 20. Cashin, C., et al., Assessing Health Provider Payment Systems: A PracƟ cal Guide for Countries Working Toward Universal Health Coverage. 2015, Joint Learning Network for Universal Health Coverage. 21. World Health OrganizaƟ on. Strategic purchasing for universal health coverage: unlocking the potenƟ al. Summary and key messages. 2017. Geneva: World Health OrganizaƟ on. 22. OECD, BeƩ er Ways to Pay for Health Care. 2016, Paris: OECD Publishing. 23. World Health OrganizaƟ on, Pay for performance in Estonia: A transformaƟ ve policy instrument to scale up prevenƟ on and management of noncommunicable diseases in Good PracƟ ce Brief. 2015: Barcelona. 24. Jakab, M., T. Evetovits, and D. McDaid, Health fi nancing strategies to support scale-up of core noncommunicable disease intervenƟ ons and services, in Health systems respond to noncommunicable diseases: Ɵ me for ambiƟ on, M. Jakab, et al., Editors. 2018, WHO Regional Offi ce for Europe: Copenhagen, Denmark. 25. Jack, W., ContracƟ ng for Medical Care: Providing IncenƟ ves and Controlling Costs, in Public Ends, Private Means: Strategic Purchasing of Health Services, A.S. Preker, et al., Editors. 2007, The World Bank: Washington, DC. 26. Barroy, H., E. Dale, and S. Sparkes, Budget maƩ ers for health: key formulaƟ on and classifi caƟ on issues, in WHO Policy brief. 2018: Geneva. 27. Mathauer, I. and F. WiƩ enbecher, Hospital payment systems based on diagnosis-related groups: experiences in low- and middle-income countries. 2013, Bull World Health Organ. p. 746-756A. 28. Smith, P.C., et al., Role of markets and compeƟ Ɵ on, in Purchasing to improve health systems performance, J. Figueras, R. Robinson, and E. Jakubowski, Editors. 2005, Open University Press: Berkshire, England. 29. Rannamäe, A., How to strengthen capacity of oversight bodies and purchasers? , in Strategic purchasing for UHC: unlocking the potenƟ al. 2017, World Health OrganizaƟ on: Geneva. 30. Frenz, P., et al., Case study: CiƟ zen parƟ cipaƟ on and comanagement for health in Chile, in Shaping Health programme on Learning from internaƟ onal experience on approaches to community power, parƟ cipaƟ on and decision-making in health. 2017: SanƟ ago. 31. Katsaga, A. and D. Marusic, SituaƟ onal Analysis on Strategic Purchasing of Health Care Services in the Republic of Moldova. 2015: Unpublished. 32. Jongudomsuk, P., et al., The Kingdom of Thailand Health System Review. Health Systems in TransiƟ on, ed. V. Tangcharoensathien. Vol. 5. 2015, Manila, Philippines: Asia Pacifi c Observatory on Health Systems and Policies. 299. 33. Hawkins, L., Governance, FuncƟ ons, Structure and Powers of the Unifi ed Fund in Georgia: Issues and OpƟ ons for Decision. 2013: Unpublished. 34. Cashin, C., Eichler, R., Hartel, L., Unleashing the potenƟ al of stratetgic purchasing, 2018, Bethesda: Abt Associates. 35. World Bank. AdministraƟ ve DecentralizaƟ on. 2018 [cited 2018 16 March 2018]; Available from: hƩ p://www1.worldbank.org/publicsector/decentralizaƟ on/admin.htm. 36. Mathauer I, Dkhimi F. AnalyƟ cal guide to assess a mixed provider payment system. A guidance document, Department of Health Systems Governance and Financing, Geneva: World Health OrganizaƟ on; 2019 (WHO/UHC/HGF/Guidance/19.5). 37. World Health OrganizaƟ on: Governance for Strategic Purchasing. An analyƟ cal framework to guide a country assessment. Geneva: World Health OrganizaƟ on; 2019 (WHO/UHC/HGF/ Guidance/19.6). 17REFERENCES ANNEX 1: MAIN PAYMENT METHODS USED IN HEALTH SYSTEMS AND EXPECTED INCENTIVES Payment method Defi niƟ on IncenƟ ves ProspecƟ ve: Line-item budget Providers receive a fi xed amount to cover specifi c input expenses (e.g. staff , medicines), with limited fl exibility to move funds across these budget lines Under-provision, no focus on quality or outputs unless specifi ed and held accountable Global budget Providers receive a fi xed amount of funds for a certain period to cover aggregate expenditures. The budget is fl exible and is not Ɵ ed to line items. Under-provision, also in terms of quality or outputs unless specifi ed and held accountable; more potenƟ al for effi ciency due to budget fl exibility CapitaƟ on Providers are paid a fi xed amount in advance to provide a defi ned set of services for each person enrolled for a fi xed period of Ɵ me. Under-provision, over-referral (if unit of payment does not include some referral services) RetrospecƟ ve: Fee-for-service Providers are paid for each individual service provided. Fees are fi xed in advance for each service or group of services. Over-provision Pay for performance Providers are paid for each individual service or case, or defi ned target (output or outcome). The payment is fi xed in advance. AlternaƟ ve terms: Performance-based fi nancing or results-based fi nancing. Over-provision, focus on those services under Pay for Performance, possibly at the detriment of other services Case-based (“DRG”) Hospitals are paid a fi xed amount per admission depending on paƟ ent and clinical characterisƟ cs. Increase of volume, reducƟ on of costs per case, avoidance of severe cases Per diem Hospitals are paid a fi xed amount per day so that an admiƩ ed paƟ ent is treated in the hospital. Extended length of stay, reduced cost per day; cream-skimming 18 HEALTH FINANCING POLICY BRIEF NO. 6 Source: Adapated from [20].