Governance for strategic purchasing: an analytical framework to guide a country assessment

GOVERNANCE FOR STRATEGIC PURCHASING: AN ANALYTICAL FRAMEWORK TO GUIDE A COUNTRY ASSESSMENT HEALTH FINANCING GUIDANCE NO. 6 © World Health OrganizaƟ on 2019 Governance for strategic purchasing: an analyƟ cal framework to guide a country assessment (Health Financing Guidance, No. 6) ISBN 978-92-4-000002-5 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. If you create a translaƟ on of this work, you should add the following disclaimer along with the suggested citaƟ on: “This translaƟ on was not created by the World Health OrganizaƟ on (WHO). WHO is not responsible for the content or accuracy of this translaƟ on. The original English ediƟ on shall be the binding and authenƟ c ediƟ on”. Any mediaƟ on relaƟ ng to disputes arising under the licence shall be conducted in accordance with the mediaƟ on rules of the World Intellectual Property OrganizaƟ on. Suggested citaƟ on. Governance for strategic purchasing: an analyƟ cal framework to guide a country assessment. Geneva: World Health OrganizaƟ on; 2019 (Health Financing Guidance, No. 6). Licence: CC BY-NC- SA 3.0 IGO. Cataloguing-in-PublicaƟ on (CIP) data. CIP data are available at hƩ p://apps.who.int/iris. Sales, rights and licensing. To purchase WHO publicaƟ ons, see hƩ p://apps.who.int/bookorders. To submit requests for commercial use and queries on rights and licensing, see hƩ p://www.who.int/about/ licensing. Third-party materials. If you wish to reuse material from this work that is aƩ ributed to a third party, such as tables, fi gures or images, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright holder. The risk of claims resulƟ ng from infringement of any third-party-owned component in the work rests solely with the user. General disclaimers. The designaƟ ons employed and the presentaƟ on of the material in this publicaƟ on do not imply the expression of any opinion whatsoever on the part of WHO concerning the legal status of any country, territory, city or area or of its authoriƟ es, or concerning the delimitaƟ on of its fronƟ ers or boundaries. DoƩ ed and dashed lines on maps represent approximate border lines for which there may not yet be full agreement. The menƟ on of specifi c companies or of certain manufacturers’ products does not imply that they are endorsed or recommended by WHO in preference to others of a similar nature that are not menƟ oned. Errors and omissions excepted, the names of proprietary products are disƟ nguished by iniƟ al capital leƩ ers. All reasonable precauƟ ons have been taken by WHO to verify the informaƟ on contained in this publicaƟ on. However, the published material is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretaƟ on and use of the material lies with the reader. In no event shall WHO be liable for damages arising from its use. Printed in Switzerland. Acknowledgements Executive Summary 1. INTRODUCTION 1.1 Purpose and overview 1.2 Defi nition of key concepts 1.3 Method of assessment 2. ANALYTICAL FRAMEWORK 2.1 The general governance context determines the scope of governance for strategic purchasing 2.2 Governance of the health care purchasing system for coordination, alignment and regulation 2.3 Governance of a purchasing agency to make it operate strategically 2.4 Factors conducive to effective governance for strategic purchasing 3. GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK Step 1. Analysis of the general governance context and the health fi nancing system Step 2. Assessment of the governance of the health care purchasing system Step 3. Assessment of the governance of a purchasing agency Step 4. Assessment of factors conducive to effective governance of strategic purchasing Step 5. Summary of key strengths and challenges and development of options and recommendations REFERENCES ANNEX 1. EXAMPLES OF TYPES OF PURCHASING-RELATED REFORMS 4 5 7 7 8 9 11 11 11 18 28 30 30 33 35 38 40 41 43 TABLE OF CONTENTS TABLE OF TABLES, FIGURES AND BOXES Table 1. Types of organizaƟ on of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing Table 2. Governance requirements for a purchasing agency Table 3. Key (socio-)economic, health and health expenditure indicators Table 4. Mapping of main purchasers and providers Table 5. Assessment of the structure of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing Table 6. Assessment of governance tasks in relaƟ on to the health care purchasing system Table 7. Assessment of governance aspects at purchaser level Table 8. Division of decision-making authority for purchasing aspects Fig. 1. Diff erent degrees of purchaser autonomy Box 1. Core governance tasks related to the overall health care purchasing system Box 2. PotenƟ al risks and eff ects of mulƟ ple health care purchasers Box 3. Governance requirements for strategic purchasing at the agency level 14 24 31 32 33 34 35 37 20 12 16 18 ACKNOWLEDGEMENTS 4 This guidance document was prepared by Loraine Hawkins, Inke Mathauer and Aurelie Klein. The authors are grateful for helpful peer review, comments and suggesƟ ons from Ayako Honda, Fahdi Dkhimi, Lisa Seidelmann, Lluis Vinals, Dave Clark, Dheepa Rajan and Tomas Roubal on earlier versions. We also thank colleagues in the WHO Department of Health Systems Governance and Financing for useful comments and feedback during a peer review meeƟ ng. The analyƟ cal framework on governance for strategic purchasing also benefi ted from valuable discussions during a global meeƟ ng on strategic purchasing in April 2017 and from country assessments in Egypt and Tunisia, for which a draŌ version of this document was applied. Last but not the least, we thank Joe Kutzin and Agnes Soucat for overall guidance, inspiraƟ on and comments. We also gratefully acknowledge fi nancial support received through a voluntary contribuƟ on to WHO from the Government of Japan. HEALTH FINANCING GUIDANCE NO. 6 Assessment areas: 1. The broader, poliƟ cal and general governance context and overview of the health fi nancing system 2. Governance of the health care purchasing system 3. Governance of an individual purchaser 4. Conducive factors for eff ecƟ ve governance for strategic purchasing =˃ Summary assessment of governance for strategic purchasing and development of recommendaƟ ons EXECUTIVE SUMMARY 5EXECUTIVE SUMMARY This document sets out an analyƟ cal framework for assessing a country’s governance arrangements for the purchasing funcƟ on. The purpose of such an assessment is to assist policy-makers and policy advisors in determining whether the exisƟ ng governance arrangements for the purchasing funcƟ on are conducive to more strategic purchasing. It can idenƟ fy gaps in governance arrangements that prevent more strategic purchasing and opƟ ons for overcoming those gaps. The analyƟ cal framework takes a comprehensive approach to governance. It is designed for assessing the governance of both the health care purchasing system and of an individual purchasing agency, thereby focusing on mandatory health insurance and government health purchasing schemes. SecƟ on 1 of the document provides defi niƟ ons of strategic purchasing and governance and describes the methods of the assessment. Governance is an overarching health systems funcƟ on and is about “ensuring strategic policy frameworks exist and are combined with eff ecƟ ve oversight, coaliƟ on-building, regulaƟ on, aƩ enƟ on to system-design and accountability”. It equally applies to specifi c health system components as well as aspects of health fi nancing. Eff ecƟ ve governance arrangements consƟ tute a criƟ cal enabler for strategic purchasing, i.e. making purchasing more strategic requires strong coordinaƟ on of all key actors, clear decision-making rules and appropriate regulaƟ ons. SecƟ on 2 describes the concepts and outlines the four areas to be assessed in relaƟ on to the governance of the purchasing funcƟ on. These are listed in the box below. In most countries, the health fi nancing system consists of more than one healthcare purchaser that fund and purchase health services. By “governance of the health care purchasing system”, we mean acƟ ve management by policy-makers and other governance actors (or stewards) of the roles and relaƟ ons between diff erent health purchasers and between the governance actors and purchasers. Core governance tasks related to the healthcare purchasing system include seƫ ng direcƟ ons, coordinaƟ on and alignment, and the seƫ ng of legal provisions and regulaƟ ons. There are a number of governance requirements that are relevant at the level of a purchasing agency. These are specifi cally geared to direct a purchaser to operate strategically, i.e. to use levers to create an environment that enhances effi ciency and quality in health care service delivery by providers. The framework outlines indicaƟ ons for eff ecƟ ve governance arrangements at the agency level and provides examples of potenƟ al defi cits in these nine governance arrangements and their eff ects. These nine governance requirements are listed below. The framework also idenƟ fi es four factors conducive to eff ecƟ ve governance for strategic purchasing. These relate to the realm of management of both the purchasing actors and governance actors. These factors are criƟ cal for the governance of the health care purchasing system and for the agency level and include: 1) good data to inform strategic planning and operaƟ ons; 2) eff ecƟ ve informaƟ on management system to handle governance and purchasing tasks; 3) managerial capacity and leadership of governance and purchasing actors; and 4) eff ecƟ ve relaƟ ons among governance actors, purchasing agencies and other stakeholders. SecƟ on 3 presents the respecƟ ve assessment steps for the four areas, which are to be recapped in a summary assessment at the end. Each step provides a set of guiding quesƟ ons, including tables to organize the collecƟ on of informaƟ on. The guiding quesƟ ons facilitate the country assessment and help to idenƟ fy key strengths and challenges. On this basis specifi c recommendaƟ ons including short- and long-term acƟ ons can be developed to contribute to improved governance for strategic purchasing. 1. Clear and consistent decision-making rules related to purchasing for Ministry of Health, oversight body and purchaser 2. Public interest mandate and clear objecƟ ves to give the purchaser strategic direcƟ on and to act strategically 3. Suffi cient autonomy and authority for the purchaser to act strategically to meet objecƟ ves, commensurate with capacity 4. Eff ecƟ ve oversight 5. Inclusive and meaningful stakeholder parƟ cipaƟ on 6. Coherent mulƟ ple accountability lines supporƟ ng transparency 7. Firm and credible budget constraint 8. SelecƟ on of head of purchasing agency based on appropriate skills and performance incenƟ ves to guide operaƟ ons 9. Compliance rules relaƟ ng to the management and control of funds by the purchaser. 6 HEALTH FINANCING GUIDANCE NO. 6 Governance is an overarching health systems funcƟ on for ensuring that “strategic policy frameworks exist and are combined with eff ecƟ ve oversight, coaliƟ on-building, regulaƟ on, aƩ enƟ on to system-design and accountability” (1). It applies equally to specifi c health system components and to aspects of health fi nancing. Governance of the purchasing of health services has, however, received liƩ le aƩ enƟ on in either research or policy pracƟ ce, despite its importance (2). Eff ecƟ ve governance arrangements are a criƟ cal enabler of strategic purchasing, as making purchasing more strategic requires strong coordinaƟ on of all key actors, clear rules for decision- making and appropriate regulaƟ ons. Strategic purchasing, in turn, is vital for progress towards universal health coverage (3). Strategic purchasing transforms budgets and funds into benefi ts, with the aim of distribuƟ ng resources more equitably and realizing gains in effi ciency. This frees resources that can be used to extend coverage. Strategic purchasing can also send signals to health providers to improve the quality of health services (4). However, weak or absent governance arrangements provide an inadequate insƟ tuƟ onal and regulatory context, which makes it diffi cult to take decisions for moving towards strategic purchasing and implemenƟ ng those decisions. In many countries, the governance arrangements in health systems, parƟ cularly with respect to purchasing, funcƟ on poorly and are under-developed or even absent. Another challenge is insuffi cient capacity for governance (5). This document sets out an analyƟ cal framework for assessing a country’s governance arrangements for the purchasing funcƟ on. The purpose of such an assessment is to assist policy-makers and policy advisors in determining whether the exisƟ ng governance arrangements for the purchasing funcƟ on are conducive to more strategic purchasing. It can idenƟ fy gaps in governance arrangements that prevent more strategic purchasing and opƟ ons for overcoming those gaps. The analyƟ cal framework serves to guide the assessment of governance arrangements for the purchasing funcƟ on, with a focus on mandatory health insurance and government health purchasing schemes. The laƩ er may include publicly funded coverage schemes for the poor, a central ministry of health or provincial health authoriƟ es. While building on the publicaƟ on by Savedoff and GoƩ ret (6) (“Governance of mandatory health insurance”), this framework goes further and focuses on governance arrangements that 1. INTRODUCTION 1.1 PURPOSE AND OVERVIEW 7INTRODUCTION induce purchasers to operate strategically. It also looks at a wider range of purchasing agencies, through a system perspecƟ ve. The framework is not designed for assessing governance aspects of voluntary health care payment schemes, such as voluntary health insurance (6, 7), nor for assessing the specifi c governance issues related to compeƟ ng health insurance funds (6). Nor does the framework cover governance arrangements for the health fi nancing funcƟ ons of revenue-raising and pooling, although many governance mechanisms relevant for purchasing are also relevant to those funcƟ ons. Finally, the framework does not provide guidance for closer assessment of broader public fi nancial management (PFM) in the health sector (Cashin et al., provide detailed guidance (9)). PFM aspects are vitally important for any well-governed organizaƟ on and infl uence the context of governance of strategic purchasing. This framework can be applied by policy analysts at ministries of health, fi nance, labour and other ministries in charge of governance and of purchasing agencies as well as purchasing and governance specialists. The target audience for this assessment are policy makers and policy advisors in the fi eld of strategic purchasing. SecƟ on 2 of the document describes the concepts and outlines the four areas to be assessed in relaƟ on to the governance of the purchasing funcƟ on. SecƟ on 3 presents the respecƟ ve assessment steps for the four areas, which are to be recapped in a summary assessment at the end. Each step provides a set of guiding quesƟ ons, including tables to organize the collecƟ on of informaƟ on. Assessment areas: 1. The broader, poliƟ cal and general governance context and overview of the health fi nancing system 2. Governance of the health care purchasing system 3. Governance of an individual purchaser 4. Conducive factors for eff ecƟ ve governance for strategic purchasing =˃ Summary assessment of governance for strategic purchasing and development of recommendaƟ ons Purchasing of health services refers to the relaƟ ons between health fi nancing agencies and the providers of health services that they pay to deliver health care to their benefi ciaries (10). A purchaser (or purchasing agency) is an agency that purchases health services on behalf of its members or a specifi c populaƟ on group from pooled funds. Strategic purchasing means the acƟ ve use of purchasing funcƟ ons, tools and levers by a health fi nancing agency to achieve the strategic objecƟ ves set for the health purchaser(s) to contribute the wider health system objecƟ ves. These include: fi nancial protecƟ on, aff ordable access to eff ecƟ ve health services according to need, fi nancial sustainability, improvement in the health of 1.2 DEFINITION OF KEY CONCEPTS 8 HEALTH FINANCING GUIDANCE NO. 6 The guiding quesƟ ons presented in SecƟ on 3 will support a systemaƟ c and comprehensive analysis. These guiding quesƟ ons, someƟ mes in table format, highlight the issues and direcƟ ons to be explored. The proposed assessment method comprises: • document review (published and grey literature related to overall governance and purchasing in the country, including mid-term health sector reviews or a health systems performance assessment); • interviews with the main purchasing agencies and governance actors, as well as other resource people and stakeholders; and • discussions with paƟ ents covered by the purchaser or representaƟ ves of paƟ ent associaƟ ons, if possible. The scope of the study, the number of people interviewed and the analysis of secondary data will depend on the focus of the study, chosen on the basis of the country’s prioriƟ es and on the Ɵ me and resources available. The study team can adapt the guiding quesƟ ons to the purpose of the assessment. The framework should therefore not be applied rigidly, i.e. not every quesƟ on or every cell may need to be answered. Instead, the guiding quesƟ ons serve to point to the key issues and direcƟ ons to be explored. Moreover, the assessment could focus on a specifi c region of the country (e.g., a state, region, or district) to provide a zoom-in on a specifi c purchasing situaƟ on and its governance arrangements. 1.3 METHOD OF ASSESSMENT the populaƟ on, improvement in the quality and effi ciency of health services and equity (11). A purchaser engaged in strategic purchasing serves the collecƟ ve public interest. Its main objecƟ ves are to meet benefi ciaries’ health needs and ensure their fi nancial protecƟ on and equitable access to high-quality health services, while balancing these objecƟ ves with the interest of contributors or taxpayers in fi nancial sustainability and the government’s wider social objecƟ ves, such as context-appropriate working condiƟ ons for health workers. An intermediate objecƟ ve is “more health for the money”, i.e. effi cient use of resources. Governance is an overarching health systems funcƟ on and also applies to specifi c health fi nancing aspects such as purchasing. As stated above, it seeks to ensure that “strategic policy frameworks exist and are combined with eff ecƟ ve oversight, coaliƟ on- building, regulaƟ on, aƩ enƟ on to system- design and accountability” (1). Governance is also referred to as exercising authority, seƫ ng roles and responsibiliƟ es and shaping the interacƟ ons of the various health actors, i.e. purchasers, providers, provider associaƟ ons, society and benefi ciaries (6). Various organizaƟ ons take on the role of a governance actor, such as the ministries of health, fi nance, labour or social aff airs, and also oversight bodies (such as a health insurance oversight board) or a health insurance regulatory agency. This analyƟ cal framework takes a comprehensive approach to governance. It is designed for assessing the governance of both the health care purchasing system and of an individual purchasing agency, as described below. 9INTRODUCTION The informaƟ on collected will inform a policy dialogue when all stakeholders are brought together. The aim of discussions should be to validate the fi ndings and idenƟ fy opportuniƟ es and entry points for strengthening governance for strategic purchasing. SuggesƟ ons and success factors for organizing such policy dialogue have been provided by WHO (12). Governance issues are complex and can be sensiƟ ve, touching upon aspects such as power relaƟ ons. Bringing diverging interests together in a producƟ ve and, construcƟ ve way will ensure that the assessment will provide added value (see Schmets et al., (13) for guidance). Possible interview partners are: Governance actors Purchasers Others • Ministry of health • Ministry of fi nance • Ministry or agency in charge of overseeing naƟ onal health insurance (e.g. ministry of labour, ministry of social welfare, president’s offi ce) • Ministry in charge of community-based health insurance • NaƟ onal or provincial assemblies • Provincial and local government health authoriƟ es • Ministry of health (departments in charge of specifi c coverage schemes at central or subnaƟ onal levels) • Local governments, municipaliƟ es • NaƟ onal or subnaƟ onal health insurance schemes • Community-based health insurance, complementary insurance • Voluntary health insurance scheme • Purchasing administrators (e.g. health management organizaƟ ons, commissioning board) • Development agencies • Researchers working on purchasing • Civil society organizaƟ ons • PaƟ ents • PaƟ ent groups and associaƟ ons, users’ associaƟ ons • Providers’ associaƟ ons, medical associaƟ ons • Formal and informal workers’ associaƟ ons (e.g. labour unions) 10 HEALTH FINANCING GUIDANCE NO. 6 The broader (socio-)economic, fi scal and poliƟ cal governance contexts in which purchasers operate are important, as they may infl uence the governance of purchasing and the prioriƟ es and feasibility of improving it. In some resource-poor countries with severe capacity constraints, overall governance might limit the purchaser from making progress in achieving some of its objecƟ ves of managing resources and improving health system performance. Likewise, problems in the wider public fi nancial management system or in reconciling public fi nancial management reform with the health purchasing agenda can signifi cantly aff ect governance for strategic purchasing. Conversely, a modern, well- funcƟ oning public fi nancial management system can create opportuniƟ es for strengthening and streamlining governance for strategic purchasing. PoliƟ cal stability, coherence, and credible policies are also needed to ensure suffi cient predictability, so that purchasers can develop medium- term strategies for moving towards more strategic purchasing. Specifi cally, the overarching governance arrangements of the health system determine the scope of governance for strategic purchasing. These arrangements include regulaƟ on of providers and provider markets, the degree of provider autonomy and health system policies, e.g. on human resources for health, procurement, medicine pricing or health technology assessments, that aff ect the scope of acƟ on of governance of the purchasing funcƟ on. RegulaƟ ons and mechanisms for consumer protecƟ on also assist in the governance of a purchasing agency. A beƩ er understanding of the broader context, idenƟ fying governance actors and mapping purchasers is the starƟ ng point for a country assessment. In most countries, the health fi nancing system includes more than one purchaser that funds and purchases health services or health-related services (such as social services). By “the health care purchasing system”, we refer to all health care purchasers (e.g., a mandatory health insurance agency, the ministry of health, government health coverage programmes, voluntary health insurance schemes, etc.) that interact with providers to buy health services. 2. ANALYTICAL FRAMEWORK 2.1 THE GENERAL GOVERNANCE CONTEXT DETERMINES THE SCOPE OF GOVERNANCE FOR STRATEGIC PURCHASING 2.2 GOVERNANCE OF THE HEALTH CARE PURCHASING SYSTEM FOR COORDINATION, ALIGNMENT AND REGULATION 11ANALYTICAL FRAMEWORK By “governance of the health care purchasing system”, we mean acƟ ve management by policy-makers and other governance actors (or stewards) of the roles and relaƟ ons between diff erent health purchasers and between the governance actors and purchasers. These system- wide tasks have also been described as the “stewardship” funcƟ on (1). The eff ecƟ ve exercise of the health system funcƟ on of governance is a criƟ cal enabler for strategic purchasing. Core governance tasks related to the health care purchasing system are listed in Box 1. Box 1. Core governance tasks related to the overall health care purchasing system Seƫ ng direcƟ ons: – policy analysis and strategy development for creating legal frameworks that facilitate strategic purchasing for purchasers and providers; – managing the dynamics and sequencing of reforms; – ensuring that a functioning integrated or interoperable information management system is in place. CoordinaƟ on and alignment: – coordination among stakeholders, including communities, civil society and representatives of the population; – consultation with and ensuring input by the population and civil society into the broad orientation of strategic purchasing; – defining and managing a coherent division of labour and effective decision-making on purchasing among purchasers and governance actors; – alignment with other health financing functions and other health system aspects (e.g. service provision, provider market regulation, accreditation, medicines pricing, health technology assessment). Legal provisions and regulaƟ on: – setting legal provisions on purchasing, such as regulation of purchasers and (public and private sector) providers, including whether and how they compete, the degree of integration or separation among providers and purchasers and mechanisms for price control in the public and private sectors; – alignment or unification of information management systems (e.g. patient records, data bases) across different purchasers to improve policy analysis; – alignment of benefit design, provider payment mechanisms and rates, including cost-sharing mechanisms across different purchaser and health coverage schemes; – alignment (“shaping”) of public financial management rules to create scope and space for strategic purchasing, including issues of provider autonomy in the public sector; – specification of the role of voluntary health insurance (VHI) and regulation of the VHI market, including mechanisms for price control; – when applicable, setting up of a functional regulatory agency. 12 HEALTH FINANCING GUIDANCE NO. 6 Fulfi lling these tasks requires leadership by those in charge of governance, such as the Ministry of Health or a commiƩ ee with representaƟ on of several ministries and other stakeholders. The main governance actor and the other actors involved must have the insƟ tuƟ onal and technical capacity to fulfi l governance tasks. They should also be supported, respected and legiƟ mized by the stakeholders, i.e. paƟ ents, benefi ciaries, ciƟ zens, purchasers, providers and health worker associaƟ ons. How and by whom governance tasks will be assumed depends on the organizaƟ on of the health care purchasing system. Comparison of diff erent country seƫ ngs led to the idenƟ fi caƟ on of six main types of health care purchasing systems: (1) a single- purchaser setup, (2) a mulƟ ple-purchaser system, (3) a system with non-compeƟ ng purchasers for diff erent populaƟ on groups, (4) a purchasing setup that combines naƟ onal and local purchasing, (5) a system in which supply-side fi nancing for public providers plays a major role and (6) a system in which out-of-pocket expenditure and/or voluntary health insurance plays a major role. These organizaƟ onal paƩ erns are not mutually exclusive, and, in most seƫ ngs, the structure of the purchaser system includes more than one paƩ ern. A brief descripƟ on of these and the opportuniƟ es and challenges they off er for strategic purchasing are presented in Table 1, with further explanaƟ on below. Some countries have a single, dominant public purchaser or mandatory health insurance agency that pools almost all funds for individual health services, whereby addiƟ onal budgets for public health, usually managed by the ministry of health, play a more limited role. This is one of the least complex governance opƟ ons for facilitaƟ ng strategic purchasing. Even in countries with a single purchasing agency, mulƟ ple funding fl ows to providers are common. Supply-side fi nancing conƟ nues to prevail, in parƟ cular for health prevenƟ on and promoƟ on and other public health surveillance acƟ viƟ es, as is the case in several low- and middle- income countries, such as Ghana and the Philippines. Also, complementary or supplementary voluntary private health insurance is generally available, usually covering beƩ er-off populaƟ ons who can aff ord and want addiƟ onal coverage. There is always a potenƟ al risk that voluntary health insurance negaƟ vely aff ects equitable access if it is not well regulated (14). In resource-poor health systems with very limited benefi ts from public pooled sources, many providers receive substanƟ al revenues from private sources (out-of-pocket expenditure and voluntary health insurance). In this context, the boundary between publicly and privately fi nanced services may be diffi cult to monitor and enforce, limiƟ ng the capacity of the purchaser to prevent providers from diverƟ ng paƟ ents to private services, thus undermining the purchaser’s objecƟ ves. It is also common that some categories of government health expenditure (such as populaƟ on-based public health services and health-related social services) are managed by another agent – oŌ en the ministry of health, an agency subordinate to it and/ or local governments. This mulƟ plicity of actors requires stronger coordinaƟ on to ensure coherent incenƟ ves for providers in line with purchasing objecƟ ves. 13ANALYTICAL FRAMEWORK Types of system organizaƟ on OpportuniƟ es for strategic purchasing 1. A single naƟ onal purchaser of most individual health services (e.g. Estonia, Slovenia) Strong fi nancial and contractual leverage over individual providers and infl uence over whole provider market 2. CompeƟ ng purchasers, open to all (e.g. Israel, Netherlands) Consumer choice may encourage responsiveness and effi ciency Less opposiƟ on for purchaser to use selecƟ ve contracƟ ng than for single purchaser. 3. Non-compeƟ ng purchasers covering diff erent populaƟ on groups (e.g. Thailand, which has separate schemes for civil servants, the formal private sector and the rest of the populaƟ on) Benchmarking of purchasers is possible if funding and benefi ts packages are comparable Calls for a unifi ed informaƟ on plaƞ orm (e.g., paƟ ent records, data bases) to facilitate this benchmarking and to support policy analysis across diff erent coverage schemes. May be easier for each purchaser to use selecƟ ve contracƟ ng than for a single purchaser. 4. CombinaƟ on of naƟ onal and local purchasing, with certain services purchased at naƟ onal level and other locally (e.g. Austria, England) Allows opƟ mal mix of economies of scale for some purchasing funcƟ ons Enables local accountability and local provider engagement Allows innovaƟ on of other purchasing funcƟ ons Benchmarking of local purchasers possible if funding and benefi ts packages are comparable. 5. Supply-side fi nancing (e.g. through ministry of health budget allocaƟ ons) plays a major or almost exclusive role in funding individual health services. When there is a separate purchaser, it fi nances only a part of costs. Supply-side allocaƟ ons can be distributed more strategically, or supply-side levers can complement purchasing levers to improve health sector planning and performance; e.g. the ministry of health or local government can reward or sancƟ on provider management or iniƟ ate provider raƟ onalizaƟ on to ensure availability in remote areas or invest in provider development. 6. Out-of-pocket expenditure plays a major role in funding individual health services, and the purchaser fi nances a limited percentage of costs. May be easier for the purchaser to use selecƟ ve contracƟ ng than for a single purchaser that will pool most funding for individual health care 14 HEALTH FINANCING GUIDANCE NO. 6 Table 1. Types of organizaƟ on of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing Challenges for strategic purchasing Purchaser may face poliƟ cal opposiƟ on to selecƟ ve contracƟ ng Steward or purchaser may face poliƟ cal pressure to adjust prices to support public providers in a fi nancial defi cit, limiƟ ng the ability to contain cost Purchaser may be unable to exert a budget constraint Principal agent problem: without benchmarking, the steward must use other mechanisms to assess performance of purchaser (e.g. evaluaƟ on and monitoring). RegulaƟ on required to ensure both compeƟ Ɵ on and equity in coverage and access, e.g. through standardized benefi ts or transparency requirements RegulaƟ on required to miƟ gate the possibility that private or highly autonomous purchasers will pursue profi t or maintain a high surplus at the expense of objecƟ ves for the “common good” and to miƟ gate the impacts of very poor or failing purchasers on benefi ciaries and providers (e.g. regulaƟ on of organizaƟ onal form and capital requirements, organizaƟ onal charters and board representaƟ on) CoordinaƟ ng mechanisms required among purchasers to strengthen their fi nancial leverage over provider performance, e.g. aligning the incenƟ ves created by standardizing performance indicators, provider payment methods and clinical guidelines Need for shared systems (e.g. common data repository, interoperability standards for IT systems) to reduce duplicaƟ on of administraƟ ve and transacƟ ons costs. Government or steward needs to align objecƟ ves, prioriƟ es and benefi ts package among purchasers and benchmark purchaser performance in order to achieve the government’s strategic purchasing objecƟ ves Risk of soŌ budget constraint because the government cannot allow purchaser to fail. The government or stewards need to set a credible, mulƟ -year budget based on a robust method for projecƟ ng future costs of funding benefi ts package with changes in demand or need, input costs and realisƟ c effi ciency targets CoordinaƟ on may be needed among purchasers to strengthen their fi nancial leverage over provider performance, e.g. aligning the incenƟ ves created by standardizing performance indicators, provider payment methods, pricing, clinical guidelines DuplicaƟ on of administraƟ ve and transacƟ ons costs unless there are shared systems, e.g. common data repository, interoperability standards for IT systems. Similar issues to opƟ on 3, and, in addiƟ on: Clarifi caƟ on of boundaries and naƟ onal–local coordinaƟ on mechanisms may be needed to avoid shiŌ ing of cost and responsibility between naƟ onal and local purchasers Pooling of budgets and/or integrated payments for some paƟ ents or condiƟ ons may be needed (e.g. when paƟ ent care requires close coordinaƟ on between services purchased naƟ onally and locally). Similar issues arise as in opƟ ons 3 and 4, and in addiƟ on: CoordinaƟ on and alignment required between the government agency that provides supply-side fi nancing and the purchaser to ensure alignment of prioriƟ es and coherent, eff ecƟ ve incenƟ ves created for the purchaser The combinaƟ on of supply-side fi nancing and purchaser payment may lead to soŌ er budget constraints for public providers Where the ministry of health owns some providers, it may have a confl ict of interest with its stewardship role over health purchasing, as it could use its stewardship to infl uence contracƟ ng or pricing decisions to the advantage of its own providers. In this setup, the purchaser’s benefi t package is rather limited, and the package should be clear and simple for benefi ciaries to understand their enƟ tlements; public communicaƟ on and monitoring of the boundary between the benefi ts package and privately fi nanced services may need to be strengthened to prevent providers from diverƟ ng paƟ ents to private services, thus undermining the purchaser’s objecƟ ves When this opƟ on is used because the purchaser’s prices cover only part of the costs of services, unless the purchaser can control “balance billing” and regulate co-payments, the purchaser will have limited ability to create incenƟ ves for the provider. In this context, strategic purchasing would be feasible only if supported by eff ecƟ ve measures to limit the total price of the service (through compeƟ Ɵ on for selecƟ ve contracts plus contract enforcement, or price regulaƟ on) BeƩ er-off people may buy supplementary or complementary voluntary health insurance, and a policy framework should be available to clarify the space for the VHI market to provide addiƟ onal coverage. 15ANALYTICAL FRAMEWORK Box 2. Potential risks and effects of multiple health care purchasers – ShiŌ ing of cost or responsibility among funders and purchasers and under- investment: For example, costs may be shiŌ ed between hospitals and social care for paƟ ents with longer-term needs, or addiƟ onal demand may be created for individual services covered by the health purchaser if there is underinvestment in prevenƟ ve populaƟ on health services. – Spill-over eff ects from voluntary health insurance: Complementary voluntary insurance or co-payments in primary health care services lead to greater use of services covered by the purchaser, making gate-keeping, expenditure control and achieving equity objecƟ ves more diffi cult. AlternaƟ vely, supplementary voluntary health insurance that off ers a wider choice of private providers might create perverse incenƟ ves for doctors who have dual public and private pracƟ ces. For example, these doctors may be unwilling to support iniƟ aƟ ves to reduce waiƟ ng Ɵ mes for public services covered by the single purchaser if this would reduce their income from private pracƟ ce. – Perverse incenƟ ves across the boundary between government-funded services and services funded from voluntary (typically private) payments. When benefi ts are limited, for example, providers may have an incenƟ ve to claim that a service is outside the purchaser’s benefi t package, so that they increase profi ts by evading the clinical guidelines and billing rules established by the purchaser, thus engaging in balance billing, which also reduces fi nancial protecƟ on. This may be more frequent when benefi ciaries are not well informed of their enƟ tlements. 1 More informaƟ on on health systems organizaƟ on in decentralized seƫ ngs is available on the WHO website (hƩ p://www. who.int/health-laws/topics/governance-decentralisaƟ on/en/). 16 HEALTH FINANCING GUIDANCE NO. 6 In countries with mulƟ ple purchasers of individual health services, governance and other policy intervenƟ ons to manage health care purchasing system as well as unifi ed or inter-operable informaƟ on management systems are even more important to lower risks of inequitable access to care, reduced fi nancial leverage of any one purchaser over providers and overlapping or ineffi cient funding fl ows. In seƫ ngs with mulƟ ple purchasers, several governance actors are oŌ en involved in purchasing policy. In decentralized seƫ ngs, there may be addiƟ onal governance arrangements for purchasing at subnaƟ onal level.1 Overall, this creates numerous power centres and accountability lines. For example, in the Lao People’s DemocraƟ c Republic, before health fi nancing system reforms in 2016, the Ministry of Health was responsible for managing the Health Equity Fund for the poor and overseeing community-based health insurance for people working in the informal sector, while the Ministry of Labour and Social Welfare was responsible for policy-making for two separate social security schemes for employees in the formal sector (15). Thus, the governance funcƟ on is parƟ cularly criƟ cal, and at the same Ɵ me more diffi cult, in a fragmented health fi nancing system. In many countries, the ministry of health has several funcƟ ons and roles, being in charge of governance, purchasing and provision. This can create internal tension and even confl icts of interest within the ministry and/or its agencies. Box 2 outlines in detail the potenƟ al risks and eff ects of mulƟ ple health care purchasers, which a single purchasing system would not suff er from. A conducive regulatory environment and strong capacity in undertaking the core governance tasks, as outlined above, can at least partly miƟ gate these risks. Box 2. (cont.) – Diluted accountability: Accountability for populaƟ on health outcomes and health system performance may be diluted when mulƟ ple actors and purchasers are responsible for contribuƟ ng to the same outcomes. – Incoherent incenƟ ves to providers: MulƟ ple purchasers might not provide coherent incenƟ ves to providers to improve effi ciency and performance. For example, a change to case-based payment by public funding for hospitals to encourage greater effi ciency in secondary-level care could be undermined by conƟ nuaƟ on of fee-for- service payments to these providers from voluntary health insurance or out-of- pocket payments, complicaƟ ng implementaƟ on of an overall strategy for shaping the provider market. 17ANALYTICAL FRAMEWORK 1. Clear and consistent rules for policy-makers, oversight bodies and purchasers on making decisions in strategic purchasing Decision-making authority on key purchasing tasks should be clearly defi ned and distributed among various actors to avoid overlaps, inconsistencies or even confl icƟ ng decisions. Purchasing related decisions range from seƫ ng overall objecƟ ves to more specifi c decisions on provider payment rates, contracƟ ng or linking payments to accreditaƟ on criteria. Moreover, the division of labour needs to be set up in a way to be conducive to moving towards more strategic purchasing. Policy-makers and governance actors may include the legislature, the cabinet 18 HEALTH FINANCING GUIDANCE NO. 6 There are a number of governance requirements that are specifi cally geared to direct a purchaser operate strategically, i.e. to use levers to create an environment that enhances effi ciency and quality in health care service delivery by providers. Defi cits in governance arrangements, however, are likely to make eff ecƟ ve strategic purchasing diffi cult. The main governance requirements are listed in Box 3. While the framework is not limited to mandatory health insurance, these governance requirements at agency level are applicable more directly to separate purchasing agencies. Nonetheless, the principles underlying these governance requirements are equally relevant for any government purchaser, including a central ministry of health or provincial health authority. Box 3. Governance requirements for strategic purchasing at the agency level 1. Clear and consistent rules for decision-making on purchasing for ministries of health, oversight bodies and purchasers 2. Public interest mandate and clear objecƟ ves to give the purchaser a strategic direcƟ on and to act strategically 3. Suffi cient autonomy and authority for purchaser to act strategically in order to meet objecƟ ves, commensurate with their capacity 4. Eff ecƟ ve oversight 5. Inclusive, meaningful stakeholder parƟ cipaƟ on 6. Coherence in mulƟ ple accountability lines to support transparency 7. Firm and credible budget constraint 8. SelecƟ on of the head of the purchasing agency based on appropriate skills and performance incenƟ ves to guide operaƟ ons 9. Compliance with rules for the management and control of funds by the purchaser 2.3 GOVERNANCE OF A PURCHASING AGENCY TO MAKE IT OPERATE STRATEGICALLY 2. Public interest mandate and clear objectives to give strategic direction 3. Suffi cient autonomy and authority to meet objectives, commensurate with capacity A clear legislaƟ ve mandate and formally defi ned objecƟ ves for the purchasing agency are the foundaƟ ons on which other elements of governance – parƟ cularly accountability and transparency – are built. The legislaƟ ve or regulatory mandate of a strategic purchaser should make clear that it has a duty to act in the public interest, to be defi ned by policies and legal provisions. Its objecƟ ves should encompass a balanced set of fi nancial and non-fi nancial strategic objecƟ ves, to be pursued with all the levers available to the purchaser. One of the core funcƟ ons of the purchaser’s governance body is to set the strategic direcƟ on, with specifi c objecƟ ves and prioriƟ es aligned with the broader health strategy of the government or steward, and to update these periodically. Achievement of these objecƟ ves should be monitored (see point 4). A strategic purchaser should have suffi cient fl exibility and autonomy within broader policy parameters to use all the available purchasing levers in order to achieve its objecƟ ves as best as possible. Depending on the context, the fl exibility allowed by the legislaƟ on and regulaƟ on governing the purchaser should include discreƟ on space to determine the detailed specifi caƟ ons of benefi ts and service, to use some prioriƟ zaƟ on and raƟ oning tools, and to infl uence if not develop clinical guidelines for the services it pays for. It should have the autonomy to design or refi ne payment mechanisms in order to share risk appropriately with providers, incenƟ vize beƩ er performance of providers and use various contracƟ ng strategies, depending on the nature of the provider market for diff erent services, populaƟ ons and localiƟ es. The PFM regulaƟ ons applying to a ministry of health oŌ en do not allow for such fl exibility, which has led to a trend of creaƟ ng autonomous purchasing agencies. AddiƟ onal autonomy should nevertheless be accompanied by appropriate oversight and suffi cient capacity to fulfi l mandates (see below). Fig. 1 outlines the degrees of purchaser autonomy and related features. Various countries may have a purchasing setup that does not fi t exactly into one of these boxes, especially when purchasing responsibiliƟ es and decision rights are divided between the ministry of health and a separate purchasing agency. 19ANALYTICAL FRAMEWORK of ministers, the prime minister or president and, in parƟ cular, the minister and the ministries of health, labour or social aff airs and fi nance, the oversight body, other regulators and the purchaser. A clear division of labour among these actors will establish credible responsibility for decisions taken. A health law, health insurance law or secondary legislaƟ on oŌ en includes the specifi c responsibiliƟ es, accountability and mandate of each actor. 20 HEALTH FINANCING GUIDANCE NO. 6 The extent to which a purchaser can use its autonomy also depends on its authority and capacity to enforce contracts and regulaƟ ons and to have leverage over providers. For example, the purchaser must be able to ensure that providers deliver safe, high-quality health services and adhere to the provider payment schedule, including paƟ ent co-payments, and to control and enforce it through sancƟ ons. The purchaser must also have necessary authority to audit and control over-billing (e.g. “up-coding”) and over-provision. Factors such as provider compeƟ Ɵ on and paƟ ent choice “within the market” for paƟ ents further aff ect the extent to which a purchaser can use its autonomy and authority. For services with less scope for compeƟ Ɵ on or if the purchaser wants providers to form groups or networks or to invest and develop, the purchaser should have the authority and capacity to use selecƟ ve contracƟ ng. Where services are a natural monopoly, this may take the form of compeƟ Ɵ on “for the market” through procurement processes for long- term contracts or franchise agreements to provide specifi ed services to a given paƟ ent populaƟ on. These forms of fl exibility and autonomy enable the purchaser to innovate and create incenƟ ves for improving service delivery and outcomes while conƟ nuing to maintain fi nancial sustainability under its projected revenue or budget constraint. Fig. 1. Diff erent degrees of purchaser autonomy Adapted from Hawkins (16) 4. Effective expert oversight to ensure accountability and to balance increased autonomy 5. Inclusive, meaningful stakeholder participation in purchasing decisions for balancing views and interests The autonomy and fl exibility given to the strategic purchaser need to be accompanied by mechanisms for accountability. An important governance arrangement for realizing this are oversight actors or an oversight body. These will have to ensure compliance with purchasing and accounƟ ng rules and, even more, have to hold the purchaser accountable for achieving an appropriate balance among the mulƟ ple objecƟ ves set by the government and potenƟ ally further specifi ed by the board. Oversight bodies ideally focus on ex-ante approval of strategic plans and policies and set broad prioriƟ es, with more detailed scruƟ ny of performance ex-post. Likewise, they should set performance indicators for mulƟ ple dimensions, including fi nancial management, member saƟ sfacƟ on and public health objecƟ ves, and review actual performance. An eff ecƟ ve oversight body of a strategic purchaser should have autonomy and authority as well as technical capacity and, in parƟ cular, strong experƟ se in fi nance and risk management, health fi nancing and health sector performance. Elected representaƟ ves of stakeholders may not have the necessary skills. Measures should be in place to ensure that the members of an oversight body have access to the experƟ se they need. InviƟ ng external experts, organizing consultaƟ ons, mandaƟ ng the ministry of health or the purchasing agency to fulfi l secretarial funcƟ ons or formally including experts in the board are some opƟ ons. AddiƟ onally or alternaƟ vely, external, independent expert oversight or review may be mandated for some decisions delegated to the purchaser. Oversight bodies should have broad stakeholder representaƟ on to ensure inclusive parƟ cipaƟ on and meaningful infl uence and balancing of the full range of views and interests of stakeholders. In parƟ cular in health insurance systems, oversight bodies should go beyond the tradiƟ onal triparƟ te representaƟ on of government, employers and employees, because the triparƟ te representaƟ on does not cover all perspecƟ ves. Other important stakeholders include paƟ ents, specifi c paƟ ent groups, benefi ciaries, ciƟ zens, doctors and nurse associaƟ ons and other organizaƟ ons represenƟ ng staff interests. Professional socieƟ es, (public and private), hospital associaƟ ons, the voluntary health insurance sector, the pharmaceuƟ cals and medical devices industries and local governments and their associaƟ ons should also have opportuniƟ es to share their views. AlternaƟ vely, policy-makers may use other mechanisms to ensure stakeholder input to key decisions delegated to the purchaser, such as formal consultaƟ ons on draŌ policy proposals and strategies, public meeƟ ngs, opinion research, stakeholder representaƟ on on advisory commiƩ ees or the right to submit proposals by certain groups, which must be considered by the board. Given the complex technical nature of the underpinnings of some strategic 21ANALYTICAL FRAMEWORK 22 HEALTH FINANCING GUIDANCE NO. 6 7. Firm and credible budget to meet contractual obligations A strategic purchaser needs a reasonably stable and predictable medium-term fi nancing trajectory to bring about improvement in performance. Strategic purchasing requires sustained mulƟ -year acƟ on, e.g. through mulƟ -year contracƟ ng, mulƟ -year predictability in provider payment or by creaƟ ng a reserve fund. Unpredictable changes in fi nancing from year to year or boƩ lenecks in budget execuƟ on risk puƫ ng the purchaser in breach of its contractual commitments. The purchaser’s budget constraint should be credible and consistent with expenditure commitments built into the benefi ts package and other purchasing policies. If the purchaser is established, with a structural defi cit due to mismatch between commitments and budget constraint, it would not be realisƟ c to hold the purchaser accountable. At the same Ɵ me, the government has to ensure that adequate resources are mobilized for the benefi t enƟ tlements of all benefi ciaries to be met. The budget constraint should also be fi rm: the purchaser should not be allowed to breach its budget constraint with impunity, in expectaƟ on that the government will fund any shorƞ all. 6. Coherent lines of accountability to support transparency In addiƟ on to the specifi c oversight mechanism, other lines of accountability may be in place. These mulƟ ple lines need to be coherent and eff ecƟ ve to ensure the funcƟ oning of the purchaser and to create transparency on purchaser performance, acƟ viƟ es and spending as well as on their impacts. For example, the purchaser may be accountable and report not only to its oversight body but also to the oversight ministry, the ministry of fi nance, parliament or other commiƩ ees in charge of scruƟ nizing the use of public funds, or to another regulator. For coherence, the aspect for which the purchaser is accountable to each of these actors should be clearly defi ned. Other accountability mechanisms include publishing annual reports, puƫ ng in place mechanisms for arbitraƟ on and complaints or appeal and responding to inquiries. As public agencies or agencies that receive public funding, they would also be required to undergo internal and external audits. In sum, adequate levels of transparency and strong ex-post audit are needed to ensure that the purchaser does not misuse its fl exibility and delegated autonomy with wasteful or inappropriate expenditure, e.g. on its own administraƟ ve budgets or staff salaries. purchaser policies, lay people may fi nd it diffi cult to provide meaningful input and to express themselves in such hearings and consultaƟ ons, unless they are supported by accessible informaƟ on and independent experƟ se. Combining independent experƟ se with stakeholder representaƟ on on advisory commiƩ ees may help to address this challenge and ensure that people’s needs, preferences and concerns are considered. 23ANALYTICAL FRAMEWORK 9. Compliance with rules for the proper use of funds 8. Selection of the head of the purchasing agency based on appropriate skills and performance incentives to guide operations to effectively manage the agency Most countries have regulaƟ ons on the management and control of public funds, the fi nancial management and control of public or semi-public agencies or rules that apply to insurance agencies. These can be translated into internal regulaƟ ons and procedures to control the execuƟ on of the budget (including contracƟ ng, invoice or claims verifi caƟ on, payment, procurement for purchaser operaƟ ons), accounƟ ng, personnel decisions, and control of fraud and corrupƟ on. Such compliance rules, together with internal audit or fi nancial control departments within the organizaƟ on, serve to ensure that staff do not abuse their posiƟ ons or take unauthorized decisions inconsistent with policy and strategy. Internal control mechanisms should also avoid excessive administraƟ ve costs. Internal audit is an addiƟ onal mechanism for checking whether rules are being adhered to, with the objecƟ ve of consƟ tuƟ ng a credible threat against fraud or theŌ of resources by staff or nepoƟ sm in hiring. In addiƟ on, a purchaser who manages public funds will be held accountable by the State fi nancial inspecƟ on agency, which is expected to conduct regular external audits. Table 2 lists indicaƟ ons for eff ecƟ ve governance and provides examples of potenƟ al defi cits in those governance requirements and their eff ects. Ideally, the head of a purchasing agency (e.g. the chief execuƟ ve offi cer, director or president of a health insurance agency) should be selected compeƟ Ɵ vely and transparently on the basis of relevant skills and experience. This serves to ensure that the person appointed has the necessary competencies. The post requires adequate remuneraƟ on and reputaƟ onal and career path rewards to ensure that qualifi ed candidates are interested. Performance incenƟ ves can be added to encourage the agency head to perform her or his role conscienƟ ously, comply with the rules and meet objecƟ ves eff ecƟ vely. The same criteria apply to the staff of the purchasing agency. An autonomous purchaser may have more fl exibility to recruit staff with the necessary skills mix, while a government agency might be limited by naƟ onal staff quotas. Specifi c experƟ se may be available only at salaries that are above the civil servant salary scale. Appropriate remuneraƟ on and responsibiliƟ es are also important to avoid high staff turnover, which can aff ect the funcƟ oning of the purchaser. Table 2. Governance requirements for a purchasing agency 24 HEALTH FINANCING GUIDANCE NO. 6 Governance requirement IndicaƟ ons of eff ecƟ ve governance 1. Clear, consistent rules for policy-makers, the oversight body and the purchaser(s) on making decisions about strategic purchasing There is an overall coordinaƟ on mechanism and regular exchange among actors. The actors have the insƟ tuƟ onal and technical capacity to fulfi l their mandates. Decision-making rules and processes serve to resolve confl icts and reach a consensus on the purchaser’s strategies and decisions and those of the ministry of health (and wider government) regarding the health sector and public fi nances. Mechanisms and processes are in place to coordinate the seƫ ng of the ministry of health’s strategy and the purchaser’s strategies. Mechanisms and processes are in place for coordinaƟ on between the government’s budgeƟ ng and planning and those of the purchaser. 2. Public interest mandate and clear objecƟ ves Clear legal provisions are in place to give the purchaser a mandate to be a strategic purchaser. The purchaser has clearly defi ned objecƟ ves, with a balance among these objecƟ ves, such as fi nancial protecƟ on, access, improved health outcomes, improved quality of health care, equity, effi cient use of resources, fi nancial sustainability of the system. The legal framework for purchasing and the objecƟ ves of the purchaser have remained substanƟ ally the same over periods of 3-5 year or more. 3. Suffi cient autonomy and authority to achieve objecƟ ves, commensurate with capacity The purchaser has enough authority or infl uence over decisions on service specifi caƟ ons, provider payment mechanisms and prices to manage its fi nancial risks and to innovate to improve its non-fi nancial objecƟ ves (access, health, equity, health care quality, effi ciency of the system). The share of revenue that providers receive from the purchaser is large or marginal enough to incenƟ vize the provider. NaƟ onal procurement law and other legal provisions regulaƟ ons clearly allow the purchaser to use a range of payment methods and procurement mechanisms methods, while ensuring transparent, objecƟ ve selecƟ on. Legal provisions or regulaƟ ons allow the purchaser to monitor contracts regularly, to follow up non-performance or fraud and to use legal sancƟ ons when necessary. In a setup where the purchaser manages its funds outside the treasury system, it is also able to operate with the necessary fl exibility and can hold adequate reserves to manage in-year fi nancial risks of variaƟ on in demand. 4. Eff ecƟ ve oversight and accountability mechanisms to balance increased autonomy The oversight bodies have suffi cient autonomy, authority and capacity to fulfi l their mandate. The processes and criteria for appoinƟ ng the oversight body ensure that it has adequate competence to oversee purchaser performance with respect to both fi nancial and non- fi nancial objecƟ ves. There are requirements for disclosure of interests by the members of the oversight body or regulator and the head of the purchaser (e.g. declaraƟ ons of business ownership or acƟ viƟ es, receipt of benefi ts from industry and fi nancial posiƟ ons) and documented procedures for handling confl icts of interest. Clear rules exist on compliance, enforcement and sancƟ ons for ensuring control of the purchaser. Financial rules, reserve and solvency or balanced-budget requirements, rules on assets and investment, internal and external audit requirements are defi ned clearly in legal acts. Clear rules require the purchaser to assess and manage its main risks, e.g. regular tracking, analysis and projecƟ ons of expenditure and revenues; cost-benefi t analysis, cost- eff ecƟ veness analysis and aff ordability analysis of changes to benefi ts package and service specifi caƟ ons and other new regulaƟ ons. 25ANALYTICAL FRAMEWORK Examples of governance defi cits and eff ects Unclear division of authority between the minister or ministry of health, the oversight body and the purchaser for making decisions, leading to confl icts or boƩ lenecks or unclear or incoherent decisions, e.g. on benefi ts package, provider payment policies or contracƟ ng strategy. The purchaser lacks a clear mandate to purchase strategically: e.g. its mandate is narrowly focused on fi nancial funcƟ ons, reimbursement of a detailed list of benefi ts and not on strategic goals such as improving health outcomes and health system performance within the budget or equitable access. There are no or vaguely defi ned objecƟ ves. The purchaser has discreƟ on to pursue goals and prioriƟ es inconsistent with the government strategy, with liƩ le infl uence from the ministry of health or government. The objecƟ ves are confl icƟ ng, for example the benefi ts and service commitments may exceed the revenue or budget of the purchaser. The purchaser lacks suffi cient autonomy to act strategically and infl uence the health system to meet its objecƟ ves. For example, if the ministry of health or fi nance takes almost all decisions on the benefi t package, provider payments, price- seƫ ng and contracƟ ng strategy, the purchaser will have liƩ le autonomy to manage its expenditure within the budget. The purchaser is bound by rigid public fi nancial management rules, which limit its use of output- or performance-based payment methods or the ability of effi cient procurement of services. The purchaser has the autonomy to take decisions about payment methods and service specifi caƟ on but does not have the fl exibility to hire the necessary number of staff or with the necessary skills to do so. High reliance of providers on out-of-pocket payment or voluntary health insurance spending limits the ability of the purchaser to infl uence provider behaviour. In the absence of regulaƟ on of private (and public) providers, the purchaser does not have access to legal mechanisms for addressing fraud. The purchaser does not have the right, means or capacity to monitor balance-billing and informal payments. The purchaser has to use budget and treasury management systems, which are not fl exible enough to allow output and performance-based payment or in-year adjustment to budgets. An independent, mulƟ -stakeholder oversight body is in place, but it lacks resources, experƟ se and capacity to fulfi l its funcƟ ons eff ecƟ vely, is too weak (poliƟ cally or economically) to act as an eff ecƟ ve counterweight to the purchaser, or does not follow up or demand acƟ on from the head of the agency if the purchaser fails to meet its objecƟ ves. The oversight body is not representaƟ ve of the interests of benefi ciaries; at worst, there are confl icts of interest or the oversight body is “captured” by provider interests or the interests of purchaser staff or some other non-representaƟ ve group. RepresentaƟ ves on the oversight board are not accountable to the consƟ tuencies they represent. The oversight arrangement is not aligned with the mandate and objecƟ ves given to the purchaser, e.g. too strict control, insuffi cient autonomy. The oversight body or regulator does not have access to informaƟ on for monitoring performance, alignment with objecƟ ves, compliance with rules and regulaƟ ons or administraƟ ve costs of the purchaser. Table 2. (cont.) 26 HEALTH FINANCING GUIDANCE NO. 6 Governance requirement IndicaƟ ons of eff ecƟ ve governance 5. Inclusive, meaningful stakeholder parƟ cipaƟ on Procedures and criteria for selecƟ ng representaƟ ves and stakeholders in the purchaser’s governance and advisory processes ensure parƟ cipaƟ on of a broad base of paƟ ent, consumer and ciƟ zen groups, when possible, and a balanced group of interests, miƟ gaƟ ng the risk of “capture” by a provider or industry or undue infl uence of special interests. Legal acts or documented procedures require the purchaser to consider and analyse the impact on stakeholders and consult them before making decisions. Procedures require the purchaser to publish the views of stakeholders (e.g. from surveys or formal consultaƟ ons) and explain its decisions and responses to concerns raised. 6. Coherent and eff ecƟ ve accountability lines The mandate of the purchaser clearly states how oŌ en, to whom and which informaƟ on should be reported. If there are mulƟ ple lines of accountability, it is clear which oversight agency is in charge of which aspect (e.g. ministry of fi nance for fi nancial management, ministry of health for achieving public health objecƟ ves), and the decisions or requirements of oversight agencies are not contradictory. 7. Firm, credible budget (constraint) The government has a medium-term budget framework for health, with a credible budget constraint relaƟ ve to the cost of the benefi ts package and service specifi caƟ on and projected demand for and cost of services. There are provisions for regular updaƟ ng of forecasts of enƟ tlements within the benefi t package and measures to reconcile the cost of meeƟ ng enƟ tlements with the budget. The purchaser can forecast its revenue stream over mulƟ -year periods and obtain approval for changes in contribuƟ on rates or other revenue sources or changes in the benefi ts package to reconcile projected costs and projected revenue. 8. SelecƟ on of the head of the purchasing agency based on skills and performance incenƟ ves The head of the purchasing agency is recruited and appointed according to an open, transparent selecƟ on process based on relevant skills and experience. The purchaser is able to hire the staff it requires, with the right skills and through compeƟ Ɵ ve recruitment. 9. Compliance rules that oblige the purchaser to ensure adequate control of use of funds. RegulaƟ ons control the enƟ re budget execuƟ on (including contracƟ ng, invoice or claims verifi caƟ on and control, payment, procurement for purchaser operaƟ ons), accounƟ ng, personnel decisions and control of fraud and corrupƟ on. 27ANALYTICAL FRAMEWORK Examples of governance defi cits and eff ects Benefi ciaries do not have a formal complaints or redress mechanism. There is no cost-eff ecƟ ve procedure for dispute resoluƟ on or for resolving confl icts between the purchaser and providers on contracƟ ng and payment. Benefi ciaries are represented in the supervisory body but do not have access to relevant informaƟ on or to analyses that are readily accessible to laypeople. Lack of transparency (e.g. the purchaser does not publish its policies, strategy, plans, accounts or reports). Lack of independent audit to ensure the reliability of data produced by the purchaser (e.g. fi nancial data, contracƟ ng or service coverage data, populaƟ on coverage data) leads to lack of transparency, even if accountability lines are clear; A soŌ budget constraint can lead to purchaser defi cits or delayed payment of providers. A non-credible budget constraint can lead to a structural defi cit and a risk of arbitrary or unfair sancƟ ons on purchaser management. The purchaser cannot accumulate or access appropriate reserves to fi nance short-term variaƟ on in the revenue collected and/or the cost of the benefi t package as compared with forecasts. There is no limit on the administraƟ ve costs of the purchaser; as a result, it imposes an excessive administraƟ ve burden on providers. There is inappropriate poliƟ cal intervenƟ on in the appointment. The remuneraƟ on off ered for the head and technical staff is inadequate to aƩ ract and retain competent people. There are no reputaƟ onal or career path rewards. Bonuses are paid according to the fi nancial situaƟ on of the health insurance fund, creaƟ ng an incenƟ ve to keep excessive reserves. There are no compliance regulaƟ ons in place. There is no internal audit. There are no checks and balances, resulƟ ng in loopholes for fraud or theŌ of resources. There are no sancƟ ons for nepoƟ sm in hiring. There are rules, but the organizaƟ ons that are supposed to enforce them have insuffi cient capacity or autonomy. There are several factors that are conducive to eff ecƟ ve governance for strategic purchasing. These relate to the realm of management of both the purchasing actors and governance actors. These factors are criƟ cal for the governance of the health care purchasing system and for the agency.2 A wide range of data is needed for strategic planning and for shaping the health care purchasing system. In parƟ cular, this informs resource allocaƟ on (e.g. for more complex risk-adjusted or needs-weighted formulae), contracƟ ng (e.g. for risk-sharing or for monitoring more complex service specifi caƟ ons and standards), provider payment (e.g. for development of more complex case-mix tools or for quality- related payments), risk analysis and management. It is important that these data be robust, validated and Ɵ mely. The strategic purchaser’s informaƟ on systems must be able to handle complex payment methods, contract administraƟ on, performance monitoring and risk management. For example, the purchaser will have to use automated methods to idenƟ fy fraud and unjusƟ fi ed variaƟ on in the invoice data they receive from providers. Purchasers also require the capacity to use the informaƟ on system and act on the informaƟ on they obtain. The purchaser will also need data management and soŌ ware for advanced data analysis to support some of the strategic purchasing funcƟ ons, including actuarial analysis, analysis of variaƟ on in claims and in-service provision and review and evaluaƟ on. The governance of the health care purchasing system requires a system-wide oriented informaƟ on system that should ideally be interoperable to provide the data required by governance actors for taking informed system-wide decisions. StandardizaƟ on of informaƟ on systems requires a steward developing a common standard. This might be done by an agency outside the health sector that is in charge of collecƟ ng staƟ sƟ cs and developing informaƟ on technology. Purchasing of health services is very complex. Skilled and eff ecƟ ve management is important for the governance actors to have suffi cient capacity and experƟ se to contribute to shaping the health care purchasing system in a meaningful and eff ecƟ ve way. At the level of the purchaser, managers and staff must have diverse and high- level capacity to undertake strategic purchasing in various areas, including fi nancial management, risk analysis and management, analyƟ cal skills (e.g., economics, staƟ sƟ cs, epidemiology), 2.4 FACTORS CONDUCIVE TO EFFECTIVE GOVERNANCE FOR STRATEGIC PURCHASING Good data to inform strategic planning and operations at both scheme and system level Effective information management system to handle governance and purchasing tasks Managerial capacity and leadership of governance and purchasing actors 2 Some of these aspects are also covered in secƟ on 3, in the assessments of governance of the health care purchasing system and of the agency. 28 HEALTH FINANCING GUIDANCE NO. 6 29ANALYTICAL FRAMEWORK performance measurement, data management, informaƟ on systems, contracƟ ng and depth of knowledge of health service delivery. High capacity on its own does not, however, guarantee that the purchaser will act strategically. The purchaser management should have strong leadership skills so that the purchaser can set direcƟ on and moƟ vate staff in the organizaƟ on and also tackle external challenges and system constraints energeƟ cally. Leadership skills might be evident in the previous career path that has involved leading a large organizaƟ on through signifi cant challenges and processes of change, in a strong reputaƟ on and a high profi le within the health sector, and in the ability to communicate eff ecƟ vely in naƟ onal media, to health sector stakeholders and to staff . Country experience suggests that the capacity of the ministry of health and its related governance arrangements should be aligned with the operaƟ onal capaciƟ es of other stakeholders involved in purchasing, in parƟ cular those of the ministry of fi nance (16). Strategic purchasing involves various actors, with a variety of interests and opinions. The actors in charge of the governance of the health care purchasing system must balance the diff erent interests and engage with all stakeholders to convince potenƟ al opponents to support its proposed policy and to explain the raƟ onale for any policy changes required to move towards more strategic purchasing. The head of the purchasing agency or its divisions must manage relaƟ ons with providers, regulatory bodies, members and the general public. These groups might support or resist changes in favour of strategic purchasing, depending on their interests and whether they perceive it as advantageous to them or not. Both the governance actors and purchasers must be able to manage these aspects of poliƟ cal economy. The aim is to promote shared understanding of strategic purchasing among all groups in order to develop construcƟ ve relaƟ onships, align interests and clarify the role of each group in strategic purchasing. Effective relations among governance actors, purchasing agencies and other stakeholders To assess the strengths and challenges related to broader poliƟ cal governance of the health sector in your country, you can follow the TAPIC framework (17): Transparency: Are the operaƟ on of public insƟ tuƟ ons and their decisions made public? Is there a law on access to informaƟ on? Accountability: Do insƟ tuƟ ons have to jusƟ fy their performance? Can they be “forced” to comply with regulaƟ ons? ParƟ cipaƟ on: Are civil society and the private sector represented or consulted in policy-making? Integrity: Are there measures to avoid confl icts of interest, corrupƟ on or patronage? Capacity: Is there suffi cient capacity for policy-making and for eff ecƟ ve management of public services? To summarize the (socio-)economic and fi scal context, list the indicators in Table 3 and/or include a short paragraph on the overall (socio-)economic and fi scal context for health. 3. GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK STEP 1. ANALYSIS OF THE GENERAL GOVERNANCE CONTEXT AND THE HEALTH FINANCING SYSTEM 1) Provide a brief summary of the broader poliƟ cal governance, (socio-)economic and fi scal context in which the health purchaser(s) operate and highlight how these aff ect purchasers. 30 HEALTH FINANCING GUIDANCE NO. 6 The aim of this secƟ on is to understand the broader country context that shapes the scope for governance of the purchasing funcƟ on. 31GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK Indicator Year 1 Year 2 Year 3 Year 4 PopulaƟ on Gross domesƟ c product per capita (GPD p.c.) Poverty head count raƟ o at naƟ onal and/or internaƟ onal poverty line (% of populaƟ on) General government expenditure as percentage of gross domesƟ c product (GGE/GDP) Current health expenditure as percentage of gross domesƟ c product (CHE/GDP) General government domesƟ c health expenditure as percentage of current health expenditure (GGHE/CHE) External health expenditure as percentage of current health expenditure (EXT/CHE) General government domesƟ c health expenditure as percentage of general government expenditure (GGHE/ GGE) Out-of-pocket payments as percentage of current health expenditure (OOP/CHE) Life expectancy at birth (years) Mortality rate of children under 5 years (per 1000 live births) Table 3. Key (socio-)economic, health and health expenditure indicators Data would be available from naƟ onal staƟ sƟ cal offi ces and/or the Global Health Expenditure Database and the World Development Indicators (hƩ p://databank.worldbank.org/data/reports.aspx?source=world-development- in). 2) Map the main purchasers and providers, and outline their core features, using Table 4. Columns may be added for other health fi nancing schemes (e.g. government-funded health coverage scheme or compulsory private insurance), addiƟ onal rows may be added to disaggregate responses as relevant; columns or rows that are not relevant in your country may be removed. Recent reforms in the purchasing funcƟ on should also be considered in this overview. Annex 1 provides examples of purchasing-related reforms that countries may undertake. Ministry of health and aƩ ached agencies (specify) Other central ministries (specify) SubnaƟ onal government (disaggregated by level if relevant) NaƟ onal health insurance (or mandatory health insurance for defi ned populaƟ on groups)a Voluntary health insurance (complementary and/or supplementary) Community- based health insurance (and other local fi nancial protecƟ on schemes) Sources of fi nance, e.g. general taxaƟ on, earmarked taxes, local taxes, compulsory contribuƟ ons, rest of world PopulaƟ on covered and (as a share of the total populaƟ on Services covered, e.g. inpaƟ ent, outpaƟ ent, care, medicines, prevenƟ ve, promoƟ ve In each column: Are these single or mulƟ ple purchasers? NA If mulƟ ple purchasers, are they compeƟ ng? NA Types of providers from whom services are purchased Per capita expenditure by this purchaser Table 4. Mapping of main purchasers and providers Source: Strategic Purchasing CollecƟ vity Group (18) a This also refers to territorial health insurance funds or health insurance funds for specifi c populaƟ on groups (e.g. funds for civil servants, military and parƟ cular industries). NA, not applicable 32 HEALTH FINANCING GUIDANCE NO. 6 Overall assessment: • Is the broad poliƟ cal and governance context supporƟ ve of eff ecƟ ve governance of the health fi nancing system and the health care purchasing agency? • What are the key issues in the economic and fi scal context that aff ect governance of the health fi nancing system and of the purchasing funcƟ on in parƟ cular? 33GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK STEP 2. ASSESSMENT OF THE GOVERNANCE OF THE HEALTH CARE PURCHASING SYSTEM 3) Assess the type of the health care purchasing system in Table 5 and idenƟ fy any opportuniƟ es and challenges this creates for making purchasing more strategic. The health care purchasing system in your country might correspond to one of the paƩ erns below or be a combinaƟ on of several. Choose the lines that are relevant for your context. Table 1 may provide guidance. Types of organizaƟ on of the health care purchasing system OpportuniƟ es for strategic purchasing Challenges for strategic purchasing 1. Single naƟ onal purchaser of most individual health services (e.g. Estonia, Slovenia) 2. CompeƟ ng purchasers, open to all benefi ciaries (e.g. Israel, Netherlands) 3. Non-compeƟ ng purchasers cover diff erent populaƟ on groups (e.g. Thailand) 4. CombinaƟ on of naƟ onal and local purchasing (e.g. Austria, England) 5. Supply-side fi nancing plays a major role in funding individual health services; the purchaser fi nances a limited share of costs (e.g. Philippines: purchasing from public providers). 6. Out-of-pocket expenditure plays a major role in funding individual health services; the public purchaser fi nances a limited share of costs (e.g. Philippines: purchasing from private providers). Table 5. Assessment of the type of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing 4) Explore by whom and how well the tasks of governance of the health care purchasing system are undertaken by using Table 6. Box 1 on p.12 may provide further guidance. Governance task Who is in charge? How well is this funcƟ on undertaken? Do those responsible have the capacity (e.g. rules in place, resources and technical experƟ se available)? What are the implicaƟ ons for moving towards more strategic purchasing? Policy analysis and strategy development Managing dynamics and sequencing reforms Ensuring an integrated and interoperable informaƟ on management is in place CoordinaƟ on among and consultaƟ on with stakeholders to get their input Defi ning and managing a coherent division of labour and eff ecƟ ve decision- making on purchasing Alignment with other health fi nancing funcƟ ons and other health system aspects Seƫ ng legal provisions on purchasing Alignment of benefi t designs, provider payment methods and rates, including cost-sharing mechanisms among purchasers Alignment (“shaping”) of public fi nancial management rules to create scope and space for strategic purchasing Specifi caƟ on of the role of voluntary health insurance and regulaƟ on of the voluntary health insurance market When necessary, establishing a funcƟ onal regulatory agency Table 6. Assessment of governance tasks in relaƟ on to the health care purchasing system 34 HEALTH FINANCING GUIDANCE NO. 6 35GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK Overall assessment: • What are the core strengths, key issues and challenges in the governance of the health care purchasing system, and how do these enable or hinder strategic purchasing? • Do fragmentaƟ on and lack of coordinaƟ on and alignment in the health care purchasing system weaken the leverage of purchasers on health sector performance? • What short- and long-term suggesƟ ons or recommendaƟ ons for shaping the purchasing system would allow it to move towards more strategic purchasing? • Can you idenƟ fy champions to lead the process? STEP 3. ASSESSMENT OF THE GOVERNANCE OF A PURCHASING AGENCY 5) Using Table 7, assess (i) whether the desired governance requirements for the purchasing agency are in place, (ii) the reasons for governance defi cits and (iii) whether the exisƟ ng governance arrangements foster or hinder strategic purchasing. Table 2 also provides examples of conducive features and potential gaps. Governance requirements and desirable features Assess whether the respecƟ ve relevant governance requirements are in place What are the reasons for the defi cits in the governance arrangements? (e.g. gaps in insƟ tuƟ onal or technical capacity?) How do the exisƟ ng governance arrangements foster or hinder strategic purchasing? Legal provisions determine a clear and coherent division of labour and defi niƟ on of decision-making authority for key purchasing aspects between the purchaser, ministry of health and other relevant parts of government. Both a public interest mandate and clear objecƟ ves for strategic direcƟ on are formalized in legal or regulatory provisions. Table 7. Assessment of governance aspects at purchaser level Governance requirements and desirable features Assess whether the respecƟ ve relevant governance requirements are in place What are the reasons for the defi cits in the governance arrangements? (e.g. gaps in insƟ tuƟ onal or technical capacity?) How do the exisƟ ng governance arrangements foster or hinder strategic purchasing? The purchaser has suffi cient autonomy and authority, commensurate with its capacity to achieve its objecƟ ves. An eff ecƟ ve (expert) oversight body and mechanisms are in place to increase accountability for results and balance increased autonomy. There is inclusive, meaningful stakeholder parƟ cipaƟ on, with checks on confl icts of interest. The mulƟ ple lines of accountability are coherent, allowing clear direcƟ on for the purchaser and clear aƩ ribuƟ on of responsibility. There is a fi rm, credible budget (constraint) in place, so that it has clear responsibility for balancing expenditure and revenue, with credible sancƟ ons in case of breaches of the budget constraint. The head of the purchasing agency is selected on the basis of appropriate skills. There are performance incenƟ ves for the head and other relevant staff to guide operaƟ ons. There are specifi c regulaƟ ons in place on the management and control of public funds, fi nancial management and control of public or semi-public agencies or rules that apply to insurance agencies, and these regulaƟ ons are implemented. Table 7. (cont.) 36 HEALTH FINANCING GUIDANCE NO. 6 37GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK 6) Use Table 8 to map the division in decision-making authority for purchasing. Mark “x” against the organization with the respective decision-making authority on each line. Decision- making right on purchasing aspects: Purchaser Oversight body Legislature (parliament) Prime minister, cabinet, president Ministry of health Other (e.g. Ministry of fi nance, regulator) Budget or contribuƟ on rates Benefi ts package List of reimbursable drugs Provider payment method Provider payment rates Contract development and award Quality standards and accreditaƟ on ContracƟ ng and selecƟ ve contracƟ ng Clinical guidelines Benefi ciary complaints and appeals Standardiza- Ɵ on of data collecƟ on Table 8. Division of decision-making authority for purchasing aspects Overall assessment: • What are the key strengths, criƟ cal issues and challenges for governance of the purchasing agency? • Do defi cits in the governance requirements adversely aff ect the development of strategic purchasing, and, if so, how? • Which strategic purchasing funcƟ ons are most aff ected by these issues? • What are the short- and long-term suggesƟ ons or recommendaƟ ons for changing the governance of the purchasing agency to move towards more strategic purchasing? Could champions be idenƟ fi ed to lead the process? In this secƟ on, we assess the extent to which factors conducive to the governance of strategic purchasing are in place. The factors apply to governance of both the overall health care purchasing system and of the purchasing agency. Therefore, separate assessments should be made for each level. QuesƟ ons to consider for each factor are suggested below. STEP 4. ASSESSMENT OF FACTORS CONDUCIVE TO EFFECTIVE GOVERNANCE OF STRATEGIC PURCHASING 7) Assess how well the factors conducive to eff ecƟ ve governance of strategic purchasing are established. IdenƟ fy strengths and explore challenges and their underlying reasons. 8) Describe any plans for improvement in these areas, including opportuniƟ es and expected challenges. • Do policy-makers, governance actors and purchasers have adequate data to undertake their tasks and fulfi l their responsibiliƟ es? E.g. data on populaƟ on health needs; health coverage and fi nancial protecƟ on of diff erent populaƟ on groups; populaƟ on and cost coverage by voluntary health insurance • In parƟ cular, do purchasers have adequate data on provider performance, diagnosƟ c and treatment services provided, clinical quality and safety, paƟ ent saƟ sfacƟ on, clinical outcomes and the cost of service provision? • Do purchasers have adequate data for developing and revising payment methods and rates? E.g., data for needs-weighted or risk- adjusted capitaƟ on payment for primary care; paƟ ent-level informaƟ on on the hospital visit or stay, including coded diagnosƟ c and treatment informaƟ on. Availability of adequate data 38 HEALTH FINANCING GUIDANCE NO. 6 39GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK • Do the reporƟ ng systems for purchasers respond to the needs of the policy- makers and governance actors of the health care purchasing system in terms of disaggregaƟ on, Ɵ meliness and completeness? • Do the purchaser’s informaƟ on systems provide Ɵ mely, complete and reliable informaƟ on to support its acƟ viƟ es related to contracƟ ng, provider payment, fi nancial control, control of fraud and other operaƟ ons? • Is the informaƟ on management system integrated or interoperable across all funcƟ ons, including revenue collecƟ on, benefi ciary registraƟ on, benefi ciaries’ benefi ts, payment of providers and monitoring of provider performance? • Are the informaƟ on systems of the ministry of health, other purchasers and providers interoperable? • Is the purchaser using an automated system to review claims and make payments and to idenƟ fy and control risks of fraud? • Do the governance actors of the purchasing system have suffi cient technical and insƟ tuƟ onal capacity and understanding to fulfi l their roles? • What are the profi les of the chief execuƟ ve and other members of the senior management team (career background, qualifi caƟ ons and experience)? • Does the purchaser assign staff to the funcƟ onal areas necessary for strategic purchasing, such as planning, forecasƟ ng, resource allocaƟ on, evidence-based benefi ts package design, provider payment development, pricing, contracƟ ng, monitoring and analysing claims and health provider performance, risk analysis and risk management, programme review and evaluaƟ on? • Can the purchaser recruit and retain staff with specialized skills in areas such as fi nancial management, economics, staƟ sƟ cs, epidemiology, informaƟ cs, data management, health systems management and evaluaƟ on? Where are the key gaps? • What are the main barriers to building stronger capacity? Can the purchaser outsource or hire contractual staff to perform criƟ cal funcƟ ons if it lacks suffi cient staff or appropriate skills? • How is the senior management team recruited and selected? It is beyond the scope of a country assessment to make a detailed analysis of the funcƟ onality and capacity of the purchaser. The intenƟ on is to provide a rough assessment of whether capacity is a constraint to the funcƟ oning of the purchaser as a strategic organizaƟ on and not just an administraƟ ve organizaƟ on. • With which main stakeholders must the governance actors of the health care purchasing system and the purchasers collaborate in order to fulfi l their role? • Do the governance actors and the purchasers have constructive relationships of trust with their stakeholders? Information management system Managerial capacity and leadership Conducive relations among governance actors, purchasers and other stakeholders Overall assessment: • What are the strengths in these four areas? • To what extent do gaps in data or in informaƟ on management systems, constraints in the capacity of the leadership and in managing stakeholder relaƟ ons prevent the development of eff ecƟ ve strategic purchasing? Which strategic purchasing funcƟ ons are most aff ected by these issues? • What are the short- and long-term suggesƟ ons or recommendaƟ ons for strengthening data collecƟ on, informaƟ on systems, capacity, leadership and management in order to move towards more strategic purchasing? • Can champions to lead this process be idenƟ fi ed? STEP 5. SUMMARY OF KEY STRENGTHS AND CHALLENGES AND DEVELOPMENT OF OPTIONS AND RECOMMENDATIONS 9) Summarize the key strengths and challenges of the governance of the country’s health purchaser(s) and health care purchasing system and how well its exisƟ ng governance arrangements allow for strategic purchasing. You can draw upon the “overall assessment” of Steps 1-4. 10) Provide a list of recommendaƟ ons and suggesƟ ons for short- and long-term acƟ on or further invesƟ gaƟ on to address these issues. In this country assessment as a whole, what appear to be the most important barriers or enablers of governance for strategic purchasing in relaƟ on to: • raƟ onal expenditure and effi cient use of resources? • meeƟ ng the objecƟ ves of fi nancial protecƟ on, populaƟ on health, access, equity, quality improvement, effi ciency and fi nancial sustainability? • Can the governance actors resolve or balance the confl icƟ ng and compeƟ ng interests of mulƟ ple stakeholders? Do some stakeholder interests dominate, thus constraining the purchaser’s ability to meet its objecƟ ves? • Do stakeholders recognize when diffi cult decisions and trade-off s are necessary, and do they view the decision-making processes of the governance actors and purchasers as reasonable? 40 HEALTH FINANCING GUIDANCE NO. 6 41REFERENCES REFERENCES (1) Everybody’s business. Strengthening health systems to improve health outcomes. WHO’s framework for action. Geneva: World Health Organization; 2007. (2) Strategic purchasing for universal health coverage: unlocking the potential. Global meeting summary and key messages. Geneva: World Health Organization; 2017 (http://www.who. int/health_financing/events/strategic-purchasing-meeting-2017/en/, accessed 20 February 2019). (3) Mathauer I, Dale E, Jowett M, Kutzin J. Purchasing of health services for Universal Health Coverage: How to make it more strategic? Policy Brief, Department of Health Systems Governance and Financing, Geneva: World Health Organization; 2019 (WHO/HGF/ PolicyBrief/19.6). (4) McIntyre D, Kutzin J. Health financing country diagnostic: a foundation for national strategy development, Health Financing Guidance No. 1. Geneva: World Health Organization; 2016. (5) Mathauer I, Dale E, Meessen B. Strategic purchasing for universal health coverage: key policy issues and questions. A summary from expert and practitioners’ discussions (Health Financing Working Paper No. 8). Geneva: World Health Organization; 2017. (6) Savedoff W, Gottret P. Governing mandatory health insurance. Washington DC: World Bank; 2008. (7) Sekhri N, Savedoff W. Regulating private health insurance to serve the public interest: policy issues for developing countries. Int J Health Plan Manage. 2006; 21(4):357–92. (8) Sagan A, Thompson S. Voluntary health insurance in Europe: role and regulation. Copenhagen: WHO Regional Office for Europe; 2016. 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Antwerp: Strategic Purchasing Collectivity Group; 2018 (https://www.thecollectivity.org/en/projects/37, accessed 20 February 2019). ANNEX 1. EXAMPLES OF TYPES OF PURCHASING-RELATED REFORMS • A country with an insurance system carried out a transiƟ on away from paying providers a “passive fee for service” to more acƟ ve use of provider payment and contracƟ ng levers to achieve health system objecƟ ves, such as managing for fi nancial sustainability; improving quality, effi ciency, equity and value for money. • A country moved from a fully integrated public delivery system with no purchaser– provider split to a tax-fi nanced public purchasing agency. • A health system moved from “passive” payment of providers by allocaƟ on of budgets based on the costs of their past inputs (including wages, other operaƟ ng costs, pharmaceuƟ cals, supplies, capital expenditure) to programme or global budgets. • A country reduced fi nancing through “supply-side subsidies” for input costs by covering the costs by an increase in the level of payments from the purchaser. • In a situaƟ on with “supply-side fi nancing” of public providers by the ministry of health or local government (e.g. for salaries and/or capital investment) with payments from a purchaser, the purchaser acƟ vely coordinated or aligned diff erent funding fl ows for the provider to ensure that the incenƟ ves for providers were coherent and conducive to good health system performance. • A country consolidated previously fragmented fund pools and purchasing agencies to designate a single purchaser or a more consolidated mulƟ -purchaser system. 43ANNEX

GOVERNANCE FOR STRATEGIC PURCHASING: AN ANALYTICAL FRAMEWORK TO GUIDE A COUNTRY ASSESSMENT HEALTH FINANCING GUIDANCE NO. 6 © World Health OrganizaƟ on 2019 Governance for strategic purchasing: an analyƟ cal framework to guide a country assessment (Health Financing Guidance, No. 6) ISBN 978-92-4-000002-5 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. If you create a translaƟ on of this work, you should add the following disclaimer along with the suggested citaƟ on: “This translaƟ on was not created by the World Health OrganizaƟ on (WHO). WHO is not responsible for the content or accuracy of this translaƟ on. The original English ediƟ on shall be the binding and authenƟ c ediƟ on”. Any mediaƟ on relaƟ ng to disputes arising under the licence shall be conducted in accordance with the mediaƟ on rules of the World Intellectual Property OrganizaƟ on. Suggested citaƟ on. Governance for strategic purchasing: an analyƟ cal framework to guide a country assessment. Geneva: World Health OrganizaƟ on; 2019 (Health Financing Guidance, No. 6). Licence: CC BY-NC- SA 3.0 IGO. Cataloguing-in-PublicaƟ on (CIP) data. CIP data are available at hƩ p://apps.who.int/iris. Sales, rights and licensing. To purchase WHO publicaƟ ons, see hƩ p://apps.who.int/bookorders. To submit requests for commercial use and queries on rights and licensing, see hƩ p://www.who.int/about/ licensing. Third-party materials. If you wish to reuse material from this work that is aƩ ributed to a third party, such as tables, fi gures or images, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright holder. The risk of claims resulƟ ng from infringement of any third-party-owned component in the work rests solely with the user. General disclaimers. The designaƟ ons employed and the presentaƟ on of the material in this publicaƟ on do not imply the expression of any opinion whatsoever on the part of WHO concerning the legal status of any country, territory, city or area or of its authoriƟ es, or concerning the delimitaƟ on of its fronƟ ers or boundaries. DoƩ ed and dashed lines on maps represent approximate border lines for which there may not yet be full agreement. The menƟ on of specifi c companies or of certain manufacturers’ products does not imply that they are endorsed or recommended by WHO in preference to others of a similar nature that are not menƟ oned. Errors and omissions excepted, the names of proprietary products are disƟ nguished by iniƟ al capital leƩ ers. All reasonable precauƟ ons have been taken by WHO to verify the informaƟ on contained in this publicaƟ on. However, the published material is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretaƟ on and use of the material lies with the reader. In no event shall WHO be liable for damages arising from its use. Printed in Switzerland. Acknowledgements Executive Summary 1. INTRODUCTION 1.1 Purpose and overview 1.2 Defi nition of key concepts 1.3 Method of assessment 2. ANALYTICAL FRAMEWORK 2.1 The general governance context determines the scope of governance for strategic purchasing 2.2 Governance of the health care purchasing system for coordination, alignment and regulation 2.3 Governance of a purchasing agency to make it operate strategically 2.4 Factors conducive to effective governance for strategic purchasing 3. GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK Step 1. Analysis of the general governance context and the health fi nancing system Step 2. Assessment of the governance of the health care purchasing system Step 3. Assessment of the governance of a purchasing agency Step 4. Assessment of factors conducive to effective governance of strategic purchasing Step 5. Summary of key strengths and challenges and development of options and recommendations REFERENCES ANNEX 1. EXAMPLES OF TYPES OF PURCHASING-RELATED REFORMS 4 5 7 7 8 9 11 11 11 18 28 30 30 33 35 38 40 41 43 TABLE OF CONTENTS TABLE OF TABLES, FIGURES AND BOXES Table 1. Types of organizaƟ on of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing Table 2. Governance requirements for a purchasing agency Table 3. Key (socio-)economic, health and health expenditure indicators Table 4. Mapping of main purchasers and providers Table 5. Assessment of the structure of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing Table 6. Assessment of governance tasks in relaƟ on to the health care purchasing system Table 7. Assessment of governance aspects at purchaser level Table 8. Division of decision-making authority for purchasing aspects Fig. 1. Diff erent degrees of purchaser autonomy Box 1. Core governance tasks related to the overall health care purchasing system Box 2. PotenƟ al risks and eff ects of mulƟ ple health care purchasers Box 3. Governance requirements for strategic purchasing at the agency level 14 24 31 32 33 34 35 37 20 12 16 18 ACKNOWLEDGEMENTS 4 This guidance document was prepared by Loraine Hawkins, Inke Mathauer and Aurelie Klein. The authors are grateful for helpful peer review, comments and suggesƟ ons from Ayako Honda, Fahdi Dkhimi, Lisa Seidelmann, Lluis Vinals, Dave Clark, Dheepa Rajan and Tomas Roubal on earlier versions. We also thank colleagues in the WHO Department of Health Systems Governance and Financing for useful comments and feedback during a peer review meeƟ ng. The analyƟ cal framework on governance for strategic purchasing also benefi ted from valuable discussions during a global meeƟ ng on strategic purchasing in April 2017 and from country assessments in Egypt and Tunisia, for which a draŌ version of this document was applied. Last but not the least, we thank Joe Kutzin and Agnes Soucat for overall guidance, inspiraƟ on and comments. We also gratefully acknowledge fi nancial support received through a voluntary contribuƟ on to WHO from the Government of Japan. HEALTH FINANCING GUIDANCE NO. 6 Assessment areas: 1. The broader, poliƟ cal and general governance context and overview of the health fi nancing system 2. Governance of the health care purchasing system 3. Governance of an individual purchaser 4. Conducive factors for eff ecƟ ve governance for strategic purchasing =˃ Summary assessment of governance for strategic purchasing and development of recommendaƟ ons EXECUTIVE SUMMARY 5EXECUTIVE SUMMARY This document sets out an analyƟ cal framework for assessing a country’s governance arrangements for the purchasing funcƟ on. The purpose of such an assessment is to assist policy-makers and policy advisors in determining whether the exisƟ ng governance arrangements for the purchasing funcƟ on are conducive to more strategic purchasing. It can idenƟ fy gaps in governance arrangements that prevent more strategic purchasing and opƟ ons for overcoming those gaps. The analyƟ cal framework takes a comprehensive approach to governance. It is designed for assessing the governance of both the health care purchasing system and of an individual purchasing agency, thereby focusing on mandatory health insurance and government health purchasing schemes. SecƟ on 1 of the document provides defi niƟ ons of strategic purchasing and governance and describes the methods of the assessment. Governance is an overarching health systems funcƟ on and is about “ensuring strategic policy frameworks exist and are combined with eff ecƟ ve oversight, coaliƟ on-building, regulaƟ on, aƩ enƟ on to system-design and accountability”. It equally applies to specifi c health system components as well as aspects of health fi nancing. Eff ecƟ ve governance arrangements consƟ tute a criƟ cal enabler for strategic purchasing, i.e. making purchasing more strategic requires strong coordinaƟ on of all key actors, clear decision-making rules and appropriate regulaƟ ons. SecƟ on 2 describes the concepts and outlines the four areas to be assessed in relaƟ on to the governance of the purchasing funcƟ on. These are listed in the box below. In most countries, the health fi nancing system consists of more than one healthcare purchaser that fund and purchase health services. By “governance of the health care purchasing system”, we mean acƟ ve management by policy-makers and other governance actors (or stewards) of the roles and relaƟ ons between diff erent health purchasers and between the governance actors and purchasers. Core governance tasks related to the healthcare purchasing system include seƫ ng direcƟ ons, coordinaƟ on and alignment, and the seƫ ng of legal provisions and regulaƟ ons. There are a number of governance requirements that are relevant at the level of a purchasing agency. These are specifi cally geared to direct a purchaser to operate strategically, i.e. to use levers to create an environment that enhances effi ciency and quality in health care service delivery by providers. The framework outlines indicaƟ ons for eff ecƟ ve governance arrangements at the agency level and provides examples of potenƟ al defi cits in these nine governance arrangements and their eff ects. These nine governance requirements are listed below. The framework also idenƟ fi es four factors conducive to eff ecƟ ve governance for strategic purchasing. These relate to the realm of management of both the purchasing actors and governance actors. These factors are criƟ cal for the governance of the health care purchasing system and for the agency level and include: 1) good data to inform strategic planning and operaƟ ons; 2) eff ecƟ ve informaƟ on management system to handle governance and purchasing tasks; 3) managerial capacity and leadership of governance and purchasing actors; and 4) eff ecƟ ve relaƟ ons among governance actors, purchasing agencies and other stakeholders. SecƟ on 3 presents the respecƟ ve assessment steps for the four areas, which are to be recapped in a summary assessment at the end. Each step provides a set of guiding quesƟ ons, including tables to organize the collecƟ on of informaƟ on. The guiding quesƟ ons facilitate the country assessment and help to idenƟ fy key strengths and challenges. On this basis specifi c recommendaƟ ons including short- and long-term acƟ ons can be developed to contribute to improved governance for strategic purchasing. 1. Clear and consistent decision-making rules related to purchasing for Ministry of Health, oversight body and purchaser 2. Public interest mandate and clear objecƟ ves to give the purchaser strategic direcƟ on and to act strategically 3. Suffi cient autonomy and authority for the purchaser to act strategically to meet objecƟ ves, commensurate with capacity 4. Eff ecƟ ve oversight 5. Inclusive and meaningful stakeholder parƟ cipaƟ on 6. Coherent mulƟ ple accountability lines supporƟ ng transparency 7. Firm and credible budget constraint 8. SelecƟ on of head of purchasing agency based on appropriate skills and performance incenƟ ves to guide operaƟ ons 9. Compliance rules relaƟ ng to the management and control of funds by the purchaser. 6 HEALTH FINANCING GUIDANCE NO. 6 Governance is an overarching health systems funcƟ on for ensuring that “strategic policy frameworks exist and are combined with eff ecƟ ve oversight, coaliƟ on-building, regulaƟ on, aƩ enƟ on to system-design and accountability” (1). It applies equally to specifi c health system components and to aspects of health fi nancing. Governance of the purchasing of health services has, however, received liƩ le aƩ enƟ on in either research or policy pracƟ ce, despite its importance (2). Eff ecƟ ve governance arrangements are a criƟ cal enabler of strategic purchasing, as making purchasing more strategic requires strong coordinaƟ on of all key actors, clear rules for decision- making and appropriate regulaƟ ons. Strategic purchasing, in turn, is vital for progress towards universal health coverage (3). Strategic purchasing transforms budgets and funds into benefi ts, with the aim of distribuƟ ng resources more equitably and realizing gains in effi ciency. This frees resources that can be used to extend coverage. Strategic purchasing can also send signals to health providers to improve the quality of health services (4). However, weak or absent governance arrangements provide an inadequate insƟ tuƟ onal and regulatory context, which makes it diffi cult to take decisions for moving towards strategic purchasing and implemenƟ ng those decisions. In many countries, the governance arrangements in health systems, parƟ cularly with respect to purchasing, funcƟ on poorly and are under-developed or even absent. Another challenge is insuffi cient capacity for governance (5). This document sets out an analyƟ cal framework for assessing a country’s governance arrangements for the purchasing funcƟ on. The purpose of such an assessment is to assist policy-makers and policy advisors in determining whether the exisƟ ng governance arrangements for the purchasing funcƟ on are conducive to more strategic purchasing. It can idenƟ fy gaps in governance arrangements that prevent more strategic purchasing and opƟ ons for overcoming those gaps. The analyƟ cal framework serves to guide the assessment of governance arrangements for the purchasing funcƟ on, with a focus on mandatory health insurance and government health purchasing schemes. The laƩ er may include publicly funded coverage schemes for the poor, a central ministry of health or provincial health authoriƟ es. While building on the publicaƟ on by Savedoff and GoƩ ret (6) (“Governance of mandatory health insurance”), this framework goes further and focuses on governance arrangements that 1. INTRODUCTION 1.1 PURPOSE AND OVERVIEW 7INTRODUCTION induce purchasers to operate strategically. It also looks at a wider range of purchasing agencies, through a system perspecƟ ve. The framework is not designed for assessing governance aspects of voluntary health care payment schemes, such as voluntary health insurance (6, 7), nor for assessing the specifi c governance issues related to compeƟ ng health insurance funds (6). Nor does the framework cover governance arrangements for the health fi nancing funcƟ ons of revenue-raising and pooling, although many governance mechanisms relevant for purchasing are also relevant to those funcƟ ons. Finally, the framework does not provide guidance for closer assessment of broader public fi nancial management (PFM) in the health sector (Cashin et al., provide detailed guidance (9)). PFM aspects are vitally important for any well-governed organizaƟ on and infl uence the context of governance of strategic purchasing. This framework can be applied by policy analysts at ministries of health, fi nance, labour and other ministries in charge of governance and of purchasing agencies as well as purchasing and governance specialists. The target audience for this assessment are policy makers and policy advisors in the fi eld of strategic purchasing. SecƟ on 2 of the document describes the concepts and outlines the four areas to be assessed in relaƟ on to the governance of the purchasing funcƟ on. SecƟ on 3 presents the respecƟ ve assessment steps for the four areas, which are to be recapped in a summary assessment at the end. Each step provides a set of guiding quesƟ ons, including tables to organize the collecƟ on of informaƟ on. Assessment areas: 1. The broader, poliƟ cal and general governance context and overview of the health fi nancing system 2. Governance of the health care purchasing system 3. Governance of an individual purchaser 4. Conducive factors for eff ecƟ ve governance for strategic purchasing =˃ Summary assessment of governance for strategic purchasing and development of recommendaƟ ons Purchasing of health services refers to the relaƟ ons between health fi nancing agencies and the providers of health services that they pay to deliver health care to their benefi ciaries (10). A purchaser (or purchasing agency) is an agency that purchases health services on behalf of its members or a specifi c populaƟ on group from pooled funds. Strategic purchasing means the acƟ ve use of purchasing funcƟ ons, tools and levers by a health fi nancing agency to achieve the strategic objecƟ ves set for the health purchaser(s) to contribute the wider health system objecƟ ves. These include: fi nancial protecƟ on, aff ordable access to eff ecƟ ve health services according to need, fi nancial sustainability, improvement in the health of 1.2 DEFINITION OF KEY CONCEPTS 8 HEALTH FINANCING GUIDANCE NO. 6 The guiding quesƟ ons presented in SecƟ on 3 will support a systemaƟ c and comprehensive analysis. These guiding quesƟ ons, someƟ mes in table format, highlight the issues and direcƟ ons to be explored. The proposed assessment method comprises: • document review (published and grey literature related to overall governance and purchasing in the country, including mid-term health sector reviews or a health systems performance assessment); • interviews with the main purchasing agencies and governance actors, as well as other resource people and stakeholders; and • discussions with paƟ ents covered by the purchaser or representaƟ ves of paƟ ent associaƟ ons, if possible. The scope of the study, the number of people interviewed and the analysis of secondary data will depend on the focus of the study, chosen on the basis of the country’s prioriƟ es and on the Ɵ me and resources available. The study team can adapt the guiding quesƟ ons to the purpose of the assessment. The framework should therefore not be applied rigidly, i.e. not every quesƟ on or every cell may need to be answered. Instead, the guiding quesƟ ons serve to point to the key issues and direcƟ ons to be explored. Moreover, the assessment could focus on a specifi c region of the country (e.g., a state, region, or district) to provide a zoom-in on a specifi c purchasing situaƟ on and its governance arrangements. 1.3 METHOD OF ASSESSMENT the populaƟ on, improvement in the quality and effi ciency of health services and equity (11). A purchaser engaged in strategic purchasing serves the collecƟ ve public interest. Its main objecƟ ves are to meet benefi ciaries’ health needs and ensure their fi nancial protecƟ on and equitable access to high-quality health services, while balancing these objecƟ ves with the interest of contributors or taxpayers in fi nancial sustainability and the government’s wider social objecƟ ves, such as context-appropriate working condiƟ ons for health workers. An intermediate objecƟ ve is “more health for the money”, i.e. effi cient use of resources. Governance is an overarching health systems funcƟ on and also applies to specifi c health fi nancing aspects such as purchasing. As stated above, it seeks to ensure that “strategic policy frameworks exist and are combined with eff ecƟ ve oversight, coaliƟ on- building, regulaƟ on, aƩ enƟ on to system- design and accountability” (1). Governance is also referred to as exercising authority, seƫ ng roles and responsibiliƟ es and shaping the interacƟ ons of the various health actors, i.e. purchasers, providers, provider associaƟ ons, society and benefi ciaries (6). Various organizaƟ ons take on the role of a governance actor, such as the ministries of health, fi nance, labour or social aff airs, and also oversight bodies (such as a health insurance oversight board) or a health insurance regulatory agency. This analyƟ cal framework takes a comprehensive approach to governance. It is designed for assessing the governance of both the health care purchasing system and of an individual purchasing agency, as described below. 9INTRODUCTION The informaƟ on collected will inform a policy dialogue when all stakeholders are brought together. The aim of discussions should be to validate the fi ndings and idenƟ fy opportuniƟ es and entry points for strengthening governance for strategic purchasing. SuggesƟ ons and success factors for organizing such policy dialogue have been provided by WHO (12). Governance issues are complex and can be sensiƟ ve, touching upon aspects such as power relaƟ ons. Bringing diverging interests together in a producƟ ve and, construcƟ ve way will ensure that the assessment will provide added value (see Schmets et al., (13) for guidance). Possible interview partners are: Governance actors Purchasers Others • Ministry of health • Ministry of fi nance • Ministry or agency in charge of overseeing naƟ onal health insurance (e.g. ministry of labour, ministry of social welfare, president’s offi ce) • Ministry in charge of community-based health insurance • NaƟ onal or provincial assemblies • Provincial and local government health authoriƟ es • Ministry of health (departments in charge of specifi c coverage schemes at central or subnaƟ onal levels) • Local governments, municipaliƟ es • NaƟ onal or subnaƟ onal health insurance schemes • Community-based health insurance, complementary insurance • Voluntary health insurance scheme • Purchasing administrators (e.g. health management organizaƟ ons, commissioning board) • Development agencies • Researchers working on purchasing • Civil society organizaƟ ons • PaƟ ents • PaƟ ent groups and associaƟ ons, users’ associaƟ ons • Providers’ associaƟ ons, medical associaƟ ons • Formal and informal workers’ associaƟ ons (e.g. labour unions) 10 HEALTH FINANCING GUIDANCE NO. 6 The broader (socio-)economic, fi scal and poliƟ cal governance contexts in which purchasers operate are important, as they may infl uence the governance of purchasing and the prioriƟ es and feasibility of improving it. In some resource-poor countries with severe capacity constraints, overall governance might limit the purchaser from making progress in achieving some of its objecƟ ves of managing resources and improving health system performance. Likewise, problems in the wider public fi nancial management system or in reconciling public fi nancial management reform with the health purchasing agenda can signifi cantly aff ect governance for strategic purchasing. Conversely, a modern, well- funcƟ oning public fi nancial management system can create opportuniƟ es for strengthening and streamlining governance for strategic purchasing. PoliƟ cal stability, coherence, and credible policies are also needed to ensure suffi cient predictability, so that purchasers can develop medium- term strategies for moving towards more strategic purchasing. Specifi cally, the overarching governance arrangements of the health system determine the scope of governance for strategic purchasing. These arrangements include regulaƟ on of providers and provider markets, the degree of provider autonomy and health system policies, e.g. on human resources for health, procurement, medicine pricing or health technology assessments, that aff ect the scope of acƟ on of governance of the purchasing funcƟ on. RegulaƟ ons and mechanisms for consumer protecƟ on also assist in the governance of a purchasing agency. A beƩ er understanding of the broader context, idenƟ fying governance actors and mapping purchasers is the starƟ ng point for a country assessment. In most countries, the health fi nancing system includes more than one purchaser that funds and purchases health services or health-related services (such as social services). By “the health care purchasing system”, we refer to all health care purchasers (e.g., a mandatory health insurance agency, the ministry of health, government health coverage programmes, voluntary health insurance schemes, etc.) that interact with providers to buy health services. 2. ANALYTICAL FRAMEWORK 2.1 THE GENERAL GOVERNANCE CONTEXT DETERMINES THE SCOPE OF GOVERNANCE FOR STRATEGIC PURCHASING 2.2 GOVERNANCE OF THE HEALTH CARE PURCHASING SYSTEM FOR COORDINATION, ALIGNMENT AND REGULATION 11ANALYTICAL FRAMEWORK By “governance of the health care purchasing system”, we mean acƟ ve management by policy-makers and other governance actors (or stewards) of the roles and relaƟ ons between diff erent health purchasers and between the governance actors and purchasers. These system- wide tasks have also been described as the “stewardship” funcƟ on (1). The eff ecƟ ve exercise of the health system funcƟ on of governance is a criƟ cal enabler for strategic purchasing. Core governance tasks related to the health care purchasing system are listed in Box 1. Box 1. Core governance tasks related to the overall health care purchasing system Seƫ ng direcƟ ons: – policy analysis and strategy development for creating legal frameworks that facilitate strategic purchasing for purchasers and providers; – managing the dynamics and sequencing of reforms; – ensuring that a functioning integrated or interoperable information management system is in place. CoordinaƟ on and alignment: – coordination among stakeholders, including communities, civil society and representatives of the population; – consultation with and ensuring input by the population and civil society into the broad orientation of strategic purchasing; – defining and managing a coherent division of labour and effective decision-making on purchasing among purchasers and governance actors; – alignment with other health financing functions and other health system aspects (e.g. service provision, provider market regulation, accreditation, medicines pricing, health technology assessment). Legal provisions and regulaƟ on: – setting legal provisions on purchasing, such as regulation of purchasers and (public and private sector) providers, including whether and how they compete, the degree of integration or separation among providers and purchasers and mechanisms for price control in the public and private sectors; – alignment or unification of information management systems (e.g. patient records, data bases) across different purchasers to improve policy analysis; – alignment of benefit design, provider payment mechanisms and rates, including cost-sharing mechanisms across different purchaser and health coverage schemes; – alignment (“shaping”) of public financial management rules to create scope and space for strategic purchasing, including issues of provider autonomy in the public sector; – specification of the role of voluntary health insurance (VHI) and regulation of the VHI market, including mechanisms for price control; – when applicable, setting up of a functional regulatory agency. 12 HEALTH FINANCING GUIDANCE NO. 6 Fulfi lling these tasks requires leadership by those in charge of governance, such as the Ministry of Health or a commiƩ ee with representaƟ on of several ministries and other stakeholders. The main governance actor and the other actors involved must have the insƟ tuƟ onal and technical capacity to fulfi l governance tasks. They should also be supported, respected and legiƟ mized by the stakeholders, i.e. paƟ ents, benefi ciaries, ciƟ zens, purchasers, providers and health worker associaƟ ons. How and by whom governance tasks will be assumed depends on the organizaƟ on of the health care purchasing system. Comparison of diff erent country seƫ ngs led to the idenƟ fi caƟ on of six main types of health care purchasing systems: (1) a single- purchaser setup, (2) a mulƟ ple-purchaser system, (3) a system with non-compeƟ ng purchasers for diff erent populaƟ on groups, (4) a purchasing setup that combines naƟ onal and local purchasing, (5) a system in which supply-side fi nancing for public providers plays a major role and (6) a system in which out-of-pocket expenditure and/or voluntary health insurance plays a major role. These organizaƟ onal paƩ erns are not mutually exclusive, and, in most seƫ ngs, the structure of the purchaser system includes more than one paƩ ern. A brief descripƟ on of these and the opportuniƟ es and challenges they off er for strategic purchasing are presented in Table 1, with further explanaƟ on below. Some countries have a single, dominant public purchaser or mandatory health insurance agency that pools almost all funds for individual health services, whereby addiƟ onal budgets for public health, usually managed by the ministry of health, play a more limited role. This is one of the least complex governance opƟ ons for facilitaƟ ng strategic purchasing. Even in countries with a single purchasing agency, mulƟ ple funding fl ows to providers are common. Supply-side fi nancing conƟ nues to prevail, in parƟ cular for health prevenƟ on and promoƟ on and other public health surveillance acƟ viƟ es, as is the case in several low- and middle- income countries, such as Ghana and the Philippines. Also, complementary or supplementary voluntary private health insurance is generally available, usually covering beƩ er-off populaƟ ons who can aff ord and want addiƟ onal coverage. There is always a potenƟ al risk that voluntary health insurance negaƟ vely aff ects equitable access if it is not well regulated (14). In resource-poor health systems with very limited benefi ts from public pooled sources, many providers receive substanƟ al revenues from private sources (out-of-pocket expenditure and voluntary health insurance). In this context, the boundary between publicly and privately fi nanced services may be diffi cult to monitor and enforce, limiƟ ng the capacity of the purchaser to prevent providers from diverƟ ng paƟ ents to private services, thus undermining the purchaser’s objecƟ ves. It is also common that some categories of government health expenditure (such as populaƟ on-based public health services and health-related social services) are managed by another agent – oŌ en the ministry of health, an agency subordinate to it and/ or local governments. This mulƟ plicity of actors requires stronger coordinaƟ on to ensure coherent incenƟ ves for providers in line with purchasing objecƟ ves. 13ANALYTICAL FRAMEWORK Types of system organizaƟ on OpportuniƟ es for strategic purchasing 1. A single naƟ onal purchaser of most individual health services (e.g. Estonia, Slovenia) Strong fi nancial and contractual leverage over individual providers and infl uence over whole provider market 2. CompeƟ ng purchasers, open to all (e.g. Israel, Netherlands) Consumer choice may encourage responsiveness and effi ciency Less opposiƟ on for purchaser to use selecƟ ve contracƟ ng than for single purchaser. 3. Non-compeƟ ng purchasers covering diff erent populaƟ on groups (e.g. Thailand, which has separate schemes for civil servants, the formal private sector and the rest of the populaƟ on) Benchmarking of purchasers is possible if funding and benefi ts packages are comparable Calls for a unifi ed informaƟ on plaƞ orm (e.g., paƟ ent records, data bases) to facilitate this benchmarking and to support policy analysis across diff erent coverage schemes. May be easier for each purchaser to use selecƟ ve contracƟ ng than for a single purchaser. 4. CombinaƟ on of naƟ onal and local purchasing, with certain services purchased at naƟ onal level and other locally (e.g. Austria, England) Allows opƟ mal mix of economies of scale for some purchasing funcƟ ons Enables local accountability and local provider engagement Allows innovaƟ on of other purchasing funcƟ ons Benchmarking of local purchasers possible if funding and benefi ts packages are comparable. 5. Supply-side fi nancing (e.g. through ministry of health budget allocaƟ ons) plays a major or almost exclusive role in funding individual health services. When there is a separate purchaser, it fi nances only a part of costs. Supply-side allocaƟ ons can be distributed more strategically, or supply-side levers can complement purchasing levers to improve health sector planning and performance; e.g. the ministry of health or local government can reward or sancƟ on provider management or iniƟ ate provider raƟ onalizaƟ on to ensure availability in remote areas or invest in provider development. 6. Out-of-pocket expenditure plays a major role in funding individual health services, and the purchaser fi nances a limited percentage of costs. May be easier for the purchaser to use selecƟ ve contracƟ ng than for a single purchaser that will pool most funding for individual health care 14 HEALTH FINANCING GUIDANCE NO. 6 Table 1. Types of organizaƟ on of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing Challenges for strategic purchasing Purchaser may face poliƟ cal opposiƟ on to selecƟ ve contracƟ ng Steward or purchaser may face poliƟ cal pressure to adjust prices to support public providers in a fi nancial defi cit, limiƟ ng the ability to contain cost Purchaser may be unable to exert a budget constraint Principal agent problem: without benchmarking, the steward must use other mechanisms to assess performance of purchaser (e.g. evaluaƟ on and monitoring). RegulaƟ on required to ensure both compeƟ Ɵ on and equity in coverage and access, e.g. through standardized benefi ts or transparency requirements RegulaƟ on required to miƟ gate the possibility that private or highly autonomous purchasers will pursue profi t or maintain a high surplus at the expense of objecƟ ves for the “common good” and to miƟ gate the impacts of very poor or failing purchasers on benefi ciaries and providers (e.g. regulaƟ on of organizaƟ onal form and capital requirements, organizaƟ onal charters and board representaƟ on) CoordinaƟ ng mechanisms required among purchasers to strengthen their fi nancial leverage over provider performance, e.g. aligning the incenƟ ves created by standardizing performance indicators, provider payment methods and clinical guidelines Need for shared systems (e.g. common data repository, interoperability standards for IT systems) to reduce duplicaƟ on of administraƟ ve and transacƟ ons costs. Government or steward needs to align objecƟ ves, prioriƟ es and benefi ts package among purchasers and benchmark purchaser performance in order to achieve the government’s strategic purchasing objecƟ ves Risk of soŌ budget constraint because the government cannot allow purchaser to fail. The government or stewards need to set a credible, mulƟ -year budget based on a robust method for projecƟ ng future costs of funding benefi ts package with changes in demand or need, input costs and realisƟ c effi ciency targets CoordinaƟ on may be needed among purchasers to strengthen their fi nancial leverage over provider performance, e.g. aligning the incenƟ ves created by standardizing performance indicators, provider payment methods, pricing, clinical guidelines DuplicaƟ on of administraƟ ve and transacƟ ons costs unless there are shared systems, e.g. common data repository, interoperability standards for IT systems. Similar issues to opƟ on 3, and, in addiƟ on: Clarifi caƟ on of boundaries and naƟ onal–local coordinaƟ on mechanisms may be needed to avoid shiŌ ing of cost and responsibility between naƟ onal and local purchasers Pooling of budgets and/or integrated payments for some paƟ ents or condiƟ ons may be needed (e.g. when paƟ ent care requires close coordinaƟ on between services purchased naƟ onally and locally). Similar issues arise as in opƟ ons 3 and 4, and in addiƟ on: CoordinaƟ on and alignment required between the government agency that provides supply-side fi nancing and the purchaser to ensure alignment of prioriƟ es and coherent, eff ecƟ ve incenƟ ves created for the purchaser The combinaƟ on of supply-side fi nancing and purchaser payment may lead to soŌ er budget constraints for public providers Where the ministry of health owns some providers, it may have a confl ict of interest with its stewardship role over health purchasing, as it could use its stewardship to infl uence contracƟ ng or pricing decisions to the advantage of its own providers. In this setup, the purchaser’s benefi t package is rather limited, and the package should be clear and simple for benefi ciaries to understand their enƟ tlements; public communicaƟ on and monitoring of the boundary between the benefi ts package and privately fi nanced services may need to be strengthened to prevent providers from diverƟ ng paƟ ents to private services, thus undermining the purchaser’s objecƟ ves When this opƟ on is used because the purchaser’s prices cover only part of the costs of services, unless the purchaser can control “balance billing” and regulate co-payments, the purchaser will have limited ability to create incenƟ ves for the provider. In this context, strategic purchasing would be feasible only if supported by eff ecƟ ve measures to limit the total price of the service (through compeƟ Ɵ on for selecƟ ve contracts plus contract enforcement, or price regulaƟ on) BeƩ er-off people may buy supplementary or complementary voluntary health insurance, and a policy framework should be available to clarify the space for the VHI market to provide addiƟ onal coverage. 15ANALYTICAL FRAMEWORK Box 2. Potential risks and effects of multiple health care purchasers – ShiŌ ing of cost or responsibility among funders and purchasers and under- investment: For example, costs may be shiŌ ed between hospitals and social care for paƟ ents with longer-term needs, or addiƟ onal demand may be created for individual services covered by the health purchaser if there is underinvestment in prevenƟ ve populaƟ on health services. – Spill-over eff ects from voluntary health insurance: Complementary voluntary insurance or co-payments in primary health care services lead to greater use of services covered by the purchaser, making gate-keeping, expenditure control and achieving equity objecƟ ves more diffi cult. AlternaƟ vely, supplementary voluntary health insurance that off ers a wider choice of private providers might create perverse incenƟ ves for doctors who have dual public and private pracƟ ces. For example, these doctors may be unwilling to support iniƟ aƟ ves to reduce waiƟ ng Ɵ mes for public services covered by the single purchaser if this would reduce their income from private pracƟ ce. – Perverse incenƟ ves across the boundary between government-funded services and services funded from voluntary (typically private) payments. When benefi ts are limited, for example, providers may have an incenƟ ve to claim that a service is outside the purchaser’s benefi t package, so that they increase profi ts by evading the clinical guidelines and billing rules established by the purchaser, thus engaging in balance billing, which also reduces fi nancial protecƟ on. This may be more frequent when benefi ciaries are not well informed of their enƟ tlements. 1 More informaƟ on on health systems organizaƟ on in decentralized seƫ ngs is available on the WHO website (hƩ p://www. who.int/health-laws/topics/governance-decentralisaƟ on/en/). 16 HEALTH FINANCING GUIDANCE NO. 6 In countries with mulƟ ple purchasers of individual health services, governance and other policy intervenƟ ons to manage health care purchasing system as well as unifi ed or inter-operable informaƟ on management systems are even more important to lower risks of inequitable access to care, reduced fi nancial leverage of any one purchaser over providers and overlapping or ineffi cient funding fl ows. In seƫ ngs with mulƟ ple purchasers, several governance actors are oŌ en involved in purchasing policy. In decentralized seƫ ngs, there may be addiƟ onal governance arrangements for purchasing at subnaƟ onal level.1 Overall, this creates numerous power centres and accountability lines. For example, in the Lao People’s DemocraƟ c Republic, before health fi nancing system reforms in 2016, the Ministry of Health was responsible for managing the Health Equity Fund for the poor and overseeing community-based health insurance for people working in the informal sector, while the Ministry of Labour and Social Welfare was responsible for policy-making for two separate social security schemes for employees in the formal sector (15). Thus, the governance funcƟ on is parƟ cularly criƟ cal, and at the same Ɵ me more diffi cult, in a fragmented health fi nancing system. In many countries, the ministry of health has several funcƟ ons and roles, being in charge of governance, purchasing and provision. This can create internal tension and even confl icts of interest within the ministry and/or its agencies. Box 2 outlines in detail the potenƟ al risks and eff ects of mulƟ ple health care purchasers, which a single purchasing system would not suff er from. A conducive regulatory environment and strong capacity in undertaking the core governance tasks, as outlined above, can at least partly miƟ gate these risks. Box 2. (cont.) – Diluted accountability: Accountability for populaƟ on health outcomes and health system performance may be diluted when mulƟ ple actors and purchasers are responsible for contribuƟ ng to the same outcomes. – Incoherent incenƟ ves to providers: MulƟ ple purchasers might not provide coherent incenƟ ves to providers to improve effi ciency and performance. For example, a change to case-based payment by public funding for hospitals to encourage greater effi ciency in secondary-level care could be undermined by conƟ nuaƟ on of fee-for- service payments to these providers from voluntary health insurance or out-of- pocket payments, complicaƟ ng implementaƟ on of an overall strategy for shaping the provider market. 17ANALYTICAL FRAMEWORK 1. Clear and consistent rules for policy-makers, oversight bodies and purchasers on making decisions in strategic purchasing Decision-making authority on key purchasing tasks should be clearly defi ned and distributed among various actors to avoid overlaps, inconsistencies or even confl icƟ ng decisions. Purchasing related decisions range from seƫ ng overall objecƟ ves to more specifi c decisions on provider payment rates, contracƟ ng or linking payments to accreditaƟ on criteria. Moreover, the division of labour needs to be set up in a way to be conducive to moving towards more strategic purchasing. Policy-makers and governance actors may include the legislature, the cabinet 18 HEALTH FINANCING GUIDANCE NO. 6 There are a number of governance requirements that are specifi cally geared to direct a purchaser operate strategically, i.e. to use levers to create an environment that enhances effi ciency and quality in health care service delivery by providers. Defi cits in governance arrangements, however, are likely to make eff ecƟ ve strategic purchasing diffi cult. The main governance requirements are listed in Box 3. While the framework is not limited to mandatory health insurance, these governance requirements at agency level are applicable more directly to separate purchasing agencies. Nonetheless, the principles underlying these governance requirements are equally relevant for any government purchaser, including a central ministry of health or provincial health authority. Box 3. Governance requirements for strategic purchasing at the agency level 1. Clear and consistent rules for decision-making on purchasing for ministries of health, oversight bodies and purchasers 2. Public interest mandate and clear objecƟ ves to give the purchaser a strategic direcƟ on and to act strategically 3. Suffi cient autonomy and authority for purchaser to act strategically in order to meet objecƟ ves, commensurate with their capacity 4. Eff ecƟ ve oversight 5. Inclusive, meaningful stakeholder parƟ cipaƟ on 6. Coherence in mulƟ ple accountability lines to support transparency 7. Firm and credible budget constraint 8. SelecƟ on of the head of the purchasing agency based on appropriate skills and performance incenƟ ves to guide operaƟ ons 9. Compliance with rules for the management and control of funds by the purchaser 2.3 GOVERNANCE OF A PURCHASING AGENCY TO MAKE IT OPERATE STRATEGICALLY 2. Public interest mandate and clear objectives to give strategic direction 3. Suffi cient autonomy and authority to meet objectives, commensurate with capacity A clear legislaƟ ve mandate and formally defi ned objecƟ ves for the purchasing agency are the foundaƟ ons on which other elements of governance – parƟ cularly accountability and transparency – are built. The legislaƟ ve or regulatory mandate of a strategic purchaser should make clear that it has a duty to act in the public interest, to be defi ned by policies and legal provisions. Its objecƟ ves should encompass a balanced set of fi nancial and non-fi nancial strategic objecƟ ves, to be pursued with all the levers available to the purchaser. One of the core funcƟ ons of the purchaser’s governance body is to set the strategic direcƟ on, with specifi c objecƟ ves and prioriƟ es aligned with the broader health strategy of the government or steward, and to update these periodically. Achievement of these objecƟ ves should be monitored (see point 4). A strategic purchaser should have suffi cient fl exibility and autonomy within broader policy parameters to use all the available purchasing levers in order to achieve its objecƟ ves as best as possible. Depending on the context, the fl exibility allowed by the legislaƟ on and regulaƟ on governing the purchaser should include discreƟ on space to determine the detailed specifi caƟ ons of benefi ts and service, to use some prioriƟ zaƟ on and raƟ oning tools, and to infl uence if not develop clinical guidelines for the services it pays for. It should have the autonomy to design or refi ne payment mechanisms in order to share risk appropriately with providers, incenƟ vize beƩ er performance of providers and use various contracƟ ng strategies, depending on the nature of the provider market for diff erent services, populaƟ ons and localiƟ es. The PFM regulaƟ ons applying to a ministry of health oŌ en do not allow for such fl exibility, which has led to a trend of creaƟ ng autonomous purchasing agencies. AddiƟ onal autonomy should nevertheless be accompanied by appropriate oversight and suffi cient capacity to fulfi l mandates (see below). Fig. 1 outlines the degrees of purchaser autonomy and related features. Various countries may have a purchasing setup that does not fi t exactly into one of these boxes, especially when purchasing responsibiliƟ es and decision rights are divided between the ministry of health and a separate purchasing agency. 19ANALYTICAL FRAMEWORK of ministers, the prime minister or president and, in parƟ cular, the minister and the ministries of health, labour or social aff airs and fi nance, the oversight body, other regulators and the purchaser. A clear division of labour among these actors will establish credible responsibility for decisions taken. A health law, health insurance law or secondary legislaƟ on oŌ en includes the specifi c responsibiliƟ es, accountability and mandate of each actor. 20 HEALTH FINANCING GUIDANCE NO. 6 The extent to which a purchaser can use its autonomy also depends on its authority and capacity to enforce contracts and regulaƟ ons and to have leverage over providers. For example, the purchaser must be able to ensure that providers deliver safe, high-quality health services and adhere to the provider payment schedule, including paƟ ent co-payments, and to control and enforce it through sancƟ ons. The purchaser must also have necessary authority to audit and control over-billing (e.g. “up-coding”) and over-provision. Factors such as provider compeƟ Ɵ on and paƟ ent choice “within the market” for paƟ ents further aff ect the extent to which a purchaser can use its autonomy and authority. For services with less scope for compeƟ Ɵ on or if the purchaser wants providers to form groups or networks or to invest and develop, the purchaser should have the authority and capacity to use selecƟ ve contracƟ ng. Where services are a natural monopoly, this may take the form of compeƟ Ɵ on “for the market” through procurement processes for long- term contracts or franchise agreements to provide specifi ed services to a given paƟ ent populaƟ on. These forms of fl exibility and autonomy enable the purchaser to innovate and create incenƟ ves for improving service delivery and outcomes while conƟ nuing to maintain fi nancial sustainability under its projected revenue or budget constraint. Fig. 1. Diff erent degrees of purchaser autonomy Adapted from Hawkins (16) 4. Effective expert oversight to ensure accountability and to balance increased autonomy 5. Inclusive, meaningful stakeholder participation in purchasing decisions for balancing views and interests The autonomy and fl exibility given to the strategic purchaser need to be accompanied by mechanisms for accountability. An important governance arrangement for realizing this are oversight actors or an oversight body. These will have to ensure compliance with purchasing and accounƟ ng rules and, even more, have to hold the purchaser accountable for achieving an appropriate balance among the mulƟ ple objecƟ ves set by the government and potenƟ ally further specifi ed by the board. Oversight bodies ideally focus on ex-ante approval of strategic plans and policies and set broad prioriƟ es, with more detailed scruƟ ny of performance ex-post. Likewise, they should set performance indicators for mulƟ ple dimensions, including fi nancial management, member saƟ sfacƟ on and public health objecƟ ves, and review actual performance. An eff ecƟ ve oversight body of a strategic purchaser should have autonomy and authority as well as technical capacity and, in parƟ cular, strong experƟ se in fi nance and risk management, health fi nancing and health sector performance. Elected representaƟ ves of stakeholders may not have the necessary skills. Measures should be in place to ensure that the members of an oversight body have access to the experƟ se they need. InviƟ ng external experts, organizing consultaƟ ons, mandaƟ ng the ministry of health or the purchasing agency to fulfi l secretarial funcƟ ons or formally including experts in the board are some opƟ ons. AddiƟ onally or alternaƟ vely, external, independent expert oversight or review may be mandated for some decisions delegated to the purchaser. Oversight bodies should have broad stakeholder representaƟ on to ensure inclusive parƟ cipaƟ on and meaningful infl uence and balancing of the full range of views and interests of stakeholders. In parƟ cular in health insurance systems, oversight bodies should go beyond the tradiƟ onal triparƟ te representaƟ on of government, employers and employees, because the triparƟ te representaƟ on does not cover all perspecƟ ves. Other important stakeholders include paƟ ents, specifi c paƟ ent groups, benefi ciaries, ciƟ zens, doctors and nurse associaƟ ons and other organizaƟ ons represenƟ ng staff interests. Professional socieƟ es, (public and private), hospital associaƟ ons, the voluntary health insurance sector, the pharmaceuƟ cals and medical devices industries and local governments and their associaƟ ons should also have opportuniƟ es to share their views. AlternaƟ vely, policy-makers may use other mechanisms to ensure stakeholder input to key decisions delegated to the purchaser, such as formal consultaƟ ons on draŌ policy proposals and strategies, public meeƟ ngs, opinion research, stakeholder representaƟ on on advisory commiƩ ees or the right to submit proposals by certain groups, which must be considered by the board. Given the complex technical nature of the underpinnings of some strategic 21ANALYTICAL FRAMEWORK 22 HEALTH FINANCING GUIDANCE NO. 6 7. Firm and credible budget to meet contractual obligations A strategic purchaser needs a reasonably stable and predictable medium-term fi nancing trajectory to bring about improvement in performance. Strategic purchasing requires sustained mulƟ -year acƟ on, e.g. through mulƟ -year contracƟ ng, mulƟ -year predictability in provider payment or by creaƟ ng a reserve fund. Unpredictable changes in fi nancing from year to year or boƩ lenecks in budget execuƟ on risk puƫ ng the purchaser in breach of its contractual commitments. The purchaser’s budget constraint should be credible and consistent with expenditure commitments built into the benefi ts package and other purchasing policies. If the purchaser is established, with a structural defi cit due to mismatch between commitments and budget constraint, it would not be realisƟ c to hold the purchaser accountable. At the same Ɵ me, the government has to ensure that adequate resources are mobilized for the benefi t enƟ tlements of all benefi ciaries to be met. The budget constraint should also be fi rm: the purchaser should not be allowed to breach its budget constraint with impunity, in expectaƟ on that the government will fund any shorƞ all. 6. Coherent lines of accountability to support transparency In addiƟ on to the specifi c oversight mechanism, other lines of accountability may be in place. These mulƟ ple lines need to be coherent and eff ecƟ ve to ensure the funcƟ oning of the purchaser and to create transparency on purchaser performance, acƟ viƟ es and spending as well as on their impacts. For example, the purchaser may be accountable and report not only to its oversight body but also to the oversight ministry, the ministry of fi nance, parliament or other commiƩ ees in charge of scruƟ nizing the use of public funds, or to another regulator. For coherence, the aspect for which the purchaser is accountable to each of these actors should be clearly defi ned. Other accountability mechanisms include publishing annual reports, puƫ ng in place mechanisms for arbitraƟ on and complaints or appeal and responding to inquiries. As public agencies or agencies that receive public funding, they would also be required to undergo internal and external audits. In sum, adequate levels of transparency and strong ex-post audit are needed to ensure that the purchaser does not misuse its fl exibility and delegated autonomy with wasteful or inappropriate expenditure, e.g. on its own administraƟ ve budgets or staff salaries. purchaser policies, lay people may fi nd it diffi cult to provide meaningful input and to express themselves in such hearings and consultaƟ ons, unless they are supported by accessible informaƟ on and independent experƟ se. Combining independent experƟ se with stakeholder representaƟ on on advisory commiƩ ees may help to address this challenge and ensure that people’s needs, preferences and concerns are considered. 23ANALYTICAL FRAMEWORK 9. Compliance with rules for the proper use of funds 8. Selection of the head of the purchasing agency based on appropriate skills and performance incentives to guide operations to effectively manage the agency Most countries have regulaƟ ons on the management and control of public funds, the fi nancial management and control of public or semi-public agencies or rules that apply to insurance agencies. These can be translated into internal regulaƟ ons and procedures to control the execuƟ on of the budget (including contracƟ ng, invoice or claims verifi caƟ on, payment, procurement for purchaser operaƟ ons), accounƟ ng, personnel decisions, and control of fraud and corrupƟ on. Such compliance rules, together with internal audit or fi nancial control departments within the organizaƟ on, serve to ensure that staff do not abuse their posiƟ ons or take unauthorized decisions inconsistent with policy and strategy. Internal control mechanisms should also avoid excessive administraƟ ve costs. Internal audit is an addiƟ onal mechanism for checking whether rules are being adhered to, with the objecƟ ve of consƟ tuƟ ng a credible threat against fraud or theŌ of resources by staff or nepoƟ sm in hiring. In addiƟ on, a purchaser who manages public funds will be held accountable by the State fi nancial inspecƟ on agency, which is expected to conduct regular external audits. Table 2 lists indicaƟ ons for eff ecƟ ve governance and provides examples of potenƟ al defi cits in those governance requirements and their eff ects. Ideally, the head of a purchasing agency (e.g. the chief execuƟ ve offi cer, director or president of a health insurance agency) should be selected compeƟ Ɵ vely and transparently on the basis of relevant skills and experience. This serves to ensure that the person appointed has the necessary competencies. The post requires adequate remuneraƟ on and reputaƟ onal and career path rewards to ensure that qualifi ed candidates are interested. Performance incenƟ ves can be added to encourage the agency head to perform her or his role conscienƟ ously, comply with the rules and meet objecƟ ves eff ecƟ vely. The same criteria apply to the staff of the purchasing agency. An autonomous purchaser may have more fl exibility to recruit staff with the necessary skills mix, while a government agency might be limited by naƟ onal staff quotas. Specifi c experƟ se may be available only at salaries that are above the civil servant salary scale. Appropriate remuneraƟ on and responsibiliƟ es are also important to avoid high staff turnover, which can aff ect the funcƟ oning of the purchaser. Table 2. Governance requirements for a purchasing agency 24 HEALTH FINANCING GUIDANCE NO. 6 Governance requirement IndicaƟ ons of eff ecƟ ve governance 1. Clear, consistent rules for policy-makers, the oversight body and the purchaser(s) on making decisions about strategic purchasing There is an overall coordinaƟ on mechanism and regular exchange among actors. The actors have the insƟ tuƟ onal and technical capacity to fulfi l their mandates. Decision-making rules and processes serve to resolve confl icts and reach a consensus on the purchaser’s strategies and decisions and those of the ministry of health (and wider government) regarding the health sector and public fi nances. Mechanisms and processes are in place to coordinate the seƫ ng of the ministry of health’s strategy and the purchaser’s strategies. Mechanisms and processes are in place for coordinaƟ on between the government’s budgeƟ ng and planning and those of the purchaser. 2. Public interest mandate and clear objecƟ ves Clear legal provisions are in place to give the purchaser a mandate to be a strategic purchaser. The purchaser has clearly defi ned objecƟ ves, with a balance among these objecƟ ves, such as fi nancial protecƟ on, access, improved health outcomes, improved quality of health care, equity, effi cient use of resources, fi nancial sustainability of the system. The legal framework for purchasing and the objecƟ ves of the purchaser have remained substanƟ ally the same over periods of 3-5 year or more. 3. Suffi cient autonomy and authority to achieve objecƟ ves, commensurate with capacity The purchaser has enough authority or infl uence over decisions on service specifi caƟ ons, provider payment mechanisms and prices to manage its fi nancial risks and to innovate to improve its non-fi nancial objecƟ ves (access, health, equity, health care quality, effi ciency of the system). The share of revenue that providers receive from the purchaser is large or marginal enough to incenƟ vize the provider. NaƟ onal procurement law and other legal provisions regulaƟ ons clearly allow the purchaser to use a range of payment methods and procurement mechanisms methods, while ensuring transparent, objecƟ ve selecƟ on. Legal provisions or regulaƟ ons allow the purchaser to monitor contracts regularly, to follow up non-performance or fraud and to use legal sancƟ ons when necessary. In a setup where the purchaser manages its funds outside the treasury system, it is also able to operate with the necessary fl exibility and can hold adequate reserves to manage in-year fi nancial risks of variaƟ on in demand. 4. Eff ecƟ ve oversight and accountability mechanisms to balance increased autonomy The oversight bodies have suffi cient autonomy, authority and capacity to fulfi l their mandate. The processes and criteria for appoinƟ ng the oversight body ensure that it has adequate competence to oversee purchaser performance with respect to both fi nancial and non- fi nancial objecƟ ves. There are requirements for disclosure of interests by the members of the oversight body or regulator and the head of the purchaser (e.g. declaraƟ ons of business ownership or acƟ viƟ es, receipt of benefi ts from industry and fi nancial posiƟ ons) and documented procedures for handling confl icts of interest. Clear rules exist on compliance, enforcement and sancƟ ons for ensuring control of the purchaser. Financial rules, reserve and solvency or balanced-budget requirements, rules on assets and investment, internal and external audit requirements are defi ned clearly in legal acts. Clear rules require the purchaser to assess and manage its main risks, e.g. regular tracking, analysis and projecƟ ons of expenditure and revenues; cost-benefi t analysis, cost- eff ecƟ veness analysis and aff ordability analysis of changes to benefi ts package and service specifi caƟ ons and other new regulaƟ ons. 25ANALYTICAL FRAMEWORK Examples of governance defi cits and eff ects Unclear division of authority between the minister or ministry of health, the oversight body and the purchaser for making decisions, leading to confl icts or boƩ lenecks or unclear or incoherent decisions, e.g. on benefi ts package, provider payment policies or contracƟ ng strategy. The purchaser lacks a clear mandate to purchase strategically: e.g. its mandate is narrowly focused on fi nancial funcƟ ons, reimbursement of a detailed list of benefi ts and not on strategic goals such as improving health outcomes and health system performance within the budget or equitable access. There are no or vaguely defi ned objecƟ ves. The purchaser has discreƟ on to pursue goals and prioriƟ es inconsistent with the government strategy, with liƩ le infl uence from the ministry of health or government. The objecƟ ves are confl icƟ ng, for example the benefi ts and service commitments may exceed the revenue or budget of the purchaser. The purchaser lacks suffi cient autonomy to act strategically and infl uence the health system to meet its objecƟ ves. For example, if the ministry of health or fi nance takes almost all decisions on the benefi t package, provider payments, price- seƫ ng and contracƟ ng strategy, the purchaser will have liƩ le autonomy to manage its expenditure within the budget. The purchaser is bound by rigid public fi nancial management rules, which limit its use of output- or performance-based payment methods or the ability of effi cient procurement of services. The purchaser has the autonomy to take decisions about payment methods and service specifi caƟ on but does not have the fl exibility to hire the necessary number of staff or with the necessary skills to do so. High reliance of providers on out-of-pocket payment or voluntary health insurance spending limits the ability of the purchaser to infl uence provider behaviour. In the absence of regulaƟ on of private (and public) providers, the purchaser does not have access to legal mechanisms for addressing fraud. The purchaser does not have the right, means or capacity to monitor balance-billing and informal payments. The purchaser has to use budget and treasury management systems, which are not fl exible enough to allow output and performance-based payment or in-year adjustment to budgets. An independent, mulƟ -stakeholder oversight body is in place, but it lacks resources, experƟ se and capacity to fulfi l its funcƟ ons eff ecƟ vely, is too weak (poliƟ cally or economically) to act as an eff ecƟ ve counterweight to the purchaser, or does not follow up or demand acƟ on from the head of the agency if the purchaser fails to meet its objecƟ ves. The oversight body is not representaƟ ve of the interests of benefi ciaries; at worst, there are confl icts of interest or the oversight body is “captured” by provider interests or the interests of purchaser staff or some other non-representaƟ ve group. RepresentaƟ ves on the oversight board are not accountable to the consƟ tuencies they represent. The oversight arrangement is not aligned with the mandate and objecƟ ves given to the purchaser, e.g. too strict control, insuffi cient autonomy. The oversight body or regulator does not have access to informaƟ on for monitoring performance, alignment with objecƟ ves, compliance with rules and regulaƟ ons or administraƟ ve costs of the purchaser. Table 2. (cont.) 26 HEALTH FINANCING GUIDANCE NO. 6 Governance requirement IndicaƟ ons of eff ecƟ ve governance 5. Inclusive, meaningful stakeholder parƟ cipaƟ on Procedures and criteria for selecƟ ng representaƟ ves and stakeholders in the purchaser’s governance and advisory processes ensure parƟ cipaƟ on of a broad base of paƟ ent, consumer and ciƟ zen groups, when possible, and a balanced group of interests, miƟ gaƟ ng the risk of “capture” by a provider or industry or undue infl uence of special interests. Legal acts or documented procedures require the purchaser to consider and analyse the impact on stakeholders and consult them before making decisions. Procedures require the purchaser to publish the views of stakeholders (e.g. from surveys or formal consultaƟ ons) and explain its decisions and responses to concerns raised. 6. Coherent and eff ecƟ ve accountability lines The mandate of the purchaser clearly states how oŌ en, to whom and which informaƟ on should be reported. If there are mulƟ ple lines of accountability, it is clear which oversight agency is in charge of which aspect (e.g. ministry of fi nance for fi nancial management, ministry of health for achieving public health objecƟ ves), and the decisions or requirements of oversight agencies are not contradictory. 7. Firm, credible budget (constraint) The government has a medium-term budget framework for health, with a credible budget constraint relaƟ ve to the cost of the benefi ts package and service specifi caƟ on and projected demand for and cost of services. There are provisions for regular updaƟ ng of forecasts of enƟ tlements within the benefi t package and measures to reconcile the cost of meeƟ ng enƟ tlements with the budget. The purchaser can forecast its revenue stream over mulƟ -year periods and obtain approval for changes in contribuƟ on rates or other revenue sources or changes in the benefi ts package to reconcile projected costs and projected revenue. 8. SelecƟ on of the head of the purchasing agency based on skills and performance incenƟ ves The head of the purchasing agency is recruited and appointed according to an open, transparent selecƟ on process based on relevant skills and experience. The purchaser is able to hire the staff it requires, with the right skills and through compeƟ Ɵ ve recruitment. 9. Compliance rules that oblige the purchaser to ensure adequate control of use of funds. RegulaƟ ons control the enƟ re budget execuƟ on (including contracƟ ng, invoice or claims verifi caƟ on and control, payment, procurement for purchaser operaƟ ons), accounƟ ng, personnel decisions and control of fraud and corrupƟ on. 27ANALYTICAL FRAMEWORK Examples of governance defi cits and eff ects Benefi ciaries do not have a formal complaints or redress mechanism. There is no cost-eff ecƟ ve procedure for dispute resoluƟ on or for resolving confl icts between the purchaser and providers on contracƟ ng and payment. Benefi ciaries are represented in the supervisory body but do not have access to relevant informaƟ on or to analyses that are readily accessible to laypeople. Lack of transparency (e.g. the purchaser does not publish its policies, strategy, plans, accounts or reports). Lack of independent audit to ensure the reliability of data produced by the purchaser (e.g. fi nancial data, contracƟ ng or service coverage data, populaƟ on coverage data) leads to lack of transparency, even if accountability lines are clear; A soŌ budget constraint can lead to purchaser defi cits or delayed payment of providers. A non-credible budget constraint can lead to a structural defi cit and a risk of arbitrary or unfair sancƟ ons on purchaser management. The purchaser cannot accumulate or access appropriate reserves to fi nance short-term variaƟ on in the revenue collected and/or the cost of the benefi t package as compared with forecasts. There is no limit on the administraƟ ve costs of the purchaser; as a result, it imposes an excessive administraƟ ve burden on providers. There is inappropriate poliƟ cal intervenƟ on in the appointment. The remuneraƟ on off ered for the head and technical staff is inadequate to aƩ ract and retain competent people. There are no reputaƟ onal or career path rewards. Bonuses are paid according to the fi nancial situaƟ on of the health insurance fund, creaƟ ng an incenƟ ve to keep excessive reserves. There are no compliance regulaƟ ons in place. There is no internal audit. There are no checks and balances, resulƟ ng in loopholes for fraud or theŌ of resources. There are no sancƟ ons for nepoƟ sm in hiring. There are rules, but the organizaƟ ons that are supposed to enforce them have insuffi cient capacity or autonomy. There are several factors that are conducive to eff ecƟ ve governance for strategic purchasing. These relate to the realm of management of both the purchasing actors and governance actors. These factors are criƟ cal for the governance of the health care purchasing system and for the agency.2 A wide range of data is needed for strategic planning and for shaping the health care purchasing system. In parƟ cular, this informs resource allocaƟ on (e.g. for more complex risk-adjusted or needs-weighted formulae), contracƟ ng (e.g. for risk-sharing or for monitoring more complex service specifi caƟ ons and standards), provider payment (e.g. for development of more complex case-mix tools or for quality- related payments), risk analysis and management. It is important that these data be robust, validated and Ɵ mely. The strategic purchaser’s informaƟ on systems must be able to handle complex payment methods, contract administraƟ on, performance monitoring and risk management. For example, the purchaser will have to use automated methods to idenƟ fy fraud and unjusƟ fi ed variaƟ on in the invoice data they receive from providers. Purchasers also require the capacity to use the informaƟ on system and act on the informaƟ on they obtain. The purchaser will also need data management and soŌ ware for advanced data analysis to support some of the strategic purchasing funcƟ ons, including actuarial analysis, analysis of variaƟ on in claims and in-service provision and review and evaluaƟ on. The governance of the health care purchasing system requires a system-wide oriented informaƟ on system that should ideally be interoperable to provide the data required by governance actors for taking informed system-wide decisions. StandardizaƟ on of informaƟ on systems requires a steward developing a common standard. This might be done by an agency outside the health sector that is in charge of collecƟ ng staƟ sƟ cs and developing informaƟ on technology. Purchasing of health services is very complex. Skilled and eff ecƟ ve management is important for the governance actors to have suffi cient capacity and experƟ se to contribute to shaping the health care purchasing system in a meaningful and eff ecƟ ve way. At the level of the purchaser, managers and staff must have diverse and high- level capacity to undertake strategic purchasing in various areas, including fi nancial management, risk analysis and management, analyƟ cal skills (e.g., economics, staƟ sƟ cs, epidemiology), 2.4 FACTORS CONDUCIVE TO EFFECTIVE GOVERNANCE FOR STRATEGIC PURCHASING Good data to inform strategic planning and operations at both scheme and system level Effective information management system to handle governance and purchasing tasks Managerial capacity and leadership of governance and purchasing actors 2 Some of these aspects are also covered in secƟ on 3, in the assessments of governance of the health care purchasing system and of the agency. 28 HEALTH FINANCING GUIDANCE NO. 6 29ANALYTICAL FRAMEWORK performance measurement, data management, informaƟ on systems, contracƟ ng and depth of knowledge of health service delivery. High capacity on its own does not, however, guarantee that the purchaser will act strategically. The purchaser management should have strong leadership skills so that the purchaser can set direcƟ on and moƟ vate staff in the organizaƟ on and also tackle external challenges and system constraints energeƟ cally. Leadership skills might be evident in the previous career path that has involved leading a large organizaƟ on through signifi cant challenges and processes of change, in a strong reputaƟ on and a high profi le within the health sector, and in the ability to communicate eff ecƟ vely in naƟ onal media, to health sector stakeholders and to staff . Country experience suggests that the capacity of the ministry of health and its related governance arrangements should be aligned with the operaƟ onal capaciƟ es of other stakeholders involved in purchasing, in parƟ cular those of the ministry of fi nance (16). Strategic purchasing involves various actors, with a variety of interests and opinions. The actors in charge of the governance of the health care purchasing system must balance the diff erent interests and engage with all stakeholders to convince potenƟ al opponents to support its proposed policy and to explain the raƟ onale for any policy changes required to move towards more strategic purchasing. The head of the purchasing agency or its divisions must manage relaƟ ons with providers, regulatory bodies, members and the general public. These groups might support or resist changes in favour of strategic purchasing, depending on their interests and whether they perceive it as advantageous to them or not. Both the governance actors and purchasers must be able to manage these aspects of poliƟ cal economy. The aim is to promote shared understanding of strategic purchasing among all groups in order to develop construcƟ ve relaƟ onships, align interests and clarify the role of each group in strategic purchasing. Effective relations among governance actors, purchasing agencies and other stakeholders To assess the strengths and challenges related to broader poliƟ cal governance of the health sector in your country, you can follow the TAPIC framework (17): Transparency: Are the operaƟ on of public insƟ tuƟ ons and their decisions made public? Is there a law on access to informaƟ on? Accountability: Do insƟ tuƟ ons have to jusƟ fy their performance? Can they be “forced” to comply with regulaƟ ons? ParƟ cipaƟ on: Are civil society and the private sector represented or consulted in policy-making? Integrity: Are there measures to avoid confl icts of interest, corrupƟ on or patronage? Capacity: Is there suffi cient capacity for policy-making and for eff ecƟ ve management of public services? To summarize the (socio-)economic and fi scal context, list the indicators in Table 3 and/or include a short paragraph on the overall (socio-)economic and fi scal context for health. 3. GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK STEP 1. ANALYSIS OF THE GENERAL GOVERNANCE CONTEXT AND THE HEALTH FINANCING SYSTEM 1) Provide a brief summary of the broader poliƟ cal governance, (socio-)economic and fi scal context in which the health purchaser(s) operate and highlight how these aff ect purchasers. 30 HEALTH FINANCING GUIDANCE NO. 6 The aim of this secƟ on is to understand the broader country context that shapes the scope for governance of the purchasing funcƟ on. 31GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK Indicator Year 1 Year 2 Year 3 Year 4 PopulaƟ on Gross domesƟ c product per capita (GPD p.c.) Poverty head count raƟ o at naƟ onal and/or internaƟ onal poverty line (% of populaƟ on) General government expenditure as percentage of gross domesƟ c product (GGE/GDP) Current health expenditure as percentage of gross domesƟ c product (CHE/GDP) General government domesƟ c health expenditure as percentage of current health expenditure (GGHE/CHE) External health expenditure as percentage of current health expenditure (EXT/CHE) General government domesƟ c health expenditure as percentage of general government expenditure (GGHE/ GGE) Out-of-pocket payments as percentage of current health expenditure (OOP/CHE) Life expectancy at birth (years) Mortality rate of children under 5 years (per 1000 live births) Table 3. Key (socio-)economic, health and health expenditure indicators Data would be available from naƟ onal staƟ sƟ cal offi ces and/or the Global Health Expenditure Database and the World Development Indicators (hƩ p://databank.worldbank.org/data/reports.aspx?source=world-development- in). 2) Map the main purchasers and providers, and outline their core features, using Table 4. Columns may be added for other health fi nancing schemes (e.g. government-funded health coverage scheme or compulsory private insurance), addiƟ onal rows may be added to disaggregate responses as relevant; columns or rows that are not relevant in your country may be removed. Recent reforms in the purchasing funcƟ on should also be considered in this overview. Annex 1 provides examples of purchasing-related reforms that countries may undertake. Ministry of health and aƩ ached agencies (specify) Other central ministries (specify) SubnaƟ onal government (disaggregated by level if relevant) NaƟ onal health insurance (or mandatory health insurance for defi ned populaƟ on groups)a Voluntary health insurance (complementary and/or supplementary) Community- based health insurance (and other local fi nancial protecƟ on schemes) Sources of fi nance, e.g. general taxaƟ on, earmarked taxes, local taxes, compulsory contribuƟ ons, rest of world PopulaƟ on covered and (as a share of the total populaƟ on Services covered, e.g. inpaƟ ent, outpaƟ ent, care, medicines, prevenƟ ve, promoƟ ve In each column: Are these single or mulƟ ple purchasers? NA If mulƟ ple purchasers, are they compeƟ ng? NA Types of providers from whom services are purchased Per capita expenditure by this purchaser Table 4. Mapping of main purchasers and providers Source: Strategic Purchasing CollecƟ vity Group (18) a This also refers to territorial health insurance funds or health insurance funds for specifi c populaƟ on groups (e.g. funds for civil servants, military and parƟ cular industries). NA, not applicable 32 HEALTH FINANCING GUIDANCE NO. 6 Overall assessment: • Is the broad poliƟ cal and governance context supporƟ ve of eff ecƟ ve governance of the health fi nancing system and the health care purchasing agency? • What are the key issues in the economic and fi scal context that aff ect governance of the health fi nancing system and of the purchasing funcƟ on in parƟ cular? 33GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK STEP 2. ASSESSMENT OF THE GOVERNANCE OF THE HEALTH CARE PURCHASING SYSTEM 3) Assess the type of the health care purchasing system in Table 5 and idenƟ fy any opportuniƟ es and challenges this creates for making purchasing more strategic. The health care purchasing system in your country might correspond to one of the paƩ erns below or be a combinaƟ on of several. Choose the lines that are relevant for your context. Table 1 may provide guidance. Types of organizaƟ on of the health care purchasing system OpportuniƟ es for strategic purchasing Challenges for strategic purchasing 1. Single naƟ onal purchaser of most individual health services (e.g. Estonia, Slovenia) 2. CompeƟ ng purchasers, open to all benefi ciaries (e.g. Israel, Netherlands) 3. Non-compeƟ ng purchasers cover diff erent populaƟ on groups (e.g. Thailand) 4. CombinaƟ on of naƟ onal and local purchasing (e.g. Austria, England) 5. Supply-side fi nancing plays a major role in funding individual health services; the purchaser fi nances a limited share of costs (e.g. Philippines: purchasing from public providers). 6. Out-of-pocket expenditure plays a major role in funding individual health services; the public purchaser fi nances a limited share of costs (e.g. Philippines: purchasing from private providers). Table 5. Assessment of the type of the health care purchasing system and opportuniƟ es and challenges for strategic purchasing 4) Explore by whom and how well the tasks of governance of the health care purchasing system are undertaken by using Table 6. Box 1 on p.12 may provide further guidance. Governance task Who is in charge? How well is this funcƟ on undertaken? Do those responsible have the capacity (e.g. rules in place, resources and technical experƟ se available)? What are the implicaƟ ons for moving towards more strategic purchasing? Policy analysis and strategy development Managing dynamics and sequencing reforms Ensuring an integrated and interoperable informaƟ on management is in place CoordinaƟ on among and consultaƟ on with stakeholders to get their input Defi ning and managing a coherent division of labour and eff ecƟ ve decision- making on purchasing Alignment with other health fi nancing funcƟ ons and other health system aspects Seƫ ng legal provisions on purchasing Alignment of benefi t designs, provider payment methods and rates, including cost-sharing mechanisms among purchasers Alignment (“shaping”) of public fi nancial management rules to create scope and space for strategic purchasing Specifi caƟ on of the role of voluntary health insurance and regulaƟ on of the voluntary health insurance market When necessary, establishing a funcƟ onal regulatory agency Table 6. Assessment of governance tasks in relaƟ on to the health care purchasing system 34 HEALTH FINANCING GUIDANCE NO. 6 35GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK Overall assessment: • What are the core strengths, key issues and challenges in the governance of the health care purchasing system, and how do these enable or hinder strategic purchasing? • Do fragmentaƟ on and lack of coordinaƟ on and alignment in the health care purchasing system weaken the leverage of purchasers on health sector performance? • What short- and long-term suggesƟ ons or recommendaƟ ons for shaping the purchasing system would allow it to move towards more strategic purchasing? • Can you idenƟ fy champions to lead the process? STEP 3. ASSESSMENT OF THE GOVERNANCE OF A PURCHASING AGENCY 5) Using Table 7, assess (i) whether the desired governance requirements for the purchasing agency are in place, (ii) the reasons for governance defi cits and (iii) whether the exisƟ ng governance arrangements foster or hinder strategic purchasing. Table 2 also provides examples of conducive features and potential gaps. Governance requirements and desirable features Assess whether the respecƟ ve relevant governance requirements are in place What are the reasons for the defi cits in the governance arrangements? (e.g. gaps in insƟ tuƟ onal or technical capacity?) How do the exisƟ ng governance arrangements foster or hinder strategic purchasing? Legal provisions determine a clear and coherent division of labour and defi niƟ on of decision-making authority for key purchasing aspects between the purchaser, ministry of health and other relevant parts of government. Both a public interest mandate and clear objecƟ ves for strategic direcƟ on are formalized in legal or regulatory provisions. Table 7. Assessment of governance aspects at purchaser level Governance requirements and desirable features Assess whether the respecƟ ve relevant governance requirements are in place What are the reasons for the defi cits in the governance arrangements? (e.g. gaps in insƟ tuƟ onal or technical capacity?) How do the exisƟ ng governance arrangements foster or hinder strategic purchasing? The purchaser has suffi cient autonomy and authority, commensurate with its capacity to achieve its objecƟ ves. An eff ecƟ ve (expert) oversight body and mechanisms are in place to increase accountability for results and balance increased autonomy. There is inclusive, meaningful stakeholder parƟ cipaƟ on, with checks on confl icts of interest. The mulƟ ple lines of accountability are coherent, allowing clear direcƟ on for the purchaser and clear aƩ ribuƟ on of responsibility. There is a fi rm, credible budget (constraint) in place, so that it has clear responsibility for balancing expenditure and revenue, with credible sancƟ ons in case of breaches of the budget constraint. The head of the purchasing agency is selected on the basis of appropriate skills. There are performance incenƟ ves for the head and other relevant staff to guide operaƟ ons. There are specifi c regulaƟ ons in place on the management and control of public funds, fi nancial management and control of public or semi-public agencies or rules that apply to insurance agencies, and these regulaƟ ons are implemented. Table 7. (cont.) 36 HEALTH FINANCING GUIDANCE NO. 6 37GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK 6) Use Table 8 to map the division in decision-making authority for purchasing. Mark “x” against the organization with the respective decision-making authority on each line. Decision- making right on purchasing aspects: Purchaser Oversight body Legislature (parliament) Prime minister, cabinet, president Ministry of health Other (e.g. Ministry of fi nance, regulator) Budget or contribuƟ on rates Benefi ts package List of reimbursable drugs Provider payment method Provider payment rates Contract development and award Quality standards and accreditaƟ on ContracƟ ng and selecƟ ve contracƟ ng Clinical guidelines Benefi ciary complaints and appeals Standardiza- Ɵ on of data collecƟ on Table 8. Division of decision-making authority for purchasing aspects Overall assessment: • What are the key strengths, criƟ cal issues and challenges for governance of the purchasing agency? • Do defi cits in the governance requirements adversely aff ect the development of strategic purchasing, and, if so, how? • Which strategic purchasing funcƟ ons are most aff ected by these issues? • What are the short- and long-term suggesƟ ons or recommendaƟ ons for changing the governance of the purchasing agency to move towards more strategic purchasing? Could champions be idenƟ fi ed to lead the process? In this secƟ on, we assess the extent to which factors conducive to the governance of strategic purchasing are in place. The factors apply to governance of both the overall health care purchasing system and of the purchasing agency. Therefore, separate assessments should be made for each level. QuesƟ ons to consider for each factor are suggested below. STEP 4. ASSESSMENT OF FACTORS CONDUCIVE TO EFFECTIVE GOVERNANCE OF STRATEGIC PURCHASING 7) Assess how well the factors conducive to eff ecƟ ve governance of strategic purchasing are established. IdenƟ fy strengths and explore challenges and their underlying reasons. 8) Describe any plans for improvement in these areas, including opportuniƟ es and expected challenges. • Do policy-makers, governance actors and purchasers have adequate data to undertake their tasks and fulfi l their responsibiliƟ es? E.g. data on populaƟ on health needs; health coverage and fi nancial protecƟ on of diff erent populaƟ on groups; populaƟ on and cost coverage by voluntary health insurance • In parƟ cular, do purchasers have adequate data on provider performance, diagnosƟ c and treatment services provided, clinical quality and safety, paƟ ent saƟ sfacƟ on, clinical outcomes and the cost of service provision? • Do purchasers have adequate data for developing and revising payment methods and rates? E.g., data for needs-weighted or risk- adjusted capitaƟ on payment for primary care; paƟ ent-level informaƟ on on the hospital visit or stay, including coded diagnosƟ c and treatment informaƟ on. Availability of adequate data 38 HEALTH FINANCING GUIDANCE NO. 6 39GOVERNANCE FOR STRATEGIC PURCHASING: COUNTRY ASSESSMENT FRAMEWORK • Do the reporƟ ng systems for purchasers respond to the needs of the policy- makers and governance actors of the health care purchasing system in terms of disaggregaƟ on, Ɵ meliness and completeness? • Do the purchaser’s informaƟ on systems provide Ɵ mely, complete and reliable informaƟ on to support its acƟ viƟ es related to contracƟ ng, provider payment, fi nancial control, control of fraud and other operaƟ ons? • Is the informaƟ on management system integrated or interoperable across all funcƟ ons, including revenue collecƟ on, benefi ciary registraƟ on, benefi ciaries’ benefi ts, payment of providers and monitoring of provider performance? • Are the informaƟ on systems of the ministry of health, other purchasers and providers interoperable? • Is the purchaser using an automated system to review claims and make payments and to idenƟ fy and control risks of fraud? • Do the governance actors of the purchasing system have suffi cient technical and insƟ tuƟ onal capacity and understanding to fulfi l their roles? • What are the profi les of the chief execuƟ ve and other members of the senior management team (career background, qualifi caƟ ons and experience)? • Does the purchaser assign staff to the funcƟ onal areas necessary for strategic purchasing, such as planning, forecasƟ ng, resource allocaƟ on, evidence-based benefi ts package design, provider payment development, pricing, contracƟ ng, monitoring and analysing claims and health provider performance, risk analysis and risk management, programme review and evaluaƟ on? • Can the purchaser recruit and retain staff with specialized skills in areas such as fi nancial management, economics, staƟ sƟ cs, epidemiology, informaƟ cs, data management, health systems management and evaluaƟ on? Where are the key gaps? • What are the main barriers to building stronger capacity? Can the purchaser outsource or hire contractual staff to perform criƟ cal funcƟ ons if it lacks suffi cient staff or appropriate skills? • How is the senior management team recruited and selected? It is beyond the scope of a country assessment to make a detailed analysis of the funcƟ onality and capacity of the purchaser. The intenƟ on is to provide a rough assessment of whether capacity is a constraint to the funcƟ oning of the purchaser as a strategic organizaƟ on and not just an administraƟ ve organizaƟ on. • With which main stakeholders must the governance actors of the health care purchasing system and the purchasers collaborate in order to fulfi l their role? • Do the governance actors and the purchasers have constructive relationships of trust with their stakeholders? Information management system Managerial capacity and leadership Conducive relations among governance actors, purchasers and other stakeholders Overall assessment: • What are the strengths in these four areas? • To what extent do gaps in data or in informaƟ on management systems, constraints in the capacity of the leadership and in managing stakeholder relaƟ ons prevent the development of eff ecƟ ve strategic purchasing? Which strategic purchasing funcƟ ons are most aff ected by these issues? • What are the short- and long-term suggesƟ ons or recommendaƟ ons for strengthening data collecƟ on, informaƟ on systems, capacity, leadership and management in order to move towards more strategic purchasing? • Can champions to lead this process be idenƟ fi ed? STEP 5. SUMMARY OF KEY STRENGTHS AND CHALLENGES AND DEVELOPMENT OF OPTIONS AND RECOMMENDATIONS 9) Summarize the key strengths and challenges of the governance of the country’s health purchaser(s) and health care purchasing system and how well its exisƟ ng governance arrangements allow for strategic purchasing. You can draw upon the “overall assessment” of Steps 1-4. 10) Provide a list of recommendaƟ ons and suggesƟ ons for short- and long-term acƟ on or further invesƟ gaƟ on to address these issues. In this country assessment as a whole, what appear to be the most important barriers or enablers of governance for strategic purchasing in relaƟ on to: • raƟ onal expenditure and effi cient use of resources? • meeƟ ng the objecƟ ves of fi nancial protecƟ on, populaƟ on health, access, equity, quality improvement, effi ciency and fi nancial sustainability? • Can the governance actors resolve or balance the confl icƟ ng and compeƟ ng interests of mulƟ ple stakeholders? Do some stakeholder interests dominate, thus constraining the purchaser’s ability to meet its objecƟ ves? • Do stakeholders recognize when diffi cult decisions and trade-off s are necessary, and do they view the decision-making processes of the governance actors and purchasers as reasonable? 40 HEALTH FINANCING GUIDANCE NO. 6 41REFERENCES REFERENCES (1) Everybody’s business. Strengthening health systems to improve health outcomes. WHO’s framework for action. Geneva: World Health Organization; 2007. (2) Strategic purchasing for universal health coverage: unlocking the potential. Global meeting summary and key messages. Geneva: World Health Organization; 2017 (http://www.who. int/health_financing/events/strategic-purchasing-meeting-2017/en/, accessed 20 February 2019). (3) Mathauer I, Dale E, Jowett M, Kutzin J. Purchasing of health services for Universal Health Coverage: How to make it more strategic? Policy Brief, Department of Health Systems Governance and Financing, Geneva: World Health Organization; 2019 (WHO/HGF/ PolicyBrief/19.6). (4) McIntyre D, Kutzin J. Health financing country diagnostic: a foundation for national strategy development, Health Financing Guidance No. 1. Geneva: World Health Organization; 2016. (5) Mathauer I, Dale E, Meessen B. Strategic purchasing for universal health coverage: key policy issues and questions. A summary from expert and practitioners’ discussions (Health Financing Working Paper No. 8). Geneva: World Health Organization; 2017. (6) Savedoff W, Gottret P. Governing mandatory health insurance. Washington DC: World Bank; 2008. (7) Sekhri N, Savedoff W. Regulating private health insurance to serve the public interest: policy issues for developing countries. Int J Health Plan Manage. 2006; 21(4):357–92. (8) Sagan A, Thompson S. Voluntary health insurance in Europe: role and regulation. Copenhagen: WHO Regional Office for Europe; 2016. (9) Cashin C, Bloom D, Sparkes S, Barroy H, Kutzin J, O’Dougherty S. Aligning public financial management and health financing. Sustaining progress toward universal coverage (Health Financing Working Paper No. 4). Geneva: World Health Organization; 2017. (10) Kutzin J. A descriptive framework for country-level analysis of health care financing arrangements. Health Policy. 2001; 56(3):171–204. (11) Health financing. The path to universal health coverage. World Health Report 2010. Geneva: World Health Organization; 2010. (12) Briefing note. Policy dialogue. What it is and how it can contribute to evidence-informed decision-making. Geneva: World Health Organization; 2015 (http://www.uhcpartnership. net/wp-content/uploads/2014/02/2015-Briefing-Note.pdf, accessed 20 February 2019). (13) Schmets G, Kadandale S, Porignon D, Rajan D. Introduction. In: Schmets G, Rajan D, Kadandale S, editors. Strategizing national health in the 21st century: a handbook. Geneva: World Health Organization; 2016. (14) Mathauer I, Kutzin J. Voluntary Health Insurance: Potentials and limits to contribute to universal health coverage, Health Financing Policy Brief No. 5, Geneva: World Health Organization; 2018 (WHO/HIS/HFPolicy Brief/18.5). 42 HEALTH FINANCING GUIDANCE NO. 6 (15) Akkhavong K, Paphassarang C, Phoxay C, Vonglokham M, Phommavong C, Pholsena S. The Lao People’s Democratic Republic health system review. Manila: World Health Organization Regional Office for the Western Pacific; 2014. (16) Hawkins L. The functions and governance of purchasing agencies. Issues and options for Georgia (Health Financing Policy Paper). Copenhagen: WHO Regional Office for Europe; 2017. (17) Greer SL, Wismar M, Figueras J, editors. Strengthening health system governance. Better policies, stronger performance (European Observatory on Health Systems and Policies Series). Maidenhead (Berks): Open University Press; 2016. (18) Strategic purchasing assessment guide. Antwerp: Strategic Purchasing Collectivity Group; 2018 (https://www.thecollectivity.org/en/projects/37, accessed 20 February 2019). ANNEX 1. EXAMPLES OF TYPES OF PURCHASING-RELATED REFORMS • A country with an insurance system carried out a transiƟ on away from paying providers a “passive fee for service” to more acƟ ve use of provider payment and contracƟ ng levers to achieve health system objecƟ ves, such as managing for fi nancial sustainability; improving quality, effi ciency, equity and value for money. • A country moved from a fully integrated public delivery system with no purchaser– provider split to a tax-fi nanced public purchasing agency. • A health system moved from “passive” payment of providers by allocaƟ on of budgets based on the costs of their past inputs (including wages, other operaƟ ng costs, pharmaceuƟ cals, supplies, capital expenditure) to programme or global budgets. • A country reduced fi nancing through “supply-side subsidies” for input costs by covering the costs by an increase in the level of payments from the purchaser. • In a situaƟ on with “supply-side fi nancing” of public providers by the ministry of health or local government (e.g. for salaries and/or capital investment) with payments from a purchaser, the purchaser acƟ vely coordinated or aligned diff erent funding fl ows for the provider to ensure that the incenƟ ves for providers were coherent and conducive to good health system performance. • A country consolidated previously fragmented fund pools and purchasing agencies to designate a single purchaser or a more consolidated mulƟ -purchaser system. 43ANNEX