1. Health financing for Primary Health Care: Strategic purchasing and mixed provider payment methods 7 April 2016 Inke Mathauer MSc., PhD Health Financing Policy, WHO, Geneva

2. What is strategic purchasing Provider payments for PHC and issues An example of mixed payment methods Challenges and open questions

3. What is strategic purchasing Strategic purchasing means active, evidence-based engagement in defining the service-mix and volume, and selecting the provider-mix in order to maximize societal objectives. The aims are to guide allocation of resources, to manage expenditure growth, to promote quality, and improve accountability, as a way to generate “more health for the money”

4. Health financing functions their pathway of influence on PHC Revenue contribution/ collection Greater shift to prepaid, compulsory sources increases the potential size of the pool that can be allocated to primary care. It can reduce direct out-of-pocket payments at the primary level that prevent the poor and vulnerable from accessing or continuing to use needed services => Access and financial protection PoolingReducing fragmentation to enhance pool size and create a better platform for equitable allocation/redistribution to underserved regions, while also minimizing scope for related fragmentation in allocations and service delivery => Equitable access; equitable use over needs PurchasingRational use of resources; relative level of funding allocated to PHC vs other services; incentives built into the payment mechanism can be used to motivate delivery of specific types of services (e.g. RBF/PBF/P4P) => Efficency savings (reduction of unncessary costs at hospital level) can be channelled to PHC Benefit design and rationing Ensuring essential PHC services are available to all, with minimal or no financial barriers, particularly for the poor and vulnerable. Governance of financing Ensuring accountability of the system, and particularly the purchaser(s), for both allocating a sufficient share of overall funds to PHC and for using its mechanisms as part of an overall quality improvement strategy.

5. Commonly used payment methods for PHC Line-item budget Fee for service Capitation Level of service bundling increasing More risk to provider Increasingly popular in LMICs No perfect provider payment model - all can be useful at different times depending on the objectives

6. Some emerging developments Movements away from the extremes –e.g. from line-item budgets, fee-for-service, full capitation  case-based payment, partial capitation and other bundled payment methods Blended payment models –e.g. capitation with some priority services paid fee-for-service Use of performance based payments, e.g. RBF/P4P –typically used in combination with one of the basic types of payment –often to address limitations of the main provider payment

7. A fixed payment made to a provider in advance to deliver all of the services in a pre-defined package for each enrolled individual for a fixed period of time. 7 What is capitation (per capita) payment? Individuals are linked to a provider for a fixed period of time (continuity in the patient-provider relationship) Providers are paid to care for a group of people—not just for sick patients Advance payment—providers can make more decisions about how to use the funds Payment is unrelated to utilization Fairness—each person is entitled to the same amount of resources (adjusted for need)

8. Reduce cost/improve efficiency of inputs – e.g. employ more nurses and fewer physicians Improve output mix –e.g. provide more low-cost preventive services and reduce diagnostic tests Attract additional enrollees –“the money follows the patient” Under-provide services Refer to other providers Attempt to enroll healthier individuals That’s Good That’s Bad Incentives of capitation

9. Principles of PBF: Explicit link between purchasing and benefits The purchaser decides which outputs are wanted (objectives) –e.g. paying providers for each attended delivery, each child immunized, for achieving certain screening targets, etc. pays a price for the output : –PBF is a means for transforming stated priorities or policies (e.g. free MCH care) into reality through explicit resource allocation incentives The provider can decide on the input allocation and keeps and decides about the revenue Basic premises Causes of poor performance can be simplified into indicators and targets These are amenable to behavior change through financial incentives of the providers

10. PBF potentials and challenges Output-based payment sets strong incentive to satisfy users Identification of key health priorities to be "purchased" (high impact interventions) means for HF system development, incl. generation and use of information on provider performance or population health needs for resource allocation decisions I s there an agreed understanding of what is performance? –often seen as a way to increase insufficient salaries, rather than as a way to increase performance PBF can create disincentives for under-providing other services Concerns around reliability of performance indicator / reporting PBF cannot address gaps in health worker numbers and skills and infrastructure

11. Capitation as part of a blended payment model Blended PHC Payment System in Estonia

12. Need for more evidence (1) Incentives created by different provider payment mechanisms on the quantity of well-defined services and interventions are well-known. But systematic knowledge is lacking on how to tailor and combine financial incentives to a broader quality improvement strategy, –more so with respect to “the platform” of PHC as the point of first contact where patients may present with a set of symptoms but without, initially, a clear diagnosis,

13. Need for more evidence (2) Evidence/knowledge needed on mixed payment systems, combining “underlying” with P4P/bonus: –how large (relative to the base/underlying system) should the performance element be? –what factors to consider in setting the mix and adjusting it over time? –how to compensate for perverse incentives; how to move towards unified information platforms? Accountability for results: what should PHC providers be accountable for, reporting systems to the purchaser More evidence needed on the enabling conditions to improve sectoral efficiency and to allocate such gains preferentially to PHC

14. Acknowledgement Presentation on provider payment methods, Advanced WHO Health Financing Course, Tunis, 2014, by Cheryl Cashin and Inke Mathauer Internal discussion paper on PHC and health financing policy, by Joe Kutzin

15. Thank you very much! Questions? Comments!

16. Arguments against PBF PBF doesn't solve the root problems Very high administrative costs –Need for surveillance/verification/monitoring absorbs a lot of human resources High design and set up costs PBF funding may not be sustainable PBF cannot address gaps in health worker numbers and skills and infrastructure Often, worst performers cannot improve their infrastructure

17. Design steps Define which services to buy Define performance for each unit and how to evaluate it (indicators) Design and write contracts Set fees and determine a payment formula Design quality checklists  Creation of new organizational bodies at different levels (purchasing agency, verification agent, steering committees…) community actors can be contracted to verify the reality of remunerated outputs  Separation of functions (purchasing, provision, verification, governance) By B. Meesen 2014