1. Priyanka Saksena 12 December 2017
International experience
with using different
provider payment methods
Priyanka Saksena
12 December 2017

2. Why should we care about provider payments?
Provider payment mechanisms are a key lever for advancing universal health coverage agenda
Many countries around the world have used provider payment mechanisms for doing this
Using provider payment mechanisms ultimately allows expansion of coverage with limited resources
But there is no one ideal provider payment mechanism
All countries need to rely on a combination of appropriate provider payment mechanisms to ensure the right incentives

3. Provider payments and incentives
Payment is a fundamental driver of healthcare provider behaviour
Analogy: Ceteris paribus, who will try to make more sales?
Salesperson paid a fixed salary
Salesperson paid through commissions

4. C-sections – a case in point for provider behaviour

5. Provider payments and incentives (2)
Different provider payment mechanisms give different incentives
But different provider payments are not black and white
How providers respond to payment incentives can vary
In reality, things are not ceteris paribus
The ability of providers to respond to payment incentives is essential
If providers have no autonomy in decision-making, then how you pay them is moot

6. General overview of provider payment mechanisms
Payment method
Definition
Negative incentives for providers
When the method may be useful
Line-item budget
Providers receive funds according to inputs
Underprovide services, increase referrals, increase inputs, spend all remaining funds by the end of the budget year
Management capacity of the purchaser and providers is low; cost control is a top priority.
Global budget
Providers receive a fixed amount for a specified period to cover aggregate expenditures
Management capacity of the purchaser and providers is at least moderate; competition among providers is not possible or not an objective; cost control is a top priority.
Capitation (per capita)
Providers are paid a fixed amount to provide a defined set of services for each enrolled individual for a fixed period of time.
Attempt to select less costly enrollees, decrease inputs, under-provide services, increase referrals,.
Management capacity of the purchaser is moderate to advanced; strengthening primary care and equity are objectives; cost control is a priority; choice and competition are possible.
Ref: Adapted from Langenbrunner, J., Cashin, C., O’Dougherty, S. & others. Designing and implementing health care provider payment systems: how-to manuals. (World Bank Publications, 2009).

7. General overview of provider payment mechanisms (2)
Payment method
Definition
Negative incentives for providers
When the method may be useful
Case-based,
e.g. diagnosis-related groups
Hospitals are paid a fixed amount per admission depending on clinical characteristics
Increase admissions, reduce length of hospital stays, shift rehabilitation care to the outpatient setting
Management capacity of the purchaser is moderate to advanced; improving efficiency is a priority; cost control is a moderate priority.
Fee-for-service
Providers are paid for each specific service provided.
Increase the number of services
When increased productivity, service supply, and access are top priorities; there is a need to retain or attract more providers; cost control is a low priority.
Ref: Adapted from Langenbrunner, J., Cashin, C., O’Dougherty, S. & others. Designing and implementing health care provider payment systems: how-to manuals. (World Bank Publications, 2009).

8. Scope for financial loss (relative to actual costs)
High
Global budget
Capitation
Fee-for-service
Case-based payment
Case-based payment
Fee-for-service
Line-item budget
Low
Global budget
Line-item budget
Capitation
Provider
Purchaser

9. How do other countries use provider payment mechanisms?
Best approach is to move away from mechanisms with extreme incentives (on either end) – i.e. full line-item budgets or full fee- for-service
A combination of different provider payment mechanisms is key
An average country with a good health financing systems could typically use:
Case-based payments/global budget for inpatient services
Capitation payments for primary services
Results-based payments/fee-for-service for the following:
To ensure providers to meet certain goals (e.g. ensuring services are of good clinical quality or efficiently delivered)
This additional funding is withheld if providers do certain bad things
Quantum of additional possible funding should not be immense
In practice, there is much variation across countries

10. But choice of provider payment mechanism is only part of the answer
Information systems and using evidence to guide purchasing decisions is the common element across all successful health financing systems
Korea’s National Health Insurance Scheme (NHIS) and Health Insurance Regulatory Agency (HIRA) know exactly what each provider is doing
Records of all health services provided to individual patients, including medicines prescribed
Use of data to ensure best behaviour from providers
Japan’s Federation of National Health Insurance Organizations scrutinizes all provider bills before the different insurance schemes in the country are allowed to make payments to them

11. Ghana’s dashboard of indicators for capitation system
Ref: Cashin, C. Influencing provider behaviour through reform – June 2016, Barcelona

12. What do things look like in India?

13. Main lessons for UHC in India
Instead of thinking at the level of different schemes and their provider payment mechanisms, we need to start thinking of the whole health financing architecture
Different provider payments mechanisms need to be in synergy with which other in order to deliver the best results
For this, good integration of different financing schemes (e.g. health insurance, government budget funds, private funds) and their different provider payments methods is essential
Capacity for purchasing needs to be urgently and decisively strengthened
A strong state level purchaser might be best placed to have this capacity