Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Reforms in purchasing in Central/ Eastern Europe and ex-USSR: pay for

Pay for performance: lessons from

central/eastern Europe and ex-USSR11 May 2011

Reforms in purchasing in Central/ Eastern Europe and ex-USSR:

pay for performance?

Joseph Kutzin

Head, WHO Barcelona Office for Health Systems Strengthening

Incentives for Health Provider Performance Network

11 May 2011, Clermont-Ferrand, France

Main sources for this presentation

And the publications produced by the Kyrgyz Health Policy Analysis Center (see www.hpac.kg for more)

http://www.hpac.kg/



Overview

• Motivations for reform of purchasing and some key messages from our analysis of financing reform implementation

• The (mostly) Kyrgyz experience

• General lessons learned from the region, and possible lessons for low and middle income countries elsewhere in the world



Motivations for reform of purchasing

• Inheritance of excess capacity, low productivity, and unresponsive systems

• Growing recognition of poor quality in service provision, especially primary care

• Expectation that with “new formulas” by which only good and efficient services would be purchased, the problems could be solved

Key alignment issues (coordination, not magic bullets or “schemes”)1. Revenue collection and pooling

- Explicit coordination/pooling of budget and payroll tax revenues

2. Revenue collection and purchasing

- Predictable, stable revenues to the purchaser

3. Pooling and purchasing for redistribution and efficiency gain

- Not only new provider payment methods; need both

4. Revenue collection and benefit package

5. Benefit package and purchasing

- Explicit links to avoid merely declarative entitlements

6. Financing and service delivery

- Incentives alone not enough: need changes on provider side and political will to implement

Our list of pitfalls – errors in conception as well as implementation1. Treating the benefits package as the solution to an

accounting problem rather than as a policy instrument

2. “Solving” informal payments simply by legalizing them as co-payments

3. Undertaking incomplete or “half-hearted” reforms

4. Implementing contradictory policies

5. Having unrealistic expectations in terms of effectiveness of health financing instruments to improve quality of care

6. “Starting insurance” with the formal sector and hoping that economic growth will bring eventual progress towards universal coverage, as it did historically in many west European countries

7. Ignoring public health services and public health programs in health financing reform and policy analysis



Aligning benefits with purchasing to enable

realization of entitlements

Reducing out-of-pocket spending for defined exempt groups in Kyrgyzstan

How benefit categories, co-payment obligations, and purchasing are linked by the Kyrgyz MHIF

Self-referred

Uninsured

Insured

Partially exempt

Fully exempt

Patient pays:

co-paymentMax

High

Mid

Low

Zero

Purchaser pays:

hospital base rateNone

Little

Mid

High

Most



Unique research on informal payment

• Data on informal payment is based on patient surveys

• There have been 5 complete survey waves between 2001 and 2006

• Interviews conducted 4-6 months after discharge

• Detailed record of payment is taken without mentioning the word ‘informal’ or ‘illegal’

• Survey data is merged with the case-based data of the MHIF to obtain administrative data on case characteristics

From declaring benefits to purchasing them: changes in OOPS by exempt patients

458

650

500 488

130

700

545500

0

100

200

300

400

500

600

700

Exempt Not exempt Exempt Not exempt

Single Payer Other regions

So

ms

Baseline Follow-up

Source: WHO surveys of discharged hospital patients



Informal payments declined most for pregnant women and children…

For children<5, the net reduction in total patient payments was KGS 736 or 52% in real terms

For pregnancies, the net reduction in total patient payments was KGS 363 or 37% in real terms

0200

400600800

1,0001,2001,4001,600

1,8002,000

2001 2006 2001 2006 2001 2006

All patients Children<5 Pregnancies

Informal payment Co-payment

-19% -52%

-37%



-400

100

600

1,100

1,600

2,100

2,600

2001 2006 2001 2006 2001 2006 2001 2006

All patients Pensioners>75 Medically exempt Socially exempt

Informal payment Co-payment

For pensioners>75, the net reduction in total patient payments was KGS 397 or 28% in real terms

For medically exempt, the net reduction in total patient payments was KGS 732 or 33% in real terms

For socially exempt, the net reduction in total patient payments was KGS 181 or 13%

-19% -28%

-33%

-13%

… and show significant improvement for pensioners and other exempt categories



Aligning purchasing with service delivery in an attempt

to improve quality and outcomes

Well conceived, but yet to deliver the results in Kyrgyzstan



Motivation

• In analyzing its hospitalization data, MHIF determined there were a lot of cases for conditions that could be effectively managed at primary care level (“primary care-sensitive conditions”) IF treatment was appropriate and the population had access to the relevant medicines



Aims of Kyrgyzstan’s additional drug package• Promote use of new family physician groups by

expanding their services (i.e. raise their credibility)

• Reduce unnecessary hospitalizations by supporting outpatient management of key conditions (asthma, hypertension, anemia, ulcers)

• Improve quality by link to new clinical guidelines, especially improved prescribing practices

• Reduce cost of outpatient drugs for beneficiaries



Features of the drug package

• Funded out of FGP capitation payment

• Covers limited list of prescribed items; targets 4 causes of avoidable hospitalization for which clinical guidelines were developed

• Prescribing by generic name required

• Purchaser (MHIF) contracts with qualifying private pharmacies

• Patient pays difference between reimbursement rate and retail price



Initial results were encouraging

• All PHC physicians have been re-trained

• Monitoring studies show that adherence to guidelines is high in PHC

• Additional Drug Benefit is widely used and HTN drugs are “top sellers”



But detailed survey analysis revealed problems in effective coverage• Kyrgyz Health Policy Analysis Center and WHO

study of health system effectiveness in Hypertension Control included hypertension monitoring as part of the health module

– Nationally representative sample

– 12,438 respondents 18 years or older in KIHS

– 10,170 completed HTN measurement

The Additional Drug Package is a good program but not enough

• ADP provides subsidy to insured people for the purchase of drugs for primary-care sensitive conditions incl. HTN

• Generic prescription rate is very high

• Patients switch to brand name drugs at the time of purchase

• Cannot afford brand-name drugs continuously

• Result: intermittent use of HTN medication

0%10%20%30%40%50%60%70%80%90%

100%

Prescribed Sold

Generic Brand name

% of generic versus brand name HTN medication in ADP

Source: MHIF

Why did people not take their HTN medication in the last 24 hours?

I did not feel like it

17%

Did not have money

10%

Other10%

Doctor told me to take it in

crisis63%

Pharmacy was far0%

Could not find0%



Major problem of provider quality

“If my physician had emphasized the importance of taking drugs for high blood pressure, I would have taken it on a regular basis, and maybe I would have avoided getting a stroke.” (Man, 50 years old, Jalal-Abad oblast)

Akunov, Ibraimov, Akkazieva et al. 2007. “Is the Kyrgyz health system effective in preventing and treating cardio-vascular disease?” CHSD Policy Research Paper No

45. http://hpac.kg

http://eng.chsd.med.kg/

http://eng.chsd.med.kg/

Measuring the effectiveness of the health system in HTN control

Aware:

26.5%

Treated:

17.1%

Controlled:

13.9%

2.4% of hypertensives whose 2.4% of hypertensives whose blood pressure is controlledblood pressure is controlled



So even this comprehensive approach was not adequate• Provider behavior resistant to change

• Generic prescribing built into the ADP was undermined by switching to more expensive branded drugs in the pharmacy

• Repeat of study in 2010 showed improvements in population awareness of their condition and care seeking behavior (especially in rural areas and for women), but little change in provider behavior and population behavior with regard to taking their HTN medications



Some conclusions and possible lessons for other low and middle income countries

Lessons learned - general

• New health purchasers have been critical in transforming (some) health systems– Several countries demonstrated gains in “structural”

efficiency, redistribution, and targeting of entitlements

– However, little documented success in actually improving quality through purchasing

– We’re still better at purchasing things we can count

• Accountability and governance structures did not receive sufficient attention

• Management autonomy and skills have been critical success factors

• Step-by-step implementation was important to give time for institutions to mature



RBF/strategic purchasing as a key step in process of building domestic health financing systems and institutions

• Need to consider the purchasing institution(s) as well as the technical mechanisms used to pay providers

• Creating a strong purchasing agency as the “change agent” in the reform process– Requires consolidating fund pools

– Technical development on payment methods, information management, provider autonomy, …

– And it takes time!



A contextual challenge?

• How to attract and retain people with the (scarce) skills needed to implement relatively sophisticated purchasing and M&E systems?– Kyrgyz hospital payment system was designed by

former rocket scientists(!), and availability of mid-level technicians to run it who had little choice but to take public sector job

– How to create enabling conditions for effective purchasing on behalf of the entire population of most LMIs, when it probably is not possible at civil service salaries?



Thank you

An illustration of the problem: government health spending by input (prior to financing reforms)

Moldova 2000 Kyrgyzstan 2001

Salaries and social benefits

47% 52%

Utilities 27% 20%

Drugs and supplies

14% 9%

Food 6% 9%

Capital and repairs

6% 5%

Other 4%



Aligning pooling and purchasing for efficiency gain

The single payer reform and downsizing in Kyrgyzstan

Fragmentation and inappropriate incentives as sources of efficiency problems

• Input-norm-based budgeting

• Fragmented and overlapping pooling and purchasing, vertically integrated with provision

• Inherited clinical practice patterns

• Rising energy prices with transition to market economy, combined with energy inefficient buildings

• Difficulty in reducing staff numbers because of social consequences of unemployment

• Inefficiencies had distributional consequences– They manifested as the need to pay/provide own

inputs, which hit the poor hardest

Source/ collection

Pooling

Purchasing

Provision

Population

Oblast, rayon and city administrations

Bishkek City Finance Dept.

Republican budget

Rayons Oblast

RFD

rayon hospitals,

polyclinics, SUBs, FAPs

OHDOFD

Oblast hospitals and

polyclinics

Each oblast

city health

depart-ment

CHD

City hospitals and polyclinics

City

MOH

MOH

Republican health facilities

Bishkek (and nearby)

Coverage Coverage

RFD OHDOFD

Social Fund

MHIF

Covered persons

contracted FGPs

& hospitals

cont

ract

ed F

GPs

& h

ospi

tals

Source/ collection

Pooling

Purchasing

Provision

Population

Bishkek City Finance Dept.

Republican budget

Rayons Oblast

CRH, FAPs, SVAs, SUBs,

FGPs, polyclinics

Oblast hospitals and

polyclinics

CHD

CHD

City hospitals, polyclinics,

FGPs

Bishkek

MOH

MOH

Republican health facilities

Bishkek (and urban Chui)

CoverageCoverage

Each of Six Oblasts


CRHRFD

OHDOFD

CRHRFD

OHDOFD

1997 compulsory insurance fund adds new player but doesn’t address underlying structure

Republican MHIF (national

pool)

Population of each Single Payer region

Cov

erag

e

contracts

Source/ collection

Pooling

Purchasing

Provision

Population

Social Fund


Republican budget

FGPs, oblast and rayon hospitals, private pharmacies, etc.

Coverage

Oblast level TDMHIF

Mandatory Health Insurance Fund

2001 “Single Payer Reform” eliminates fragmentation within oblasts

Summary of Single Payer features

• Sources: local budgets, Republican budget, payroll taxes, formal co-payments

• Pooling: Single pool for each territory (oblast), and complementary national pool for “insured”

• Purchasing: purchaser-provider split; capitation payment for PHC, case-based payment for inpatient care

• Benefits: universal entitlement funded from local budgets, complementary contribution-based entitlement for insured funded from payroll tax and Republican budget

Planned for years, but downsizing only began after the incentives changed

Source: Socium Consult (2002)

Share of hospital expenditures spent on patients increased

20.4 20.1

30.532.7

0

5

10

15

20

25

30

35

2004 2005 2006 2007

Direct medical expenditures (medicines, medical supplies, and food) as a share of total public expenditures at the hospital level in the SGBP

Source: Mandatory Health Insurance Fund, Kyrgyzstan



Aligning pooling and purchasing for redistribution

Centralization of pooling and change to output-based payment for redistribution

in Moldova and Kyrgyzstan

Insured population

Cov

erag

e

contracts

Source/ collection

Pooling

Purchasing

Provision

Population

Central budget revenues

Payroll taxes

Health care providers

National Health Insurance Company

Moldova also eliminated fragmentation with single national pool of funds

2/3 1/3

Centralized pooling combined with shift from input to output-oriented payment reduced geographic inequity in spending

Source: Shishkin et al. (2008). Evaluation of Moldova’s 2004 Health Financing Reform. Copenhagen: WHO/EURO Health Financing Policy Paper 2008/3.

Centralization of pool and continued output-based payment in Kyrgyzstan led to similar results in 2006

Source: Financial Management Reports on execution of the State Guaranteed Benefit Package and 2007 MOH Performance Indicator Report

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

Bishkek city Chui Issyk-Kul Osh Jalal-Abad Batken Naryn Talas

Ind

ex

of

pe

r c

ap

ita

MH

IF s

pe

nd

ing

re

lati

ve

to

Bis

hk

ek

2005 2006

Lessons learned – primary health care

• Capitation payment is a good start to equalize resource allocation when moving away from historical budgets – Provider autonomy and improved management skills

are key

– Age, sex and other need adjusters in capitation formula are important

• Not sufficiently powerful incentive to encourage expansion of PHC task profile – Limited patient switching weakens competitive drive

– Inherent incentive is to prescribe and refer weak early detection and chronic disease management



Lessons learned - hospital care

• The trend towards case-based payment was driven by efficiency considerations and need for purchasers to have activity information

• Case based payments indeed drive efficiency improvement at the hospital level mostly through volume increase

• Purchasing reform alone did not trigger reduction of physical infrastructure

• To achieve better balance between different levels of care, additional instruments needed



Data

Month of hospitalization

Number of interviews As share of hospitalization* in month of survey

2001 February 2,913 7.4%

2001 July 3,731 9.9%

2003 April 4,440 9.5%

2004 April 4,534 8.0%

2006 October 5,337 9.4%

* Among hospitals contracted by the MHIF



Total volume of informal payment decreased

+18%

-54%

-63%

+37%

-22%

-

200

400

600

800

1,000

1,200

2001 2003 2004 2006

milli

on s

oms

Personnel Drugs Medical supplies Other supplies Food

In real terms @ 2001 prices

Documents

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Reforms in purchasing in Central/ Eastern Europe and ex-USSR: pay for