Document of The World Bank For Official Use Only Report No: 75232-LS PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT FROM THE INTERNATIONAL DEVELOPMENT ASSOCIATION IN THE AMOUNT OF SDR 7.8 MILLION (US$12 MILLION EQUIVALENT) AND PROPOSED GRANT IN THE AMOUNT OF US$4 MILLION FROM THE HEALTH RESULTS INNOVATION TRUST FUND TO THE KINGDOM OF LESOTHO FOR A MATERNAL AND NEWBORN HEALTH PERFORMANCE-BASED FINANCING PROJECT March 15, 2013 Health, Nutrition and Population, Eastern and Southern Africa Country Department AFCS1 Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2013) Currency Unit = LSL LSL 8.97 = US$ 1 US$ 1.5413403 = SDR 1 FISCAL YEAR April 1 – March 31 ABBREVIATIONS AND ACRONYMS ADF Africa Development Fund AFTME Africa Region Financial Management - East unit AFTHE Africa Health, Nutrition & Population East/South unit AFTSG Africa Region Safeguards Group AIDS Acquired Immune Deficiency Syndrome AJR Annual Joint Review ANC Antenatal Care ARV Antiretroviral Drugs BCG Bacillus Calmette Guerin BOS Bureau of Statistics CAS Country Assistance Strategy CBA Cost Benefit Analysis CBO Community-Based Organization CHAL Christian Health Association of Lesotho CIPS Center for International Policy Studies CLNHCWMP Consolidated Lesotho National Health Care Waste Management Plan CPA Complementary Package of Activities CPAR Country Procurement Assessment Report CQS Selection Based on Consultants’ Qualifications CS Cesarean Section (surgical delivery of a baby) DA Designated Account DC District Council DHIO District Health Information Officer DHMT District Health Management Team DHS Demographic and Health Survey DOTs Directly Observed Treatment DP Development Partner DPT Diphtheria, Pertussis and Tetanus ii EGPAF Elisabeth Glaser Pediatric AIDS Foundation EmONC Emergency Obstetric and Neonatal Care EMR Electronic Medical Record ERR Economic Rate of Return ESAMI Eastern and Southern African Management Institute FBS Fixed Budget Selection FMO Financial Management Officer GDP Gross Domestic Product GOL Government of the Kingdom of Lesotho GPOBA Global Partnership on Output-based Aid HCGW Health Care General Waste HCRW Health Care Risk Waste HDI Human Development Index HDNHE Human Development Network Health Unit HIV Human Immunodeficiency Virus HMIS Health Management Information System HPSD Health Planning and Statistics Department HRH Human Resources for Health HRITF Health Results Innovation Trust Fund IBRD International Bank for Reconstruction and Development ICAP International Center for HIV/AIDS Programs ICB International Competitive Bidding ICT Information and Communication Technology IDA International Development Association IFAC International Federation of Accountants IFC International Finance Corporation IFMIS Integrated Financial Management Information System IFR Interim unaudited Financial Report IHM Institute for Health Measurement IMF International Monetary Fund LCS Least Cost Selection LRCS Lesotho Red Cross Society LSL Lesotho Loti M&E Monitoring and Evaluation MCA Millennium Challenge Account MCC Millennium Challenge Corporation MDG Millennium Development Goal MNH Maternal and Newborn Health MMR Maternal Mortality Ratio MODP Ministry of Development Planning MOF Ministry of Finance iii MOH Ministry of Health MOLGC Ministry of Local Government and Chieftainship MOU Memorandum of Understanding MPA Minimum Package of Activities MTEF Mid-Term Expenditure Framework MVA Manual Vacuum Aspiration NCB National Competitive Bidding NDSO National Drug Service Organization NGO Non-Governmental Organization NPV Net Present Value NSDP National Strategic Development Plan NSRHSC National Sexual and Reproductive Health Steering Committee ORAF Operational Risk Assessment Framework ORS Oral Rehydration Solution PAD Project Appraisal Document PAU Project Accounting Unit PBF Performance-based Financing PDO Project Development Objective PEFA Public Expenditure and Financial Accountability PEPFAR The U.S President's Emergency Plan For AIDS Relief PFM Public financial management PFMA Public Financial Management and Accountability PIH Partners in Health PIM Project Implementation Manual PMTCT Prevention of Mother-to-Child Transmission of HIV PO Procurement Officer PPA Project Preparation Advance PPAD Procurement Policy Advisory Division PPP Public Private Partnership PPR Public Procurement Regulation PPTA Performance Purchasing Technical Assistance QBS Quality-Based Selection QCBS Quality and Cost-Based Selection RBF Results-Based Financing RHAP Reproductive Health Action Plan SACU South Africa Customs Union SBD Standard Bidding Document SOE Statement of Expenditures STI Sexually Transmitted Infection TA Technical Assistance TB Tuberculosis iv TOR Terms of Reference TWG Technical Working Group UN United Nations UNDP United Nations Development Programme UNFPA United Nations Population Fund UNICEF United Nations Children's Fund USAID United States Agency for International Development VHW Village Health Worker WHO World Health Organization Regional Vice President: Makhtar Diop Country Director: Asad Alam Sector Director: Ritva S. Reinikka Sector Manager: Olusoji O. Adeyi Task Team Leader: Kanako Yamashita-Allen v LESOTHO Maternal and Newborn Health Performance Based Financing Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context ............................................................................................................ 1 B. Sectoral and Institutional Context................................................................................. 1 C. Higher Level Objectives to which the Project Contributes .......................................... 5 II. PROJECT DEVELOPMENT OBJECTIVES ................................................................5 A. PDO............................................................................................................................... 5 Project Beneficiaries ........................................................................................................... 5 PDO Level Results Indicators ............................................................................................. 6 III. PROJECT DESCRIPTION ..............................................................................................6 A. Project Components ...................................................................................................... 6 B. Project Financing ........................................................................................................ 10 Lending Instrument ........................................................................................................... 10 Project Cost and Financing ............................................................................................... 10 C. Lessons Learned and Reflected in the Project Design ................................................ 11 IV. IMPLEMENTATION .....................................................................................................13 A. Institutional and Implementation Arrangements ........................................................ 13 B. Results Monitoring and Evaluation ............................................................................ 17 C. Sustainability............................................................................................................... 18 V. KEY RISKS AND MITIGATION MEASURES ..........................................................19 A. Risk Ratings Summary Table ..................................................................................... 19 B. Overall Risk Rating Explanation ................................................................................ 20 VI. APPRAISAL SUMMARY ..............................................................................................20 A. Economic and Financial Analyses .............................................................................. 20 B. Technical ..................................................................................................................... 21 C. Financial Management ................................................................................................ 22 D. Procurement ................................................................................................................ 23 vi E. Social (including Safeguards) ..................................................................................... 24 F. Environment (including Safeguards) .......................................................................... 24 G. Other Safeguards Policies Triggered (if required)...................................................... 25 Annex 1: Results Framework and Monitoring .........................................................................26 Annex 2: Detailed Project Description .......................................................................................33 Annex 3: Implementation Arrangements ..................................................................................44 Project Institutional and Implementation Arrangements .................................................. 44 Financial Management, Disbursements and Procurement ................................................ 49 Environmental and Social (including safeguards) ............................................................ 67 Monitoring & Evaluation .................................................................................................. 67 Annex 4: Operational Risk Assessment Framework (ORAF) .................................................71 Annex 5: Implementation Support Plan ....................................................................................74 Annex 6: Performance-Based Financing ...................................................................................77 Annex 7: Economic and Financial Analysis ..............................................................................85 Annex 8: Development Partners Support to Maternal and Newborn Health ........................97 Annex 9: Country Map ..............................................................................................................103 vii PAD DATA SHEET Lesotho Lesotho Maternal & Newborn Health PBF (P114859) PROJECT APPRAISAL DOCUMENT . AFRICA AFTHE Report No.: 75232-LS . Basic Information Project ID Lending Instrument EA Category Team Leader P114859 Specific Investment B - Partial Assessment Kanako Yamashita-Allen Loan Project Implementation Start Date Project Implementation End Date 11-April-2013 30-June-2017 Expected Effectiveness Date Expected Closing Date 1-July-2013 30-June-2017 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Olusoji O. Adeyi Ritva S. Reinikka Asad Alam Makhtar Diop . Borrower: Kingdom of Lesotho Responsible Agency: Ministry of Health, P.O. Box 514, Maseru 100, Lesotho Contact: Mr. Lefu Manyokole Title: Principal Secretary Telephone No.: +266-22312836 Email: ps@health.gov.ls; lefusebopi@yahoo.com ? Project Financing Data(US$M) [ ] Loan [X] Grant [X ] Term: The proposed credit will be on standard IDA [X] Credit [ ] Guarantee terms with a forty-year maturity, including a ten year grace period. For Loans/Credits/Others Total Project Cost (US$M): 20.00 Total Bank Financing 12.00 (US$M): . Financing Source Amount(US$M) BORROWER/RECIPIENT 4.00 viii International Development Association (IDA) 12.00 Health Results Innovation Trust Fund 4.00 Total 20.00 . Expected Disbursements (in USD Million) Fiscal Year 2013 2014 2015 2016 2017 Annual 0.63 2.00 4.62 4.37 4.38 Cumulative 0.63 2.63 7.25 11.62 16.00 . Project Development Objective(s) The overall project development objective is to improve the utilization and quality of maternal and newborn health (MNH) services in selected districts in Lesotho. . Components Component Name Cost (USD Millions) Component 1: Improving Maternal and Newborn Health 13.70 (MNH) Service Delivery at Community, Primary and Secondary levels through PBF. Component 2: Training of health professionals and Village 2.30 Health Workers (VHWs) and improving Monitoring and Evaluation (M&E) capacity. . Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? . Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X ix Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . Legal Covenants Name Recurrent Due Date Frequency Financial Management software: No one (1) month after Once Financing Agreement Reference Section the Effective Date II. B. 4 of Schedule 2 Description of Covenant The Recipient shall procure, no later than one (1) month after the Effective Date, additional financial management software (TOMPRO) licenses, in accordance with the provisions of Section III of this Schedule 2 to the Financing Agreement. Annual Work Program and Budget: Yes one (1) month after Annual Financing Agreement Reference Section the Effective Date I D. 1 of Schedule 2 and every Feb. 28 thereafter Description of Covenant Each Fiscal Year, the Recipient shall prepare a program of activities(including Training and Operating Costs) proposed for inclusion in the Project during the following Fiscal Year, including: (a) a detailed timetable for the sequencing and implementation of such activities; and (b) a proposed budget and financing plan for such activities. The Recipient shall furnish such program of activities to the Association as soon as available and in any case no later than February 28 of each year, for its review and approval by the Association; except for the program of activities for the first year of Project implementation, which shall be furnished no later than one (1) month after the Effective Date. MOH Procurement Unit Staffing: No six (6) months after Once Financing Agreement Reference Section the Effective Date I. A. 2 (b) of Schedule 2 Description of Covenant The Recipient shall (i) maintain within the MOH, throughout the period of Project implementation, a procurement unit, with terms of reference and resources satisfactory to the Association, and supported by qualified and experienced staff in adequate numbers and (ii) recruit a procurement manager and two (2) procurement officers, each with terms of reference and qualifications and experience satisfactory to the Association, no later than six (6) months after the Effective Date. . Conditions Name Type HRITF Grant Agreement cross-effectiveness: Effectiveness Financing Agreement Reference Section 4.01 (a) Description of Condition The Trust Fund Grant Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of the Financing Agreement) have been fulfilled. x Project Implementation Manual: Effectiveness Financing Agreement Reference Section 4.01 (b) Description of Condition The Recipient shall have adopted the Project Implementation Manual, in form and substance satisfactory to the Association. Performance Purchasing Technical Assistance (PPTA) firm: Effectiveness Financing Agreement Reference Section 4.01 (c) Description of Condition The Recipient shall have contracted the PPTA, in accordance with Section III of Schedule 2 to the Financing Agreement. Team Composition Bank Staff Name Title Specialization Unit Alex Hakuzimana Consultant Performance Based AFTHE Financing Amer Dastgir Junior Professional Operations AFTHE Associate Anthony Molle Senior Counsel Legal LEGAM Carolyn J. Shelton Operations Officer Operations Officer AFTHE Cassandra de Souza E T Consultant Operations AFTHE Chitambala John Procurement Specialist Procurement Specialist AFTPE Sikazwe Damien de Walque Senior Economist Senior Economist DECHD Gert van der Linde Lead Financial Lead Financial AFTME Management Specialist Management Specialist Gil Shapira E T Consultant Impact Evaluation DECHD Gyorgy Bela Fritsche Senior Health Specialist Performance Based AFTHW Financing Hocine Chalal Lead Environmental Lead Environmental AFTN3 Specialist Specialist Kanako Yamashita- Senior Health Specialist Team Leader AFTHE Allen Kofi Amponsah Consultant Health Economist AFTHE Melissa Landesz Operations Analyst Operations Analyst AFTSG Patricio V. Marquez Lead Health Specialist Lead Health Specialist AFTHE Samuel Lantei Mills Senior Health Specialist Senior Health Specialist HDNHE Sangeeta Raja Senior Public Health Senior Public Health AFTHE Jobanputra Specialist Specialist Tandile Gugu Msiwa Financial Management Financial Management AFTME xi Specialist Specialist Yoko Shimada E T Consultant E T Consultant AFTHE Yvette M. Atkins Senior Program Senior Program AFTHE Assistant Assistant . Locations: 9 of Lesotho’s 10 administrative districts Country First Location Planned Actual Comments Administrative Division Lesotho Districts Berea, Botha Bothe, Leribe, Mafeteng, Mohale’s Hoek, Mokhotlong, Qacha’s Nek, Quthing, and Thaba Tseka. . Institutional Data Sector Board Health, Nutrition and Population . Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co-benefits % Co-benefits % Health and other social services Health 90 Public Administration, Law, and Central Government 10 Justice Administration Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. . Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Human development Population and Reproductive Health 40 Human development Health System Performance 35 Human Development Child Health 20 Human Development HIV/AIDS 5 Total 100 xii I. STRATEGIC CONTEXT A. Country Context 1. Lesotho is a small parliamentary constitutional monarchy landlocked by South Africa, covering an area of 30,355 square kilometers, and an estimated population of 1.9 million, which has been growing at less than 1 percent per annum. 1 Nearly a quarter of the population resides in Maseru district, the country’s capital. In recent years, Lesotho has witnessed improvements in its key macroeconomic indicators. Lesotho is a lower middle income country with a per capita gross national income of US$1,210 and annual GDP growth of 3.7 percent in 2011. Inflation rose steadily in 2011, and reached almost 7% at the end of 2011. This was induced by high international commodity prices and agricultural supply shortages as a result of months of floods that hit Lesotho in 2010-2011. Lesotho suffered a significant drop in revenues from the South African Customs Union (SACU) in fiscal year 2010/11. In FY2011/12, higher government spending placed additional pressure on fiscal and external balances. Total expenditures increased by about 5 percent of GDP; as a result, the fiscal deficit reached about 10.3 percent of GDP, up from 5 percent of GDP the previous year. However, in FY2012/13 the fiscal balance is projected to reach 5.7 percent of GDP given the doubling of SACU revenues and under-execution of capital expenditures. The importance of efficient public spending in service delivery sectors was highlighted in the 2012 budget speech. 2 2. Despite its improved economic outlook, Lesotho continues to have one of the highest levels of inequality with 57 percent of the population living below the national poverty line and a Gini coefficient of about 0.63 (based upon 2003/04 survey data. Moreover, Lesotho is ranked 160 out of 187 in the 2011 United Nations Human Development Index (HDI). Government of Lesotho (GOL) has identified ‘Improve health, combat HIV and AIDS and reduce vulnerability’ as one of the six key pillars of the 2012/13 to 2016/17 National Strategic Development Plan (NSDP). Against the backdrop of its health development goal, GOL has significantly increased its allocations to the health sector from US$147.80 million in fiscal year 2009/10 to US$186.70 million in fiscal year 2011/12. 3 Comparable recent expenditure data shows that Lesotho spent an average of US$33.20 per capita over the period 2004/5 to 2009/10.4 Given these circumstances, the Ministry of Finance (MOF), Ministry of Development Planning (MODP) and the Ministry of Health (MOH) have expressed renewed commitment to bringing efficiency and results to public spending in the health sector. B. Sectoral and Institutional Context 3. There is a clear divergence between economic growth and human development in Lesotho evident in the country’s poor health outcomes. Lesotho remains off track to meet the Millennium Development Goals (MDGs) 4 (reducing child mortality) and 5 (improving maternal health). The 2009 Demographic and Health Survey (DHS) reported Maternal Mortality Ratio 1 World Development Indicators, World Bank 2012. 2 Strengthening Fiscal Resilience and National Competitiveness for Accelerating Economic Growth and Development, Budget Speech to Parliament for the 2012/2013 Fiscal Year By Honorable Timothy T. Thahane, Minister of Finance and Development Planning, Lesotho, 18 January, 2012. 3 Constructed from MOF and MOH expenditure data, 2012. 4 Expenditure data from published budget book, MOF and Directorate of Finance, MOH, 2012. 1 (MMR) to be very high at 1,155 per 100,000 live births. 5 Moreover, according to the 2012 WHO/UNICEF/UNFPA/World Bank report, the average annual percentage decline in MMR between 1990 and 2010 was only 0.9 percent, far less than the 5.5 percent or more needed to be “on track� towards achieving MDG 5. 6 The lack of progress towards MDG 5 is a particularly serious national concern, given that it is considered a proxy indicator for overall health system functioning. 7 Similarly, under-five mortality rate was estimated to have only decreased slightly from 89 in 1990 to 86 deaths per 1,000 live births in 2011.8 Weak health service performance has contributed to Lesotho’s worsening health outcomes, which have been exacerbated by the HIV/AIDS epidemic. Lesotho has the third highest HIV adult prevalence rate in the world at 23 percent, 9 and has contributed to the considerable decline in life expectancy at birth from 60 years in 1992 to 49 years in 2012. 10 4. Complications during pregnancy and delivery remain the primary cause of maternal morbidity and mortality in Lesotho. The 2011/2012 MOH Annual Joint Review indicated that the most frequent cause of female admissions at health facilities was abortion complications at 16 percent, followed by HIV/AIDS (10 percent). According to the 2009 DHS, deliveries attended by skilled providers (doctors/nurses/midwives) increased from 55 percent in 2004 to 61 percent in 2009, but wide disparities still exist. While 90 percent of women in the wealthiest quintile delivered with the assistance of skilled health personnel, only 35 percent of women in the poorest quintile obtained such assistance. Recognizing that access to and quality of emergency obstetric and neonatal care (EmONC) 11 is critical to reducing maternal mortality, the MOH is preparing to conduct an EmONC assessment which will provide information on the current status of basic and comprehensive EmONC provision at health centers and hospitals. 5. Lesotho’s health system is dominated by two main providers: the MOH and the Christian Health Association of Lesotho (CHAL). The health system consists of four-tiers: (i) tertiary and specialized hospitals; (ii) district hospitals; (iii) filter clinics and health centers; and (iv) village health posts. There are 10 administrative districts in Lesotho. As of 2009, there were 216 health facilities across the country including 1 national referral hospital, 2 specialized hospitals, 19 hospitals, 190 health centers and 4 filter clinics. Of the 216 health facilities, 97 were operated by MOH, 81 were operated by CHAL, 34 were privately owned, and 4 were operated by the Lesotho Red Cross Society (LRCS). 5 Lesotho Demographic and Health Survey (LDHS), 2009. 6 WHO/UNICEF/UNFPA/The World Bank. 2012. Trends in maternal mortality: 1990 to 2010. WHO, UNICEF, UNFPA and The World Bank estimates. 7 World Bank Reproductive Health Action Plan 2010-2015 (RHAP). www.worldbank.org/population 8 WHO/UNICEF/UNFPA/The World Bank. 2012. Levels and Trends in Child Mortality: Report 2012. WHO, UNICEF, UNFPA and The World Bank estimates. 9 Lesotho Global AIDS Response Country Progress Report, January 2010-December 2011, March 26, 2012. 10 World Development Indicators (WDI) data 11 A Basic EmONC facility provides 7 critical lifesaving procedures: administration of parenteral antibiotics, oxytocic drugs, and anticonvulsants (magnesium sulphate) for pre-eclampsia/eclampsia; manual removal of retained placenta; removal of retained products of conception (manual vacuum aspiration [MVA] or dilatation and curettage [D&C]); assisted vaginal delivery (vacuum extraction or forceps delivery); and basic neonatal resuscitation (bag and mask). A comprehensive EmONC facility offers blood transfusion and Caesarean delivery in addition to the 7 basic EmONC procedures. 2 6. System-wide problems in the health sector contribute to Lesotho’s worsening outcomes in maternal and newborn health. The first is low utilization of health facilities due to the poor (perceived and actual) quality of services. Service quality is not only undermined by the lack of equipment and a poor referral system between health centers and hospitals, 12 but also by an inadequate number of healthcare workers. The country has one of the worst ratios of health workers to population in sub-Saharan Africa with just over one health professional per 1,000 people. On average, there are nine primary facilities and just one hospital per 100,000 people, with Quthing and Mohale’s Hoek districts having the lowest ratio of primary facilities to population. 7. There is no formal medical education system in the country, aside from nursing schools, and most Basotho attend medical school outside the country. Few, however, return to practice in their home country. To combat the healthcare worker shortage and attrition, the MOH has been working with Irish Aid in the recruitment of nurses with improved remuneration packages and with the Millennium Challenge Account Lesotho (MCA-Lesotho) in the retention of nurses through provision of staff houses across the country. The minimum nursing staff complement for a health center is one nursing officer (nurse clinician or nurse with advanced midwifery), one nursing sister (registered nurse with midwifery), and one nursing assistant. Currently, the vacancies for nursing officers, nursing sisters, and nursing assistants yet to be filled in health centers across the country are 33, 59 and 46 respectively. Given the country’s challenges with human resources for health (HRH), the Government of Lesotho (GOL) realizes that it is crucial to focus on maximizing the productivity and performance of existing healthcare workers through incentive-based compensation schemes. 8. Financial and geographic barriers to access also remain a challenge. The healthcare delivery challenge in Lesotho is compounded by the fact that about 40 percent of the population lives in remote rural villages, often several hours walk through rough mountain paths to the nearest facility. Despite the GOL’s effort to improve access to health care by eliminating user fees from all public health centers including facilities affiliated with CHAL and LRCS in 2008, access to health services remains a serious challenge. Seventy three percent of women cited at least one problem in accessing health care – respondents cited unavailability of drugs (59 percent), treatment costs (33 percent), transportation costs (32 percent) and long distances to facilities (31 percent) as problems for accessing health services (2009 LDHS). 9. Village Health Workers (VHWs) play a crucial role in improving the health of the Basotho given the challenges in accessing health services, combined with the lack of skilled healthcare workers and adequate facilities (including equipment and drugs) to provide quality services. VHWs, whose role is to link communities and the first line of care at health centers are, however, currently under-utilized in primary health care outreach and referral, including provision of maternal and newborn health care information, education and motivation at the community level. Until recently, VHWs were unpaid volunteers. In 2008, GOL announced VHWs would be paid a monthly flat rate of LSL 300 or approximately US$35. However, compensation is not performance-based and has not yielded the intended results in terms of increasing their effectiveness. 12 WHO, UNICEF and UNFPA, “Reduction of Maternal and Newborn Morbidity and Mortality,� 2010 3 10. Lesotho has some experience with Performance-Based Financing (PBF) models for improved service delivery. These have included: (i) successfully establishing a Public Private Partnership (PPP) hospital and filter clinics with a subsidy provided by the Global Partnership on Output-based Aid (GPOBA) support, (ii) introducing performance indicators in service contracts with CHAL and LRCS, and (iii) small PBF projects supported by Partners in Health (PIH) to test the feasibility in the Lesotho rural community context. The Bank and the International Finance Corporation (IFC) supported a PPP initiative for the establishment of filter clinics (in April/May 2010) and the replacement of the old national referral hospital (Queen Elizabeth II) with the Queen ’Mamohato Memorial Hospital in October 2011. Disbursements were based on the achievement of performance targets for key service delivery indicators; actual performance consistently exceeded its key targets for in-patient admission, outpatient visits and client satisfaction. Building on the positive experience with the hospital PPP project, IFC has supported the GOL to negotiate another PPP to strengthen the Information and Communication Technology (ICT) and Health Management Information Systems (HMIS) and to improve health care waste management (HCWM) at the health center level. 11. Furthermore, PIH projects include training and performance-based financing to maternal health workers to promote maternal and child health seeking behavior in the communities they serve. The outcomes so far have been very encouraging. In light of these positive PBF experiences and those in other African countries, the GOL is keen to develop its own PBF scheme to improve effectiveness and efficiency in the delivery of maternal and newborn health (MNH) services. Moreover, the government plans to use the lessons learned from this project to catalyze its own investments as well as those from other development partners (DPs) to support PBF more broadly across the health sector. 12. The proposed project is an informed continuation of the Bank’s involvement in the health sector in Lesotho. The Bank supported the health sector reform led by the government through Health Sector Reform Project Phase I (2000 – 2005) and II (2005-2009) through an Adaptable Program Loan. The main reform areas were: health financing, human resources, district health services, decentralization, pharmaceuticals, monitoring and evaluation, infrastructure and partnerships. The Bank also played a catalytic role in supporting Lesotho’s response to the HIV and AIDS epidemic. The ongoing HIV and AIDS Technical Assistance Project (2009-2015) builds the capacity of the government and civil society to address gaps in implementing the National HIV and AIDS Strategic Plan. 13. The proposed project design was guided by two feasibility studies 13 conducted in Lesotho in 2010 with resources from the World Bank-administered Health Results Innovation Trust Fund (HRITF). This project provides an opportunity for GOL to address two priorities: health-related MDGs and health systems strengthening, using a performance-based approach. By carefully incentivizing targeted service areas such as MNH services, the GOL will tackle key challenges in the sector. First, it will reduce inefficiencies in public health sector spending by financing 13 The PBF feasibility studies (February and August 2010) identified multiple critical supply side challenges, including: (i) variable productivity by health workers, (ii) lack of qualified health personnel in many health facilities as a result of uncompetitive salaries particularly in the remote areas, (iii) a lack of autonomy for health facility staff, (iv) low quality of care, and (v) a lack of drive for results in facilities. They also identified options for suitable PBF pilot design and potential implementation arrangements. 4 services based on performance. Second, it will address Human Resources for Health (HRH) shortages by focusing on maximizing the productivity and performance of existing healthcare workers through incentive-based compensation schemes. Finally, performance-based financing will motivate facilities and their workers to improve overall service quality, which will contribute to reducing maternal and child mortality. C. Higher Level Objectives to which the Project Contributes 14. The proposed project is closely aligned with the Country Assistance Strategy (CAS) 2010-2014 discussed by the Executive Directors on July 1, 2010. The second area of engagement is human development and service delivery, which aims to reverse negative trends in health and improve access to services. The proposed operation is consistent with the priorities and goals identified by the CAS: to protect and better serve the needs of the poor and the vulnerable; increase access to services; strengthen institutional capacity; upgrade quality and effectiveness of services delivery; enhance the role of the private sector in achieving important public health goals; and decentralize through enhanced participation of local government bodies and communities. The project will promote these objectives by improving quality and uptake of MNH services. The project is also aligned with the Bank’s Africa Region strategy which focuses on governance and public sector capacity building. The project will facilitate the delivery of quality health services which will contribute to the strategy’s vision to reduce child and maternal mortality. Further, the proposed project supports the National Strategic Development Plan (NSDP) 2012/13 to 2016/17. The NSDP aims to: “improve the quality of health; reduce maternal and child mortality; combat and prevent the spread and new infections of HIV and AIDS; and, reduce social vulnerability, especially for children and old people.� Additionally, the PBF mechanism will contribute to the government’s decentralization agenda in Lesotho. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 15. The overall project development objective is to improve the utilization and quality of maternal and newborn health (MNH) services in selected districts in Lesotho. Project Beneficiaries 16. In addition to MNH services, selected services such as those for HIV and AIDS, tuberculosis and nutrition in the Lesotho essential services package will also be covered. It is expected that these services will contribute to reducing maternal and newborn deaths in Lesotho given its high maternal mortality and HIV prevalence. Therefore, direct beneficiaries are women of childbearing age, newborns and children below 5 years of age, as well as tuberculosis and HIV patients. The indirect beneficiaries initially include the 417,417 inhabitants in the 2 districts (Leribe and Quthing) participating in phase I of the project and will eventually include three- quarters of the population, excluding Maseru district, during the phase II and phase III scale up. 14 The project will specifically target beneficiaries in hard-to-reach areas within the selected 9 14 Population estimates for Leribe (293,369) and Quthing (124,048) are taken from the Lesotho Statistical Yearbook 2010. The potential districts for Phase II are Mafeteng (192,621), Mohale’s Hoek (176,928), Mokhotlong (97,713), 5 districts (through a remoteness bonus) and will aim to improve utilization of services by the poor. From an institutional perspective, health personnel, notably doctors, nurses and midwives at hospitals and health centers as well as VHWs will benefit from training in MNH care and from having more conducive work environments due to changes made at the health facilities using the incentive funds. Finally, the knowledge and experience on PBF in the health sector could potentially benefit other sectors. PDO Level Results Indicators 17. The PDO will be measured by the following outcome indicators: • Percent of pregnant women delivering in health facilities • Percent of children 1 year-old who received all basic vaccinations 15 • Percent of currently married women using modern contraceptive method • Average Health Facility Quality of Care Score 16 18. Hospitals and health centers will use performance-based financing to improve the quality of care through activities such as training, supportive supervision, and case reviews. Performance-based financing will promote utilization through a continuum of care throughout pregnancy, childbirth, postpartum and the neonatal period by simultaneously stimulating performance of health workers at the health centers and VHWs at the community level. III. PROJECT DESCRIPTION A. Project Components 19. The project has two components: Component 1 is MNH service delivery at community, primary and secondary levels through PBF while Component 2 entails training of health professionals, and VHWs as well as improving M&E capacity. The project will be implemented in three phases. In Phase I (July 2013-June 2014), the project will be piloted in Leribe 17 and Quthing districts. In Phase II (July 2014-June 2017) and Phase III (July 2015-June 2017), the and Thaba Tseka (129,881) while the Phase III districts are Berea (250,006), Botha-Bothe (110,320), and Qacha's Nek (69 749). 15 BCG, measles, three doses of pentavalent vaccine (diphtheria, tetanus, whooping cough, hepatitis B and Haemophilus influenza type b) and three doses of polio vaccine (excluding polio vaccine given at birth) 16 Quality of care will be assessed as part of project supervision using a health facility quality checklist on a quarterly basis for performance-based financing. The score will be based on a composite Health Facility Quality Index covering domains of staff attendance, recordkeeping and timeliness of reports, adherence to protocols and guidelines for child survival, environmental health, general consultations, reproductive health, essential drugs management, tracer drugs, maternal health, STI, HIV, tuberculosis, and community based services. The value for this indicator in the results framework will be verified by independent health facility quality of care assessments conducted by the MOH Quality Assurance Unit. The baseline data reported here were collected in the two pilot districts in January 2013. This will be updated with baseline data to be collected in May 2013 in all 9 project districts. 17 In Leribe district, Mamohau Hospital is being excluded because PIH is currently supporting a small PBF project there, which would be a confounding factor. 6 project will gradually scale-up to all selected districts excluding Maseru district. 18 This three- phased approach will allow for adjustments in design based on lessons learned during the pilot phase. Districts enrolled in the PBF implementation in phases I and II will continue implementation through phase III, incorporating lessons learned in each phase. Component 1: Improving Maternal and Newborn Health (MNH) Service Delivery at Community, Primary and Secondary levels through PBF (US$13.7 million). 20. This component will be jointly financed by IDA (US$9.7 million), and the Health Results Innovation Trust Fund (US$4 million). 19 The objective of this component is to improve MNH service delivery at health facility and community level through two sub-components, as detailed below. The sub-components will dovetail the almost complete support provided by the Millennium Challenge Account (MCA) to renovate, refurbish 20 and equip health centers, including reinstating adequate provisions for waiting shelters for expecting mothers. Building on infrastructure improvement supported by MCA, the project will contribute to the supply-side improvements which are fundamental to strengthen the quality and utilization of health services. 21. Sub-component 1A: Delivery of MNH Services through PBF will support the provision of quality MNH services as well as selected services in the Essential Services Package in communities, health centers and hospitals by providing performance-based financing to VHWs, health centers, and hospitals. Health centers and VHWs will be considered as one unit for financing in their respective catchment areas in order to strengthen their collaboration. Furthermore, performance-based financing for VHWs will be linked to the overall performance of the health centers to which they are mapped. The incentivized services to be delivered by health centers (Minimum Package of Activities [MPA]) and hospitals (Complementary Package of Activities [CPA]) are shown in Annex 2 (Tables 3 and 4). 22. Additionally, performance-based financing will be made to District Health Management Teams (DHMTs) [which will become part of the District Councils with the decentralization of health services], based on supervision of health facilities using a quality checklist, providing feedback to health facility staff, submission of quarterly overall reports to the District Council Secretary with lessons learned, identified constraints and suggested solutions, and other information related to service delivery within the district. The performance-based financing linked to achievement of pre-defined quantity and quality indicators at the health facilities are expected to stimulate health worker motivation and productivity and provide additional cash to overcome obstacles affecting the quality or continuum of care of their patients. Performance- based financing will be adjusted based on comparative isolation of a facility to provide additional financing to hospitals and health centers in remote areas and influence retention of health personnel in remote areas. 18 Phase I districts are Leribe and Quthing; Phase II districts are Mafeteng, Mohale’s Hoek, Mokhotlong, and Thaba Tseka; Phase III districts are Berea, Botha-Bothe, and Qacha's Nek. During the pilot phase, the districts for Phases II and III will be reviewed to determine which ones are ready for scaling up at each phase. Maseru district will not be included because the district’s health outcomes are better than other districts as shown in Annex 2 Table 2. 19 If at Midterm review, the project has progressed satisfactorily and there is need for additional financing, the Government could seek funding from DPs or additional financing from IDA and HRITF. 20 This MCA-Lesotho support was expected to be completed in August 2012 but has experienced some delays. Thus, works under this support does not trigger any World Bank-related environmental safeguards. 7 23. Sub-component 1B: PBF Implementation and Supervision Support will provide critical support for: (i) PBF implementation and supervision; (ii) capacity building of the MOH and CHAL at central and district levels, district and community councils; and, (iii) best practice documentation and sharing. The MOH has established a central PBF Unit to handle the day-to- day management of the MNH PBF Project. The PBF unit consists of five full time MOH staff. Given that MOH and CHAL have had limited experience with PBF, both strategic and operational capacity will be built at respective levels. The project will competitively recruit a performance purchasing technical assistance (PPTA) firm to provide technical assistance and build in-country capacity. The PPTA’s key functions are to: (i) provide technical and implementation support to the MOH PBF unit and other PBF implementing entities on managing performance-based contracts for the delivery of incentivized services; and (ii) verify delivery of the quantity and quality of services, prepare the invoices for performance-based financing, and assist health facilities with preparing their PBF business plans. The role of the PPTA will gradually reduce as the implementing entities and facilities gain greater experience with PBF implementation. Component 2: Training of health professionals and VHWs and improving Monitoring and Evaluation (M&E) capacity (US$2.3 million) 24. This component will be solely financed through IDA financing and have two sub- components. 25. Sub-component 2A: Training health professionals and Village Health Workers will support an ongoing MOH program for training doctors, nurse anesthetists and midwives to achieve an acceptable standard of competency in the delivery of MNH services including EmONC. In August 2012, the Bank engaged a consultant to review the turnaround time in the working capital management of the National Drug Service Organization (NDSO) and related processes at NDSO, MOH, GOL and CHAL health facilities. 21 Based on the report’s findings, the project will support a 5-day training of health center nurses on the MOH adopted drug supply management manual. This would allow the health centers to improve their forecasting and order preparation for NDSO, which will potentially reduce the delays in turning around and delivering orders and curtail stock-outs of drugs and medical supplies at the health center level. Additionally, 18 hospital and DHMT pharmacists, one NDSO staff, and one MOH Pharmacy Directorate staff will participate in the Eastern and Southern African Management Institute (ESAMI) training courses on: (i) overview of supply chain management and (ii) quantification of health commodities. Refresher training will also be provided to MOH financial management 22 and procurement 23 staff. 21 NDSO Working Capital Management Report. November 2012, prepared by Thiagarajah Veluppillai, Fellow Chartered Certified Accountant (FCCA). 22 The MOH PBF Unit Financial Management Officer and Accountant will participate in a two-week course for the ICT Based Financial Management and Disbursements Course for Project Accountants for World Bank funded Projects in Kenya. They will also receive hands-on training on TOMPRO accounting software. 23 ESAMI training on procurement management programmes for MOH Procurement Unit staff on: (i) Works Procurement and Selection of Consultants; (ii) Advanced Works Procurement and Selection of Consultants; (iii) Goods and Equipment Procurement; and (iv) Advanced Goods and Equipment Procurement Programme. Additionally, a consultant will provide hands-on training of key MOH Procurement Unit staff, District Councils, DHMTs, District Hospitals and CHAL Secretariat on public procurement and strengthening of procurement systems. 8 26. Currently, health centers do not provide the full complement of Basic EmONC services since midwives are not allowed to perform three basic EmONC procedures: manual removal of retained placenta; removal of retained products of conception; and assisted vaginal delivery. 24 The Nursing and Midwifery Act is being revised to allow advanced midwives to perform these procedures. 27. Advanced midwives are needed at hospitals to train nurse midwives and also for the mentorship and preceptorship of newly trained nurse midwives. The Directorate of Nursing indicated that 36 advanced midwives are required (two for each of the 18 hospitals), but there are currently only three advanced midwives nationwide. The project will support part-time training for 15-20 nurse midwives at a university in South Africa for Advanced University Diploma in Advanced Midwifery and Neonatology. 25 Given the shortage of nurse anesthetists, the project will also support the ongoing MOH effort to provide pre-service training of nurse anesthetists in African training institutions. Twelve nurse anesthetists are expected to be trained. 26 28. In 2013, the MOH together with UNFPA, UNICEF, and WHO plan to conduct an EmONC assessment, which will inform the need for on-the-job training for nurse midwives and medical doctors providing obstetric services in districts. The project will provide support for this assessment. 29. The MOH, with support from development partners, has established a VHW training manual and curriculum and is conducting ongoing training for VHWs. 27 This sub-component will support the ongoing VHW training on basic services such as family planning and referrals as well as taking care of mothers and children in the postnatal period and promotion of exclusive breastfeeding. VHWs will also be supported to conduct community head count and periodically update the village health registers for more accurate health facility catchment area data. 30. Sub-component 2B: Improving M&E capacity will support the strengthening of the Health Management Information System (HMIS) in all districts and build the capacity of M&E personnel at the central and district levels. Specific activities under this sub-component include: (i) improving the quality of health data by reviewing, updating and harmonizing data collection tools for strengthening the HMIS; (ii) printing, training, dissemination, and utilization of the updated data collection tools, HMIS registers, forms and reports at all health facilities over the project duration; (iii) enrolling District Health Information Officers (DHIO) and central MOH staff in a short course on M&E of health programs (for 2 central and 10 district personnel) as well as a two-year part-time Master of Public Health (MPH) degree program with an M&E or 24 The remaining four Basic EmONC services that all midwives are allowed to perform are: administration of parenteral antibiotics, oxytocic drugs, and anticonvulsants (magnesium sulphate) for pre-eclampsia/eclampsia, and basic neonatal resuscitation (bag and mask). 25 As per the 2008 Training and Development Policy in the Public Service of Lesotho, Regulation 97, each trainee will enter into a bonding agreement to work in Lesotho for a number of years. 26 As per the 2008 Training and Development Policy in the Public Service of Lesotho, Regulation 97, each trainee will enter into a bonding agreement to work in Lesotho for a number of years. 27 The project will support a total of 1,811 VHWs to be trained: 1,044 and 383 in Leribe and Quthing respectively. The Government plans to train VHWs in all the other districts. 9 Biostatistics concentration (for 2 central personnel); 28 and (iv) conducting health facility quality of care assessments 29 and baseline household survey. 30 B. Project Financing Lending Instrument 31. The lending instrument will be a Specific Investment Loan (US$12 million IDA) combined with a grant from the HRITF (US$4 million) from the Kingdom of Norway and the United Kingdom. 32. The Lesotho counterpart contribution, as parallel financing to the IDA and HRITF financing, will be US$4 million. This will consist of the operating costs for the MOH PBF Unit in years 1 and 2, which are estimated to be a total of US$500,000. In years 3 and 4, the total counterpart funding of US$3,500,000 will consist of the operating expenses as well as the cost of Phase III scaling up, in parallel to the 6 districts initiated in years 1 and 2, the three remaining districts not covered by IDA and HRITF funds (Berea, Botha-Bothe, and Qacha's Nek). Project Cost and Financing Table 1. Project Cost and Financing IDA HRITF Project cost Project Components Financing Financing (US $million) (US $million) (US $million) 1. Improving Maternal and Newborn Health (MNH) Service 13.7 9.7 4.0 Delivery at Community, Primary and Secondary levels through PBF 2. Training of health professionals and VHWs and improving 2.3 2.3 0.0 Monitoring and Evaluation (M&E) capacity Total Project Costs 16.0 12.0 4.0 Total Financing Required 16.0 12.0 4.0 28 As per the 2008 Training and Development Policy in the Public Service of Lesotho, Regulation 97, each trainee for the MPH degree program will enter into a bonding agreement to work in Lesotho for a number of years. 29 Annual health facility quality of care assessments will be conducted by the MOH Quality Assurance Unit under this sub-component. 30 Impact evaluation of the project, which will entail baseline and endline household surveys, will be carried out with a separate Bank-executed HRITF of US $1.5 million. The Impact Evaluation study will carry out baseline survey in districts covered under Phase II and III just before scale-up in those districts. It will also support an endline survey in those districts. 10 C. Lessons Learned and Reflected in the Project Design 33. Experience indicates that PBF approaches can be very successful in rapidly increasing the coverage of cost-effective health interventions in the population and ultimately contributing to improved health outcomes. PBF studies in Cambodia and Afghanistan and a randomized controlled study in Rwanda have demonstrated the effectiveness in providing performance-based motivation for health workers. PBF also has a number of advantages: (i) it is a clear signal to health workers about the priorities of the government and ensures that facilities give importance to preventive and pro-poor interventions; (ii) it increases health workers motivation and productivity; (iii) it ensures that projects focus on producing tangible results and on stronger M&E systems; (iv) it decentralizes decision-making to facility managers who are much closer to the community; and (v) it allows for increased community participation and accountability. 34. The strong focus on results through data collection and verification increases accountability in the system and ensures a more direct link between financing and results. At the same time, PBF involves some risks that need to be addressed in project design. Such risks include focusing excessively on incentivized indicators with unintended declines in other indicators and over-reporting to obtain more funds. These risks will be mitigated by careful design based on lessons learned from other countries which include diligent verification mechanisms to deter over-reporting and tracking of outcomes on other indicators to ensure that there is no unintended decline in provision of non-incentivized services. 35. The following lessons learned on PBF were derived from the design and implementation of Bank operations in Africa and around the world, and incorporated in the design of the project. Most countries introduce PBF with a pilot and the lessons learned during the initial phase become crucial to a successful expansion. The pilot in Leribe and Quthing will provide a solid foundation to scale up throughout Lesotho. 36. Ensuring transparency and independent verification. Robust, independent and technically sound mechanisms are needed to verify the accuracy of reported results. There are typically two types of verification. First, ex-ante verification before payment is made to a facility that involves the review of service registers and the checking of service quality. This is often done by a district administrative structure and involves invoices submitted by health facilities. Second, ex-post verification is done by independent groups or organizations and uses different techniques to detect “gaming,� including the sampling of patients listed in registers to see whether they exist and received the services listed. It is important to specify what sanctions will be imposed on facilities found to be misrepresenting their performance. Moreover, the same mechanism can be used to determine patient and family satisfaction by visiting them in their community. 37. Recipients of PBF Proceeds. In most PBF schemes, individual health facilities have received the proceeds. This is the best way of ensuring that providers see the benefits of PBF. Creating a managerial environment for motivation and results is important and this implies that health facilities have more autonomy. 38. Approving PBF Proceeds. It needs to be clear who approves the invoice submitted by the health facility and what procedures they will use to: (i) check the calculations; (ii) verify that services were actually delivered; and (iii) that appropriate adjustments for quality and equity are 11 applied. A good practice is to establish a decentralized governance mechanism for this (i.e. a “district PBF Steering Committee�) with powers to validate the PBF proceeds. Usually MOH officials, local government officials, and civil society representatives sit in formal meetings. After approval of the invoice, payment is made. 39. Manual of Procedures. Developing a clear and concise manual of procedures that includes all the forms and information needed to implement the PBF scheme is important. Being explicit about policies will facilitate the dialogue with stakeholders and is an essential part of training providers and managers. 40. Training of Health Workers and Supervisors. PBF usually involves important changes in a health care system and new procedures that need to be explained to providers and supervisors. Conducting high-quality training at different levels is required for people to be thoroughly familiar with the manual of procedures and PBF implementation. 41. Resources to facilitate the supervision of health facilities. One of the major contributions of PBF is to make supervision more systematic and frequent. Ensuring that supervisors have the adequate resources to carry out frequent field visits will be important for success. This has been incorporated in the design by providing financing to the DHMTs to encourage them to enhance their supervisory role. 42. Measuring results. The Rwanda PBF demonstrated improvements in the quality of health care through a rigorous impact evaluation. For this reason, a complementary impact evaluation study will be conducted concurrently with the project to ensure the availability of rigorous data to assess the project’s effect and make appropriate mid-course corrections. 43. The following lessons from previous Bank operations in the Lesotho health sector were also incorporated. Given the limited management capacity of the MOH, especially at the decentralized level, it is important to avoid an ambitious design and agree on practical institutional arrangements. M&E capacity is limited and uneven (weaker at the district level) despite the intentions to improve M&E quality and implementation in the country. The project design will be realistic and practical and take the capacity limitations into consideration. 44. The use and strengthening of existing systems is preferred over creating separate fiduciary and other systems. The Bank has been building procurement and financial management capacity of MOH through the Health Sector Reform Project and HIV and AIDS TA Project. The proposed project will not create a parallel system but continue to strengthen the existing system and capacity. 45. The implementation of activities that are integrally related to processes and decisions beyond the MOH takes time. For example, human resource issues involve the Public Services Commission and decentralization issues involve the Ministry of Local Government Chieftainship (MOLGC). The project will coordinate closely with other Ministries during the project implementation. Finally, sustained government commitment and coordination among implementing agencies as well as among technical units within the MOH are keys to successful implementation. 12 IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 46. The Ministry of Health (MOH) will be the main implementing agency. The pre-existing National Sexual and Reproductive Health Steering Committee (NSRHSC) 31of the MOH will meet quarterly, provide policy guidance and project implementation oversight, and approve annual work programs and budget. The NSRHSC is chaired by the Director General for Health Services, and includes representatives of key MOH directorates (primary health care, nursing services, health planning, clinical services, human resources, social welfare, finance, pharmacy, laboratory services, family health, health education, and quality assurance). The NSRHSC also includes representatives from other Ministries, CHAL, LRCS, Lesotho Planned Parenthood Association, Lesotho Medical, Dental, Pharmacy and Nursing Councils, National University of Lesotho Dean of the Faculty of Health Sciences. The NSRHSC Terms of Reference (TOR) have been modified to incorporate the PBF-specific steering committee terms of reference and will be included in the Project Implementation Manual (PIM). The PIM is under review prior to adoption by the NSRHSC and to ensure that it is in form and substance acceptable to the World Bank. It is listed as an effectiveness condition. 47. All PBF design features and terms of reference for implementing entities will be captured in the PIM. The existing Technical Working Group (TWG) will provide operational and administrative support for the preparation and implementation of the PBF scheme. The TWG is comprised of technical, working-level staff from MOH, MOF, MODP, CHAL, and LRCS. Detailed TORs for the TWG will be provided in the PIM. 48. A PBF Unit has been established in the MOH Health Planning and Statistics Department (HPSD) to manage the day-to-day implementation, monitoring and management of the project, in coordination with relevant technical units and the TWG. The PBF Unit will endorse and make performance-based financing to contracted implementing entities, i.e. hospitals, health centers, and DHMTs, based on the invoices prepared according to the predetermined formula (i.e. PBF outputs adjusted for quality and remoteness). Detailed TORs for the PBF Unit and for the specific positions will be included in the PIM. It was agreed that the PBF Unit should be fully staffed with personnel under established posts in the MOH rather than recruiting external consultants for greater ownership and sustainability. The following staff has been appointed to the PBF Unit from existing MOH personnel: (i) PBF Unit Director, (ii) Financial Management Officer, (iii) Accountant, (iv) M&E Officer, and (v) Operations Officer. 49. A firm with PBF implementation experience will be contracted to provide Performance Purchasing Technical Assistance (PPTA). The PPTA firm will provide capacity building on PBF implementation to: (i) health workers at facility level; (ii) health center committees and VHWs at community level; (iii) DHMTs and the District PBF Steering Committees at district level; and (iv) the PBF Unit and the NSRHSC at the national level. The PPTA will also verify and prepare the performance-based payment invoices for delivery of health services (in quantity and quality 31 The NSRHSC was established under the National Reproductive Health Policy, which was finalized, adopted and signed by the Minister of Health, Ministry of Health and Social Welfare, 2009. 13 terms), and assist health facilities, and district and community councils with preparing PBF business plans. The goal would be to build sufficient capacity in the MOH to ultimately facilitate the transfer of the purchaser function to the PBF Unit. Since the PPTA is an external entity, it is expected that the MOH will increase the staffing of the PBF Unit as the PPTA devolves more responsibility to the PBF Unit when capacity is built on PBF implementation. The detailed functions and roles of the PPTA will be included in the PIM. Given the critical role to be played by the PPTA in the implementation of the project, the PPTA firm selection is an effectiveness condition. 50. The CHAL Secretariat will also be involved at the national level because they will provide coordination, capacity building in monitoring and evaluation, and financial management and reporting for the CHAL facilities, similar to their current arrangement with the MOH. Additionally, performance-based financing for CHAL facilities will be channeled through the CHAL Secretariat so as to maintain good financial governance and reporting for those facilities that lack the capacity to do it themselves. The CHAL Secretariat will work closely with the PBF Unit and the PPTA to ensure that any challenges/bottlenecks are rapidly addressed and the CHAL Secretariat benefits from the PPTA’s expertise. 51. Similar to the NSRHSC at the national level, the District PBF Steering Committee will review and endorse health centers’ business plans within their districts as well as approve invoices for payment once the quantity and quality for services provided have been verified at the district level for submission to the PPTA and the PBF Unit. These District PBF Steering Committees are being established and will be in place prior to the start of implementation. At the community level, the pre-existing Health Center Committees will play a role in working with health center personnel to develop business plans and review VHW performance in line with the business plans. Detailed TORs for the District PBF Steering Committee and the Health Center Committees will also be outlined in the PIM. 52. The implementing entities to receive performance-based financing include the district hospitals, DHMTs, and health centers. District hospitals will receive performance-based financing to maintain the secondary level of the continuum of care and improve the quality of these secondary services while also strengthening the referral linkages with the health centers. DHMTs will receive performance-based financing to ensure that they continue to provide effective supervision of health centers, capacity building to the health center personnel and to assist in oversight of the quality of services at the primary level. Health centers will receive performance-based financing on a primary health care package and will be encouraged to revitalize the community level through the VHWs. 53. Given that this PBF scheme involves financing based on the quantity and quality of service provided by district hospitals and health centers, combined with a remoteness factor, it is essential that data verification and auditing be conducted in a systematic and transparent way consistent with the project design. Both the PPTA and the DHMTs will verify the quantity and quality of health services which will be validated by the District PBF Steering Committees. 54. Community participation will be promoted to strengthen project ownership and accountability. The PPTA will engage local NGOs or Community Based Organizations (CBOs) 14 for tracing patients, randomly selected from health facility records, and verifying the services received and determining their satisfaction with these services. A financial audit of the MOH and CHAL will be conducted annually by an external auditor and will be extended in the TORs to cover health facilities and DHMTs that receive PBF financing. Figure 1 below reflects the institutional arrangements described above (health facilities in the diagram represent both CHAL and GOL facilities). 15 Figure 1. PBF Institutional Arrangements 16 55. Following an intense preparatory phase to lay the foundation, the PBF project will go through three phases: the Phase I pilot for one year covering two districts (Leribe and Quthing), a phase II to scale up activities from the pilot districts to other districts in Lesotho (Mafeteng, Mohale’s Hoek, Mokhotlong, and Thaba Tseka), and a Phase III in three additional districts (Berea, Botha-Bothe, and Qacha's Nek). 32 56. The preparatory activities for the proposed project were financed through an HRITF preparation grant (US$400,000) and a Project Preparation Advance (PPA) (US$635,048) from the Bank to improve implementation readiness and initiate the first performance-based financing. A draft PIM is under review, and will contain all of the basic PBF technical design and procedural features, formats, and drafts of applicable documentation to be used for monthly and quarterly reports, monitoring and verification. B. Results Monitoring and Evaluation 57. A comprehensive description of the project’s results framework and the arrangements for monitoring and evaluation (M&E) are described in Annexes 1 and 3 respectively. The results framework will be tracked and a mid-term review will provide the opportunity to assess progress and make appropriate mid-course corrections. The Health Planning and Statistics Department (HPSD) of the MOH will be responsible for monitoring the project. 58. Sources of data and data collection mechanisms: Data for the indicators in the results framework as well as for the quantity and quality indicators to be incentivized come primarily from government sources and the impact evaluation study: (i) the MOH's routine HMIS, (ii) annual health facility quality of care assessments, (iii) household surveys (impact evaluation study and Demographic and Health Survey [DHS]), and (iv) PBF Unit administrative records. HMIS data collection will be done monthly, consistent with current practice. In addition, monthly supervisory visits are essential, especially in the pilot phase and initial scale up phase. Health facility quality of care assessments will be conducted annually while population-based surveys will be collected at baseline (impact evaluation or 2014 DHS) and endline (impact evaluation). 33 59. Capacity for Monitoring and Evaluation: Some of the M&E capacity challenges in the health sector include: (i) critical shortage of key personnel - health centers lack data clerks, DHMT’s lack ICT personnel, and the central MOH lacks adequate staff for regular supervision of district health information officers; (ii) inadequate data quality assessment and verification; (iii) an MOH M&E Plan/Framework is yet to be developed in line with the recently developed National Health Policy; 34 (iv) HMIS data for some programs such as tuberculosis, HIV/AIDS, immunization and nutrition are kept by the respective programs instead of by the HPSD M&E Unit; and (v) low utilization of HMIS data to inform decision-making at the facility level. 32 The districts that are included in Phase II and Phase III may change depending on whether they fit the criteria for scaling up at the time of scaling up. 33 The baseline household survey data will be from either the impact evaluation study or the 2014 DHS depending on which one is administered earlier 34 The National Health Policy is yet to be translated into Strategic and Operational Plans. 17 60. The Millennium Challenge Account (MCA) Lesotho Health Sector Project (2009-2013) is providing support for strengthening the HMIS. The US President’s Emergency Plan for USAID Relief (PEPFAR) has been financing both the Elisabeth Glaser Pediatric AIDS Foundation (EGPAF) and Institute for Health Measurement (IHM), a local NGO, to build M&E capacity at the central and district levels. The proposed project (Sub-component 2B) will complement already ongoing efforts to strengthen M&E capacity. 61. Verification of data provided by health facilities: To ensure accurate reporting and financing, several mechanisms have been put in place for ex-ante and ex-post verification of data reported by health facilities. (a) Ex-Ante Verification: The quantity of services delivered by the health centers and hospitals will be verified prior to making the performance-based financing. Each PBF facility will report monthly on delivery of agreed outputs. The quantities reported will be systematically verified by the PPTA verification officers and DHMT. Additionally, a PPTA verification officer will participate in quarterly DHMT supervision visits to health centers to verify the quality of service delivery using a health center quality checklist. For the hospitals, a peer review mechanism will be employed to perform quality verification to provide immediate feedback to the hospital staff regarding their performance on the quality checklist. Peer reviews will comprise personnel from other hospitals and the MOH Clinical Services Directorate with a representative from the DHMT. Based on performance data (both quantity and quality), the District PBF Steering Committee and PBF Unit will review and validate the quarterly amounts to be financed for each health center and hospital, respectively. A PBF web application, 35that will be developed by an independent consultant working closely with MOH ICT staff, will facilitate invoicing and reduce delays in the financing. (b) Ex-post verification: This will be carried out in two ways. The PPTA will contract local community-based organizations or non-governmental organizations to visit homes (or by telephone) of randomly chosen clients from the registers in facilities to determine whether they exist, whether they received the services that have been paid for, and their satisfaction with these services (client satisfaction survey). Each quarter, a random selection of health facilities and services will be assessed. Each defined service will be recorded with a client address and a mobile phone number through which a client can be reached. Additionally, health facility quality of care assessments will be carried out to independently verify the Health Facility Quality of Care Score. C. Sustainability 62. As identified in the Lesotho Health Sector Expenditure Review, 36 the largest constraint for the health sector is not the lack of available funds to implement health sector activities, but poor allocative and technical efficiency of resources. The project intends to provide mechanisms for improving the technical efficiency of health service provision and health facility performance through monitoring of key health indicators and outputs. Thus, by incentivizing health facilities to meet specified technical and outcome targets, the project will address the two primary 35 These are currently being used in Rwanda, Burundi, Zambia, Nigeria, Chad and Benin. 36 Lesotho Health Sector Expenditure Review report, World Bank, 2009 (p.59). 18 challenges in the health sector that have made progress difficult. Increased efficiency in utilization of resources and improved performance of health personnel and health facilities will help Lesotho to get more health for the money. 63. There has been considerable experience to show that well-implemented results-based financing helps to increase the utilization of essential health services and improve health outcomes. The project will also provide training to health care personnel to improve quality of services. These technical improvements in health sector performance and utilization of services are likely to last well beyond the end of the project and contribute towards Lesotho’s economic growth by providing a healthier population for employment. 64. The GOL plans to use the lessons learned from this project to catalyze investments from other DPs to support PBF more broadly across the health sector since donors have supported countries such as Rwanda and Mexico with additional funds to implement health sector reforms after demonstrating results with PBF. Additionally, sustainability will be addressed through a combination of improved budget execution for health sector programs and improved efficiency and performance. 65. Moreover, political commitment is strong, as all project components are fully aligned with national priorities and consistent with the GOL’s desire to expand PBF schemes within the public sector in general, with the health sector taking the lead in providing multiple opportunities for successful implementation in Lesotho. Thus, the GOL will ensure continued implementation of the PBF interventions and that the lessons learned are extracted for the purposes of other public sector programs. V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Rating Stakeholder Risk Moderate Implementing Agency Risk - Capacity Substantial - Governance Moderate Project Risk - Design Substantial - Social and Environmental Moderate - Program and Donor Moderate - Delivery Monitoring and Sustainability Substantial Overall Implementation Risk High 19 B. Overall Risk Rating Explanation 66. The overall risk associated with the project is rated high. The Government’s strong commitment to the project is demonstrated by its work on program design and by the appointment and financing of PBF Unit staff. However, the main risk is related to the introduction of a new instrument, PBF, in a relatively low-capacity setting, especially at the local level. Despite GOL’s commitment and interest, competing national and programmatic priorities and limited human resources capacity at the central and district levels could affect the decision making speed on key program design, adjustment and implementation supervision. The institutional arrangements at the district level presuppose decentralization of health services which may not fully materialize. Moreover, there is a significant risk that introduction of the PBF scheme with its shift in thinking and practice from an input-based approach to an output- based approach, does not fully translate into the necessary understanding and actions by senior MOH management to motivate the DHMTs and health service delivery staff at health facilities to achieve the desired outcome in the project. 67. Experience from other countries shows that this can be successfully mitigated through a gradual scale-up, technical assistance and training, including PBF training courses targeting senior decision makers from the MOF and MOH. Therefore, the Bank has supported: (i) PBF training at the central, district and community levels; (ii) technical assistance to assist the GOL to prepare key PBF instruments, including the PBF User Manual; and (iii) technical assistance to help the GOL determine the financial aspects of the PBF scheme. The Bank has also responded to the GOL’s request for a Project Preparation Advance (PPA) to finance the activities which will build the prerequisite skills in the MOH for improved M&E as well as PBF foundational knowledge for health personnel, the core PBF Unit staff and senior decision makers in key Ministries. Technical and capacity building support from the PPTA coupled with the piloting of the PBF scheme in two districts during the first year of project implementation should mitigate the overall implementation risk. 68. Additionally, MCA-Lesotho financed rehabilitation and provision of basic equipment for health centers, which was expected to be completed in August 2012, and has been delayed to April 2013. Further delay would mean that some health centers enrolled in the PBF pilot will not be fully functional. If the rehabilitation of the health centers is not completed by September 17, 2013, the closing date of the MCC-MCA Compact, the Government is expected to complete the renovations. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 69. The economic analysis of Lesotho’s Maternal and Newborn Health project provides the justification for the economic viability of the project. The project’s interventions are expected to generate direct and indirect benefits to target beneficiaries (women of childbearing age, pregnant women, and newborns) through an improvement in a range of maternal and newborn services in the targeted districts. The net economic benefits generated by the project’s inputs and outputs resulted in a positive net present value (NPV) of US $89,755,957 and an economic rate of return (ERR) of 70 percent. Further analysis (sensitivity analysis) undertaken to address the 20 uncertainties associated with the choice of variables for the cost benefits analysis also resulted in positive NPV of US $92,309,436. These results clearly show that the project’s investments are worth undertaking. 70. An analysis of health sector financing shows that donor inflows are key drivers of investment expenditures in the sector. The total investment budget for the three year period (2010/11-2012/13) amounted to US$270.0 million (LSL2372.6 million). Over 52 percent of this amount came from donors. The analysis also shows the difficulty in identifying recurrent expenditures that go into the delivery of MNH services due mainly to the nature of public expenditure classification (economic classification) in Lesotho. This presupposes that MNH services may have been significantly underfunded. Besides, trends in the composition of recurrent expenditures indicate that the GOL allocates fewer resources to non-wage recurrent expenditures than salaries and wages, particularly drugs and other essential supplies needed for effective delivery of health services, including MNH services. In order for the GOL to increase the population’s access to quality MNH services, sustainable and predictable allocations in non- wage recurrent budget will be required. The GOL needs to allocate substantial resources to procure drugs and other essential supplies for the delivery of maternal and newborn health services as well as operations and maintenance of existing facilities and equipment. 71. The fiscal impact analysis of the project shows that the PBF instrument, over the next four years, would rake in substantial resources into the sector, and in particular for maternal and newborn health services. The analysis shows that GOL spending levels in the sector are currently comparable to the top spending countries in the region, and its allocations would match the expected resources from PBF. This would dramatically increase the overall resource to the sector, with a combined expected total expenditure per capita averaging about US$46.42 over the life of the project. This analysis provides a clear justification for a positive fiscal impact of the project on the implementation of sector programs/activities. If the GOL maintains its current levels of spending by consistently financing health services delivery in the country, it will be able to sustainably maintain the expected development outcomes after the project has closed (see Annex 7 for a detailed discussion of the economic analysis). B. Technical 72. The project design appropriately addresses the current state of the health sector in Lesotho. The country is off track to achieving MDGs 4 (reducing child mortality) and 5 (improving maternal health). The average annual percentage decline since 1990 in maternal mortality ratio and under-five mortality rate were only 0.9 percent and 0.1 percent respectively. 37 , 38 Thus, the proposed project’s focus on maternal and newborn health is appropriate. Additionally, the project covers selected relevant services in the Lesotho Essential Services Package, thereby responding to the high HIV prevalence (23 percent) and the nearly two-fifths of children with stunted growth. The full list of services to be incentivized at health 37 WHO/UNICEF/UNFPA/The World Bank. 2012. Trends in maternal mortality: 1990 to 2010. WHO, UNICEF, UNFPA and The World Bank estimates. 38 WHO/UNICEF/UNFPA/The World Bank. 2012. Levels and Trends in Child Mortality: Report 2012. WHO, UNICEF, UNFPA and The World Bank estimates. 21 center and hospital levels, which were carefully selected with inputs from various departments of the MOH, are presented in Annex 2. 73. Some of the system-wide challenges in the health sector which contribute to Lesotho’s worsening health outcomes have been shown to respond to PBF mechanisms to improve health outcomes and the efficiency of health services delivery. PBF motivates facilities and staff to improve productivity and quality of services; improves the planning, monitoring and management of health service delivery through the development of business plans that specify strategies and targets to increase the quantity and quality of the incentivized health services; and improves the information system through verification of incentivized services and use of information for decisions. Additionally, the PBF will accelerate the ongoing decentralization of health services since it will entail performance-based contracts between the District Councils and health centers. 74. The three-phased approach (initial pilot phase and then scale-up in two subsequent phases) will allow for adjustments in design based on lessons learned. Following the pilot phase, project design enhancements will be incorporated in the PIM, which will be updated accordingly. Unlike previous projects that engage independent consultants for project implementation with limited capacity building of MOH staff, this project’s implementation arrangement will ensure the Government’s ownership of the project and sustainability. The capacity of the newly established MOH PBF unit will be built by the PPTA firm which has considerable experience with PBF implementation but with time the reliance on the PPTA will reduce as the implementing entities and facilities gain greater experience. Further, the project will support the strengthening of M&E capacity at both central and district levels. It is envisaged that the HMIS will be adequately improved for the routine monitoring of not only the incentivized indicators selected under this project but also other pertinent indicators in the health sector. C. Financial Management 75. The fiduciary aspects of the project will be handled by the PBF Unit with support from the PPTA Financial Management Officer. 76. MOH and CHAL will use their computerized accounting systems to record and report on the activities. The project’s accounting records will be maintained using cash basis of accounting. The project will comply with international public sector accounting standards (under the cash basis of accounting), as promulgated by the international federation of accountants (IFAC). 77. Disbursement of the funds will be done on a need basis by submitting expenditure forecast for six months. The project will document eligible expenditures by submitting Statement of Expenditures (SOEs) together with withdrawal application. The option of upgrading the project to document eligible expenditures by submitting interim unaudited financial reports (IFRs) together with withdrawal application will be considered during the project implementation based on the observed implementation track record and results. 78. The project will report on the use of funds on a quarterly basis by submitting IFRs. The IFRs will be submitted to the Bank 45 days after the end of the calendar quarter. These reports 22 will include a statement of sources and uses of funds, an updated six-month forecast, designated account activity statement and statements of eligible expenditure under contracts subject to and not subject to prior review. Eligible expenditures include the performance-based financing made to Health Facilities (Health Centers, Hospitals, DHMTs) in the form of PB Grants for the Health Service Package comprised of goods, small works, non-consulting services, consultants’ services, training and package-related operating costs. 79. The project financial statements will be audited by the office of the Auditor General in accordance with international standards on auditing promulgated by the IFAC and audit reports will be submitted to IDA within 6 months after the financial year-end, 30 September each year. Activities implemented under CHAL will be audited by their existing private external auditor. 80. The overall conclusion of the financial management assessment is that the project’s financial management arrangements have an overall moderate risk rating. D. Procurement 81. All procurement to be financed under the proposed project will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits� dated January 2011, and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers� dated January 2011, and the provisions stipulated in the Legal Agreement. For International Competitive Bidding (ICB) and National Competitive Bidding (NCB), all procurement of goods, works and non-consultant services will be done using the Bank’s Standard Bidding Documents. For procurements using proceeds of the performance- based financing that fall within the Shopping threshold, all procurement of goods, works and non-consultant services will be done in accordance with the provisions of the Procurement Manual. All consultant selection undertaken for firms will be done using the Bank’s Standard Requests for Proposals. The project will carry out implementation in accordance with the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD and IDA and Grants� dated October 15, 2006 and revised January 2011 (the Anti-Corruption Guidelines). 82. An assessment has also been made of the following institutions: MOH Procurement Unit; Leribe District Health Management Team (DHMT) – which also serves the Motebang Hospital in Leribe; Quthing District Council and Quthing DHMT – which also serves the Quthing District Hospital; Paray Mission Hospital; St James Mission Hospital; and the CHAL Secretariat. The key issues identified regarding procurement for project implementation are: (a) the need for MOH to fully staff the Procurement Unit; (b) limited capacity for new staff at MOH and existing staff at Leribe, Quthing, Paray Mission Hospital, St James Mission Hospital and CHAL Secretariat to assure adherence to World Bank Procurement and Consultant Selection Guidelines; (c) the potential risk of erroneously using Government of Lesotho or CHAL procurement procedures for Bank-financed activities; and, (d) potential delays for procurements done at district level. The overall procurement risk assessment is rated as high. 83. Proposed corrective measures to mitigate the overall risks include: (a) MOH to fully staff the Procurement Unit; (b) training of key MOH staff on World Bank Procurement and Consultant Selection Methods and Procedures and strengthening of procurement systems at 23 MOH; (c) training for key staff on public procurement and strengthening of procurement systems at participating District Councils, DHMTs, District and Mission Hospitals and CHAL Secretariat; (d) selected contracts to be subject to prior review; (e) MOH to prepare a Procurement Manual to clearly indicate the roles and responsibilities of different staff (MOH, District Council, DHMT, District and Mission Hospitals, and CHAL Secretariat) and the procurement procedures to be followed under the proposed project. An acceptable Procurement Plan covering the first 18 months of the project has been prepared. E. Social (including Safeguards) 84. The project is expected to have a positive social impact by improving utilization and quality of maternal and newborn health. All the proposed interventions for components 1 and 2 are expected to yield an improved health delivery system for communities in the selected districts. 85. The specific needs of the most rural communities have been taken into account through the performance-based financing formula which factor in remoteness for health facilities. This should contribute to retention of healthcare workers at remote hospitals and health centers and incentivize the provision of services in those areas. 86. The strong focus on results in the sector will increase the transparency and accountability in the system. The quarterly reports on results as well as the independent verification reports and the results of the impact evaluation will be widely disseminated for use in program management and strategic discussion. 87. Finally, the project will not trigger OP/BP 4.12 for Involuntary Resettlement as there will be no new land acquisition leading to involuntary resettlement and/or restrictions of access to resources or livelihoods. There are no encroachers at the various sites. F. Environment (including Safeguards) 88. No major works will be directly financed by the project. However, health centers and hospitals may use the performance-based financing under sub-component 1A for small repairs of existing health structures. Such minor works shall exclude any new building and will be undertaken according to national and local laws and regulations. Accordingly, no specific environmental safeguard instrument is required here. 89. Project activities will contribute to increase the utilization of health services which will in turn increase health care waste production. Accordingly, the health center and hospital quality checklists, which will be filled out once per quarter for each PBF facility, will enable the monitoring and incentivizing adherence to GOL health care waste management regulations and guidelines. 90. Consequently, the proposed project has been classified as a Category B for environmental assessment given the risks associated with the handling and disposal of health care risk waste (HCRW) and health care general waste (HCGW). The project is not expected to generate any major adverse environmental impacts. Possible environmental risks include the inappropriate 24 handling and disposal of hazardous medical waste, including sharps, and especially the inadequate management of disposal sites in rural areas, where domestic and health care waste, in particular HCRW, could be mixed. 91. To address the potential negative impact consistent with the requirements of the triggered Environmental Assessment safeguard policy, OP/BP 4.01, the MOH will implement the Consolidated Lesotho National Health Care Waste Management Plan (CLNHCWMP) which was prepared and adopted in 2010, and consolidated and updated in August 2012 for the purposes of the proposed project. The consolidated HCWMP provides adequate recommendations regarding appropriate waste management and disposal procedures pertaining to both HCRW and HCGW, a detailed account of the current policy framework, baseline situation and capacity building needs, and a detailed implementation and monitoring plan going forward, in order to ensure its proper and effective execution. 92. Under the CLNHCWMP, a phased approach – 4 phases - to the implementation of an improved HCWM system was developed. MOH is currently implementing Phase II (2012-2014) first through a Pilot Project testing improved HCW management options for containerization, collection, and disposal of HCRW. The pilot is being implemented in Berea, Leribe, and Maseru districts and will run November 2012 to November 2013. National roll-out is anticipated to be launched for all other districts starting in May 2013. IFC is supporting the Pilot Project through the Health Care Waste Management PPP which has helped the MOH with the procurement of a private operator to undertake health care waste management services. As part of the IFC’s PPP pilot, collection and disposal of HCRW has been outsourced to a service provider. The pilot will help the MOH: (i) build capacity in HCRW collection and disposal, (ii) complete a cost-benefit analysis of different methods for HCRW collection and disposal, and (iii) decide whether to continue to outsource HCRW collection and disposal or to keep these functions in-house. G. Other Safeguards Policies Triggered (if required) 93. No other safeguards policy is triggered in this operation. 25 Annex 1: Results Framework and Monitoring LESOTHO: Maternal and Newborn Health PBF Project Project Development Objective (PDO): To improve the utilization and quality of maternal and newborn health (MNH) services in selected districts in Lesotho. Responsibility Description Data Source/ Core Unit of 3940 Cumulative Target Values** Frequency 41 for Data (indicator definition PDO Level Results Indicators* Baseline Methodology Measure Collection etc.) YR 1 YR 2 YR3 YR 4 42 PDO1: Pregnant women Percent Aggregate – 56.2 58 64 2014 Impact evaluation MOH Number of births in delivering in health facilities Leribe – 61.2 63 69 baseline or 2014 HPSD/BOS health facilities Quthing – 53.0 55 61 DHS /Number of births in Mafeteng – 55.8 58 63 the same area and Mohale’s Hoek –50.6 52 58 2017 Impact evaluation period *100 Mokhotlong – 47.6 49 57 endline survey Thaba Tseka – 41.7 43 49 Berea – 65.7 68 72 Botha-Bothe – 63.9 65 70 Qacha's Nek – 63.5 65 70 39 Baseline values: (i) for the indicators with household survey as data sources, values shown here are from the 2009 LDHS. These will be updated in the first Implementation Support and Results report with the baseline data from either the impact evaluation study or the 2014 DHS, whichever comes earlier; (ii) for PDO4, the value reported here is the composite score for Leribe and Quthing from an assessment conducted in January 2013. Similarly, this will be updated with the May 2013 baseline data from health facility quality of care assessment in all 9 project districts; (iii) for indicators with data from the HMIS, the values reported are for the period January-December 2012 but will be updated with data to be collected for the year preceding project implementation (ie June 2012-May 2013). Further, the cumulative values are based on the fact that the baseline values are zero since the project had no beneficiaries at the beginning of the project. Thus, the baseline values provided are only to indicate the number of beneficiaries prior to the project’s implementation. 40 The aggregate values for indicators with percentages were computed using a weighted average taking into account the indicator value and the value of the denominator of the indicator in the survey sample for each of the nine districts. The formula for computing a weighted average for all nine districts e.g. for PDO1 is computed as (% of pregnant women delivering in health facilities * number of live births in the survey sample for Leribe) + (% of pregnant women delivering in health facilities * number of live births in sample for Quthing) + (% of pregnant women delivering in health facilities * number of live births in sample for Mafeteng) + (% of pregnant women delivering in health facilities * number of live births in sample for Mohale’s Hoek) + (% of pregnant women delivering in health facilities * number of live births in sample for Mokhotlong) + (% of pregnant women delivering in health facilities * number of live births in sample for Thaba Tseka) + (% of pregnant women delivering in health facilities * number of live births in sample for Berea) + (% of pregnant women delivering in health facilities * number of live births in sample for Botha-Bothe) + (% of pregnant women delivering in health facilities * number of live births in sample for Qacha's Nek) divided by (number of live births in sample survey for Leribe + number of live births for Quthing + number of live births for Mafeteng + number of live births for Mohale’s Hoek + number of live births for Mokhotlong + number of live births for Thaba Tseka + number of live births for Berea + number of live births for Botha-Bothe + number of live births for Qacha's Nek). 41 The MOH is currently delineating the catchment areas for each health facility to provide population denominators for annual measurement of outcome indicators. If well done, it might complement or obviate the need for expensive household surveys. 42 The target values for the outcome indicators took cognizance of the change in indicator values from the 2004 to 2009 DHS. 26 PDO2: Children 1 year-old who Percent Aggregate – 62.1 64 67 2014 Impact evaluation MOH Number of children received all basic vaccinations 43 Leribe – 54.9 56 61 baseline or 2014 HPSD/BOS age 12-23 months Quthing – 58.5 60 64 DHS who received all Mafeteng – 66.4 68 71 basic vaccinations at Mohale’s Hoek–59.5 61 64 2017 Impact evaluation any time before the Mokhotlong - 74.7 76 79 endline survey survey/number of Thaba Tseka – 52.7 54 57 children age 12-23 Berea – 71.2 73 75 months in the same Botha-Bothe – 53.7 55 58 area and period Qacha's Nek – 79.0 81 84 PDO3: Currently married women Percent Aggregate – 42.6 44 48 2014 Impact evaluation MOH Number of currently using modern contraceptive Leribe – 44.2 45 48 baseline or 2014 HPSD/BOS married women using method Quthing – 32.3 34 38 DHS modern contraceptive Mafeteng – 49.6 51 53 method /Number of Mohale’s Hoek-40.7 41 43 2017 Impact evaluation currently married Mokhotlong – 29.5 31 33 endline survey women ages 15-49 in Thaba Tseka – 32.0 33 35 the same area and Berea – 48.5 49 51 period (per 100 Botha-Bothe – 53.7 54 56 women) Qacha's Nek – 34.3 35 37 PDO4: Average Health Facility Percent Aggregate – 43.8 44 45 46 50 Yearly Health facility Quality A composite Health Quality of Care Score 44 Leribe – 47.3 quality of care Assurance Unit Facility Quality Quthing - 36.7 assessment Index on scale of Mafeteng – 0-100 will be Mohale’s Hoek- computed for all Mokhotlong – health facilities in a Thaba Tseka – given district and the Berea - average score Botha-Bothe - reported Qacha's Nek - 43 BCG, measles, three doses of pentavalent vaccine (diphtheria, tetanus, whooping cough, hepatitis B and Haemophilus influenza type b) and three doses of polio vaccine (excluding polio vaccine given at birth) 44 Quality of care will be assessed as part of project supervision using a health facility quality checklist on a quarterly basis for performance-based financing. The score will be based on a composite Health Facility Quality Index covering domains of staff attendance, recordkeeping and timeliness of reports, adherence to protocols and guidelines for child survival, environmental health, general consultations, reproductive health, essential drugs management, tracer drugs, maternal health, STI, HIV, tuberculosis, and community based services. The value for this indicator in the results framework will be verified by independent health facility quality of care assessments conducted by the MOH Quality Assurance Unit. The baseline data reported here were collected in the two pilot districts in January 2013. This will be updated with baseline data to be collected in May 2013 in all 9 project districts. 27 INTERMEDIATE RESULTS Intermediate Result (Component One): Improving Maternal and Newborn Health (MNH) Service Delivery at Community, Primary and Secondary levels through PBF (US$17.7 million) Intermediate Result indicator Percent 32.2 33 35 2014 Impact evaluation MOH Number of births in One:; Pregnant women in a baseline or 2014 HPSD/BOS health facilities in lowest wealth quintile delivering DHS project districts by in health facilities 45 women from 2017 Impact evaluation households in the endline survey lowest wealth quintile/Number of births in project districts in the same area and period *100 Intermediate Result indicator Percent Aggregate – 70.4 71 74 2014 Impact evaluation MOH Number of pregnant Two: Women with at least four Leribe – baseline or 2014 HPSD/BOS women attended by antenatal care visits during Quthing – DHS skilled health pregnancy 46 Mafeteng – personnel/ Number of Mohale’s Hoek- 2017 Impact evaluation births in the same Mokhotlong – endline survey area and period * 100 Thaba Tseka – Berea - Botha-Bothe - Qacha's Nek - Intermediate Result indicator Number Aggregate – 17,453 18,000 37,000 57,000 77,000 Yearly HMIS MOH HPSD Number of births Three: Births attended by skilled Leribe – 3499 attended by skilled health personnel Quthing – 1058 health personnel Mafeteng – 1746 Mohale’s Hoek-1432 X Mokhotlong – 1242 Thaba Tseka – 1614 Berea - 3957 Botha-Bothe - 1894 Qacha's Nek - 1011 Intermediate Result indicator Percent Aggregate – 42.1 43 47 2014 Impact evaluation MOH Number of mothers Four: Mothers who received Leribe – 40.7 42 46 baseline or 2014 HPSD/BOS who received postnatal care within two days of Quthing - 34.0 35 39 DHS postnatal care visit childbirth Mafeteng – 40.0 41 44 within two days of Mohale’s Hoek-49.9 51 54 2017 Impact evaluation childbirth / Number 45 This is to ascertain whether the project has contributed to improvement among the poor. In future household surveys, this indicator will be computed for the 9 project districts. 46 Data not available in the 2009 DHS report by district. The baseline household survey will provide the data by district. 28 Mokhotlong – 37.7 38 41 endline survey of women age 15-49 Thaba Tseka – 33.5 35 38 giving birth in the Berea – 46.2 47 50 same area and period Botha-Bothe – 48.7 49 52 * 100 Qacha's Nek – 39.9 41 43 Intermediate Result indicator Number Aggregate – 24,324 25,000 50,500 76,000 100,000 Yearly HMIS MOH HPSD Number of pregnant Five: Pregnant women receiving Leribe - 5693 women receiving first antenatal care from a health Quthing - 1668 antenatal care visit to provider Mafeteng – 2806 a health provider Mohale’s Hoek- 2756 X Mokhotlong – 1977 Thaba Tseka – 2333 Berea - 3605 Botha-Bothe - 1849 Qacha's Nek - 1637 Intermediate Result indicator Six: Number Aggregate – 26,474 26,500 53,000 70,000 98,000 Yearly HMIS MOH HPSD Number of children Children receiving pentavalent Leribe - 5611 who received vaccine (diphtheria, tetanus, Quthing - 1432 pentavalent vaccine whooping cough, hepatitis B and Mafeteng – 3187 (diphtheria, tetanus, Haemophilus influenza type b) Mohale’s Hoek- 2465 whooping cough, X Mokhotlong – 2205 hepatitis B and Thaba Tseka – 2951 Haemophilus Berea - 4520 influenza type b) Botha-Bothe - 2512 Qacha's Nek - 1591 Intermediate Result indicator Percent Aggregate –69 70 71 72 73 Yearly Annual Joint MOH HPSD Number of Seven: Tuberculosis treatment Leribe - 65 66 67 68 69 Review tuberculosis cases success rate Quthing – 65 66 67 68 69 treated/ Number of Mafeteng – 57 58 59 60 61 registered cases) Mohale’s Hoek- 78 79 80 81 82 Mokhotlong – 70 71 72 73 74 Thaba Tseka – 70 71 72 73 74 Berea - 65 66 67 68 69 Botha-Bothe - 76 77 78 79 80 Qacha's Nek - 59 60 61 62 63 Intermediate Result indicator Number Aggregate – 8,553 8,600 17,600 26,600 35,600 Yearly HMIS MOH HPSD Number of people Eight: People receiving Leribe - 1724 receiving X tuberculosis treatment in Quthing - 361 tuberculosis accordance to the WHO- Mafeteng – 1003 treatment in recommended “Directly Observed Mohale’s Hoek- 1222 accordance to the 29 Treatment Short course� (DOTS) Mokhotlong – 318 WHO-recommended Thaba Tseka – 297 “Directly Observed Berea - 1424 Treatment Short Botha-Bothe - 1794 course� (DOTS) Qacha's Nek - 410 Intermediate Result indicator Percent Aggregate – 4,972 5,000 10,500 16,000 21,000 Yearly HMIS MOH HPSD Number of pregnant Nine: Pregnant women living Leribe - 1977 women living with with HIV who received ARV Quthing - 295 HIV who received prophylaxis or complete course of Mafeteng – 601 ARV prophylaxis or ARV to reduce the risk of MTCT Mohale’s Hoek- 478 complete course of Mokhotlong – 262 ARV to reduce the Thaba Tseka – 297 risk of Berea - 568 MTCT/Number of Botha-Bothe - 269 HIV positive Qacha's Nek - 225 pregnant women Intermediate Result indicator Number Aggregate – Yearly HMIS MOH HPSD Number of children Ten: Children under 5 years Leribe - under 5 years whose whose weight and height are Quthing - weight and height are monitored regularly 47 Mafeteng – monitored regularly Mohale’s Hoek- according to the X Mokhotlong – following protocol Thaba Tseka – (six times in the first Berea - year, four times in Botha-Bothe - the second year, and Qacha's Nek - thereafter three times yearly from 2 to 5 years) Intermediate Result indicator Number Aggregate – 0 25 61 100 107 Yearly PBF Unit PBF Unit Number of health Eleven: Number of health Leribe - 0 20 administrative facilities that have facilities with PBF contract 48 Quthing - 0 5 records signed a PBF Mafeteng – 0 14 contract Mohale’s Hoek- 0 12 X Mokhotlong – 0 10 Thaba Tseka – 0 14 Berea - 0 13 Botha-Bothe - 0 9 Qacha's Nek - 0 10 47 Data is available in the under-five register but has not been collated in the central HMIS database. Baseline data will be collected in May 2013. 48 Not all health facilities will sign contracts. The number of facilities in each district expected to sign contract are as follows: Leribe (26), Quthing (9), Mafeteng (18), Mohale’s Hoek (16), Mokhotlong (10), and Thaba Tseka (18), Berea (17), Botha-Bothe (12), and Qacha's Nek (12). 30 Intermediate Result (Component Two): Training of health professionals and VHWs and improving Monitoring and Evaluation (M&E) capacity (US$2.3 million) Intermediate Result indicator Percent Aggregate – Less than 5% Yearly Health facility Quality Number of health Twelve: Health facilities reporting Leribe quality of care Assurance Unit facilities that stock-out of tracer medicines and Quthing assessment experience stock-out medical supplies 49 at the time of Mafeteng – of tracer medicines the health facility quality of care Mohale’s Hoek- and medical supplies assessment Mokhotlong – at the time of the Thaba Tseka – health facility quality Berea - of care Botha-Bothe - assessment/numbers Qacha's Nek - of health facilities surveyed Intermediate Result indicator Number 0 2 10 10 20 Yearly PBF Unit MOH Number of nurse Thirteen: Health personnel administrative Directorate of midwives enrolled in receiving training in Advanced records Nursing a university in South Midwifery and Neonatology X Africa for Advanced University Diploma in Advanced Midwifery and Neonatology Intermediate Result indicator Number 0 1 3 6 12 Yearly PBF Unit MOH Number of health Fourteen: Health personnel X administrative Directorate of personnel enrolled in receiving pre-service nurse records Nursing pre-service nurse anesthetists training anesthetists training Intermediate Result indicator Number 0 20 40 75 150 Yearly PBF Unit MOH Number of nurses Fifteen: Nurses receiving training administrative Directorate of receiving training on X on the MOH adopted drug supply records Pharmaceuticals the MOH adopted management manual drug supply management manual Intermediate Result indicator Number 0 2 4 9 18 Yearly PBF Unit MOH Number of hospital Sixteen: Hospital and DHMT administrative Directorate of and DHMT X pharmacists receiving ESAMI records Pharmaceuticals pharmacists receiving training courses ESAMI training courses Intermediate Result indicator Number 0 2 4 8 16 Yearly PBF Unit MOH Number of personnel seventeen: Personnel receiving administrative Procurement receiving training in training in procurement and records Unit procurement and financial management financial management 49 The tracer medicines and medical supplies are the following: Iron tabs, folic acid tabs, ORS, oxytocin, co-trimoxazole, tetanus toxoid vaccine, and injectable contraceptives. The baseline data to be collected in May 2013 in all 9 project districts. 31 Intermediate Result indicator Number 0 100 500 750 1,500 Yearly PBF Unit MOH Family Number of village Eighteen: Village health workers administrative Health Division health workers trained records trained Intermediate Result indicator Number 0 2 4 8 12 Yearly PBF Unit MOH HPSD Number of Nineteen: Monitoring and administrative Monitoring and Evaluation officers and District records Evaluation officers X Health Information Officers and District Health receiving formal M&E training Information Officers enrolled in formal M&E training course *Please indicate whether the indicator is a Core Sector Indicator (see further http://coreindicators) **Target values are entered for the years data is expected to be available, not necessarily annually. 32 Annex 2: Detailed Project Description LESOTHO: Maternal and Newborn Health Performance Based Financing Project 1. The proposed Lesotho Maternal and Newborn Health (MNH) Performance-Based Financing (PBF) project aims to improve the utilization and quality of maternal and newborn health (MNH) services in selected districts in Lesotho. Selected services in the Lesotho essential services package such as HIV and AIDS, tuberculosis and nutrition will also be covered. Hospitals and health centers will use performance-based financing to improve the quality of care through training, supportive supervision, and case reviews. The project will introduce PBF to improve maternal and neonatal health services and promote a continuum of care throughout pregnancy, childbirth, postpartum and the neonatal period to achieve the PDO through simultaneous stimulation of performance of health workers at the hospitals and health centers and VHWs at the community level. 2. The project has two components: Component 1 is MNH service delivery at community, primary and secondary levels through PBF while Component 2 includes training of health professionals and VHWs as well as improving M&E capacity. The proposed project will be implemented in three phases. In Phase I (July 2013-June 2014), the project will be piloted in Leribe 50 and Quthing districts. In Phases II (July 2014-June 2017) and Phase III (July 2015-June 2017), the project will gradually scale-up to potentially 9 districts excluding Maseru district.51 This three-phased approach will allow for adjustments in design based on lessons learned during the pilot phase. 3. The project is attuned to existing government policies, systems and ongoing or planned health systems strengthening efforts. The on-going effort of the Millennium Challenge Account- Lesotho (MCA-Lesotho) to rehabilitate health care infrastructure including renovating the physical structures as well as providing basic equipment is particularly relevant. This support will contribute to expanded service capacity and quality at the health center level. As a result, health centers will be adequately equipped to conduct deliveries and some health centers will accommodate expectant mothers in a waiting shelter. PBF financial benefits will supplement the regular or project-based financial contributions by the MOH, CHAL and other DPs. This applies to at least (but is not necessarily limited) to: • Provision of human resources (numbers and qualification) • Remuneration in line with MOH regulations • Stock of commodities adjusted for service uptake • Preservation of minimal infrastructural and equipment standards 50 In Leribe district, Mamohau Hospital is being excluded because PIH is currently supporting a small PBF project, which would be a confounding factor. 51 Phase I districts are Leribe and Quthing; Phase II districts are Mafeteng, Mohale’s Hoek, Mokhotlong, and Thaba Tseka; Phase III districts are Berea, Botha-Bothe, and Qacha's Nek. During the pilot phase, the selection of the districts for Phases II and III will be reviewed. Maseru district will not be included as the district’s health outcomes are better than other districts as shown in Table 2 below. 33 Component 1: Improving Maternal and Newborn Health (MNH) Service Delivery at Community, Primary and Secondary levels through PBF (US$13.7 million). 4. This component is jointly financed by IDA (US$9.7 million), the Health Results Innovation Trust Fund (US$4 million). The objective of this component is to improve MNH service delivery at health facility and community level through two sub-components: Sub- Component 1A: Delivery of MNH Services through PBF, and Sub-Component 1B: PBF Implementation and Supervision Support. 5. The GOL has decided to focus on two districts (Leribe and Quthing) in Phase I, based on ecological zones, 52 district maternal health indicators relative to other districts, and the existing capacity of the District Health Management Teams (DHMT). Table 2 shows selected characteristics of Leribe and Quthing districts compared to Maseru district (where the capital city is located) and national levels. These two districts provide a geographical balance that will provide implementation experience in different contexts, and allow broad capacity building that will be useful for future expansion of PBF. While Quthing district is predominantly rural (in the Mountains and Senqu River Valley ecological zones) with poor transport and connectivity which poses challenges in accessing health services, Leribe district with both lowlands and Foothills has the second largest population after Maseru. The maternal health indicator values for Quthing are generally worse than the national average but Leribe has relatively better than average indicator values. Additionally, although Quthing DHMT staff do not have dedicated offices, the DHMT held all meetings planned for 2010 and carried out 64 percent of the planned supervisory visits. Conversely, Leribe DHMT staff have dedicated offices but held only 8 percent of meetings planned for 2010 and carried out only 4 percent of the planned supervisory visits. Table 2. Selected characteristics of Pilot districts, Maseru and national level Indicator Leribe Quthing Maseru National Population 293,369 124,048 458, 710 Ecological zone Lowlands and Mountains and Lowlands - Foothills Senqu River and Valley Foothills Hospitals 2 (1 Govt and 1 Govt 6 (4 Govt 22 1 CHAL) and 2 CHAL) Health centers 25 8 48 188 Filter clinic 1 1 2 4 Hospital beds 285 132 408 (QE II) Average bed occupancy ratea 22% - 99% (QE II) Average OPD waiting timea 5 hours 19 4 hours 27 3 hours 26 3 hours 63 mins. (Govt mins. (Govt mins. (QE mins. Hosp) hosp) II) (average) 1 hour 53 mins. (CHAL hosp) 52 Lesotho has four ecological zones: Lowlands, Foothills, Mountains, and Senqu River Valley 34 Indicator Leribe Quthing Maseru National DHMT dedicated officesa Yes No Yes Planned DHMT meetings held 8% 100% 33% in 2010a Planned DHMT supervisory 4% 64% - visits carried out in 2010a Pregnant women delivering in 61.2% 53% 69% 58.7% health facilitiesb Children 1 year-old who 54.9% 58.9% 60.3 61.7 received all basic vaccinationsb Currently married women 44.2% 32.3% 54.5% 45.6% using modern contraceptive methodb Mothers who received 40.7% 34.0% 67.1% 47.9% postnatal care visit within two days of childbirthb % Cesarean sectionb 6.7% 4.4% 9.6% 6.7% Newborns protected against 76.6% 61.0% 81.7% 75.7% tetanusb a Annual Joint Review Report. 2010/11 Financial Year. Ministry of Health and Social Welfare, May 2011 b Lesotho Demographic and Health Survey (LDHS), 2009 6. Sub-component 1A: Delivery of MNH Services through PBF will support the provision of quality MNH services as well as selected services in the Essential Services Package at community, health centers and hospitals by providing performance-based financing to health centers, hospitals, and the District Health Management Teams (DHMTs) (which will become part of the District Councils with the decentralization of health services). In order to strengthen collaboration between the health centers and the VHWs in the respective catchment areas, they will be considered as one unit for the financing. The performance-based financing for VHWs will be linked to the overall performance of the respective health centers to which they are mapped. 7. The incentivized services to be delivered by Health Centers (Minimum Package of Activities [MPA]) and hospitals (Complementary Package of Activities [CPA]) are shown in Tables 3 and 4. Additionally, performance-based financing will be made to DHMTs based on supervision of health facilities using a quality checklist, providing feedback to health facility staff, submission of quarterly overall reports to the District Council Secretary with lessons learned, identified constraints and suggested solutions, and other information related to service delivery within the district. The performance-based financing linked to achievement of predefined quantity and quality indicators at the health facilities are expected to stimulate health worker motivation and productivity and provide additional cash to overcome obstacles affecting the quality or continuity of care of their patients. Performance-based financing will be adjusted based on comparative isolation of a facility to provide additional financing to hospitals and health centers in remote areas and influence retention of health personnel in remote areas. The 35 health facilities routinely complete HMIS forms and will submit quarterly reports regarding the quantity of services provided and progress on each indicator. Table 3. Minimum Package of Activities (MPA): Services to be incentivized at the health center level No Incentivized indicator Definitions Data source/register 1 Number of new outpatient Patients attending OPD for a new OPD Register consultations for curative care complaint or disease. If a patient has consultations multiple complaints, s/he is counted only once 2 Number of pregnant women having Pregnant women attending antenatal care ANC Register their first antenatal care visit in the for the first time during first 12 weeks of first trimester their pregnancy 3 Number of pregnant women with four Pregnant women with four (4) antenatal ANC Register antenatal care visits care visits completed 4 Number of women delivering in Women delivering in a health facility Delivery health facilities assisted by skilled/trained health staff Register 5 Number of women with 2 postnatal Women who have delivered, receiving at Postnatal care visits within 1 week least two postnatal care visits within one Register week according to protocol. It is assumed that women who deliver in health facilities receive post natal care prior to discharge. 6 Number of patients referred who Patients referred who arrived at hospital Referral arrive at the hospital with referral forms from their health Register center. 7 Number of new and repeat users of Women receiving 3 monthly cycles of oral Family short-term modern contraceptive contraceptives (Pills) or quarterly Planning methods contraceptive injections for the first time. Register Women receiving a refill after 3 months will be counted as repeat visits. 8 Number of new and repeat users of Women receiving intrauterine device and Family long-term modern contraceptive Implants for the first time or are repeat Planning methods users. Each of the method provides an Register estimated protection for 3 or more years. 9 Number of children under 1 year fully Children who have completed their Under 5 immunized primary course of immunization before the Register age of one year. A primary course includes BCG, Polio 3, Pentavalent 3 and measles before one year of age. 10 Number of children under 5 years Children under 5 years whose weight and Under 5 whose weight and height are height are monitored regularly according Register monitored regularly according to to the following protocol protocol (six times in the first year, four times in the second year, and thereafter three times yearly from 2 to 5 years) 11 Number of notified HIV-positive Notified tuberculosis patients tested HIV- TB Register tuberculosis patients completed positive and completed their treatment or 36 No Incentivized indicator Definitions Data source/register treatment and/or cured cured. TB patients are confirmed to be cured (Category I- by sputum negative smears at end of treatment month 6 and at least one previous occasion, Category II sputum negative smears at 5 and 8 months) and completed treatment (not classified as cured and not as failure e.g for sputum negative declared tuberculosis patients) 12 Number of children born to HIV- All children of known HIV-positive Under 5 positive women who receive a mothers have a HIV test between 18 and Register confirmatory HIV test at 18 months 24 months. This test should be done before after birth the child is 2 years old. Table 4. Complementary Package of Activities (CPA): Services to be incentivized at the hospital level No Incentivized indicatora Definitions Data source/register 1 Number of referred indigent patients Indigent referred patients by health OPD from Health Centre to the OPD of a centers needing hospital OPD services Register/referral hospital register 2 Number of counter referral forms Hospital returns counter referrals forms Referral Register returned to health centers with feedback on the referred patient to /Counter Referral the referring health center forms File 3 Number of indigent inpatient Indigent patients admitted as inpatient to Inpatient Register admissions the hospital 4 Number of pregnant women having Pregnant women attending antenatal care ANC Register their first antenatal care visit in the for the first time during first 12 weeks of first trimester their pregnancy 5 Number of major obstetric The list of major obstetric complications Delivery Register complications treated treated include Severe pre-eclampsia or eclampsia, ectopic pregnancy, haemorrhage (antepartum or postpartum) prolonged or obstructed labor (dystocia, abnormal labor), postpartum sepsis and complications of abortion 6 Number of assisted vaginal deliveries Number of assisted vaginal deliveries Delivery Register (vacuum extraction or forceps) 7 Number of Caesarean deliveries Number of pregnant women who Delivery Register undergo Caesarean delivery with an appropriate indication (absolute or relative) for the procedure as per protocol. 8 Number of referred newborn children Referred new born children who require Neonatal/postnatal for emergency neonatal care emergency care due to perinatal register complications, low birth weight, etc. Referral Register /Counter Referral 37 No Incentivized indicatora Definitions Data source/register forms File 9 Number of women with 2 postnatal Women who have delivered, receiving at Postnatal Register care visits within 1 week least two postnatal care visits within one week according to protocol. It is assumed that women who deliver in health facilities receive post natal care prior to discharge. 10 Number of new and repeat users of Women receiving intrauterine device and Family Planning long-term modern contraceptive Implants for the first time or are repeat Register methods users. Each of the method provides an estimated protection for 3 or more years. 11 Number of HIV-positive tuberculosis HIV-positive tuberculosis treatment TB Register treatment-resistant patient referred to resistant patients referred by health center the hospital to the hospital for appropriate treatment advice 12 Number of notified HIV-positive Notified tuberculosis patients tested HIV- TB Register tuberculosis patients completed positive and completed their treatment or treatment and/or cured cured. TB patients are confirmed to be cured (Category I- by sputum negative smears at end of treatment month 6 and at least one previous occasion, Category II sputum negative smears at 5 and 8 months) and completed treatment (not classified as cured and not as failure e.g for sputum negative declared tuberculosis patients) 13 Number of children born to HIV- All children of known HIV-positive Under 5 Register positive women who receive a mothers have a HIV test between 18 and confirmatory HIV test at 18 months 24 months. This test should be done after birth before the child is 2 years old. a Indicators 4, 9, 10, 12, and 13 are selected MPA indicators which will only be incentivized for patients in the catchment population of the hospital and not the whole district. Hospitals are expected to provide primary health care services for those who live in the vicinity or catchment area. 8. Verification of data provided by health facilities: To ensure accurate reporting and financing, several mechanisms have been put in place for ex-ante and ex-post verification of data reported by health facilities, as outlined in Section IV.B in the main text and the Monitoring and Evaluation section in Annex3. Penalties will be imposed for over-reporting or mis-reporting data following the verification. 9. Furthermore, performance-based financing can motivate facilities to invest in critical items to improve the quality of care such as additional compensation for health facility personnel, supply chain management for essential drugs, training, supportive supervision, minor eligible works ( painting, plastering, furnishing, repairs, and equipment), and better data collection and monitoring. Specific criteria for the appropriate use of allocated PBF monies to health facilities will be included in the Project Implementation Manual (PIM) with differentiation between the uses applicable for hospitals and health centers. 38 10. A portion of performance-based financing to health centers will be provided to VHWs at community level based on achievement of agreed performance indicators. This is a vital and unique part of the project, which aims to stimulate improved service delivery at the community level and strengthen the linkage between the community level care and the primary care at the health center level. VHWs will initially conduct a comprehensive community mapping which will entail VHWs obtaining information about her own village such as household composition, the number of women in the reproductive age, their reproductive health history and current status, breastfeeding practice, and information on children. Subsequently, VHWs will be compensated for achieving a set of MNH output indicators based on a “continuum of care� approach. Currently, health personnel at the health centers supervise VHWs in their catchment area, so this design is aimed at further boosting collaboration between health centers and VHWs. 11. The overall performance-based financing costs for benefits offered to health facilities and VHWs are currently estimated at US$3.00 per capita per year. The amount is consistent with PBF performance-based financing utilized in other African countries; sufficient to make a difference in the efficiency and quality of health services while still being low enough to be absorbed by the regular MOH budget when the PBF project funding expires. 12. Calculation of PBF performance-based financing for hospitals and health centers was based on a formula with three elements (quantity provided, quality, and remoteness). The three elements are further defined below (and detailed in the PIM): • Amount based on quantity of incentivized services delivered against the price per service (unit price). • Quality adjustment above quantity amount based on the score obtained on the quality check list which defines standard for quality of care for hospitals and health centers. The proportion for the additional payment and the target quality score will be adjusted during implementation to reflect ongoing improvements in the service quality and ensure that the objective of continually improving quality is maintained. • Remoteness adjustment based on comparative isolation of a facility to provide additional financing to health centers in remote areas and support Government of Lesotho’s pro- poor approach. The MOH has already developed a mechanism for classifying health centers into four remoteness categories and distributed the health centers in Leribe and Quthing within the 4 categories. 53 13. Sub-component 1B: PBF Implementation and Supervision Support. This sub- component will provide critical support for: (i) PBF implementation and supervision; (ii) PBF 53 Category 1: Health centers are those where health professionals prefer to work, mostly centrally located in the town center, or within one hour travelling by vehicle (0% bonus). Category 2: Health centers located in the district, but needs between 1 and 2 hours travel to the center of the district by vehicle (10% bonus). Category 3: Health centers located in the district, but needs 2 hours and more to reach the center of the district by vehicle (20% bonus). Category 4: Geographically hard to access. Health centers located in areas where health providers do not want to work, far from the main roads, irregular transport, bad roads, difficulty to reach in rainy season, where sometimes there is no water, electricity in health center and village, schools (30% bonus). 39 capacity building of the MOH and CHAL at central and district levels, district and community councils; and, (iii) best practice documentation and sharing. The MOH and CHAL have limited experiences with PBF and hence the appropriate capacity will have to be built at both strategic and operational levels. The MOH has established an office at the central level (PBF Unit) to handle the day-to-day management of the MNH PBF Project. The PBF Unit consists of five full time MOH staff: PBF Unit Director, Financial Management Officer, Monitoring and Evaluation Officer, Operations Officer, and Accountant. The project will competitively recruit a PPTA for Phase I to provide technical assistance and to build in-country capacity to implement the PBF in Phase II and III. The PPTA’s key functions are to: (i) provide technical and implementation support to the MOH PBF Unit and other PBF implementing entities at national and district levels on managing performance-based contracts with health facilities for the delivery of incentivized services; and (ii) verify delivery of the quantity and quality of services, prepare the invoices for performance-based financing, and assist health facilities with preparing their PBF business plans. 14. This sub-component will finance the activities to be carried out by the PPTA and the PBF Unit in managing and facilitating PBF implementation by the health facilities and decentralized entities. Specific activities will include community sensitization and training on PBF tools, development of quarterly facility business plans, training on the web-based application to upload quantity data and PBF invoices, study tours for GOL officials, development and maintenance of the PBF invoicing web-based application, field testing of the quality checklists, collection of baseline data for incentivized services, PBF training courses for core personnel such as the PBF Unit and health facility personnel, steering committee members, best practice documentation and dissemination workshops, conduct supervision and verification visits at health facilities, and undertake the community tracking surveys. Some of these activities have already been initiated for the pilot districts using an HRITF Recipient-executed preparation grant of US $400,000 and the PPA provided by the Bank, but will still need to be reinforced by the PPTA even in the pilot districts and initiated in the scale-up districts in Year 1. In subsequent years, similar activities would be undertaken to disseminate and provide guidance on any adjustments to the PBF indicators, definitions, and incentive fees or quality and remoteness allocations. 15. Notably, the Recipient-executed HRITF preparation grant supported a consultancy firm which worked closely with the MOH PBF Technical Working Group (April-October 2012) to: (i) build PBF competence and capacity at the various levels for both MOH and CHAL through workshops, training sessions, sensitization activities and study tours (Rwanda and Zimbabwe), 54 (ii) develop the list of services to be incentivized as well as quality checklists for health centers and hospitals; (iii) determine the use of financing; (iv) compile a PBF User Manual; (v) prepare a roadmap, including phasing of the pilot PBF project; and (vi) develop terms of references for various entities. Additionally, a Project Preparation Advance (PPA) was approved for the following preparatory activities: (i) HMIS consultancy, (ii) PBF training course in Mombasa, Kenya for PBF Unit staff, (iii) study tour for senior Government officials from MOH and other Ministries, (iv) development of a web-enabled application for PBF invoicing, (v) pretesting of the quality checklist for health centers and hospitals, and (vi) training of VHWs. 54 Workshop for central and district personnel conducted in May 21-25, 2012 and district based trainings and community level sensitization and training level were also carried out in July-October 2012; 8 central and district staff participated in an African regional RBF workshop, organized by the Bank, in Zambia (May 29- June 1, 2012); and MOH Directors undertook a PBF study tour to Rwanda and Zimbabwe between August 12-18, 2012. 40 Component 2: Training of health professionals and VHWs and improving Monitoring and Evaluation (M&E) capacity (US$2.3million) 16. This component will be financed through IDA credit and have two sub-components. 17. Sub-component 2A: Training health professionals and Village Health Workers. This sub-component will support the ongoing MOH program for training of nurse anesthetists and midwives to achieve an acceptable standard of competency in the delivery of MNH services including EmONC as well as the training of VHWs. There will also be training on supply chain management, procurement, and financial management. 18. According to a 2011 Health Facility Survey, only 41 percent of health centers conduct normal deliveries. 55 Further, the 2011/2012 MOH Annual Joint Review indicated that the most frequent cause of female admissions at health facilities was abortion complications at 16 percent, indicating the need to capacitate doctors on the use of manual vacuum aspiration (a procedure safer than D&C during the first 10 weeks of pregnancy) for the treatment of abortion complications. 19. Currently, health centers do not provide the full complement of Basic EmONC services since midwives are not allowed to perform three basic EmONC procedures: manual removal of retained placenta; removal of retained products of conception; and assisted vaginal delivery. 56 The Nursing and Midwifery Act is being revised to allow advanced midwives to perform these procedures. 20. Advanced midwives are needed at the hospitals for the training of in-service nurse midwives and also for the mentorship and preceptorship of newly trained nurse midwives. The Directorate of Nursing indicated that 36 advanced midwives are required (two for each of the 18 hospitals) but there are currently only three advanced midwives. The project will support part time training of 15-20 nurse midwives at a university in South Africa for Advanced University Diploma in Advanced Midwifery and Neonatology. Further, given the shortage of nurse anesthetists, the project will support the ongoing MOH effort on pre-service training of nurse anesthetists in training institutions in African countries. Twelve nurse anesthetists are expected to be trained. 57 21. In 2013, the MOH together with UNFPA, UNICEF, and WHO plan to conduct EmONC assessments, which will inform the on-the-job training needs for nurse midwives and medical doctors providing obstetric services in districts. The project will provide support for the assessment but given that the MOH together with DPs are supporting in-service training, the project will not finance EmONC in-service training of doctors and nurse midwives. 55 ICON-INSTITUT Public Sector GmbH, NUL-CONSULS of the University of Lesotho, and Millennium Challenge Account Lesotho (MCA-Lesotho). Health Facility Survey – Round 1. November 21, 2011. 56 The remaining four Basic EmONC services that midwives are allowed to perform are: administration of parenteral antibiotics, oxytocic drugs, and anticonvulsants (magnesium sulphate) for pre-eclampsia/eclampsia, and basic neonatal resuscitation (bag and mask). 57 As per the 2008 Training and Development Policy in the Public Service of Lesotho, Regulation 97, each trainee will enter into a bonding agreement to work in Lesotho for a number of years. 41 22. The MOH with support from DPs has developed a VHW training manual and curriculum and has been training VHWs. 58 This sub-component will support the ongoing VHW training on basic services such as family planning and referrals as well as taking care of mothers and children in the postnatal period and promotion of exclusive breastfeeding. VHWs will also be supported to conduct community head count and periodically update the village health registers for more accurate health facility catchment area data. 23. In August 2012, the Bank engaged a consultant to review the turnaround time in the working capital management of National Drug Service Organization (NDSO) and related processes at NDSO, MOH, GOL and CHAL health facilities. 59 Based on the report’s findings, the project will support 5-day training of 315 health center nurses on the MOH adopted drug supply management manual. This would allow the health centers to improve their forecasting and order preparation for NDSO, which will potentially reduce the delays in turning around and delivering orders and curtail stock-outs of drugs and medical supplies at the health center level. This training should not create a burden for the facility personnel since it will be arranged for a local consultant to provide the training on a rotational basis to train 3 nurses per health center. The training will be reinforced by the inclusion of the DHMT pharmacists in the initial training to provide refresher training to the nurses, when necessary. Additionally, 18 hospital and DHMT pharmacists, one NDSO staff, and one MOH Pharmacy Directorate staff will participate in the Eastern and Southern African Management Institute (ESAMI) training courses on (i) overview of supply chain management and (ii) quantification of health commodities. Based on the Bank’s assessment of the MOH procurement capacity, this sub-component will support (i) training of key MOH Procurement Unit staff on World Bank Procurement and Consultant Selection Methods and Procedures; 60 and (ii) hands-on training of key MOH Procurement Unit staff, District Councils, DHMTs, District and Mission Hospitals and CHAL Secretariat on public procurement and strengthening of procurement systems. 61 Further, the MOH PBF Unit Financial Management Officer and Accountant will participate in a two-week course for the ICT Based Financial Management and Disbursements Course for Project Accountants for World Bank funded Projects in Kenya. They will also receive hands-on training on TOMPRO accounting software. 24. Sub-Component 2B: Improving M&E capacity. This sub-component will support the strengthening of the HMIS in all districts and capacity-building of M&E personnel at the central and district levels. Specific activities under this sub-component include: (i) review, update and harmonize data collection tools for strengthening the HMIS; (ii) printing of HMIS registers, forms and reports over the project duration; (iii) enrollment of District Health Information Officers (DHIO) and central MOH staff in M&E continuing education to build their capacity; and (iv) conducting health facility quality of care assessments and household survey. 58 A total of 1,811 VHWs will be trained: 1,044 and 383 in Leribe and Quthing respectively. The Government plans to train VHWs in all the other districts. 59 NDSO Working Capital Management Report. November 2012, prepared by Thiagarajah Veluppillai, Fellow Chartered Certified Accountant (FCCA). 60 ESAMI training on Procurement Management Programmes: ( i) Works Procurement and Selection of Consultants; (ii) Advanced Works Procurement and Selection of Consultants; (iii) Goods and Equipment Procurement; and (iv) Advanced Goods and Equipment Procurement Programme. 61 The consultant will focus on focus on capacity building and not on executing activities. 42 25. As part of project preparation, the MOH has engaged a consultant to assist the Health Planning and Statistics Department (HPSD) to improve the quality of health data through the review and update of data collection tools in order to strengthen and harmonize data collection at health centers and hospitals. The consultant will specifically carryout the following activities: (i) review and update health facility registers (including referral registers), tally sheets, summary forms (including referral forms); (ii) review and update guidelines for data collection at facility level; (iii) review and update the templates for facility level monthly reports and graphic display of key indicators on facility walls; (iv) review and update facility level data quality review guidelines; and (v) conduct three regional 'Training of Trainers' trainings on the newly designed registers, tally sheets and reporting forms so that trainers can train facility staff in their prospective districts. The newly designed registers, tally sheets and reporting forms will be printed for all health facilities in Lesotho. 26. This sub-component will also support central MOH M&E officers and DHIOs to undertake formal M&E training. This will include a short course at a university in South Africa in the M&E of Health Programs (for 2 central and 10 district personnel) as well as a two-year part-time Master of Public Health degree program with M&E concentration or Biostatistics concentration(for 2 central personnel). 62 27. Annual health facility quality of care assessments will be conducted by the MOH Quality Assurance Unit under this sub-component. Impact evaluation of the project, which will entail baseline and endline household surveys, will be carried out with a separate Bank-executed HRITF of US $1.5 million. This sub-component will provide additional funding to either the impact evaluation study or the 2014 DHS for the collection of baseline data in all project districts for the 6 indicators in the results framework with household survey as the data source. 63 62 As per the 2008 Training and Development Policy in the Public Service of Lesotho, Regulation 97, each trainee for the MPH degree program will enter into a bonding agreement to work in Lesotho for a number of years. 63 An impact evaluation of the project, which will entail baseline and endline household surveys, will be carried out with a separate Bank-executed HRITF of US $1.5 million. The Impact Evaluation study will carry out a baseline survey in the 4 Phase II districts (Mafeteng, Mohale’s Hoek, Mokhotlong, and Thaba Tseka.) just before scale-up in those districts. It will also support endline survey in all project districts. The baseline household survey data to be reported in the results framework will be from either the impact evaluation study or the 2014 DHS depending on which one is administered earlier. 43 Annex 3: Implementation Arrangements LESOTHO: Maternal and Newborn Health Performance Based Financing Project Project Institutional and Implementation Arrangements 1. The Ministry of Health (MOH) will be the main implementing agency. The pre-existing National Sexual and Reproductive Health Steering Committee (NSRHSC) 64 of the MOH will meet quarterly and be responsible for endorsing the ultimate design of the PBF scheme, provide policy guidance and project implementation oversight, and approve the annual work programs and budget. The NSRHSC is chaired by the Director General for Health Services, and includes representatives of key MOH directorates (primary health care, nursing services, health planning, clinical services, human resources, social welfare, finance, pharmacy, laboratory services, family health, health education, and quality assurance). The NSRHSC also includes representatives from MODP, MOLGC, Ministry of Public Service, Ministry of Education and Training, Ministry of Gender, Youth, Sports and Recreation, Ministry of Justice, Human Rights and Rehabilitation and Law and Constitutional Affairs, CHAL, LRCS, Lesotho Planned Parenthood Association, Lesotho Medical, Dental and Pharmacy Council, Lesotho Nursing Council, National University of Lesotho Dean of the Faculty of Health Sciences. The heads of UN agencies and the heads of delegation of Irish Aid, the European Union, PEPFAR, other international NGOs, a parliamentarian/community member and the private sector are also included. The NSRHSC Terms of Reference (TOR) have been modified to incorporate the PBF-specific steering committee terms of reference and will be included in the Project Implementation Manual (PIM). 2. The NSRHSC is responsible for endorsing the design of the PBF scheme, including: maximum financing to districts and facilities; incentivized services (indicators); eligibility criteria on which districts and facilities are enrolled in the PBF scheme; quality of care standards; mechanism for calculating PBF performance-based financing (unit costs, weights and adjustments for quality and remoteness) and conditions for their use; and standards for health facility business plans. All PBF design features and terms of reference for implementing entities will be captured in the PIM, which the NSRHSC will formally endorse. The existing Technical Working Group (TWG) will provide operational and administrative support for the preparation and implementation of the PBF scheme. The TWG will prepare meeting agenda, reference documents and meeting minutes for the Steering Committee’s endorsement. The TWG is comprised of technical, working-level staff from MOH, MOF, MODP, CHAL, and LRCS. Detailed TORs for the TWG will also be provided in the PIM. 3. A PBF Unit has been established in the MOH Health Planning and Statistics Department (HPSD) to manage the day-to-day implementation, monitoring and management of the project, in coordination with relevant technical units and the TWG. The PBF Unit will endorse and make PBF financing to contracted service providers, i.e. hospitals, health centers, and DHMTs, based on the invoices prepared according to the predetermined formula (i.e. PBF outputs adjusted for quality and remoteness). Detailed TORs for the PBF Unit and for the specific positions will be included in the PIM. It was agreed that the PBF Unit should be fully staffed with personnel under 64 The NSRHSC was established under the National Reproductive Health Policy, which was finalized, adopted and signed by the Minister of Health, Ministry of Health and Social Welfare, 2009. 44 established posts in the MOH rather than recruiting external consultants for sustainability. The following staff has been appointed to the PBF Unit from existing MOH personnel: (i) PBF Unit Director, (ii) Financial Management Officer, (iii) Accountant, (iv) M&E officer, and (v) Operations Officer. 4. A firm with the PBF implementation experience will be contracted to provide Performance Purchasing Technical Assistance (PPTA). The PPTA will provide capacity building on PBF implementation to health workers at facility level; at community level to health center committees and VHWs; at district level to DHMTs and the District PBF Steering Committee; and at national level to the PBF Unit and the NSRHSC. The PPTA will also verify delivery of the services, prepare the PBF invoices for delivery of incentivized services (in quantity and quality terms), and assist health facilities and the district and community councils with preparing their PBF business plans. The goal would be to build sufficient capacity in the MOH to ultimately facilitate the transfer of the purchaser function to the PBF Unit. Since the PPTA is an external entity, it is expected that the MOH will increase the staffing of the PBF Unit as the PPTA devolves more responsibility to the PBF Unit when capacity is built on PBF implementation. The detailed functions and roles of the PPTA will be included in the PIM. 5. The CHAL Secretariat will also be involved at the national level because they will provide coordination, capacity building in monitoring and evaluation, and financial management and reporting for the CHAL facilities, similar to their current arrangement with the MOH. Additionally, performance-based financing for CHAL facilities will be channeled through the CHAL Secretariat so as to maintain good financial governance and reporting for those facilities that lack the capacity to do it themselves. 6. In addition to the NSRHSC at the national level, there will be a District PBF Steering Committee comprised of the District Council and DHMT, representation of the area Chiefs, chair of the Community Councils, representatives of other relevant Ministries (e.g. MOF and District Planning Unit), local CHAL officials, civil society representatives, and the PPTA. District PBF Steering Committee will review and endorse the business plans of the health centers within their district, and validate PBF invoices for financing once the quantity and quality have been verified at the district level. At the community level, the pre-existing Health Center Committees will play a role in working with health center personnel to develop business plans and review VHWs performance in line with the business plans. The detailed TORs for the District PBF Steering Committee and the Health Center Committees will also be outlined in the PIM. 7. The implementing entities to receive performance-based financing include the hospitals, DHMTs, and health centers. Hospitals will receive performance-based financing in order to maintain the secondary level of the continuum of care and improve the quality of these secondary services while also strengthening the referral linkages with the health centers. DHMTs will receive performance-based financing as well to ensure that they continue to provide effective supervision of health centers, capacity building to the health center personnel and to assist in oversight of the quality of services at the primary level. As the primary level of health care, health centers will be incentivized on a primary health care package and will be encouraged to revitalize the community level through the VHWs. Since VHWs are already mapped to a specific health center, they will be treated similarly to the health center personnel by being 45 rewarded on the basis of the overall health center performance and receiving a portion of the performance-based financing to the health center. 8. Given that this PBF scheme involves financing based on the quantity and quality of service provided by hospitals and health centers, combined with a remoteness factor, it is essential that data verification and auditing be conducted in a systematic and transparent way consistent with the project design. The PPTA and the DHMTs will verify the quantity and quality of incentivized services. 9. Community participation will be promoted to strengthen project ownership and accountability. The PPTA will engage local NGOs or Community Based Organizations (CBOs) for tracing patients, randomly selected from health facility records, and verifying the services received and determining their satisfaction with these services. The outcomes of patient verification and patient satisfaction surveys will partly determine the quantity and quality of care scores and influence quarterly PBF financing. A financial audit of the MOH and CHAL will be conducted annually by an external auditor and the audit will also cover health facilities and DHMTs that receive PBF funding. Figure 2 below reflects the institutional arrangements described above (health facilities in the diagram represent both CHAL and GOL facilities). 46 Figure 2. PBF Institutional Arrangements 47 10. Following an intense preparatory phase to lay the foundation, the PBF project will go through three phases: Phase I pilot for one year covering two districts (Leribe and Quthing), phase II to scale up activities from the pilot districts to other districts in Lesotho (Mafeteng, Mohale’s Hoek, Mokhotlong, and Thaba Tseka), and Phase III, using parallel financing from the GOL counterpart contribution, in three additional districts (Berea, Botha-Bothe, and Qacha's Nek). For the preparatory phase, a consultancy firm was recruited to assist the MOH to: (i) build PBF awareness at the various levels for both MOH and CHAL (district and community councils, health facility staff, VHWs, and DHMTs in the pilot districts, and central levels) through workshops, training sessions, sensitization activities and study tours; (ii) determine the health services to be incentivized; (iii) determine the use of financing; (iv) compile a PBF User Manual; (v) prepare a roadmap, including phasing for the PBF pilot and scale up phases; and (vi) develop TORs for the various entities. 11. The preparatory phase and project implementation readiness activities were financed through an HRITF preparation grant (US$400,000) and a Project Preparation Advance (PPA) (US$635,048). The PPA, countersigned in January 2013, will finance activities related to collection of the baseline data for the incentivized services, field testing of the quality checklists, PBF training for PBF Unit staff, revision and updating of the HMIS data collection tools, and advance payment for the PPTA firm to engage in further preparation activities for rapid implementation after Board approval. The PPTA recruitment process has been initiated and is now undergoing review. Given the critical role to be played by the PPTA in the implementation of the project, the PPTA selection is identified as an effectiveness condition. The draft PIM has been compiled and contains all of the basic PBF technical design and procedural features, formats, and drafts of applicable documentation to be used for monthly and quarterly reports, monitoring and verification. There has been and will be a heavy investment in capacity building at all levels of the MOH but particularly to strengthen the M&E system to capture the requisite data for PBF implementation. 12. The pilot phase will be implemented upon Board approval using the PBF design and tools developed during the preparatory phase. This will allow health facilities and implementing entities to become familiar with the PBF mechanism and identify what works and what doesn’t work in the Lesotho context. During the pilot phase, the PPTA and the PBF Unit will organize regular workshops and seminars with participation from PBF-health facility personnel, VHWs, MOH and CHAL staff to discuss lessons learned, and resolve bottlenecks and challenges. In these sessions key aspects related to performance-based and contracts, external verification procedures, equity goals, and costing of the menu of services can be widely discussed. Adjustments based on the pilot phase will be incorporated into the PIM and implemented during both scale up phases to the 7 other districts. Thus, adjustments can be made to the functionality of technical features, incentive calculation formula, unit costs and weights. The PPTA will also provide technical support and capacity building to the MOH PBF Unit during this period to allow for gradual transfer of the roles and responsibilities of the PPTA to the PBF Unit as they gain experience in PBF implementation. 13. Specific triggers on the progress observed in the pilot phase districts will be identified and agreed with the NSRHSC and the PBF Unit after at least six months of implementation to determine moving into the scale up phase. These triggers will be noted in the PIM to ensure 48 transparency on expected outcomes and the way forward. A scale-up schedule will be developed to ensure that activities follow a reasonable timetable for the other districts to be included into the PBF project without overwhelming demands on the implementation units and the PBF Unit. 14. Ongoing adjustments to the project design and incentivized services, unit fees and performance contracts are expected to occur over the life of the project and beyond. The PIM contains detailed terms of reference for each implementing entity, sample forms for the business plans, contracts and invoices, the quality checklists to be used for supervision, relevant administrative, financial and procurement procedures for the receipt and use of performance- based financing, to mention a few. Financial Management, Disbursements and Procurement Financial Management 15. The Bank’s financial management team conducted a financial management assessment of the MOH and CHAL, which will be the implementing entities of the project. The objective of the assessment was to determine whether the financial management arrangements: (a) are capable of correctly and completely recording all transactions and balances relating to the project; (b) will facilitate the preparation of regular, accurate, reliable and timely financial statements; (c) will safeguard the project’s entity assets; and (d) will be subjected to auditing arrangements acceptable to the Bank. The assessment complied with the Financial Management Manual for World Bank-Financed Investment Operations that became effective on March 1, 2010 and Africa Region Financial Management (AFTME) Financial Management Assessment and Risk Rating Principles. 16. The conclusion of the assessment is that the financial management arrangements meet the Bank’s minimum requirements under OP/BP10.02. The overall residual risk rating for MOH is Moderate. Country issues 17. According to draft Public Expenditure and Financial Accountability (PEFA) report of 2012, major steps have been taken since 2009 to improve public financial management (PFM). These steps include: (i) introduction of the new Integrated Financial Management Information System (IFMIS) in 2009 to serve as the basis for more effective monitoring and control over government revenue and expenditure. The system has improved transparency and discipline, but its functionality is constrained by capacity gaps due to loss of trained personnel to other institutions and the fact that it was introduced without any piloting in parallel with the maintenance of the former system, and has encountered numerous difficulties in the performance of both the hard- and software elements; (ii) enactment of the 2011 Public Financial Management and Accountability Act (PFMA) to clarify responsibilities and to provide the foundation for better financial control and reporting, and also for better and more pro-active monitoring and control over public enterprises. Practical steps are still awaited to give effect to the requirements of PFMA for the timely production of financial statements (including financial statements built by each Ministry) and for much-improved monitoring and supervision of State-owned enterprises. 49 18. For the project, the implication at this time is that full utilization of the GOL PFM system is not yet possible. Elements that will be relied upon are the following: Staffing and independent audit by the Office of the Auditor General. Risk assessment and mitigation 19. Table 5 below summarizes the results of the risk assessment and the mitigation measures. Table 5. Financial Management Risk Assessment and Mitigation Description of Risk Risk Mitigation Measures Condition of Residual incorporated in Project Effectiveness Risk/ (Risk) Implementation (Yes/No) rating INHERENT RISKS Country Level There are still notable challenges in the The Government has acknowledged No Substantial PFM reforms, namely, the rollout of the these challenges and action plans have IFMIS and implementation of the been identified with the support of the enacted PFMA. donors to work on these challenges. Entity Level The MOH has limited understanding and The MOH has already created a PBF No Substantial knowledge of PBF system despite their technical working group (TWG) with strong commitment and support to whom the Bank has been working introduce PBF to improve health service closely on designing the project. delivery. Officers who will be working on the PBF have been attending various workshops to better understand the project. Project Level The project introduces a new instrument, A firm with the PBF implementing No Substantial PBF, which will require special skills experience will be contracted to and knowledge. Project implementation provide Performance Purchasing could be stalled if MOH and CHAL staff Technical Assistance. The firm will do not acquire the skills to manage a provide capacity building to the all the PBF scheme. The implementation participating implementing entities. arrangement with multiple level of verification might prove to be too complicated Overall Inherent Risk Residual Risk: Substantial CONTROL RISK Budgeting The budgeting process may not be Budgets will be based on approved No Moderate comprehensive and provide an adequate business plans which will be prepared basis for performance monitoring for by all the implementing entities. There component 1A. (the project concept is will be ownership to the process, as new in Lesotho). the business plans will be prepared on local context information on 50 Description of Risk Risk Mitigation Measures Condition of Residual incorporated in Project Effectiveness Risk/ (Risk) Implementation (Yes/No) rating catchment population and disease burden. Accounting and financial reporting The identified FM project staff may not The staff will undertake training for No Moderate be familiar with the accounting system the proposed system and the Project (TOMPRO) to be used for this project, Administration Unit for the HIV and as it will not be using the familiar IFMIS AIDS project is using the same system. system, so there will be cross support within the same Ministry. Internal control Risk of inadequate approval and The Financial Management Officer No Moderate authorization controls, inaccurate (FMO) will ensure that procedures as recording of transactions and inadequate documented in PIM are upheld at all reconciliation procedures. times. There will be additional check and balances provided by the PPTA on adherence to procedures. Funds flow There is risk that the government The PPTA independent verification No Substantial participating entities might delay in mechanisms will monitor delays in receiving the funds due to the chain in funds flow and report to the steering funds flow. committee for immediate action. This will be included as part of TOR of PPTA. Auditing Audit reports not submitted to the Bank The MOH will request the Office of No Low within six months of the close of the the Auditor General to include the fiscal year due to delays in the project in the external audit calendar commencement of the external audit as soon as the project is approved. Overall Control Risk Moderate Overall Risk Moderate Strengths and Weaknesses of the Financial Management System 20. Strengths: The FM aspects of the project will be implemented under the guidance of the qualified and experienced FMO who is fully conversant with the Government systems. 21. Weaknesses: The project concept is new to Lesotho and the disbursement arrangements are cumbersome for component 1(A). This might delay the disbursement rate of the project and hence adversely affect the achievement of the PDO. 51 Institutional and Implementation Arrangements 22. The MOH will be the main implementing agency for the project and has overall responsibility of implementation of all the project components. The PBF Unit has been established in the MOH and is staffed by the PBF Unit Director, Financial Management Officer (FMO), Accountant, Operations Officer and M&E Officer. The FM matters will be handled by the FMO with the support of the accountant. The FMO and Accountant have adequate experience in handling the technical FM arrangements for the project, but they will need further training on the Bank’s financial management and disbursement guidelines. The FMO and accountant will also need further training on the use of TOMPRO system. This will be provided by the supplier of the software once it is purchased and installed. The staff will also benefit from cross support from the HIV and AIDS Project accounting team which is currently using the TOMPRO system within the same Ministry. 23. The Finance Manager for CHAL will be responsible for the component implemented by CHAL and will be supported by the accountants at the facilities. CHAL has adequate capacity and FM systems and are annually audited by a private external auditor. FINANCIAL MANAGEMENT ARRANGEMENTS 24. Budgeting arrangements: For component 1(A), budgets will be prepared based on approved business plans prepared by the all the participating facilities with the support of the PPTA. For the other components, budgets will be prepared based on approved procurement plans. The FMO in the PBF unit and CHAL FM will be responsible for coordinating and monitoring the budget process for the project. 25. Accounting arrangements: The new IFMIS currently in use by the MOH is not settled enough to handle the accounting function. The project will use the TOMPRO accounting system to record accounting transactions. For all the implemented activities under MOH, District Hospitals, DHMTs, and health center the accounting will be centralized in the PBF unit. 26. The CHAL FM will oversee and coordinate the accounting function for the participating CHAL facilities. The accountants for CHAL mission hospitals will be responsible for recording the accounting transactions in Pastel accounting system and producing monthly reports as per agreed reporting requirements for further consolidation by the FM. 27. Some of the CHAL health centers have bookkeepers who will record the accounting transactions manually for further consolidation by the FM. For health centers without bookkeepers, this function will be entrusted to the Managers responsible for the health center. The FM will consolidate all the CHAL reports and forward them to MOH. The FMO together with the CHAL Finance Manager will develop a simplified recording template in consultation with the World Bank. The Managers will be trained and coached by the CHAL FM and FMO until they are conversant with the process. 52 28. CHAL FM and FMO will agree on the reporting deadlines for all participating entities in order to meet reporting and disbursement requirements needed to support the implementation of the project. Internal control and internal auditing arrangements 29. Staffing: The PBF unit has been established and is staffed with a FM Officer and Accountant. The FMO is the holder of the senior degree in finance with at least 10 years of experience in public financial management. The overall responsibility for project FM will rest with the FMO with support from PPTA, and the PBF Unit Accountant. 30. CHAL Finance Manager will be responsible for FM function for their activities. She will be assisted by the hospitals’ Accountants, Health Center Managers and Nurses in charge in discharging her responsibilities 31. Internal Control Systems: The project will use the existing MOH policies and procedures to manage the project funds. The existing procedures and policies will be supplemented on project specifics by the procedures in the Project Implementation Manual (PIM). CHAL will also use their existing accounting policies and procedures supplemented by the PIM on project specifics. 32. Internal Audit: The FMO will request the MOH Internal Audit Unit to include the project activities in the annual internal audit plans of the MOH. In addition to the internal audit function, there will be support provided through financial management supervision missions and review and follow up on issues related to interim unaudited financial reports and audit reports. This function will also be strengthened by independent monitoring function to be offered by PPTA on the reported implementing entities deliverables. 33. CHAL does not have internal audit department. The project will rely on the external audit on review of the internal control environment. The Finance Manager acts as the internal auditor for hospitals and will continue with this function for the PBF activities. Disbursements Funds flow and disbursement arrangements 34. Banking arrangements: The Government will open a Designated Account (DA) at the Central Bank for MOH to receive funds from IDA upon project effectiveness. 65 The MOH will be required to open an Operational Account denominated in Maloti at a commercial bank to pay the project expenditures. Transfers from the Designated Account for payment of transactions in local currency will be deposited in this account in accordance with the project objectives. Counterpart funding from the Government of Lesotho will be remitted to the Project Account denominated in Maloti. 35. Funds Flow: Component 1 A – Performance-based financing: PBF Unit will create sub- accounts (budgets) to spend for all participating entities (CHAL Secretariat for CHAL health 65 The Government is opening a USD Designated Account to receive funds under the Project Preparation Advance Agreement that was signed on January 29, 2013. The MOH intends to use the same account to receive the funds under the overall Project once the Financing and Grant Agreements are signed. 53 centers and CHAL hospitals), District Councils (for GOL health centers and DHMTs) and Hospitals based on approved business plans. The participating entities will prepare claims for performance-based financing which will be verified by the PPTA before being submitted to the PBF Unit for payment. Payment will be effected from the Operational Account to the separate bank accounts of the participating entities against the created budget votes for monitoring purposes. Rules, procedures and reporting of the further use of the performance-based financing by the participating entities are detailed in the PIM. 36. For the rest of the components funds will be paid to the service providers by the PBF Unit from the Operational Account after following due processes of validation and approvals. Payments to foreign consultants can be made from the DA to minimize foreign currency fluctuations. 54 Figure 3. Funds flow diagram GOL IDA HRITF MOH Designated Account (DA) in USD MOH Operational Account in Maloti Suppliers/Service Transfers to implementing providers for all entities for performance- components based payments 37. Disbursement arrangements: An initial advance will be made into the Designated Account upon the effectiveness of the Financing and Grant Agreements and at the request of GOL. The initial advance will be the estimated cash requirements to meet the project expenditure for the first 6 months of the project. Further disbursement of the IDA funds will be done based on Withdrawal Applications supported by expenditure forecast for six months. The project will document eligible expenditures by submitting Statement of Expenditures (SOEs) together with withdrawal applications. Eligible expenditures include the performance-based financing made to Health Facilities (Health Centers, Hospitals, DHMTs) in the form of PB Grants for the Health Service Package comprised of goods, small works, non-consulting services, consultants’ services, training and package-related operating costs. The option to transition to document eligible expenditures by submitting IFRs together with withdrawal applications will be considered during project implementation based on the track record. 38. The option of disbursing the funds through direct payments from IDA for payments above the threshold indicated in the Disbursement Letter will be available. Withdrawal applications for such payments will be accompanied by relevant supporting documents such as copies of the contract, contractors’ invoices, and appropriate certifications. Options for use of special commitments and reimbursements will also be available. The Bank will issue the Disbursement 55 Letter that will specify additional instructions for withdrawal of the proceeds of the Credit and the Grant. 39. The categories of expenditure, related amounts and percentages to be financed under the project are reflected in the table below for both the IDA Credit (in SDR) and the HRITF Grant (in USD). These are also specified in the respective legal agreements and agreed during negotiations. Category Amount and Percentage Amount and Percentage of the Credit Allocated of the Grant Allocated (expressed in SDR) (expressed in USD) (1) Goods, small works, non- 4,825,000 2,475,000 consulting services and POC required for each Health Service Package provided under a Health Service Project and to be financed (75%) (25%) out of a PB Grant under Part A.1 of the Project and paid at the Unit Price for said Health Service Package (2) Consultants services (other 1,372,000 837,500 than under Part A.1) (75%) (25%) (3) Training (other than under Part 1,026,000 0 A.1) (100%) (4) Operating Costs (other than 162,000 687,500 under Part A.1) (31.25%) (68.75%) (5) Refund of Preparation 415,000 0 Advance (100%) Amount payable pursuant to Section 2.07 of the General Conditions. TOTAL AMOUNT 7,800,000 4,000,000 56 Financial reporting arrangements 40. MOH will produce on regular basis required financial reports to monitor and effectively manage the project. Interim unaudited financial reports (IFRs) will be produced on a quarterly basis and submitted to the Bank within 45 days after the end of calendar quarter. The contents of these reports should consist of financial reports, including sources and uses of funds reports by disbursement categories, project components and activities, and Designated Account activity statement. 41. MOH will also produce annual project financial statements, which will comprise of: a. A Statement of Sources and Uses of Funds / Cash Receipts and Payments which recognizes all cash receipts, cash payments and cash balances controlled by the entity for this project; and separately identifies payments by third parties on behalf of the agency. b. The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should be presented in a systematic manner with items on Statement of Cash Receipts and Payments being cross referenced to any related information in the notes. Examples of this information include a summary of fixed assets by category of assets c. A Management Assertion that IDA funds have been expended in accordance with the intended purposes as specified in the relevant World Bank legal agreement Auditing arrangements 42. The project financial statements will be audited by the Office of the Auditor General in accordance with International Standards on Auditing, and the audit report together with the management letter and management responses will be submitted to the Bank within six months after the financial year-end. Additional auditing procedures required to cover the PBF activities are detailed in the terms of reference for the external auditor. 43. The external auditor will be required to express a single opinion on the project financial statements. In addition, a detailed management letter containing the auditor’s assessment of the internal controls, accounting system and compliance with financial covenants in the financing agreement, suggestions for improvement, and management’s response to the auditor’s management letter will be prepared and submitted to management for follow-up actions Audit Report Due Date Project- specific financial statements and Within six months after the end of the financial management letter year i.e. 30 September Project Governance and Accountability: Verification of the key deliverables will be conducted semi-annually by the PPTA and there will be monthly routine supervisions by the PPTA. In addition, local NGOs or community-based entities will be sub-contracted by the PPTA to conduct spot checks by tracing patients in the communities and verifying the services rendered for which performance-based financing have been made. The Bank will also review adequacy of project financial management during the implementation review mission and GOL will have to ensure that adequate financial management is maintained through the implementation of the project. The project will be audited annually by the Auditor General. 57 Financial Management Action Plan 44. The following actions need to be taken in order to enhance the financial management arrangements for the project: Action Date due by Responsible 1 Appoint the Financial Management Officer Negotiations – MOH and Accountant completed 2 Agree on reporting template for IFRs Negotiations -- MOH/Bank completed 3 Prepare external auditor terms of reference Negotiations -- MOH/Bank completed 4 Purchase additional licenses for accounting One (1) month after MOH software (TOMPRO) and arrange for training Effectiveness 5 Provide FM and Disbursement training Project launch Bank Conclusion of the assessment and the implementation support plan 45. The conclusion of the assessment is that, the financial management arrangements are acceptable to the Bank. The overall residual risk rating for MOH is Moderate and since the Recipient is unfamiliar with the project, two on-field supervisions per year are recommended. PROCUREMENT 46. The key issues concerning procurement for project implementation identified are: (a) the need for MOH to fully staff the Procurement Unit; (b) limited capacity for new staff at MOH and existing staff at Leribe, Quthing and CHAL Secretariat to assure adherence to World Bank Procurement and Consultant Selection Guidelines; (c) the potential risk of erroneously using Government of Lesotho or CHAL procurement procedures for Bank financed activities, (d) potential delays for procurements done at district level. 47. Proposed corrective measures to mitigate the overall risks are: (a) MOH to fully staff the Procurement Unit; (b) training of key MOH staff on World Bank Procurement and Consultant Selection Methods and Procedures and strengthening of procurement systems at MOH; (c) training for key staff on public procurement and strengthening of procurement systems at participating District Councils, DHMTs, District Hospitals and CHAL Secretariat; (d) selected contracts to be subject to prior review; (e) MOH to prepare a Procurement Manual, as part of the PIM, to clearly indicate the roles and responsibilities of different staff (MOH, District Council, DHMT, District Hospital, and CHAL Secretariat) and the procurement procedures to be followed under the proposed project. An acceptable Procurement Plan covering the first 18 months of the project has been prepared. 48. The Risk Assessment is rated as HIGH. 49. Risk mitigation action plan. The following actions are suggested to mitigate the procurement risk and facilitate the implementation of the project. 58 Procurement Management Action Plan to Mitigate Procurement Risk Risk Mitigation/Action Responsibility Due Date MOH Procurement MOH to fully staff the Procurement Unit (PU) Unit not fully staffed (PU is supposed to consist of 1 Procurement Six (6) months leading to inability to Manager, 2 Senior Procurement Officers, and 2 MOH after Effective manage procurement Procurement officers – only 2 Senior Date Procurement Officers are in place). Limited capacity for ESAMI training of key MOH Procurement Unit new staff at MOH and staff on World Bank Procurement and existing staff at Leribe, Consultant Selection Methods and Procedures December 2013 Quthing, District and and strengthening of procurement systems at Mission Hospitals, and MOH. 66 Bank CHAL Secretariat to /MOH/Districts/ assure adherence to Hands-on training of key MOH Procurement CHAL World Bank Unit staff, District Councils, DHMTs, District and Mission Hospitals and CHAL Secretariat December 2013 Procurement and Consultant Selection on public procurement and strengthening of Guidelines procurement systems. 67 Procedures for project procurement not properly established leading to likelihood of delays and also of Produce and adopt a Procurement Manual, as erroneously using part of the Project Implementation Manual, Effectiveness acceptable to the World Bank MOH/Bank Government of condition Lesotho or CHAL Selected contracts to be subject to prior review procurement procedures for World Bank-financed activities 50. All procurement to be financed under the proposed project will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits� dated January 2011, and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers� dated January 2011, and the provisions stipulated in the Legal Agreement. For ICB and NCB, all procurement of goods, works and non-consultant services will be done using the Bank’s Standard Bidding Documents (SBD). For procurements using proceeds of the performance-based financing that fall within the Shopping threshold, all procurement of goods, works and non-consultant services will be done in accordance with the provisions of the Procurement Manual. All consultant selection undertaken for firms will be done using the Bank’s Standard Requests for Proposals. The project will carry out implementation in accordance with the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD and IDA and Grants� dated October 15, 2006 and revised January 2011 (the Anti- Corruption Guidelines). 66 ESAMI training on Procurement Management Programmes: (i) Works Procurement and Selection of Consultants; (ii) Advanced Works Procurement and Selection of Consultants; (iii) Goods and Equipment Procurement; and (iv) Advanced Goods and Equipment Procurement. 67 This will ensure the focus is on capacity building and not on executing activities. 59 51. A Country Procurement Assessment Report (CPAR) for Lesotho was conducted in 2008. Public Procurement in Lesotho is regulated by the 2008 Public Procurement Regulations (PPR). The CPAR noted the considerable progress made in adopting a modern legislation to regulate public procurement. The CPAR also noted areas requiring improvement including (a) allowing for the use of different procurement procedures for projects financed by development partners; (b) harmonizing the conflict between the 2008 PPR, the 1967 Stores Regulations and the 2007 Local Government Act; (c) reviewing the provision for domestic preference so that it related to the content of the goods being provided and not to the nationality of the provider; and, (d) developing a procurement manual and accompanying bidding documents. 52. The 2008 CPAR further highlighted limited capacity of the regulator, the Procurement Policy Advisory Division (PPAD) under the MOF, of the Procurement Units at central level and of District Procurement Units at district level. Lack of specific training and experience in public procurement and weak contract management capacity were noted. The private sector reported to perceive public procurement as having limited competition, inadequate information and lengthy payment arrangements and viewed public procurement practices as detrimental to its interest and prone to corruption. Robust procurement oversight systems are still being developed with the 2008 PPR providing for a dispute resolution process managed by an Appeals Panel appointed by the PPAD which may limit its independence. 53. The Government of the Kingdom of Lesotho has started implementing some of the CPAR recommendations: the redrafting of the 2008 PPR; the finalization of the Procurement Manual and the standard bidding documents; a review of the current Center for International Policy Studies (CIPS) program to consider the introduction of a public procurement module; the recent introduction of the Procurement Tribunal under the Public Financial Management and Accountability(PFMA) bill to handle procurement disputes; the implementation of the Integrated Financial Management System (IFMIS). Other matters still remain to be addressed. 54. National Competitive Bidding shall follow the Government of the Lesotho procurement procedures provided that the following provisions apply (a) Use of the Banks Standard Bidding Documents; (b) Registration/classification of bidders by PPAD, Ministry of Public Works and Transport or any other body shall not be used as a condition of bidding; (c) Preferences will not be granted based on citizen degree of ownership and local content; (d) Bracketing to provide for the rejection of bids which are in excess of 15% of the cost estimate will not be used; (e) Award of contract must be made to the lowest evaluated tender; and (f) Award of contracts shall be publicly disclosed in media of wide circulation. Procurement of Works 55. The project will not finance works directly. The project does not envisage procurement for works under ICB procedures. However, both hospitals and Health Centers may use the performance-based financing for minor works, i.e. painting, plastering, furnishing, repairs, and equipment at existing health facilities. Minor works to be procured under this project are estimated in aggregate at not more than US$ 12.5 million. 68 The procurement of such small 68 Aggregate amount consists of the full estimated performance-based financing for quantity, quality and remoteness to be provided to health centers, hospitals and DHMTs throughout the four-year project period. The proportion of 60 works that falls within the Shopping threshold will be done using procedures described in the procurement manual. The procurement of works will be done using the World Bank’s SBDs for all procurement under ICB and NCB as appropriate. Direct Contracting may be used when competition is not advantageous with the World Bank’s prior review and approval. Pre- qualification of contractors is not envisaged under this project as only minor works are expected to be carried out. Procurement of Goods 56. Goods to be procured under this project are estimated in aggregate at not more than US$ 12.5 million. 69 The procurement of goods will be done using the World Bank’s SBDs for all procurement under ICB and NCB as appropriate. Both district/local hospitals and health centers may use the performance-based financing for procurement of goods and equipment. The procurement of such goods and equipment that falls within the Shopping threshold will be done using procedures described in the procurement manual. UN Agencies and direct contracting may also be considered with the World Bank’s prior review and approval. Procurement of Services (other than consultants’ services) 57. Services (other than consultants’ services) to be procured under the project estimated in aggregate at not more than US$ 12.5 million70 will include printing, services for contracts for installation and technical support of telecommunication and computerized systems and public awareness campaigns among others. The project will use the World Bank’s SBDs for both ICB and NCB as appropriate. Selection of Consultants 58. Consultants’ services required for firms and individuals by the overall project are estimated in aggregate at not more than US$ 3.34 million to cover consultancies for: (a) Performance Purchasing Technical Assistance (PPTA) support to the project; (b) technical reviews and evaluations; (c) subsector studies; (d) training module development; (e) surveys; and (g) project management services among others. Additionally, consultants to be procured with PBF financing are estimated in aggregate at not more than US$ 12.5 million.71 59. Training. This category would cover all costs related to the carrying out of study tours, training courses and workshops, i.e., hiring of venues and related expenses, stationery, and resources required to deliver the workshops as well as costs associated with financing the participation of community organization in short-courses, seminars and conferences including associated per diem and travel costs. Training projects would be part of the Annual Work Plan and Budget and will be included in the procurement plan. Prior review of training plans, this aggregate amount to be used as performance-based financing to health center personnel and VHWs, goods, minor works, consultancies, and non-consultancies services will be determined by the quarterly business plans. 69 Aggregate amount consists of the full estimated performance-based financing for quantity, quality and remoteness to be provided to health centers, hospitals and DHMTs throughout the four-year project period. The proportion of this aggregate amount to be used as performance-based financing to health center personnel and VHWs, goods, minor works, consultancies, and non-consultancies services will be determined by the quarterly business plans. 70 Aggregate amount consists of the full estimated performance-based financing for quantity, quality and remoteness to be provided to health centers, hospitals and DHMTs throughout the four-year project period. 71 Aggregate amount consists of the full estimated performance-based financing for quantity, quality and remoteness to be provided to health centers, hospitals and DHMTs throughout the four-year project period. 61 including proposed budget, agenda, participants, location of training, and other relevant details, will be required only on annual basis. 60. Operating Costs. Incremental operating costs include expenditures for maintaining equipment and vehicles, fuel, office supplies, utilities, consumables, allowable travel per diems and, allowable travel and accommodation expenses, workshop venues and materials. These will be procured using the Borrower's administrative procedures, acceptable to the World Bank. 61. Procurement Manual. The procurement procedures and SBDs to be used for World Bank- funded procurement will be presented in the Procurement Manual in line with the guidelines of the World Bank. The Procurement Manual would include the component descriptions, institutional arrangements, regulatory framework for procurement, approval systems, activities to be financed, procurement and selection methods, thresholds, prior review and post reviews arrangements and provisions, filing and data management and the procurement plan for the first 18 months for all project components. 62. Assessment of the agency’s capacity to implement procurement. An assessment has been made of the following institutions: MOH Procurement Unit; Leribe District Health Management Team (DHMT) – which also serves the Motebang Hospital in Leribe; Quthing District Council and Quthing DHMT – which also serves the Quthing District Hospital; Paray Mission Hospital; St James Mission Hospital and; Churches Health Association of Lesotho (CHAL) Secretariat. As of January 2013, the MOH Procurement Unit is staffed with 3 Senior Procurement Officers, 1 Procurement Officer, and 3 Assistant Procurement Officers. The Procurement Unit relied solely on expertise being provided by the Procurement Manager (a position financed by the Bank under the HIVAIDS TA Project and whose support ended in November 2012) and a Procurement Officer (financed by Global Fund). The vacant positions to be filled are: Procurement Manager and 2 Procurement officers. 63. At Leribe DHMT, procurement is managed by a Procurement Officer (PO) assisted by a Stores Keeper. The PO has limited experience in procurement and is more familiar with using the shopping method for small value procurements of less than US$15,000. At Quthing District Council the procurement section is staffed by a PO and an Assistant PO who also provide support to the Health Centre Committees. The PO and Assistant PO have limited experience in procurement and are more familiar with using the shopping method for small value procurements of less than US$15,000. At Quthing DHMT, there are two POs for the District Hospital and one PO for the DHMT. The staff has limited experience in procurement and is more familiar with using the shopping method for low value procurements of less than US$15,000. As it is reported that there are 2 to 5 nurses per health center, an assessment of the individual health centers has not been done as it has been assumed that all procurements will be done at DHMT or District Council or District or Mission Hospital level. A cursory assessment has been done at Paray Mission Hospital and St James Mission Hospital where similar processes are also in place with similar staff capacities and constraints. 64. As per the Public Procurement Regulations of Lesotho (2007), procurement has been decentralized to procuring entities, and all procurement decisions will therefore be made at MOH/District level. Delays in obtaining procurement clearances at MOH level are therefore not 62 envisaged. However, procurement clearances at District level experience long delays. At CHAL Secretariat, procurement is regulated by the Procurement Policy and Procedure Manual of June 2012. Procurements for participating CHAL Health Centers will be done by CHAL Secretariat. The procurement function falls under the Deputy Executive Secretary who is assisted by a Records Clerk who manages the procurement process. A Tender Evaluation Committee comprising the Deputy Executive Secretary and 3 senior staff recommends procurement documentation and contract awards to the Tender Committee which comprises the Executive Secretary and 3 other senior staff. CHAL has limited experience in Bank procurement and consultant selection procedures. CHAL has some experience in procurement of high value medical equipment. Most of CHAL’s procurements use the shopping method for low value procurements of less than US$15,000. 65. Procurement Supervision. Given the country context and the project risk indicated above, an annual Post Procurement Review will be conducted in addition to the semi-annual supervision missions by the World Bank. The annual Post Procurement Review will be carried out either by the World Bank or World Bank-appointed consultants. The frequency of procurement supervision missions will be once every six months and special procurement supervision for post procurement reviews will be carried out at least once every twelve months. 66. To enhance the transparency of the procurement process, the Recipient shall publish the award of Contracts procured under ICB procedures or selected under QCBS method, generally within two weeks of receiving the World Bank no-objection to the recommendation of award of Contract, in accordance with the Procurement and Consultant’s Guidelines. Additional procedures, as elaborated in the procurement manual, will govern the disclosure under other procurement and selection methods. 67. Procurement Plan. The Borrower has developed a draft Procurement Plan for project implementation. The Procurement Plan will be updated annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Goods and Works and Non-consulting Services 68. Prior Review Threshold. Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the Guidelines for Procurement. Prior Review Threshold: Good, works and non-consulting services Procurement Method Prior Review Threshold Comments (US$) Works 1. ICB >$3,000,000 All 2. NCB >$100,000 - <$3,000,000 As per procurement plan 3.. Shopping (Small contracts) <$100,000 As per procurement plan 4. Direct Contracting N/A All Goods and Services (excluding Consultants Services) 1. ICB >$500,000 All 2. NCB >$50,000 - <$500,000 As per procurement plan 3. Shopping <$50,000 As per procurement plan 4. Direct Contracting N/A All 63 Procurement Packages Subject to Bank Prior and Post Review with Selection Methods and Time 1 2 3 4 5 6 7 Ref Contract Estimated Procure Review Expected Comments No. (Description) Cost ment by Bank Bid- (US$) Method (Prior/ Opening Post) Date Goods, small Works and Non US$12,500, ICB/NC Prior See note 1 Consultant Services from 000 B/Shopp review below proceeds of the Performance- ing for all based financing ICB/NCB 1 Aggregate amount of US$12,500,000 consists of the full estimated performance-based financing for quantity, quality and remoteness to be provided to health centers, hospitals and DHMTs throughout the four-year project period. The proportion of this aggregate amount to be used as financing for bonus payments to health center personnel and VHWs, goods, small works, consultancies, and non-consultant services will be determined by the quarterly business plans. Selection of Consultants 69. Prior Review Threshold. Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants. Prior Review Threshold: Consultants Selection Method Prior Review Comments Threshold 1. QCBS and QBS >, =$100,000 All 2. FBS, QBS, LCS and CQS <$100,000 As per procurement plan 3. Single Source (Firms) N/A All 4. Individual Consultants >, =$50,000 All 5. Individual Consultants <$50,000 As per procurement plan 6. Single Source (Individual Consultants) N/A All QCBS = Quality- and Cost-Based Selection (Section II of the Consultants’ Guidelines) LCS = Least Cost Selection (Para 3.6, of the Guidelines) CQS = Selection based on Consultants’ Qualifications (Para 3.7 of the Guidelines) FBS= Fixed Budget Selection (Para 3.5 of the Guidelines) QBS = Quality Based Selection (Para 3.2 of the Guidelines) 70. Short list comprising entirely of national consultants. Short list of consultants for services, estimated to cost less than US$ 100,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. All Terms of Reference irrespective of the value of the consultancy assignment are subject to prior review. 64 Consultancy Assignments with Selection Methods and Time Schedule 1 2 3 4 5 6 7 Ref. Description of Assignment Estimated Selection Review Expected No. Cost Method by Bank Proposals Comments (US$) Prior/ Submission Post Date 1 Consultant firm to support PBF 2.5 million QCBS Prior January 25, Partly implementation and supervision 2013 financed from PPA 1.2A2 CBOs/ NGOs to conduct ex- 200,000 CQS Prior July 2013 post verification studies 2 Individual Consultant to conduct 51,000 IC Prior June 2013 IC to be procurement training and assist engaged for with procurement systems 2 weeks improvements every quarter for first 18 months of project 3 International/regional short-term 150,000 IC Prior July 2013 consultant for Web-enabled PBF application development, maintenance and training 4 External Audit firm 50,000 LCS Prior October 2013 5 Short-term Local Consultant to 50,000 IC Prior April 2013 review, update and harmonize data collection tools for strengthening HMIS revision 6 Consulting firm to conduct 300,000 QCBS Prior March 2014 household survey for baseline in 4 districts 7 Short-term Local/Regional 21,000 IC Prior September Consultant to train health center 2013 nurses on MOH-adopted drug supply management manual 8 TOMPRO Consultant for 21,500 IC Prior July 2013 training and installation costs of upgraded software Total 3,343,500 Implementing Agency Capacity Building Activities with Time Schedule Ref Expected outcome / Estimated Estimated Start Date Comments No. Activity Description Cost (US$) Duration 1 PBF Study Tour for MOH and other GOL Senior Officials to April 2013 other countries with PBF-heath 81,000 activities 2 Kenya PBF training course for 20,000 July 2013 PBF Unit staff 65 Ref Expected outcome / Estimated Estimated Start Date Comments No. Activity Description Cost (US$) Duration 3 Preparatory PBF training and workshops such as community sensitization and training on PBF July 2013 200,000 tools, development of facility business plans, etc. 4 Nurse midwives training for Advanced University Diploma in Advanced Midwifery and January 2014 Neonatology for 15-20 nurse- 150,000 midwives (depends on existing budget and cost) 5 Overseas pre-service training of Nurse anesthetists for 12 nurses May 2013 156,000 from 9 districts 6 ESAMI Works Procurement and Selection of Consultants course July 2013 65,000 for 5 PU staff 7 ESAMI Advanced Works Procurement and Selection of September 2013 25,000 Consultants course for 2 PU staff 8 ESAMI Goods and Equipment Procurement course for 5 PU June 2013 60,000 Staff 9 ESAMI Advanced Goods and November 2013 Equipment course for 2 PU staff 25,000 10 ESAMI Overview of supply chain management and Quantification February 2014 of Health Commodities courses 150,000 for 20 pharmacists 11 ICT Based Financial Management and Disbursements Course for Project Accountants for World June 2013 12,000 Bank funded Projects for 2 FM staff of PBF Unit 12 Initial training of 1,811 Village Health Workers in Leribe and April 2013 450,000 Quthing 13 Short term M&E training in South Africa for 12 District Health September 2013 97,000 Information Officers 14 Master’s program for M&E of health programs for 2 M&E Unit February 2014 47,000 staff 15 Workshops to train health center nurses for 5 days on MOH drug September 2013 131,000 supply management manual 16 Best practice documentation and 50,000 October 2013 dissemination (including national and international seminars, conferences) for year 1 of implementation Total 1,719,000 66 Environmental and Social (including safeguards) 71. The project will not entail any new land acquisition leading to involuntary resettlement and/or restrictions of access to resources or livelihoods and there are no encroachers at the various sites; therefore, OP 4.12 for Involuntary Resettlement is not triggered. No social safeguards issues are applicable to the project. It is expected that the project will increase the quantity and quality of health services thereby improving the population’s access to such health services, which may in turn lead to additional health care waste production. Consequently, the proposed project has been classified as Category B in compliance with OP/B.P. 4.01 Environmental Assessment Policy of the World Bank given the risks associated with the handling and disposal of health care risk waste (HCRW) and health care general waste (HCGW). The project is not expected to generate any major adverse environmental impact. Possible environmental risks include the inappropriate handling and disposal of hazardous medical waste, including sharps, and especially the inadequate management of disposal sites in urban or peri- urban areas, where domestic and health care waste could be mixed, and where scavenging is common. 72. To address the potential negative impact consistent with the requirements of the triggered safeguard policy, i.e., preparation of an environmental assessment, the MOH adopted the National Health Care Waste Management Plan (HCWMP) which was prepared and approved in 2010, and consolidated and updated in August 2012 for the purposes of the this project. The consolidated HCWMP provides adequate recommendations regarding appropriate waste management and disposal procedures pertaining to both HCRW and HCGW, a detailed account of the current policy framework, baseline situation and capacity building needs, and a detailed implementation and monitoring plan going forward, in order to ensure its proper and effective execution. The renovating and refurbishing of health centers, including reinstating adequate provisions for waiting shelters for expecting mothers will be undertaken by the Millennium Challenge Account (MCA) prior to the implementation of the project. The project will not invest in infrastructure rehabilitation. 73. Although no major works will be directly financed by the project, health centers and hospitals may use the performance-based financing under sub-component 1A for small repairs of existing health structures. Such minor works shall exclude any new building and will be undertaken according to national and local laws and regulations. Monitoring & Evaluation 74. The results framework presented in Annex 1 will guide project supervision and management. The results framework will be tracked and a mid-term review will provide the opportunity to assess progress and make appropriate mid-course corrections. To ensure the Government’s ownership of the results framework, the Health Planning and Statistics Department (HPSD) of the MOH will be responsible for the monitoring of the project. The M&E of the project will comprise: (i) monitoring of the PBF implementation (or process evaluation); (ii) results monitoring of the project using the results framework in Annex 1; and iii) impact evaluation of the project. The M&E implementation arrangements described below pertains to (ii) and includes 67 sources of data and data collection mechanisms, frequency of the data collection, capacity on monitoring and evaluation, and investments in the M&E system. 72 75. Sources of data, frequency and data collection mechanisms: Data for the indicators in the results framework as well as the quantity and quality indicators to be incentivized come primarily from government sources and the impact evaluation study: (i) the MOH’s routine Health Management Information System (HMIS), (ii) annual health facility quality of care assessments, (iii) household surveys (impact evaluation study and Demographic and Health Survey [DHS]), and (iv) PBF Unit administrative records. HMIS data collection will be done monthly, consistent with current practice. In addition, monthly supervisory visits are essential, especially in the pilot phase and initial scale up phase. Health facility quality of care assessments will be conducted annually while population-based surveys will be collected at baseline (impact evaluation or 2014 DHS), and endline (impact evaluation). 73 Institute for Health Measurement (IHM) with financial support from PEPFAR has hired a consultant to demarcate the catchment areas to determine health services coverage at the community council levels to provide population denominators for annual measurement of outcome indicators in the results framework. 76. Health Management Information System: The HMIS, which is managed by the MOH’s HPSD, provides routine data for the monitoring of the indicators on health service provision and utilization. The districts hold two quarterly meetings (first and third) but the second and fourth quarterly reviews are coordinated by the HPSD. At the national level, a meeting is held with all DHMTs at the end of the second quarter of the financial year during which the district reports are discussed. Awards such as computer are given to the best improved district. A review conducted by the MOH and the Health Metrics Network (HMN) in 2006 indicated that the HMIS covers all MOH and CHAL health facilities, there is a complete list of health facilities (public and private) that are annually updated, and that clearly defined set of essential indicators are tracked quarterly. 74 The weaknesses noted by the review include shortage of appropriate District Health Information Officers (DHIO), paper-based reporting system that adversely affects the timeliness of the submission of reports, and the lack of feedback to the health facilities. Following the 2006 review, a HMIS Strategic Plan (2008-2012) was developed which aimed at: (i) Functional District Health Management Information System by 2012 in all 10 districts; (ii) Integrated and harmonized data collection, management analysis, sharing and use at all levels by 2012; (iii) Health data quality meeting the HMN/WHO/GOL Standards by 2012; and evidence-based information is used to achieve desired results at all levels by 2012. Nevertheless, a 2011 Health Facility Survey revealed that the HMIS needs further strengthening. 75, 76 For instance, health 72 The arrangements for process evaluation and impact evaluation are described in detail in the PIM. 73 An impact evaluation of the project, which will entail baseline and endline household surveys, will be carried out with a Bank-executed HRITF. The Impact Evaluation study will carry out a baseline survey in the 4 Phase II districts (Mafeteng, Mohale’s Hoek, Mokhotlong, and Thaba Tseka) just before scale-up in those districts. It will also support endline survey in all project districts. The baseline household survey data to be reported in the results framework will be from either the impact evaluation study or the 2014 DHS depending on which one is administered earlier. 74 GOL Ministry of Health and Social Welfare, and Health Metric Network. Lesotho Health Information System: Review and Assessment. January 2007. 75 ICON-INSTITUT Public Sector GmbH, NUL-CONSULS of the University of Lesotho, and Millennium Challenge Account Lesotho (MCA-Lesotho). Health Facility Survey – Round 1. November 21, 2011. 68 facilities continue to submit paper summary reports to the DHMTs and only 24 percent of health facilities receive feedback from the district or national levels. 77. Based on discussions with Central MOH M&E staff, selected DHIOs, and Development Partners, the challenges in M&E of health programs include: (i) critical shortage of key personnel--some health centers lack data entry clerks, DHMT’s lack ICT personnel, and the central level lack key adequately trained staff for regular supervision of the DHIO; (ii) inadequate data quality assessment and verification, and supervision of the DHIOs from the central MOH remains patchy; (iii) inadequate skilled trainers to conduct trainings for the districts councils, community councils, and health personnel; (iv) a MOH Monitoring and Evaluation Plan/framework is yet to be developed in line with the recently developed National Health Policy, 77 (v) some registers such as Outpatient Department, postnatal, referral, and family planning registers are yet to be developed; (vi) HMIS data for some programs such as tuberculosis, HIV/AIDS, immunization, and nutrition are kept by the respective programs instead of by the HPSD M&E Unit; and (vii) low utilization of HMIS data to inform decision-making at health facility level. 78. Health facility quality of care assessments: The MOH Quality Assurance Unit has developed health facility quality of care checklist for health centers and hospitals which cover domains of staff attendance, recordkeeping and timeliness of reports, adherence to protocols and guidelines for child survival, environmental health, general consultations, reproductive health, essential drugs management, tracer drugs, maternal health, STI, HIV, tuberculosis, and community based services. Quality of care of health facilities will be assessed as part of project supervision using the checklist on a quarterly basis for performance-based financing. The value for this indicator in the results framework will be verified by independent health facility quality of care assessments conducted by the MOH Quality Assurance Unit. 79. Health facility surveys are periodically conducted to provide data for the monitoring of indicators that are not available from the routine HMIS. A 2011 national health facility survey jointly funded by the Government and the Millennium Challenge Account Lesotho (MCA- Lesotho) covered 138 health centers, and 14 hospital Outpatient Departments, collected data on physical infrastructure, human resources, equipment and supplies, HMIS, service provision, and quality of care. 78 However, the 2011 HFS did not collect information on the provision of EmONC; this would have updated information on the 2005 EmONC assessment conducted by MOH and UNICEF. 79 The MOH plans to conduct EmONC assessment in all 10 districts (both intervention and control districts) in 2013 to provide baseline data on EmONC. 80. Demographic and Health Survey: The Bureau of Statistics is the main Government institution that provides support to line ministries in the execution of national surveys. It 76 Ministry of Health and Social Welfare. HMIS Strategic Plan (2008 – 2012). Prepared by Health Planning and Statistics Department, September 2007. 77 The National Health Policy is yet to be translated into Strategic and Operational Plans. 78 In Lesotho, there are 216 health facilities including 1 referral hospital, 2 special hospitals, 19 hospitals, 190 health centers and 4 filter clinics. 79 GOL Ministry of Health and Social Welfare and UNICEF. Lesotho Emergency Obstetric Care Assessment. June 2005. 69 supported the MOH in the execution of the 2004 and 2009 DHS. 80 The DHS is the main source of population-based data for the monitoring of health outcomes in all 10 districts. The next round of DHS is scheduled to be conducted in 2014. This project will support similar population-based surveys in selected districts in 2014 and 2017 to provide baseline and endline data respectively. 81. Capacity and investments in Monitoring and Evaluation: It is imperative to have an adequate HMIS to effectively monitor the provision of incentivized services at the health centers and hospitals. Development Partners support for strengthening the HMIS is presented in Table 6. Through the support of MCA, the MOH has engaged a Health Systems Strengthening firm to develop an integrated software solution. There is a need to ensure that data collection tools at facility level are user friendly, that there is no duplication, and that the registers, tally sheets or other summary forms are effectively used to collect quality data for capturing in the newly developed integrated HMIS software solution. As part of the preparation of the PBF project, the MOH engaged a consultant to assist improving the quality of health data through a review and update of data collection tools in order to strengthen and harmonize data collection at health centers and hospitals. The details are described in sub-component 2B in Annex 2. This project will also support central MOH M&E and DHIOs to undertake formal courses on M&E as described in Annex 2. Table 6. Development Partners’ support for M&E capacity Agency Support to MOH EGPAF • Printing of several HMIS tools (with funding from PEPFAR) • Provision of 3G Internet connectivity for the District Health Information Officers in all the 10 districts • M&E Officer position at central MOH • Onsite trainings for health care workers on data recording and reporting Institute for Health Measurement (IHM) • M&E capacity building support including (with funding from PEPFAR) M&E assessment and development of M&E framework for the health sector • Demarcation of the catchment areas of the community councils • On-the-job training (for DHMT, Health facilities personnel, and district councils) Health Systems Strengthening TA (HS-A-012- • Integrated HMIS software solution 09) (with funding from Millennium Challenge • Electronic Medical Record (EMR) system Account) in Lesotho Outpatient Departments • ICT Infrastructure for software solutions • Capacity building • EMR and HMIS software trainings 80 Ministry of Health and Social Welfare (MOHSW) [Lesotho] and ICF Macro. 2010. Lesotho Demographic and Health Survey 2009. Maseru, Lesotho: MOHSW and ICF Macro. 70 Annex 4: Operational Risk Assessment Framework (ORAF) LESOTHO: Maternal and Newborn Health Performance Based Financing Project Stage: Board Project Stakeholder Risks Rating Moderate Description: Risk Management: There is strong ownership of the project as demonstrated by the In order to mitigate the identified challenges, the Bank team has worked closely with the MOH appointment and financing of the PBF Unit staff by the MOH. core team to provide TA and finalize the design of the PBF scheme for the project. PBF The design details, including the basic package of services to be training was conducted at central, district and community levels. Moreover, senior level incentivized, have been finalized. However, there are government officials went on study tours to Rwanda and Zimbabwe to: (i) learn the lessons challenges with respect to putting the systems in place and first hand from countries that are implementing the PBF schemes; (ii) interact with policy building requisite capacities for PBF implementation. makers and program managers; and (iii) take the decision on the PBF scheme design features Moreover, while introduction of a PBF scheme requires a major and implementation arrangements that are best suited for the Lesotho context. change in the philosophy and mindset of the Government leaders, it is not easy to fully understand, embrace the concept, lead the process and motivate the District Health Management Status: Resp: Bank Stage: Preparation Due Date : Teams (DHMTs) as well as health service delivery staff to Completed achieve the desired outcome in the project. Implementing Agency Risks (including fiduciary) Capacity Rating: Substantial Description : Risk Management: The MOH and CHAL have limited understanding and A PBF technical working group (TWG), consisting of MOH, MOF and CHAL, has played a knowledge of the PBF mechanism despite their strong key role in finalizing the PBF design features and facilitating the timely receipt of inputs from commitment and support to introduce a PBF scheme to improve appropriate technical units. In addition, training and capacity building support has been health service delivery. Introducing this new concept into the provided during the project preparation to raise awareness and improve knowledge of key country may take more capacity building than currently decision makers and project implementers. The MOH has established a PBF Unit in the MOH anticipated and planned. Moreover, competing priorities as well Health Planning and Statistics Department (HPSD) and appointed the following staff from as limited human resource capacity within the MOH may existing MOH personnel: (i) PBF Unit Director, (ii) Financial Management Officer, (iii) hamper the decision making process on key program decisions Accountant, (iv) M&E Officer, and (v) Operations Officer. A contracted Performance during project preparation and implementation. Purchasing Technical Assistance (PPTA) firm will provide capacity building support to the PBF Unit staff to ultimately implement the PBF scheme on its own. Stage: Preparation Status: Resp: Client Due Date : and Implementation Ongoing Risk Management: The MOH capacity at the district level is particularly low. The risk will be mitigated through (i) preparation of the Project Implementation Manual, District Health Management Team (DHMT) has to play a including the PBF User Manual, (ii) providing a substantial amount of technical assistance significant role in administering, managing and supervising the especially at the district level during the preparation and pilot phases, and (iii) putting the PBF scheme; Therefore, their low capacity could slow down the requisite systems in place during the project preparation to improve implementation readiness. pace of project implementation. Status: Resp: Client Stage: Preparation Due Date : Ongoing 71 Many Health Centers (HCs) suffer from shortage of healthcare Risk Management: workers to provide needed services, including MNH services. The government is preparing a HRH retention scheme with the support of MCA-Lesotho. Irish This problem is more serious in the rural areas. Aid and Clinton Foundation have supported hiring and deployment of additional nurses. In addition, incentive mechanisms have been set up under the project considering HRH deployment challenges in remote areas (i.e. remoteness bonus). The project will provide performance-based financing to health care workers with the aim to improve HRH retention and productivity. Resp: Bank Stage: Implementation Due Date : Status: Ongoing Lack of timely delivery of essential drugs and commodities at Risk Management targeted district hospitals and health centers. One of the key The project will support training of health center nurses on the MOH adopted drug supply barriers to reliable supply of drugs and commodities has been management manual. Additionally, hospital and DHMT pharmacists, NDSO staff, and MOH identified as payment delays relating to the timely payment of Pharmacy Directorate staff will participate in the Eastern and Southern African Management NDSO invoices submitted for GOL health facilities. Institute (ESAMI) training courses on: (i) overview of supply chain management; and (ii) quantification of health commodities. Status: Resp: Bank Stage: Implementation Due Date : Ongoing A large number of HCs lack equipment, basic commodities and Risk Management furniture for MNH service provision affecting their capacity to MCA-Lesotho has been renovating HCs and is providing essential equipment. The project will provide these key services. Moreover, the staff’s capacity is provide EmONC training to doctors and midwives. The District Hospitals and Health Centers low with respect to provision of EmONC services. will be able to use PBF performance-based financing for facility improvement and the maintenance of equipment. Status: Resp: Client Stage: Implementation Due Date : Ongoing Governance Rating: Moderate Description : Risk Management : There is strong ownership of the project as demonstrated by the The PBF Unit will act as a secretariat to the NSRHSC. A contracted PPTA will provide appointment and financing of the PBF Unit staff by the MOH as capacity building support to the NSRHSC. The Bank team will review the Minutes of the well as counterpart funding from MOF. The GOL has decided NSRHSC meetings on PBF. Any changes to the PIM endorsed by the NSRHSC will be to use the existing National Sexual and Reproductive Health subject to Bank’s No Objection. Steering Committee (NSRHSC) to provide overall governance and oversight during the project implementation. However, Status: Resp: Client/Bank Stage: Implementation Due Date : NSRHSC members are not all conversant with the PBF Ongoing approach. Project Risks Design Rating: Substantial Description : Risk Management : The project introduces a new instrument, PBF, which will Based on the lessons learned from other African countries, the PBF scheme will be piloted in require specific skills and knowledge. The implementation two districts during the first year. In addition, the PPTA will build the capacity of arrangements involving the decentralized structure might prove implementing agencies (e.g. MOH and CHAL) at the decentralized levels with the aim that to be too complicated. they will be fully capable of implementing PBF at the end of the project. 72 Resp: Client Stage: Implementation Due Date : Status: The proposed project intends to improve MNH provision and Risk Management: quality by incentivizing the health facilities that are providing The MOH has agreed to include non-MNH indicators for performance-based financing to these services. One of the unintended results could be the mitigate the decline in provision of other services. The performance of MNH and non-MNH decline in service provision of other un-incentivized indicators. services will be monitored and PBF formula will be adjusted as needed. Resp: Client Stage: Implementation Due Date : Status: Social & Environmental Rating: Moderate Description : Risk Management : The proposed project aims to increase the MNH service The MOH is well versed in World Bank safeguard policies and has prepared and adopted a provision and quality of care as well as the productivity of the 2010 National Health Care Waste Management Plan, which was subsequently reviewed, staff. The increased level of healthcare service will inevitably consolidated and applied to this project. In addition, IFC is supporting the MOH with a PPP result in more healthcare waste. There is a risk that health for HCWM. facilities will not be equipped with adequate safeguard policy Although no civil works will be directly financed by the project, health centers and hospitals and knowledge to handle the waste. may use the performance-based financing under sub-component 1A for small repairs of existing health structures. Such minor works shall exclude any new building and will be undertaken according to national and local laws and regulations. Resp: Client Stage: Implementation Due Date : Status: Program & Donor Rating: Moderate Description : Risk Management : MCA-Lesotho is providing support for infrastructure and Enrollment of health facilities in PBF will be done on a district basis when renovation and equipment at the health center level. However, if there will be equipping is completed. delays with MCA-supported facility renovation and equipping, Resp: Client Stage: Preparation Due Date : Status: the project’s impact on health services would be sub-optimal. Delivery Monitoring & Sustainability Rating: Substantial Description : Risk Management : M&E capacity is low especially at the district level. Though The MOH has a basic health management information system (HMIS) that collects data on routine data is being collected, aggregation and timely reporting most key indicators required for the project on a routine basis. However, there is a need for of the data is not adequate. This could result in implementation further capacity building. The Bank is working with other DPs to strengthen the HMIS delays, as performance-based financing are made based on the capacity through this project. An HMIS consultant will be recruited to work closely with the reported data for agreed indicators. HPSD to strengthen the system. Moreover, the project will finance a web-based application which will facilitate timely reporting and monitoring. Status: Resp: Bank Stage: Implementation Due Date : Ongoing Implementation Risk Rating: High Comments: The overall project risk rating associated with the project is high given that the PBF is a new approach that will be introduced in a relatively low- capacity setting, especially at the local level, despite the Government’s strong commitment to the project. The project design includes the provision of extensive technical and capacity building support to the implementing agency and health facilities to address the low capacity constraints. Additionally, the PBF approach will be piloted in two districts during the first year of implementation and gradually scaled up to other districts in subsequent years. Together, these factors should mitigate the overall risk. 73 Annex 5: Implementation Support Plan LESOTHO: Maternal and Newborn Health Performance Based Financing Project 1. The proposed project design and preparation period will mitigate the capacity risks identified in the ORAF through gradual scale-up, technical assistance and training, including PBF training courses targeting senior decision makers from the MOF and MOH. Notably, the recipient-executed HRITF preparation grant supported a consultancy firm which worked closely with the MOH PBF Technical Working Group (April-October 2012) to: (i) build PBF competence and capacity at the various levels for both MOH and CHAL through workshops, training sessions, sensitization activities and study tours (Rwanda and Zimbabwe); (ii) develop a list of services to determine which services to be incentivized as well as quality checklists for health centers and hospitals; (iii) determine the use of payments; (iv) compile a PBF User Manual; (v) prepare a roadmap, including phasing of the pilot PBF project; and (vi) develop terms of references for various entities. 2. The Bank has responded to the GOL’s request for a Project Preparation Advance (PPA) to finance the activities which will build the prerequisite skills in the MOH for improved M&E as well as PBF foundational skills for health personnel, the core PBF Unit staff and senior decision makers in key Ministries. Technical and capacity building support from the Performance Purchasing Technical Assistance (PPTA) firm coupled with the piloting of the PBF scheme in two districts during the first year of project implementation should mitigate the overall implementation risk. 3. The project would need intensive supervision given implementation capacity weaknesses at the national and district levels. The Bank will provide thorough supervision using a budget of US$150,000 supervision under the first 12 months of implementation as well as approximately US$60,000 per year from the HRITF. 4. The overall supervision of PBF implementation will be the responsibility of the MOH PBF Unit. Supervision by the Bank will be leveraged by the continuous oversight carried out by the central MOH PBF unit, facilitated by the PPTA, and supported by the national Sexual Reproductive Health Steering Committee (NSRHSC). The PBF unit and PPTA staff will make supervision visits to each district four times a year and will prepare action-oriented supervision reports for review by the Bank. This system will allow the MOH to distinguish between the better and lesser-performing health centers and districts, and provide more assistance to the latter. The PPTA will support PBF refresher training and review sessions during the pilot phase and on an ongoing basis as needed to reinforce the PBF practices and procedures and improve performance among weaker health centers and districts. Sufficient funds have been included in the project costs for the PPTA activities. 5. The project’s institutional and implementation arrangements described in detail in Annex 3, entails various actors including the MOH, other Government line ministries, development partners (who are part of the NSRHSC), and the PPTA. Additionally, community participation will be promoted to strengthen project ownership and social accountability. The PPTA will engage local NGOs or Community Based Organizations (CBOs) for tracing patients, randomly selected from health records, and verifying the services received and determining their 74 satisfaction with these services. Bank supervision will ensure that these entities are carrying out their functions properly according to the terms of its contract through direct interaction with the entities, sample verification of their records, and interviews and feedback from the MOH. 6. While the central MOH has significant experience in implementing Bank-funded projects, there is only nascent capacity in PBF implementation gained from the implementation of the Public Private Partnership (PPP) referral hospital in Maseru. Moreover, there would still be a substantial learning process and incubation period during which the MOH adjusts to this ‘business unusual’ approach of PBF for district-level health services, while incorporating these changes in both MOH and CHAL institutions. There may also be new MOH staff without knowledge of Bank procedures and standards, and there would be a learning curve for the development of a smooth-working team to get the supervision program under way. Initial World Bank supervision missions would focus on the PPTA’s efforts at capacity development at both the central and district levels 7. Thus, a much more intensive than normal supervision program should be carried out during the first year of the project to put in place a sound institutional base for the interventions to be implemented. The Bank team would be comprised of a core supervision team with skills in financial management, procurement, PBF, and operational basic needs, complemented by technical specialists, in particular those covering reproductive health, and monitoring and evaluation. It is expected that the inclusion of key development partners and UN agencies in the NSRHSC will contribute towards Bank supervision on technical quality of the project. Additionally, given the ongoing support from UNFPA and UNDP in reproductive health in- service training for doctors and ICAP support for training of nurses and midwives which complement the support provided by the project, the development partners will prevent the duplication of efforts for greater effectiveness. While regular Bank supervision would take place twice a year, this could be further leveraged by additional visits from the Pretoria-based fiduciary specialists to verify progress and provide ongoing assistance. 8. The supervision team includes the following members: (i) Task Team Leader with experience in maternal health; (ii) a PBF specialist with hands-on experience to support implementation of the PBF scheme and ensure the Lesotho design and implementation are consistent with acceptable global standards for PBF interventions; (iii) an RH/MNH specialist to ensure adherence to MNH best practices; (iv) adequate financial management and procurement specialists who would review adherence to Bank procedures with regard to fiduciary responsibilities; (v) general Bank operations specialists to facilitate smooth implementation and resolve bottlenecks and challenges; (vi) an environmental specialist; and (vii) a monitoring and evaluation specialist to ensure that the impact evaluation design and implementation are consistent with acceptable global standards for PBF interventions. Where necessary and relevant, Bank supervision teams will include and leverage technical assistance from the key development partners mentioned above with complementary support. This will be coordinated by the existing engagement with the Health Partners forum and efforts to ensure that Bank supervision visits coincide with the health sector’s Annual Joint Review meetings. 75 9. Based on the outcome of the FM risk assessment, the following implementation support plan is proposed with the objective of ensuring the project maintains a satisfactory financial management system throughout the project’s life. FM Activities Frequency Desk reviews Interim financial reports review Quarterly Audit report review of the program Annually Review of other relevant information such as interim Continuous as they become internal control systems reports. available On site visits Review of overall operation of the FM system At least semi-annual for MOH (Implementation Support Mission) Monitoring of actions taken on issues highlighted in audit As needed reports, auditors’ management letters, internal audit and other reports Transaction reviews (if needed) As needed Capacity building support FM training sessions During implementation and as and when needed. 10. As during project preparation, donor and technical partners such as UN agencies, bilateral donors and international NGOs would be invited on an ad hoc basis to participate in supervision missions to ensure donor harmonization, quality of health interventions and project implementation, build strong partnerships, and facilitate a cross-fertilization of experience. 76 Annex 6: Performance-Based Financing LESOTHO: Maternal and Newborn Health Performance Based Financing Project 1. Lesotho intends to introduce Performance-Based Financing (PBF) in the health sector in a phased way so as to eventually reach nationwide coverage. Inputs necessary for the operation of the health system such as personnel, drugs, contraceptives, supplies, and major equipment will continue to be financed by the Government. In addition, the Government will provide Performance-Based Financing–an output based financing mechanism using IDA, HRITF and GOL counterpart funding to health facilities for the delivery of agreed-upon quality basic health services. This changes health management dynamics from a passive one in which health facilities’ personnel wait for patients to show up (e.g. for a family planning consultation) into an active one whereby health personnel develop links with the community to encourage patient visits. In September 2012, using their own funding, the MOH created the PBF Unit in charge of managing PBF implementation and administration. 2. Goals. The general goal of PBF is to improve health outputs, both quantity and quality. The specific goals are to: (i) provide funding at facility level to cover the additional costs of delivering improved services; (ii) provide financial payments to facilities in order to increase productivity and quality of care, especially for pre-identified key services; and (iii) Increase the equity of distribution of resources between urban and rural areas, with relatively more funding going to rural remote health facilities. 3. Institutional arrangements. Each of the key functions of performance-based financing - purchasing, verification, regulation, service delivery and reimbursement for services will be performed by the existing structures of the MOH, district health management teams, and health facilities as specified in Annex 3. 4. Purchasing and verification. The experience from other countries 81 shows that pilot PBF phases are best managed by contracted private entities, including local organizations and community-based entities. As capacity is built, countries may evolve towards a quasi-public purchaser approach. In the case of Lesotho, a quasi-public purchaser arrangement has been put in place, with a private entity to be contracted by the MOH (the Performance Purchasing Technical Assistance firm) which will help the MOH PBF Unit manage the performance contracts, conduct the verification and counter-verification activities, the performance-based financing and the coaching. The amounts transferred will be based on pre-determined unit prices of maternal and newborn health (MNH) services adjusted by a quality factor and remoteness. 5. The tasks of the PPTA will be to help the PBF Unit to: (i) draft and negotiate purchase contracts with the health facilities and performance agreements with the District Health Management Team; (ii) verify the performance through regular data quality audits at the source; (iii) provide hands-on training and advice to the MOH PBF Unit; (iv) organize community client 81 Rwanda, Burundi, Democratic Republic of Congo, Congo, Benin, Cameroon, Central African Republic, Zambia, Chad, Zimbabwe and Nigeria, 77 satisfaction surveys through local community based organizations; (iv) maintain the server which hosts the web-enabled database and enter the performance data in this database; (v) build capacity at all levels (national, regional, district and health facility level) to support the PBF approach especially in the area of strategic purchasing; (vi) coach district and health facility staff in the application of PBF management instruments (the quality checklist; the indice tool; the business plan and the individual performance evaluations) 6. Elaboration of the PBF framework. The PBF approach will be implemented through performance contracts between the government and its own and CHAL health facilities. . The Project Implementation Manual (PIM), which includes the PBF User Manual, will be valid for the duration of the project, but could be revised, subject to World Bank approval. It includes the following elements: o The specific health services to be purchased; o Methodology and procedures for calculating the unit prices for determining amounts to be paid under the performance contracts for each service; o Initial unit prices for each service; o A template of the purchase contract; o Procedures for approval, monitoring and evaluation, including the designation of the local health verification team for each targeted district to be responsible for quality supervision using a quality checklist in its district, and for development and delivery of training under the Project; and, o Rules for the use of performance-based financing. 7. Determination of the maximum allocation for PBF. The maximum annual allocation for each district will be set out in the PIM. However, the maximum amounts allocated to a given district per year over the project cycle, will in any event not exceed the equivalent of the district population multiplied by the per capita PBF allocation of US$3. In the final 3 years, 50% of the total PBF budget will be for “treatment� facilities and 50% for “control� facilities. 8. The basic health services package. 82 As identified in Annex 2, the following services will be purchased at the health center level: No Health Center PBF services 1 Number of new outpatient consultations for curative care 2 Number of patients referred who arrive at the hospital 3 Number of children under 1 year fully immunized Number of children under 5 years whose weight and height are monitored regularly 4 according to protocol 5 Number of women with 2 postnatal care visits within 1 week 6 Number of pregnant women having their first antenatal care visit in the first trimester 7 Number of pregnant women with four antenatal care visits 8 Number of women delivering in health facilities 82 The basic health services are subject to revision following regular reviews according to strategic purchasing. 78 9 Number of new and repeat users of short-term modern contraceptive methods 10 Number of notified HIV-positive tuberculosis patients completed treatment and/or cured Number of children born to HIV-positive women who receive a confirmatory HIV test at 11 18 months after birth 12 Number of new and repeat users of long-term modern contraceptive methods 9. The complementary health service package. 83 Hospitals have been assigned a total of 13 services, including 5 services that are also assigned at health center level because this provides the hospitals with an opportunity to benefit from the primary health care services that they provide to their immediate catchment population. The hospital indicators are the following: No Hospital PBF services 1 Number of pregnant women having their first antenatal care visit in the first trimester 2 Number of referred indigent patients from Health Centre to the OPD of a hospital 3 Number of counter-referral forms returned to health centers 4 Number of major obstetric complications treated 5 Number of assisted vaginal deliveries 6 Number of Caesarean deliveries 7 Number of indigent inpatient admissions 8 Number of HIV-positive tuberculosis treatment-resistant patients referred to the hospital 9 Number of referred newborn children for emergency neonatal care 10 Number of women with 2 postnatal care visits within 1 week 11 Number of notified HIV-positive tuberculosis patients completed treatment and/or cured Number of children born to HIV-positive women who receive a confirmatory HIV test at 12 18 months after birth 13 Number of new and repeat users of long-term modern contraceptive methods 10. Based on the above services (whose definitions are provided in Annex 2), a health center and hospital pricing schedule has been developed. This consists of the core services, a weighting for each service and the respective pricing in USD and LSL. In arriving at the weighting, due consideration was accorded to the significance of the service, i.e. the associated or perceived result in attaining the national public health goals as well as the level of complexity in conducting the requisite service. For example, an outpatient curative consultation has an index of 1, whereas an institutional delivery is accorded 50 – taking into consideration time taken, level of skill, drugs and supplies utilised, equipment used and a national priority. Specific details for the weighting and pricing schedule for each of the health center and hospital indicators are provided in the PIM. 83 The complementary health services are subject to revision following regular reviews according to strategic purchasing. 79 11. During appraisal, estimated unit costs of services were calculated and these were found to be much higher than the proposed PBF pricing. Unit costs were estimated, using data from multiple sources (e.g. Ministry of Health, CHAL, technical/trade associations, NDSO drug price list) and in consultation with facilities and health personnel on the inputs required to deliver each service. More than one source was used so as to avoid a “unique source bias.� The cost estimates on the basis of which unit prices are determined, reflected below for a select set of indicators, provide preliminary evidence that through the PBF mechanism the project will ensure that basic health services will be reimbursed at a level well below the additional costs of these services. Consequently, this mechanism is compliant with the guidelines on Output-Based Disbursement Mechanisms (OPCS, April 2007). Total Unit PBF PBF subsidization Cost Pricing level % Number of new outpatient consultations for curative care $15.14 $0.50 3.3% Number of children under 1 year fully immunized $17.75 $7.50 42.3% Number of children under 5 years whose weight and height are monitored regularly according to protocol $5.02 $0.50 10% Number of notified HIV-positive tuberculosis patients completed treatment and/or cured $123.45 $45.00 36.4% Number of Caesarean deliveries $89.56 $36.00 40.2% 12. During implementation, disbursements will be made based on the independently verified quantity and quality of services. The unit prices will be included in the PIM, approved by the Bank. 84 13. In order to avoid a situation where PBF services become the centre of attention and improve at the detriment of other health services the non-incentivized services will also be routinely monitored. The aim is to ensure that improvements in incentivized services are comprehensive and not at the expense of other services. Therefore, if non-incentivized services fall below the expected trend during the PBF implementation period, the facility must meet with the DHMT to review the situation and define corrective measures. The MOH PBF Unit will follow results closely and modify the performance contract if discrepancies become too large. 14. All services will be claimed by the health facility managers and then verified, prior to and after performance-based financing are made, on location by various entities (see below), including: • District health management teams (for the quality/ex-ante); • “verifiers,� who are in the PBF Unit and technical assistants serving each district and sub-contracted by the PPTA, selected at the beginning of the project (for the quantity/ex-ante); 84 The PIM will be revised as health service packages and unit costs are adjusted. 80 • Community-based organizations (CBOs), which are selected and sub-contracted by the PPTA (ex-post). 15. Preparation and execution of PBF training. Before launching the award of performance contracts, decision-makers have to be extensively trained in PBF, especially at the district and health facility levels. The following training will be prepared and implemented by the MOH, with support from the PPTA and the District Councils. Table 7. Description of the PBF training activity Activity and target Content of the Modes Responsible population message PBF training for health care facility The whole PBF user personnel, DHMTs, 5 whole days manual, with PPTA, PBF Unit district PBF Steering (for each district) exercises. Committees, health center committees 16. Prior Bank approval. The first three performance-based financing, regardless of cost; and each performance-based payment for an amount equivalent to $50,000 or more would be subject to prior Bank review and approval. Determination of performance-based financing 17. Performance-based financing are determined as follows. Calculation of PBF performance-based financing for Health Centres and Hospitals is based on a formula with three elements: (i) quantity of services provided; (ii) quality of services provided; (iii) top up of the performance-based financing related to the relative remoteness of the health center. 18. The three elements are defined as follows: • Amount based on quantity of incentivised services delivered multiplied by the price per unit of the service • A quality bonus, which is an additional payment on top of the quantity performance-based payment. This is based on the quality score obtained by the health facility on the quality assessment check list. The latter defines standard for quality of care for hospitals and health centers and the patient/client satisfaction score. There is a minimum quality threshold to achieve for the quality bonus and a maximal quality benefit to be received. • A remoteness bonus based on comparative isolation of a facility to provide additional payments to health centers in remote areas and influence adequate distribution of health personnel and support GOL’s pro-poor approach. 81 19. Thus, the measurement of the expected PBF performance-based payment for a health center would be based on the following formula: - Amount for Quantity => A - Quality Bonus (%) => B - Remoteness Bonus (%) =>C The formula is: PBF benefit = A x (1+B) x (1+C) 20. The following example illustrates how the formula works: • The assessment of 12 output indicators of a health center led to a benefit for quantity services of Lesotho Loti (LSL) 5,000 • The quality of care has been assessed at 90% which corresponds to a quality bonus of 20% • The health center is located in the district, but needs between 1 and 2 hours travel to the centre of the district by vehicle, indicating a remoteness category 2 and a corresponding remoteness bonus of 10% Therefore, the PBF performance-based payment calculation for this scenario is as follows: LSL 5,000 x 1.20 x 1.10 = LSL 6,600. 21. Measurement of achieved results. Health facilities will report their monthly quantitative results to the PBF Unit and respective DHMTs. Ex-ante verification for quantitative results will be carried out by the DHMTs and relevant district “verifier� using the health facility records. Ex- post verification, which is done after performance-based payment has been made, will be conducted on a random sample of health facilities by the local NGOs/CBOs identified by the PPTA. Client satisfaction surveys will also be used to discourage the existence of ‘phantom patients’ and collect valuable feedback from the community on their perception of the quality of these services. 22. Quality of Care will be assessed through a quality checklist conducted by the DHMT for health centers and by the Quality Assurance Unit for hospitals. It will be assessed once per quarter. The DHMT will be under a performance contract to carry out this function timely. 23. Performance-based financing. Performance-based financing will take place every 3 months, when the PBF Unit has determined the amount of the payment for each facility, following ex-ante verification and validation of performance by the relevant entity. This performance-based payment will be sent to the health facilities via the District Council Designated Account for GOL health centers and DHMTs, facility accounts for the district hospitals, and via the CHAL Secretariat to CHAL facility accounts. 24. Utilization of performance-based financing by health facilities. A key feature of PBF projects is that the recipient has autonomy on the use of performance-based financing. The Lesotho PBF pilot will offer restricted autonomy in usage of performance-based financing because the MOH feels it is essential – particularly during the pilot phase – to offer guidance to contracted parties. This will safeguard the realisation of the project aims and avoid negative effects, such as short-term gain over long-term win decisions that may have an adverse impact on public health or staff collaboration. In the PBF pilot, PBF contracts are signed by the MOH with following parties: 82 • Health Centers • Hospitals, and • DHMTs 25. Contracts will solely be issued to institutions, and not to individuals, on the understanding that PBF requires collective performance of a group of individuals to jointly implement actions that generate the services leading to performance-based financing. Nevertheless, individual staff will benefit, either indirectly (improvement in their working and living environment, access to resources that contribute to their performance, etc.) and/or directly through individual motivation bonuses. 26. Health center performance-based financing earned in a particular quarter will be divided between three main purposes: a. Resources for improvement of service delivery minimum 25% of total b. Motivation bonuses to health center staff: range 20-45% of total c. Motivation bonuses to VHWs range 20-45% of total Resources for improvement of service delivery refer to (re)investments in facilities for improvements in quality of and accessibility to care and improvement of staff welfare. The quarterly, renewable and updated health center business plan will provide guidance on the actual division of PBF performance-based financing between these three purposes, as well as accountability on the actual use of performance-based financing from the previous quarter. 27. Hospitals will be contracted for (i) limited range of primary care services offered to their catchment area, and (ii) for a limited set of (2nd line) referral health services to the whole district (or part of the district in case the district has more than one hospital). Performance-based financing earned by a hospital should be used for investment in the hospital’s functioning, especially to improve the quality of care. The annual hospital business plan will provide guidance on the actual use of PBF performance-based financing and for accountability afterwards. 28. DHMT performance-based financing may be used in accordance with an annual renewable business plan that is endorsed by the District Council, after having received a recommendation from the PPTA. DHMT performance-based financing may be used for two purposes: • Resources for improvement of DHMT functioning range 80-100% of total • Motivation bonuses to DHMT staff: range 0-20% of total 29. The implementation of PBF has been designed to allow for rigorous impact evaluation, which will enable Government to judge the effects of PBF on health system performance, including health utilization, health outcomes and service quality indicators. In order to answer this question, the Bank-executed impact evaluation under complementary financing (HRITF impact evaluation grant) will conduct a randomized, controlled and prospective experiment that will be undertaken during the four years of the PBF project implementation. 83 30. During Phase II and Phase III, there will be “PBF treatment� and “PBF control� health centers in each district. The randomisation in the experiment will be at the facility level so that the impact evaluation will have sufficient statistical power to measure the impact of PBF. The randomization process will be blocked by district and facility type (GOL vs. CHAL) to increase the comparability of the treatment and control groups and increase statistical power. Hospitals will all be PBF treatment facilities due to their prominent role as secondary care institutions and their supervisory role. “PBF treatment� facilities will receive performance- based financing linked to the quantity and quality of health services provided. 31. In the “PBF control facilities�, financing will also be available, every 3 months based on the average of all performance-based financing made to the “PBF treatment facilities� for that quarter. “PBF control� facilities will receive equivalent additional budget increases, but the amount will not be linked to performance (as measured by quantity and quality of services). “PBF control� facilities will not be allowed to use the financing for staff motivation bonuses. This PBF mechanism ensures that all the facilities (treatment and control) receive comparable financial amounts. It allows measuring the effects attributable to the PBF mechanism. 32. The impact evaluation design will allow isolation of the impact of the PBF mechanism on the quantity and quality of health services delivered and ultimately on health outcomes. It will be prospective, with a baseline survey conducted by the Bank before implementation of PBF in the Phase II and Phase III districts. A follow-up survey and evaluation will be conducted at the end of year 4 for PBF treatment and PBF control facilities; subsequently, all facilities will become eligible to implement PBF activities with design and implementation changes as guided by the results of the impact evaluation endline survey. 84 Annex 7: Economic and Financial Analysis LESOTHO: Maternal and Newborn Health Performance Based Financing Project 1. Long-term financial sustainability is critical to ensuring that the expected benefits from this MNH project improve the overall health status of the population. However, sustained improvement in MNH will depend to a greater extent on the level of commitment of the GOL regarding financing of health services delivery in Lesotho, especially recurrent costs required to provide quality MNH services. The financial analysis examines trends in public sector expenditure on health, assesses the financial resources required to sustainably provide MNH services at the macro level, the fiscal/financial impact of the project as a result of PBF funding at the sector level. Health Sector Financing 2. In Lesotho, three major sources of financing health services can be distinguished: (i) government sources, (ii) household and private sources, and (iii) donor sources. Government sources are mainly financed through SACU revenues, general taxation, and grants. SACU revenues alone constituted an average of 55% of total government revenues over the period 2004/05-2008/09. Tax revenues are the second (32%) contributor to government revenue, followed by non-tax revenue (9%) and grants (3%). Household and private contributions are the second major source of financing health services, with private out-of-pocket expenditure accounting for about 95% of this type of funding. The third largest source of financing health care is external sources, which rose from less than 10% in fiscal year 2004/05 to 18% in fiscal year 2008/09. Figure 4 provides trends in the share of the three major sources of financing health services in Lesotho over the period 2004/05-2008/09. Figure 4. Sources of financing for health services in Lesotho (2004/05-2008/09) 100% 90% 80% 70% 58.8% 60.1% 60.5% 63% 60.7% 60.9% % Contribution 60% 50% 40% 0.1% 13.7% 11.9% 14.2% 30% 17.2% 18% 20% 29.0% 27.5% 28.0% 10% 22.3% 25.1% 19% 0% 2004/05 2005/06 2006/07 2007/08 2008/09 Average 2004/05- Private Donors GoL 2008/09 Fiscal Year Source: Adopted from Lesotho Health Systems Assessment Report (Abt Associates), June 2010 85 Public sector financing of health 3. GOL has made provision of health care one of the six key pillars of the “The National Strategic Development Plan (NSDP) 2012/13 to 2016/17.� Against the backdrop of its health development goal, GOL has significantly increased its allocations to the health sector from US$147.80 million in fiscal year 2009/10 to US$186.70 in fiscal year 2011/12, albeit with a slight fall in fiscal year 2010/11. The fall in SACU revenues in fiscal year 2010/11 may have impacted the decline in the health expenditure. Figure 5 presents trends in government expenditure on health over the period 2009/10 to 2011/12). Figure 5. Trends in public sector financing of health (2009/10-2011/12) 200,000,000 186,727,725 147,764,251 146,343,829 150,000,000 US$ million 100,000,000 50,000,000 0 2009/10 2010/11 2011/12 Fiscal Year Source: Constructed from MOF and MOH expenditure data, 2012. 4. A similar trend is observed when the health budget is split into recurrent and capital expenditures. GOL has consistently increased its contribution to finance the two major categories of expenditures from fiscal year 2009/10 to 2010/12, with a slight fall in recurrent expenditures in 2010/11. Figure 6 below shows that GOL allocated US$99.8 million in recurrent expenditures to health in fiscal year 2009/2010, fell to US$95.20 million in 2010/2011, and rebounded to US$123.2 million in 2011/2012. This could be attributed to improvement in domestic revenue generation that offset a fall in SACU revenues. While recurrent expenditures fell sharply in the second fiscal year, capital expenditures have consistently increased from US$48.00 million in 2009/10 to US$63.60 million in 2011/2012. The consistent increase in the capital budget is mainly due to the construction of the new referral hospital and upgrading of health facilities that have taken place in Lesotho over the past couple of years. 85 85 Lesotho Public Expenditure Review, August 2012, World Bank 86 Figure 6. Trends in recurrent and capital expenditure on health (2009/10-2011/12) Recurrent Expenditure Capital Expenditure 140,000,000 120,000,000 123,156,000 100,000,000 99,778,951 95,175,229 US$million 80,000,000 60,000,000 63,565,539 47,985,300 51,168,600 40,000,000 20,000,000 0 2009/10 2010/11 2011/12 Fiscal Year Source: Constructed from Expenditure Data from MOF and MOH Finance Department, 2012 Analysis of donor support to health 5. Donor support to health services is largely focused on development projects. According to the GOL’s expenditure classification, this form of support is categorized as capital project budget. The largest contributor is the Millennium Challenge Corporation (MCC), followed by Africa Development Facility (ADF). Over the past three years, MCC has consistently increased funding through implementation of the health sector reform project. In 2010/11, MCC alone contributed about LSL252.00 million (64.0%) of the total donor resources, rising to LSL280 million (72.4%) in 2010/11, and to 357.14 million (77.3%) in 2011/13. Table 9 provides trends in donor contributions to the sector from fiscal 2010/11 to 2012/13. Table 8. Trends in donor contributions to the sector from fiscal 2010/11 to 2012/13 Capital Project Budget Funding Source2010/11 2011/12 2012/13 (LSL million) (LSL million) (LSL million) Health Sector Reform project IA 55,000,000 37,358,342 32,000,000 Health Sector Reform project MCC 252,000,000 280,000,000 357,137,080 Health Sector Reform project UNICEF 6,650,000 9,000,000 500,000 Health Sector Reform project WHO 9,000,000 4,500,000 4,500,000 Capacity Building KF 4,500,000 - - Health Sector Reform project ADF 39,000,000 - - Health Sector Reform project IDA 7,500,000 - - Support to Reproductive Health UNFPA - 6,230,000 8,000,000 GAVI(Support to Immunization) GAVI - 2,300,000 2,517,188 Support to TB Control Program GF 20,000,000 28,077,703 34,980,078 HIV & AIDS Tech. Assistance IDA - 6,781,265 4,900,000 Support to Laboratory Services USAID - 12,566,400 17,500,000 Total 20,000,000 55,955,368 67,897,266 Source: Expenditure data from MOF and MOH Finance Department, 2012 87 Figure 7. Trends in composition of health sector investment expenditures (2010/11-2012/13) GoL Donors 120,000,000 100,000,000 US$ miliion 80,000,000 60,000,000 40,000,000 20,000,000 0 2010/11 2011/12 2012/13 Fiscal Year Source: Constructed from Expenditure data from MOF and Finance Department MOH, 2012 6. GOL annual allocations to salaries and wages constitute the bulk of the recurrent budget, followed by drugs and other essential goods and services. As indicated in table 10, the salaries and wages category was about 26.6% of total recurrent expenditure in 2009/10 compared to 19.7% for drugs. In 2010/11, salaries and wages’ share of total recurrent expenditure fell to 22.9%, while drugs’ share increased slightly to 19.9%. In 2011/12, the two categories of expenditures both increased, but salaries and wages increased a bit higher than drugs. In order to provide quality services and improve the overall health status of its population, GOL would have to substantially increase non-wage recurrent expenditures, particularly those that go directly into the provision of health services. Table 9. Trends in composition of health sector recurrent expenditure (2009/10-2011/12) % 2011/12 % Item of 2009/10 % of Total 2010/11 Total (LSL Total expenditure (LSL million) Recurrent (LSL million) Recurrent million) Recurrent Salaries 225,481,588 26.6 193,690,961 22.9 196,753,089 23.2 Drugs 166,477,095 19.7 168,253,042 19.9 186,914,340 22.1 Dressings 25,727,282 3.0 21,814,107 2.6 12,588,982 1.5 Vaccines 1,760,133 0.2 6,802,366 0.8 18,708,351 2.2 Dips & Anthelmitics 100,100 0.0 25,000 0.0 - 0.0 Total Recurrent* 846,301,536 807,253,851 1,044,632,624 Source: Expenditure data from published budget book, MOF and Directorate of Finance, MOH, 2012 Note: *Total recurrent includes all recurrent items of expenditures e.g. maintenance, transport, communication, stationeries, food, fodder & beverages etc. Macroeconomic impact and financing requirement analysis 7. In order to ascertain the stream of resource requirement for the health sector, including maternal and newborn health services, and in view of macroeconomic impact on resource flow to the sector, a thorough review of the joint Lesotho authorities and the International Monetary Fund (IMF) recent macroeconomic impact assessment report, and the health sector development 88 strategy document was conducted. The review allowed us to develop two scenarios (base case and high growth) for macroeconomic implication of resource requirement for the health sector, and indeed for maternal and newborn health services. These scenarios enabled us to predict the expected level of government funding for the health sector in Lesotho, and also estimate the resources required for MNH services. 86 Table 11 shows the results of the base case scenario analysis. Table 10. Results of base case scenario of the analysis of resource requirement for the health sector 2012 2013 2014 2015 2016 2017 2018 Baseline Real GDP Growth 3.40 3.40 3.40 3.40 3.40 3.40 3.40 Gross Domestic Product (in billions of 5.9 6.08 6.43 6.80 7.20 7.61 8.06 US$)-2011 values Total Government Expenditure (% of 26.80 27.07 27.34 27.61 27.89 28.17 28.45 GDP) Total Government Expenditure (US$ 1.58 1.64 1.76 1.88 2.01 2.14 2.29 billions) Total Government Expenditure on 10.49 10.49 10.49 10.49 10.49 10.49 10.49 Health (%) Total Health Expenditure (US$ 165.87 172.55 184.39 197.03 210.54 224.98 240.41 million) Percentage of Health Expenditure for 0.300 0.31 0.32 0.33 0.34 0.35 0.36 Maternal and Newborn Health (%) Total Maternal and Newborn Health 49.76 53.49 59.00 65.02 71.58 78.74 86.55 Expenditure (US$ million) Source: Estimated from IMF and MOF, GOL expenditure data and MOH financial data Note: Data for GDP outturn (2010/11) was obtained from Budget Speech to Parliament (2012/13) by the Minister of Finance. Exchange rate LSL8.78707=1US$ 8. As shown in Table 11 above, the base case scenario analysis depicts an increase of total government expenditure from US$1.58 billion in 2012 to US$2.29 billion in 2018. This represents a rise of about 44.9% over the period 2012-2018. The increased total government expenditure is expected to translate into an increase in total health expenditure by approximately 45.0% from US$458.25 million in 2012 to US$664.19 million in 2018. In addition to the base case scenario, a high growth scenario reflecting the growth potential of the Lesotho economy was undertaken. The analysis was based on the Lesotho authorities and the IMF high growth projections over the period 2012 to 2018. The initial year 2012 real GDP growth rate of 3.4% is estimated to increase steadily to 7.3% in 2018. This is expected to increase total government expenditure as a percentage of GDP from 23.8% in 2011 to 53.7% in 2018. The proportion of government expenditure on health is projected to increase from about 11.3% in 2012 to 13.7% in 2018. Table 12 shows the results of the high growth scenario analysis. 86 The analysis assumed an (i) an annual real GDP growth rate of 3.4%; and (ii) a constant 5.49% annual increase in total government expenditure on health over the period 2012-2018 based on historical and current allocations to the health sector. 89 Table 11. Results of high growth scenario for the analysis of resources requirement for the health sector 2012 2013 2014 2015 2016 2017 2018 Baseline Real GDP Growth 3.40 4.50 5.10 5.20 6.50 6.90 7.30 Gross Domestic Product ( in 6.12 6.55 6.97 7.43 7.91 8.42 8.97 billions of US$)-2010/11 values Total Government Expenditure (% 23.80 27.86 33.30 36.56 39.66 46.28 53.69 of GDP) Total Government Expenditure 1.46 1.82 2.32 2.72 3.14 3.90 4.82 (US$ billions) Total Government Expenditure on 11.30 11.50 12.40 12.70 13.20 13.60 13.70 Health (%) Total Health Expenditure (US$ 164.59 209.80 287.97 344.86 414.11 530.23 659.93 million) Percentage of Health Expenditure 0.40 0.41 0.42 0.43 0.44 0.45 0.46 for Maternal and Newborn Health (%) Total Maternal and Newborn 65.84 86.02 120.95 148.29 182.21 238.60 303.57 Health Expenditure (US$ million) Source: Estimated from IMF and MOF, GOL expenditure data and MOH financial data Note: Data for GDP outturn (2010/11) was obtained from Budget Speech to Parliament (2012/13) by the Minister of Finance. Exchange rate LSL8.78707=1US$ 9. The results of the high growth scenario analysis show a rise in total government expenditure from US$1.46 billion in 2012 to US$4.82 billion in 2018. This indicates that total government expenditure on health is projected to increase from US$164.59 million to US$659.93 million over the same period. The share of the health sector expenditure on MNH services is estimated to increase from US$65.84 million in 2012 to US$303.57 million in 2018. Fiscal/financial impacts of the PBF project 10. The PBF project is expected to increase funding for health services (especially MNH services) over the project duration. Approximately US$20 million, including IDA resources, will be injected into the sector. Available expenditure data show that Lesotho spent on average US$33.2 per capita over the period 2004/05 to 2009/10. This compares favorably with World Bank estimates of US$33.0 in lower middle income countries over the same period. Table 12 compares Lesotho’s average expenditure indicators with World Bank and WHO averages. 90 Table 12. Lesotho’s actual health spending averages compared with lower middle income countries and the rest of Africa regional averages Indicator Fiscal/Financial Year World Bank WHO 2004/05 2005/06 2006/07 2007/08 2008/09 Average Low Middle Africa 2004/05- Income Region 2009/10 Classificatio 2006 (Lesotho) n 2006 Total 7.4 7.8 6.9 7.9 8.5 7.7 4.50 5.60 Expenditure on health as % of GDP Per capita total 45.5 51.5 48.5 61.2 66.3 54.6 74.0 27.0 health expenditure(US$) Per capita gov’t 27.7 30.3 29.2 37.0 41.8 33.2 33.0 - expenditure on health (US$) Gov’t expenditure 9.4 9.1 8.1 9.8 11.5 9.6% 8.4 8.6 on health % of total gov’t expenditure Public (gov’t 60.9 58.8 60.1 60.5 63.1 60.7 43.90 46.3 expenditure) spending on health as % of total health expenditure Donor 10.1 13.7 11.9 17.2 18.0 14.2 0.9 8.7 expenditure on health as % of total expenditure on health Out-of-pocket 98.4 95.9 95.5 94.8 93.9 95.7 84.90 46.8 expenditure as % of private health spending Source: Government expenditure outturns (various years); annual joint review (AJR) reports (various years); Oxford Policy Management (2008); Lesotho Bureau of Statistics (2004); World Health Organization. * US$ calculated at average exchange rate. **Lesotho is classified by the World Bank as a low middle income country. ***The WHO African Region includes all countries in Africa (46) except Morocco, Egypt, Sudan, Tunisia, Libya, Djibouti, and Western Sahara. 11. An analysis of estimated fiscal/financial impact of the PBF project depicts that the project would add an average of US$4.78 per year to total health expenditure during the course of the project’s life (2012 – 2016). This represents an average of around 18.4% of the 2008/09 87 total health expenditure level per year. As shown in table 14, additional health expenditure from PBF will be amounted to US$12.5million at the end of the project period, and that total expected per 87 2008/09 expenditure levels are assumed to be shifted forward. 91 capita health expenditure will average about US$46.42. This would increase average health expenditure as a percentage of the 2008/09 total spending level over the project’s period to about 19.0% from 14.2% in fiscal year 2008/09. Table 13 provides a summary of the PBF project’s fiscal/financial impact analysis on health expenditures in Lesotho. Table 13. Estimated PBF impact on Lesotho’s Health Expenditure (2013-2017) 2013 2014 2015 `2016 2017 Averages Total Total estimated GOL budget for 164.5 209.8 287.9 344.9 414. 1 health-2008/09 expenditure levels (U$million) Total additional resources from PBF 2.5 2.5 2.5 2.5 2.5 12.5 per annum (US$ million) Per capita additional health 6.69 6.08 4.77 3.47 2.90 4.78 23.91 expenditure from PBF (US$ ) Total expected health expenditure 48.49 47.08 46.57 45.27 44.70 46.42 with PBF (US$) based on 2008/09** health expenditure levels Per capita PBF additional financing 26.7 23.9 18.1 12.7 10.5 18.38 (% of total health expenditure 2008/09 level) Total expected health expenditure (% 11.02 14.05 19.29 23.1 27.73 19.04 of 2008/09 total health expenditure levels) Note on Table 6 88. 12. The above analysis clearly shows that the GOL could sustain the project’s expected development outcomes beyond the PBF funding period, if it maintains its current levels of spending by consistently being among the top regional big spenders of health services. Project benefits and costs 13. The development objective of the project is to increase the utilization and improve the quality of maternal and newborn health services in targeted areas. Specifically the project will benefit rural districts, and will aim to improve access and utilization by the poor. The project’s main beneficiaries are women of childbearing age, newborns and children below 5 years of age. Project interventions would increase the beneficiaries’ access to quality health services. Benefits are the positive outcomes that result from project implementation. In this regard, two categories of benefits (direct and indirect benefits) can be distinguished. Beneficiaries who are directly targeted by the project would receive direct benefits, while indirect benefits are benefits related to the behavioral change of project beneficiaries. Owing to difficulty in measuring indirect benefits, the analysis excluded indirect benefits. 14. Costs are the financial resources used in project implementation. Two kinds of costs can be distinguished: (i) direct costs (e.g. equipment and material costs, maintenance costs, drug and medical supplies costs, utilities such as power costs, and labor costs etc.), and(ii)indirect costs 88 (i)Total health expenditure in 2008/09 in US$148.8 million; (ii)**2008/09 expenditure per capita from table 5: US$41.8; (iii) exchange rate US$1= LSL8.78707; (iv)the total expected per capita health spending with PBF was arrived at by adding the additional health expenditure per capita from PBF to the 2008/09 per capita health expenditure as indicated in table 5; (v) population growth rate for all states assumed to be 2.4% annually. 92 are associated with patients waiting for consultation, traveling costs, child care costs, etc. Indirect costs are borne by project’s beneficiaries as results of seeking health care. Again, lack of data did not allow for the inclusion of indirect costs in the analysis. Activities included in the analysis 15. From the PBF costing model, which details the costs of each activities/interventions, the project will focus on core maternal and newborn activities to be carried out in health centers (HC) and district hospitals (DH). These activities/interventions include: (i) first ANC visit before 3 months of pregnancy; (ii) outpatient referral from HC to DH; (iii) counter-referral slip at the Health Center; (iv) normal delivery of at-risk referrals; (v) assisted delivery (non-CS); (vi) Caesarean Section; (vii) inpatient admission (indigent); (viii) new AIDS and TB treatment- resistant patient; (ix) emergency neonatal care for newborn children; (x) postnatal consultations; (xi) treatment or cured for TB and HIV positive patients; and (xii) 18 months testing for children born to HIV+ mothers; and training of health professionals at central and district level of care. This analysis focused on component 1 and 2 activities for which data were available. Cost Benefit Analysis 16. To determine the economic viability of the project, a cost benefit analysis (CBA) was carried out and took into consideration the estimated incremental project’s costs and benefits associated with the implementation of each component of the project. A CBA identifies measures and calculates a project’s cost and benefits in order to ascertain the net returns [net present value (NPV) and economic rate of return (ERR)] of the project’s investments. Methodology. 17. An input-output 89 approach to CBA was employed. The incentivized services were classified under the two main production centers (health centers and hospitals) where the PBF interventions would be implemented. Key inputs and expected outputs, including the associated costs, in these centers were used to derive the net benefits. From the net benefits, the net present value (NPV) and economic rate of return (ERR) were calculated to determine economic viability of the project. Key methodological considerations of the CBA include: (i) identification of project inputs and outputs through PBF costing spreadsheet data, and classify activities above into to production units: (a) a Health Center and (b) a Hospital; (ii) quantification of outputs to determine the benefit stream, using Lesotho’s GDP per capita and life expectancy at birth; (iii) development value flow tables to determine the net benefits that would be generated from a combination of inputs and outputs; (iv) using techniques of discounting to discount project benefits and costs, and calculating the net present value (NPV) and the economic rate of return (ERR) of the project in order to determine economic viability of the project; (v) conduction of component by component analysis and derivation of overall NPV and ERR; (vi) conduction of sensitivity analysis to address the uncertainties associated with the CBA assumptions so as to determine the relative responsiveness of changes in some key variables used in the analysis. 89 The input-output approach is based on the premise that implementation of every project requires a combination of basic factors of production (labor, capital, equipment and material and supplies) to generate the project’s benefits. 93 Key underlying assumptions. 18. The following are underlying assumptions for the analysis: (i) total population of Lesotho is 1.9 million (Source: WDI, 2011); (ii)annual population growth rate is assumed to be 1.1%; (iii) GDP per capita= $851 (Source: WDI, 2011); (iv) life expectancy at birth: 45 years; (v) 13.5% of the total population is considered as women who would receive pre-and post natal, including reproductive health services; (vi) 18% of the population is assumed to be children, including newborns; (vii) assume 12% discount rate for calculating present values of net benefits and costs. The discount rate represents the opportunity cost of capital in Lesotho; (viii) it is assumed that project beneficiaries would derive significant benefits beyond the duration of the project; therefore, the period of the analysis covers a ten-year period; and (ix) economic project costs have been calculated by the project’s COSTAB which takes into account the effects of taxes and prices. Summary of results of the analysis 19. Based on the key assumptions and taking into account economic project costs and benefits, the net present value (NPV) of the project has been estimated at US$89,755,000. The positive NPV means that the project would generate the expected benefits. The overall economic rate of return (ERR) has also been estimated at 70%. Table 14 summarizes the results of the analysis. Table 14. Results of CBA Analysis Net Present Value Economic Rate of Components/activities (NPV) Return (ERR) (in US$’000) % Component 1: Improving Maternal and Newborn Health (MNH) Service Delivery at Community, Primary and Secondary levels through PBF Sub-component 1A: Delivery of MNH Services through PBF Hospital Services 776,197 92 Health Center Services 70,074 80 Sub-component 1B:PBF implementation and supervision 109,285 47 support Component 2: Training of health professionals and VHWs and improving Monitoring and Evaluation (M&E) capacity Capacity building of the MOH and CHAL at central and 117,360 55 district levels Sub-component 2A: Training of health professionals and VHWs 16,014 37 Sub-component 2B: Improving M&E capacity 2,832 52 Overall 89,755,957 70 20. To address uncertainties associated with the underlying assumptions of the CBA, a sensitivity analysis was carried out by changing some of the key variables used in the 94 computation of the NPV and the ERR over a reasonable range. The aim was to determine the degree of responsiveness of the results to changes in these variables. Based on the assumption that the project’s interventions would improve the overall health status of the population, and increase in income levels as a result of economic growth, the life expectancy and GDP per capita figures were altered to 50 years and US$ 958 respectively. This resulted in an NPV of US$ 92,309,436 and an overall ERR of 72%. Table 15 provides a summary of the results of the sensitivity analysis. Table 15. Results of sensitivity analysis Net Present Value Economic Rate of Components/activities (NPV) Return (ERR) (in US$ ’000) % Component 1: Improving Maternal and Newborn Health (MNH) Service Delivery at Community, Primary and Secondary levels through PBF Sub-component 1A: Delivery of MNH Services through PBF Hospital Services 823,973 107 Health Center Services 71,691 82 Sub-component 1B: PBF Implementation and Supervision Support Sub-component 1B:PBF implementation and supervision 117,758 51 support Component 2: Training of health professionals and VHWs and improving Monitoring and Evaluation (M&E) capacity Capacity building of the MOH and CHAL at central and 127,043 59 district levels Sub-component 2A: Training of health professionals and VHWs 16,678 38 Sub-component 2B: Improving M&E capacity 2,997 55 Overall 92,309,436 72 21. From the foregone analysis, and the results in Tables 14 and 15, it is clear that when the project’s benefits are compared with projects costs the NPV and the ERR depict positive outcomes. This shows that the project investments are worth undertaking. A sensitivity analysis conducted to test the robustness of the CBA results also led to a positive NPV and a higher ERR when the life expectancy and GDP figures were changed. 22. An analysis of health sector financing shows that donor inflows are key drivers of investment expenditures in the sector. In addition, the analysis presupposes a modest funding of maternal and newborn interventions over the past years, as it is difficult to identify expenditures specifically devoted to the provision of maternal and newborn services, because expenditures are categorized by economic classification. A comparison of salaries and wages with non-wage recurrent buttresses this observation, as salaries and wages are proportionately higher than non- wage recurrent expenditures such as drugs and other essential supplies. 95 23. The fiscal impact analysis of the project shows that the PBF instrument, over the next four years, would rake in substantial resources into the sector, particularly for MNH services. The economic analysis shows that GOL spending levels in the sector are currently comparable to the top spending countries in the region, and its allocations match the expected resources from PBF. This would dramatically increase the overall resource to the sector, with a combined expected total expenditure per capita averaging about US$46.42 over the project life. This provides a clear justification for a positive fiscal impact of the project on the implementation of sector programs/activities. If the GOL maintains its current levels of spending by consistently financing the health services delivery in the country, it will be in prime position to sustainably maintain the expected development outcomes after the project ends. 96 Annex 8: Development Partners Support to Maternal and Newborn Health LESOTHO: Maternal and Newborn Health Performance Based Financing Project Partner Main objective of the Components of the Program Budget per Coverage Length of Program component Program UNICEF Improved and expanded 1. Adolescent Friendly Health Services $290,000.00 3 districts 2009-2010 equitable access to quality 2. Maternal Health and PMTCT $650,000.00 National 2009-2010 basic health, education and 3. Child survival and nutrition social welfare services for all. $500,000.00 National 2009-2010 Lesotho To strengthen the human 1. Outpatient and health center $3,200,000 2 Districts: 2010 - Boston resources for health capacity continuing nursing education (In- Leribe and 2014 Health needed to improve and service training) program in the Leribe Berea Alliance sustain good quality district (LeBoHa) comprehensive health care in 2. Quality improvement initiatives Lesotho. 3. Physician post graduate training World Health WHO Lesotho aims to • Disease prevention and control: US$300,000 Country 2012-2013 Organization provide technical and policy o Communicable diseases wide (WHO) leadership in health matters in o Non communicable diseases US$129,000 order to address the country • HIV/AIDS and TB US$320,000 needs and MDGs. • Strengthening maternal and child US$400,000 health US$40,000 • Health Promotion US$71,000 • Addressing the social determinants of health US$66,000 • Environmental health US$100,000 • Nutrition and food safety US$100,000 • Health systems strengthening 97 Partner Main objective of the Components of the Program Budget per Coverage Length of Program component Program Elizabeth To help Lesotho to provide 1. PMTCT+ care and treatment for +/- Country 2010-2014 Glaser High quality, comprehensive, families affected by HIV/AIDS. 5,000,000 wide Pediatric integrated client-centered 2. Operational research that enhances USD/year AIDS HIV services aiming to Prevention, care and treatment of Foundation prevent pediatric HIV pediatric HIV/AIDS (EGPAF) infection and to eradicate 3. PMTCT+ care and treatment for pediatric AIDS. families affected by HIV/AIDS. 4. Operational research that enhances Prevention, care and treatment of pediatric HIV/AIDS Millennium To mitigate the negative Rehabilitation and equip of HCs and 122,398,000/ Up to 138 Five years. Challenge economic impacts of poor OPDs, construction and equip central lab, = in five Health To end in Corporation maternal health, HIV/AIDS, Blood transfusion center & NHTC dorm years centers, 14 September (MCC) tuberculosis and other and mentor suits and HSS OPDs 2013 diseases by strengthening the (Decentralization, HMIS, HR training, throughout country health care system Research & Health care Waste the country management) World Food Development Project - 1. management of acute moderate $12, 233, 913 4 districts: 2011 to Program Prevent and reduce malnutrition for ART, TB, children (all Mokhotlong 2012: 2 (WFP) malnutrition among under 5, pregnant and lactating components) , Thaba- years vulnerable groups women; Tseka, 2. reducing stunting and micronutrient Qacha’s deficiencies; Nek and 3. improving nutrition and health Berea practices; 4. enhancing capacity to inform and manage national nutrition programs Country Program - Improve $20 181 063 6 districts 2013 to socio-economic capacities by 1. Prevention of stunting targeting (all 2017 (5 investing in people’s physical children 6 to 23 months old, pregnant components) years) well-being, reducing the care and lactating women. 98 Partner Main objective of the Components of the Program Budget per Coverage Length of Program component Program and economic burden 2. Treatment of moderate acute associated with chronic malnutrition for ART, TB, illness and improving children under 5, pregnant and people’s nutritional status lactating women 3. Improvement of household food security of recovered ART and TB-DOT clients SolidarMed To improve the health status 4 Projects USD +/- Thaba 2010-2012 of the catchment population 1) SolidarMed Antiretroviral Project 800.000,- Tseka; by strengthening the health SMART III 2010-2012 /year Butha system at hospital, health (will be cited As SMART light in 2013) Buthe; 2011-2013 centre and community level 2) Pilot project PHC (VHW, Community) and at CHAL Paray + 3) Hospital Development Project Seboche 2012-2014 Hospitals 4) HMIS Support CHAL 2012 8 CHAL Hospitals Jhpiego 1. To strengthen pre-service 1. MCHIP - Nursing Pre-service $3,910,000 Country 2010-2014 nursing and midwifery Education (PEPFAR, wide education in order to 2010-2013) improve the quality of nurse and midwife delivered care; Approximatel 2011-2015 2. To strengthen pre-service 2. Partner to Human Resources y $590,000 Maseru education systems for Alliance for Africa (HRAA) (PEPFAR, health and social welfare- 2011-2013) related professionals, paraprofessionals and community health workers; To strengthening health professional 99 Partner Main objective of the Components of the Program Budget per Coverage Length of Program component Program regulatory bodies and associations UNFPA To support Lesotho in 1) Sexual and Reproductive Health $4,600,000 Country 2013 – ensuring universal access to information and service wide 2017 Sexual and Reproductive Health services including 2) HIV Prevention $2,600,000 HIV prevention Country 2013 - wide 2017 Clinton Health - Under Tripartite - Rural Initiative: To increase ART USD PMTCT in 6 - Tripartit Access partnership (Irish AID, coverage in rural areas and improve the 1,152,374 Districts – e Initiative Ministry of Health and quality of primary health care provided Thaba- Partners (CHAI) CHAI) at LFDS sites Tseka, hip ends • Increase access to - Clinical Mentoring: To increase the rate Leribe, Berea, Decemb comprehensive at which the national ART program is prevention, care, and rolled out through one-on-one trainings Maseru, er 2012 treatment for people of health care workers Mafeteng living with HIV/AIDS - Lab Mentoring: To strengthen and Qacha’s • Strengthen health laboratory operations and services, Nek. - PMTCT systems in Lesotho safety, quality, and management to program through Clinical and match the increasing demand in Other me Laboratory Mentoring, diagnosis, monitoring and surveillance programmes ended Human Resources, of disease – All June Procurement and - Procurement and Supply Chain districts 2012 Supply chain Management: To improve access to management and consistent supply services for quality access to health care treatment and care commodities services in rural - Human Resource for Health: Support Lesotho via the Rural MOH in strengthening the human Initiative programmes resource capacity for quality health service delivery in Lesotho - focuses on other - PMTCT: To improve district and 100 Partner Main objective of the Components of the Program Budget per Coverage Length of Program component Program programmes namely- national health systems that will support PMTCT and access work a decrease in the mother-to-child (medicines and laboratory transmission services and commodities) - Access: support to the government with procurement and supply chain related issues and assist the Laboratory Services Directorate with its mission to provide the highest possible quality laboratory services by strengthening management, building systems, and increasing patient access to high-quality diagnostics Mothers to To provide education and Prevention of Mother to Child transmission +/- $1million Operating Mothers psychosocial support to of HIV USD in six (M2M) pregnant and new mothers districts, 66 living with HIV health facilities Lesotho To strengthen two way PMTCT+ care and treatment for families +/- Country 5 years Network of referral systems between the affected by HIV/AIDS 408,000.00 wide AIDS Services community and the health USD per year Organizations facilities. To mobilize Capacity building for CBOs, lobby and (LENASO) community to actively advocacy, information sharing, networking participate and be involved in and resource mobilization the health activities. To build competent communities on Health and HIV and AIDS related issues Human HRAA is a PEPFAR 1. Support operationalization and $1,000,000 Country April 2011 Resources implementing partner management of HRH policies and USD per wide to March Alliance for To improve health workforce plans. year, this is 2014 Africa policies, planning, 2. Strengthen the Human Resource just an (HRAA) development, and support Information Management system. indicative 101 Partner Main objective of the Components of the Program Budget per Coverage Length of Program component Program systems for retention and 3. Pre-service education systems for figure that we productivity in order to health and social welfare related use, and increase access to and cadres strengthened. could improve the quality of health 4. Workforce shortages addressed fluctuate services through improved recruitment, depending on retention and productivity several 5. Strengthen health professional factors. Note regulatory bodies and associations. that this is 6. Strengthen Capacity of local also included institutions to advance HRH in the issues. PEPFAR amount. ICAP To support transformative Scholarship support to nurses and US$ 1.2 Country 2010-2015 strategies that will improve midwives million wide quality and quantity of Skills Laboratories equipped with trained nurses and midwives simulators in all 6 nursing institutions in Lesotho Change Curriculum to become - Competency based approach - Use E-Learning - Include QA 102 IBRD 33434 L E S O TH O SELECTED CITIES AND TOWNS MAIN ROADS LESOTHO DISTRICT CAPITALS RAILROADS NATIONAL CAPITAL DISTRICT BOUNDARIES RIVERS INTERNATIONAL BOUNDARIES 27°E 28°E 29°E S OU TH AF R I C A on To Caled Fouriesburg Libono Mont-aux- Sources (3,282 m) Butha-Buthe To Senekal BUTHA- Leribe BUTHE Maputsoe To Clocolan Peka LERIBE 29°S 29°S Pitseng Mapoteng Njesuthi MOKHOTLONG (3,446 m) Teyateyaneng . tns To Makheka Ladybrand (3,461 m) BEREA M Mokoeng ti a lu Mokhotlong Thaba- MASERU Machache M Phafane Thabana ge Mazenwood (2,885 m) (3,250m) Ntlenyana s . O ra n 3,482 m) tn e ar Roma M ok oh M Seqoqo g Thaba-Tseka (3,394 m) b er MASERU ns Mantsonyane Ranko THABA-TSEKA e Matsieng ak To Mashai Dr Himeville To Thaba Dewetsdorp Putsoa MAFETENG (3,095 m) Semonkong Mafeteng Sehlabathebe Tsoloane Sekake Q A C H A’ S N E K 30°S To ng e 30°S Zastron MOHALE’S Ora Qacha’s HOEK Nek To Matatiele Mohale’s Hoek To To Matatiele Zastron Mekaling Mount Moorosi QUTHING Quthing To Sterkspruit SO UT H A FRICA Sinxondo This map was produced by the Map Design Unit of The World Bank. The boundaries, 0 10 20 30 40 50 Kilometers colors, denominations and any other information shown on this map do not imply, on the part of The World Bank 0 10 20 30 Miles Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such 27°E 28°E 29°E boundaries. SEPTEMBER 2004