54272 sEpTEmBER 2009 Health Results-Based Financing (RBF) in Practice: Ten Institutional Challenges BY LOGAN BRENZEL ANd jOsEph NAimOLi hEALTh, NUTRiTiON, ANd pOpULATiON UNiT Health Results-Based Financing (HRBF) is a cash payment or non-monetary transfer made to a national or sub-national government, manager, provider, payer, or consumer of health services after pre-defined results have been achieved and verified. HRBF is one tool that can be used by governments to increase coverage of the population with high-impact interventions, such as im- munization or institutional deliveries. There are different kinds of HRBF mechanisms. Performance agreements between national and sub- Challenge 2: politiCal Commitment and national levels transfer financing based upon achievement Country ownership at both national and sub- of verified health indicators and targets. Performance- national levels are essential to effective implementation and based contracts between district health offices and public sustainability. High-level political commitment and owner- health facilities or NGO facilities transfer funding based on ship can facilitate and support the transition from an input achievement of quantity and quality outputs, which are to a results orientation. Success in Rwanda with HRBF verified by third parties. Community-based or household- was linked to the strong political commitment of the Presi- based schemes can enhance utilization of specific priority dent, who signed performance-based contracts with each health services in return for a cash or in-kind transfer. mayor. Lack of ownership by local government authorities at provincial level, however, hampered project implementa- Designing, implementing, and monitoring HRBF mecha- tion in Indonesia. nisms present several institutional challenges to countries. This brief discusses ten of the more salient challenges that Challenge 3: involvement oF all relevant have emerged from a recent review of World Bank proj- stakeholders in the design of the HRBF ects.1 The challenges associated with monitoring results scheme helps to mitigate resistance and facilitate under- and evaluating impact are described elsewhere. standing and communication of the mechanism. This is particularly so when changing the way health care provid- Challenge 1: From input to output and ers or insurers are paid. In Armenia, involvement of local outComes thinking. The shift to a results orienta- authorities, the Ministry of Health, and hospital manage- tion usually requires a change in the way countries and do- ment in both technical and political processes facilitated nors are used to doing business, which currently empha- consensus building and significantly increased ownership sizes planning, financing, and monitoring inputs. In Bolivia, and cooperation. A good communications strategy makes implementation of performance agreements changed the expectations explicit: all relevant actors must understand logic of interaction between the national level and sub- the incentive scheme and the requirements of perfor- national departments in the health sector, and the results mance-based contracts. focus replaced the traditional sector emphasis on inputs. Challenge 4: analysis oF the Current 1. "Taking Stock: World Bank Experience with Results-Based Financing for inCentive struCtures that exist in the health sys- Health," 2009. 1 www.rbfhealth.org technical brief tem and their relationship to health system performance, importance of a focused and gradual approach. Creat- provision and utilization of services should be the starting ing an enabling environment often requires incremental point for designing RBF mechanisms. An important lesson layering of reforms. For instance, the development of Plan from Indonesia, was that the design of the mechanism did Nacer in Argentina evolved from the Maternal and Child not build on existing incentives. . The size of the finan- Health Insurance Program and its efforts to strengthen the cial incentive relative to current incentives and payments stewardship functions of the provincial health authorities. also needs to be considered carefully. In Uganda, the Such an approach may not be necessary in every setting, performance bonus was 11 percent of the base grant, or however. For example, in Afghanistan, performance-based between 5 to 7 percent of operating costs for Ugandan contracting with NGOs was established within a relatively NGOs. The small size of the bonus incentive was thought short period of time. to be one of the reasons why the RBF was unsuccessful in raising utilization of health services. Challenge 7: quality oF serviCes Cannot Be overlooked. Schemes that seek to increase use Challenge 5: adequate organizational of health services often need complementary interventions struCtures and institutional CapaCity to improve the quantity and quality of health services. For are CritiCal for HRBF mechanisms to work well. instance, a project in Mexico was designed to enhance Fundamental decisions on legal status, organizational the provision of services through a supply-side component arrangements, and governance structures often must be that was a complement to a Conditional Cash Transfer taken before changes can be introduced. Usually, pro- program (CCT). Without this complement, the supply of vider management and accounting systems need to be health services may not have been able to keep up with strengthened, purchasing capacity improved, performance the increased demand created by the cash transfer, nor and quality standards established, and adequate provider would demand have been sustained if quality health ser- reporting and information systems introduced to allow for vices were unavailable. In India and Indonesia, increases in appropriate performance monitoring and transparency. utilization of institutional births related to implementation of A limitation in Armenia was that the project focused on a voucher scheme must be met with improvements in the technical aspects of the design (such as payment systems) quality of health services to meet these new demands on at the expense of organizational and institutional aspects, the health system. such as governance and autonomy, which demanded equal attention Challenge 8: perverse inCentives and gaming will arise during implementation and steps need Challenge 6: Complementary reForms are to be taken to mitigate these. Perverse incentives occur in oFten needed For suCCessFul implementa- relation to the quantity and types of services provided, and tion oF hrBF meChanisms: HRBF schemes are the temptation to exaggerate or falsify reports to receive embedded in and may benefit from or be constrained by payment. If providers are paid on a fee-for-service basis, larger efforts to strengthen health systems. For instance, there will be a tendency to focus service provision on those decentralization may result in greater financial autonomy services that result in payment at the possible expense for health facilities and sub-national health authorities. of other needed services. Patients with conditions not Full-scale decentralization of the Rwandan health system covered in the RBF payment scheme may be referred to and increased autonomy of health centers, which allowed other providers or not attended to at all. Quality of services for the local hiring and firing of health workers, contributed provided also might suffer as the incentive is to increase to Rwanda's success. However, other challenges may quantity to boost the level of the financial reward. accompany decentralization. For example, HRBF schemes that rely on local government units (LGUs) to finance Challenge 9: sustainaBility. HRBF schemes performance bonuses may be hampered by inadequate usually require additional resources not only to finance the capacity at that level to purchase contracted health care incentive, but also to set up the accompanying systems services or to evaluate and verify the reporting of results. required for successful implementation, such as manage- ment modifications and improvements to the health man- A common lesson from World Bank projects is the agement information system. The design of HRBF mecha- 2 www.rbfhealth.org technical brief nisms, therefore, needs to reflect how these schemes will be sustained financially once donor support is no longer available. At a minimum, the cost of the HRBF mechanism, both during and after the project period, needs to be as- sessed as part of project design to estimate the recurrent costs and fiscal impact of the incentive. In theory, success- ful schemes could convince governments to allocate some portion of the budget to support results-based schemes. In Cambodia, performance-based contracting pilots sup- ported by the donor community contributed to increased use of services. Subsequent phases of this project are looking into sustainability issues and national support to the scheme more closely. Challenge 10: planting the seeds For sCaling up: Promising HRBF schemes are often piloted to see whether the scheme works and has the desired impact. Piloting, however, can have its drawbacks. In Indonesia, implementing externally financed pilots at the local level was easier than convincing local governments to support these initiatives after pilot project completion. Pilot efforts that are not well-connected to the broader health sector context risk not being scaled-up, even if successful at the pilot stage. Policy makers and planners need to plan for scaling up at the design stage. 3 www.rbfhealth.org technical brief