September 2007 · Number 111 44629 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region. BRAZIL Raising the Quality of Public Spending and Resource Management in the Health Sector Bernard Couttolenc, Gerard La Forgia and Yasuhiko Matsuda Introduction Brazil has made significant progress in human develop- to the means by which a provider organization (such as a ment over the last decade, thanks to a series of policy hospital), its managers and staff are held accountable for innovations, and equity of access has increased consid- their behaviors (such as resource management, planning, erably. In health, consolidation of government health fi- service monitoring, financial management, etc). Account- nancing, the organization of the sector into a country-wide ability is a key concept that captures the responsibilities system (Unified Health System, or SUS) and an increased of actors and the consequences they face based on perfor- emphasis on primary care have been critical for these im- mance. That means that poor performance is sanctioned provements. and good performance rewarded to promote quality and impact. Where there is no accountability those that excel Significant challenges relating to inefficiencies and the and those that under-perform are treated equally; a system low quality of services remain. Given high public debt that is unfair, and compromises quality and impact. In and tax burden, system affordability and sustainability short, governance impacts the quality of public spending, may be increasingly threatened, while equity gains ob- the effectiveness of resource management, and ultimately, tained in recent years may be difficult to sustain. Financial the efficiency and quality of service delivery. authorities are increasingly concerned about rising health care costs, which already represent about 11 percent of This report referenced in this note1 assesses resource al- public expenditures. At current levels of health system location and management, planning and budgeting func- inefficiency, total health spending could increase from 8 tions, and budget execution at different levels of govern- to 12 percent of GDP by 2025, while household spending ment for public expenditures on health services. The on health as a share of income could rise from 5 to 11 per- emphasis is on understanding the incentives generated cent. Increasing the efficiency and effective use of health for service providers, and the overall soundness of the resources to contain rising costs is perhaps the greatest accountabilities established in the public health services challenge facing the Brazilian health system. expenditure system. The analysis seeks to identify weak- nesses of accountabilities for service provision that stem Many of the challenges facing the health sector are from the structure and process of intergovernmental and linked to governance failures, notably the lack of incen- provider funding flows and related managerial practices. tives and accountabilities that ensure that services are affordable and of acceptable quality. Public spending con- The Unified Health System stitutes a powerful instrument to influence performance in The publicly financed Unified Health System (SUS) publicly-funded providers. The structure and management nominally covers the entire Brazilian population with a of funding flows to these providers strongly influences complete range of services free of charge. In practice it the incentives they face. In health, governance also refers is the only health service for over half of the population, 1 Extracted from "Brazil: Governance in Brazil's Unified Health System (SUS): Raising the Quality of Public Spending and Resource Management", World Bank Report No 36601-BR, February 14 2007 and is the main provider of care for the poor. · Legally mandated deadlines for the process of plan- ning and budget preparation and delivery are usually Brazil's federal structure and the decentralized nature of met with few delays but the use of data and analysis the SUS make the financial flows difficult to track and to identify priority problems in a given locality and monitor, which in turn makes accountabilities diffuse and as a basis for planning is rare. difficult. Despite continuous upgrading, existing infor- · States and municipalities suffer from a serious lack mation systems do not permit accurate identification of of capacity to develop evidence-based plans to guide how resources are allocated within the context of SUS, their health policies and interventions. nor how expenditures are executed and services provided · The plans present objectives and targets, but almost at the health unit level. Information is lacking regard- never define articulated strategies and actions to meet ing how much SUS as a whole (including the federal, them. In many cases, the plans constitute declara- state and municipal governments) spends on hospital and tions of intentions rather than maps of how to arrive primary care. The levels of efficiency in health service at desired outcomes. provision are not systematically documented. · Participation of the various actors involved, includ- ing the expected accountability structures, such as the The report assesses how the processes of allocation, Health Councils, is insufficient, largely ineffective transfer and utilization of resources are conducted at the and potentially counter-productive. different levels of the system. The study provides valu- · Planning and budgeting are disconnected, especially able information regarding the reality of the executing at the local level. units of the system and how these relate to the central · Strategic and financial data needed to develop plans levels. It also seeks to identify problems related to fi- and budgets are often centralized in the Finance or nancial flows, analyze how resources are used at the lo- Planning Secretariat and not often made available to cal level, and estimate their impact on the efficiency and the Health Secretariat and or unit managers. quality of health services in general. In this respect, the · Managers of most public facilities (primary, diagnos- study provides a basis for improving the entire cycle of tic or hospitals) have limited or no authority to plan public resource management processes (i.e., planning, service provision, define their budgets, reallocate budgeting, budget execution, input management, and resources or manage inputs. health service production) in the health sector, which together help to bolster good governance in health care delivery. Budget Execution The weaknesses in planning and budget formulation is Specifically, the study seeks to survey and describe how further evidenced by the widespread practice observed at public expenditure is allocated for each type of health sub-national levels of significantly modifying allocations unit, program or health program; assess the extent to during the budget execution phase often ignoring priori- which the resources transferred to states and municipali- ties specified in the planning process. ties are used for the purposes for which they are intend- · Significant changes between the initial budgetary ed; collect evidence of delays and slippages in budget allocation and the amount actually available limit the execution by state and municipal secretariats and service benefits of planning and financial forecasting.The provider units and how these problems affect service de- frequent delays observed in the release of budgeted livery; and offer a set of policy recommendations to im- funds results in their suboptimal use by managers. prove efficiency in resource management and the quality For example, some of the "frozen" funds can be of care in the SUS. released only at the end of the year, leaving little time for purchases. Municipalities have little capacity for Planning and Budgeting robust budgetary execution due to a lack of qualified The planning and budgeting process in SUS ­ similar to personnel and limited autonomy and decision-making that of Brazilian government institutions in general ­ is authority of line secretariats and health facilities. well structured but overly formalized. Its complexity and · Most of the states and many municipalities do not bureaucratic formalism limit its usefulness as an effec- comply with the constitutionally-mandated minimum tive management tool and as a basis for holding public percentage of their funding to be spent on health, entities accountable. even though some spend considerably more. Fed- 2 · September 2007 · Number 111 eral transfers do not compensate for this inequality in accountability. spending. · At the level of the state and municipal secretariats, the Management of Production and Quality system for budget monitoring, control and reporting is Service and quality management is in its infancy. Few well structured, but focuses on compliance with legal health secretariats or units regularly collect data on standards and financial control, with little concern for productivity, efficiency, or quality. In some cases, the assessing results. classic indicators of productivity (average hospital-stay, · A multitude of parallel reporting exists associated with turnover of beds, occupation rate) and quality (mortality, programs having restricted funding and/or specific hospital infections) are monitored, but rarely used for de- payment mechanisms. cision-making, which contributes to the inability to hold · Availability of disaggregated data on budget execution providers accountable for their performance. is limited The data gathered through the survey show, for example, Management of Supplies and Medicines that doctors work fewer hours than the number of hours In the health sector, management of supplies (e.g., from contracted, while still producing the same number of acquisition to use) consumes a substantial portion of fi- consultations. This situation is typical of public facilities nancial resources (about 20 percent of the total) and can where "real" working hours are negotiated between doc- be a major cause for inefficiency and loss. The current tors and managers, and have little relation to "contract- norms governing the process of government purchases ed" hours. The reduced time spent with patients may also are effective in limiting (but not eliminating) the likeli- compromise quality of care. In addition, 40 percent of hood of misappropriation of resources, but at the same the cancellations of scheduled surgeries reported in the time, their strictness and lack of flexibility create signifi- survey are attributed to internal management problems cant distortions. and inefficient use of resources, such as the absence of medical or support staff, lack of materials, the failure to Management of Equipment and Installations sterilize the equipment, etc. Acquisition and maintenance of equipment and physical plant is among the most costly elements of any health The survey inquired about the principal problems af- system. Inefficiency in this area can therefore be a sig- fecting the service offered and its quality. The principal nificant source of cost escalation. In recent years, the problems as identified by state, municipal and facility Ministry of Health (MOH) and state and municipal health managers include: shortage of medical drugs, lack of secretariats have attempted to achieve more rational plan- personnel, limited installed capacity to deal with demand ning of equipment purchases and distribution. The report in outpatient units, and lack of medical supplies. These finds that most units still encounter serious difficulties in are all related to shortcomings in resource management maintaining installations and equipment, with significant- practices detailed in this study. Hospitals managers also ly negative consequences for the quality and efficiency report poorly qualified personnel and low quality hygiene of treatment; but to date facilities have not been held ac- practices (e.g., raising the risk of hospital-acquired infec- countable for the management of equipment and installa- tions) while outpatient managers citied the lack of or un- tions. availability of diagnostic and therapeutic equipment. Management of Personnel MaIn CHallEngES and RECoMMEndaTIonS The rigid legislation governing human resources in the The various problems identified in the analysis, and their health sector makes management of human resources associated recommendations, can be grouped into four difficult and burdensome. However, the problems identi- categories. fied in personnel management in the health secretariats and units ­ principally those of the public sector ­ are Fragmentation of the planning and budgeting process not solely due to limitations and distortions imposed by legislation. Many problems are related to management Synchronize and align the processes of planning, budget- practices that result in inefficient use of resources, and in ing, execution, and information, and orient them toward some cases, an absence of management. More fundamen- performance. Planning should be the basis for defining tally they are grounded in a complete absence of manager September 2007 · Number 111 · performance targets. Plans should contain a limited set of The Ministry could promote adoption of modern manage- easily measurable performance goals. Measurement of ac- ment techniques by the secretariats and health units. Such tivity costs would be an important complement. As such, techniques would include management of decentralized the MOH should support the installation of cost account- personnel; management of purchases and stocks that fa- ing systems at the facility level, particularly in hospitals. cilitates estimation of needs, programming of purchases and better control of stocks; management of equipment Consolidate the transfer of funding resource-by-resource and installations that enables monitoring of the state of the and link growth in financing to growth in performance, equipment and its permanent maintenance; evaluation of thereby rewarding good performance and penalizing low activity costs and efficiency; evaluation of results in terms performance. The existing transfers can be streamlined of coverage and performance indicators on effectiveness based on broad functional/programmatic categories that and quality of services. It would be necessary to revamp are already well-accepted in the sector (e.g., Primary Care, human resource policies (e.g., better structuring of health Hospital Treatment of Medium and High Complexity, care and management careers, systematic training policy) etc.). The states and municipalities could then allocate to make careers in the public health sector more attractive. the funds received through these block transfers to spe- cific programs, based on their own plan and budget. The Apply mechanisms to strengthen accountability, such formula for determining the distribution of the transfers as management contracts that make the administrators should be guided by explicit policy criteria such as (i) focus on specific goals and measurable results. This in- attenuation of inter-regional/jurisdictional inequality in strument could serve as a basic mechanism for planning, health outcomes and access to services, or (ii) performance monitoring, and evaluation. Greater autonomy granted enhancement at the unit level (i.e., greater efficiency and to specific facilities should be balanced with clear perfor- better quality, as measured by specific, results-oriented mance expectations (targets) and ex-post accountability. indicators). In using management contracts as a tool of accountability, a mechanistic application of "reward and punishment" Inflexibility and complexity in budget execution should be avoided. Instead, the performance targets Develop and introduce organizational arrangements should be used as references around which the secretariat that give the management units increasing levels of the and the unit can develop on-going reviews, dialogue, and freedom of action and authority to make decision on the appropriate corrective measures to enhance the unit's per- management of resources. The pace of granting such formance. autonomy must be calibrated with each unit's demon- strated capacity, however, and the capacity of the central Inadequate management information. agency (e.g., health secretariat) to monitor and control its Establish strong monitoring systems that aim to improve performance. On a pilot basis, some of the large hospitals organizational performance. These systems should sup- (e.g., referral units), and possibly regional health districts, ply useful and clear information for internal management, can be granted full autonomy to manage its finance and including data on program/unit performance that permit human and material resources. It would be best to start comparisons with targets as well as among the units them- with hospitals that already are official budgetary units selves. and therefore have some experience with autonomous input management. For smaller units with more limited More Information administrative capacity, specific aspects of decision-mak- Obtain the report and further information of the work of the ing authorities could be delegated. Some could become World Bank in the Health Sector at http://www.worldbank. budgetary units, whereas others may need to be given less org/lachealth autonomy. For each case, a preparatory study should be conducted to determine the exact level of decision-making about the authors Bernard Couttolenc is a Consultant), Gerard La Forgia is a each of the authorities is to be delegated. Lead Health Specialist (LCSHH) in the Latin America and the Caribbean of the World Bank., and Yasuhiko Matsuda is a lack of managerial autonomy, incentives and capacity Senior Public Sector Specialist in the East Asia and Pacific Region (EASPR) Strengthen and professionalize management capacity. "en breve" is produced by the Knowledge and Learning Team of the Operations Services Department of the Latin America and the Caribbean Region of the World Bank - http://www.worldbank.org/lac · September 2007 · Number 111