Reforms in purchasing in Central/ Eastern Europe and ex-USSR: pay for performance?

1. Reforms in purchasing in Central/ Eastern Europe and ex-USSR: pay for performance? Joseph Kutzin Head, WHO Barcelona Office for Health Systems Strengthening Incentives for Health Provider Performance Network 11 May 2011, Clermont-Ferrand, France

2. Main sources for this presentation And the publications produced by the Kyrgyz Health Policy Analysis Center (see www.hpac.kg for more)

3. Overview • Motivations for reform of purchasing and some key messages from our analysis of financing reform implementation • The (mostly) Kyrgyz experience • General lessons learned from the region, and possible lessons for low and middle income countries elsewhere in the world

4. Motivations for reform of purchasing • Inheritance of excess capacity, low productivity, and unresponsive systems • Growing recognition of poor quality in service provision, especially primary care • Expectation that with “new formulas” by which only good and efficient services would be purchased, the problems could be solved

5. Key alignment issues (coordination, not magic bullets or “schemes”) • Revenue collection and pooling - Explicit coordination/pooling of budget and payroll tax revenues • Revenue collection and purchasing - Predictable, stable revenues to the purchaser • Pooling and purchasing for redistribution and efficiency gain - Not only new provider payment methods; need both • Revenue collection and benefit package • Benefit package and purchasing - Explicit links to avoid merely declarative entitlements • Financing and service delivery - Incentives alone not enough: need changes on provider side and political will to implement

6. Our list of pitfalls – errors in conception as well as implementation • Treating the benefits package as the solution to an accounting problem rather than as a policy instrument • “Solving” informal payments simply by legalizing them as co-payments • Undertaking incomplete or “half-hearted” reforms • Implementing contradictory policies • Having unrealistic expectations in terms of effectiveness of health financing instruments to improve quality of care • “Starting insurance” with the formal sector and hoping that economic growth will bring eventual progress towards universal coverage, as it did historically in many west European countries • Ignoring public health services and public health programs in health financing reform and policy analysis

7. Aligning benefits with purchasing to enable realization of entitlements Reducing out-of-pocket spending for defined exempt groups in Kyrgyzstan

8. Purchaser pays: hospital base rate Patient pays: co-payment None Little Mid High Most Max High Mid Low Zero How benefit categories, co-payment obligations, and purchasing are linked by the Kyrgyz MHIF Self-referred Uninsured Insured Partially exempt Fully exempt

9. Unique research on informal payment • Data on informal payment is based on patient surveys • There have been 5 complete survey waves between 2001 and 2006 • Interviews conducted 4-6 months after discharge • Detailed record of payment is taken without mentioning the word ‘informal’ or ‘illegal’ • Survey data is merged with the case-based data of the MHIF to obtain administrative data on case characteristics

10. From declaring benefits to purchasing them: changes in OOPS by exempt patients Source: WHO surveys of discharged hospital patients

11. Informal payments declined most for pregnant women and children… • For children<5, the net reduction in total patient payments was KGS 736 or 52% in real terms • For pregnancies, the net reduction in total patient payments was KGS 363 or 37% in real terms -52% -19% -37%

12. … and show significant improvement for pensioners and other exempt categories • For pensioners>75, the net reduction in total patient payments was KGS 397 or 28% in real terms • For medically exempt, the net reduction in total patient payments was KGS 732 or 33% in real terms • For socially exempt, the net reduction in total patient payments was KGS 181 or 13% -33% -19% -28% -13%

13. Aligning purchasing with service delivery in an attempt to improve quality and outcomes Well conceived, but yet to deliver the results in Kyrgyzstan

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

15. Aims of Kyrgyzstan’s additional drug package • Promote use of new family physician groups by expanding their services (i.e. raise their credibility) • Reduce unnecessary hospitalizations by supporting outpatient management of key conditions (asthma, hypertension, anemia, ulcers) • Improve quality by link to new clinical guidelines, especially improved prescribing practices • Reduce cost of outpatient drugs for beneficiaries

16. Features of the drug package • Funded out of FGP capitation payment • Covers limited list of prescribed items; targets 4 causes of avoidable hospitalization for which clinical guidelines were developed • Prescribing by generic name required • Purchaser (MHIF) contracts with qualifying private pharmacies • Patient pays difference between reimbursement rate and retail price

17. Initial results were encouraging • All PHC physicians have been re-trained • Monitoring studies show that adherence to guidelines is high in PHC • Additional Drug Benefit is widely used and HTN drugs are “top sellers”

18. But detailed survey analysis revealed problems in effective coverage • Kyrgyz Health Policy Analysis Center and WHO study of health system effectiveness in Hypertension Control included hypertension monitoring as part of the health module • Nationally representative sample • 12,438 respondents 18 years or older in KIHS • 10,170 completed HTN measurement

19. The Additional Drug Package is a good program but not enough • ADP provides subsidy to insured people for the purchase of drugs for primary-care sensitive conditions incl. HTN • Generic prescription rate is very high • Patients switch to brand name drugs at the time of purchase • Cannot afford brand-name drugs continuously • Result: intermittent use of HTN medication % of generic versus brand name HTN medication in ADP Source: MHIF

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

21. “If my physician had emphasized the importance of taking drugs for high blood pressure, I would have taken it on a regular basis, and maybe I would have avoided getting a stroke.” (Man, 50 years old, Jalal-Abad oblast) Akunov, Ibraimov, Akkazieva et al. 2007. “Is the Kyrgyz health system effective in preventing and treating cardio-vascular disease?” CHSD Policy Research Paper No 45. http://hpac.kg Major problem of provider quality

22. Measuring the effectiveness of the health system in HTN control Aware: 26.5% Treated: 17.1% Controlled: 13.9% 2.4% of hypertensives whose blood pressure is controlled

23. So even this comprehensive approach was not adequate • Provider behavior resistant to change • Generic prescribing built into the ADP was undermined by switching to more expensive branded drugs in the pharmacy • Repeat of study in 2010 showed improvements in population awareness of their condition and care seeking behavior (especially in rural areas and for women), but little change in provider behavior and population behavior with regard to taking their HTN medications

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

25. Lessons learned - general • New health purchasers have been critical in transforming (some) health systems • Several countries demonstrated gains in “structural” efficiency, redistribution, and targeting of entitlements • However, little documented success in actually improving quality through purchasing • We’re still better at purchasing things we can count • Accountability and governance structures did not receive sufficient attention • Management autonomy and skills have been critical success factors • Step-by-step implementation was important to give time for institutions to mature

26. RBF/strategic purchasing as a key step in process of building domestic health financing systems and institutions • Need to consider the purchasing institution(s) as well as the technical mechanisms used to pay providers • Creating a strong purchasing agency as the “change agent” in the reform process • Requires consolidating fund pools • Technical development on payment methods, information management, provider autonomy, … • And it takes time!

27. A contextual challenge? • How to attract and retain people with the (scarce) skills needed to implement relatively sophisticated purchasing and M&E systems? • Kyrgyz hospital payment system was designed by former rocket scientists(!), and availability of mid-level technicians to run it who had little choice but to take public sector job • How to create enabling conditions for effective purchasing on behalf of the entire population of most LMIs, when it probably is not possible at civil service salaries?

28. Thank you

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

30. Aligning pooling and purchasing for efficiency gain The single payer reform and downsizing in Kyrgyzstan

31. Fragmentation and inappropriate incentives as sources of efficiency problems • Input-norm-based budgeting • Fragmented and overlapping pooling and purchasing, vertically integrated with provision • Inherited clinical practice patterns • Rising energy prices with transition to market economy, combined with energy inefficient buildings • Difficulty in reducing staff numbers because of social consequences of unemployment • Inefficiencies had distributional consequences • They manifested as the need to pay/provide own inputs, which hit the poor hardest

32. Source/ collection Oblast, rayon and city administrations Bishkek City Finance Dept. Republican budget Rayons Oblast City city health depart-ment OHDOFD MOH Pooling RFD OHDOFD RFD Purchasing CHD MOH rayon hospitals, polyclinics, SUBs, FAPs Oblast hospitals and polyclinics City hospitals and polyclinics Republican health facilities Provision Coverage Coverage Population Each oblast Bishkek (and nearby)

33. 1997 compulsory insurance fund adds new player but doesn’t address underlying structure Source/ collection Oblast, rayon and city administrations Social Fund Bishkek City Finance Dept. Republican budget Rayons Oblast Bishkek CRH RFD OHDOFD CHD MOH Pooling MHIF CRH RFD OHDOFD Purchasing CHD MOH contracted FGPs & hospitals contracted FGPs & hospitals CRH, FAPs, SVAs, SUBs, FGPs, polyclinics City hospitals, polyclinics, FGPs Oblast hospitals and polyclinics Republican health facilities Provision Coverage Coverage Population Each of Six Oblasts Bishkek (and urban Chui) Covered persons

34. 2001 “Single Payer Reform” eliminates fragmentation within oblasts Source/ collection Social Fund Oblast, rayon and city administrations Republican budget Oblast level TDMHIF Republican MHIF (national pool) Pooling Mandatory Health Insurance Fund Purchasing contracts FGPs, oblast and rayon hospitals, private pharmacies, etc. Provision Population of each Single Payer region Population Coverage Coverage

35. Summary of Single Payer features • Sources: local budgets, Republican budget, payroll taxes, formal co-payments • Pooling: Single pool for each territory (oblast), and complementary national pool for “insured” • Purchasing: purchaser-provider split; capitation payment for PHC, case-based payment for inpatient care • Benefits: universal entitlement funded from local budgets, complementary contribution-based entitlement for insured funded from payroll tax and Republican budget

36. Planned for years, but downsizing only began after the incentives changed Source: Socium Consult (2002)

37. Share of hospital expenditures spent on patients increased Direct medical expenditures (medicines, medical supplies, and food) as a share of total public expenditures at the hospital level in the SGBP Source: Mandatory Health Insurance Fund, Kyrgyzstan

38. Aligning pooling and purchasing for redistribution Centralization of pooling and change to output-based payment for redistribution in Moldova and Kyrgyzstan

39. Moldova also eliminated fragmentation with single national pool of funds Source/ collection Central budget revenues Payroll taxes 2/3 1/3 Pooling National Health Insurance Company Purchasing contracts Provision Health care providers Insured population Population Coverage

40. Centralized pooling combined with shift from input to output-oriented payment reduced geographic inequity in spending Source: Shishkin et al. (2008). Evaluation of Moldova’s 2004 Health Financing Reform. Copenhagen: WHO/EURO Health Financing Policy Paper 2008/3.

41. Centralization of pool and continued output-based payment in Kyrgyzstan led to similar results in 2006 Source: Financial Management Reports on execution of the State Guaranteed Benefit Package and 2007 MOH Performance Indicator Report

42. Lessons learned – primary health care • Capitation payment is a good start to equalize resource allocation when moving away from historical budgets • Provider autonomy and improved management skills are key • Age, sex and other need adjusters in capitation formula are important • Not sufficiently powerful incentive to encourage expansion of PHC task profile • Limited patient switching weakens competitive drive • Inherent incentive is to prescribe and refer  weak early detection and chronic disease management

43. Lessons learned - hospital care • The trend towards case-based payment was driven by efficiency considerations and need for purchasers to have activity information • Case based payments indeed drive efficiency improvement at the hospital level mostly through volume increase • Purchasing reform alone did not trigger reduction of physical infrastructure • To achieve better balance between different levels of care, additional instruments needed

44. Data * Among hospitals contracted by the MHIF

45. Total volume of informal payment decreased In real terms @ 2001 prices -22% +37% -63% -54% +18%